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WaMu Asset Acceptance Corp., et al. – ‘424B5’ on 3/27/07

On:  Tuesday, 3/27/07, at 5:00pm ET   ·   Accession #:  930413-7-2861   ·   File #s:  333-130795, -58

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

 3/27/07  WaMu Asset Acceptance Corp.       424B5                  1:8.4M                                   Command Financial
          Washington Mutual Mtge Pass-Through Certificates WMAL..2007-OA3

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

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                          HTML   6.09M 


Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
5Summary Information
"Transaction Participants
"What You Own
"Information About the Mortgage Pool
7The Certificates
"The Offered Certificates
20The Non-Offered Certificates
21Relationship Between Loan Groups and the Offered Certificates
"Initial Principal Balance of the Certificates
22Last Scheduled Distribution Date
"Distributions on the Certificates
24Distributions of Interest
26Compensating Interest and Interest Shortfalls
"Distributions of Principal
29Cross-Collateralization of (i) Loan Group 1 and Loan Group 2 and (ii) Loan Group 3, Loan Group 4 and Loan Group 5
"The Class R Certificates
"Credit Enhancements
30Allocation of Losses
31Optional Termination
32Yield Considerations
"Book-Entry Registration
"Denominations
"Legal Investment
"ERISA Considerations
"Federal Income Tax Consequences
33Ratings
34Risk Factors
61The Sponsors
"General
62The Sponsors' Origination Channels
63Static Pool Information
"Underwriting of the Mortgage Loans
"Evaluation of the Borrower's Credit Standing
64Evaluation of the Borrower's Repayment Ability
"Evaluation of the Adequacy of the Collateral
65Documentation Programs
66Exceptions to Program Parameters
"Automated Underwriting System
67Due Diligence
"The Originators
"MortgageIT, Inc
68The Depositor
"The Trust
"Assignment of the Mortgage Loans and Other Assets to the Trust
69Restrictions on Activities of the Trust
"Discretionary Activities With Respect to the Trust
71The Trustees
"The Trustee
"Material Duties of the Trustee
72Events of Default Under the Pooling Agreement or the Countrywide Servicing Agreement
"The Delaware Trustee
"Limitations on the Trustees' Liability
73Resignation and Removal of the Trustees
"The Servicers
74Wmb
"WMB's Servicing Experience
75WMB's Servicing Procedures
77Flow of Payments
80WMB's Quality Control Procedures
"Countrywide Home Loans
"Countrywide Home Loans Servicing Obligations
82The Administrative Agent
"The Administrative Agent's Servicing Experience
"Services Performed by the Administrative Agent
83The Administrative Agent's Quality Control Procedures
"The Custodian
84Special Servicing Agreements
"Affiliations and Related Transactions
85Description of the Mortgage Pool
98The Indexes
100Additional Information
101Representations and Warranties Regarding the Mortgage Loans
103Criteria for Selection of Mortgage Loans
104Description of the Certificates
107Definitive Certificates
108Priority of Distributions
117Distributions to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates
134Calculation of LIBOR
136Cross-Collateralization
140Group 1 Senior Principal Distribution Amount
141Group 2 Senior Principal Distribution Amount
"Group 3 Senior Principal Distribution Amount
142Group 4 Senior Principal Distribution Amount
"Group 5 Senior Principal Distribution Amount
143Group L-B Subordinate Principal Distribution Amount
145Group M-B Subordinate Principal Distribution Amount
146Principal Prepayments
148Subordination and Allocation of Losses
156Available Distribution Amount
158Amendment of the Pooling Agreement
159Payment of Fees and Expenses
162Reports and Other Information
164Yield and Prepayment Considerations
165Principal Prepayments and Compensating Interest
166LIBOR Certificates
"Rate of Payments
167Prepayment Assumptions
183Lack of Historical Prepayment Data
"Yield Considerations with Respect to the Right of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates to Receive Prepayment Penalties
184Yield Considerations with Respect to the Class X Certificates
187Yield Considerations with Respect to the Senior Subordinate Certificates
193Additional Yield Considerations Applicable Solely to the Class R Certificates
"Subordination
194Shifting of Interests
"Material Federal Income Tax Consequences
195Special Tax Considerations Applicable to the Class A and Class B Certificates
196Taxation of the Cap Agreement Portion of the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates
197Taxation of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Component Portion of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates
199Special Tax Considerations Applicable to the Residual Certificates
201Certain Legal Investment Aspects
203Method of Distribution
"Legal Matters
204Certificate Ratings
206Appendix A: Decrement Tables
208Appendix B: Mortgage Loan Tables
256Index of Terms
281Additional Risk Factors Applicable to Negative Amortization Loans
284Description of the Trusts
"Description of the Mortgage Assets to be Held By a Trust
291Mortgage Loan Information in Prospectus Supplement
292Description of the Pre-Funding Account for the Purchase of Additional Mortgage Loans
293The Depositor, the Sponsor, the Servicer and Certain Other Transaction Parties
"Use of Proceeds
294Yield and Maturity Considerations
296Maturity and Weighted Average Life
299The Depositor's Mortgage Loan Purchase Program
"Underwriting Standards
300Qualifications of Originators and Mortgage Loan Sellers
301Description of the Securities
302Form of Securities
304Exchangeable Securities
306Assignment of Trust Assets; Review of Files by Trustee
308Representations and Warranties Regarding the Mortgage Loans; Remedies for Breach
310Establishment of Custodial Account; Deposits to Custodial Account In Respect of Trust Assets
313Deposits to Distribution Account
"Distributions on the Securities
315Advances by Servicer in Respect of Delinquencies on the Trust Assets
316Form of Reports to Securityholders
317Collection and Other Servicing Procedures Employed by the Servicer, Manager, Bond Administrator or Certificate Administrator
318Description of Sub-Servicing
319Procedures for Realization Upon Defaulted Mortgage Assets
321Retained Interest; Servicing or Administration Compensation and Payment of Expenses
"Annual Servicing Compliance Reports
322Matters Regarding the Servicer and the Depositor
323Events of Default Under the Governing Agreement and Rights Upon Events of Default
325Amendment of the Governing Agreements
326Termination of the Trust and Disposition of Trust Assets
327Description of the Trustee
"Duties of the Trustee
328Description of Credit Support
329Letter of Credit
331Mortgage Pool Insurance Policy
332Special Hazard Insurance Policy
334Bankruptcy Bond
"Fraud Bond
"Financial Guarantee Insurance
"Reserve Fund
"Overcollateralization
335Cross-Support Features
"Other Financial Obligations Related to the Securities
"Swaps and Yield Supplement Agreements
"Purchase Obligations
336Mandatory Auctions
337Description of Primary Insurance Policies
"Primary Mortgage Insurance Policies
"Primary Hazard Insurance Policies
338FHA Insurance
341VA Guarantees
"Legal Aspects of Mortgage Assets
"Mortgage Loans
342Cooperative Loans
343Foreclosure on Mortgages
344Foreclosure on Mortgaged Properties Located in the Commonwealth of Puerto Rico
345Foreclosure on Cooperative Shares
346Rights of Redemption with Respect to Mortgage Loans
"Anti-Deficiency Legislation and Other Limitations on Lenders
348Junior Mortgages
"Home Equity Line of Credit Loans
"Enforceability of Due-on-Sale Clauses
349Prepayment Charges and Prepayments
"Leases and Rents
"Subordinate Financing
350Applicability of Usury Laws
"Alternative Mortgage Instruments
351Servicemembers Civil Relief Act
"Environmental Legislation
352Forfeitures in Drug and RICO Proceedings
"Negative Amortization Loans
353Opinions
354REMICs
356Taxation of Owners of REMIC Regular Certificates
362Taxation of Owners of REMIC Residual Certificates
367Matters Relevant to Holders of All REMIC Certificates
372Withholding Regulations
"Notes
"Grantor Trusts
380Partnership Trusts
385Tax Return Disclosure and Investor List Requirements
"State and Other Tax Consequences
386Plan Asset Regulation
"Underwriter's and WCC Exemption
389Other Exemptions
390Insurance Company General Accounts
"Representations from Investing Plans
"Tax-Exempt Plan Investors
"Consultation with Counsel
392Methods of Distribution
393Financial Information
394Available Information
"Incorporation of Certain Information by Reference
395Glossary
400Appendix A

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Prospectus Supplement to Prospectus Dated March 22, 2007

Washington Mutual Mortgage Pass-Through
Certificates, WMALT Series 2007-OA3

WaMu Asset Acceptance Corp.
Depositor

Washington Mutual Bank
Countrywide Home Loans, Inc.

Servicers

Washington Mutual Mortgage Securities Corp.
Washington Mutual Bank

Co-Sponsors

$2,326,046,100
(Approximate)

Consider carefully the risk factors beginning on page S-34 in this prospectus supplement and page 5 in the accompanying prospectus.

The certificates will represent interests only in the issuing entity which is Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA3 Trust and will not represent interests in or obligations of Washington Mutual Bank, Washington Mutual Mortgage Securities Corp., WaMu Asset Acceptance Corp., Washington Mutual, Inc. or any of their affiliates.

Neither these certificates nor the underlying mortgage loans are guaranteed by any agency or instrumentality of the United States.

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

The Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA3 Trust will issue thirty-five classes of offered certificates and six classes of privately placed certificates. Each class of certificates will be entitled to receive monthly distributions of interest, principal or both, beginning on April 25, 2007. The certificate interest rate for some classes of offered certificates will be variable, and will be based in part on the one-year MTA index, the COFI index or the one-month LIBOR index, as described in this prospectus supplement. The table on pages S-7 and S-8 of this prospectus supplement contains a list of the classes of offered certificates, including the initial class principal balance, certificate interest rate, and special characteristics of each class.

The primary asset of the Trust will be a pool of first lien single-family residential mortgage loans whose interest rates (after an initial fixed-rate period) adjust monthly and which include a negative amortization feature. The Trust will also contain other assets, which are described on page S-68 of this prospectus supplement.

Offered Certificates

 

 

 

Total principal amount (approximate)

 

$2,326,046,100

First payment date

 

April 25, 2007

Interest and/or principal paid

 

Monthly

Last payment date

 

April 25, 2047

Credit enhancement for the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP, Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B- 9, Class L-B-10 and Class L-B-11 Certificates is being provided by three classes of privately offered certificates, which have an aggregate principal balance of approximately $17,054,929. Credit enhancement for the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX, Class 5X-PPP, Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates is being provided by three classes of privately offered certificates, which have an aggregate principal balance of approximately $28,858,231. Additional credit enhancement for the offered senior certificates is being provided by the related classes of offered subordinate certificates. Losses otherwise allocable to some senior certificates will instead be allocated to other senior certificates.

The underwriter listed below will offer the offered certificates at varying prices to be determined at the time of sale. The proceeds to WaMu Asset Acceptance Corp. from the sale of the offered certificates will be approximately 100.08% of the principal balance of the offered certificates plus accrued interest, before deducting expenses. The underwriter’s commission will be the difference between the price it pays to WaMu Asset Acceptance Corp. for the offered certificates and the amount it receives from the sale of the offered certificates to the public.

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

Underwriter
WaMu Capital Corp.

March 26, 2007


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Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus

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

You should be certain to review the information in this prospectus supplement for a description of the specific terms of your certificates.

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

You can find a listing of the pages where some of the capitalized terms used in this prospectus supplement and the accompanying prospectus are defined under the caption “Index of Terms” on page S-256 in this prospectus supplement and under the caption “Glossary” beginning on page 138 in the accompanying prospectus. Capitalized terms used in this prospectus supplement and not otherwise defined in this prospectus supplement have the meanings assigned in the accompanying prospectus.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), the underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of certificates to the public in that Relevant Member State prior to the publication of a prospectus in relation to the certificates which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of certificates to the public in that Relevant Member State at any time:

 

(a)

 

 

 

to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

 

(b)

 

 

 

to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; or

 

(c)

 

 

 

in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of certificates to the public” in relation to any certificates in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the certificates to be offered so as to enable an investor to decide to purchase or subscribe to the certificates, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United Kingdom

The underwriter has represented and agreed that:

 

(a)

 

 

 

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act) received by it in connection with the issue or sale of the certificates in circumstances in which Section 21(1) of the Financial Services and Markets Act does not apply to the issuer; and

 

(b)

 

 

 

it has complied and will comply with all applicable provisions of the Financial Services and Markets Act with respect to anything done by it in relation to the certificates in, from or otherwise involving the United Kingdom.

S-2


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TABLE OF CONTENTS

 

 

 

 

 

Page

SUMMARY INFORMATION

 

 

 

S-5

 

Transaction Participants

 

 

 

S-5

 

What You Own

 

 

 

S-5

 

Information About the Mortgage Pool

 

 

 

S-5

 

The Certificates

 

 

 

S-7

 

The Offered Certificates

 

 

 

S-7

 

The Non-Offered Certificates

 

 

 

S-20

 

Relationship Between Loan Groups and the Offered Certificates

 

 

 

S-21

 

Initial Principal Balance of the Certificates

 

 

 

S-21

 

Last Scheduled Distribution Date

 

 

 

S-22

 

Distributions on the Certificates

 

 

 

S-22

 

Monthly Distributions

 

 

 

S-22

 

Distributions of Interest

 

 

 

S-24

 

Compensating Interest and Interest Shortfalls

 

 

 

S-26

 

Distributions of Principal

 

 

 

S-26

 

Cross-Collateralization of (i) Loan Group 1 and Loan Group 2 and (ii) Loan Group 3, Loan Group 4 and Loan Group 5

 

 

 

S-29

 

The Class R Certificates

 

 

 

S-29

 

Credit Enhancements

 

 

 

S-29

 

Allocation of Losses

 

 

 

S-30

 

Optional Termination

 

 

 

S-31

 

Yield Considerations

 

 

 

S-32

 

Book-Entry Registration

 

 

 

S-32

 

Denominations

 

 

 

S-32

 

Legal Investment

 

 

 

S-32

 

ERISA Considerations

 

 

 

S-32

 

Federal Income Tax Consequences

 

 

 

S-32

 

Ratings

 

 

 

S-33

 

RISK FACTORS

 

 

 

S-34

 

THE SPONSORS

 

 

 

S-61

 

General

 

 

 

S-61

 

The Sponsors’ Origination Channels

 

 

 

S-62

 

STATIC POOL INFORMATION

 

 

 

S-63

 

UNDERWRITING OF THE MORTGAGE LOANS

 

 

 

S-63

 

General

 

 

 

S-63

 

Evaluation of the Borrower’s Credit Standing

 

 

 

S-63

 

Evaluation of the Borrower’s Repayment Ability

 

 

 

S-64

 

Evaluation of the Adequacy of the Collateral

 

 

 

S-64

 

Documentation Programs

 

 

 

S-65

 

Exceptions to Program Parameters

 

 

 

S-66

 

Automated Underwriting System

 

 

 

S-66

 

Due Diligence

 

 

 

S-67

 

THE ORIGINATORS

 

 

 

S-67

 

MortgageIT, Inc.

 

 

 

S-67

 

THE DEPOSITOR

 

 

 

S-68

 

THE TRUST

 

 

 

S-68

 

General

 

 

 

S-68

 

Assignment of the Mortgage Loans and Other Assets to the Trust

 

 

 

S-68

 

Restrictions on Activities of the Trust

 

 

 

S-69

 

Discretionary Activities With Respect to the Trust

 

 

 

S-69

 

THE TRUSTEES

 

 

 

S-71

 

The Trustee

 

 

 

S-71

 

General

 

 

 

S-71

 

Material Duties of the Trustee

 

 

 

S-71

 

Events of Default Under the Pooling Agreement or the Countrywide Servicing Agreement

 

 

 

S-72

 

The Delaware Trustee

 

 

 

S-72

 

Limitations on the Trustees’ Liability

 

 

 

S-72

 

Resignation and Removal of the Trustees

 

 

 

S-73

 

THE SERVICERS

 

 

 

S-73

 

General

 

 

 

S-73

 

WMB

 

 

 

S-74

 

General

 

 

 

S-74

 

WMB’s Servicing Experience

 

 

 

S-74

 

WMB’s Servicing Procedures

 

 

 

S-75

 

Flow of Payments

 

 

 

S-77

 

WMB’s Quality Control Procedures

 

 

 

S-80

 

Countrywide Home Loans

 

 

 

S-80

 

General

 

 

 

S-80

 

Countrywide Home Loans Servicing Obligations

 

 

 

S-80

 

The Administrative Agent

 

 

 

S-82

 

The Administrative Agent’s Servicing Experience

 

 

 

S-82

 

Services Performed by the Administrative Agent

 

 

 

S-82

 

The Administrative Agent’s Quality Control Procedures

 

 

 

S-83

 

The Custodian

 

 

 

S-83

 

Special Servicing Agreements

 

 

 

S-84

 

AFFILIATIONS AND RELATED TRANSACTIONS

 

 

 

S-84

 

DESCRIPTION OF THE MORTGAGE POOL

 

 

 

S-85

 

The Indexes

 

 

 

S-98

 

Additional Information

 

 

 

S-100

 

Representations and Warranties Regarding the Mortgage Loans

 

 

 

S-101

 

Criteria for Selection of Mortgage Loans

 

 

 

S-103

 

DESCRIPTION OF THE CERTIFICATES

 

 

 

S-104

 

General

 

 

 

S-104

 

Book-Entry Registration

 

 

 

S-107

 

Definitive Certificates

 

 

 

S-107

 

Priority of Distributions

 

 

 

S-108

 

S-3


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Page

Distributions to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates

 

 

 

S-117

 

Distributions of Interest

 

 

 

S-118

 

Calculation of LIBOR

 

 

 

S-134

 

Calculation of Indexes for MTA and COFI Certificates

 

 

 

S-135

 

Cross-Collateralization

 

 

 

S-136

 

Distributions of Principal

 

 

 

S-139

 

General

 

 

 

S-139

 

Group 1 Senior Principal Distribution Amount

 

 

 

S-140

 

Group 2 Senior Principal Distribution Amount

 

 

 

S-141

 

Group 3 Senior Principal Distribution Amount

 

 

 

S-141

 

Group 4 Senior Principal Distribution Amount

 

 

 

S-142

 

Group 5 Senior Principal Distribution Amount

 

 

 

S-142

 

Group L-B Subordinate Principal Distribution Amount

 

 

 

S-143

 

Group M-B Subordinate Principal Distribution Amount

 

 

 

S-145

 

Principal Prepayments

 

 

 

S-146

 

Subordination and Allocation of Losses

 

 

 

S-148

 

The Class R Certificates

 

 

 

S-156

 

Available Distribution Amount

 

 

 

S-156

 

Last Scheduled Distribution Date

 

 

 

S-157

 

Optional Termination

 

 

 

S-158

 

Amendment of the Pooling Agreement

 

 

 

S-158

 

Payment of Fees and Expenses

 

 

 

S-159

 

Reports and Other Information

 

 

 

S-162

 

YIELD AND PREPAYMENT CONSIDERATIONS

 

 

 

S-164

 

General

 

 

 

S-164

 

Principal Prepayments and Compensating Interest

 

 

 

S-165

 

LIBOR Certificates

 

 

 

S-166

 

Rate of Payments

 

 

 

S-166

 

Prepayment Assumptions

 

 

 

S-167

 

Lack of Historical Prepayment Data

 

 

 

S-183

 

Yield Considerations with Respect to the Right of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates to Receive Prepayment Penalties

 

 

 

S-183

 

Yield Considerations with Respect to the Class X Certificates

 

 

 

S-184

 

Yield Considerations with Respect to the Senior Subordinate Certificates

 

 

 

S-187

 

Additional Yield Considerations Applicable Solely to the Class R Certificates

 

 

 

S-193

 

CREDIT ENHANCEMENTS

 

 

 

S-193

 

Subordination

 

 

 

S-193

 

Shifting of Interests

 

 

 

S-194

 

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

 

 

 

S-194

 

Special Tax Considerations Applicable to the Class A and Class B Certificates

 

 

 

S-195

 

Taxation of the Cap Agreement Portion of the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates

 

 

 

S-196

 

Taxation of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Component Portion of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates

 

 

 

S-197

 

Special Tax Considerations Applicable to the Residual Certificates

 

 

 

S-199

 

CERTAIN LEGAL INVESTMENT ASPECTS

 

 

 

S-201

 

ERISA CONSIDERATIONS

 

 

 

S-202

 

METHOD OF DISTRIBUTION

 

 

 

S-203

 

LEGAL MATTERS

 

 

 

S-203

 

CERTIFICATE RATINGS

 

 

 

S-204

 

APPENDIX A: DECREMENT TABLES

 

 

 

S-205

 

APPENDIX B: MORTGAGE LOAN TABLES

 

 

 

S-208

 

INDEX OF TERMS

 

 

 

S-256

 

S-4


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SUMMARY INFORMATION

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

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

TRANSACTION PARTICIPANTS

On March 28, 2007, which is the closing date, the mortgage loans that support the certificates will be sold by Washington Mutual Mortgage Securities Corp. and Washington Mutual Bank, as applicable, each a co- sponsor of the securitization transaction, to WaMu Asset Acceptance Corp., the depositor. On the closing date, the depositor will sell the mortgage loans and related assets to the Washington Mutual Mortgage Pass- Through Certificates WMALT Series 2007-OA3 Trust. In exchange for the mortgage loans and related assets, the Trust will issue the certificates pursuant to the order of the depositor.

Washington Mutual Mortgage Securities Corp. purchased, and Washington Mutual Bank originated or purchased, the related mortgage loans directly or indirectly from affiliated or unaffiliated third parties who either originated the mortgage loans or purchased the mortgage loans through correspondent or broker lending. Approximately 38.8% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of March 1, 2007) were originated by MortgageIT, Inc. No other entity originated more than 10% of the mortgage loans in loan group 1 and loan group 2. Washington Mutual Bank originated all of the mortgage loans in loan group 3, loan group 4 and loan group 5.

Approximately 98.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of March 1, 2007) and all of the mortgage loans in loan group 3, loan group 4 and loan group 5 will be serviced by Washington Mutual Bank. Approximately 2.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of March 1, 2007) will be serviced by Countrywide Home Loans, Inc. (“Countrywide Home Loans”) or an affiliate thereof. With respect to the mortgage loans serviced by Countrywide Home Loans, Washington Mutual Bank, as servicer, on behalf of the Trust, will take actions required or permitted to be taken by the Trust as assignee of Washington Mutual Mortgage Securities Corp.’s rights under the Countrywide servicing agreement (including making requests or demands or giving consents to Countrywide Home Loans, and receiving notices from Countrywide Home Loans).

Some servicing functions will be performed by Washington Mutual Mortgage Securities Corp., as administrative agent of Washington Mutual Bank. Some servicing functions will be outsourced to third party vendors.

The trustee of the Trust will be LaSalle Bank National Association, and the Delaware trustee will be Christiana Bank & Trust Company. Washington Mutual Bank fsb will have possession of and will review the mortgage notes, mortgages and other legal documents related to some of the mortgage loans as custodian for the Trust.

WHAT YOU OWN

Your certificates represent interests only in the assets of the issuing entity. All payments to you will come only from the amounts received in connection with those assets.

The Trust owns a pool of mortgage loans and other assets, as described under “The Trust” in this prospectus supplement.

There are no outstanding series or classes of securities that are backed by the assets of the issuing entity or otherwise have claims on the assets of the issuing entity, other than the certificates. The depositor does not expect that any securities representing additional interests in or claims on the assets of the issuing entity will be issued in the future.

Information About the Mortgage Pool

The mortgage pool consists of 4,969 mortgage loans with an aggregate principal balance as of March 1, 2007 of approximately $2,371,959,260. All of the mortgage loans are secured by residential properties (or shares of cooperative apartments) and each has an original term to maturity of not more than 40 years.

After an initial fixed-rate period of zero, one, two or three months, the interest rate on each mortgage

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loan will adjust monthly to equal the sum of an index and a margin. As of March 1, 2007, approximately 3.1% (by aggregate principal balance as of March 1, 2007) of the mortgage loans in loan group 1 and loan group 2 and approximately 47.9% (by aggregate principal balance as of March 1, 2007) of the mortgage loans in loan group 3, loan group 4 and loan group 5 were still in their initial fixed-rate period. The interest rates on the mortgage loans are subject to overall maximum and minimum interest rate limits.

The index for the mortgage loans in loan group 1, loan group 3 and loan group 4 and approximately 98.0%, of the mortgage loans (by principal balance as of March 1, 2007) in loan group 2 will be One-Year MTA, the 12-month moving average yield on United States Treasury Securities adjusted to a constant maturity of one year. The index for approximately 1.9% of the mortgage loans (by principal balance as of March 1, 2007) in loan group 2 will be the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market (as described in this prospectus supplement under the heading “Description of the Mortgage Loans–The Indexes”). The index for the mortgage loans in loan group 5 and approximately 0.1% of the mortgage loans (by principal balance as of March 1, 2007) in loan group 2 will be COFI, the 11th District Monthly Weighted Average Cost of Funds Index published by the Federal Home Loan Bank of San Francisco, as described in this prospectus supplement under the heading “Description of the Mortgage Loans—The Indexes”.

While the interest rate on each mortgage loan will adjust monthly (after the initial fixed-rate period), the minimum monthly payment on each mortgage loan generally will adjust only annually (except that for (i) approximately 1.1%, by aggregate principal balance as of March 1, 2007, of the mortgage loans in loan group 1 and loan group 2, the minimum monthly payment will initially adjust twenty-four months after origination of such mortgage loans, and then adjust annually thereafter and (ii) approximately 2.2%, by aggregate principal balance as of March 1, 2007, of the mortgage loans in loan group 1 and loan group 2, the minimum monthly payment will initially adjust sixty months after origination of such mortgage loans, and then adjust annually thereafter). On each annual payment adjustment date, the minimum monthly payment generally will not increase by more than 7.5%. As a result, the interest due with respect to a mortgage loan for any given month may, under certain circumstances, exceed the monthly payment for that month. In that case, payment of the excess of interest due over the monthly payment will be deferred and that excess will be added to the principal balance of that mortgage loan in the form of “negative amortization.” See “Description of the Mortgage Pool” in this prospectus supplement.

In the event of a material breach of the representations and warranties made by Washington Mutual Mortgage Securities Corp., Washington Mutual Bank, as a mortgage loan seller, or the depositor with respect to the mortgage loans, or in the event that a required loan document is not included in the mortgage files for the mortgage loans, the breaching party will, unless it has cured the breach in all material respects, be required to repurchase the affected mortgage loan or substitute a new mortgage loan for the affected mortgage loan. See “Description of the Mortgage PoolRepresentations and Warranties Regarding the Mortgage Loans” in this prospectus supplement.

For a further description of the mortgage loans, see “Description of the Mortgage Pool” and Appendix B in this prospectus supplement.

The mortgage pool consists of the following five loan groups:

 

 

 

 

 

 

 

Loan Group

 

Number of
Mortgage
Loans

 

Approximate
Principal Balance
as of
March 1, 2007

 

Maximum
Years to
Maturity
From
Origination
Date

 

Loan Group 1

 

 

 

1,128

   

 

$

 

325,305,695

   

 

 

40

 

Loan Group 2

 

 

 

883

   

 

$

 

486,788,334

   

 

 

40

 

Loan Group 3

 

 

 

1,081

   

 

$

 

281,607,015

   

 

 

40

 

Loan Group 4

 

 

 

1,218

   

 

$

 

930,597,997

   

 

 

40

 

Loan Group 5

 

 

 

659

   

 

$

 

347,660,219

   

 

 

40

 

As of March 1, 2007, the principal balances of the mortgage loans in loan group 1 and loan group 3 will not exceed the limits established by Freddie Mac in connection with Freddie Mac’s mortgage loan purchase program.

For purposes of calculating distributions (i) to the Class CX-2-PPP Certificates of prepayment penalties paid by borrowers upon voluntary full prepayment of certain mortgage loans, if such mortgage loans are prepaid during certain periods, and (ii) of interest to the Class CX-1 and Class CX-2-PPP Certificates, the mortgage loans in loan group 1 will be divided into the following two subgroups:

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Subgroup

 

Number of
Mortgage
Loans

 

Approximate
Principal Balance
as of
March 1, 2007

 

Maximum
Years to
Maturity
From
Origination
Date

 

Subgroup 1-A

 

 

 

56

   

 

$

 

16,831,167

   

 

 

40

 

Subgroup 1-B

 

 

 

1,072

   

 

$

 

308,474,527

   

 

 

40

 

For purposes of calculating distributions (i) to the Class CX-2-PPP Certificates of prepayment penalties paid by borrowers upon voluntary full prepayment of certain mortgage loans, if such mortgage loans are prepaid during certain periods, and (ii) of interest to the Class CX-1 and Class CX-2-PPP Certificates, the mortgage loans in loan group 2 will be divided into the following two subgroups:

 

 

 

 

 

 

 

Subgroup

 

Number of
Mortgage
Loans

 

Approximate
Principal Balance
as of
March 1, 2007

 

Maximum
Years to
Maturity
From
Origination
Date

 

Subgroup 2-A

 

 

 

96

   

 

$

 

59,212,175

   

 

 

40

 

Subgroup 2-B

 

 

 

787

   

 

$

 

427,576,158

   

 

 

40

 

Distributions to the Class CX-1 Certificates of interest will be based on payments received or advanced in respect of the mortgage loans in subgroup 1-A and subgroup 2-A. Distributions to the Class CX-2-PPP Certificates of (i) interest and (ii) certain prepayment penalties on the related mortgage loans will be based on payments received or advanced in respect of the mortgage loans in subgroup 1-B and subgroup 2-B.

The mortgage loans in subgroup 1-A and subgroup 2-A are mortgage loans that do not impose prepayment penalties. The mortgage loans in subgroup 1-B and subgroup 2-B are mortgage loans that impose a prepayment penalty for voluntary prepayments in full for a period no greater than 60 months from the date of origination of such mortgage loan.

For purposes of calculating distributions of interest to the Class FX Certificates, the mortgage loans in loan group 4 will be divided into the following two subgroups:

 

 

 

 

 

 

 

Subgroup

 

Number of
Mortgage
Loans

 

Approximate
Principal Balance
as of
March 1, 2007

 

Maximum
Years to
Maturity
From
Origination
Date

 

Subgroup 4-A

 

 

 

97

   

 

$

 

78,996,746

   

 

 

40

 

Subgroup 4-B

 

 

 

1,121

   

 

$

 

851,601,250

   

 

 

40

 

For purposes of calculating distributions of interest to the Class FX Certificates, the mortgage loans in loan group 5 will be divided into the following two subgroups:

 

 

 

 

 

 

 

Subgroup

 

Number of
Mortgage
Loans

 

Approximate
Principal Balance
as of
March 1, 2007

 

Maximum
Years to
Maturity
From
Origination
Date

 

Subgroup 5-A

 

 

 

51

   

 

$

 

41,730,979

   

 

 

40

 

Subgroup 5-B

 

 

 

608

   

 

$

 

305,929,239

   

 

 

40

 

Distributions to the Class FX Certificates of interest will be calculated based on interest accruing on the mortgage loans in Subgroup 4-A and Subgroup 5-A.

The mortgage loans in Subgroup 4-A are mortgage loans in loan group 4 that do not impose prepayment penalties and have an initial fixed rate period of three months. The mortgage loans in Subgroup 4-B are mortgage loans in loan group 4 that are not mortgage loans in Subgroup 4-A.

The mortgage loans in Subgroup 5-A are mortgage loans in loan group 5 that do not impose prepayment penalties and have an initial fixed rate period of three months. The mortgage loans in Subgroup 5-B are mortgage loans in loan group 5 that are not mortgage loans in Subgroup 5-A.

THE CERTIFICATES

The Offered Certificates

The approximate initial class principal balance, annual certificate interest rate and type of each class of the offered certificates will be as follows:

 

 

 

 

 

 

 

Class

 

Approximate
Initial Class
Principal
Balance

 

Annual
Certificate
Interest Rate

 

Type

 

1A

 

 

$

 

230,966,000

   

Variable(1)

 

Senior/One-Year MTA

2A

 

 

 

345,618,000

   

Variable(2)

 

Senior/One-Year MTA

3A

 

 

 

195,998,000

   

Variable(3)

 

Senior/One-Year MTA

4A-1

 

 

 

435,772,000

   

Variable(4)

 

Senior/One-Year MTA

4A-2

 

 

 

50,000,000

   

Variable(5)

 

Senior/One-Year MTA

4A-B

 

 

 

161,924,000

   

Variable(6)

 

Senior/One-Year MTA /Mezzanine

5A

 

 

 

241,970,000

   

Variable(7)

 

Senior/COFI

CA-1B

 

 

 

72,074,000

(8)

 

 

Variable(9)

 

Senior/LIBOR/Mezzanine

CA-1C

 

 

 

72,074,000

(10)

 

 

Variable(11)

 

Senior/LIBOR/Mezzanine

DA-1B

 

 

 

135,709,000

(12)

 

 

Variable(13)

 

Senior/LIBOR/Mezzanine

DA-1C

 

 

 

135,709,000

(14)

 

 

Variable(15)

 

Senior/LIBOR/Mezzanine

CX-1

 

 

 

(16)

 

 

Variable(17)

 

Senior/IO/PO

CX-2-PPP

 

 

 

(16)

 

 

Variable(18)

 

Senior/IO/PO/Prepayment Penalty

EX-PPP

 

 

 

(16)

 

 

Variable(19)

 

Senior/IO/PO/Prepayment Penalty

FX

 

 

 

(20)

 

 

(21)

 

Senior/IO

5X-PPP

 

 

 

(16)

 

 

Variable(22)

 

Senior/IO/PO/Prepayment Penalty

L-B-1

 

 

 

16,243,000

   

Variable(23)

 

Subordinate/LIBOR

L-B-2

 

 

 

16,242,000

   

Variable(24)

 

Subordinate/LIBOR

L-B-3

 

 

 

6,090,000

   

Variable(25)

 

Subordinate/LIBOR

L-B-4

 

 

 

6,091,000

   

Variable(26)

 

Subordinate/LIBOR

L-B-5

 

 

 

6,091,000

   

Variable(27)

 

Subordinate/LIBOR

L-B-6

 

 

 

4,060,000

   

Variable(28)

 

Subordinate/LIBOR

L-B-7

 

 

 

4,061,000

   

Variable(29)

 

Subordinate/LIBOR

L-B-8

 

 

 

2,030,000

   

Variable(30)

 

Subordinate/LIBOR

L-B-9

 

 

 

4,060,000

   

Variable(31)

 

Subordinate/LIBOR

L-B-10

 

 

 

5,279,000

   

Variable(31)

 

Subordinate/LIBOR

L-B-11

 

 

 

4,060,000

   

Variable(31)

 

Subordinate/LIBOR

M-B-1

 

 

 

35,097,000

   

Variable(32)

 

Subordinate/LIBOR

M-B-2

 

 

 

38,997,000

   

Variable(33)

 

Subordinate/LIBOR

M-B-3

 

 

 

11,699,000

   

Variable(34)

 

Subordinate/LIBOR

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Class

 

Approximate
Initial Class
Principal
Balance

 

Annual
Certificate
Interest Rate

 

Type

 

M-B-4

 

 

 

51,475,000

   

Variable(35)

 

Subordinate/LIBOR

M-B-5

 

 

 

19,499,000

   

Variable(36)

 

Subordinate/LIBOR

M-B-6

 

 

 

8,579,000

   

Variable(37)

 

Subordinate/LIBOR

M-B-7

 

 

 

8,579,000

   

Variable(38)

 

Subordinate/LIBOR

R

 

 

 

100

   

6.364%

 

Senior/Residual

 

(1)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 1A Certificates will equal the lesser of (x) the weighted average of the mortgage interest rates on the mortgage loans in loan group 1, as of the second preceding due date less the per annum rate at which the servicing fee (as described in “Description of the Certificates—Payment of Fees and Expenses” in this prospectus supplement) is calculated for those mortgage loans (the “Loan Group 1 Weighted Average Pass-Through Rate”) and (y) One-Year MTA (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus 0.74%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 1A Certificates is equal to the Loan Group 1 Weighted Average Pass-Through Rate, the Class 1A Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. The Class 1A Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.723%.

 

(2)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 2A Certificates will equal the lesser of (x) the weighted average of the mortgage interest rates on the mortgage loans in loan group 2, as of the second preceding due date less the per annum rate at which the servicing fee (as described in “Description of the Certificates—Payment of Fees and Expenses” in this prospectus supplement) is calculated for those mortgage loans (the “Loan Group 2 Weighted Average Pass-Through Rate”) and (y) One-Year MTA (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus 0.75%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 2A Certificates is equal to the Loan Group 2 Weighted Average Pass-Through Rate, the Class 2A Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. The Class 2A Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.733%.

 

(3)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 3A Certificates will equal the lesser of (x) the weighted average of the mortgage interest rates on the mortgage loans in loan group 3, as of the second preceding due date less the per annum rate at which the servicing fee (as described in “Description of the Certificates—Payment of Fees and Expenses” in this prospectus supplement) is calculated for those mortgage loans (the “Loan Group 3 Weighted Average Pass-Through Rate”) and (y) One-Year MTA (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus 0.77%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 3A Certificates is equal to the Loan Group 3 Weighted Average Pass-Through Rate, the Class 3A Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and 5X-PPP Certificates, as described in this prospectus supplement. The Class 3A Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial

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distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.753%.

 

(4)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 4A-1 Certificates will equal the lesser of (x) the “Loan Group 4 Net Weighted Average Pass-Through Rate”, which is (i) the weighted average of the mortgage interest rates on the mortgage loans in loan group 4 as of the second preceding due date less the per annum rate at which the related servicing fee (as described in “Description of the Certificates—Payment of Fees and Expenses” in this prospectus supplement) is calculated, reduced by (ii) a fraction, the numerator of which is the product of (a) the weighted average of an amount for that distribution date on each mortgage loan in Subgroup 4-A which is calculated as follows: (1) for each mortgage loan in Subgroup 4-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (2) for each mortgage loan in Subgroup 4-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin (as defined in “Description of the Mortgage Pool” in this prospectus supplement) for such mortgage loan over 1.475% and (b) the aggregate principal balance of the mortgage loans in Subgroup 4-A as of the second preceding due date and the denominator is the aggregate principal balance of the mortgage loans in loan group 4 as of the second preceding due date and (y) One-Year MTA (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus 0.77%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 4A-1 Certificates is equal to the Loan Group 4 Net Weighted Average Pass- Through Rate, the Class 4A-1 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. The Class 4A-1 Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.753%.

 

(5)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 4A-2 Certificates will equal the lesser of (x) the Loan Group 4 Net Weighted Average Pass-Through Rate and (y) One-Year MTA plus 0.70%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 4A-2 Certificates is equal to the Loan Group 4 Net Weighted Average Pass-Through Rate, the Class 4A-2 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. The Class 4A-2 Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.683%.

 

(6)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 4A-B Certificates will equal the lesser of (x) the Loan Group 4 Net Weighted Average Pass-Through Rate and (y) One-Year MTA plus 0.77%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 4A-B Certificates is equal to the Loan Group 4 Net Weighted Average Pass-Through Rate, the Class 4A-B Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this

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prospectus supplement. The Class 4A-B Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.753%.

 

(7)

 

 

 

For each distribution date, the annual certificate interest rate on the Class 5A Certificates will equal the lesser of (x) the “Loan Group 5 Net Weighted Average Pass-Through Rate”, which is (i) the weighted average of the mortgage interest rates on the mortgage loans in loan group 5 as of the second preceding due date less the per annum rate at which the related servicing fee (as described in “Description of the Certificates—Payment of Fees and Expenses” in this prospectus supplement) is calculated, reduced by (ii) a fraction, the numerator of which is the product of (a) the weighted average of an amount for that distribution date on each mortgage loan in Subgroup 5-A which is calculated as follows: (1) for each mortgage loan in Subgroup 5-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (2) for each mortgage loan in Subgroup 5-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin (as defined in “Description of the Mortgage Pool” in this prospectus supplement) for such mortgage loan over 2.125% and (b) the aggregate principal balance of the mortgage loans in Subgroup 5-A as of the second preceding due date and the denominator is the aggregate principal balance of the mortgage loans in loan group 5 as of the second preceding due date and (y) COFI (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus 1.25%. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. In addition, if on the initial distribution date the certificate interest rate on the Class 5A Certificates is equal to the Loan Group 5 Net Weighted Average Pass-Through Rate, the Class 5A Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. The Class 5A Certificates will not be entitled to receive carryover shortfall amounts on any distribution date other than the initial distribution date. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal approximately 5.642%.

 

(8)

 

 

 

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class CA-1B Certificates will be deemed to be comprised of two components (the “Class CA-1B Group 1 Component” and the “Class CA-1B Group 2 Component”, each, a “Class CA-1B Component”). Each Class CA-1B Component will have a component principal balance representing a portion of the Class CA-1B principal balance. Interest will be payable with respect to each Class CA-1B Component. The initial principal balance of the Class CA-1B Group 1 Component and the Class CA-1B Group 2 Component will be approximately $28,871,000 and $43,203,000, respectively.

 

(9)

 

 

 

For each distribution date on or before the date on which the aggregate principal balance of the mortgage loans in loan group 1 and loan group 2 has been reduced to less than 10% of that balance as of March 1, 2007 (the “Groups 1-2 Clean-Up Call Option Date”), the annual certificate interest rate on the Class CA-1B Group 1 Component will equal the least of (x) the product of (i) the Loan Group 1 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period (the “Adjusted Loan Group 1 Weighted Average Pass-Through Rate”), (y) the London Interbank Offered Rate for one-month United States dollar deposits, as described in this prospectus supplement under “Description of the Certificates—Calculation of LIBOR” (“LIBOR”), plus 0.22% and (z) the Maximum Loan Group 1 Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For

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each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1B Group 1 Component will equal the least of (x) the Adjusted Loan Group 1 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.44% and (z) the Maximum Loan Group 1 Rate.

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1B Group 2 Component will equal the least of (x) the product of (i) the Loan Group 2 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period (the “Adjusted Loan Group 2 Weighted Average Pass-Through Rate”), (y) LIBOR plus 0.22% and (z) the Maximum Loan Group 2 Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1B Group 2 Component will equal the least of (x) the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.44% and (z) the Maximum Loan Group 2 Rate.

In addition, if on any distribution date the certificate interest rate on any of the Class CA-1B Components is equal to the Adjusted Loan Group 1 Weighted Average Pass-Through Rate or the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, as applicable, the Class CA-1B Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these Class CA-1B Components will equal LIBOR as of March 26, 2007 plus 0.22%.

 

(10)

 

 

 

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class CA-1C Certificates will be deemed to be comprised of two components (the “Class CA-1C Group 1 Component” and the “Class CA-1C Group 2 Component”, each, a “Class CA-1C Component”). Each Class CA-1C Component will have a component principal balance representing a portion of the Class CA-1C principal balance. Interest will be payable with respect to each Class CA-1C Component. The initial principal balance of the Class CA-1C Group 1 Component and the Class CA-1C Group 2 Component will be approximately $28,871,000 and $43,203,000, respectively.

 

(11)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1C Group 1 Component will equal the least of (x) the Adjusted Loan Group 1 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.28% and (z) the Maximum Loan Group 1 Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1C Group 1 Component will equal the least of (x) the Adjusted Loan Group 1 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.56% and (z) the Maximum Loan Group 1 Rate.

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1C Group 2 Component will equal the least of (x) the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.28% and (z) the Maximum Loan Group 2 Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class CA-1C Group 2 Component will equal the least of (x) the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.56% and (z) the Maximum Loan Group 2 Rate.

In addition, if on any distribution date the certificate interest rate on any of the Class CA-1C Components is equal to the Adjusted Loan Group 1 Weighted Average Pass-Through Rate or the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, as applicable, the Class CA-1C Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and

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  Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these Class CA-1C Components will equal LIBOR as of March 26, 2007 plus 0.28%.

 

(12)

 

 

 

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class DA-1B Certificates will be deemed to be comprised of three components (the “Class DA-1B Group 3 Component,” “Class DA-1B Group 4 Component” and the “Class DA-1B Group 5 Component”, each, a “Class DA-1B Component”). Each Class DA-1B Component will have a component principal balance representing a portion of the Class DA-1B principal balance. Interest will be payable with respect to each Class DA-1B Component. The initial principal balance of the Class DA-1B Group 3 Component, the Class DA-1B Group 4 Component and the Class DA-1B Group 5 Component will be approximately $24,500,000, $80,962,000 and $30,247,000, respectively.

 

(13)

 

 

 

For each distribution date on or before the date on which the aggregate principal balance of the mortgage loans in loan group 3, loan group 4 and loan group 5 has been reduced to less than 10% of that balance as of March 1, 2007 (the “Groups 3-5 Clean-Up Call Option Date”), the annual certificate interest rate on the Class DA-1B Group 3 Component will equal the least of (x) the product of (i) the Loan Group 3 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period (the “Adjusted Loan Group 3 Weighted Average Pass-Through Rate”), (y) LIBOR plus 0.23% and (z) the Maximum Loan Group 3 Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1B Group 3 Component will equal the least of (x) the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.46% and (z) the Maximum Loan Group 3 Rate.

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1B Group 4 Component will equal the least of (x) the product of (i) the Loan Group 4 Net Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period (the “Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate”), (y) LIBOR plus 0.23% and (z) the Maximum Loan Group 4 Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1B Group 4 Component will equal the least of (x) the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.46% and (z) the Maximum Loan Group 4 Rate.

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1B Group 5 Component will equal the least of (x) the product of (i) the Loan Group 5 Net Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period (the “Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate”), (y) LIBOR plus 0.23% and (z) the Maximum Loan Group 5 Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1B Group 5 Component will equal the least of (x) the Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.46% and (z) the Maximum Loan Group 5 Rate.

In addition, if on any distribution date the certificate interest rate on any of the Class DA-1B Components is equal to the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, the Adjusted Loan Group 4

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Net Weighted Average Pass-Through Rate or the Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, as applicable, the Class DA-1B Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these Class DA-1B Components will equal LIBOR as of March 26, 2007 plus 0.23%.

 

(14)

 

 

 

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class DA-1C Certificates will be deemed to be comprised of three components (the “Class DA-1C Group 3 Component,” “Class DA-1C Group 4 Component” and the “Class DA-1C Group 5 Component”, each, a “Class DA-1C Component”). Each Class DA-1C Component will have a component principal balance representing a portion of the Class DA-1C principal balance. Interest will be payable with respect to each Class DA-1C Component. The initial principal balance of the Class DA-1C Group 3 Component, Class DA-1C Group 4 Component and the Class DA-1C Group 5 Component will be approximately $24,500,000, $80,962,000 and $30,247,000, respectively.

 

(15)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 3 Component will equal the least of (x) the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.32% and (z) the Maximum Loan Group 3 Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 3 Component will equal the least of (x) the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, (y) LIBOR plus 0.64% and (z) the Maximum Loan Group 3 Rate.

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 4 Component will equal the least of (x) the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.32% and (z) the Maximum Loan Group 4 Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 4 Component will equal the least of (x) the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.64% and (z) the Maximum Loan Group 4 Rate.

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 5 Component will equal the least of (x) the Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.32% and (z) the Maximum Loan Group 5 Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class DA-1C Group 5 Component will equal the least of (x) the Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.64% and (z) the Maximum Loan Group 5 Rate.

In addition, if on any distribution date the certificate interest rate on any of the Class DA-1C Components is equal to the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate or the Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, as applicable, the Class DA-1C Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these Class DA-1C Components will equal LIBOR as of March 26, 2007 plus 0.32%.

 

(16)

 

 

 

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans (i) the Class CX-1 Certificates will be deemed to be comprised of two interest-only components (the “Class CX-1 Subgroup 1-A IO Component” and the “Class CX-1 Subgroup 2-A IO Component”, each, a “Class X IO

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Component”) and two principal-only components (the “Class CX-1 Subgroup 1-A PO Component” and the “Class CX-1 Subgroup 2-A PO Component”, each, a “Class X PO Component”), (ii) the Class CX-2-PPP Certificates will be deemed to be comprised of two interest-only components (the “Class CX-2-PPP Subgroup 1-B IO Component” and the “Class CX-2-PPP Subgroup 2-B IO Component”, each, a “Class X IO Component”) and two principal-only components (the “Class CX-2-PPP Subgroup 1-B PO Component” and the “Class CX-2-PPP Subgroup 2-B PO Component”, each, a “Class X PO Component”), (iii) the Class EX-PPP Certificates will be deemed to be comprised of two interest-only components (the “Class EX-PPP Loan Group 3 IO Component” and the “Class EX-PPP Loan Group 4 IO Component”, each, a “Class X IO Component”) and two principal-only components (the “Class EX-PPP Loan Group 3 PO Component” and the “Class EX-PPP Loan Group 4 PO Component”, each, a “Class X PO Component”) and (iv) the Class 5X-PPP will be deemed to be comprised of an interest-only component (a “Class X IO Component”) and a principal-only component (a “Class X PO Component”). Interest, if any, will be payable with respect to each Class X IO Component. The Class X IO Components will not have a principal balance and principal will not be payable with respect to the Class X IO Components. Each of the Class X PO Components will have a principal balance which initially will equal zero. Interest will not accrue on any Class X PO Component. In the event that interest otherwise payable with respect to any Class X IO Component is reduced as a result of the allocation of net negative amortization (as described in “Description of the Certificates—Distributions of Interest” in this prospectus supplement), the amount of such reduction will be added as principal to the related Class X PO Component.

In addition, (i) the Class CX-2-PPP Certificates will be entitled to receive prepayment penalties paid by borrowers upon voluntary full prepayment of certain mortgage loans serviced by Washington Mutual Bank in subgroup 1-B and subgroup 2-B if such mortgage loans are prepaid during certain periods, (ii) the Class EX-PPP Certificates will be entitled to receive prepayment penalties paid by borrowers upon voluntary full prepayment of certain mortgage loans in loan group 3 and loan group 4 if such mortgage loans are prepaid during certain periods and (iii) the Class 5X-PPP Certificates will be entitled to receive prepayment penalties paid by borrowers upon voluntary full prepayment of certain mortgage loans in loan group 5 if such mortgage loans are prepaid during certain periods. See “Description of the Mortgage Pool” and “Description of the Certificates—Distributions to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates” herein and the “Prepayment Penalty Terms of the Subgroup 1-B Loans”, “Prepayment Penalty Terms of the Subgroup 2-B Loans,” “Prepayment Penalty Terms of the Loan Group 3 Loans,” “Prepayment Penalty Terms of the Loan Group 4 Loans” and “Prepayment Penalty Terms of the Loan Group 5 Loans” tables in Appendix B hereto for more information regarding the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates and prepayment penalties.

 

(17)

 

 

 

The amount of interest available for distribution to the Class CX-1 Certificates on any distribution date (before giving effect to the allocation of any shortfall in interest collections and payment of carryover shortfall amounts) will equal the Class CX-1 Accrued Interest (as defined in this prospectus supplement). Notwithstanding the foregoing, interest otherwise available for distribution to the Class CX-1 Certificates on any distribution date may instead be distributed as carryover shortfall amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

 

(18)

 

 

 

The amount of interest available for distribution to the Class CX-2-PPP Certificates on any distribution date (before giving effect to the allocation of any shortfall in interest collections and payment of carryover shortfall amounts) will equal the Class CX-2-PPP Accrued Interest (as defined in this prospectus supplement). Notwithstanding the foregoing, interest otherwise available for distribution to the Class CX-2-PPP Certificates on any distribution date may instead be distributed as carryover shortfall amounts. See “Description

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  of the Certificates—Distributions of Interest” in this prospectus supplement.

 

(19)

 

 

 

The amount of interest available for distribution to the Class EX-PPP Certificates on any distribution date (before giving effect to the allocation of any shortfall in interest collections and payment of carryover shortfall amounts) will equal the Class EX-PPP Accrued Interest (as defined in this prospectus supplement). Notwithstanding the foregoing, interest otherwise available for distribution to the Class EX-PPP Certificates on any distribution date may instead be distributed as carryover shortfall amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

 

(20)

 

 

 

For each distribution date, the Class FX Certificates will not receive any distributions of principal, but will accrue interest on the Class FX notional amount, which will equal the aggregate principal balance of the mortgage loans in Subgroup 4-A and Subgroup 5-A as of the second preceding due date. The initial Class FX notional amount will be approximately $120,727,725. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

 

(21)

 

 

 

For each distribution date, the certificate interest rate for the Class FX Certificates will be equal to the weighted average of (i) an amount on each mortgage loan in Subgroup 4-A which is calculated as follows: (a) for each mortgage loan in Subgroup 4-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (b) for each mortgage loan in Subgroup 4-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin (as defined in “Description of the Mortgage Pool” in this prospectus supplement) for such mortgage loan over 1.475% and (ii) an amount on each mortgage loan in Subgroup 5-A which is calculated as follows: (a) for each mortgage loan in Subgroup 5-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (b) for each mortgage loan in Subgroup 5-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin for such mortgage loan over 2.125%.

 

(22)

 

 

 

The amount of interest available for distribution to the Class 5X-PPP Certificates on any distribution date (before giving effect to the allocation of any shortfall in interest collections and payment of carryover shortfall amounts) will equal the Class 5X-PPP Accrued Interest (as defined in this prospectus supplement). Notwithstanding the foregoing, interest otherwise available for distribution to the Class 5X-PPP Certificates on any distribution date may instead be distributed as carryover shortfall amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

 

(23)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-1 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement), (y) LIBOR plus 0.52% and (z) the Maximum Group L-B Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-1 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 0.78% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-1 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-1 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.52%.

 

(24)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the

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Class L-B-2 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 0.60% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-2 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 0.90% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-2 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-2 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.60%.

 

(25)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-3 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 0.75% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-3 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.125% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-3 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-3 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.75%.

 

(26)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class  L-B-4 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 0.90% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-4 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.35% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-4 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-4 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.90%.

 

(27)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-5 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.00% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-5 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.50% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-5 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-5 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See

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“Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.00%.

 

(28)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-6 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.10% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-6 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.650% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-6 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-6 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.10%.

 

(29)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-7 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.50% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-7 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 2.25% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-7 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-7 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.50%.

 

(30)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-8 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-8 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-8 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-8 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

 

(31)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-9, Class L-B-10 and Class L-B-11 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-9, Class L-B-10 and Class L-B-11 Certificates will equal the least

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of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L- B-9, Class L-B-10 and Class L-B-11 Certificates is equal to the Group L-B Weighted Average Pass-Through Rate, the Class L-B-9, Class L-B-10 and Class L-B-11 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

 

(32)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-1 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement), (y) LIBOR plus 0.50% and (z) the Maximum Group M-B Rate (as defined in “Description of the Certificates—Distributions of Interest” in this prospectus supplement). For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-1 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.75% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-1 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-1 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.50%.

 

(33)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-2 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.55% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-2 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.825% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-2 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-2 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.55%.

 

(34)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-3 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 0.90% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-3 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.35% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-3 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-3 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions

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of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 0.90%.

 

(35)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-4 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.25% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-4 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.875% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-4 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-4 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.25%.

 

(36)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-5 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-5 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-5 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-5 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

 

(37)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-6 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-6 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-6 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-6 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

 

(38)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-7 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-7

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Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-7 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-7 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

The Non-Offered Certificates

In addition to the offered certificates, the Trust will also issue the Class L-B-12, Class L-B-13, Class L-B-14, Class M-B-8, Class M-B-9 and Class M-B-10 Certificates. These certificates are not being offered by this prospectus supplement.

The approximate initial class principal balance, annual certificate interest rate and type of each of the Class L-B-12, Class L-B-13, Class L-B-14, Class M-B-8, Class M-B-9 and Class M-B-10 Certificates will be as follows:

 

 

 

 

 

 

 

Class

 

Approximate
Initial Class
Principal
Balance

 

Annual
Certificate
Interest
Rate

 

Type

 

L-B-12

 

 

$

 

3,249,000

   

Variable(1)

 

Subordinate/LIBOR

L-B-13

 

 

 

6,497,000

   

Variable(1)

 

Subordinate/LIBOR

L-B-14

 

 

 

7,308,929

   

Variable(1)

 

Subordinate/LIBOR

M-B-8

 

 

 

6,240,000

   

Variable(2)

 

Subordinate/LIBOR

M-B-9

 

 

 

6,239,000

   

Variable(2)

 

Subordinate/LIBOR

M-B-10

 

 

 

16,379,231

   

Variable(2)

 

Subordinate/LIBOR

 

(1)

 

 

 

For each distribution date on or before the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group L-B Rate. For each distribution date after the Groups 1-2 Clean-Up Call Option Date, the annual certificate interest rate on the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates will equal the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group L-B Rate. In addition, if on any distribution date the certificate interest rate on the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates is equal to the Group L-B Weighted Average Pass- Through Rate, the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class CX-1 and Class CX-2-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

The Class L-B-12, Class L-B-13 and Class L-B-14 Certificates will be subordinate in right of payment to the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP, Class L-B-1, Class L- B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates and will not receive distributions of interest or principal on any distribution date until the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP, Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates have received all distributions of interest and principal that they are entitled to receive on that distribution date. In addition, losses realized on the mortgage loans in loan group 1 and loan group 2 will be allocated to the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates, until their principal balances have been reduced to zero, before they are allocated to the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP, Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates. See “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

 

(2)

 

 

 

For each distribution date on or before the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-8, Class M-B-9 and Class M-B-10

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Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 1.75% and (z) the Maximum Group M-B Rate. For each distribution date after the Groups 3-5 Clean-Up Call Option Date, the annual certificate interest rate on the Class M-B-8, Class M-B-9 and Class M-B-10 Certificates will equal the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus 2.625% and (z) the Maximum Group M-B Rate. In addition, if on any distribution date the certificate interest rate on the Class M-B-8, Class M-B-9 and Class M-B-10 Certificates is equal to the Group M-B Net Weighted Average Pass-Through Rate, the Class M-B-8, Class M-B-9 and Class M-B-10 Certificates may be entitled to receive, as interest, carryover shortfall amounts from amounts, if any, otherwise payable to the Class EX-PPP and Class 5X-PPP Certificates, as described in this prospectus supplement. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For the initial distribution date, after giving effect to carryover shortfall payments, if any, the annual certificate interest rate on these certificates will equal LIBOR as of March 26, 2007 plus 1.75%.

The Class M-B-8, Class M-B-9 and Class M-B-10 Certificates will be subordinate in right of payment to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX, Class 5X-PPP, Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates and will not receive distributions of interest or principal on any distribution date until the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX, Class 5X-PPP, Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates have received all distributions of interest and principal that they are entitled to receive on that distribution date. In addition, losses realized on the mortgage loans in loan group 3, loan group 4 and loan group 5 will be allocated to the Class M-B-8, Class M-B-9 and Class M-B-10 Certificates, until their principal balances have been reduced to zero, before they are allocated to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX, Class 5X-PPP, Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates. See “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

Relationship Between Loan Groups and the Offered Certificates

The certificates whose class designation begins with “1” correspond to loan group 1. The certificates whose class designation begins with “2” correspond to loan group 2. The certificates whose class designation begins with “3” correspond to loan group 3. The certificates whose class designation begins with “4” correspond to loan group 4. The certificates whose class designation begins with “5” correspond to loan group 5. The certificates whose class designation begins with “L” or “C” correspond to loan group 1 and loan group 2. The certificates whose class designation begins with “M” or “D” correspond to loan group 3, loan group 4 and loan group 5. The certificates whose class designation begins with “E” correspond to loan group 4 and loan group 5. The certificates whose class designation begins with “F” correspond to loan group 3 and loan group 4. Each of the certificates generally receives distributions based on principal and interest collected from mortgage loans in its corresponding loan group or loan groups.

Initial Principal Balance of the Certificates

The initial aggregate principal balance of the certificates issued by the Trust is approximately $2,371,959,260, subject to an upward or downward variance of no more than 5%.

The initial aggregate principal balance of the certificates has the following composition:

Certificates related to loan group 1 and loan group 2:

 

 

 

 

the senior certificates related to loan group 1 and loan group 2 comprise approximately 88.75% of the principal balance of the applicable loan group;

 

 

 

 

the Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates comprise approximately 9.15% of the aggregate principal balance of loan group 1 and loan group 2; and

 

 

 

 

the privately offered Class L-B-12, Class L-B-13 and Class L-B-14 Certificates comprise

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approximately 2.10% of the aggregate principal balance of loan group 1 and loan group 2.

Certificates related to loan group 3, loan group 4 and loan group 5:

 

 

 

 

the senior certificates related to loan group 3, loan group 4 and loan group 5 comprise approximately 87.00% of the principal balance of the applicable loan group;

 

 

 

 

the Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates comprise approximately 11.15% of the aggregate principal balance of loan group 3, loan group 4 and loan group 5; and

 

 

 

 

the privately offered Class M-B-8, Class M-B-9 and Class M-B-10 Certificates comprise approximately 1.85% of the aggregate principal balance of loan group 3, loan group 4 and loan group 5.

Last Scheduled Distribution Date

The last scheduled distribution date for each class of certificates is the distribution date in the month after the scheduled maturity date for the latest maturing mortgage loan in the related loan group or loan groups, as applicable.

The actual rate of principal payments on the certificates will depend on the rate of principal payments (including principal prepayments) on the related mortgage loans. No assurance can be given as to the actual payment experience on the mortgage loans.

See “Description of the Certificates—Last Scheduled Distribution Date” in this prospectus supplement.

DISTRIBUTIONS ON THE CERTIFICATES

Monthly Distributions

Each month, the trustee, LaSalle Bank National Association, will make distributions of interest and/or principal to the holders of the certificates. Distributions will be made on the 25th day of each month, or if the 25th day is not a business day, on the next business day. The first distribution date will be April 25, 2007.

Source of Payments. The mortgagors pay their interest and principal during the month to the servicer. Each month, the servicer subtracts its servicing fee and sends the remainder to the trustee. On the distribution date for that month, the trustee distributes that remaining amount by loan group to the holders of the certificates related to that loan group in the order described in “Description of the Certificates—Priority of Distributions” in this prospectus supplement (in accordance with the monthly distribution report). The servicing fee will be calculated as a per annum percentage for each mortgage loan. The following table describes the servicing fee for each type of mortgage loan:

 

 

 

Type of Mortgage Loan

 

Servicing Fee

mortgage loan in subgroup 1-A serviced by Washington Mutual Bank

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan (as stated in the related mortgage note) over 0.90%

mortgage loan in subgroup 1-B serviced by Washington Mutual Bank that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of up to (and including) 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 0.90%

mortgage loan in subgroup 1-B serviced by Washington Mutual Bank that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of greater than 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.60%

mortgage loan in subgroup 2-A serviced by Washington Mutual Bank that has an initial fixed-rate period of one month

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on the applicable mortgage loan over 0.90%

mortgage loan in subgroup 2-A serviced by Washington Mutual Bank that has an initial fixed-rate period of greater than one month

 

0.375%

 

 

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Type of Mortgage Loan

 

Servicing Fee

mortgage loan in subgroup 2-B serviced by Washington Mutual Bank that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of up to (and including) 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 0.90%

mortgage loan in subgroup 2-B serviced by Washington Mutual Bank that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of greater than 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.60%

mortgage loan in loan group 1 and loan group 2 serviced by Countrywide Home Loans

 

0.375% (plus, in the case of certain mortgage loans with lender paid primary mortgage insurance, the amount of the monthly portion of the applicable insurance premium required to be paid at origination, even if no longer required to be paid), with a weighted average as of March 1, 2007 of approximately 0.6519%

mortgage loan in loan group 3 that imposes no prepayment penalty

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on the applicable mortgage loan over 1.10%

mortgage loan in loan group 3 that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of up to (and including) 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.40%

mortgage loan in loan group 3 that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of greater than 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.57%

mortgage loan in subgroup 4-A

 

0.375%

mortgage loan in subgroup 4-B that imposes no prepayment penalty

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on the applicable mortgage loan over 1.10%

mortgage loan in subgroup 4-B that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of up to (and including) 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.40%

mortgage loan in subgroup 4-B that imposes a penalty for voluntary full prepayments and has a prepayment penalty term of greater than 29 months from origination

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.57%

mortgage loan in subgroup 5-A

 

0.375%

mortgage loan in subgroup 5-B

 

the greater of (i) 0.375% and (ii) the excess, if any, of the gross margin on that mortgage loan over 1.75%

Advances. For any month, if the servicer receives a payment on a mortgage loan that is less than the minimum monthly payment due or if no payment is received at all, the servicer will advance its own funds (or, in the case of the mortgage loans serviced by Washington Mutual Bank, either its own funds or funds collected on the mortgage loans but not required to be distributed to the certificateholders on the current distribution date), to cover the difference between the minimum monthly payment due and the amount actually received by the servicer. However,

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the servicer will not be required to make advances if it determines that those advances will not be recoverable from future payments or collections on that mortgage loan. See “The Servicers—WMB—WMB’s Servicing Procedures—Advances” and “The Servicers—Countrywide Home Loans—Countrywide Home Loans’ Servicing Obligations—Advances” in this prospectus supplement.

Distributions of Interest

Each class of offered certificates will accrue interest. On each distribution date interest will be distributed to these classes in the order described in “Description of the Certificates—Priority of Distributions” in this prospectus supplement.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, (i) the Class CX-1 Certificates will be deemed to be comprised of the Class CX-1 Subgroup 1-A IO Component, the Class CX-1 Subgroup 2-A IO Component, the Class CX-1 Subgroup 1-A PO Component and the Class CX-1 Subgroup 2-A PO Component, (ii) the Class CX-2-PPP Certificates will be deemed to be comprised of the Class CX-2-PPP Subgroup 1-B IO Component, the Class CX-2-PPP Subgroup 2-B IO Component, the Class CX-2-PPP Subgroup 1-B PO Component and the Class CX-2-PPP Subgroup 2-B PO Component, (iii) the Class EX-PPP Certificates will be deemed to be comprised of the Class EX-PPP Loan Group 3 IO Component, the Class EX-PPP Loan Group 4 IO Component, the Class EX-PPP Loan Group 3 PO Component and the Class EX-PPP Loan Group 4 PO Component and (iv) the Class 5X-PPP Certificates will be deemed to be comprised of a Class X IO Component and a Class X PO Component. Interest, if any, will be payable with respect to each Class X IO Component. The Class X IO Components will not have a principal balance and principal will not be payable with respect to those Class X IO Components. Each of the Class X PO Components will have a principal balance, which initially will equal zero. Interest will not accrue on any Class X PO Component.

The Class FX Certificates will accrue interest on the Class FX Notional Amount. The Class FX Certificates will not have a principal component and will not receive distributions of principal.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, (i) the Class CA-1B Certificates will be deemed to be comprised of the Class CA-1B Group 1 Component and the Class CA-1B Group 2 Component and (ii) the Class CA-1C Certificates will be deemed to be comprised of the Class CA-1C Group 1 Component and the Class CA-1C Group 2 Component. Each Class CA-1B and Class CA-1C Component will have a component principal balance representing a portion of the related class principal balance. Interest will be payable with respect to each Class CA-1B and Class CA-1C Component.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, (i) the Class DA-1B Certificates will be deemed to be comprised of the Class DA-1B Group 3 Component, Class DA-1B Group 4 Component and the Class DA-1B Group 5 Component and (ii) the Class DA-1C Certificates will be deemed to be comprised of the Class DA-1C Group 3 Component, Class DA-1C Group 4 Component and the Class DA-1C Group 5 Component. Each Class DA-1B and Class DA-1C Component will have a component principal balance representing a portion of the related class principal balance. Interest will be payable with respect to each Class DA-1B and Class DA-1C Component.

Interest to be distributed on the certificates (or added to the principal balance of the certificates in the form of Net Negative Amortization, as defined below) on any distribution date will consist of accrued and unpaid interest as of previous distribution dates and interest accrued during the period beginning on the 25th day of the preceding calendar month (or, in the case of the first distribution date, March 28, 2007) and ending on the 24th day of the month of that distribution date, except for the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A and Class X Certificates (as defined in “Description of the Certificates—General” in this prospectus supplement), which accrue interest during the preceding calendar month. Interest on the Class CA-1B, Class CA-1C, Class DA-1B, Class DA-1C and Class B Certificates (as defined in “Description of the Certificates—General” in this prospectus supplement) will be calculated based on the actual number of days in the certificate accrual period and assuming a 360 day year. Interest on the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A and Class X Certificates will be calculated based on a year consisting of twelve thirty-day months.

In the event that an increase in the applicable index causes interest to accrue on a mortgage loan for a

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given month in excess of the monthly payment for that mortgage loan, the excess interest will be added to the outstanding principal balance of that mortgage loan in the form of “negative amortization.” For any distribution date, the excess, if any, of (i) the aggregate amount of negative amortization with respect to all mortgage loans in a loan group for the calendar month prior to that distribution date, over (ii) the aggregate amount of prepayments in full and partial prepayments received with respect to all mortgage loans in that loan group during the related prepayment period (the “Net Negative Amortization”), will be deducted from interest payable to the related certificates as described in “Description of the Certificates—Distributions of Interest” in this prospectus supplement. The amount deducted from the interest payable to each class of certificates will be added to the principal balance of that class.

It is possible that, on any given distribution date, there will be insufficient payments from the mortgage loans to make the interest distributions (net of any Net Negative Amortization deducted from interest payable) described in this prospectus supplement. If the servicer does not advance its own funds, because it determines that the advance would be nonrecoverable, some certificates, most likely the subordinate certificates, may not receive the full amount of accrued interest to which they are entitled. If this happens, those certificates will be entitled to receive any shortfall in interest distributions on future distribution dates in the same priority as their distribution of current interest. However, there will be no extra interest paid on that shortfall.

The amount of interest each Class CA-1B and Class CA-1C Component, each Class DA-1B and Class DA-1C Component and each class of Class B Certificates accrues during each certificate accrual period will equal a ratio, the numerator of which is the actual number of days in that accrual period and the denominator of which is 360, multiplied by the annual certificate interest rate in effect for that accrual period for that class or component and multiplied by the related class principal balance or component principal balance. The amount of interest the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A and Class FX Certificates accrue during each certificate accrual period will equal 1/12th of the annual certificate interest rate in effect for that accrual period for that class multiplied by their respective class principal balance or class notional amount, as applicable. The principal balance used for this calculation for the Class A Certificates (as defined in “Description of the Certificates—General” in this prospectus supplement) and Class B Certificates on the first distribution date will be the applicable principal balance as of March 28, 2007, which is the closing date. The principal balance used for this calculation on each distribution date thereafter will be the applicable principal balance immediately after the preceding distribution date. For a description of how the interest distributions to the Class X Certificates are determined, see “Description of the Certificates—Distributions of Interest” in this prospectus supplement. The annual certificate interest rate for each class of offered certificates is described on pages S-8 to S-20 of this prospectus supplement.

No interest will accrue on the Class X PO Components.

One-Year MTA Certificates. The certificate interest rates for the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates adjust monthly based on an index (currently the One-Year MTA, as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement). The formulas for the calculation of the certificate interest rates for the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates appear in the notes to the table on pages S-7 and S-8 of this prospectus supplement. However, the certificate interest rates for these classes of certificates are subject to caps described in the notes to the table on pages S-7 and S-8 of this prospectus supplement. For more information, see “Risk Factors—The Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates May Receive Interest at a Certificate Interest Rate Lower than the One-Year MTA Index Plus the Related Margin”, “Description of the Mortgage Pool—The Indexes” and “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

For the initial distribution date only, the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates may receive as interest, in addition to interest accrued at their certificate interest rates, carryover shortfall amounts, as described in “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amount” in this prospectus supplement. The Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates will not

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receive any carryover shortfall payments on any other distribution date.

COFI Certificates. The certificate interest rate for the Class 5A Certificates adjusts monthly based on an index (currently COFI, as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement). The formula for the calculation of the certificate interest rate for the Class 5A Certificates appears in the notes to the table on pages S-7 and S-8 of this prospectus supplement. However, the certificate interest rate for these certificates is subject to a cap described in the notes to the table on pages S-7 and S-8 of this prospectus supplement. For more information, see “Risk FactorsThe Class 5A Certificates May Receive Interest at a Certificate Interest Rate Lower than the COFI Index Plus the Related Margin”, “Description of the Mortgage Pool—The Indexes” and “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

For the initial distribution date only, the Class 5A Certificates may receive as interest, in addition to interest accrued at their certificate interest rate, carryover shortfall amounts, as described in “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amount” in this prospectus supplement. The Class 5A Certificates will not receive any carryover shortfall payments on any other distribution date.

LIBOR Certificates. The certificate interest rates for the Class CA-1B, Class CA-1C, Class DA-1B, Class DA-1C and Class B Certificates (or components thereof) adjust monthly based on the average of quotations of the London Interbank Offered Rate for one-month U.S. dollar deposits, or LIBOR, as described in “Description of the Certificates—Calculation of LIBOR” in this prospectus supplement. The formulas for the calculation of the certificate interest rates for these LIBOR Certificates (or components thereof) appear in the notes to the table on pages S-7 and S-8 of this prospectus supplement. However, the certificate interest rates for these LIBOR Certificates (or the components thereof) are subject to caps described in the notes to the table on pages S-7 and S-8 of this prospectus supplement.

The Class CA-1B, Class CA-1C, Class DA-1B, Class DA-1C and Class B Certificates (or components thereof) may receive as interest, in addition to interest accrued at their certificate interest rates, carryover shortfall amounts, as described in “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement.

Subject to the limitations described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, interest otherwise available for distribution to (i) the Class CX-1 or Class CX-2-PPP Certificates on any distribution date may be reduced by carryover shortfall amounts payable to the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP and Group L-B Certificates (as defined in “Description of the Certificates—General” in this prospectus supplement) and (ii) the Class EX-PPP and Class 5X-PPP Certificates on any distribution date may be reduced by carryover shortfall amounts payable to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C and Group M-B Certificates (as defined in “Description of the Certificates—General” in this prospectus supplement), in each case, as described in “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement.

Compensating Interest and Interest Shortfalls

When mortgagors make prepayments in full, they are required to pay interest only to the date of their prepayment. This may result in a shortfall in the amount available to pay interest accrued on the certificates. When mortgagors make partial prepayments, they do not pay interest on the amount of that prepayment, which also results in a shortfall in the amount available to pay interest accrued on the certificates. To compensate certificateholders for a portion of the shortfall in interest this causes, each servicer may pay compensating interest to the certificateholders out of the servicing fee it collects, as well as, in the case of Washington Mutual Bank, from certain other sources. For a description of how compensating interest payable by each servicer is calculated as well as important limitations on the amount of compensating interest, see “Description of the Certificates—Distributions of Interest—Compensating Interest” and “Yield and Prepayment Considerations” in this prospectus supplement.

Distributions of Principal

General. As the mortgagors pay principal on the mortgage loans in each loan group, that principal is passed on to the holders of the certificates related to that loan group.

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The Class A Certificates and (in the event Net Negative Amortization has been allocated to the Class CX-1, Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates) the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates (or components thereof), in the aggregate, generally will receive their pro rata share of scheduled principal payments received on the mortgage loans in the related loan group or subgroup on each distribution date. In addition, unless credit enhancement to the Class A, Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates (or components thereof) has reached a specified level and the delinquencies and losses on the mortgage loans in the related loan groups do not exceed specified limits, the Class A, Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates (or components thereof), in the aggregate, generally will receive 100% of all principal prepayments received on the mortgage loans in the related loan group, net of any portion thereof applied to reduce negative amortization, until the tenth anniversary of the first distribution date, after which they will receive a disproportionately large, but decreasing, share of principal prepayments.

Certificates Related to Loan Group 1. On each distribution date, a portion of the principal received or advanced on the mortgage loans in loan group 1 will be distributed to the Class 1A Certificates and the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 1 Senior Principal Distribution Amount” in this prospectus supplement. However, not all of these certificates may receive principal on each distribution date. See Appendix A for a table showing, for each class of these certificates (other than the Class CX-1 and Class CX-2-PPP Certificates), the rate of return of principal that would result from different rates of prepayments on the mortgage loans in loan group 1. However, if the Group L-B Certificates are no longer outstanding, then the Class 1A Certificates and the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and CX-2-PPP Subgroup 1-B PO Components will not receive principal in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 1 Senior Principal Distribution Amount” in this prospectus supplement. Instead, each of these classes of certificates will generally receive principal pro rata according to its class principal balance or related component principal balance, as applicable.

Certificates Related to Loan Group 2. On each distribution date, a portion of the principal received or advanced on the mortgage loans in loan group 2 will be distributed to the Class 2A Certificates and the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and CX-2-PPP Subgroup 2-B PO Components in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 2 Senior Principal Distribution Amount” in this prospectus supplement. However, not all of these certificates may receive principal on each distribution date. See Appendix A for a table showing, for each class of these certificates (other than the Class CX-1 and Class CX-2-PPP Certificates), the rate of return of principal that would result from different rates of prepayments on the mortgage loans in loan group 2. However, if the Group L-B Certificates are no longer outstanding, then the Class 2A Certificates and the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and CX-2-PPP Subgroup 2-B PO Components will not receive principal in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 2 Senior Principal Distribution Amount” in this prospectus supplement. Instead, each of these classes of certificates will generally receive principal pro rata according to its class principal balance or related component principal balance, as applicable.

Certificates Related to Loan Group 3. On each distribution date, a portion of the principal received or advanced on the mortgage loans in loan group 3 will be distributed to the Class 3A Certificates and the Class DA-1B Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 3 Senior Principal Distribution Amount” in this prospectus supplement. However, not all of these certificates may receive principal on each distribution date. See Appendix A for a table showing, for each class of these certificates (other than the Class EX-PPP Certificates), the rate of return of principal that would result from different rates of prepayments on the mortgage loans in loan group 3. However, if the Group M-B Certificates are no longer outstanding, then the Class 3A Certificates and the Class DA-1B

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Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components will not receive principal in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 3 Senior Principal Distribution Amount” in this prospectus supplement. Instead, each of these classes of certificates will generally receive principal pro rata according to its class principal balance or related component principal balance, as applicable.

Certificates Related to Loan Group 4. On each distribution date, a portion of the principal received or advanced on the mortgage loans in loan group 4 will be distributed to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and the Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 4 Senior Principal Distribution Amount” in this prospectus supplement. However, not all of these certificates may receive principal on each distribution date. See Appendix A for a table showing, for each class of these certificates (other than the Class EX-PPP Certificates), the rate of return of principal that would result from different rates of prepayments on the mortgage loans in loan group 4. However, if the Group M-B Certificates are no longer outstanding, then the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and the Class DA-1B Group 4, Class DA-1C Group 4 and Class EX- PPP Loan Group 4 PO Components will not receive principal in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 4 Senior Principal Distribution Amount” in this prospectus supplement. Instead, each of these classes of certificates will generally receive principal pro rata according to its class principal balance or related component principal balance, as applicable.

Certificates Related to Loan Group 5. On each distribution date, a portion of the principal received or advanced on the mortgage loans in loan group 5 will be distributed to the Class 5A and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 5 Senior Principal Distribution Amount” in this prospectus supplement. However, not all of these certificates may receive principal on each distribution date. See Appendix A for a table showing, for each class of these certificates (other than the Class 5X-PPP Certificates), the rate of return of principal that would result from different rates of prepayments on the mortgage loans in loan group 5. However, if the Group M-B Certificates are no longer outstanding, then the Class 5A and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components will not receive principal in the order of priority described in “Description of the Certificates—Distributions of Principal—Group 5 Senior Principal Distribution Amount” in this prospectus supplement. Instead, each of these classes of certificates will generally receive principal pro rata according to its class principal balance or related component principal balance, as applicable.

Group L-B Certificates. On each distribution date, the Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10, Class L-B-11, Class L-B-12, Class L-B-13 and Class L-B-14 Certificates will be entitled to receive a portion of the scheduled principal received or advanced on the mortgage loans in loan group 1 and loan group 2, pro rata, according to their respective class principal balances. Unless credit enhancement to the related senior certificates has reached a specified level and the delinquencies and losses on the related mortgage loans do not exceed specified limits, the Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10, Class L-B-11, Class L-B-12, Class L-B-13 and Class L-B-14 Certificates generally will receive a portion of the principal prepayments on the mortgage loans in loan group 1 and loan group 2 only on and after the tenth anniversary of the first distribution date. However, under certain conditions described in this prospectus supplement under “Description of the Certificates—Priority of Distributions,” the amount of principal prepayments otherwise distributable to some classes of Group L-B Certificates will instead be paid to other classes of these certificates with a higher priority.

Group M-B Certificates. On each distribution date, the Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6, Class M-B-7, Class M-B-8, Class M-B-9 and Class M-B-10 Certificates will be entitled to receive a portion of the scheduled principal received or advanced on the mortgage loans in loan group 3, loan group 4 and loan group 5, pro rata, according to their respective class principal balances. Unless credit enhancement to the related senior certificates has

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reached a specified level and the delinquencies and losses on the related mortgage loans do not exceed specified limits, the Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6, Class M-B- 7, Class M-B-8, Class M-B-9 and Class M-B-10 Certificates generally will receive a portion of the principal prepayments on the mortgage loans in loan group 3, loan group 4 and loan group 5 only on and after the tenth anniversary of the first distribution date. However, under certain conditions described in this prospectus supplement under “Description of the Certificates—Priority of Distributions,” the amount of principal prepayments otherwise distributable to some classes of Group M-B Certificates will instead be paid to other classes of these certificates with a higher priority.

Priority of Principal Distributions. Each class of certificates entitled to principal receives its principal entitlements in the order described in “Description of the Certificates—Priority of Distributions” in this prospectus supplement. It is possible that, on any given distribution date, there will be insufficient payments from the mortgage loans to make the principal distributions described in this prospectus supplement. As a result, some certificates, most likely the related subordinate certificates, may not receive the full amount of principal distributions to which they are entitled.

The Class X Certificates will not receive any distributions of principal in respect of their Class X IO Components.

The Class FX Certificates will not receive any distributions of principal.

For a more detailed description of how distributions of principal will be allocated among the various classes of certificates, see “Description of the Certificates—Distributions of Principal” in this prospectus supplement.

Cross-Collateralization of (i) Loan Group 1 and Loan Group 2 and (ii) Loan Group 3, Loan Group 4 and Loan Group 5

In certain limited circumstances, principal and interest collected from loan group 1 may be used to pay principal or interest, or both, to the senior certificates related to loan group 2. In certain limited circumstances, principal and interest collected from loan group 2 may be used to pay principal or interest, or both, to the senior certificates related to loan group 1. In certain limited circumstances, principal and interest collected from loan group 3 may be used to pay principal or interest, or both, to the senior certificates related to loan group 4 or loan group 5. In certain limited circumstances, principal and interest collected from loan group 4 may be used to pay principal or interest, or both, to the senior certificates related to loan group 3 or loan group 5. In certain limited circumstances, principal and interest collected from loan group 5 may be used to pay principal or interest, or both, to the senior certificates related to loan group 3 or loan group 4. None of the senior or subordinate certificates related to loan group 3, loan group 4 or loan group 5 will receive any principal or interest collected from either of loan group 1 or loan group 2 and none of the senior or subordinate certificates related to either of loan group 1 or loan group 2 will receive any principal or interest collected from loan group 3, loan group 4 or loan group 5. See “Description of the Certificates—Cross-Collateralization” in this prospectus supplement.

The Class R Certificates

The Class R Certificates will receive $100 of principal on the first distribution date, as well as one month’s interest on that amount. These certificates are not expected to receive any material distributions on any other distribution date. See “Description of the Certificates—The Class R Certificates” in this prospectus supplement. However, holders of the Class R Certificates may have tax liabilities that substantially exceed any distributions on those certificates. See “Yield and Prepayment Considerations—Additional Yield Considerations Applicable Solely to the Class R Certificates” and “Material Federal Income Tax Consequences—Special Tax Considerations Applicable to the Residual Certificates” in this prospectus supplement.

CREDIT ENHANCEMENTS

Subordination. The senior certificates will receive all distributions of interest and principal that they are entitled to receive on each distribution date before the related subordinate certificates receive any distributions on that distribution date. This provides credit enhancement to the senior certificates. In a similar fashion, each class of subordinate certificates will provide credit enhancement to all other related subordinate certificates with lower numerical class designations.

Shifting of Interests. The senior certificates related to loan group 1 and loan group 2 generally will

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receive their pro rata share of scheduled principal payments received on the mortgage loans in the related loan group on each distribution date. In addition, unless credit enhancement to these senior certificates has reached a specified level and the delinquencies and losses on the related mortgage loans do not exceed specified limits, these senior certificates in the aggregate will receive 100% of all principal prepayments received on the mortgage loans in the related loan group, net of any portion thereof applied to reduce negative amortization, until the tenth anniversary of the first distribution date. During the next four years these senior certificates in the aggregate will generally receive a disproportionately large, but decreasing, share of principal prepayments on the mortgage loans in the related loan group. This will result in a quicker return of principal to these senior certificates and increases the likelihood that holders of these senior certificates will be paid the full amount of principal to which they are entitled.

The senior certificates related to loan group 3, loan group 4 and loan group 5 generally will receive their pro rata share of scheduled principal payments received on the mortgage loans in the related loan group on each distribution date. In addition, unless credit enhancement to these senior certificates has reached a specified level and the delinquencies and losses on the related mortgage loans do not exceed specified limits, these senior certificates in the aggregate will receive 100% of all principal prepayments received on the mortgage loans in the related loan group, net of any portion thereof applied to reduce negative amortization, until the tenth anniversary of the first distribution date. During the next four years these senior certificates in the aggregate will generally receive a disproportionately large, but decreasing, share of principal prepayments on the mortgage loans in the related loan group. This will result in a quicker return of principal to these senior certificates and increases the likelihood that holders of these senior certificates will be paid the full amount of principal to which they are entitled. For a more detailed description of how principal prepayments are allocated among the senior certificates and the related subordinate certificates, see “Description of the Certificates—Principal Prepayments” in this prospectus supplement.

ALLOCATION OF LOSSES

Realized Losses. A loss is realized on a mortgage loan when the servicer determines that it has received all amounts it expects to recover for that mortgage loan and the amounts are less than the outstanding principal balance of the mortgage loan and its accrued and unpaid interest. Losses will be allocated to the certificates by deducting the losses from the principal balance of the certificates without making any payments to the certificateholders. The amount of losses will be allocated to the most junior class of subordinate certificates related to the loan group that suffered those losses then outstanding. Losses will be allocated to the senior certificates only after the principal balances of all of the related subordinate certificates have been reduced to zero. After the principal balances of all of the Group L-B Certificates have been reduced to zero, (i) any principal loss with respect to a mortgage loan in loan group 1 will be allocated to the Class 1A Certificates and Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components, pro rata, until their respective principal balances have been reduced to zero; provided, however, that the aggregate losses so allocated to the Class 1A Certificates and Class CA-1B Group 1 and Class CA-1C Group 1 Components will be allocated (a) first, to the Class CA-1C Group 1 Component, until its component principal balance has been reduced to zero; (b) second, to the Class CA-1C Group 2 Component, until its component principal balance (after giving effect to losses applied in clause (ii)(a) below) has been reduced to zero; (c) third, to the Class CA-1B Group 1 Component, until its component principal balance has been reduced to zero; (d) fourth, to the Class CA-1B Group 2 Component, until its component principal balance (after giving effect to losses applied in (ii)(c) below) has been reduced to zero; and (e) fifth, to the Class 1A Certificates, until their class principal balance has been reduced to zero; and (ii) any principal loss with respect to a mortgage loan in loan group 2 will be allocated to the Class 2A Certificates and Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components, pro rata, until their respective principal balances have been reduced to zero; provided, however, that the aggregate losses so allocated to the Class 2A Certificates and Class CA-1B Group 2 and Class CA-1C Group 2 Components will be allocated (a) first, to the Class CA-1C Group 2 Component, until its component principal balance has been reduced to zero; (b) second, to the Class CA-1C Group 1 Component, until its

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component principal balance (after giving effect to losses applied in clause (i)(a) above) has been reduced to zero; (c) third, to the Class CA-1B Group 2 Component, until its component principal balance has been reduced to zero; (d) fourth, to the Class CA-1B Group 1 Component, until its component principal balance (after giving effect to losses applied in (i)(c) above) has been reduced to zero; and (e) fifth, to the Class 2A Certificates, until their class principal balance has been reduced to zero.

After the principal balances of all of the Group M-B Certificates have been reduced to zero, (i) any principal loss with respect to a mortgage loan in loan group 3 will be allocated to the Class 3A Certificates and Class DA-1B Group 3, Class DA-1C Group 3, Class EX-PPP Loan Group 3 PO Components, pro rata, until their respective principal balances have been reduced to zero; provided, however, that the aggregate losses so allocated to the Class 3A Certificates and Class DA-1B Group 3 and Class DA-1C Group 3 Components will be allocated (a) first, to the Class DA-1C Group 3 Component, until its component principal balance has been reduced to zero; (b) second, to the Class DA-1C Group 4 and Group 5 Components, pro rata, until their component principal balances (after giving effect to losses applied in clauses (ii)(a) and (iii)(a) below, respectively, and pro rata with any loss allocations in clauses (ii)(b) and (iii)(b) below, respectively) have been reduced to zero; (c) third, to the Class DA-1B Group 3 Component, until its component principal balance has been reduced to zero; (d) fourth, to the Class DA-1B Group 4 and Group 5 Components, until their component principal balances (after giving effect to losses applied in clauses (ii)(c) and (iii)(c) below, respectively, and pro rata with any loss allocations in clauses (ii)(d) and (iii)(d) below, respectively) have been reduced to zero; and (e) fifth, to the Class 3A Certificates, until their class principal balance has been reduced to zero; (ii) any principal loss with respect to a mortgage loan in loan group 4 will be allocated to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components, pro rata, until their respective principal balances have been reduced to zero; provided, however, that the aggregate losses so allocated to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and Class DA-1B Group 4 and Class DA-1C Group 4 Components will be allocated (a) first, to the Class DA-1C Group 4 Component, until its component principal balance has been reduced to zero; (b) second, to the Class DA-1C Group 3 and Group 5 Components, until their component principal balances (after giving effect to losses applied in clause (i)(a) above and clause (iii)(a) below, respectively, and pro rata with any loss allocations in clauses (i)(b) above and (iii)(b) below, respectively) have been reduced to zero; (c) third, to the Class DA-1B Group 4 Component, until its component principal balance has been reduced to zero; (d) fourth, to the Class DA-1B Group 3 and Group 5 Components, until their component principal balances (after giving effect to losses applied in clause (i)(c) above and clause (iii)(c) below, respectively, and pro rata with any loss allocations in clauses (i)(d) above and (iii)(d) below, respectively) have been reduced to zero; (e) fifth, to the Class 4A-B Certificates, until their class principal balance has been reduced to zero; and (f) sixth, to the Class 4A-1 and Class 4A-2 Certificates, pro rata, until their class principal balances have been reduced to zero; and (iii) any principal loss with respect to a mortgage loan in loan group 5 will be allocated to the Class 5A and Class 5X-PPP Certificates and Class DA-1B Group 5 and Class DA-1C Group 5 Components, pro rata, until their respective principal balances have been reduced to zero; provided, however, that the aggregate losses so allocated to the Class 5A Certificates and Class DA-1B Group 5 and Class DA-1C Group 5 Components will be allocated (a) first, to the Class DA-1C Group 5 Component, until its component principal balance has been reduced to zero; (b) second, to the Class DA-1C Group 3 and Group 4 Components, pro rata, until their component principal balances (after giving effect to losses applied in clauses (i)(a) and (ii)(a) above, respectively, and pro rata with any loss allocations in clauses (i)(b) and (ii)(b) above, respectively) have been reduced to zero; (c) third, to the Class DA-1B Group 5 Component, until its component principal balance has been reduced to zero; (d) fourth, to the Class DA-1B Group 3 and Group 4 Components, until their component principal balances (after giving effect to losses applied in clauses (i)(c) and (ii)(c) above, respectively, and pro rata with any loss allocations in clauses (i)(d) and (ii)(d) above, respectively) have been reduced to zero; and (e) fifth, to the Class 5A Certificates, until their class principal balance has been reduced to zero.

OPTIONAL TERMINATION

When the aggregate principal balance of the mortgage loans in loan group 1 and loan group 2 has been reduced to less than 10% of that balance

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as of March 1, 2007, Washington Mutual Bank may purchase all of those mortgage loans which will result in the retirement of the related certificates. See “Description of the Certificates—Optional Termination” in this prospectus supplement.

When the aggregate principal balance of the mortgage loans in loan group 3, loan group 4 and loan group 5 has been reduced to less than 10% of that balance as of March 1, 2007, Washington Mutual Bank may purchase all of those mortgage loans which will result in the retirement of the related certificates. See “Description of the Certificates—Optional Termination” in this prospectus supplement.

YIELD CONSIDERATIONS

The yield to maturity on each class of certificates will depend upon, among other things:

 

 

 

 

the price at which the certificates are purchased;

 

 

 

 

the amount payable to that class as interest, as applicable;

 

 

 

 

the amount of net negative amortization;

 

 

 

 

the rate of prepayments (including liquidations) on the related mortgage loans; and

 

 

 

 

whether the optional termination occurs.

The Class X Certificates, which generally receive only distributions of interest (except, with respect to the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates, for amounts added to their class principal balance as a result of the allocation of Net Negative Amortization, which is then distributed to those Class X Certificates as principal, and any amounts distributed to the Class CX-2-PPP, Class EX- PPP and Class 5X-PPP Certificates in respect of prepayment penalties on the related mortgage loans), will be especially sensitive to the rate of prepayments on the related mortgage loans. For a discussion of special yield considerations applicable to these certificates, see “Risk Factors” and “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement.

See “Yield and Prepayment Considerations” in this prospectus supplement.

BOOK-ENTRY REGISTRATION

In general, the offered certificates, other than the Class R Certificates, will be available only in book-entry form through the facilities of The Depository Trust Company, Euroclear and Clearstream. See “Description of the Securities—Form of Securities” in the accompanying prospectus.

DENOMINATIONS

The offered certificates, other than the Class X and Class R Certificates, are offered in minimum denominations of $25,000 each and multiples of $1 in excess of $25,000.

The Class X Certificates are offered in minimum denominations of $100,000 initial class notional amount each and multiples of $1 in excess of $100,000.

The Class R Certificates will have an initial class principal balance of $100 and will be offered in a single certificate that represents a 99.99% interest in its class.

LEGAL INVESTMENT

As of the date of their issuance, all of the offered certificates, other than the Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10, Class L-B-11, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates, will be “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984. See “Certain Legal Investment Aspects” in this prospectus supplement for important information concerning possible restrictions on ownership of the offered certificates by regulated institutions. You should consult your own legal advisors in determining whether and to what extent the offered certificates constitute legal investments for you.

ERISA CONSIDERATIONS

Subject to important considerations described under “ERISA Considerations” in this prospectus supplement and in the accompanying prospectus, the offered certificates, other than the Class CX-2-PPP, Class EX-PPP, Class 5X-PPP and Class R Certificates, will be eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. See “ERISA Considerations” in this prospectus supplement and in the accompanying prospectus.

FEDERAL INCOME TAX CONSEQUENCES

For federal income tax purposes, the servicer will cause one or more REMIC elections to be made with respect to the Trust (exclusive of the prepayment penalties to which the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates are entitled). The offered certificates, other than the Class R Certificates, will represent ownership of

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REMIC regular interests coupled, in the case of the Class A and Class B offered certificates, with rights to receive carryover shortfall amounts and, in the case of the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates with the obligation to pay carryover shortfall amounts, and will generally be treated as representing ownership of debt for federal income tax purposes, to the extent of the REMIC regular interest portion thereof. You will be required to include in income all interest and original issue discount on these certificates in accordance with the accrual method of accounting regardless of your usual methods of accounting. In addition, (i) the Class CX-2-PPP Certificates will also represent a right to receive certain prepayment penalties paid with respect to mortgage loans serviced by Washington Mutual Bank in subgroup 1-B and subgroup 2-B, (ii) the Class EX-PPP Certificates will also represent a right to receive certain prepayment penalties paid with respect to mortgage loans in loan group 3 and loan group 4 and (iii) the Class 5X-PPP Certificates will also represent a right to receive certain prepayment penalties paid with respect to mortgage loans in loan group 5. For federal income tax purposes, the Class R Certificates will represent ownership of the residual interests in each of the REMICs. The portions of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates that represent a right to receive certain prepayment penalties will represent stripped interests in the mortgage loans to which they relate and will not represent an interest in any REMIC.

For further information regarding the federal income tax consequences of investing in the offered certificates, including important information regarding the tax treatment of the Class R Certificates, see “Material Federal Income Tax Consequences” in this prospectus supplement and in the accompanying prospectus.

RATINGS

It is a condition to the issuance of the offered certificates that they receive the following ratings from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and Moody’s Investors Service, Inc.:

 

 

 

 

 

Class

 

Rating Agency

 

S&P

 

Moody’s

 

1A

 

AAA

 

Aaa

2A

 

AAA

 

Aaa

3A

 

AAA

 

Aaa

4A-1

 

AAA

 

Aaa

4A-2

 

AAA

 

Aaa

4A-B

 

AAA

 

Aaa

5A

 

AAA

 

Aaa

CA-1B

 

AAA

 

Aaa

CA-1C

 

AAA

 

Aaa

DA-1B

 

AAA

 

Aaa

DA-1C

 

AAA

 

Aaa

CX-1

 

AAA

 

Aaa

CX-2-PPP

 

AAA

 

Aaa

EX-PPP

 

AAA

 

Aaa

FX

 

AAA

 

Aaa

5X-PPP

 

AAA

 

Aaa

L-B-1

 

AA+

 

Aa1

L-B-2

 

AA

 

Aa1

L-B-3

 

AA–

 

Aa1

L-B-4

 

A+

 

Aa1

L-B-5

 

A

 

Aa2

L-B-6

 

A–

 

Aa3

L-B-7

 

BBB+

 

A1

L-B-8

 

BBB

 

A1

L-B-9

 

BBB–

 

A2

L-B-10

 

BB+

 

Baa1

L-B-11

 

BB

 

Baa3

M-B-1

 

AA+

 

Aa1

M-B-2

 

AA

 

Aa1

M-B-3

 

AA–

 

Aa1

M-B-4

 

Not Rated

 

Aa2

M-B-5

 

Not Rated

 

A2

M-B-6

 

Not Rated

 

Baa1

M-B-7

 

Not Rated

 

Baa3

R

 

AAA

 

Aaa

The ratings on the offered certificates address the likelihood of the receipt by holders of the offered certificates of all distributions on the underlying mortgage loans to which they are entitled. They do not address the likely actual rate of prepayments. The rate of prepayments, if different than originally anticipated, could adversely affect the yield realized by holders of the offered certificates or cause the holders of the Class X Certificates to fail to recover their initial investment. The ratings assigned to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates do not address any assessment of the likelihood or frequency of prepayments on the related mortgage loans or the likelihood of receipt of prepayment penalty payments.

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RISK FACTORS

The offered certificates are not suitable investments for all investors. In particular, you should not purchase any class of offered certificates unless you understand and are able to bear the prepayment, credit, liquidity and market risks associated with that class.

The offered certificates are complex securities and it is important that you possess, either alone or together with your advisors, including your accountants, the expertise necessary to evaluate the information contained in this prospectus supplement and the accompanying prospectus in the context of your financial situation.

 

 

 

 

 

 

 

There is No Guarantee That You Will Receive Principal Payments on Your Certificates at any Specific Rate or on any Specific Dates

 

As the mortgagors make payments of interest and principal on their mortgage loans, you will receive payments. Because the mortgagors are free to make those payments faster than scheduled, you may receive distributions faster than you expected. There is no guarantee that you will receive principal payments on your certificates at any specific rate or on any specific dates.

The Yield on Your Certificates is Directly Related to the Prepayment Rate on the Related Mortgage Loans

 

The yield to maturity on your certificates is directly related to the rate at which the mortgagors pay principal on the related mortgage loans. Principal payments on the mortgage loans may be in the following forms:

 

 

 

scheduled principal payments; and

 

 

 

principal prepayments, which consist of:

 

 

 

 

 

prepayments in full on a mortgage loan;

 

 

 

 

 

partial prepayments on a mortgage loan; and

 

 

 

 

 

liquidation principal, which is the principal recovered after foreclosing on or otherwise liquidating a defaulted mortgage loan.

    Each mortgage loan owned by the Trust is an adjustable-rate mortgage loan with an initial fixed-rate period. In general, during the initial fixed-rate period of zero, one, two or three months, if prevailing mortgage interest rates decline significantly below the mortgage interest rates on the mortgage loans, the prepayment rate may increase. In addition, even after the initial fixed-rate period, if prevailing mortgage interest rates fall significantly, adjustable-rate mortgage loans could be subject to higher prepayment rates than if prevailing mortgage interest rates remain constant because the availability of fixed-rate mortgage loans at competitive interest rates may encourage mortgagors to refinance their mortgage loans to “lock in” lower fixed interest rates. Penalties for early prepayment may also affect the prepayment rate, as they may discourage mortgagors from prepaying their mortgage loans during the period such prepayment penalties are in effect, even in a declining interest rate environment. See “Description of the Mortgage Pool” in this prospectus supplement for a description of prepayment penalties imposed on the mortgage loans. General economic conditions and homeowner mobility will also affect the prepayment

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rate. See “Yield and Prepayment Considerations” in this prospectus supplement and “Yield and Maturity Considerations” in the accompanying prospectus. The prepayment rate may affect the yield on all of the offered certificates. However, if you have purchased a Class X Certificate, the prepayment rate will be especially important to you.

 

 

From time to time, the servicer may implement programs to solicit mortgagors of qualifying mortgage loans that it services for refinance, including mortgage loans underlying the certificates. While those programs will not specifically target the mortgage loans underlying the certificates for refinance, they may have the effect of accelerating the prepayment rate of those mortgage loans, which would adversely affect the yield on all classes of certificates purchased at a premium, particularly the Class X Certificates.

An Optional Termination of the Mortgage Loans in Loan Group 1 and Loan Group 2 or an Optional Termination of the Mortgage Loans in Loan Group 3, Loan Group 4 and Loan Group 5 May Adversely Affect the Related Certificates   When the aggregate principal balance of the mortgage loans in loan group 1 and loan group 2 has been reduced to less than 10% of that balance as of March 1, 2007, Washington Mutual Bank, as servicer, may purchase all of those mortgage loans, which will result in the retirement of the related certificates. Washington Mutual Bank, as servicer, will have this right even if the aggregate principal balance of the mortgage loans in either of loan group 1 or loan group 2 is greater than 10% of that balance as of March 1, 2007. When the aggregate principal balance of the mortgage loans in loan group 3, loan group 4 and loan group 5 has been reduced to less than 10% of that balance as of March 1, 2007, Washington Mutual Bank, as servicer, may purchase all of those mortgage loans, which will result in the retirement of the related certificates. See “Description of the Certificates—Optional Termination” in this prospectus supplement. If this happens, the purchase price paid by Washington Mutual Bank, as servicer, will be passed through to the related certificateholders. This would have the same effect as if all of the remaining related mortgagors made prepayments in full on the last day of the month. Any class of certificates purchased at a premium could be adversely affected by an optional termination. Since the Class CX-1 and Class CX-2-PPP Certificates generally receive only distributions of interest (except, in the case of the Class CX-1 and Class CX-2-PPP Certificates, for interest added to their class principal balances as a result of the allocation of any Net Negative Amortization, which is then distributed to the Class CX-1 and Class CX-2-PPP Certificates as principal, and any amount distributed to the Class CX-2-PPP Certificates in respect of certain prepayment penalties), an optional termination of the mortgage loans in loan group 1 and loan group 2 would adversely affect holders of those certificates. Since the Class FX, Class EX-PPP and

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Class 5X-PPP Certificates generally receive only distributions of interest (except, in the case of the Class EX-PPP and Class 5X-PPP Certificates, for interest added to their class principal balances as a result of the allocation of any Net Negative Amortization, which is then distributed to the Class EX-PPP and Class 5X-PPP Certificates as principal, and any amount distributed to the Class EX-PPP and Class 5X-PPP Certificates in respect of certain prepayment penalties), an optional termination of the mortgage loans in loan group 3, loan group 4 and loan group 5 would adversely affect holders of those certificates.

Rapid Prepayments on the Mortgage Loans in Subgroup 1-A or Subgroup 2-A Will Reduce the Yield on the Class CX-1 Certificates

 

The Class CX-1 Certificates generally receive only distributions of interest (except for amounts added to their class principal balance as a result of the allocation of Net Negative Amortization, which is then distributed to the Class CX-1 Certificates as principal). The yield to maturity on the Class CX-1 Certificates will be extremely sensitive to the level of prepayments on the mortgage loans in subgroup 1-A and subgroup 2-A. The faster that the mortgage loans in subgroup 1-A and subgroup 2-A prepay, the less interest the Class CX-1 Certificates will receive.

 

 

The yield to maturity on the Class CX-1 Certificates will be especially sensitive to the level of prepayments on the mortgage loans in subgroup 1-A and subgroup 2-A with higher interest rates. For each distribution date, the amount of interest available for distribution to the Class CX-1 Certificates is calculated by reference to the Subgroup 1-A Weighted Average Pass-Through Rate and Subgroup 2-A Weighted Average Pass-Through Rate (each as defined in this prospectus supplement). Consequently, the higher the interest rates on the mortgage loans in subgroup 1-A and subgroup 2-A that prepay, the less interest will be available for distribution to the Class CX-1 Certificates. Under certain prepayment scenarios, the Class CX-1 Certificates may not be entitled to receive any interest. If mortgage interest rates decline, the higher interest rate mortgage loans in subgroup 1-A and subgroup 2-A are more likely to be refinanced, and, therefore, prepayments in full on these mortgage loans are more likely to occur.

 

 

You should fully consider the risks associated with an investment in the Class CX-1 Certificates. If the mortgage loans in subgroup 1-A or subgroup 2-A prepay faster than expected, if the rate of liquidations on the mortgage loans in subgroup 1-A or subgroup 2-A is greater than expected or if the Trust is terminated earlier than expected, you may not fully recover your initial investment. See “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement for a table showing expected yields at different prepayment rates.

 

 

 

 

 

 

             

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Rapid Prepayments on the Mortgage Loans in Subgroup 1-B or Subgroup 2-B Will Reduce the Yield on the Class CX-2-PPP Certificates

 

The Class CX-2-PPP Certificates generally receive only distributions of interest (except for amounts added to their class principal balance as a result of the allocation of Net Negative Amortization, which is then distributed to the Class CX-2-PPP Certificates as principal, and certain prepayment penalties collected with respect to mortgage loans serviced by Washington Mutual Bank in subgroup 1-B and subgroup 2-B). The yield to maturity on the Class CX-2-PPP Certificates will be extremely sensitive to the level of prepayments on the mortgage loans in subgroup 1-B and subgroup 2-B. The faster that the mortgage loans in subgroup 1-B and subgroup 2-B prepay, the less interest the Class CX-2-PPP Certificates will receive.

 

 

The yield to maturity on the Class CX-2-PPP Certificates will be especially sensitive to the level of prepayments on the mortgage loans in subgroup 1-B and subgroup 2-B with higher interest rates. For each distribution date, the amount of interest available for distribution to the Class CX-2-PPP Certificates is calculated by reference to the Subgroup 1-B Weighted Average Pass-Through Rate and Subgroup 2-B Weighted Average Pass-Through Rate (each as defined in this prospectus supplement). Consequently, the higher the interest rates on the mortgage loans in subgroup 1-B and subgroup 2-B that prepay, the less interest will be available for distribution to the Class CX-2-PPP Certificates. Under certain prepayment scenarios, the Class CX-2-PPP Certificates may not be entitled to receive any interest. If mortgage interest rates decline, the higher interest rate mortgage loans in subgroup 1-B and subgroup 2-B are more likely to be refinanced, and, therefore, prepayments in full on these mortgage loans are more likely to occur.

 

 

You should fully consider the risks associated with an investment in the Class CX-2-PPP Certificates. If the mortgage loans in subgroup 1-B or subgroup 2-B prepay faster than expected, if the rate of liquidations on the mortgage loans in subgroup 1-B or subgroup 2-B is greater than expected or if the Trust is terminated earlier than expected, you may not fully recover your initial investment. See “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement for a table showing expected yields at different prepayment rates.

Rapid Prepayments on the Mortgage Loans in Loan Group 3 or Loan Group 4 Will Reduce the Yield on the Class EX-PPP Certificates   The Class EX-PPP Certificates generally receive only distributions of interest (except for amounts added to their class principal balance as a result of the allocation of Net Negative Amortization, which is then distributed to the Class EX-PPP Certificates as principal, and certain prepayment penalties collected with respect to mortgage loans in loan group 3 and loan group 4). The yield to maturity on the Class EX-PPP Certificates will

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be extremely sensitive to the level of prepayments on the mortgage loans in loan group 3 and loan group 4. The faster that the mortgage loans in loan group 3 and loan group 4 prepay, the less interest the Class EX-PPP Certificates will receive.

 

 

The yield to maturity on the Class EX-PPP Certificates will be especially sensitive to the level of prepayments on the mortgage loans in loan group 3 and loan group 4 with higher interest rates. For each distribution date, the amount of interest available for distribution to the Class EX-PPP Certificates is calculated by reference to the Loan Group 3 Weighted Average Pass-Through Rate and Loan Group 4 Net Weighted Average Pass-Through Rate (each as defined in this prospectus supplement). Consequently, the higher the interest rates on the mortgage loans in loan group 3 and loan group 4 that prepay, the less interest will be available for distribution to the Class EX-PPP Certificates. Under certain prepayment scenarios, the Class EX-PPP Certificates may not be entitled to receive any interest. If mortgage interest rates decline, the higher interest rate mortgage loans in loan group 3 and loan group 4 are more likely to be refinanced, and, therefore, prepayments in full on these mortgage loans are more likely to occur.

 

 

You should fully consider the risks associated with an investment in the Class EX-PPP Certificates. If the mortgage loans in loan group 3 and loan group 4 prepay faster than expected, if the rate of liquidations on the mortgage loans in loan group 3 and loan group 4 is greater than expected or if the Trust is terminated earlier than expected, you may not fully recover your initial investment. See “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement for a table showing expected yields at different prepayment rates.

Rapid Prepayments on the Mortgage Loans in Subgroup 4-A or Subgroup 5-A Will Reduce the Yield on the Class FX Certificates

 

The Class FX Certificates receive only distributions of interest. The yield to maturity on the Class FX Certificates will be extremely sensitive to the level of prepayments on the mortgage loans in subgroup 4-A and subgroup 5-A. The faster that the mortgage loans in subgroup 4-A and subgroup 5-A prepay, the less interest the Class FX Certificates will receive.

    The yield to maturity on the Class FX Certificates will be especially sensitive to the level of prepayments on the mortgage loans in subgroup 4-A and subgroup 5-A with higher interest rates. For each distribution date, the amount of interest accrued on the Class FX Certificates is calculated by reference to the excess, if any, of the initial Margin on certain mortgage loans in subgroup 4-A and subgroup 5-A over a fixed percentage (as described in note (21) to the table on pages S-7 and S-8 of this prospectus supplement). Consequently, the higher the interest rates on the mortgage loans in

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subgroup 4-A and subgroup 5-A that prepay, the less interest will be available for distribution to the Class FX Certificates. Under certain prepayment scenarios, the Class FX Certificates may not be entitled to receive any interest. If mortgage interest rates decline, the higher interest rate mortgage loans in subgroup 4-A and subgroup 5-A are more likely to be refinanced, and, therefore, prepayments in full on these mortgage loans are more likely to occur.

 

 

You should fully consider the risks associated with an investment in the Class FX Certificates. If the mortgage loans in subgroup 4-A and subgroup 5-A prepay faster than expected, if the rate of liquidations on the mortgage loans in subgroup 4-A and subgroup 5-A is greater than expected or if the Trust is terminated earlier than expected, you may not fully recover your initial investment. See “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement for a table showing expected yields at different prepayment rates.

Rapid Prepayments on the Mortgage Loans in Loan Group 5 Will Reduce the Yield on the Class 5X-PPP Certificates

 

The Class 5X-PPP Certificates generally receive only distributions of interest (except for amounts added to their class principal balance as a result of the allocation of Net Negative Amortization, which is then distributed to the Class 5X-PPP Certificates as principal, and certain prepayment penalties collected with respect to mortgage loans in loan group 5). The yield to maturity on the Class 5X-PPP Certificates will be extremely sensitive to the level of prepayments on the mortgage loans in loan group 5. The faster that the mortgage loans in loan group 5 prepay, the less interest the Class 5X-PPP Certificates will receive.

 

 

The yield to maturity on the Class 5X-PPP Certificates will be especially sensitive to the level of prepayments on the mortgage loans in loan group 5 with higher interest rates. For each distribution date, the amount of interest available for distribution to the Class 5X-PPP Certificates is calculated by reference to the Loan Group 5 Net Weighted Average Pass-Through Rate (as defined in this prospectus supplement). Consequently, the higher the interest rates on the mortgage loans in loan group 5 that prepay, the less interest will be available for distribution to the Class 5X-PPP Certificates. Under certain prepayment scenarios, the Class 5X- PPP Certificates may not be entitled to receive any interest. If mortgage interest rates decline, the higher interest rate mortgage loans in loan group 5 are more likely to be refinanced, and, therefore, prepayments in full on these mortgage loans are more likely to occur.

    You should fully consider the risks associated with an investment in the Class 5X-PPP Certificates. If the mortgage loans in loan group 5 prepay faster than expected, if the rate of liquidations on the mortgage

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loans in loan group 5 is greater than expected or if the Trust is terminated earlier than expected, you may not fully recover your initial investment. See “Yield and Prepayment Considerations—Yield Considerations with Respect to the Class X Certificates” in this prospectus supplement for a table showing expected yields at different prepayment rates.

The Class 1A, Class 2A, Class 3A,
Class 4A-1, Class 4A-2 and Class 4A-B Certificates Will be Sensitive to Changes in the One-Year MTA Index

 

The Class 1A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 1 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the Class 1A Certificates will be sensitive to changes in the index value, unless the certificate interest rate for such certificates is limited to the Loan Group 1 Weighted Average Pass-Through Rate.

 

 

The Class 2A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 2 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index plus the related margin. Accordingly, the Class 2A Certificates will be sensitive to changes in the index value, unless the certificate interest rate for such certificates is limited to the Loan Group 2 Weighted Average Pass-Through Rate.

 

 

The Class 3A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 3 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index plus the related margin. Accordingly, the Class 3A Certificates will be sensitive to changes in the index value, unless the certificate interest rate for such certificates is limited to the Loan Group 3 Weighted Average Pass-Through Rate.

 

 

The Class 4A-1, Class 4A-2 and Class 4A-B Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 4 Net Weighted Average Pass-Through Rate and (y) the One-Year MTA Index plus the related margin. Accordingly, the Class 4A-1, Class 4A-2 and Class 4A-B Certificates will be sensitive to changes in the index value, unless the certificate interest rate for such certificates is limited to the Loan Group 4 Net Weighted Average Pass-Through Rate.

 

 

No prediction can be made as to future levels of the One-Year MTA Index.

 

 

For more information, see “Description of the Mortgage Pool—The Indexes” and “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

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The Class 1A, Class 2A, Class 3A,
Class 4A-1, Class 4A-2 and Class 4A-B Certificates May Receive Interest at a Certificate Interest Rate Lower than
the One-Year MTA Index Plus the
Related Margin

 

The Class 1A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 1 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the prepayment of mortgage loans in loan group 1 with relatively higher pass-through rates may cause the Loan Group 1 Weighted Average Pass- Through Rate to be lower than the One-Year MTA Index plus the related margin, in which case the certificate interest rate for these certificates will be limited to the Loan Group 1 Weighted Average Pass-Through Rate. Therefore, the holders of the Class 1A Certificates will be subject to the risk that interest distributable to those certificates will equal the Loan Group 1 Weighted Average Pass-Through Rate.

 

 

If on the initial distribution date the certificate interest rate for the Class 1A Certificates is limited to the Loan Group 1 Weighted Average Pass-Through Rate, a carryover shortfall amount, equal to the excess, if any, of (i) the amount of interest that would have accrued on such class at a certificate interest rate equal to the One-Year MTA Index plus the related margin, over (ii) the actual amount of interest accrued on such class for such distribution date, will be payable to such certificates, to the extent of available funds on the initial distribution date.

 

 

The Class 2A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 2 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index plus the related margin. Accordingly, the prepayment of mortgage loans in loan group 2 with relatively higher pass-through rates may cause the Loan Group 2 Weighted Average Pass-Through Rate to be lower than the One-Year MTA Index plus the related margin, in which case the certificate interest rate for these certificates will be limited to the Loan Group 2 Weighted Average Pass-Through Rate. Therefore, the holders of the Class 2A Certificates will be subject to the risk that interest distributable to those certificates will equal the Loan Group 2 Weighted Average Pass-Through Rate.

    If on the initial distribution date the certificate interest rate for the Class 2A Certificates is limited to the Loan Group 2 Weighted Average Pass-Through Rate, a carryover shortfall amount, equal to the excess, if any, of (i) the amount of interest that would have accrued on such class at a certificate interest rate equal to the One-Year MTA Index plus the related margin, over (ii) the actual amount of interest accrued on such class for such distribution date, will be payable to such certificates, to

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the extent of available funds on the initial distribution date.

 

 

The Class 3A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 3 Weighted Average Pass-Through Rate and (y) the One-Year MTA Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the prepayment of mortgage loans in loan group 3 with relatively higher pass-through rates may cause the Loan Group 3 Weighted Average Pass- Through Rate to be lower than the One-Year MTA Index plus the related margin, in which case the certificate interest rate for these certificates will be limited to the Loan Group 3 Weighted Average Pass-Through Rate. Therefore, the holders of the Class 3A Certificates will be subject to the risk that interest distributable to those certificates will equal the Loan Group 3 Weighted Average Pass-Through Rate.

 

 

If on the initial distribution date the certificate interest rate for the Class 3A Certificates is limited to the Loan Group 3 Weighted Average Pass-Through Rate, a carryover shortfall amount, equal to the excess, if any, of (i) the amount of interest that would have accrued on such class at a certificate interest rate equal to the One-Year MTA Index plus the related margin, over (ii) the actual amount of interest accrued on such class for such distribution date, will be payable to such certificates, to the extent of available funds on the initial distribution date.

 

 

The Class 4A-1, Class 4A-2 and Class 4A-B Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 4 Net Weighted Average Pass-Through Rate and (y) the One-Year MTA Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the prepayment of mortgage loans in loan group 4 with relatively higher pass-through rates may cause the Loan Group 4 Net Weighted Average Pass-Through Rate to be lower than the One-Year MTA Index plus the related margin, in which case the certificate interest rate for these certificates will be limited to the Loan Group 4 Net Weighted Average Pass-Through Rate. Therefore, the holders of the Class 4A-1, Class 4A-2 and Class 4A-B Certificates will be subject to the risk that interest distributable to those certificates will equal the Loan Group 4 Net Weighted Average Pass-Through Rate.

    If on the initial distribution date the certificate interest rate for the Class 4A-1, Class 4A-2 and Class 4A-B Certificates is limited to the Loan Group 4 Net Weighted Average Pass-Through Rate, a carryover shortfall amount, equal to the excess, if any, of (i) the

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amount of interest that would have accrued on such class at a certificate interest rate equal to the One-Year MTA Index plus the related margin, over (ii) the actual amount of interest accrued on such class for such distribution date, will be payable to such certificates, to the extent of available funds on the initial distribution date.

 

 

However, carryover shortfall amounts will be paid to the Class 1A and Class 2A Certificates on the initial distribution date only, and only to the extent that there are amounts on deposit to pay such shortfalls, funded from interest accrued on and otherwise distributable to the Class CX-1 and Class CX-2- PPP Certificates. Furthermore, on the initial distribution date the amounts available to pay such carryover shortfall amount from interest accrued on and otherwise distributable to the Class CX-1 and Class CX-2-PPP Certificates will be paid in the order of priority described under “Description of the Certificates—Priority of Distributions” in this prospectus supplement. Except to the extent that any carryover shortfall amounts are paid to the Class 1A and Class 2A Certificates from amounts otherwise distributable to the Class CX-1 and Class CX-2-PPP Certificates, the holders of the Class 1A and Class 2A Certificates will be subject to the risk that interest distributable to those classes will equal the Loan Group 1 Weighted Average Pass-Through Rate or Loan Group 2 Weighted Average Pass-Through Rate, as applicable.

 

 

However, carryover shortfall amounts will be paid to the Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates on the initial distribution date only, and only to the extent that there are amounts on deposit to pay such shortfalls, funded from interest accrued on and otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates. Furthermore, on the initial distribution date the amounts available to pay such carryover shortfall amount from interest accrued on and otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates will be paid in the order of priority described under “Description of the Certificates—Priority of Distributions” in this prospectus supplement. Except to the extent that any carryover shortfall amounts are paid to the Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates from amounts otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates, the holders of the Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates will be subject to the risk that interest distributable to those classes will equal the Loan Group 3 Weighted Average Pass-Through Rate or Loan Group 4 Net Weighted Average Pass-Through Rate, as applicable. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

 

 

 

 

 

 

             

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Changes to the Certificate Margins After the Related Clean-Up Call Option Date Will Reduce the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificate Interest Distributions

 

The certificate margins for the Class CA-1B, Class CA-1C and Group L-B Certificates will increase after the Groups 1-2 Clean-Up Call Option Date to the amounts specified in the notes to the table on pages S-7 and S-8 of this prospectus supplement, which will result in a corresponding decrease in the amount of interest available for distribution to the Class CX-1 and CX-2-PPP Certificates. The Groups 1-2 Clean-Up Call Option Date is the date on which the aggregate principal balance of the mortgage loans in loan group 1 and loan group 2 has been reduced to less than 10% of that balance as of March 1, 2007. The certificate margins for the Class DA-1B, Class DA-1C and Group M-B Certificates will increase after the Groups 3-5 Clean-Up Call Option Date to the amounts specified in the notes to the table on pages S-7 and S-8 of this prospectus supplement, which will result in a corresponding decrease in the amount of interest available for distribution to the Class EX-PPP and Class 5X-PPP Certificates. The Groups 3-5 Clean-Up Call Option Date is the date on which the aggregate principal balance of the mortgage loans in loan group 3, loan group 4 and loan group 5 has been reduced to less than 10% of that balance as of March 1, 2007. Consequently, the faster that the mortgage loans prepay, the sooner this change in the amount of interest available for distribution to the Class EX-PPP and Class 5X-PPP Certificates will occur.

The Class 5A Certificates Will be Sensitive to Changes in the COFI Index

 

The Class 5A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 5 Net Weighted Average Pass-Through Rate and (y) the COFI Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the Class 5A Certificates will be sensitive to changes in the index value, unless the certificate interest rate for such certificates is limited to the Loan Group 5 Net Weighted Average Pass-Through Rate. No prediction can be made as to future levels of the COFI Index.

 

 

For more information, see “Description of the Mortgage Pool—The Indexes” and “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

The Class 5A Certificates May Receive Interest at a Certificate Interest Rate Lower than the COFI Index Plus the Related Margin   The Class 5A Certificates will receive interest at a certificate interest rate equal to the lesser of (x) the Loan Group 5 Net Weighted Average Pass-Through Rate and (y) the COFI Index (as described in “Description of the Mortgage Pool—The Indexes” in this prospectus supplement) plus the related margin. Accordingly, the prepayment of mortgage loans in loan group 5 with relatively higher pass-through rates may cause the Loan Group 5 Net Weighted Average Pass-Through Rate to be lower than the COFI Index plus the related margin, in which case the certificate interest rate for these

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certificates will be limited to the Loan Group 5 Net Weighted Average Pass-Through Rate. Therefore, the holders of the Class 5A Certificates will be subject to the risk that interest distributable to those certificates will equal the Loan Group 5 Net Weighted Average Pass-Through Rate.

 

 

If on the initial distribution date the certificate interest rate for the Class 5A Certificates is limited to the Loan Group 5 Net Weighted Average Pass-Through Rate, a carryover shortfall amount, equal to the excess, if any, of (i) the amount of interest that would have accrued on such class at a certificate interest rate equal to the COFI Index plus the related margin over (ii) the actual amount of interest accrued on such class for such distribution date, will be payable to such certificates, to the extent of available funds on the initial distribution date.

 

 

However, any such carryover shortfall amount will be paid to the Class 5A Certificates on the initial distribution date only, and only to the extent that there are amounts on deposit to pay such shortfalls, funded from interest accrued on and otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates. Except to the extent that any carryover shortfall amounts are paid to the Class 5A Certificates from amounts otherwise distributable to the Class EX- PPP and Class 5X-PPP Certificates, the holders of the Class 5A Certificates will be subject to the risk that interest distributable to those classes will equal the Loan Group 5 Net Weighted Average Pass-Through Rate. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

The Class CA-1B, Class CA-1C,
Class DA-1B, Class DA-1C, Group L-B and Group M-B Certificates Will be Sensitive to Changes in LIBOR

 

Each component of the Class CA-1B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Adjusted Loan Group 1 Weighted Average Pass-Through Rate or the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, as applicable (the “Applicable Class CA-1B Net WAC Cap”), (y) LIBOR plus the related margin and (z) the maximum rate described in clause (z) of the applicable paragraph of note (9) in the table on pages S-7 and S-8 of this prospectus supplement (the “Applicable Maximum Class CA-1B Rate”). Accordingly, each component of the Class CA-1B Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such component is limited to the Applicable Class CA-1B Net WAC Cap.

    Each component of the Class CA-1C Certificates will receive interest at a certificate interest rate equal to the least of (x) the Adjusted Loan Group 1 Weighted Average Pass-Through Rate or the Adjusted Loan Group 2 Weighted Average Pass-Through Rate, as applicable (the “Applicable Class CA-1C Net WAC Cap”), (y) LIBOR plus the related margin and (z) the

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maximum rate described in clause (z) of the applicable paragraph of note (11) in the table on pages S-7 and S-8 of this prospectus supplement (the “Applicable Maximum Class CA-1C Rate”). Accordingly, each component of the Class CA-1C Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such component is limited to the Applicable Class CA-1C Net WAC Cap.

 

 

Each component of the Class DA-1B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate or the Adjusted Loan Group 5 Net Weighted Average Pass- Through Rate, as applicable (the “Applicable Class DA-1B Net WAC Cap”), (y) LIBOR plus the related margin and (z) the maximum rate described in clause (z) of the applicable paragraph of note (13) in the table on pages S-7 and S-8 of this prospectus supplement (the “Applicable Maximum Class DA-1B Rate”). Accordingly, each component of the Class DA-1B Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such component is limited to the Applicable Class DA-1B Net WAC Cap.

 

 

Each component of the Class DA-1C Certificates will receive interest at a certificate interest rate equal to the least of (x) the Adjusted Loan Group 3 Weighted Average Pass-Through Rate, the Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate or the Adjusted Loan Group 5 Net Weighted Average Pass- Through Rate, as applicable (the “Applicable Class DA-1C Net WAC Cap”), (y) LIBOR plus the related margin and (z) the maximum rate described in clause (z) of the applicable paragraph of note (15) in the table on pages S-7 and S-8 of this prospectus supplement (the “Applicable Maximum Class DA-1C Rate”). Accordingly, each component of the Class DA-1C Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such component is limited to the Applicable Class DA-1C Net WAC Cap.

 

 

The Group L-B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus the related margin and (z) the Maximum Group L-B Rate. Accordingly, the Group L-B Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such certificates is limited to the Group L-B Weighted Average Pass-Through Rate.

    The Group M-B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus the related margin and (z) the

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Maximum Group M-B Rate. Accordingly, the Group M-B Certificates will be sensitive to changes in LIBOR, unless the certificate interest rate for such certificates is limited to the Group M-B Net Weighted Average Pass-Through Rate.

 

 

No prediction can be made as to future levels of LIBOR.

 

 

See “Description of the Certificates—Distributions of Interest” and “—Calculation of LIBOR” in this prospectus supplement.

The Class CA-1B, Class CA-1C,
Class DA-1B, Class DA-1C, Group L-B and Group M-B Certificates May Receive Interest at a Certificate Interest Rate Lower than LIBOR Plus the Related Margin and the Related Maximum Rate

 

Each component of the Class CA-1B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Applicable Class CA-1B Net WAC Cap, (y) LIBOR plus the related margin and (z) the Applicable Maximum Class CA-1B Rate. Accordingly, the prepayment of mortgage loans in loan group 1 or loan group 2 with relatively higher pass-through rates may cause the Applicable Class CA-1B Net WAC Cap to be lower than LIBOR plus the related margin, in which case the certificate interest rate for the related component of the Class CA-1B Certificates will be limited to the lesser of (i) the Applicable Class CA-1B Net WAC Cap and (ii) the Applicable Maximum Class CA-1B Rate.

 

 

If on any distribution date the certificate interest rate for either Class CA-1B Component is limited to the Applicable Class CA-1B Net WAC Cap, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

 

 

Each component of the Class CA-1C Certificates will receive interest at a certificate interest rate equal to the least of (x) the Applicable Class CA-1C Net WAC Cap, (y) LIBOR plus the related margin and (z) the Applicable Maximum Class CA-1C Rate. Accordingly, the prepayment of mortgage loans in loan group 1 or loan group 2 with relatively higher pass-through rates may cause the Applicable Class CA-1C Net WAC Cap to be lower than LIBOR plus the related margin, in which case the certificate interest rate for the related component of the Class CA-1C Certificates will be limited to the lesser of (i) the Applicable Class CA-1C Net WAC Cap and (ii) the Applicable Maximum Class CA-1C Rate.

    If on any distribution date the certificate interest rate for either Class CA-1C Component is limited to the Applicable Class CA-1C Net WAC Cap, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this

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prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

 

 

Each component of the Class DA-1B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Applicable Class DA-1B Net WAC Cap, (y) LIBOR plus the related margin and (z) the Applicable Maximum Class DA-1B Rate. Accordingly, the prepayment of mortgage loans in loan group 3, loan group 4 or loan group 5 with relatively higher pass-through rates may cause the Applicable Class DA-1B Net WAC Cap to be lower than LIBOR plus the related margin, in which case the certificate interest rate for the related component of the Class DA-1B Certificates will be limited to the lesser of (i) the Applicable Class DA-1B Net WAC Cap and (ii) the Applicable Maximum Class DA-1B Rate.

 

 

If on any distribution date the certificate interest rate for any Class DA-1B Component is limited to the Applicable Class DA-1B Net WAC Cap, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

 

 

Each component of the Class DA-1C Certificates will receive interest at a certificate interest rate equal to the least of (x) the Applicable Class DA-1C Net WAC Cap, (y) LIBOR plus the related margin and (z) the Applicable Maximum Class DA-1C Rate. Accordingly, the prepayment of mortgage loans in loan group 3, loan group 4 or loan group 5 with relatively higher pass-through rates may cause the Applicable Class DA-1C Net WAC Cap to be lower than LIBOR plus the related margin, in which case the certificate interest rate for the related component of the Class DA-1C Certificates will be limited to the lesser of (i) the Applicable Class DA-1C Net WAC Cap and (ii) the Applicable Maximum Class DA-1C Rate.

 

 

If on any distribution date the certificate interest rate for any Class DA-1C Component is limited to the Applicable Class DA-1C Net WAC Cap, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

    The Group L-B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Group L-B Weighted Average Pass-Through Rate, (y) LIBOR plus the related margin and (z) the

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Maximum Group L-B Rate. For any class of these certificates, the prepayment of mortgage loans with relatively higher pass-through rates may cause the Group L-B Weighted Average Pass-Through Rate to be lower than LIBOR plus the related margin, in which case the certificate interest rate for these certificates will be limited to the lesser of (i) the Group L-B Weighted Average Pass-Through Rate and (ii) the Maximum Group L-B Rate.

 

 

If on any distribution date the certificate interest rate for the Group L-B Certificates is limited to the Group L-B Weighted Average Pass-Through Rate, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

 

 

The Group M-B Certificates will receive interest at a certificate interest rate equal to the least of (x) the Group M-B Net Weighted Average Pass-Through Rate, (y) LIBOR plus the related margin and (z) the Maximum Group M-B Rate. For any class of these certificates, the prepayment of mortgage loans with relatively higher pass-through rates may cause the Group M-B Net Weighted Average Pass-Through Rate to be lower than LIBOR plus the related margin, in which case the certificate interest rate for these certificates will be limited to the lesser of (i) the Group M-B Net Weighted Average Pass-Through Rate and (ii) the Maximum Group M-B Rate.

 

 

If on any distribution date the certificate interest rate for the Group M-B Certificates is limited to the Group M-B Net Weighted Average Pass-Through Rate, a carryover shortfall amount, in the amount described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates.

    However, any such carryover shortfall amounts, subject to the limitations described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, will be paid on any distribution date only to the extent that there are amounts on deposit to pay such shortfalls, funded from interest accrued on and otherwise distributable to the Class CX-1 and Class CX-2-PPP Certificates (in the case of the Class CA-1B, Class CA-1C and Group L-B Certificates) or Class EX-PPP and Class 5X-PPP Certificates (in the case of the Class DA-1B, Class DA-1C and Group M-B Certificates). Furthermore, on any distribution date,

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subject to the limitations described under “Description of the Certificates—Distributions of Interest—Carryover Shortfall Amounts” in this prospectus supplement, the amounts available to pay such carryover shortfall amounts from interest accrued on and otherwise distributable to the Class CX-1, Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates will be paid in the order of priority described under “Description of the Certificates—Priority of Distributions” in this prospectus supplement. Accordingly, these carryover shortfall amounts may remain unpaid on the date of any optional termination or the final distribution date.

    Except to the extent that any carryover shortfall amounts are paid to (a) the Class CA-1B Certificates from amounts otherwise distributable to the Class CX-1 and CX-2-PPP Certificates, the holders of the Class CA-1B Certificates will be subject to the risk that interest distributable to those certificates in respect of each component will equal the lesser of (i) the Applicable Class CA-1B Net WAC Cap and (ii) the Applicable Maximum Class CA-1B Rate, (b) the Class CA-1C Certificates from amounts otherwise distributable to the Class CX-1 and CX-2-PPP Certificates, the holders of the Class CA-1C Certificates will be subject to the risk that interest distributable to those certificates in respect of each component will equal the lesser of (i) the Applicable Class CA-1C Net WAC Cap and (ii) the Applicable Maximum Class CA-1C Rate, (c) the Group L-B Certificates from amounts otherwise distributable to the Class CX-1 and CX-2-PPP Certificates, the holders of the Group L-B Certificates will be subject to the risk that interest distributable to those classes will equal the lesser of (i) the Group L-B Weighted Average Pass-Through Rate and (ii) the Maximum Group L-B Rate, (d) the Class DA-1B Certificates from amounts otherwise distributable to the Class EX-PPP and 5X-PPP Certificates, the holders of the Class DA-1B Certificates will be subject to the risk that interest distributable to those certificates in respect of each component will equal the lesser of (i) the Applicable Class DA-1B Net WAC Cap and (ii) the Applicable Maximum Class DA-1B Rate, (e) the Class DA-1C Certificates from amounts otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates, the holders of the Class DA-1C Certificates will be subject to the risk that interest distributable to those certificates in respect of each component will equal the lesser of (i) the Applicable Class DA-1C Net WAC Cap and (ii) the Applicable Maximum Class DA-1C Rate and (f) the Group M-B Certificates from amounts otherwise distributable to the Class EX-PPP and Class 5X-PPP Certificates, the holders of the Group M-B Certificates will be subject to the risk that interest distributable to those classes will equal the lesser of (i) the Group M-B

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Net Weighted Average Pass-Through Rate and (ii) the Maximum Group M-B Rate. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

Certificates Bought at Premiums and Discounts May Receive a Lower Yield Than Expected

 

If you purchase a certificate at a discount from its original principal balance and the rate of principal payments is slower than you expect, your yield may be lower than you anticipate. If you purchase a certificate at a premium over its original principal balance and the rate of principal payments is faster than you expect, your yield may be lower than you anticipate.

Losses on the Mortgage Loans Will Reduce the Yield on the Certificates

 

The yield to maturity of the Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates will be sensitive to losses on the mortgage loans in loan group 1 and loan group 2 that occur after the aggregate principal balance of the Class L-B-12, Class L-B-13 and Class L-B-14 Certificates has been reduced to zero. Losses on the mortgage loans in loan group 1 and loan group 2 that occur after that time will be allocated exclusively to the Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B- 8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates in reverse numerical order until the aggregate principal balance of those certificates has been reduced to zero.

 

 

In addition, if the aggregate principal balance of all the Group L-B Certificates has been reduced to zero, (i) any loss with respect to a mortgage loan in loan group 1 will be allocated to the Class 1A Certificates and Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components and (ii) any loss with respect to a mortgage loan in loan group 2 will be allocated to the Class 2A Certificates and Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components, in the case of each of clause (i) and (ii), as described under “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

    The yield to maturity of the Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates will be sensitive to losses on the mortgage loans in loan group 3, loan group 4 and loan group 5 that occur after the aggregate principal balance of the Class M-B-8, Class M-B-9 and Class M-B-10 Certificates has been reduced to zero. Losses on the mortgage loans in loan group 3, loan group 4 and loan group 5 that occur after that time will be allocated exclusively to the Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates in reverse numerical order until

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the aggregate principal balance of those certificates has been reduced to zero.

 

 

In addition, if the aggregate principal balance of all the Group M-B Certificates has been reduced to zero, (i) any loss with respect to a mortgage loan in loan group 3 will be allocated to the Class 3A Certificates and Class DA-1B Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components, (ii) any loss with respect to a mortgage loan in loan group 4 will be allocated to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components and (iii) any loss with respect to a mortgage loan in loan group 5 will be allocated to the Class 5A and Class 5X-PPP Certificates and Class DA-1B Group 5 and Class DA-1C Group 5 Components, in the case of each of clause (i), (ii) and (iii), as described under “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

 

 

See “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

Losses on the Mortgage Loans in either of Loan Group 1 or Loan Group 2 May Reduce the Yield on Senior Certificates Unrelated to That Loan Group

 

Because the Group L-B Certificates represent interests in the mortgage loans in loan group 1 and loan group 2, the class principal balances of those subordinate certificates could be reduced to zero as a result of realized losses on the mortgage loans in either of these loan groups. Therefore, the allocation of realized losses on the mortgage loans in either of loan group 1 and loan group 2 to the Group L-B Certificates will reduce the subordination provided by those subordinate certificates to all of the related senior certificates, including the senior certificates related to any of these loan groups that did not suffer any losses. This will increase the likelihood that future realized losses may be allocated to the senior certificates related to a loan group that did not suffer those previous losses.

    Similarly, if the Group L-B Certificates are no longer outstanding, because losses on the mortgage loans in loan group 1 and loan group 2 are allocated to the Class CA-1B and Class CA-1C Certificates, the class principal balance of the Class CA-1B and Class CA-1C Certificates could be reduced to zero as a result of a disproportionate amount of losses on the mortgage loans in one or both of those loan groups. Therefore, the allocation to the Class CA-1B and Class CA-1C Certificates of realized losses on the mortgage loans in loan group 1 will increase the likelihood that future realized losses in loan group 2 may be allocated to the senior certificates (or components thereof, as applicable) relating to loan group 2, and the allocation of the Class CA-1B and Class CA-1C Certificates of realized losses on the mortgage loans in loan group 2 will

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increase the likelihood that future realized losses in loan group 1 may be allocated to the senior certificates (or components thereof, as applicable) relating to loan group 1, respectively.

 

 

See “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

Losses on the Mortgage Loans in either of Loan Group 3, Loan Group 4 or Loan Group 5 May Reduce the Yield on Senior Certificates Unrelated to That Loan Group

 

Because the Group M-B Certificates represent interests in the mortgage loans in loan group 3, loan group 4 and loan group 5, the class principal balances of those subordinate certificates could be reduced to zero as a result of realized losses on the mortgage loans in either of these loan groups. Therefore, the allocation of realized losses on the mortgage loans in either of loan group 3, loan group 4 and loan group 5 to the Group M-B Certificates will reduce the subordination provided by those subordinate certificates to all of the related senior certificates, including the senior certificates related to any of these loan groups that did not suffer any losses. This will increase the likelihood that future realized losses may be allocated to the senior certificates related to a loan group that did not suffer those previous losses.

 

 

Similarly, if the Group M-B Certificates are no longer outstanding, because losses on the mortgage loans in loan group 3, loan group 4 and loan group 5 are allocated to the Class DA-1B and Class DA-1C Certificates, the class principal balance of the Class DA-1B and Class DA-1C Certificates could be reduced to zero as a result of a disproportionate amount of losses on the mortgage loans in one or more of those loan groups. Therefore, the allocation to the Class DA-1B and Class DA-1C Certificates of realized losses on the mortgage loans in loan group 3 will increase the likelihood that future realized losses in loan group 4 or loan group 5 may be allocated to the senior certificates (or components thereof, as applicable) relating to loan group 4 or loan group 5, and the allocation of the Class DA-1B and Class DA-1C Certificates of realized losses on the mortgage loans in loan group 4 will increase the likelihood that future realized losses in loan group 3 or loan group 5 may be allocated to the senior certificates (or components thereof, as applicable) relating to loan group 3 or loan group 5 and the allocation of the Class DA-1B and Class DA-1C Certificates of realized losses on the mortgage loans in loan group 5 will increase the likelihood that future realized losses in loan group 3 or loan group 4 may be allocated to the senior certificates (or components thereof, as applicable) relating to loan group 3 or loan group 4, respectively.

 

 

See “Description of the Certificates—Subordination and Allocation of Losses” in this prospectus supplement.

 

 

 

 

 

 

             

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The Lack of Secondary Markets May Make it Difficult for You to Resell Your Certificates and Your Investment May Lose Value

 

The underwriter may make a secondary market in the classes of offered certificates actually purchased by it, but it has no obligation to do so. There is no assurance that such a secondary market will develop or, if it develops, that it will continue. Consequently, you may not be able to sell your certificates readily or at prices that will enable you to realize your desired yield. The market values of the offered certificates are likely to fluctuate; these fluctuations may be significant and could result in significant losses to you.

 

 

Investments can lose value because of actual performance as well as perceptions of future performance based on changes in the external interest rate environment and other market factors not directly related to the performance of the mortgage loans themselves.

 

 

The secondary markets for asset-backed securities have experienced periods of illiquidity and may be expected to do so in the future. Illiquidity can have a severely adverse effect on the prices of securities that are especially sensitive to prepayment, credit, or interest rate risk, or that have been structured to meet the investment requirements of limited categories of investors.

The Lack of Physical Certificates for Some Certificates May Cause Delays in Payment

 

You will not have a physical certificate if you own a Class A, Class X or Class B Certificate. As a result, you will be able to transfer your certificates only through The Depository Trust Company, participating organizations, including Euroclear and Clearstream and indirect participants. In addition, you may experience some delay in receiving distributions on these certificates because the trustee will not send distributions directly to you. Instead, the trustee will send all distributions to The Depository Trust Company, which will then credit those distributions to the participating organizations. Those organizations will in turn credit accounts you have either directly with them or indirectly with them through indirect participants.

The Return on Your Certificates Could be Reduced due to the Application of the Servicemembers Civil Relief Act or any Comparable State Legislation   Following the terrorist attacks in the United States on September 11, 2001, the United States has increased its active military operations (including, most recently, significant military actions in Iraq) and has placed a substantial number of military 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 in the near future may increase. Calling reservists, members of the National Guard and civilians to active military duty may adversely affect the performance of your certificates. Under the Servicemembers Civil Relief Act, as amended (the “Relief Act”), formerly known as the Soldiers’ and Sailors’ Civil Relief Act of 1940, persons in active military service are provided relief from the performance of some payment obligations. The relief includes a

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6.000% per annum interest rate cap on each mortgage loan, provided that the mortgage loan was obtained before the commencement of active military service. In addition, all civil court actions, such as bankruptcy and foreclosure proceedings, are delayed. Furthermore, the servicer may be required to waive all or part of any prepayment penalty that would otherwise be due during the time that any mortgage loan is subject to the Relief Act.

 

 

State legislation may provide similar relief for military personnel placed on active duty status. For the purpose of this prospectus supplement, references to the Relief Act include any such comparable state legislation.

 

 

The application of the interest rate cap to any mortgage loan underlying the related certificates would result in certificateholders receiving less interest than they would otherwise be entitled to. The interest shortfall on any distribution date arising out of each of these mortgage loans would be equal to one month of interest on the principal balance of the mortgage loan at a rate equal to the difference between the interest rate payable by the borrower under the terms of the applicable mortgage note and 6.000%. The interest shortfall would be deducted from the interest payable to each class of related certificates, pro rata, in accordance with interest accrued on each class of certificates (or component thereof, as applicable) related to that loan group for the applicable distribution date.

 

 

The effect of a delay in foreclosure proceedings with respect to any mortgage loan underlying the related certificates could be to cause a loss, or increase the severity of any loss that would have otherwise occurred, upon the final liquidation of the mortgage loan. These losses in (i) loan group 1 and loan group 2 would be applied first to the Class L-B-14, Class L-B-13, Class L-B-12, Class L-B-11, Class L-B-10, Class L-B-9, Class L-B-8, Class L-B-7, Class L-B-6, Class L-B-5, Class L-B-4, Class L-B-3, Class L-B-2 and Class L-B-1 Certificates, in that order, and then to the related senior certificates and (ii) loan group 3, loan group 4 and loan group 5 would be applied first to the Class M-B-10, Class M-B-9, Class M-B-8, Class M-B-7, Class M-B-6, Class M-B-5, Class M-B-4, Class M-B-3, Class M-B-2 and Class M-B-1 Certificates, in that order, and then to the related senior certificates.

 

 

Neither the depositor nor the servicer is able to determine how many of the mortgage loans underlying the certificates may be affected by application of the Relief Act in the future.

The Balloon Loans Have a Greater Degree of Risk of Default   As of March 1, 2007, approximately 1.4% of the mortgage loans in loan group 1 and approximately 4.2% of the mortgage loans in loan group 2 (in each case, by principal balance as of March 1, 2007) will not fully

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amortize over their terms to maturity and, thus, will require principal payments at their stated maturity, which may be substantially greater than the monthly payments otherwise due on such mortgage loans (i.e., balloon payments). All of these mortgage loans amortize over 40 years, but require payment in full 360 months after the origination of such mortgage loans. Mortgage loans with balloon payments involve a greater degree of risk because the ability of a mortgagor to make a balloon payment typically will depend on the mortgagor’s ability either to timely refinance the loan or to timely sell the related mortgaged property. The ability of a mortgagor to refinance the loan or sell the related mortgaged property will be affected by a number of factors, including:

 

 

 

the level of available mortgage interest rates at the time of refinancing or sale;

 

 

 

the mortgagor’s equity in the related mortgaged property;

 

 

 

prevailing general economic conditions; and

 

 

 

the availability of credit for one- to four-family residential properties generally.

The Geographic Concentration of the Mortgaged Properties Relating to the Mortgage Loans Increases Your Exposure to Adverse Conditions in California or in Other States With High Concentrations of Mortgaged Properties

 

The geographic concentration of mortgaged properties can expose the related mortgage loans to a higher incidence of losses due to a greater susceptibility to hazards not covered by standard hazard insurance, such as hurricanes, floods, mudslides and earthquakes, than properties located in other parts of the country. Also, the geographic concentration of mortgaged properties can expose the related mortgage loans to a higher incidence of losses due to economic conditions in states that have higher concentrations of businesses in particular economic segments than the nation as a whole. Consequently, the high concentration of mortgage loans in California or other states may adversely affect losses and prepayments on the mortgage loans which, in turn, would adversely affect the certificates. See Appendix B to this prospectus supplement for a table showing the geographic distribution of the mortgage loans by state.

A Loss or Delinquency on a Mortgage Loan May Have a Disproportionate Impact on the Performance of the Mortgage Pool Because the Mortgage Loans Have High Principal Balances

 

As of March 1, 2007, some of the mortgage loans had original principal balances in excess of $1,000,000. You should consider the risk that the loss and delinquency experience on the higher balance mortgage loans may have a disproportionate effect on the mortgage loans as a whole. A loss of the entire principal balance of one of these mortgage loans may result in a substantial realized loss, which may be allocated to the offered certificates. See Appendix B to this prospectus supplement for a table showing the original principal balance ranges of the mortgage loans.

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Not All Mortgage Loans Impose Prepayment Penalties, and Those That Do Impose Them for Only a Limited Period of Time

 

As of March 1, 2007, certain of the mortgage loans impose prepayment penalties for certain prepayments of principal. See Appendix B to this prospectus supplement for a table showing prepayment penalty terms of the mortgage loans. Generally, the mortgage loans with prepayment penalties provide for the payment of a penalty in connection with certain voluntary, full or partial prepayments made within a period of time specified in the related mortgage note and generally ranging from six to 60 months from the date of origination of such mortgage loan. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note. Such prepayment penalty may discourage mortgagors from prepaying their mortgage loans during the period such prepayment penalties are in effect and, accordingly, thereby affect the rate of prepayment of such mortgage loans even in a declining interest rate environment. See the “Prepayment Penalty Terms of the Subgroup 1-B Loans”, “Prepayment Penalty Terms of the Subgroup 2-B Loans,” “Prepayment Penalty Terms of the Loan Group 3 Loans,” “Prepayment Penalty Terms of the Loan Group 4 Loans” and “Prepayment Penalty Terms of the Loan Group 5 Loans” tables in Appendix B hereto for information regarding the number of loans, and the related percentage of each loan group, that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

Only Penalties on Voluntary Prepayments in Full Will Be Assigned to the Class CX-2-PPP, Class EX-PPP and 5X-PPP Certificateholders

 

The Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will receive distributions of interest and principal as described in this prospectus supplement. In addition, the Class CX-2-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for subgroup 1-B and subgroup 2-B, the Class EX-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for loan group 3 and loan group 4 and the Class 5X-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for loan group 5.

    The “Assigned Prepayment Penalties” for a loan group or subgroup and a distribution date will equal the sum of (a) all prepayment penalty payments remitted to the Trust with respect to voluntary full prepayments on those mortgage loans in that loan group or subgroup serviced by Washington Mutual Bank that have prepayment penalties during the Prepayment Penalty Period and (b) any amounts paid by Washington Mutual Bank, as servicer, during the Prepayment Penalty Period pursuant to the pooling agreement if Washington Mutual Bank, as servicer, waives a penalty on a voluntary full prepayment of such a mortgage loan other than in accordance with the standards set forth in the pooling agreement, or paid by Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, during the Prepayment Penalty Period

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pursuant to the related mortgage loan sale agreement if it breaches certain representations and warranties with respect to such mortgage loans that require payment of a penalty on voluntary full prepayment.

 

 

The holders of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will not receive any prepayment penalty payments collected by Washington Mutual Bank, as servicer, with respect to voluntary partial prepayments; each such payment will be retained by Washington Mutual Bank, as servicer, as additional servicing compensation. No prepayment penalty payments will be available for distribution to holders of the other classes of certificates.In addition, in the event of a material breach of the representations and warranties made by the depositor, Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as a mortgage loan seller, with respect to the mortgage loans, the breaching party may be required to repurchase the affected mortgage loan from the Trust (or substitute a new mortgage loan for that mortgage loan). The holders of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will not receive any prepayment penalties paid, after the date of repurchase or substitution, on a mortgage loan that was repurchased or substituted for.

 

 

No prepayment penalty payments will be available for distribution to holders of the other classes of certificates.

There are Limitations in the Mortgage Loans on the Imposition of Prepayment Penalties; The Servicer May Waive Prepayment Penalties Under Certain Circumstances

 

Some of the mortgage loans that impose penalties for voluntary full prepayments contain an exception for prepayments in full made in connection with a bona fide and arm’s length sale of the related mortgaged property during a certain period following origination, or after a certain period following origination, as specified in the mortgage note or contain various other exceptions specified in the mortgage note, and therefore penalties are not imposed on such prepayments and are not available for distribution to the Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates.

    In addition, under certain circumstances set forth in the pooling agreement, the payment of any otherwise applicable penalty for voluntary full prepayment by a mortgagor, on a mortgage loan serviced by Washington Mutual Bank, may be waived by Washington Mutual Bank, as servicer, and, if waived in accordance with the terms of the pooling agreement, the amount of the waived penalty will not be available for distribution to the holders of the Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates. Circumstances under which Washington Mutual Bank, as servicer, may waive a prepayment penalty include, among other circumstances set forth in the pooling agreement, (i) some cases, for mortgage loans originated by Washington Mutual Bank

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or an affiliate thereof, where the mortgagor sells the mortgaged property and obtains a new mortgage loan originated and serviced by the servicer to purchase another property, provided that the prepayment is made no earlier than one year after origination, (ii) some cases, for mortgage loans originated by the servicer or an affiliate thereof with prepayment penalty terms longer than one year, where the mortgagor refinances the mortgage loan with a new mortgage loan originated and serviced by the servicer, provided that 90 days or less remain in the prepayment penalty term or (iii) for prepayments of accrued but unpaid interest that has been added to principal as a result of negative amortization.

 

 

No prepayment penalty payments on any mortgage loan serviced by Countrywide Home Loans will be remitted to the Trust. All such payments on mortgage loans serviced by Countrywide Home Loans will be retained by Countrywide Home Loans and will not be payable to any class of certificates.

 

 

Moreover, regardless of the terms of the mortgage note, the servicer will not collect prepayment penalties required to be paid more than three years after the origination of the mortgage loan.

 

 

Investors should conduct their own analysis of the effect that the payment of penalties for voluntary full prepayment of the related mortgage loans, or decisions by Washington Mutual Bank, as servicer, with respect to waiver thereof, may have on the performance of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates. See also “Description of the Mortgage Pool” and “Description of the Certificates—Distributions to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates” in this prospectus supplement for a description of prepayment penalties imposed on the related mortgage loans.

Additional Risks Relating to Option ARM Loans

 

In addition to the risk factors described in this prospectus supplement, you should carefully consider the risk factors described under “Additional Risk Factors Applicable to Negative Amortization Loans” in the accompanying prospectus, as well as the other risk factors in the accompanying prospectus related to your certificates.

The Conservatorship, Receivership, or Insolvency of Washington Mutual Bank as Mortgage Loan Seller Could Result In Delayed or Reduced Distributions on the Certificates   In addition to the applicable risk factors described in the accompanying prospectus, investors should consider the following risk factor:
In the receivership of an unrelated national bank, the FDIC successfully argued that certain of its rights and powers extended to a statutory trust formed by that national bank in connection with a securitization of credit card receivables. If Washington Mutual Bank were to enter conservatorship or receivership, the FDIC could

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argue that its rights and powers extend to the depositor or the Trust. If the FDIC were to take this position and seek to repudiate or otherwise affect the rights of the trustee or the holders of the certificates under any transaction document, delays or reductions in distributions on the certificates could result.

 

 

There could also be delays or reductions in distributions on the certificates if the FDIC successfully asserts that a statutory injunction automatically prevents the Trust, the trustee, and the holders of the certificates from exercising their rights, remedies, and interests for up to 90 days.

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THE SPONSORS

General

Washington Mutual Mortgage Securities Corp., as Co-Sponsor

Washington Mutual Mortgage Securities Corp., a co-sponsor of the securitization transaction, is a Delaware corporation and a wholly owned subsidiary of Washington Mutual Bank and an indirect wholly- owned subsidiary of Washington Mutual, Inc. At December 31, 2006, Washington Mutual, Inc. and its subsidiaries had assets of $346.3 billion. Washington Mutual Mortgage Securities Corp. engages in the business of (i) purchasing mortgage loans on a servicing retained and servicing released basis, (ii) selling mortgage loans in whole loan transactions and securitizing mortgage loans through affiliated and unaffiliated depositors, (iii) master servicing mortgage loans, (iv) acting as administrative agent of Washington Mutual Bank and its affiliates with respect to mortgage loans serviced by Washington Mutual Bank and its affiliates and (v) providing securitization services. Washington Mutual Mortgage Securities Corp. generally acts as master servicer or administrative agent with respect to all mortgage loans securitized by Washington Mutual Mortgage Securities Corp.

Securitization of mortgage loans is an integral part of Washington Mutual Mortgage Securities Corp.’s conduit program. It has engaged in securitizations of first lien single-family residential mortgage loans through WaMu Asset Acceptance Corp., as depositor, since 2005, and has acted as its own depositor from 1979 until 2005.

Washington Mutual Mortgage Securities Corp. participated with the underwriter in structuring the securitization transaction.

The following table shows, for each indicated period, the aggregate principal balance of first and second lien single-family residential mortgage loans purchased by Washington Mutual Mortgage Securities Corp. during that period (except mortgage loans purchased in its capacity as depositor from an affiliated sponsor) and the portion of those mortgage loans securitized during that period in securitization transactions for which it or WaMu Asset Acceptance Corp. acted as depositor.

Washington Mutual Mortgage Securities Corp.’s Purchase and Securitization of Single-Family
Residential Mortgage Loans

 

 

 

 

 

 

 

 

 

Year Ended
December 31, 2004

 

Year Ended
December 31, 2005

 

Year Ended
December 31, 2006

 

 

(Dollar Amounts in Millions)

Aggregate Principal Balance of Mortgage Loans Purchased by Washington Mutual Mortgage Securities Corp.

 

 

$

 

10,803

   

 

$

 

11,265

   

 

$

 

24,861

 

Aggregate Principal Balance of Mortgage Loans Securitized

 

 

$

 

1,045

   

 

$

 

7,149

   

 

$

 

17,051

 

Washington Mutual Bank, as Co-Sponsor

Washington Mutual Bank, a co-sponsor of the securitization transaction, is a federal savings association that provides financial services to consumers and commercial clients. It is an indirect wholly-owned subsidiary of Washington Mutual, Inc. At December 31, 2006, Washington Mutual, Inc. and its subsidiaries had assets of $346.3 billion. Washington Mutual Bank and its affiliates currently operate more than 2,600 retail banking, mortgage lending, commercial banking and financial services offices throughout the United States.

Securitization of mortgage loans is an integral part of Washington Mutual Bank’s management of its capital. It has engaged in securitizations of first lien single-family residential mortgage loans through WaMu Asset Acceptance Corp., as depositor, since 2005, and through Washington Mutual Mortgage Securities Corp., as depositor, since 2001. From 1997 until 2001, Washington Mutual Bank engaged in securitizations of single-family residential mortgage loans through unaffiliated depositors, and some of its predecessor organizations also securitized mortgage loans. It has engaged in securitizations of multi-family and commercial mortgage loans through unaffiliated depositors since 2001.

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Washington Mutual Bank generally acts as servicer of all mortgage loans securitized by Washington Mutual Bank, and it will act as servicer of the mortgage loans owned by the Trust. Washington Mutual Bank participated with the underwriter in structuring the securitization transaction.

The following table shows, for each indicated period, the aggregate principal balance of first lien single-family residential mortgage loans originated by Washington Mutual Bank (or purchased by Washington Mutual Bank from correspondent lenders) during that period and the portion of those mortgage loans securitized during that period through affiliated depositors.

Washington Mutual Bank’s Origination and Securitization of Single-Family
Residential Mortgage Loans

 

 

 

 

 

 

 

 

 

Year Ended
December 31, 2004

 

Year Ended
December 31, 2005

 

Year Ended
December 31, 2006

 

 

(Dollar Amounts in Millions)

Aggregate Principal Balance of Mortgage Loans Originated by Washington Mutual Bank

 

 

$

 

212,362

   

 

$

 

207,722

   

 

$

 

158,383

 

Aggregate Principal Balance of Mortgage Loans Securitized

 

 

$

 

34,707

   

 

$

 

71,584

   

 

$

 

70,781

 

The Sponsor’s Origination Channels

All of the mortgage loans owned by the Trust have been either originated by Washington Mutual Bank or purchased by Washington Mutual Mortgage Securities Corp. either from Washington Mutual Bank or from approved mortgage loan sellers. Through Washington Mutual Mortgage Securities Corp.’s conduit program, Washington Mutual Mortgage Securities Corp. purchases mortgage loans in bulk from approved mortgage loan sellers on both a servicing retained and servicing released basis. In initially approving a mortgage loan seller, Washington Mutual Mortgage Securities Corp. takes into account the following: annual origination volume, tenure of business and key staff in originating loans, policies and procedures for originating loans including quality control and appraisal review, review audits performed on mortgage loan seller by rating agencies, regulatory agencies and government sponsored entities, the mortgage loan seller’s financial statements, errors and omissions insurance coverage and fidelity bond and liability insurance coverage. Approved mortgage loan sellers’ financial statements, insurance coverage and new review audits are reviewed on an annual basis. Additionally, Washington Mutual Mortgage Securities Corp. performs a monthly ongoing performance review of previously purchased mortgage loans for trends in delinquencies, losses and repurchases. The mortgage loan sellers’ underwriting guidelines are reviewed for consistency with Washington Mutual Mortgage Securities Corp.’s credit parameters and conformity with the underwriting standards described under “Underwriting of the Mortgage Loans” below and are either approved or approved with exceptions. The mortgage loan sellers represent to Washington Mutual Mortgage Securities Corp. upon sale that the mortgage loans have been underwritten in accordance with the approved underwriting guidelines.

Washington Mutual Mortgage Securities Corp. purchases some mortgage loans from Washington Mutual Bank. Washington Mutual Bank originates mortgage loans through its retail lending division, which is a network of its own banks and mortgage lending offices; through its ConsumerDirect lending division, which originates mortgage loans to employees of Washington Mutual Bank and its affiliates, originates mortgage loans through the internet and refinances mortgage loans held in Washington Mutual Bank’s mortgage loan portfolio; and through its wholesale lending division, which is a network of independent mortgage loan brokers approved by Washington Mutual Bank. For each mortgage loan originated through Washington Mutual Bank’s wholesale lending division, a mortgage loan broker submits a loan application package to Washington Mutual Bank for underwriting and funding, and receives a portion of the loan origination fee charged to the mortgagor at the time the loan is made. For some of the mortgage loans originated under Washington Mutual Bank’s correspondent division, the correspondent lenders have delegated underwriting approval. Those correspondent lenders are authorized to underwrite mortgage loans with specified characteristics up to specified loan amounts, and must refer all other mortgage loans to Washington Mutual Bank for underwriting. In the case of mortgage loans underwritten by a correspondent lender, the correspondent lender will represent to Washington Mutual Bank that the mortgage loans have been underwritten in accordance with Washington Mutual Bank’s underwriting guidelines. Correspondent lenders without delegated underwriting approval submit loan application packages to Washington Mutual Bank for underwriting and fund each loan only upon approval by Washington Mutual Bank.

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STATIC POOL INFORMATION

On February 12, 2007, the depositor filed with the Securities and Exchange Commission, as (i) Exhibits 99.1, 99.2, 99.3 and 99.4 to a Current Report on Form 8-K, static pool information about prior securitized pools and vintage pools of fixed-rate residential mortgage loans (non-traditional or “alternative A” underwriting standards) of Washington Mutual Mortgage Securities Corp., (ii) Exhibits 99.9 and 99.10 to a Current Report on Form 8-K, static pool information about prior securitized pools of Option ARM Loans (non-traditional or “alternative A” underwriting standards) of Washington Mutual Mortgage Securities Corp. and (iii) Exhibits 99.7 and 99.8 to a Current Report on Form 8-K, static pool information about prior securitized pools of Option ARM Loans of Washington Mutual Bank. The static pool information includes (i) information about the original characteristics of each prior securitized pool and vintage pool as of the cut-off date for that pool and (ii) delinquency, loss and prepayment information about each prior securitized pool and vintage pool in quarterly increments from the related cut-off date through December 31, 2006. The static pool information about prior securitized pools and vintage pools of either of the co- sponsors that were established before January 1, 2006 will not be deemed to be a part of this prospectus supplement, the accompanying prospectus or the related registration statement. “Option ARM Loans” are adjustable rate mortgage loans whose interest rates are tied to an index, which have an initial fixed-rate period of between one and twelve months, and which have a negative amortization feature.

There can be no assurance that the rates of delinquencies, losses and prepayments experienced by the prior securitized pools and vintage pools will be comparable to delinquencies, losses and prepayments expected to be experienced by the mortgage loans owned by the Trust.

UNDERWRITING OF THE MORTGAGE LOANS

General

All of the mortgage loans owned by the Trust have been originated in accordance with the underwriting standards of Washington Mutual Mortgage Securities Corp. or the underwriting guidelines of Washington Mutual Bank as described in this section. With respect to the mortgage loans sold by Washington Mutual Bank to the depositor, the mortgage loans may have been underwritten directly by Washington Mutual Bank or by correspondent lenders with delegated underwriting approval. In addition, see “The Originators” in this prospectus supplement for additional information about the mortgage loans originated by MortgageIT, Inc.

Washington Mutual Mortgage Securities Corp.’s underwriting standards and Washington Mutual Bank’s underwriting guidelines generally are intended to evaluate the prospective borrower’s credit standing and repayment ability and the value and adequacy of the mortgaged property as collateral. Some mortgage loans are manually underwritten, in which case an underwriter reviews a loan application and supporting documentation, if required, and a credit report of the borrower, and based on that review determines whether to originate a loan in the amount and with the terms stated in the loan application. Some mortgage loans may be underwritten through an automated underwriting system, including Washington Mutual Bank’s automated underwriting system, described below.

Prospective borrowers are required to complete a standard loan application in which they may provide financial information regarding such factors as their assets, liabilities and related monthly payments, income, employment history and credit history. Each borrower also provides an authorization to access a credit report that summarizes the borrower’s credit history. With respect to the mortgage loans sold by Washington Mutual Bank to the depositor, some mortgage loans may have been originated under Washington Mutual Bank’s streamline documentation programs (described below), in which case the prospective borrower is not required to provide certain financial information, including information about income and assets.

Evaluation of the Borrower’s Credit Standing

To evaluate a prospective borrower’s credit history, the loan underwriter obtains a credit report relating to the borrower from one or more credit reporting companies, usually in the form of a merged credit report. The credit report typically contains information relating to such matters as credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcy,

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repossession, suits or judgments. In most cases the credit report provides a credit score for the borrower, which represents a numerical weighing of the borrower’s credit characteristics. Credit scores are designed to assess a borrower’s creditworthiness and likelihood to default on an obligation over a defined period (usually two to three years) based on a borrower’s credit history. Credit scores do not necessarily correspond to the probability of default over the life of a mortgage loan because they reflect past credit history, rather than an assessment of future payment performance. In addition, credit scores only indicate general creditworthiness, and credit scores are not intended to specifically apply to mortgage debt. Credit scores range from approximately 250 to approximately 900, with higher scores indicating more favorable credit history. If the loan underwriter obtains credit scores from three credit reporting companies, the middle score generally is used, and if two credit scores are obtained, the lowest score generally is used. In the case of co-borrowers, the credit score for the borrower with the lowest credit score generally is used (determined for each borrower as described in the immediately preceding sentence). Minimum credit scores are required for some loan products and loan programs. For borrowers for which credit scores are not available, the loan underwriter will require alternative documentation indicating the borrower’s creditworthiness, such as rental or utility payment history or payment history on other debt.

Evaluation of the Borrower’s Repayment Ability

For Mortgage Loans Sold by Washington Mutual Mortgage Securities Corp. to the Depositor:

With respect to the mortgage loans sold by Washington Mutual Mortgage Securities Corp. to the depositor, under all documentation programs other than the no ratio programs and the no documentation programs, in evaluating a prospective borrower’s ability to repay a mortgage loan, the loan underwriter considers the ratio of the borrower’s mortgage payments, real property taxes and other monthly housing expenses to the borrower’s gross income (referred to as the “housing-to-income ratio” or “front end ratio”), and the ratio of the borrower’s total monthly debt (including certain non-housing expenses) to the borrower’s gross income (referred to as the “debt-to-income ratio” or “back end ratio”). The maximum acceptable ratios may vary depending on other loan factors, such as loan amount and loan purpose, loan-to- value ratio, credit score and the availability of other liquid assets. Exceptions to the ratio guidelines may be made when compensating factors are present.

For Mortgage Loans Sold by Washington Mutual Bank to the Depositor:

With respect to the mortgage loans sold by Washington Mutual Bank to the depositor, in evaluating a prospective borrower’s ability to repay a mortgage loan, the loan underwriter considers the ratio of the borrower’s mortgage payments, real property taxes and other monthly housing expenses to the borrower’s gross income (referred to as the “housing-to-income ratio” or “front end ratio”), and the ratio of the borrower’s total monthly debt (including non-housing expenses) to the borrower’s gross income (referred to as the “debt-to-income ratio” or “back end ratio”). The maximum acceptable ratios may vary depending on other loan factors, such as loan amount and loan purpose, loan-to-value ratio, credit score and the availability of other liquid assets. Exceptions to the ratio guidelines may be made when compensating factors are present.

For purposes of calculating the “front end” and “back end” ratios for certain Option ARM Loans, the borrower’s monthly mortgage debt is determined based on the fully indexed rate and a predetermined factor as set by Washington Mutual Bank’s credit department from time to time (which rate may be greater than the rate in effect for the mortgage loan during the initial fixed-rate period). In addition, for purposes of calculating these ratios for an Option ARM Loan with a 40-year term, the borrower’s monthly mortgage debt is determined based on 30-year term.

Evaluation of the Adequacy of the Collateral

The adequacy of the mortgaged property as collateral generally is determined by an appraisal made in accordance with pre-established appraisal guidelines. At origination, all appraisals are required to conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation, and are made on forms acceptable to Fannie Mae and/or Freddie Mac. Appraisers may be staff appraisers employed by Washington Mutual Bank or independent appraisers selected in accordance with the pre-established appraisal guidelines. Such guidelines generally require that the

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appraiser, or an agent on its behalf, personally inspect the property and verify whether the property is in adequate condition and, if the property is new construction, whether it is substantially completed. However, in the case of mortgage loans underwritten through an automated underwriting system, an automated valuation model may be used, under which an appraiser does not inspect the property. In either case, the valuation normally is based upon a market data analysis of recent sales of comparable properties and, in some cases, a replacement cost analysis based on the current cost of constructing or purchasing a similar property. In the case of a streamline refinance, the appraisal guidelines may permit the property value obtained for an existing mortgage loan (or a mortgage loan which was previously refinanced) to be used. Title insurance is required for all mortgage loans, except that for mortgage loans secured by shares of cooperative apartments, title insurance is not required for the cooperative apartment building (but a lien search is provided by the title company). Specific additional title insurance coverage is required for some types of mortgage loans.

Documentation Programs

For Mortgage Loans Sold by Washington Mutual Mortgage Securities Corp. to the Depositor:

With respect to the mortgage loans sold by Washington Mutual Mortgage Securities Corp. to the depositor, each mortgage loan has been underwritten under one of the following documentation programs. Under a full/alternative documentation program, a borrower’s employment and income are verified. The employment and income as stated in the prospective borrower’s loan application are verified either directly with the borrower’s stated employer(s) or through receipt of alternative documentation such as the borrower’s recent pay stub(s) and/or W-2 form(s) reflecting a minimum of 12 months of employment and income or, in the case of self-employed borrowers or borrowers who derive a substantial portion of their income from commissions, receipt of the borrower’s personal (and, if applicable, business) tax returns. For self- employed borrowers, profit and loss statements may also be required. Generally, under a full/alternative documentation program, the borrower’s stated assets are also verified either directly with the stated financial institution holding the stated asset or through receipt of alternative documentation such as the borrower’s recent bank and/or brokerage statement(s). In addition, the borrower’s employment may be verified with the employer by telephone or by other independent means.

Generally, a reduced documentation program is available to borrowers with certain loan-to-value ratios, loan amounts, and credit scores. A reduced documentation program places increased reliance on the value and adequacy of the mortgaged property as collateral, the borrower’s credit standing and (in some cases) the borrower’s assets. Generally, under a reduced documentation program, either (i) a borrower’s employment and assets are verified, but no verification of a borrower’s income is undertaken, (ii) a borrower’s employment and income are verified, but no verification of a borrower’s assets is undertaken, or (iii) in the case of some rate/term and cash-out refinance mortgage loans, only the borrower’s employment is verified. For mortgage loans underwritten under a reduced documentation program, less than 12 months of the borrower’s income may be verified. Additionally, mortgage loans underwritten under a reduced documentation program may include mortgage loans originated as a “streamline” refinance if the lender originated the borrower’s existing mortgage loan. In this case, the prospective borrower’s income and assets either are not required to be obtained or are obtained but not verified, and the appraisal obtained for the existing mortgage loan (or a mortgage loan which was previously refinanced) may be used rather than a new appraisal. Eligibility criteria vary but may include minimum credit scores, maximum loan amounts, maximum debt-to-income ratios and specified payment histories on an existing mortgage loan (generally, a history of timely mortgage payments for the past twelve months, or for the duration of the mortgage loan if less than twelve months old) or on other debt. In all cases, the borrower’s employment is verified with the employer by telephone or by other independent means.

Generally, a no ratio program is available to borrowers with certain loan-to-value ratios, loan amounts, and credit scores. A no ratio program relies on the value and adequacy of the mortgaged property as collateral and the borrower’s credit standing. The borrower’s income is not required to be obtained or verified. Generally, under a no ratio program, the borrower’s stated assets are also verified through receipt of the borrower’s recent bank or brokerage statements or directly with the financial institution. In all cases, the borrower’s employment is verified with the employer by telephone or by other independent means.

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Generally, a no documentation program is available to borrowers with certain loan-to-value ratios, loan amounts, and credit scores. A no documentation program relies on the value and adequacy of the mortgaged property as collateral and the borrower’s credit standing. Generally, the borrower’s employment, income and assets are neither obtained nor verified. In some cases, the borrower’s employment may be verified by telephone with the employer or by other independent means if the borrower’s employment has been disclosed.

For Mortgage Loans Sold by Washington Mutual Bank to the Depositor:

With respect to the mortgage loans sold by Washington Mutual Bank to the depositor, each mortgage loan has been underwritten under one of three documentation guidelines for verification of the borrower’s stated income and assets. Under Washington Mutual Bank’s full/alternative documentation program, the prospective borrower’s stated income is verified through receipt of the borrower’s most recent pay stub and most recent W-2 form or, in the case of self-employed borrowers or borrowers with more than 25% of their income from commissions, two years of personal (and, if applicable, business) tax returns. For self- employed borrowers, profit and loss statements may also be required. Under the full/alternative documentation program, the borrower’s stated assets are verified through receipt of the borrower’s two most recent bank or brokerage statements. In addition, the borrower’s employment may be verified with the employer by telephone or by other independent means.

Washington Mutual Bank’s low documentation program places increased reliance on the value and adequacy of the mortgaged property as collateral, the borrower’s credit standing and (in some cases) the borrower’s assets. It is available to borrowers with certain loan-to-value ratios, loan amounts and credit scores. Under this program, the income as stated in the borrower’s loan application is not verified, although the borrower’s employment may be verified by telephone. The borrower’s stated income must be reasonable for the borrower’s occupation and assets (as determined in the underwriter’s discretion). Assets may be verified for higher risk transactions and when exceptions are approved, such as when specific loan-to-value ratios or loan amount limits are exceeded.

Washington Mutual Bank has several “streamline” documentation programs under which the prospective borrower’s income and assets either are not required to be obtained or are obtained but not verified. Eligibility criteria vary but may include minimum credit scores, maximum loan amounts, maximum debt-to-income ratios and specified payment histories on an existing mortgage loan (generally, a history of timely mortgage payments for the past twelve months, or for the duration of the mortgage loan if less than twelve months old) or on other debt. Purchase loans as well as refinance loans may be eligible under the streamline documentation programs. For some mortgage loans that qualify under these programs, the borrower’s income and assets are not required to be obtained. For some other mortgage loans that qualify under these programs, the borrower’s income and assets are obtained but not verified, the borrower’s employment is verified with the employer by telephone, and the borrower’s stated income must be reasonable for the borrower’s occupation and assets (as determined in the underwriter’s discretion).

A credit report for the borrower generally is required for all mortgage loans underwritten under Washington Mutual Bank’s full/alternative and low documentation programs, and for all but a small percentage of mortgage loans underwritten under Washington Mutual Bank’s streamline documentation program.

Exceptions to Program Parameters

Exceptions to the underwriting standards described above may be made on a case-by-case basis if compensating factors are present. In those cases, the basis for the exception is documented. Compensating factors may include, but are not limited to, low loan-to-value ratio, low debt-to-income ratio, good credit standing, the availability of other liquid assets, stable employment and time in residence at the prospective borrower’s current address.

Automated Underwriting System

Some mortgage loans may have been originated through Washington Mutual Bank’s retail and wholesale lending divisions and have been underwritten in whole or in part through Washington Mutual Bank’s proprietary automated underwriting system, known as Enterprise Decision Engine or “EDE”. Based

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on the borrower’s credit report and the information in the borrower’s loan application, the system either (a) approves the loan subject to the satisfaction of specified conditions, which may include the receipt of additional documentation, or (b) refers the loan application to an underwriter for manual underwriting. In making the underwriting decision, EDE evaluates the borrower’s default risk based on both the credit score and the characteristics of the loan. Washington Mutual Bank has been using EDE for underwriting of mortgage loans since January 2005. The version of EDE used by Washington Mutual Bank through October 2006 was developed based on a statistical analysis of the past performance of approximately 193,000 mortgage loans originated by Washington Mutual Bank for its own portfolio between 1998 and 2001. The version of EDE used by Washington Mutual Bank since October 2006 was developed based on a statistical analysis of the past performance of approximately one million mortgage loans originated by Washington Mutual Bank between 1998 and 2002. Washington Mutual Bank has also used in the past, and currently uses, other automated underwriting systems. All or some of the mortgage loans owned by the Trust and originated by Washington Mutual Bank may have been underwritten through EDE or another automated underwriting system.

Due Diligence

Washington Mutual Mortgage Securities Corp.’s credit risk oversight department conducts a credit, appraisal, and compliance review of adverse samplings (and, in some cases, statistical samplings) of mortgage loans prior to purchase from unaffiliated mortgage loan sellers. Sample size is determined by due diligence results for prior purchased pools from that seller, performance of mortgage loans previously purchased and characteristics of the pool presented for purchase. Automated valuation models are obtained on all mortgage loans purchased from unaffiliated sellers. For mortgage loans originated by Washington Mutual Bank, Washington Mutual Bank’s credit risk oversight department conducts a quality control review of statistical samplings of originated mortgage loans on a regular basis.

THE ORIGINATORS

Washington Mutual Mortgage Securities Corp. purchased, or Washington Mutual Bank originated or purchased, the related mortgage loans directly or indirectly from affiliated or unaffiliated third parties who either originated the mortgage loans or purchased the mortgage loans through correspondent or broker lending. The following unaffiliated third parties originated at least 10% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of Cut-Off Date): MortgageIT, Inc., approximately 39.8%. No other unaffiliated third party originator originated more than 10% of the mortgage loans in loan group 1 and loan group 2. No unaffiliated third party originator originated more than 10% of the mortgage loans in loan group 3, loan group 4 and loan group 5. All of the mortgage loans owned by the Trust have been originated in accordance with the underwriting standards of Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank. Below is information about MortgageIT, Inc., including information about its origination program and origination experience.

MortgageIT, Inc.

MortgageIT, Inc. (“MortgageIT”), a subsidiary of Deutsche Bank, is a New York corporation with an executive and administrative office located at 33 Maiden Lane, New York, New York. MortgageIT is a full-service residential mortgage banking company that is licensed to originate loans throughout the United States. MortgageIT originates single-family mortgage loans of all types, including prime adjustable-rate mortgage loans and fixed-rate, first lien residential mortgage loans.

MortgageIT and its predecessors have been in the residential mortgage banking business since 1988, and have originated Mortgage Loans of the type backing the certificates offered hereby since the second quarter of 2005. For the year ended December 31, 2006, MortgageIT had an origination portfolio of approximately $29.5 billion, all of which was secured by one- to four-family residential real properties and individual condominium units.

The following table describes the size, composition and growth of MortgageIT’s total Mortgage Loan production for Pay Option ARMs since it began originating them.

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Loan Type

 

December 31, 2005

 

December 31, 2006

 

Number

 

Total Portfolio
of Loans

 

Number

 

Total Portfolio
of Loans

Pay Option ARMs

 

 

 

14,702

   

 

$

 

5,326,259,387

   

 

 

22,758

   

 

$

 

8,193,761,553

 

THE DEPOSITOR

WaMu Asset Acceptance Corp., the depositor, is a Delaware corporation and a wholly owned subsidiary of Washington Mutual Bank. The depositor engages in no activities other than securitizing assets. It will have no material continuing obligations with respect to the mortgage loans or the certificates following the issuance of the certificates, other than the obligations (i) to file financing statements perfecting the Trust’s interest in the mortgage loans, (ii) to repurchase or substitute for affected mortgage loans in the event of a material breach of a representation and warranty made by the depositor in the pooling agreement that has not been remedied and (iii) to indemnify the underwriter against some civil liabilities, including liabilities under the Securities Act of 1933.

THE TRUST

General

The issuer of the certificates, the Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA3 Trust (the “Trust”), will be a statutory trust formed under the laws of the State of Delaware pursuant to a trust agreement between WaMu Asset Acceptance Corp., as depositor, and Christiana Bank & Trust Company, as Delaware trustee. The pooling and servicing agreement, dated as of the Cut- Off Date (the “pooling agreement”), among the depositor, Washington Mutual Bank, as servicer, the Delaware trustee and LaSalle Bank National Association, as trustee, will restate the trust agreement and will be the governing instrument of the Trust.

The Trust will not own any assets other than the mortgage loans and the other assets described below. The Trust will not have any liabilities other than those incurred in connection with the pooling agreement and any related agreement. The Trust will not have any directors, officers or other employees. No equity contribution will be made to the Trust by either co-sponsor, the depositor or any other party, except for a de minimis contribution made by the depositor pursuant to the trust agreement, and the Trust will not have any other capital. The fiscal year end of the Trust will be December 31. The Trust will act through the trustee and the Delaware trustee, whose fees and reasonable expenses will be paid or reimbursed by Washington Mutual Bank, as servicer.

Assignment of the Mortgage Loans and Other Assets to the Trust

A pool of mortgage loans, as described in this prospectus supplement, will be sold to the Trust on March 28, 2007 (the “Closing Date”). The Trust will own the right to receive all payments of principal and interest on the mortgage loans due after March 1, 2007 (the “Cut-Off Date”). A schedule to the pooling agreement will include information about each mortgage loan, including:

 

 

 

 

the applicable loan group or subgroup;

 

 

 

 

the outstanding principal balance as of the close of business on the Cut-Off Date;

 

 

 

 

the term of the mortgage loan; and

 

 

 

 

the mortgage interest rate as of the close of business on the Cut-Off Date and information about how that mortgage interest rate adjusts.

With respect to all of the mortgage loans in loan group 3, loan group 4 and loan group 5, the mortgage notes will not be endorsed to the Trust and no assignment of the mortgages to the Trust will be prepared. Washington Mutual Bank fsb, a wholly-owned subsidiary of WMB, will have possession of and will review the mortgage notes and mortgages related to those mortgage loans as custodian for the Trust and financing statements will be filed evidencing the Trust’s interest in those mortgage loans.

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The mortgage pool will be the primary asset of the Trust. The Trust will also contain other assets, including:

 

 

 

 

insurance policies related to individual mortgage loans, if applicable;

 

 

 

 

any property that secured a mortgage loan that the Trust acquires after the Cut-Off Date by foreclosure or deed in lieu of foreclosure;

 

 

 

 

the rights of the Trust under the Countrywide servicing agreement; and

 

 

 

 

amounts held in the certificate account.

In exchange for the mortgage loans and the other assets described above, the trustee will authenticate and deliver the certificates pursuant to the order of the depositor.

It is the intent of the parties to the pooling agreement that the conveyance of the mortgage loans and the related assets to the Trust constitute an absolute sale of those assets. However, in the event that the pooling agreement for any reason is held or deemed to create a security interest in those assets, then the pooling agreement will constitute a security agreement and the depositor grants to the Trust a security interest in those assets. The depositor will file financing statements perfecting such security interest.

Restrictions on Activities of the Trust

Pursuant to the pooling agreement, the Trust will have the power and authority (i) to acquire, hold, lease, manage, administer, control, invest, reinvest, operate and transfer assets of the Trust, (ii) to issue and make distributions on the certificates and (iii) to engage in such other activities as are described in the pooling agreement. The Trust will be required to act in accordance with requirements specified in the pooling agreement that are designed to maintain the Trust’s existence as a legal entity separate and distinct from any other entity. The Trust will not be permitted to do any of the following:

 

 

 

 

to engage in any business or activity other than those described in the pooling agreement;

 

 

 

 

to incur or assume any indebtedness other than indebtedness incurred under the pooling agreement or any related agreement;

 

 

 

 

to guarantee or otherwise assume liability for the debts of any other entity;

 

 

 

 

to confess a judgment against the Trust;

 

 

 

 

to possess or assign the assets of the Trust for other than a Trust purpose;

 

 

 

 

to lend any funds to any entity, except as contemplated by the pooling agreement; or

 

 

 

 

to do other actions prohibited by the pooling agreement.

The permissible activities of the Trust may not be modified except by an amendment to the pooling agreement. See “Description of the Certificates—Amendment of the Pooling Agreement” in this prospectus supplement.

Discretionary Activities With Respect to the Trust

The following is a description of material discretionary activities that may be taken with regard to the administration of the mortgage loans or the certificates:

 

 

 

 

Each of Washington Mutual Bank and Countrywide Home Loans will be authorized to exercise discretion with regard to its servicing of the related mortgage loans in accordance with the servicing standard specified in the pooling agreement and the Countrywide servicing agreement, respectively. See “Servicing of the Mortgage Loans—WMB—WMB’s Servicing Procedures” and “Servicing of the Mortgage Loans—Countrywide Home Loans—Countrywide Home Loans’ Servicing Obligations” in this prospectus supplement.

 

 

 

 

Washington Mutual Bank will be authorized to exercise discretion with regard to the actions taken, as servicer, on behalf of the Trust, as assignee of Washington Mutual Mortgage Securities Corp.’s rights under the Countrywide servicing agreement (including making requests or demands or giving consents to Countrywide Home Loans).

 

 

 

 

Each of Washington Mutual Mortgage Securities Corp., Washington Mutual Bank and the depositor will have discretion to determine whether to repurchase a mortgage loan or to

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substitute for a mortgage loan, if required under the related mortgage loan sale agreement or the pooling agreement, as applicable, to repurchase or substitute for a defective mortgage loan. See “Description of the Mortgage Pool—Representations and Warranties Regarding the Mortgage Loans” in this prospectus supplement.

 

 

 

 

On any Distribution Date after the related Clean-Up Call Option Date, Washington Mutual Bank will be permitted to purchase all of the related mortgage loans owned by the Trust. See “Description of the Certificates—Optional Termination” in this prospectus supplement.

 

 

 

 

In the event of certain transfers of the Class R Certificates to a person who is not a permitted transferee under the pooling agreement, the depositor will have the right to sell the Class R Certificates to a purchaser selected by the depositor.

 

 

 

 

In the event of a default by Washington Mutual Bank as servicer under the pooling agreement or Countrywide Home Loans as servicer under the Countrywide servicing agreement that has not been remedied, either the trustee or holders of certificates evidencing at least 25% of the voting rights will have the right to terminate such servicer. If Washington Mutual Bank is terminated or resigns the trustee will become the successor servicer of the WMB Loans. If Countrywide Home Loans is terminated or resigns Washington Mutual Bank will become the successor servicer of the Countrywide Loans, unless Washington Mutual Bank has also been terminated or has resigned in which case the trustee will become the successor servicer of the Countrywide Loans. If the trustee has become successor servicer, it will have the right to appoint, or to petition a court to appoint, a successor servicer. See “The Trustees—The Trustee—Events of Default Under the Pooling Agreement or the Countrywide Servicing Agreement” in this prospectus supplement.

 

 

 

 

Holders of certificates evidencing more than 50% of the voting rights will have the right at any time to remove the trustee or the Delaware trustee and to appoint an eligible successor trustee.

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THE TRUSTEES

The Trustee

General

LaSalle Bank National Association (“LaSalle”) will be the trustee under the pooling agreement. LaSalle is a national banking association formed under the federal laws of the United States of America. Its parent company, LaSalle Bank Corporation, is an indirect subsidiary of ABN AMRO Bank N.V., a Netherlands banking corporation. LaSalle has extensive experience serving as trustee or securities administrator or paying agent on securitizations of residential mortgage loans. Since January 1994, LaSalle has served as trustee or securities administrator or paying agent on over 500 residential mortgage-backed security transactions involving assets similar to the mortgage loans. As of December 31, 2006, LaSalle serves as trustee or securities administrator or paying agent on over 425 residential mortgage-backed security transactions. The depositor and servicer may maintain other banking relationships in the ordinary course of business with the trustee. The trustee’s corporate trust office is located at 135 South LaSalle Street, Suite 1511, Chicago, Illinois, 60603, Attention: Global Securities and Trust Services—Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA3, or at such other address as the trustee may designate from time to time.

Material Duties of the Trustee

The trustee will have the following material duties under the pooling agreement:

 

 

 

 

to hold the mortgage notes, mortgages and other legal documents in the mortgage files (other than the mortgage files held by the custodian);

 

 

 

 

to review each mortgage file (other than the mortgage files held by the custodian) and deliver a certification to the effect that, except as noted in the certification, all required documents have been executed and received;

 

 

 

 

to authenticate and deliver the certificates, pursuant to the order of the depositor;

 

 

 

 

to maintain a certificate register and, upon surrender of certificates for registration of transfer or exchange, to authenticate and deliver new certificates;

 

 

 

 

to make the required distributions to certificateholders on each Distribution Date, in accordance with the monthly distribution report prepared by the administrative agent (and without any independent review or verification of the information provided in the report);

 

 

 

 

to deliver or make available to certificateholders the monthly distribution reports and any other reports required to be delivered by the trustee under the pooling agreement;

 

 

 

 

in the event that the trustee has received notice from Washington Mutual Bank that the remaining Class Principal Balance of a class of certificates is to be paid on a specified Distribution Date, to send a notice to that effect to the holders of that class of certificates; and

 

 

 

 

to act as successor servicer, or to appoint a successor servicer, to the extent described under “—Events of Default Under the Pooling Agreement or the Countrywide Servicing Agreement” below.

In its capacity as trustee, LaSalle will hold the mortgage loan files (other than the mortgage files held by the custodian) exclusively for the use and benefit of the Trust. LaSalle will not have any duty or obligation to inspect, review or examine any of the documents, instruments, certificates or other papers relating to the mortgage loans delivered to it to determine that the same are valid. The disposition of the mortgage loan files will be governed by the pooling agreement.

LaSalle provides custodial services on over 1,000 residential, commercial and asset-backed securitization transactions and maintains almost 2.5 million custodial files in its two vault locations in Elk Grove, Illinois and Irvine, California. LaSalle’s two vault locations can maintain a total of approximately 6 million custody files. All custody files are segregated and maintained in secure and fire resistant facilities in compliance with customary industry standards. The vault construction complies with Fannie Mae/Ginnie Mae guidelines applicable to document custodians. LaSalle maintains disaster recovery protocols to ensure

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the preservation of custody files in the event of force majeure and maintains, in full force and effect, such fidelity bonds and/or insurance policies as are customarily maintained by banks which act as custodians. LaSalle uses unique tracking numbers for each custody file to ensure segregation of collateral files and proper filing of the contents therein and accurate file labeling is maintained through a monthly quality assurance process. LaSalle uses a licensed collateral review system to track and monitor the receipt and movement internally or externally of custody files and any release or reinstatement of collateral.

Events of Default Under the Pooling Agreement or the Countrywide Servicing Agreement

In the event of a default by Washington Mutual Bank as servicer under the pooling agreement or Countrywide Home Loans as servicer under the Countrywide servicing agreement that has not been remedied, either the trustee or holders of certificates evidencing at least 25% of the voting rights will have the right to terminate the applicable servicer.

If Washington Mutual Bank is terminated, or Washington Mutual Bank resigns because its duties under the pooling agreement are no longer permitted under applicable law, the trustee will become the successor servicer under the pooling agreement. However, if the trustee is unwilling or unable to act as successor servicer, it may appoint, or petition a court to appoint, a successor servicer.

If Countrywide Home Loans is terminated, or Countrywide Home Loans resigns because its duties under the Countrywide servicing agreement are no longer permitted under applicable law, Washington Mutual Bank will become the successor servicer of the Countrywide Loans, unless Washington Mutual Bank has also been terminated or has resigned in which case the trustee will become the successor servicer. However, if the trustee is unwilling or unable to act as successor servicer, it may appoint, or petition a court to appoint, a successor servicer. See “The Servicers—Countrywide Home Loans—Countrywide Home Loans’ Servicing Obligations—Back-up Servicing” in this prospectus supplement for important information regarding the servicing of the Countrywide Loans by a successor servicer.

The trustee will be required to notify certificateholders and the rating agencies of any event of a default by either servicer known to the trustee, and of the appointment of any successor servicer.

In the event of a default by the depositor under the pooling agreement that has not been remedied, holders of certificates evidencing at least 25% of the voting rights will have the right to direct the trustee to institute a legal action to enforce the depositor’s obligations under the pooling agreement.

See “Description of the Securities—Events of Default Under the Governing Agreement and Rights Upon Events of Default” in the prospectus.

The Delaware Trustee

Christiana Bank & Trust Company, the Delaware trustee under the pooling agreement, is a Delaware banking corporation. The Delaware trustee has served as Delaware trustee for asset-backed securities transactions involving first lien single-family residential mortgage loans since approximately January 2002.

The Delaware trustee will serve as trustee for the Trust for the sole purpose of satisfying the requirement under the Delaware statutory trust statute that the Trust have at least one trustee with a principal place of business in Delaware. The Delaware trustee’s duties under the pooling agreement will be limited to (i) accepting legal process served on the Trust in the State of Delaware and (ii) executing any certificates with respect to the Trust which the Delaware Trustee is required to execute under the Delaware statutory trust statute.

Limitations on the Trustees’ Liability

Neither the trustee nor the Delaware trustee will be liable under the pooling agreement:

 

 

 

 

except for the performance of such duties and obligations as are specifically set forth in the pooling agreement;

 

 

 

 

for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by the pooling agreement; or

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for any action taken or omitted by it in good faith in accordance with the direction of holders of certificates evidencing at least 25% of the voting rights relating to the time, method and place of conducting any proceeding for any remedy available to such trustee, or relating to the exercise of any trust or power conferred upon such trustee under the pooling agreement.

In the absence of bad faith, the trustee and the Delaware trustee may conclusively rely upon any certificates or opinions of counsel furnished to such trustee under the pooling agreement. Any such opinion of counsel will be full and complete authorization and protection in respect of any action taken or omitted to be taken by such trustee in good faith and in accordance with such opinion of counsel. Neither the trustee nor the Delaware trustee will be deemed to have knowledge or notice of any matter, including an event of default, unless actually known to it or unless it has received written notice thereof.

Resignation and Removal of the Trustees

Each of the trustee and the Delaware trustee may at any time resign by giving written notice thereof to the servicer. Upon receiving such notice of resignation, the servicer will be required to appoint a successor trustee. If the trustee or the Delaware trustee ceases to be eligible under the pooling agreement and fails to resign, or if the trustee or the Delaware trustee becomes incapable of acting, the servicer may remove such trustee and appoint a successor trustee. The holders of certificates evidencing more than 50% of the voting rights may at any time remove the trustee or the Delaware trustee and appoint a successor trustee.

Any expenses associated with the resignation of a trustee will be required to be paid by such trustee, and any expenses associated with the removal of a trustee will be required to be paid by the servicer.

THE SERVICERS

General

Approximately 98.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of Cut-Off Date) and all of the mortgage loans in loan group 3, loan group 4 and loan group 5 will be serviced by Washington Mutual Bank pursuant to the pooling agreement. Approximately 2.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of Cut-Off Date) will be serviced by Countrywide Home Loans or an affiliate thereof pursuant to the servicing agreement between Washington Mutual Mortgage Securities Corp. and Countrywide Home Loans, which servicing agreement will be assigned to the Trust. With respect to the mortgage loans serviced by Countrywide Home Loans, Washington Mutual Bank, as servicer, on behalf of the Trust, will take actions required or permitted to be taken by the Trust as assignee of Washington Mutual Mortgage Securities Corp.’s rights under the Countrywide servicing agreement (including making requests or demands or giving consents to Countrywide Home Loans, and receiving notices from Countrywide Home Loans).

Washington Mutual Mortgage Securities Corp. will act as administrative agent of Washington Mutual Bank, as servicer, with respect to the mortgage loans, pursuant to an administrative agent agreement between the administrative agent and Washington Mutual Bank. The administrative agent will be responsible for calculating monthly distributions on the certificates, preparing monthly distribution reports and other functions, as described under “—The Administrative Agent” below. The administrative agent will calculate monthly distributions to certificateholders and prepare monthly distribution reports using software licensed from a third party vendor and based on the third party vendor’s model of the priority of distributions on the certificates. Washington Mutual Bank fsb, a wholly-owned subsidiary of Washington Mutual Bank, may have possession of the mortgage files with respect to some of the mortgage loans as custodian for the Trust. The trustee will have possession of all mortgage files other than those in the possession of the custodian.

Washington Mutual Bank will outsource to third party vendors some servicing functions, as described under “—WMB—WMB’s Servicing Procedures—WMB’s Third Party Vendors” below.

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WMB

General

Washington Mutual Bank (“WMB”) will service some of the mortgage loans in the pool (the “WMB Loans”). Approximately 98.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of Cut-Off Date) will be WMB Loans and all of the mortgage loans in loan group 3, loan group 4 and loan group 5 will be WMB Loans. The functions to be performed by WMB as servicer with respect to the WMB Loans will include payment collection and payment application, default management and escrow administration. In addition, with respect to the Countrywide Loans, WMB, as servicer, on behalf of the Trust, will take actions required or permitted to be taken by the Trust as assignee of Washington Mutual Mortgage Securities Corp.’s rights under the Countrywide servicing agreement (including making requests or demands or giving consents to Countrywide Home Loans, and receiving notices from Countrywide Home Loans).

In addition, WMB will perform investor reporting and other investor services, including calculating monthly distributions to certificateholders and preparing monthly distribution reports.

WMB will perform its servicing functions pursuant to the pooling agreement.

WMB’s Servicing Experience

WMB has been servicing single-family residential mortgage loans for over 100 years. The single-family residential mortgage loans serviced by WMB have included, since 2001, sub-prime residential mortgage loans serviced for Long Beach Mortgage Company, an affiliate of WMB, or for its securitization trusts.

The following table shows the number and aggregate principal balance of single-family residential mortgage loans, including conforming and nonconforming mortgage loans and fixed rate and adjustable rate mortgage loans, and including prime and sub-prime mortgage loans, serviced by WMB as of the specified date.

Single-Family Residential Prime and Subprime Mortgage Loans Serviced by WMB
(Dollar Amounts in Millions)

 

 

 

 

 

 

 

 

 

2/31/2004

 

12/31/2005

 

12/31/2006

Number of Mortgage Loans Serviced for Washington Mutual Bank or Its Affiliates (or Their Securitization Trusts)

 

 

 

965,841

   

 

 

964,940

   

 

 

983,094

 

Aggregate Principal Balance

 

 

$

 

238,360

   

 

$

 

259,466

   

 

$

 

280,427

 

Number of Mortgage Loans Serviced for Unaffiliated Third Parties

 

 

 

3,832,119

   

 

 

3,568,487

   

 

 

2,801,702

 

Aggregate Principal Balance

 

 

$

 

445,272

   

 

$

 

436,293

   

 

$

 

373,873

 

The following table shows the number and aggregate principal balance of single-family residential mortgage loans, including conforming and nonconforming mortgage loans and fixed rate and adjustable rate mortgage loans (but excluding sub-prime mortgage loans), serviced by WMB as of the specified date.

Single-Family Residential Prime Mortgage Loans Serviced by WMB
(Dollar Amounts in Millions)

 

 

 

 

 

 

 

 

 

2/31/2004

 

12/31/2005

 

12/31/2006

Number of Mortgage Loans Serviced for Washington Mutual Bank or Its Affiliates (or Their Securitization Trusts)

 

 

 

798,269

   

 

 

766,384

   

 

 

707,497

 

Aggregate Principal Balance

 

 

$

 

213,525

   

 

$

 

226,334

   

 

$

 

232,607

 

Number of Mortgage Loans Serviced for Unaffiliated Third Parties

 

 

 

3,820,696

   

 

 

3,527,670

   

 

 

2,800,162

 

Aggregate Principal Balance

 

 

$

 

444,595

   

 

$

 

429,944

   

 

$

 

373,679

 

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WMB’s Servicing Procedures

Loan Servicing Centers. WMB will perform its servicing functions at loan servicing centers located in Florence, South Carolina; Milwaukee, Wisconsin; Northridge/Chatsworth, California; and Jacksonville, Florida.

Servicing Standard; Waivers and Modifications. Pursuant to the pooling agreement, WMB will be required to service the WMB Loans consistent with prudent mortgage loan servicing practices and (unless inconsistent with those servicing practices) in the same manner in which, and with the same care, skill, prudence and diligence with which, it services and administers similar mortgage loans for other portfolios. WMB will be required to make reasonable efforts to collect or cause to be collected all payments under the WMB Loans and, to the extent consistent with the pooling agreement and applicable insurance policies, follow such collection procedures as are followed with respect to comparable mortgage loans that are held in portfolios of responsible mortgage lenders in the local areas where each mortgaged property is located.

Consistent with the servicing standard described above, WMB will be permitted to waive, modify or vary any term of any WMB Loan, subject to certain conditions, as described in “Description of the Securities—Collection and Other Servicing Procedures Employed by the Servicer, Manager, Bond Administrator or Certificate Administrator” in the prospectus.

Mortgage Loan Servicing System. In performing its servicing functions, WMB will use computerized mortgage loan servicing systems that it leases from Fidelity Information Services, a division of Fidelity National Financial (“Fidelity”), a third party vendor (collectively, the “Fidelity System”). The Fidelity System produces detailed information about the financial status of each mortgage loan, including outstanding principal balance, current interest rate and the amount of any advances, unapplied payments, outstanding fees, escrow deposits or escrow account overdrafts, and about transactions that affect the mortgage loan, including the amount and due date of each payment, the date of receipt of each payment (including scheduled payments and prepayments), and how the payment was applied. The Fidelity System also produces additional information about mortgage loans that are in default, including the amount of any insurance and liquidation proceeds received. WMB began using the Fidelity System in 1996. Prior to July 2004, WMB serviced some mortgage loans using a proprietary mortgage loan servicing system; in July 2004, WMB consolidated servicing into a single servicing platform by converting approximately 1.2 million loan records from the proprietary mortgage loan servicing system to the Fidelity System.

Custodial Account, Escrow Account, Investment Account and Certificate Account. Mortgagor payments on the WMB Loans, including scheduled monthly payments, any Curtailments and Payoffs and any escrow payments (which are payments made by some mortgagors and held by the servicer in escrow for future payment of taxes and insurance), will initially be deposited into either a lockbox account maintained by a third party financial institution or a payment clearing account maintained by WMB. Payments deposited into the lockbox account will be transferred by WMB into the payment clearing account. Other collections on the WMB Loans, including Liquidation Proceeds and Insurance Proceeds net of allowable reimbursement (each, as defined in the pooling agreement) (other than Insurance Proceeds required for the restoration or repair of the related mortgaged property, which WMB will retain for such purpose), will also initially be deposited into a payment clearing account maintained by WMB. Within 48 hours of receipt, WMB will (i) transfer all such collections on the WMB Loans (other than escrow payments) into a custodial account maintained by WMB and (ii) transfer all escrow payments into an escrow account maintained by WMB.

WMB will deposit into the custodial account any required advances of principal and interest. See “—Advances” below. WMB will also deposit into the custodial account any Repurchase Proceeds with respect to any of the mortgage loans. See “Description of the Mortgage Pool—Representations and Warranties Regarding the Mortgage Loans” below.

Under the pooling agreement, WMB will be permitted to make a net deposit into the custodial account of the amounts required to be deposited into that account less the amounts that WMB is permitted to withdraw from that account, as described under “—Permitted Withdrawals” below. Under the pooling agreement, WMB will also be permitted to transfer funds held in the custodial account into an investment account maintained with an eligible investment depository, and to invest those funds in eligible investments, for its own benefit, before those funds are to be transferred to a certificate account maintained by the trustee. In addition, WMB will hold in the investment account funds with respect to the Countrywide Loans transferred by Countrywide Home Loans into such account from the custodial account maintained by

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Countrywide Home Loans, and will invest those funds in eligible investments, for its own benefit, before those funds are to be transferred to the certificate account.

On the business day immediately preceding each Distribution Date, WMB will transfer (or cause the administrative agent to transfer) from the investment account into the certificate account the funds held in the investment account that are required to be distributed to certificateholders on that Distribution Date (including, to the extent deposited in the investment account by Countrywide Home Loans, payments in respect of the Countrywide Loans). WMB may request the trustee to invest funds held in the certificate account in eligible investments, for WMB’s benefit, before those funds are to be distributed to certificateholders.

On each Distribution Date, the trustee will withdraw from the certificate account the funds required to be distributed to certificateholders on that date in accordance with the monthly distribution report prepared by the administrative agent.

Scheduled monthly payments on WMB Loans generally will be held pending distribution to certificateholders from the date of receipt by WMB until the immediately following Distribution Date. However, if a monthly payment is received prior to its scheduled Due Date, that payment will be held until the Distribution Date in the calendar month in which it was due. Payoffs with respect to WMB Loans and received by WMB in any Prepayment Period (that is, from the 15th day of a calendar month until the 14th day of the next calendar month) will be held until the Distribution Date immediately following the end of that Prepayment Period. Curtailments, Liquidation Proceeds, Insurance Proceeds and Subsequent Recoveries with respect to WMB Loans, and Repurchase Proceeds with respect to any of the mortgage loans, will be held from the date of receipt by WMB until the Distribution Date in the immediately succeeding calendar month. Funds with respect to the Countrywide Loans transferred by Countrywide Home Loans into the investment account generally will be held by WMB from the date of such transfer until the immediately following Distribution Date.

Funds with respect to WMB Loans held in the lockbox accounts and the payment clearing accounts may be commingled with collections on other mortgage loans serviced by WMB. Funds held in the investment account may be commingled with funds related to series of pass-through certificates with one or more classes of certificates that have ratings equal to the highest of the ratings of the certificates. Funds held in the custodial account and the escrow account maintained by WMB will not be commingled with collections on mortgage loans other than the WMB Loans. Funds held in the certificate account will not be commingled with collections on mortgage loans that are not owned by the Trust.

Only WMB or the third party financial institutions that maintain the lockbox accounts will have access to funds held in those accounts. Only WMB will have access to funds held in the payment clearing accounts, the custodial account and the escrow account. Only WMB and the administrative agent will have access to funds held in the investment account. Only the trustee will have direct access to funds held in the certificate account; however, WMB or the administrative agent on its behalf may direct the trustee to invest funds in the certificate account for WMB’s benefit and may direct the trustee to make certain withdrawals from that account.

All of the transaction accounts described above will be reconciled on a monthly basis. There will not be any external verification of activity in the transaction accounts, except as may occur in connection with the annual examination by Washington Mutual, Inc.’s independent accountants in connection with their audit of Washington Mutual, Inc. and its subsidiaries, or in connection with periodic examination by WMB’s regulatory authorities.

The diagram on the next page illustrates the flow of (a) collections and other payments on the WMB Loans and (b) payments on the Countrywide Loans from the date of receipt of those payments by WMB.

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Flow of Payments

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Permitted Withdrawals. The pooling agreement will permit WMB to make withdrawals (or, in the case of the certificate account, to direct the trustee to make withdrawals), from time to time, from the custodial account, the investment account and the certificate account for the following purposes:

 

 

 

 

to reimburse itself for advances, as described under “—Advances” below;

 

 

 

 

to pay to itself the servicing fee (to the extent not applied to pay compensating interest);

 

 

 

 

to pay to itself investment earnings earned on funds held in the investment account and the certificate account (to the extent not applied to pay compensating interest);

 

 

 

 

to pay to itself interest that was accrued and received on Payoffs on WMB Loans received during the period from the first day through the 14th day of any month (to the extent not applied to pay compensating interest);

 

 

 

 

to pay to Washington Mutual Mortgage Securities Corp. any proceeds received from Countrywide Home Loans with respect to a Countrywide Loan that was repurchased by Countrywide Home Loans pursuant to the Countrywide servicing agreement, to the extent not applied in satisfaction of Washington Mutual Mortgage Securities Corp.’s obligation to repurchase such mortgage loan;

 

 

 

 

to reimburse itself or the depositor or any of their directors, officers, employees or agents for certain expenses, costs and liabilities incurred in connection with any legal action relating to the pooling agreement or the certificates, as and to the extent described under “Description of the Securities—Matters Regarding the Servicer and the Depositor” in the prospectus; and

 

 

 

 

other permitted purposes described in the pooling agreement.

Procedures for Applying Additional Payments. If WMB receives a payment on a non-delinquent WMB Loan in addition to the minimum monthly payment, WMB generally will apply the additional payment as a Curtailment (unless the mortgagor instructs the servicer to apply the payment in another manner). If the WMB Loan is an Option ARM Loan and the interest accrued on the mortgage loan exceeds the minimum monthly payment, the servicer will first increase the principal balance of the mortgage loan by the amount of the excess interest in the form of negative amortization, and will then decrease the principal balance by the amount of the Curtailment.

WMB generally will not apply Curtailments on delinquent WMB Loans. If WMB receives an additional payment on a delinquent WMB Loan with instruction from the mortgagor to apply the payment as a Curtailment, WMB will hold the additional payment until the mortgage loan has been brought current. If WMB receives an additional payment on a delinquent mortgage loan without instruction from the mortgagor as to payment application, WMB generally will apply the additional payment to bring the mortgage loan current, to reimburse WMB for any escrow advances and to pay any applicable outstanding fees, and will apply any remainder as a Curtailment.

Advances. With respect to the WMB Loans, WMB will be required under the pooling agreement to advance its own funds (i) to cover any shortfall between payments of principal and interest scheduled to be received each month and the amounts actually received, (ii) to pay any taxes or insurance with respect to mortgaged properties to the extent not paid by the mortgagor, (iii) to cover costs and expenses in connection with foreclosure or bankruptcy proceedings and (iv) to pay for the maintenance of and, to the extent not covered by insurance, the restoration of, properties acquired or to be acquired through foreclosure; provided, however, that WMB will not make any of the advances described in clauses (i), (ii), (iii) and (iv) above if it determines, in good faith, that the advance would not be recoverable from late payments, Insurance Proceeds, Liquidation Proceeds or other amounts received for the applicable mortgage loan; provided, further, that in the case of clause (iv) above, WMB will not make advances for the restoration of foreclosure properties unless it determines that the restoration will increase the Liquidation Proceeds after reimbursement to itself for those advances; and provided, further, with respect to any WMB Loan that is a Balloon Loan that is delinquent on its maturity date, WMB will not be required to advance the related balloon payment but will be required to continue to make advances with respect to that Balloon Loan in an amount equal to one month’s interest on the unpaid principal balance at the applicable Pass-Through Rate to the extent WMB deems such amount to be recoverable. WMB will not charge interest or other fees with respect to any advances. For any Distribution Date and any advance described in clause (i) of this paragraph, instead of advancing its own funds, WMB will be permitted to advance funds it collected

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on the WMB Loans but that are not required to be distributed to the certificateholders on the current Distribution Date, in which case WMB will be required to reimburse those funds to the Trust prior to the Distribution Date on which they are required to be distributed to certificateholders

If, at the time a WMB Loan becomes a Liquidated Mortgage Loan, an advance previously made by WMB with respect to that mortgage loan has not been recovered from late payments, Insurance Proceeds, Liquidation Proceeds or other amounts received for that WMB Loan (a “Nonrecoverable WMB Advance”), WMB will be entitled to be reimbursed for such advance from collections on other WMB Loans prior to any payments being made to the certificateholders.

Servicing of Delinquent Mortgage Loans; Foreclosure. WMB will make reasonable efforts to collect or cause to be collected all delinquent payments (that is, payments that are more than 30 days past due) on WMB Loans. Such efforts may include payment reminder telephone calls to the mortgagor, letter campaigns and drive-by property inspections. WMB will be required under the pooling agreement to foreclose upon the mortgaged property related to each defaulted WMB Loan as to which no satisfactory arrangements can be made for collection of delinquent payments. Under the pooling agreement, WMB will be permitted, in lieu of foreclosure, if prudent to do so and taking into account the desirability of maximizing net Liquidation Proceeds, to accept a payment of less than the outstanding principal balance of the defaulted WMB Loan. WMB will not be permitted to foreclose upon a mortgaged property if it is aware of evidence of toxic waste or other environmental contamination on the mortgaged property and it determines that it would be imprudent to foreclose. See “Description of the Securities—Procedures for Realization Upon Defaulted Mortgage Assets” and “Legal Aspects of the Mortgage Assets—Foreclosure on Mortgages” in the prospectus.

Maintenance of Primary Mortgage, Hazard and Flood Insurance. For each WMB Loan with an original loan-to-value ratio greater than 80%, the pooling agreement generally will require WMB to keep in full force and effect a primary mortgage insurance policy. WMB generally will not be required to maintain such policy if the outstanding principal balance of the mortgage loan is 80% or less of the original appraised value of the related mortgaged property, unless required by applicable law.

WMB will also be required to maintain or cause to be maintained hazard insurance and, if applicable, flood insurance for each WMB Loan.

Limitations on WMB’s Liability. See “Description of the Securities—Matters Regarding the Servicer and the Depositor” in the prospectus for a description of certain limitations on WMB’s liability under the pooling agreement.

Back-up Servicing. See “Description of the Securities—Events of Default Under the Governing Agreement and Rights Upon Events Of Default” in the prospectus for a description of the material terms under the pooling agreement regarding WMB’s replacement, resignation or transfer.

WMB’s Third Party Vendors. WMB expects to outsource to third party vendors all or a portion of the following servicing functions with respect to the WMB Loans: (i) early stage collections, up to 59 days delinquent, (ii) processing and monitoring of foreclosure actions, (iii) processing and monitoring of mortgagor bankruptcy proceedings, (iv) preservation of properties related to delinquent loans, (v) maintenance, marketing and sale of REO properties, (vi) assuring that hazard insurance coverage is maintained, (vii) determining whether flood insurance coverage is required and assuring that any required coverage is maintained, (viii) tax bill procurement and tracking of delinquent tax payments, (ix) printing and mailing billing statements, ARM notices and default notices and (x) depositing mortgagor payments into a lockbox account. From time to time, WMB may cease to outsource one or more of the foregoing servicing functions or may choose to outsource additional servicing functions. Some vendors may perform more than one function, and some functions may be performed by more than one vendor.

WMB has entered into service level agreements with some of its vendors, which set forth detailed performance criteria, including in some cases minimum time requirements for completing specified tasks and maximum error rates, and which in some cases impose penalties for non-compliance with such criteria. WMB will monitor vendor compliance with applicable servicing criteria through procedures that may include reviews of statistical samplings of mortgage loans and reviews of reports on vendor performance prepared by the vendor or WMB.

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WMB’s Quality Control Procedures

WMB uses a combination of management controls and technology controls to ensure the accuracy and integrity of servicing records. Management controls include the use of approval levels, the segregation of duties, and reconciliations of servicing data and accounts, among others. Technology controls include the use of data security controls and interface controls to ensure that only authorized persons have the ability to access and change system data or to submit data to or receive data from vendors and investors. Specific security profiles for each job function include a predetermined set of data security controls that are appropriate for that job function. The data center for the Fidelity System, which is located in Jacksonville, Florida, is kept in a fire protected environment, and commercial electrical power is backed up by generators.

In addition, WMB conducts periodic internal audits of critical servicing and technology functions. External audits by entities such as Fannie Mae, Freddie Mac and Ginnie Mae and the annual examination by Washington Mutual, Inc.’s independent accountants in connection with their audit of Washington Mutual, Inc. and its subsidiaries may provide independent verification of the adequacy of such functions. Periodic examination by the servicer’s regulatory authorities may provide additional independent review of the servicer’s management controls.

Both WMB and Fidelity maintain detailed business continuity plans to enable each entity to resume critical business functions in the event of a disaster or other serious system outage, which plans are reviewed and updated periodically. Fidelity is contractually obligated to return WMB to full functionality within 48 hours of a reported system outage. WMB and Fidelity perform annual disaster recovery tests in which they reroute data and servicing system operations to Fidelity’s back-up site, and then process sample transactions from all servicing locations to ensure the functionality of the back-up site.

It is WMB’s policy to require its other third party vendors to implement measures similar to those described above to ensure the accuracy and integrity of servicing records.

Countrywide Home Loans

General

Countrywide Home Loans or an affiliate thereof pursuant to a mortgage loan purchase and servicing agreement entered into between Countrywide Home Loans and Washington Mutual Mortgage Securities Corp., which agreement will be assigned to the Trust pursuant to the pooling agreement, will service some of the mortgage loans in the pool (the “Countrywide Loans”). Approximately 2.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of Cut-Off Date) will be Countrywide Loans. The functions to be performed by Countrywide Home Loans with respect to the Countrywide Loans will include payment collection and payment application, default management and escrow administration.

Countrywide Home Loans’ Servicing Obligations

Custodial Account, Escrow Account and Investment Account. Within two business days of receipt, Countrywide Home Loans will be required to deposit in a custodial account maintained by Countrywide Home Loans the following amounts with respect to the Countrywide Loans: (i) all mortgagor payments, including scheduled monthly payments (net of Countrywide Home Loans’ servicing fee) and any Curtailments and Payoffs, and (ii) all liquidation proceeds and insurance proceeds (other than insurance proceeds required for the restoration or repair of the related mortgaged property). Within two business days of receipt, Countrywide Home Loans will be required to transfer into an escrow account maintained by Countrywide Home Loans all escrow payments (which are payments made by some mortgagors and held by the servicer in escrow for future payment of taxes and insurance). In addition, Countrywide Home Loans will be required to deposit in the custodial account each month (i) any required advances of principal and interest (as described under “—Advances” below), (ii) any compensating interest payable by Countrywide Home Loans (as described under “Description of the Certificates—Distributions of Interest—Compensating Interest” below) and (iii) proceeds of any Countrywide Loan repurchased by Countrywide Home Loans in accordance with the Countrywide servicing agreement.

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On the 18th day of each month (or the next business day, if such 18th day is not a business day), Countrywide Home Loans will be required to transfer from the custodial account maintained by Countrywide Home Loans into the investment account maintained by WMB the funds held in the custodial account that are required to be distributed to certificateholders in respect of the Countrywide Loans on the Distribution Date in that month.

Permitted Withdrawals. Countrywide Home Loans will be permitted to make withdrawals, from time to time, from the custodial account maintained by Countrywide Home Loans for the following purposes:

 

 

 

 

to reimburse itself for advances, as described under “—Advances” below;

 

 

 

 

to pay to itself the servicing fee (to the extent not already retained);

 

 

 

 

to pay to itself investment earnings earned on funds held in the custodial account; and

 

 

 

 

other permitted purposes described in the Countrywide servicing agreement.

Advances. With respect to the Countrywide Loans, Countrywide Home Loans will be required under the Countrywide servicing agreement to advance its own funds (i) to cover any shortfall between payments of principal and interest scheduled to be received each month and the amounts actually received, (ii) to pay any taxes or insurance with respect to mortgaged properties to the extent not paid by the mortgagor, (iii) to cover costs and expenses in connection with foreclosure and bankruptcy proceedings, (iv) to cover the cost of preserving, restoring and protecting the mortgaged properties and (v) to cover the cost of managing and liquidating properties acquired through foreclosure; provided, however, that Countrywide Home Loans will not make the advances described in clause (i) above unless it determines that such advance will be recoverable from amounts received for the applicable mortgage loan; and provided, further, that in the case of clause (iv) above, Countrywide Home Loans will not make advances for the restoration of properties unless it determines that (x) the restoration will increase the liquidation proceeds after reimbursement to itself for those advances and (y) such advances will be recoverable from amounts received for the applicable mortgage loan. Countrywide Home Loans will not charge interest or other fees with respect to any advances.

If Countrywide Home Loans determines that an advance previously made with respect to a Countrywide Loan is not recoverable from amounts to be received for that loan or if all funds with respect to that loan have previously been remitted to the Trust (a “Nonrecoverable Countrywide Advance”), Countrywide Home Loans will be entitled to be reimbursed for such advance from collections on other Countrywide Loans prior to any payments being made to the certificateholders.

Back-up Servicing. In the event of a default by Countrywide Home Loans as servicer under the Countrywide servicing agreement that has not been remedied, either the trustee or holders of certificates evidencing at least 25% of the voting rights will have the right to terminate Countrywide Home Loans. A servicing default under the Countrywide servicing agreement will include each of the following:

 

 

 

 

any failure by Countrywide Home Loans to remit to the Trust (as assignee of Washington Mutual Mortgage Securities Corp. ) any payment required to be made thereunder which continues unremedied for a specified number of business days after Countrywide Home Loans’ receipt of written notice of such failure;

 

 

 

 

any failure by Countrywide Home Loans duly to observe or perform in any material respect any other of its covenants or agreements in the Countrywide servicing agreement which continues unremedied for a specified number of days after Countrywide Home Loans’ receipt of written notice of such failure;

 

 

 

 

events of insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings regarding Countrywide Home Loans and actions by Countrywide Home Loans indicating its insolvency or inability to pay its obligations; and

 

 

 

 

other servicing defaults described in the Countrywide servicing agreement.

If Countrywide Home Loans is terminated, or Countrywide Home Loans resigns because its duties under the Countrywide servicing agreement are no longer permitted under applicable law, WMB will become the successor servicer of the Countrywide Loans, unless WMB has also been terminated or has resigned in which case the trustee will become the successor servicer. However, if the trustee is unwilling or unable to act as successor servicer, it may appoint, or petition a court to appoint, a successor servicer.

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The successor servicer of the Countrywide Loans will be required to service the Countrywide Loans in accordance with the pooling agreement, rather than the Countrywide servicing agreement, except that the “Prepayment Period” for each Payoff on a Countrywide Loan will be the calendar month preceding the related Distribution Date and compensating interest payable with respect to the Countrywide Loans will be calculated in accordance with the Countrywide servicing agreement as described in this prospectus supplement. The successor servicer will be entitled to the same servicing compensation as Countrywide Home Loans would have been entitled to under the Countrywide servicing agreement.

The Administrative Agent

The Administrative Agent’s Servicing Experience

Washington Mutual Mortgage Securities Corp., the administrative agent, is a Delaware corporation and a wholly owned subsidiary of WMB. The administrative agent has been master servicing single-family residential mortgage loans since before 1979. The administrative agent has been acting as administrative agent of WMB with respect to single-family residential mortgage loans serviced by WMB since February 2005. The services performed by Washington Mutual Mortgage Securities Corp. as master servicer include (in addition to other services) substantially the same services as those performed by it as administrative agent.

The following table shows the number and aggregate principal balance of single-family residential mortgage loans, including conforming and nonconforming mortgage loans and fixed rate and adjustable rate mortgage loans (but excluding sub-prime mortgage loans), serviced by the administrative agent (as master servicer or administrative agent) as of the specified date.

Single-Family Residential Prime Mortgage Loans Serviced by the Administrative Agent
(Dollar Amounts in Millions)

 

 

 

 

 

 

 

 

 

12/31/2004

 

12/31/2005

 

12/31/2006

Number of Mortgage Loans Serviced for Washington Mutual Bank or Its Affiliates (or Their Securitization Trusts)

 

 

 

110,940

   

 

 

191,332

   

 

 

226,558

 

Aggregate Principal Balance

 

 

$

 

42,500

   

 

$

 

79,420

   

 

$

 

102,980

 

Number of Mortgage Loans Serviced for Unaffiliated Third Parties

 

 

 

257,060

   

 

 

233,181

   

 

 

215,984

 

Aggregate Principal Balance

 

 

$

 

47,635

   

 

$

 

42,325

   

 

$

 

38,834

 

Services Performed by the Administrative Agent

WMB and the administrative agent are parties to an administrative agent agreement under which the administrative agent has agreed to perform some of the services required to be performed by WMB under the pooling agreement. The administrative agent will perform the following services: (1) calculation of monthly distributions to certificateholders, (2) calculation of compensating interest to be paid by WMB with respect to the WMB Loans, (3) with respect to the Countrywide Loans, taking actions required or permitted to be taken by the Trust as assignee of Washington Mutual Mortgage Securities Corp.’s rights under the Countrywide servicing agreement (including making requests or demands or giving consents to Countrywide Home Loans, and receiving notices from Countrywide Home Loans), (4) preparation of monthly distribution reports and other reports required under the pooling agreement, (5) tax administration services for the Trust, (6) communications with investors and rating agencies with respect to the certificates and (7) other services specified in the administrative agent agreement.

The administrative agent’s principal offices are located in Vernon Hills, Illinois. The administrative agent will perform its services using SBO2000, a computerized mortgage loan servicing system that it has licensed from Alan King and Co., a third party vendor. SBO2000 produces detailed information about the financial status of each mortgage loan, including outstanding principal balance and current interest rate, and about transactions that affect the mortgage loan, including the amount and due date of each scheduled payment, the amount and date of receipt of each Payoff, the amount and month of receipt of all other unscheduled payments, and how each payment was applied. Each month, the administrative agent will receive from WMB a servicing report generated by the Fidelity System with respect to the WMB Loans owned by the Trust and will receive from Countrywide Home Loans a servicing report with respect to the

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Countrywide Loans, and will input data from those servicing reports into SBO2000. The administrative agent began using SBO2000 in October 2006. Prior to October 2006, the administrative agent performed its services using a proprietary computerized mortgage loan servicing system.

The administrative agent will calculate monthly distributions to certificateholders and prepare monthly distribution reports using software that it has licensed from IMAKE Consulting, Inc. (“IMAKE”), a third party vendor. IMAKE will develop that software based on its model of the priority of distributions on the certificates. Each month, the administrative agent will generate a monthly distribution report by uploading data from its mortgage loan servicing system onto a server that houses the software licensed from IMAKE. In order to verify the accuracy of the monthly distribution report, the administrative agent will upload the distribution report onto the internet website of a nationally recognized accounting firm, which will compare the distribution report to a report prepared by it based on its own independently developed model of the priority of distributions on the certificates. The administrative agent will deliver the final monthly distribution report to the trustee and post it on the administrative agent’s internet website.

WMB will pay the administrative agent a fee for its services under the administrative agent agreement. Payment of this fee will not affect distributions to certificateholders.

The Administrative Agent’s Quality Control Procedures

The administrative agent uses substantially the same management and technology controls as those of WMB to ensure the accuracy and integrity of servicing records. See “—WMB—WMB’s Servicing Procedures—WMB’s Quality Control Procedures” above.

The administrative agent conducts periodic internal audits of critical servicing and technology functions. Investor reviews and the annual examination by Washington Mutual, Inc.’s independent accountants in connection with their audit of Washington Mutual, Inc. and its subsidiaries may provide independent verification of the adequacy of such functions. Periodic examination by Washington Mutual Bank’s regulatory authorities may provide additional independent review of the administrative agent’s management controls.

The administrative agent maintains a detailed business continuity plan to enable it to resume critical business functions in the event of a disaster or other serious servicing system outage, which plan is reviewed and updated periodically. The administrative agent performs annual disaster recovery tests in which it reroutes data and servicing system operations to a back-up site, and then processes sample transactions to ensure the functionality of the back-up site.

It is the administrative agent’s policy to require its third party vendors to implement measures similar to those described above to ensure the accuracy and integrity of servicing records.

The Custodian

Washington Mutual Bank fsb, a wholly owned subsidiary of Washington Mutual Bank, will act as custodian for the Trust pursuant to a custodial agreement among the trustee, Washington Mutual Bank and the custodian, with respect to all of the mortgage loans in loan group 3, loan group 4 and loan group 5. The custodian will hold the mortgage notes, mortgages and other legal documents in the mortgage files with respect to those mortgage loans for the benefit of the Trust. The custodian will maintain the mortgage files in secure and fireproof facilities. The mortgage files will not be physically segregated from other mortgage files in the custodian’s custody but will be kept in shared facilities. However, the custodian’s computerized document tracking system will show the location within the custodian’s facilities of each mortgage file and will show that the mortgage loan documents are held by the custodian on behalf of the Trust. The custodian will review each mortgage file and deliver a certification to the effect that, except as noted in the certification, all required documents have been executed and received. See “Risk Factors” in the accompanying prospectus for a description of certain risks relating to the custodian’s possession of the mortgage notes and mortgages.

In the event of the termination of the custodial agreement, the custodian will be required to deliver all mortgage files in the custodian’s custody to the trustee or any successor custodian appointed by the trustee.

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Washington Mutual Bank will pay the custodian a fee for its services under the custodial agreement. Payment of this fee will not affect distributions to certificateholders.

Special Servicing Agreements

The pooling agreement permits WMB to enter into one or more special servicing agreements with unaffiliated owners of one or more classes of Subordinate Certificates or of a class of securities representing interests in one or more classes of Subordinate Certificates. Under those agreements, the owner may, for delinquent WMB Loans:

(a) instruct WMB to start or delay foreclosure proceedings, provided that the owner deposits a specified amount of cash with WMB, which will be available for distribution to certificateholders if Liquidation Proceeds are less than they otherwise may have been had WMB acted pursuant to its normal servicing procedures;

(b) purchase those delinquent WMB Loans from the Trust immediately before the beginning of foreclosure proceedings at a price equal to the aggregate outstanding principal balance of the mortgage loans, plus accrued interest at the applicable mortgage interest rates through the last day of the month in which the mortgage loans are purchased; and/or

(c) assume all of the servicing rights and obligations for the delinquent mortgage loans so long as (i) WMB has the right to transfer the servicing rights and obligations of the mortgage loans to another servicer and (ii) the owner will service the mortgage loans according to WMB’s servicing guidelines.

AFFILIATIONS AND RELATED TRANSACTIONS

Washington Mutual Mortgage Securities Corp., the depositor and the custodian are all wholly owned subsidiaries of Washington Mutual Bank. Washington Mutual Bank is the servicer of the WMB Loans.

There is not currently, and there was not during the past two years, any material business relationship, agreement, arrangement, transaction or understanding that is or was entered into outside the ordinary course of business or is or was on terms other than would be obtained in an arm’s length transaction with an unrelated third party, between (a) any of the co-sponsors, the depositor and the Trust and (b) any of the servicers, the administrative agent, the custodian, the trustees or any originator of the mortgage loans.

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DESCRIPTION OF THE MORTGAGE POOL*

The mortgage pool will consist of 4,969 mortgage loans that will have an aggregate principal balance as of the Cut-Off Date, after deducting payments due on or before that date, of approximately $2,371,959,260. The mortgage loans in subgroup 1-A and subgroup 2-A are comprised of mortgage loans in loan group 1 and loan group 2, respectively, that do not impose prepayment penalties. The mortgage loans in subgroup 1-B and subgroup 2-B are comprised of mortgage loans in loan group 1 and loan group 2, respectively, that impose a prepayment penalty for voluntary prepayments in full for a period no greater than 60 months from the date of origination of such mortgage loan. The mortgage loans in subgroup 4-A and subgroup 5-A are mortgage loans in loan group 4 and loan group 5, respectively, that do not impose prepayment penalties and have an initial fixed rate period of three months. The mortgage loans in subgroup 4-B are mortgage loans in loan group 4 that are not mortgage loans in subgroup 4-A. The mortgage loans in subgroup 5-B are mortgage loans in loan group 4 that are not mortgage loans in subgroup 5-A.

The mortgage loans are secured by first mortgages or first deeds of trust or other similar security instruments creating first liens on fee simple or leasehold interests in one- to four-family residential properties or shares of stock relating to cooperative apartments. These mortgaged properties, which may include detached homes, duplexes, triplexes, fourplexes, townhouses, individual condominium units, individual units in planned unit developments and other attached dwelling units that are part of buildings consisting of more than four units (so long as the mortgaged property (other than cooperative apartments) consists of no more than four units), have the additional characteristics described below, in Appendix B (which is incorporated by reference into this prospectus supplement) and in the accompanying prospectus.

As of the Cut-Off Date, approximately 1.5% of the borrowers on mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) are obligated on more than one mortgage loan underlying the related certificates. As of the Cut-Off Date, approximately 4.4% of the borrowers on mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance) are obligated on more than one mortgage loan underlying the related certificates. As of the Cut-Off Date, the maximum number of mortgage loans in loan group 1 and loan group 2 related to a single borrower is three, and the maximum aggregate principal balance of those mortgage loans related to a single borrower obligated on more than one of those mortgage loans represents approximately 0.2% of those mortgage loans by principal balance. As of the Cut-Off Date, the maximum number of mortgage loans in loan group 3, loan group 4 and loan group 5 related to a single borrower is eight, and the maximum aggregate principal balance of those mortgage loans related to a single borrower obligated on more than one of those mortgage loans represents approximately 0.3% of those mortgage loans principal balance.

For all mortgage loans, the Minimum Monthly Payment will be due on the first day of each month (the “Due Date”). Each mortgage loan will have a first Due Date during the period from March 2006 through April 2007, inclusive, and will have an original term to maturity of not more than 40 years.

 


 

* The description of the mortgage pool and the mortgaged properties in this section and in Appendix B is based on the mortgage loans as of the close of business on the Cut-Off Date, after deducting the scheduled principal payments due on or before that date, whether or not actually received. All references in this prospectus supplement to “principal balance” refer to the principal balance as of the Cut-Off Date, unless otherwise specifically stated or required by the context. Due to rounding, percentages may not sum to 100%. References to percentages of mortgage loans refer in each case to the percentage of the aggregate principal balance of the mortgage loans in the related loan group, subgroup or in the aggregate, as applicable, based on the outstanding principal balances of the mortgage loans after giving effect to scheduled monthly payments due on or before the Cut-Off Date. References to weighted averages refer in each case to weighted averages by principal balance as of the Cut-Off Date of the related mortgage loans determined in the same way as described in the previous sentence. Before the issuance of the certificates, mortgage loans may be removed from the mortgage pool as a result of Payoffs, delinquencies or otherwise. If that happens, other mortgage loans may be included in the mortgage pool. The depositor believes that the information in this prospectus supplement for the mortgage pool is representative of the characteristics of the mortgage pool as it will actually be constituted when the certificates are issued, although the range of mortgage interest rates and other characteristics of the mortgage loans in the mortgage pool may vary. See “—Additional Information” in this prospectus supplement.

 

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Each mortgage loan will be a conventional mortgage loan evidenced by a mortgage note. After an initial fixed-rate period of zero, one, two or three months, the mortgage interest rate on each mortgage loan will be adjusted monthly to equal the sum of the applicable Index and the per annum rate specified in the applicable mortgage note (the “Margin”), rounded to the nearest 0.001% or 0.125%, as specified in the applicable mortgage note. In addition, adjustments to the mortgage interest rate for each mortgage loan are subject to a lifetime maximum interest rate (a “Rate Ceiling”). As of the Cut-Off Date, (a) approximately 0.5% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) and (b) none of the mortgage loans in loan group 3, loan group 4 and loan group 5 have reached their Rate Ceiling. The lifetime minimum interest rate for each mortgage loan is its related Margin, unless otherwise specified in the mortgage note.

Each mortgage loan was originated with an initial fixed-rate period of zero, one, two or three months. As of the Cut-Off Date, (a) approximately 3.1% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) and (b) approximately 47.9% of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance) were still in their fixed-rate period.

For each mortgage loan, a minimum monthly payment (the “Minimum Monthly Payment”) is required to be paid by the mortgagor pursuant to the terms of the mortgage note. The initial Minimum Monthly Payment for each mortgage loan is the amount which will fully amortize the mortgage loan at its initial fixed interest rate (which will generally be lower than the sum of the Index and Margin) in equal monthly installments over its remaining term to maturity. The Minimum Monthly Payment for each mortgage loan will adjust annually (except that (i) approximately 1.1% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) have a fixed Minimum Monthly Payment for the first twenty-four months after origination of such mortgage loans and (ii) approximately 2.2% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) have a fixed Minimum Monthly Payment for the first sixty months after origination of such mortgage loans, and after the expiration of the related fixed payment period, the Minimum Monthly Payment on each of these mortgage loans will adjust annually thereafter), and on any Due Date on which the principal balance of the mortgage loan would otherwise exceed 110% (in the case of (a) approximately 29.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) and (b) approximately 64.4% of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance as of the Cut-Off Date)), 115% (in the case of (a) approximately 71.0% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) and (b) approximately 35.6% of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance as of the Cut-Off Date)) or 125% (in the case of (a) none of the mortgage loans in loan group 1 and loan group 2 and (b) approximately 0.01% of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance as of the Cut-Off Date)) of its original principal balance, to an amount which will fully amortize the mortgage loan at the then current mortgage interest rate in equal monthly installments over its remaining term to maturity. The Minimum Monthly Payment may not, however, increase on any adjustment date by an amount greater than 7.5% of the Minimum Monthly Payment in effect immediately before that adjustment date (the “Payment Cap”), provided that this 7.5% limitation does not apply to the adjustment made on the fifth anniversary of the first Due Date, on each fifth anniversary thereafter and on the final adjustment date, or if the principal balance of the mortgage loan would otherwise exceed 110%, 115% or 125%, as applicable, of its original principal balance. In addition, any amounts owed under each mortgage loan on its maturity date are required to be paid on that date without regard to any Minimum Monthly Payment. Depending on the amount and timing of increases to the principal balance of a mortgage loan due to negative amortization, the final payment on that mortgage loan may be substantially larger than the immediately preceding Minimum Monthly Payment.

Since the mortgage interest rate on each mortgage loan adjusts monthly and the Minimum Monthly Payment adjusts annually (except that (i) approximately 1.1% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) have a fixed Minimum Monthly Payment for the first twenty-four months after origination of such mortgage loans and (ii) approximately 2.2% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance as of the Cut-Off Date) have a fixed Minimum Monthly Payment for the first sixty months after origination of such mortgage loans, and after the expiration of the related fixed payment period, the Minimum Monthly

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Payment on each of these mortgage loans will adjust annually thereafter), subject to the limitations described above, and since the Minimum Monthly Payment may not be increased on most adjustment dates by an amount greater than 7.5%, increases in the Index will cause a larger portion of the Minimum Monthly Payment to be allocated to interest and a smaller portion to principal. In some cases, the interest due on the mortgage loan may exceed the Minimum Monthly Payment. Any such excess will be added to the outstanding principal balance of the mortgage loan in the form of “negative amortization.” Decreases in the Index, on the other hand, will cause a larger portion of the Minimum Monthly Payment to be allocated to principal and a smaller portion to interest.

The Minimum Monthly Payment for the entire first year (or first two or five years, as applicable) of a mortgage loan following origination reflects the fixed rate in effect during its initial fixed-rate period, which will generally be lower than the fully indexed rate in effect at any time during the first year. Therefore, even if the applicable Index does not increase, the Minimum Monthly Payment during the first year (or first two or five years, as applicable) of the mortgage loan may not be enough to pay the amount of interest due on the mortgage loan at the fully indexed rate, which is calculated based on the sum of the applicable Index and the Margin. If the mortgagor chooses to pay the Minimum Monthly Payment rather than one of the other higher payment options described below, this will lead to an increase in the outstanding principal balance of the mortgage loan in the form of negative amortization. Even after the first year (or first two or five years, as applicable), when the Minimum Monthly Payment may increase by 7.5%, this adjustment may not be enough to raise the Minimum Monthly Payment to the amount necessary to pay the interest due on the mortgage loan based on the sum of the applicable Index and the Margin in effect during the following year. If the new Minimum Monthly Payment is still less than the fully indexed rate during the following year, there will continue to be negative amortization if the mortgagor chooses to pay only the Minimum Monthly Payment. Therefore the effect of the initial fixed rate at the beginning of the life of the mortgage loan may be to continue to cause the Minimum Monthly Payment to be less than the monthly interest due on the mortgage loan until the fifth anniversary of the first Due Date (or until such Due Date as the principal balance of the mortgage loan would otherwise exceed 110%, 115% or 125%, as applicable, of its original principal balance) when the Minimum Monthly Payment will be reset to a fully-amortizing payment.

Except for mortgagors who elect to participate in WMB’s Auto Pay program (as described below), the monthly statement for some of the mortgage loans may show one or more payment options, which may include an amount less than, equal to or greater than a fully-amortizing monthly payment (that is, an amount that would fully amortize the mortgage loan at its current interest rate in equal monthly installments over its remaining term to maturity). In general, when the Minimum Monthly Payment is less than the amount of interest due that month (which, after the initial fixed-rate period, is calculated each month as the sum of the applicable Index and the Margin), the mortgagor may have the option to pay the actual amount of interest due that month. Likewise, whenever the Minimum Monthly Payment is less than a fully- amortizing monthly payment, the mortgagor may have the option to pay that fully-amortizing amount. Finally, the mortgagor may have the option of paying a monthly payment that would amortize the mortgage loan based on a 15-year term from the first payment date, rather than the actual 30-year or 40-year term of the mortgage loan. Even those mortgage loans that do not specify particular payment options allow the related mortgagor to make payments in addition to the Minimum Monthly Payment.

Mortgagors related to WMB Loans may elect to participate in WMB’s Auto Pay program, under which funds in an amount preselected by the mortgagor (not less than the Minimum Monthly Payment) are electronically debited from the mortgagor’s checking or savings account and credited to the mortgage loan on a monthly payment date. The mortgagor may select as the monthly payment date any date from the first through the 15th day of the month. In order to enroll in the Auto Pay program, the mortgagor’s bank account must be with a financial institution that is a member of the Automated Clearing House processing system.

Mortgagors may remit principal prepayments together with the scheduled monthly payment or at any other time.

Each servicer will send monthly statements to mortgagors. Each servicer may assess late fees for late monthly payments, nonsufficient funds fees, payoff statement fees (in connection with Payoffs) and, if applicable, prepayment penalties for early Payoffs.

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In addition, for any month, if the servicer receives a payment on a mortgage loan that is less than the Minimum Monthly Payment or if no payment is received at all, the servicer will advance its own funds (or, in the case of the WMB Loans, its own funds or funds collected by WMB on the WMB Loans but not required to be distributed to the certificateholders on the current Distribution Date), to cover the difference between the Minimum Monthly Payment scheduled to be received and the amount actually received with respect to that mortgage loan. However, the servicer will not be required to make such advances if it determines that those advances will not be recoverable from future payments or collections on that mortgage loan.

As of the Cut-Off Date, (a) approximately 13.9% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) and (b) all of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance) are assumable to the extent provided in the related mortgage note.

None of the mortgage loans will be “Buydown Loans,” which are mortgage loans for which scheduled payments of principal and/or interest have been subsidized for a period of time through a fund provided by the originator or another person at the time of origination. Some of the risks of loss on some mortgage loans will be covered up to specified limits by primary insurance policies.

With respect to each mortgage loan sold by Washington Mutual Mortgage Securities Corp. to the depositor, as of March 20, 2007, no mortgage loan is delinquent (that is, more than 30 days past due), and no mortgage loan was delinquent more than once during the twelve-months preceding the Cut-Off Date (or during such shorter period as has elapsed from the date of acquisition of such mortgage loan by Washington Mutual Mortgage Securities Corp. or, if earlier, from the date of origination or acquisition of such mortgage loan by an affiliate of Washington Mutual Mortgage Securities Corp.) and any such delinquency lasted for no more than 30 days.

With respect to each mortgage loan sold by Washington Mutual Bank to the depositor, as of March 20, 2007, no mortgage loan is delinquent (that is, more than 30 days past due), and no mortgage loan was delinquent more than once during the twelve-months preceding the Cut-Off Date (or during such shorter period as has elapsed from the date of origination of such mortgage loan by Washington Mutual Bank or its affiliates or, if originated by an unaffiliated party, from the date of acquisition of such mortgage loan by Washington Mutual Bank or its affiliates) and any such delinquency lasted for no more than 30 days.

Except for approximately 0.01% (by aggregate principal balance as of the Cut-Off Date) of the mortgage loans in loan group 1 and loan group 2, each mortgage loan with both (i) an original loan-to-value ratio and (ii) a loan-to-value ratio as of the Cut-Off Date in excess of 80% was covered, as of the Cut-Off Date, by a primary insurance policy. For purposes of determining whether a primary insurance policy is required, the loan-to-value ratio is generally calculated as follows: (1) with respect to mortgage loans not secured by property located in the State of New York, the original principal amount of such loan divided by the lesser of (x) the original appraised value of the related mortgaged property and (y) the purchase price of such loan; and (2) with respect to mortgage loans secured by property in the State of New York, the original principal amount of such loan divided by the original appraised value of the related mortgaged property.

As of the Cut-Off Date, (a) approximately 1.4% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) and (b) approximately 4.2% of the mortgage loans in loan group 3, loan group 4 and loan group 5 (by aggregate principal balance) will not, by the terms of the related mortgages, fully amortize by their stated maturity dates (each, a “Balloon Loan”).

As of the Cut-Off Date, certain of the mortgage loans impose prepayment penalties for certain prepayments of principal. See Appendix B to this prospectus supplement for a table showing prepayment penalty terms of the mortgage loans by loan group and subgroup. Generally, the mortgage loans with prepayment penalties provide for the payment of a penalty in connection with certain voluntary, full or partial prepayments made within a period of time specified in the related mortgage note and generally ranging from six to 60 months from the date of origination of such mortgage loan. The amount of the applicable prepayment penalty, to the extent permitted under applicable law, is as provided in the related mortgage note. As of the Cut-Off Date, approximately 2.4% of the mortgage loans in loan group 1 and loan group 2 (by aggregate principal balance) impose penalties for early prepayments but contain an exception for prepayments in full made in connection with a bona fide and arm’s length sale of the related

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mortgaged property during a certain period following origination, or after a certain period following origination, as specified in the mortgage note or contain various other exceptions specified in the mortgage note, and therefore penalties are not imposed on such prepayments and are not available for distribution to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates, as applicable. See the “Prepayment Penalty Terms of the Subgroup 1-B Loans”, “Prepayment Penalty Terms of the Subgroup 2-B Loans,” “Prepayment Penalty Terms of the Loan Group 3 Loans,” “Prepayment Penalty Terms of the Loan Group 4 Loans” and “Prepayment Penalty Terms of the Loan Group 5 Loans” tables in Appendix B hereto for information regarding the number of loans, and the related percentage of each loan group, that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

No prepayment penalty payments on any Countrywide Loans will be remitted to the Trust. All such payments on Countrywide Loans will be retained by Countrywide Home Loans and will not be payable to any class of certificates.

Investors should note that, regardless of the terms of the mortgage note, WMB will not collect prepayment penalties after the third anniversary of the origination of the mortgage loan.

The mortgage loans will be purchased by the depositor directly from (i) Washington Mutual Bank or (ii) Washington Mutual Mortgage Securities Corp., which purchased the mortgage loans directly or indirectly from affiliated or unaffiliated third parties who either originated the applicable mortgage loans or purchased the mortgage loans through correspondent or broker lending programs operated by these third parties. See “The Sponsors—The Sponsors’ Origination Channels,” “Underwriting of the Mortgage Loans” and “The Originators” in this prospectus supplement.

Loan Group 1

The mortgage loans in loan group 1 consist of 1,128 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $325,305,695.

As of the Cut-Off Date, approximately 5.9% (by principal balance) of the mortgage loans in loan group 1 were covered by a primary insurance policy.

As of the Cut-Off Date, approximately 1.4% (by principal balance) of the mortgage loans in loan group 1 are Balloon Loans. As of the Cut-Off Date, all of the Balloon Loans in loan group 1 amortize over 40 years, but require payment in full 360 months after the origination of such mortgage loans.

As of the Cut-Off Date, the principal balances of the mortgage loans in loan group 1 will not exceed the limits established by Freddie Mac in connection with Freddie Mac’s mortgage loan purchase program.

As of the Cut-Off Date, approximately 94.8% (by principal balance) of the mortgage loans in loan group 1 impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, approximately 2.4% (by principal balance) of the mortgage loans in loan group 1 are Countrywide Loans. All of these Countrywide Loans in loan group 1 impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary of the origination of the mortgage loan, but the penalties collected on these mortgage loans will be retained by Countrywide Home Loans.

As of the Cut-Off Date, approximately 97.6% (by principal balance) of the mortgage loans in loan group 1 are WMB Loans.

As of the Cut-Off Date, WMB Loans in loan group 1, representing approximately 0.4% (by principal balance) of the mortgage loans in loan group 1, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the six month anniversary of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 86.4% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 13.6% of these mortgage loans is 5% of the amount of the prepayment.

As of the Cut-Off Date, WMB Loans in loan group 1, representing approximately 19.9% (by principal balance) of the mortgage loans in loan group 1, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the first anniversary (exclusive of the mortgage

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loans in the immediately preceding paragraph) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 91.1% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.4% of these mortgage loans is 2% of the amount of the prepayment, (iii) for 2.3% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (iv) for 1.6% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount, (v) for 1.2% of these mortgage loans is 5% of the amount of the prepayment, (vi) for 0.7% of these mortgage is the lesser of (a) 3 months of interest on the amount of the prepayment and (b) 2% of the amount of the prepayment, (vii) for 0.5% of these mortgage loans is 3 months of interest and (viii) for 0.3% of these mortgage loans is the lesser of (a) six months of interest on the amount of the prepayment exceeding 20% of the original loan amount and (b) a specific amount as defined in the mortgage note.

As of the Cut-Off Date, WMB Loans in loan group 1, representing approximately 1.6% (by principal balance) of the mortgage loans in loan group 1, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the second anniversary (exclusive of the mortgage loans in the two immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 92.9% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 4.6% of these mortgage loans is 2% of the prepaid amount if owner-occupied, 1% of the prepaid amount if non-owner occupied and the original loan amount was less than $75,000, 6 months of interest on the prepayment amount exceeding 20% of the original balance in a 12 month period if non-owner occupied and the original loan amount was greater than or equal to $75,000 and (iii) for 2.5% of the mortgage loans is 5% of the amount of the prepayment if the prepayment occurs during the first year, 3% of the amount of the prepayment if the prepayment occurs during the second year.

As of the Cut-Off Date, WMB Loans in loan group 1, representing approximately 0.2% (by principal balance) of the mortgage loans in loan group 1, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 30 month anniversary (exclusive of the mortgage loans in the three immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 47.1% of these mortgage loans 1% of the amount of the prepayment (only applies if the outstanding balance at the time of the prepayment is at least $150,000), (ii) for 30.1% of these mortgage loans is 1% of the amount of the prepayment and, (iii) for 22.8% of these mortgage is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in loan group 1, representing approximately 70.3% (by principal balance) of the mortgage loans in loan group 1, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary (exclusive of the mortgage loans in the four immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 86.7% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 3.1% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount, (iii) for 2.9% of these mortgage loans is 5% of the amount of the prepayment, (iv) for 2.6% of these mortgage loans is 2% of the amount of the prepayment, (v) for 1.7% of these mortgage loans is 3 months of interest, (vi) for 0.8% of these mortgage loans is 1% of the amount of the prepayment, (vii) for 0.4% of these mortgage loans is the lesser of (a) six months of interest on the amount of the prepayment exceeding 20% of the original loan amount and (b) a specific amount as defined in the mortgage note, (viii) for 0.3% of these mortgage loans is 3 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ix) for 0.3% of these mortgage loans is 2% of the amount of the prepayment amount exceeding 20% of the original loan amount, (x) for 0.3% of these mortgage loans is the lesser of (a) 3 months of interest on the amount of the prepayment and (b) 2% of the amount of the prepayment, (xi) for 0.2% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (xii) for 0.2% of these mortgage loans is the lesser of (a) 2% of the amount of the prepayment and (b) 60 days interest on the amount of the prepayment, (xiii) for 0.1% of these mortgage loans is 1% of the original loan amount, (xiv) for 0.1% of these mortgage loans is 2% of the prepaid amount if owner occupied, 1% of the prepaid amount if non-owner occupied and the original loan amount is less than $75,000, 6 months of interest on the prepayment amount exceeding 20% of the original balance in a 12 month period if non-owner occupied and the original balance is greater than or

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equal to $75,000, (xv) for 0.1% of these mortgage loans is 60 days accrued interest on the prepaid amount that when added to any other prepay amount in the last 12 months exceeds 33% of the original loan amount, (xvi) for 0.1% of these mortgage loans is 3% of the amount of the prepayment if the prepayment occurs during the first year, 2% of the amount of the prepayment if the prepayment occurs during the second year and 1% of the amount of the prepayment if the prepayment occurs during the third year, (xvii) for 0.1% of these mortgage loans is 2% of the amount of the prepayment or 2% of the average daily balance for the prior 6 months if the prepayment results from a refinance with a new lender and (xviii) for 0.1% of these mortgage loans is 1% of the amount of the prepayment exceeding 20% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in loan group 1.

Subgroup 1-A

The mortgage loans in subgroup 1-A consist of 56 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $16,831,167.

As of the Cut-Off Date, approximately 4.5% (by principal balance) of the mortgage loans in subgroup 1-A were covered by a primary insurance policy.

None of the mortgage loans in subgroup 1-A imposes penalties for early prepayments of any kind.

See Appendix B for a detailed description of the mortgage loans in subgroup 1-A.

Subgroup 1-B

The mortgage loans in subgroup 1-B consist of 1,072 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $308,474,527.

As of the Cut-Off Date, approximately 5.9% (by principal balance) of the mortgage loans in subgroup 1-B were covered by a primary insurance policy.

As of the Cut-Off Date, approximately 1.4% (by principal balance) of the mortgage loans in subgroup 1-B are Balloon Loans. As of the Cut-Off Date, all of the Balloon Loans in subgroup 1-B amortize over 40 years, but require payment in full 360 months after the origination of such mortgage loans.

As of the Cut-Off Date, all of the mortgage loans in subgroup 1-B impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, approximately 2.5% (by principal balance) of the mortgage loans in subgroup 1-B are Countrywide Loans. All of these Countrywide Loans in subgroup 1-B impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary of the origination of the mortgage loan, but the penalties collected on these mortgage loans will be retained by Countrywide Home Loans.

As of the Cut-Off Date, approximately 97.5% (by principal balance) of the mortgage loans in subgroup 1-B are WMB Loans.

As of the Cut-Off Date, WMB Loans in subgroup 1-B, representing approximately 0.4% (by principal balance) of the mortgage loans in subgroup 1-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the six month anniversary of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 86.4% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 13.6% of these mortgage loans is 5% of the amount of the prepayment.

As of the Cut-Off Date, WMB Loans in subgroup 1-B, representing approximately 21.0% (by principal balance) of the mortgage loans in subgroup 1-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the first anniversary (exclusive of the mortgage loans in the immediately preceding paragraph) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 91.1% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.4% of these mortgage loans is 2% of the amount of the prepayment, (iii) for 2.3% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (iv) for 1.6% of these mortgage loans is 2 months of interest on the

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amount of the prepayment exceeding 33% of the original loan amount, (v) for 1.2% of these mortgage loans is 5% of the amount of the prepayment, (vi) for 0.7% of these mortgage is the lesser of (a) 3 months of interest on the amount of the prepayment and (b) 2% of the amount of the prepayment, (vii) for 0.5% of these mortgage loans is 3 months of interest and (viii) for 0.3% of these mortgage loans is the lesser of (a) six months of interest on the amount of the prepayment exceeding 20% of the original loan amount and (b) a specific amount as defined in the mortgage note.

As of the Cut-Off Date, WMB Loans in subgroup 1-B, representing approximately 1.7% (by principal balance) of the mortgage loans in subgroup 1-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the second anniversary (exclusive of the mortgage loans in the two immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 92.9% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 4.6% of these mortgage loans is 2% of the prepaid amount if owner-occupied, 1% of the prepaid amount if non-owner occupied and the original loan amount was less than $75,000, 6 months of interest on the prepayment amount exceeding 20% of the original balance in a 12 month period if non-owner occupied and the original loan amount was greater than or equal to $75,000 and (iii) for 2.5% of the mortgage loans is 5% of the amount of the prepayment if the prepayment occurs during the first year, 3% of the amount of the prepayment if the prepayment occurs during the second year.

As of the Cut-Off Date, WMB Loans in subgroup 1-B, representing approximately 0.2% (by principal balance) of the mortgage loans in subgroup 1-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 30 month anniversary (exclusive of the mortgage loans in the three immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 47.1% of these mortgage loans 1% of the amount of the prepayment (only applies if the outstanding balance at the time of the prepayment is at least $150,000), (ii) for 30.1% of these mortgage loans is 1% of the amount of the prepayment and, (iii) for 22.8% of these mortgage is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in subgroup 1-B, representing approximately 74.1% (by principal balance) of the mortgage loans in subgroup 1-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary (exclusive of the mortgage loans in the four immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 86.7% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 3.1% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount, (iii) for 2.9% of these mortgage loans is 5% of the amount of the prepayment, (iv) for 2.6% of these mortgage loans is 2% of the amount of the prepayment, (v) for 1.7% of these mortgage loans is 3 months of interest, (vi) for 0.8% of these mortgage loans is 1% of the amount of the prepayment, (vii) for 0.4% of these mortgage loans is the lesser of (a) six months of interest on the amount of the prepayment exceeding 20% of the original loan amount and (b) a specific amount as defined in the mortgage note., (viii) for 0.3% of these mortgage loans is 3 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ix) for 0.3% of these mortgage loans is 2% of the amount of the prepayment amount exceeding 20% of the original loan amount, (x) for 0.3% of these mortgage loans is the lesser of (a) 3 months of interest on the amount of the prepayment and (b) 2% of the amount of the prepayment, (xi) for 0.2% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (xii) for 0.2% of these mortgage loans is the lesser of (a) 2% of the amount of the prepayment and (b) 60 days interest on the amount of the prepayment, (xiii) for 0.1% of these mortgage loans is 1% of the original loan amount, (xiv) for 0.1% of these mortgage loans is 2% of the prepaid amount if owner occupied, 1% of the prepaid amount if non-owner occupied and the original loan amount is less than $75,000, 6 months of interest on the prepayment amount exceeding 20% of the original balance in a 12 month period if non-owner occupied and the original balance is greater than or equal to $75,000, (xv) for 0.1% of these mortgage loans is 60 days accrued interest on the prepaid amount that when added to any other prepay amount in the last 12 months exceeds 33% of the original loan amount, (xvi) for 0.1% of these mortgage loans is 3% of the amount of the prepayment if the prepayment occurs during the first year, 2% of the amount of the prepayment if the prepayment occurs during the second year and 1% of the amount of the prepayment if the prepayment occurs during the third year, (xvii) for 0.1% of

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these mortgage loans is 2% of the amount of the prepayment or 2% of the average daily balance for the prior 6 months if the prepayment results from a refinance with a new lender and (xviii) for 0.1% of these mortgage loans is 1% of the amount of the prepayment exceeding 20% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in subgroup 1-B.

Loan Group 2

The mortgage loans in loan group 2 consist of 883 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $486,788,334.

As of the Cut-Off Date, approximately 3.5% (by principal balance) of the mortgage loans in loan group 2 were covered by a primary insurance policy.

As of the Cut-Off Date, approximately 4.2% (by principal balance) of the mortgage loans in loan group 2 are Balloon Loans. As of the Cut-Off Date, all of the Balloon Loans in loan group 2 amortize over 40 years, but require payment in full 360 months after the origination of such mortgage loans.

As of the Cut-Off Date, approximately 87.8% (by principal balance) of the mortgage loans in loan group 2 impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, approximately 1.7% (by principal balance) of the mortgage loans in loan group 2 are Countrywide Loans. All of these Countrywide Loans in loan group 2 impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary of the origination of the mortgage loan, but the penalties collected on these mortgage loans will be retained by Countrywide Home Loans.

As of the Cut-Off Date, approximately 98.3% (by principal balance) of the mortgage loans in loan group 2 are WMB Loans.

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 0.5% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the six month anniversary of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 24.9% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the first anniversary (exclusive of the mortgage loans in the immediately preceding paragraph) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 93.9% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.0% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (iii) for 1.5% of these mortgage loans is 2% of the amount of the prepayment, (iv) for 0.9% of these mortgage loans is 5% of the amount of the prepayment, (v) for 0.7% of these mortgage loans is 1% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $150,000), (vi) for 0.5% of these mortgage is 3 months of interest, (vii) for 0.4% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount and (viii) for 0.2% of these mortgage loans is 2% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $50,000).

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 4.4% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the second anniversary (exclusive of the mortgage loans in the two immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 0.05% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 30 month anniversary (exclusive of the

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mortgage loans in the three immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 1% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $150,000).

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 56.2% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary (exclusive of the mortgage loans in the four immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 91.8% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.4% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount, (iii) for 1.7% of these mortgage loans is 1% of the original loan amount, (iv) for 1.4% of these mortgage loans is 2% of the amount of the prepayment, (v) for 0.8% of these mortgage loans is 5% of the amount of prepayment, (vi) for 0.7% of these mortgage loans is 2% of the amount of the prepayment or 2% of the average daily balance for the prior 6 months if the prepayment results from a refinance with a new lender, (vii) for 0.4% of these mortgage loans is 3 months of interest, (viii) for 0.3% of these mortgage loans is 2% of the amount of the prepayment amount exceeding 20% of the original loan amount, (ix) for 0.2% of these mortgage loans is 1% of the prepayment amount, (x) for 0.2% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (xi) for 0.1% of these mortgage loans is 6 months of interest on 80% of the original loan amount and (xii) for 0.1% of these mortgage loans is 5% of the amount of the prepayment if the prepayment occurs during the first year, 4% of the amount of the prepayment if the prepayment occurs during the second year and 3% of the amount of the prepayment if the prepayment occurs during the third year.

As of the Cut-Off Date, WMB Loans in loan group 2, representing approximately 0.1% (by principal balance) of the mortgage loans in loan group 2, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 60 month anniversary (exclusive of the mortgage loans in the five immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in loan group 2.

Subgroup 2-A

The mortgage loans in subgroup 2-A consist of 96 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $59,212,175.

As of the Cut-Off Date, approximately 2.9% (by principal balance) of the mortgage loans in subgroup 2-A were covered by a primary insurance policy.

None of the mortgage loans in subgroup 2-A imposes penalties for early prepayments of any kind.

See Appendix B for a detailed description of the mortgage loans in subgroup 2-A.

Subgroup 2-B

The mortgage loans in subgroup 2-B consist of 787 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $427,576,158.

As of the Cut-Off Date, approximately 3.6% (by principal balance) of the mortgage loans in subgroup 2-B were covered by a primary insurance policy.

As of the Cut-Off Date, approximately 4.7% (by principal balance) of the mortgage loans in subgroup 2-B are Balloon Loans. As of the Cut-Off Date, all of the Balloon Loans in subgroup 2-B amortize over 40 years, but require payment in full 360 months after the origination of such mortgage loans.

As of the Cut-Off Date, all of the mortgage loans in subgroup 2-B impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

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As of the Cut-Off Date, approximately 1.9% (by principal balance) of the mortgage loans in subgroup 2-B are Countrywide Loans. All of these Countrywide Loans in subgroup 2-B impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary of the origination of the mortgage loan, but the penalties collected on these mortgage loans will be retained by Countrywide Home Loans.

As of the Cut-Off Date, approximately 98.1% (by principal balance) of the mortgage loans in subgroup 2-B are WMB Loans.

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 0.6% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the six month anniversary of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 28.4% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the first anniversary (exclusive of the mortgage loans in the two immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 93.9% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.0% of these mortgage loans is 6 months of interest on 80% of the original loan amount, (iii) for 1.5% of these mortgage loans is 2% of the amount of the prepayment, (iv) for 0.9% of these mortgage loans is 5% of the amount of the prepayment, (v) for 0.7% of these mortgage loans is 1% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $150,000), (vi) for 0.5% of these mortgage is 3 months of interest, (vii) for 0.4% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount and (viii) for 0.2% of these mortgage loans is 2% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $50,000).

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 5.0% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the second anniversary (exclusive of the mortgage loans in the three immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount.

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 0.1% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 30 month anniversary (exclusive of the mortgage loans in the four immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 1% of the amount of the prepayment (only applies if the outstanding balance at the time of prepayment is at least $150,000).

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 64.0% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the third anniversary (exclusive of the mortgage loans in the five immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty (i) for 91.8% of these mortgage loans is 6 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (ii) for 2.4% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount, (iii) for 1.7% of these mortgage loans is 1% of the original loan amount, (iv) for 1.4% of these mortgage loans is 2% of the amount of the prepayment, (v) for 0.8% of these mortgage loans is 5% of the amount of prepayment, (vi) for 0.7% of these mortgage loans is 2% of the amount of the prepayment or 2% of the average daily balance for the prior 6 months if the prepayment results from a refinance with a new lender, (vii) for 0.4% of these mortgage loans is 3 months of interest, (viii) for 0.3% of these mortgage loans is 2% of the amount of the prepayment amount exceeding 20% of the original loan amount, (ix) for 0.2% of these mortgage loans is 1% of the prepayment amount, (x) for 0.2% of these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 20% of the original loan amount, (xi) for 0.1% of

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these mortgage loans is 6 months of interest on 80% of the original loan amount and (xii) for 0.1% of these mortgage loans is 5% of the amount of the prepayment if the prepayment occurs during the first year, 4% of the amount of the prepayment if the prepayment occurs during the second year and 3% of the amount of the prepayment if the prepayment occurs during the third year.

As of the Cut-Off Date, WMB Loans in subgroup 2-B, representing approximately 0.1% (by principal balance) of the mortgage loans in subgroup 2-B, impose penalties for early prepayments in full (and in some cases for partial prepayments) received on or before the 60 month anniversary (exclusive of the mortgage loans in the six immediately preceding paragraphs) of the origination of the mortgage loan. The amount of the prepayment penalty for these mortgage loans is 2 months of interest on the amount of the prepayment exceeding 33% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in subgroup 2-B.

Loan Group 3

The mortgage loans in loan group 3 consist of 1,081 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $281,607,015.

As of the Cut-Off Date, approximately 6.7% (by principal balance) of the mortgage loans in loan group 3 were covered by a primary insurance policy.

As of the Cut-Off Date, the principal balances of the mortgage loans in loan group 3 will not exceed the limits established by Freddie Mac in connection with Freddie Mac’s mortgage loan purchase program.

As of the Cut-Off Date, approximately 88.3% (by principal balance) of the mortgage loans in loan group 3 impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, all of the mortgage loans in loan group 3 are WMB Loans.

As of the Cut-Off Date, certain of the mortgage loans in loan group 3 impose penalties for early prepayments in full but do not impose penalties for partial prepayments received on or before the first or third anniversary, as stated in the related mortgage note, of the origination of the mortgage loan. As of the Cut-Off Date, certain of the mortgage loans in loan group 3 impose penalties for early prepayments in full, and for partial prepayments in the event that aggregate partial prepayments made during a 12-month period exceed 20% of the original principal balance. Those prepayment penalties are in effect for 30 months after the origination of those mortgage loans. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note. See the “Prepayment Penalty Terms of the Group 3 Loans” table in Appendix B hereto for information regarding the number of mortgage loans, and the related percentage of each loan group, that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

As of the Cut-Off Date, for mortgage loans in loan group 3 that impose prepayment penalties for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the original loan amount.

As of the Cut-Off Date, for mortgage loans in loan group 3 that impose prepayment penalties for voluntary full prepayments received within three years from origination of the mortgage loan, the amount of such prepayment penalty is (i) 3.0% of the original loan amount for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, (ii) 2.0% of the original loan amount for voluntary full prepayments received after the first anniversary of the origination of the mortgage loan but on or before the second anniversary of the origination of the mortgage loan and (iii) 1.0% of the original loan amount for voluntary full prepayments received after the second anniversary of the origination of the mortgage loan but on or before the third anniversary of the origination of the mortgage loan.

As of the Cut-Off Date, for mortgage loans in loan group 3 that impose prepayment penalties for voluntary full prepayments received within 30 months from origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the of the prepayment amount exceeding 20% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in loan group 3.

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Subgroup 4-A

The mortgage loans in subgroup 4-A consist of 97 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $78,996,746.

As of the Cut-Off Date, approximately 0.5% (by principal balance) of the mortgage loans in subgroup 4-A were covered by a primary insurance policy.

None of the mortgage loans in subgroup 4-A imposes penalties for early prepayments of any kind.

See Appendix B for a detailed description of the mortgage loans in subgroup 4-A.

Subgroup 4-B

The mortgage loans in subgroup 4-B consist of 1,121 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $851,601,250.

As of the Cut-Off Date, approximately 2.6% (by principal balance) of the mortgage loans in subgroup 4-B were covered by a primary insurance policy.

As of the Cut-Off Date, 85.3% of the mortgage loans in subgroup 4-B impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, all of the mortgage loans in subgroup 4-B are WMB Loans.

As of the Cut-Off Date, certain of the mortgage loans in subgroup 4-B impose penalties for early prepayments in full but do not impose penalties for partial prepayments received on or before the first or third anniversary, as stated in the related mortgage note, of the origination of the mortgage loan. As of the Cut-Off Date, certain of the mortgage loans in subgroup 4-B impose penalties for early prepayments in full, and for partial prepayments in the event that aggregate partial prepayments made during a 12-month period exceed 20% of the original principal balance. Those prepayment penalties are in effect for 30 months after the origination of those mortgage loans. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note. See the “Prepayment Penalty Terms of the Group 3 Loans” table in Appendix B hereto for information regarding the number of mortgage loans, and the related percentage of each loan group, that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

As of the Cut-Off Date, for mortgage loans in subgroup 4-B that impose prepayment penalties for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the original loan amount.

As of the Cut-Off Date, for mortgage loans in subgroup 4-B that impose prepayment penalties for voluntary full prepayments received within three years from origination of the mortgage loan, the amount of such prepayment penalty is (i) 3.0% of the original loan amount for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, (ii) 2.0% of the original loan amount for voluntary full prepayments received after the first anniversary of the origination of the mortgage loan but on or before the second anniversary of the origination of the mortgage loan and (iii) 1.0% of the original loan amount for voluntary full prepayments received after the second anniversary of the origination of the mortgage loan but on or before the third anniversary of the origination of the mortgage loan.

As of the Cut-Off Date, for mortgage loans in subgroup 4-B that impose prepayment penalties for voluntary full prepayments received within 30 months from origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the prepayment amount exceeding 20% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in subgroup 4-B.

Subgroup 5-A

The mortgage loans in subgroup 5-A consist of 51 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $41,730,979.

As of the Cut-Off Date, approximately 0.6% (by principal balance) of the mortgage loans in subgroup 5-A were covered by a primary insurance policy.

None of the mortgage loans in subgroup 5-A imposes penalties for early prepayments of any kind.

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See Appendix B for a detailed description of the mortgage loans in subgroup 5-A.

Subgroup 5-B

The mortgage loans in subgroup 5-B consist of 608 mortgage loans with an aggregate principal balance as of the Cut-Off Date of approximately $305,929,239.

As of the Cut-Off Date, approximately 1.7% (by principal balance) of the mortgage loans in subgroup 5-B were covered by a primary insurance policy.

As of the Cut-Off Date, 83.2% of the mortgage loans in subgroup 5-B impose penalties for early prepayments. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note.

As of the Cut-Off Date, all of the mortgage loans in subgroup 5-B are WMB Loans.

As of the Cut-Off Date, certain of the mortgage loans in subgroup 5-B impose penalties for early prepayments in full but do not impose penalties for partial prepayments received on or before the first or third anniversary, as stated in the related mortgage note, of the origination of the mortgage loan. As of the Cut-Off Date, certain of the mortgage loans in subgroup 5-B impose penalties for early prepayments in full, and for partial prepayments in the event that aggregate partial prepayments made during a 12-month period exceed 20% of the original principal balance. Those prepayment penalties are in effect for 30 months after the origination of those mortgage loans. The amount of the applicable prepayment penalty, to the extent permitted by applicable law, is as provided in the related mortgage note. See the “Prepayment Penalty Terms of the Group 3 Loans” table in Appendix B hereto for information regarding the number of mortgage loans, and the related percentage of each loan group, that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

As of the Cut-Off Date, for mortgage loans in subgroup 5-B that impose prepayment penalties for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the original loan amount.

As of the Cut-Off Date, for mortgage loans in subgroup 5-B that impose prepayment penalties for voluntary full prepayments received within three years from origination of the mortgage loan, the amount of such prepayment penalty is (i) 3.0% of the original loan amount for voluntary full prepayments received on or before the first anniversary of the origination of the mortgage loan, (ii) 2.0% of the original loan amount for voluntary full prepayments received after the first anniversary of the origination of the mortgage loan but on or before the second anniversary of the origination of the mortgage loan and (iii) 1.0% of the original loan amount for voluntary full prepayments received after the second anniversary of the origination of the mortgage loan but on or before the third anniversary of the origination of the mortgage loan.

As of the Cut-Off Date, for mortgage loans in subgroup 5-B that impose prepayment penalties for voluntary full prepayments received within 30 months from origination of the mortgage loan, the amount of such prepayment penalty is 2.0% of the prepayment amount exceeding 20% of the original loan amount.

See Appendix B for a detailed description of the mortgage loans in subgroup 5-B.

The Indexes

The index for each mortgage loan (the “Index”) is either One-Year MTA, One-Month LIBOR or COFI, as described below.

The index for all the mortgage loans in loan group 1, loan group 3, loan group 4 and approximately 98.0% of the mortgage loans in loan group 2 (by principal balance as of the Cut-Off Date) is a per annum rate equal to the twelve-month moving average monthly yield on United States Treasury Securities adjusted to a constant maturity of one year (“One-Year MTA”), as published by the Board of Governors of the Federal Reserve System in the Federal Reserve Statistical Release “Selected Interest Rates (H.15)”, determined by averaging the monthly yields for the most recently available twelve months. The One-Year MTA figure used for each interest rate adjustment date will be the most recent One-Year MTA figure available as of fifteen days before that date. If One-Year MTA is no longer available, the servicer will choose a new Index that is based on comparable information.

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Listed below are some historical values of One-Year MTA since 2002. The values of One-Year MTA shown are intended only to provide an historical summary of the movements in the One-Year MTA and may not be indicative of future rates. No assurances can be given as to the value of One-Year MTA on any interest rate adjustment date or during the life of any mortgage loan.

 

 

 

 

 

 

 

 

 

 

 

 

 

Month

 

2007

 

2006

 

2005

 

2004

 

2003

 

2002

January

 

 

 

4.983%

   

 

 

3.751%

   

 

 

2.022%

   

 

 

1.234%

   

 

 

1.935%

   

 

 

3.260%

 

February

 

 

 

5.014%

   

 

 

3.888%

   

 

 

2.171%

   

 

 

1.229%

   

 

 

1.858%

   

 

 

3.056%

 

March

 

 

 

 

 

4.011%

   

 

 

2.347%

   

 

 

1.225%

   

 

 

1.747%

   

 

 

2.912%

 

April

 

 

 

 

 

4.143%

   

 

 

2.504%

   

 

 

1.238%

   

 

 

1.646%

   

 

 

2.787%

 

May

 

 

 

 

 

4.282%

   

 

 

2.633%

   

 

 

1.288%

   

 

 

1.548%

   

 

 

2.668%

 

June

 

 

 

 

 

4.432%

   

 

 

2.737%

   

 

 

1.381%

   

 

 

1.449%

   

 

 

2.553%

 

July

 

 

 

 

 

4.563%

   

 

 

2.865%

   

 

 

1.463%

   

 

 

1.379%

   

 

 

2.414%

 

August

 

 

 

 

 

4.664%

   

 

 

3.019%

   

 

 

1.522%

   

 

 

1.342%

   

 

 

2.272%

 

September

 

 

 

 

 

4.758%

   

 

 

3.163%

   

 

 

1.595%

   

 

 

1.302%

   

 

 

2.180%

 

October

 

 

 

 

 

4.827%

   

 

 

3.326%

   

 

 

1.677%

   

 

 

1.268%

   

 

 

2.123%

 

November

 

 

 

 

 

4.883%

   

 

 

3.478%

   

 

 

1.773%

   

 

 

1.256%

   

 

 

2.066%

 

December

 

 

 

 

 

4.933%

   

 

 

3.618%

   

 

 

1.887%

   

 

 

1.244%

   

 

 

2.002%

 

The index for approximately 1.9% of the mortgage loans in loan group 2 (by principal balance as of the Cut-Off Date) is the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market, as published in The Wall Street Journal and most recently available as of fifteen days before the applicable interest rate adjustment date (“One-Month LIBOR”). In the event One-Month LIBOR is no longer available, the servicer will choose a new Index in accordance with the terms of the related mortgage note and in compliance with federal and state law.

Listed below are some historical values of the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market. These values were not determined in accordance with the provisions for One-Month LIBOR described above. The values shown below are intended only to provide a historical summary of the movement in rates related to One-Month LIBOR and may not be indicative of future rates. The values shown below were derived from various sources.

 

 

 

 

 

 

 

 

 

 

 

 

 

Month

 

2007

 

2006

 

2005

 

2004

 

2003

 

2002

January

 

 

 

5.320%

   

 

 

4.570%

   

 

 

2.590%

   

 

 

1.100%

   

 

 

1.340%

   

 

 

1.848%

 

February

 

 

 

5.320%

   

 

 

4.633%

   

 

 

2.716%

   

 

 

1.098%

   

 

 

1.338%

   

 

 

1.870%

 

March

 

 

 

 

 

4.829%

   

 

 

2.870%

   

 

 

1.090%

   

 

 

1.300%

   

 

 

1.879%

 

April

 

 

 

 

 

5.040%

   

 

 

3.089%

   

 

 

1.100%

   

 

 

1.320%

   

 

 

1.840%

 

May

 

 

 

 

 

5.111%

   

 

 

3.130%

   

 

 

1.114%

   

 

 

1.320%

   

 

 

1.844%

 

June

 

 

 

 

 

5.334%

   

 

 

3.340%

   

 

 

1.369%

   

 

 

1.120%

   

 

 

1.839%

 

July

 

 

 

 

 

5.391%

   

 

 

3.519%

   

 

 

1.504%

   

 

 

1.100%

   

 

 

1.820%

 

August

 

 

 

 

 

5.330%

   

 

 

3.700%

   

 

 

1.670%

   

 

 

1.119%

   

 

 

1.820%

 

September

 

 

 

 

 

5.322%

   

 

 

3.864%

   

 

 

1.840%

   

 

 

1.120%

   

 

 

1.811%

 

October

 

 

 

 

 

5.320%

   

 

 

4.090%

   

 

 

2.000%

   

 

 

1.120%

   

 

 

1.716%

 

November

 

 

 

 

 

5.350%

   

 

 

4.294%

   

 

 

2.290%

   

 

 

1.170%

   

 

 

1.439%

 

December

 

 

 

 

 

5.322%

   

 

 

4.390%

   

 

 

2.400%

   

 

 

1.120%

   

 

 

1.380%

 

The index for the mortgage loans in loan group 5 and approximately 0.1% of the mortgage loans in loan group 2 (by principal balance as of the Cut-Off Date) is a per annum rate equal to the “11th District Cost of Funds Index” or “COFI” that is published each month by the Federal Home Loan Bank of San Francisco for the prior month in its monthly Information Bulletin (the “COFI Bulletin”), currently available from the Federal Home Loan Bank of San Francisco, 600 California Street, San Francisco, California 94108, telephone: (415) 616-1000. The Federal Home Loan Bank of San Francisco determines COFI based on the weighted average cost of funds for its member savings institutions, which are located in Arizona, California and Nevada. The index figure used for each interest rate adjustment date will be the most recently available index as of the interest rate adjustment date. If COFI is no longer available, the servicer will choose a new Index in accordance with the terms of the related mortgage note and in compliance with federal and state law.

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Listed below are some historical values of COFI since 2002. The values of COFI shown are intended only to provide an historical summary of the movements in COFI and may not be indicative of future rates. No assurances can be given as to the value of COFI on any interest rate adjustment date or during the life of any mortgage loan.

 

 

 

 

 

 

 

 

 

 

 

 

 

Month

 

2007

 

2006

 

2005

 

2004

 

2003

 

2002

January

 

 

 

4.392%

   

 

 

3.347%

   

 

 

2.183%

   

 

 

1.811%

   

 

 

2.308%

   

 

 

2.823%

 

February

 

 

 

 

 

3.604%

   

 

 

2.317%

   

 

 

1.841%

   

 

 

2.257%

   

 

 

2.744%

 

March

 

 

 

 

 

3.624%

   

 

 

2.400%

   

 

 

1.815%

   

 

 

2.210%

   

 

 

2.653%

 

April

 

 

 

 

 

3.759%

   

 

 

2.515%

   

 

 

1.802%

   

 

 

2.208%

   

 

 

2.723%

 

May

 

 

 

 

 

3.884%

   

 

 

2.622%

   

 

 

1.708%

   

 

 

2.130%

   

 

 

2.772%

 

June

 

 

 

 

 

4.090%

   

 

 

2.676%

   

 

 

1.758%

   

 

 

2.113%

   

 

 

2.847%

 

July

 

 

 

 

 

4.177%

   

 

 

2.757%

   

 

 

1.816%

   

 

 

2.018%

   

 

 

2.821%

 

August

 

 

 

 

 

4.277%

   

 

 

2.870%

   

 

 

1.875%

   

 

 

1.946%

   

 

 

2.763%

 

September

 

 

 

 

 

4.382%

   

 

 

2.972%

   

 

 

1.931%

   

 

 

1.923%

   

 

 

2.759%

 

October

 

 

 

 

 

4.346%

   

 

 

3.074%

   

 

 

1.960%

   

 

 

1.909%

   

 

 

2.708%

 

November

 

 

 

 

 

4.358%

   

 

 

3.190%

   

 

 

2.025%

   

 

 

1.821%

   

 

 

2.537%

 

December

 

 

 

 

 

4.396%

   

 

 

3.296%

   

 

 

2.118%

   

 

 

1.902%

   

 

 

2.375%

 

Additional Information

Appendix B contains important information about the mortgage loans in each loan group and subgroup including:

 

 

 

 

the mortgage interest rates, the Pass-Through Rates and the original principal balances of the mortgage loans;

 

 

 

 

the Margins, the interest rate floors and the Rate Ceilings;

 

 

 

 

the years in which initial monthly payments on the mortgage loans are due;

 

 

 

 

the first interest rate adjustment dates on the mortgage loans;

 

 

 

 

the loan-to-value ratios of the mortgage loans as of the Cut-Off Date;

 

 

 

 

the types of mortgaged properties;

 

 

 

 

the geographic distribution by state of the mortgaged properties;

 

 

 

 

the scheduled maturity years of the mortgage loans;

 

 

 

 

the original terms to maturity of the mortgage loans;

 

 

 

 

the number of mortgage loans originated under full documentation or reduced documentation programs;

 

 

 

 

the stated owner occupancy status of the mortgaged properties when the mortgage loans were originated;

 

 

 

 

the mortgagor’s purpose of financing;

 

 

 

 

the credit score ranges;

 

 

 

 

current and past delinquencies of the mortgage loans, if applicable;

 

 

 

 

the monthly debt-to-income ratio of all debt;

 

 

 

 

the combined loan-to-value ratios of the first and second liens at origination;

 

 

 

 

current and past delinquencies of the mortgage loans; and

 

 

 

 

the number of mortgage loans that contain prepayment penalties, broken out for each of the various prepayment penalty terms.

The credit score tables appearing in Appendix B show the credit scores, if any, that the originators or underwriters of the mortgage loans collected for the mortgagors. The credit scores shown were collected from a variety of sources over a period of weeks, months or longer, and the credit scores do not necessarily reflect the credit scores that would be reported as of the date of this prospectus supplement. Credit scores should not be considered as an accurate predictor of the likelihood of repayment of the related mortgage

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loans. See “Underwriting of the Mortgage Loans—Evaluation of the Borrower’s Credit Standing” in this prospectus supplement.

The material terms of the pooling agreement are described in this prospectus supplement, and the pooling agreement will be available to purchasers of the certificates through a Current Report on Form 8-K that will be filed with the Securities and Exchange Commission within fifteen days after the initial issuance of the certificates. If mortgage loans are removed from or added to the mortgage pool as described in the footnote on page S-85, that removal or addition will be noted in a Distribution Report on Form 10-D or a Current Report on Form 8-K.

Representations and Warranties Regarding the Mortgage Loans

Under the related mortgage loan sale agreement pursuant to which Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, will sell the mortgage loans to the depositor, Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, will make representations and warranties in respect of the related mortgage loans, which representations and warranties the depositor will assign to the Trust pursuant to the pooling agreement. Among those representations and warranties made by each of Washington Mutual Mortgage Securities Corp. and Washington Mutual Bank, with respect to the mortgage loans sold by such entity to the depositor under the related mortgage loan sale agreement, are the following:

 

 

 

 

Each mortgage is a valid and enforceable first lien on an unencumbered estate in fee simple or leasehold estate in the related mortgaged property, except as such enforcement may be limited by laws affecting the enforcement of creditors’ rights generally and principles of equity, and except as provided in the mortgage loan sale agreement;

 

 

 

 

The depositor will be the legal owner of each mortgage loan, free and clear of any encumbrance or lien (other than any lien under the mortgage loan sale agreement);

 

 

 

 

For each mortgage loan sold by Washington Mutual Mortgage Securities Corp. to the depositor, no mortgage loan is delinquent (that is, more than 30 days past due), and no mortgage loan was delinquent more than once in the preceding 12 months (or during such shorter period as has elapsed from the date of acquisition of such mortgage loan by Washington Mutual Mortgage Securities Corp. or, if earlier, from the date of origination or acquisition of such mortgage loan by an affiliate of Washington Mutual Mortgage Securities Corp.) and any such delinquency lasted for no more than 30 days;

 

 

 

 

For each mortgage loan sold by Washington Mutual Bank to the depositor, no mortgage loan is delinquent (that is, more than 30 days past due), and no mortgage loan was delinquent more than once in the preceding 12 months (or during such shorter period as has elapsed from the date of origination of such mortgage loan by Washington Mutual Bank or its affiliates or, if originated by an unaffiliated party, from the date of acquisition of such mortgage loan by Washington Mutual Bank or its affiliates) and any such delinquency lasted for no more than 30 days;

 

 

 

 

There are no delinquent assessments or taxes outstanding against any mortgaged property;

 

 

 

 

There is no offset, defense or counterclaim to any mortgage note, except as stated in the mortgage loan sale agreement;

 

 

 

 

Each mortgaged property is free of damage and in good repair, ordinary wear and tear excepted;

 

 

 

 

Each mortgage loan at the time it was made complied with all applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, disclosure and recording laws, and predatory and abusive lending laws applicable to the originating lender;

 

 

 

 

Each mortgage loan (except mortgage loans secured by cooperative properties) is covered by a title insurance policy insuring the lien status of the mortgage, subject to the exceptions set forth in the policy;

 

 

 

 

For each mortgage loan sold by Washington Mutual Mortgage Securities Corp. to the depositor, except as provided in the mortgage loan sale agreement, each mortgage loan with a loan-to-

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value ratio both (i) as of the Cut-Off Date and (ii) as of its respective origination date in excess of 80% was covered, as of the Cut-Off Date, by a primary insurance policy, and such policy or guaranty is valid and remains in full force and effect;

 

 

 

 

For each mortgage loan sold by Washington Mutual Bank to the depositor, each mortgage loan with a loan-to-value ratio both (i) as of the Cut-Off Date and (ii) as of its respective origination date in excess of 80% was covered, as of the Cut-Off Date, by a primary insurance policy, and such policy or guaranty is valid and remains in full force and effect;

 

 

 

 

All hazard insurance or other insurance required under the mortgage loan sale agreement has been validly issued and remains in full force and effect;

 

 

 

 

Each mortgage and mortgage note is the legal, valid and binding obligation of the maker thereof and is enforceable in accordance with its terms, except only as such enforcement may be limited by laws affecting the enforcement of creditors’ rights generally and principles of equity;

 

 

 

 

Washington Mutual Mortgage Securities Corp. and Washington Mutual Bank, as applicable, used no adverse selection procedures in selecting the mortgage loans from among the outstanding adjustable rate conventional mortgage loans owned by it which were available for sale and as to which the representations and warranties in the mortgage loan sale agreement could be made; and

 

 

 

 

Each mortgage loan constitutes a qualified mortgage under the Internal Revenue Code.

Pursuant to the pooling agreement, the depositor will represent and warrant to the Trust that, as of the Closing Date, the Trust will be the legal owner of each mortgage loan, free and clear of any encumbrance or lien (other than (i) any lien arising before the depositor’s purchase of the mortgage loan from Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, and (ii) any lien under the pooling agreement).

In the event of a material breach of the representations and warranties made by a co-sponsor or the depositor, the breaching party will be required to either cure the breach in all material respects, repurchase the affected mortgage loan or substitute for the affected mortgage loan. In the event that a required loan document is not included in the mortgage files for the mortgage loans, the related co-sponsor generally will also be required to either cure the defect or repurchase or substitute for the affected mortgage loan. See “Description of the Securities—Representations and Warranties Regarding the Mortgage Loans; Remedies for Breach” in the prospectus for a description of the purchase price for each repurchased mortgage loan and the requirements with respect to substitutions of mortgage loans.

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Criteria for Selection of Mortgage Loans

Each co-sponsor selected the mortgage loans it sold to the depositor from among its portfolio of mortgage loans held for sale based on a variety of considerations, including type of mortgage loan, geographic concentration, range of mortgage interest rates, principal balance, credit scores and other characteristics described in Appendix B to this prospectus supplement, and taking into account investor preferences and the depositor’s objective of obtaining the most favorable combination of ratings on the certificates.

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DESCRIPTION OF THE CERTIFICATES

General

The certificates will be issued pursuant to the pooling agreement to be dated as of the Cut-Off Date among WaMu Asset Acceptance Corp., as depositor, Washington Mutual Bank, as servicer, LaSalle Bank National Association, as trustee, and Christiana Bank & Trust Company, as Delaware trustee. A form of the pooling agreement is filed as an exhibit to the registration statement relating to the certificates. The accompanying prospectus contains important additional information regarding the terms and conditions of the pooling agreement and the certificates. The offered certificates will not be issued unless they receive the ratings from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”), and Moody’s Investors Service, Inc. (“Moody’s”) indicated under “Certificate Ratings” in this prospectus supplement. As of the Closing Date, the offered certificates, other than the Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10, Class L-B-11, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates, will qualify as “mortgage related securities” within the meaning of the Secondary Mortgage Market Enhancement Act of 1984.

The Washington Mutual Mortgage Pass-Through Certificates, WMALT Series 2007-OA3 will consist of the following classes:

 Class 1A

 Class 2A

 Class 3A

 Class 4A-1

 Class 4A-2

 Class 4A-B

 Class 5A

 Class CA-1B

 Class CA-1C

 Class DA-1B

 Class DA-1C

 Class CX-1

 Class CX-2-PPP

 Class EX-PPP

 Class FX

 Class 5X-PPP

 Class L-B-1

 Class L-B-2

 Class L-B-3

 Class L-B-4

 Class L-B-5

 Class L-B-6

 Class L-B-7

 Class L-B-8

 Class L-B-9

 Class L-B-10

 Class L-B-11

 Class L-B-12

 Class L-B-13

 Class L-B-14

 Class M-B-1

 Class M-B-2

 Class M-B-3

 Class M-B-4

 Class M-B-5

 Class M-B-6

 Class M-B-7

 Class M-B-8

 Class M-B-9

 Class M-B-10

 Class R

Collectively, the certificates will represent all of the beneficial interests in the Trust. The certificates will have the following designations:

 

 

 

Class A Certificates

 

Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class CA-1B, Class CA-1C, Class DA-1B and Class DA-1C Certificates.

Class X Certificates

 

Class CX-1, Class CX-2-PPP, Class EX-PPP, Class FX and Class 5X-PPP Certificates.

Senior Certificates

 

Class A, Class X and Class R Certificates.

Group L-B Senior Subordinate Certificates

 

Class L-B-1, Class L-B-2, Class L-B-3, Class L-B-4, Class L-B-5, Class L-B-6, Class L-B-7, Class L-B-8, Class L-B-9, Class L-B-10 and Class L-B-11 Certificates.

Group M-B Senior Subordinate Certificates

 

Class M-B-1, Class M-B-2, Class M-B-3, Class M-B-4, Class M-B-5, Class M-B-6 and Class M-B-7 Certificates.

Group L-B Junior Subordinate Certificates

 

Class L-B-12, Class L-B-13 and Class L-B-14 Certificates.

Group M-B Junior Subordinate Certificates

 

Class M-B-8, Class M-B-9 and Class M-B-10 Certificates.

 

 

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Group L-B Certificates

 

Group L-B Senior Subordinate and Group L-B Junior Subordinate Certificates. The Group L-B Certificates are the subordinate certificates for the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1 and Class CX-2-PPP Certificates and, therefore, as used in this prospectus supplement, their “related loan group” includes the mortgage loans in loan group 1 and loan group 2.

Group M-B Certificates

 

Group M-B Senior Subordinate and Group M-B Junior Subordinate Certificates. The Group M-B Certificates are the subordinate certificates for the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX and Class 5X-PPP Certificates and, therefore, as used in this prospectus supplement, their “related loan group” includes the mortgage loans in loan group 3, loan group 4 and loan group 5.

Senior Subordinate Certificates

 

Group L-B Senior Subordinate and Group M-B Senior Subordinate Certificates.

Junior Subordinate Certificates

 

Group L-B Junior Subordinate and Group M-B Junior Subordinate Certificates.

Class B or Subordinate Certificates

 

Group L-B and Group M-B Certificates.

Residual Certificates

 

Class R Certificates.

Regular Certificates

 

All classes of certificates other than the Class R Certificates.

MTA Certificates

 

Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates.

COFI Certificates

 

Class 5A Certificates.

LIBOR Certificates

 

Class CA-1B, Class CA-1C, Class DA-1B, Class DA-1C and Class B Certificates.

Physical Certificates

 

Class R Certificates.

Book-Entry Certificates

 

All classes of certificates other than the Physical Certificates.

Only the Senior Certificates and the Senior Subordinate Certificates, called the offered certificates, are offered by this prospectus supplement. The Junior Subordinate Certificates are not offered by this prospectus supplement.

The “Class Principal Balance” for any Distribution Date and for any Class of certificates will equal the aggregate amount of principal to which such Class or, in the case of the Class CX-1, Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates, the related Class X PO Components are entitled on the Closing Date, reduced by all distributions of principal to that Class or those components, as applicable, and all allocations of losses required to be borne by that Class or those components, as applicable, before that Distribution Date and increased by the portion of the aggregate Net Negative Amortization allocated to that Class or those components, as applicable, as described in “—Distributions of Interest” in this prospectus supplement. The “Class Principal Balance” of the Class CA-1B and Class CA-1C Certificates will equal the sum of the related Component Principal Balances.

The “Certificate Principal Balance” for any certificate will be the portion of the corresponding Class Principal Balance that it represents; provided, however, that each of the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will represent a portion of the related Class Principal Balance equal to its percentage interest in the related Class X Notional Amount (as described in this prospectus supplement under “Distributions of Interest—Class X Notional Amounts and Class X Principal Balances”).

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Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, (i) the Class CX-1 Certificates will be deemed to be comprised of two interest-only components, the Class CX-1 Subgroup 1-A IO Component and the Class CX-1 Subgroup 2-A IO Component, and two principal-only components, the Class CX-1 Subgroup 1-A PO Component and the Class CX-1 Subgroup 2-A PO Component, (ii) the Class CX-2-PPP Certificates will be deemed to be comprised of two interest-only components, the Class CX-2-PPP Subgroup 1-B IO Component and the Class CX- 2-PPP Subgroup 2-B IO Component, and two principal-only components, the Class CX-2-PPP Subgroup 1-B PO Component and the Class CX-2-PPP Subgroup 2-B PO Component, (iii) the Class EX-PPP Certificates will be deemed to be comprised of two interest-only components, the Class EX-PPP Loan Group 3 IO Component and the Class EX-PPP Loan Group 4 IO Component, and two principal-only components, the Class EX-PPP Loan Group 3 PO Component and the Class EX-PPP Loan Group 4 PO Component and (iv) the Class 5X-PPP Certificates will be deemed to be comprised of an interest-only component and a principal-only component. Interest, if any, will be payable with respect to each Class X IO Component, calculated as described in this prospectus supplement under “—Distributions of Interest—Interest Distributions on the Class X Certificates.” In addition, each of the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will have a Class Principal Balance, which will be the sum of the Component Principal Balances of the related Class X PO Components and which will initially equal zero. In the event that interest otherwise payable with respect to a Class X IO Component and derived from a loan group or subgroup, as applicable, is reduced as a result of the allocation of Net Negative Amortization, the amount of such reduction will be added as principal to the related Class X Component Principal Balance. Interest will not accrue on any Class X Component Principal Balance. The Class FX Certificates will not have a Class Principal Balance.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class CA-1B Certificates will be deemed to be comprised of the Class CA-1B Group 1 Component and the Class CA-1B Group 2 Component. Each Class CA-1B Component will have a Component Principal Balance representing a portion of the Class CA-1B Principal Balance. Interest will be payable with respect to each Class CA-1B Component. Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class CA-1C Certificates will be deemed to be comprised of the Class CA-1C Group 1 Component and the Class CA-1C Group 2 Component. Each Class CA-1C Component will have a Component Principal Balance representing a portion of the Class CA-1C Principal Balance. Interest will be payable with respect to each Class CA-1C Component.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class DA-1B Certificates will be deemed to be comprised of the Class DA-1B Group 3 Component, the Class DA-1B Group 4 Component and the Class DA-1B Group 5 Component. Each Class DA-1B Component will have a Component Principal Balance representing a portion of the Class DA-1B Principal Balance. Interest will be payable with respect to each Class DA-1B Component. Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, the Class DA-1C Certificates will be deemed to be comprised of the Class DA-1C Group 3 Component, the Class DA-1C Group 4 Component and the Class DA-1C Group 5 Component. Each Class DA-1C Component will have a Component Principal Balance representing a portion of the Class DA-1C Principal Balance. Interest will be payable with respect to each Class DA-1C Component.

The “Component Principal Balance” for any Class X PO Component will be the principal balance of that Class X PO Component calculated as described in the second preceding paragraph. The “Component Principal Balance” for any component of the Class CA-1B, Class CA-1C, Class DA-1B and Class DA-1C Certificates and any Distribution Date will equal the aggregate amount of principal to which that component is entitled on the Closing Date, reduced by all distributions of principal to that component, and all allocations of losses required to be borne by that component, before that Distribution Date and increased by the portion of the aggregate Net Negative Amortization allocated to that component, as described in   “—Distributions of Interest” in this prospectus supplement.

The Senior Certificates related to loan group 1 and loan group 2 will comprise approximately 88.75%, the Group L-B Senior Subordinate Certificates will comprise approximately 9.15%, and the Group L-B

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Junior Subordinate Certificates will comprise approximately 2.10% of the aggregate principal balance of the mortgage loans in loan group 1 and loan group 2 as of the Cut-Off Date.

The Senior Certificates related to loan group 3, loan group 4 and loan group 5 will comprise approximately 87.00%, the Group M-B Senior Subordinate Certificates will comprise approximately 11.15%, and the Group M-B Junior Subordinate Certificates will comprise approximately 1.85% of the aggregate principal balance of the mortgage loans in loan group 3, loan group 4 and loan group 5 as of the Cut-Off Date.

The offered certificates, other than the Class X and Class R Certificates, are each offered in minimum denominations equivalent to not less than $25,000 each and multiples of $1 in excess of that amount.

The Class X Certificates are offered in minimum denominations equivalent to not less than $100,000 initial related Class X Notional Amount each and multiples of $1 in excess of that amount.

The Class R Certificates will have an initial Class Principal Balance of $100 and will be offered in registered, certificated form in a single denomination of a 99.99% percentage interest. The remaining 0.01% percentage interest of the Class R Certificates will be owned by the servicer as described in this prospectus supplement under “Material Federal Income Tax Consequences.”

Distributions (i) on the Class 1A Certificates will be based solely on payments received or advanced in respect of the mortgage loans in loan group 1 and (ii) on the Class 2A Certificates will be based solely on payments received or advanced in respect of the mortgage loans in loan group 2, except, in each case, in the limited circumstances described in this prospectus supplement under “—Cross-Collateralization,” and except that Carryover Shortfall Amounts may be paid from interest otherwise available for distribution to the Class CX-1 and Class CX-2-PPP Certificates. Distributions on the Class CX-1, Class CX-2-PPP, Class CA- 1B, Class CA-1C and Group L-B Certificates will be based on payments received or advanced in respect of the mortgage loans in loan group 1 and loan group 2.

Distributions (i) on the Class 3A Certificates will be based solely on payments received or advanced in respect of the mortgage loans in loan group 3, (ii) on the Class 4A-1, Class 4A-2 and Class 4A-B Certificates will be based solely on payments received or advanced in respect of the mortgage loans in loan group 4 and (iii) on the Class 5A and 5X-PPP Certificates will be based solely on payments received or advanced in respect of the mortgage loans in loan group 5, except, in each case, in the limited circumstances described in this prospectus supplement under “—Cross-Collateralization,” and except that Carryover Shortfall Amounts may be paid from interest otherwise available for distribution to the Class EX-PPP and Class 5X-PPP Certificates. Distributions on the Class EX-PPP Certificates will be based on payments received or advanced in respect of the mortgage loans in loan group 3 and loan group 4. Distributions on the Class FX Certificates will be based on payments received or advanced in respect of the mortgage loans in loan group 4 and loan group 5. The Class DA-1B, Class DA-1C and Group M-B Certificates will be based on payments received or advanced in respect of the mortgage loans in loan group 3, loan group 4 and loan group 5.

Book-Entry Registration

Each Class of Book-Entry Certificates will initially be represented by a single certificate registered in the name of Cede & Co., a nominee of The Depository Trust Company, New York, New York (“DTC”). See “Description of the Securities—Form of Securities” in the accompanying prospectus for a description of the book-entry system.

Definitive Certificates

The Book-Entry Certificates will be issued in fully registered, certificated form to certificateholders or their nominees, rather than to DTC or its nominee, only upon the occurrence of certain events described under “Description of the Securities—Form of Securities—Definitive Securities” in the accompanying prospectus.

The trustee or its paying agent, if any, will make distributions of principal and interest on the definitive certificates directly to holders of those definitive certificates in accordance with the pooling agreement procedures described in this prospectus supplement. Distributions of principal and interest on

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each Distribution Date will be made to holders in whose names certificates were registered at the close of business on the related Record Date. Distributions will be made by wire transfer in immediately available funds for the account of each holder or, if a holder has not provided wire instructions, by check mailed to the address of the holder as it appears on the register maintained by the certificate registrar. The final payment on any certificate will be made only on presentation and surrender of the certificate at the offices of the trustee or its agent or such office or agency as is specified in the notice of final distribution to holders of certificates being retired. When the trustee receives notice from the servicer that it believes the remaining unpaid principal balance of a Class of certificates will be distributable on the next Distribution Date, the trustee is required to provide notice to registered certificateholders of that Class not later than the eighteenth day of the month in which that Class will be retired.

Definitive certificates will be transferable and exchangeable at the office or agency of the trustee maintained for that purpose, which initially shall be in Chicago, Illinois. A reasonable service charge may be imposed for any registration of transfer or exchange, and the trustee or its agent may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with registration of transfer or exchange.

Priority of Distributions

Beginning in April 2007, on the 25th day of each month, or if the 25th day is not a business day, on the immediately following business day (each, a “Distribution Date”), distributions will be made to the certificateholders in the order and priority as follows:

 

(a)

 

 

 

with respect to the Class 1A, Class CX-1, Class CX-2-PPP and Class R Certificates and the Class CA-1B Group 1 and Class CA-1C Group 1 Components, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 1 for that Distribution Date:

 

(i)

 

 

 

first, to the Class 1A, Class CX-1, Class CX-2-PPP and Class R Certificates and the Class CA-1B Group 1 and Class CA-1C Group 1 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of (a) the Class CX-1 Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class CX-1 Accrued Interest” and (b) the Class CX-2-PPP Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class CX-2-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, amounts to be distributed to (x) the Class CX-1 Certificates in respect of accrued interest (after giving effect to any Net Negative Amortization allocated to the Class CX-1 Certificates and any shortfall in interest collections resulting from the delay in distribution of Curtailments and some Payoffs (to the extent not covered by compensating interest) and the Relief Act allocated to the Class CX-1 Certificates) (the “Class CX-1 Distributable Interest”) pursuant to this paragraph (a)(i) and (y) the Class CX-2-PPP Certificates in respect of accrued interest (after giving effect to any Net Negative Amortization allocated to the Class CX-2-PPP Certificates and any shortfall in interest collections resulting from the delay in distribution of Curtailments and some Payoffs (to the extent not covered by compensating interest) and the Relief Act allocated to the Class CX-2-PPP Certificates) (the “Class CX-2-PPP Distributable Interest”) pursuant to this paragraph (a)(i) will be reduced to the extent necessary to pay first, any Carryover Shortfall Amounts to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates pursuant to clause (h) below, and second, any Carryover Shortfall Amounts to the Group L-B Certificates pursuant to clause (i)(xxiv) below;

 

(ii)

 

 

 

second, to the Class R Certificates, as principal, until the Class R Principal Balance has been reduced to zero; and

 

(iii)

 

 

 

third, to the Class 1A Certificates and the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components, as principal, the Group 1 Senior Principal Distribution Amount, in the order described in “—Distributions of Principal—Group 1 Senior Principal Distribution Amount” in this prospectus supplement;

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(b)

 

 

 

with respect to the Class 2A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 2 and Class CA-1C Group 2 Components, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 2 for that Distribution Date:

 

(i)

 

 

 

first, to the Class 2A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 2 and Class CA-1C Group 2 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of (a) the Class CX-1 Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition of “Class CX-1 Accrued Interest” and (b) the Class CX-2-PPP Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition of “Class CX-2-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class CX-1 Distributable Interest and the Class CX-2-PPP Distributable Interest distributable pursuant to this paragraph (b)(i) will be reduced to the extent necessary to pay first, any Carryover Shortfall Amounts to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates pursuant to clause (h) below, and second, any Carryover Shortfall Amounts to the Group L-B Certificates pursuant to clause (i)(xxiv) below; and

 

(ii)

 

 

 

second, to the Class 2A Certificates and the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components, as principal, the Group 2 Senior Principal Distribution Amount, in the order described in
“—Distributions of Principal—Group 2 Senior Principal Distribution Amount” in this prospectus supplement;

 

(c)

 

 

 

with respect to the Class 3A and Class EX-PPP Certificates and the Class DA-1B Group 3 and Class DA-1C Group 3 Components, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 3 for that Distribution Date:

 

(i)

 

 

 

first, to the Class 3A and Class EX-PPP Certificates and the Class DA-1B Group 3 and Class DA-1C Group 3 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of the Class EX-PPP Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class EX-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, amounts to be distributed to (x) the Class EX-PPP Certificates in respect of accrued interest (after giving effect to any Net Negative Amortization allocated to the Class EX-PPP Certificates and any shortfall in interest collections resulting from the delay in distribution of Curtailments and some Payoffs (to the extent not covered by compensating interest) and the Relief Act allocated to the Class EX-PPP Certificates) (the “Class EX-PPP Distributable Interest”) pursuant to this paragraph (c)(i) will be reduced to the extent necessary to pay first, any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates pursuant to clause (f) below, and second, any Carryover Shortfall Amounts to the Group M-B Certificates pursuant to clause (g)(16) below; and

 

(ii)

 

 

 

second, to the Class 3A Certificates and the Class DA-1B Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components, as principal, the Group 3 Senior Principal Distribution Amount, in the order described in “—Distributions of Principal—Group 3 Senior Principal Distribution Amount” in this prospectus supplement;

 

(d)

 

 

 

with respect to the Class 4A-1, Class 4A-2, Class 4A-B, Class FX and Class EX-PPP Certificates and the Class DA-1B Group 4 and Class DA-1C Group 4 Components, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 4 for that Distribution Date:

 

(i)

 

 

 

first, to the Class 4A-1, Class 4A-2, Class 4A-B, Class FX and Class EX-PPP Certificates and the Class DA-1B Group 4 and Class DA-1C Group 4 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance, Class Notional Amount or Component Principal Balance, as applicable (or, in the case of (a) the Class FX Certificates, accrued and unpaid interest calculated as described in the definition of “Class FX Subgroup 4-A Accrued Interest” and (b) the Class EX-PPP

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Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition of “Class EX-PPP Accrued Interest”); provided, however, that, notwithstanding the Class EX-PPP Distributable Interest distributable pursuant to this paragraph (d)(i) will be reduced to the extent necessary to pay first, any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates pursuant to clause (f) below, and second, any Carryover Shortfall Amounts to the Group M-B Certificates pursuant to clause (g)(16) below; and

 

(ii)

 

 

 

second, to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and the Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components, as principal, the Group 4 Senior Principal Distribution Amount, in the order described in
“—Distributions of Principal—Group 4 Senior Principal Distribution Amount” in this prospectus supplement;

 

(e)

 

 

 

with respect to the Class 5A, Class FX, and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 5 for that Distribution Date:

 

(i)

 

 

 

first, to the Class 5A, Class FX and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance, Class Notional Amount or Component Principal Balance, as applicable (or, in the case of (a) the Class FX Certificates, accrued and unpaid interest calculated as described in the definition of “Class FX Subgroup 5-A Accrued Interest” and (b) the Class 5X-PPP Certificates, accrued and unpaid interest calculated as described in the definition of “Class 5X-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, amounts to be distributed to (x) the Class 5X-PPP Certificates in respect of accrued interest (after giving effect to any Net Negative Amortization allocated to the Class 5X-PPP Certificates and any shortfall in interest collections resulting from the delay in distribution of Curtailments and some Payoffs (to the extent not covered by compensating interest) and the Relief Act allocated to the Class 5X-PPP Certificates) (the “Class 5X-PPP Distributable Interest”) will be reduced to the extent necessary to pay first, any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates pursuant to clause (f) below, and second, any Carryover Shortfall Amounts to the Group M-B Certificates pursuant to clause (g)(16) below; and

 

(ii)

 

 

 

second, to the Class 5A and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, as principal, the Group 5 Senior Principal Distribution Amount, in the order described in “—Distributions of Principal—Group 5 Senior Principal Distribution Amount” in this prospectus supplement;

 

(f)

 

 

 

(a) on the initial Distribution Date, to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class CA-1B and Class CA-1D Certificates, their Carryover Shortfall Amounts, pro rata according to such Carryover Shortfall Amounts, from the aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest (pro rata according to such aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest) for loan group 3, loan group 4 and loan group 5; and

(b) on each Distribution Date after the initial Distribution Date, to the Class CA-1B and Class CA-1D Certificates, their Carryover Shortfall Amounts, pro rata according to such Carryover Shortfall Amounts, from the aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest (pro rata according to such aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest) for loan group 3, loan group 4 and loan group 5;

 

(g)

 

 

 

with respect to the Group M-B and Class R Certificates, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 3, loan group 4 and loan group 5 for that Distribution Date, subject to the payment of the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX and Class 5X-PPP Certificates as described above in paragraphs (c), (d), (e) and (f) and subject to any payments to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B,

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  Class DA-1C, Class EX-PPP, Class FX and Class 5X-PPP Certificates from amounts otherwise distributable to the Group M-B Certificates, as described in this prospectus supplement under
“—Cross-Collateralization”:

 

(1)

 

 

 

first, to the Class M-B-1 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-1 Principal Balance;

 

(2)

 

 

 

second, to the Class M-B-1 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(3)

 

 

 

third, to the Class M-B-2 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-2 Principal Balance;

 

(4)

 

 

 

fourth, to the Class M-B-2 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(5)

 

 

 

fifth, to the Class M-B-3 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-3 Principal Balance;

 

(6)

 

 

 

sixth, to the Class M-B-3 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(7)

 

 

 

seventh, to the Class M-B-4 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-4 Principal Balance;

 

(8)

 

 

 

eighth, to the Class M-B-4 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(9)

 

 

 

ninth, to the Class M-B-5 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-5 Principal Balance;

 

(10)

 

 

 

tenth, to the Class M-B-5 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(11)

 

 

 

eleventh, to the Class M-B-6 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-6 Principal Balance;

 

(12)

 

 

 

twelfth, to the Class M-B-6 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(13)

 

 

 

thirteenth, to the Class M-B-7 Certificates, accrued and unpaid interest at their certificate interest rate on the Class M-B-7 Principal Balance;

 

(14)

 

 

 

fourteenth, to the Class M-B-7 Certificates, their pro rata share of the Group M-B Subordinate Principal Distribution Amount;

 

(15)

 

 

 

fifteenth, to the Group M-B Junior Subordinate Certificates, interest and principal in the same manner as for the Group M-B Senior Subordinate Certificates, first to the Class M-B-8 Certificates, then to the Class M-B-9 Certificates and then to the Class M-B-10 Certificates;

 

(16)

 

 

 

sixteenth, to each Class of Group M-B Certificates in order of seniority, the Carryover Shortfall Amount for each such class, from the aggregate Class EX-PPP Distributable Interest and Class 5X- PPP Distributable Interest (pro rata according to such aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest) for loan group 3, loan group 4 and loan group 5 remaining after the distributions pursuant to clause (f) above;

 

(17)

 

 

 

seventeenth, to each Class of Group M-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (g)(17) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(18)

 

 

 

eighteenth, to the Class R Certificates;

 

(h)

 

 

 

(i) on the initial Distribution Date, to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates, their Carryover Shortfall Amounts, pro rata according to such Carryover Shortfall

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Amounts, from the aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest (pro rata according to such aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest) for loan group 1 and loan group 2; and

(ii) on each Distribution Date after the initial Distribution Date, to the Class CA-1B and Class CA-1C Certificates, their Carryover Shortfall Amounts, pro rata according to such Carryover Shortfall Amounts, from the aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest (pro rata according to such aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest) for loan group 1 and loan group 2; and

 

(i)

 

 

 

with respect to the Group L-B and Class R Certificates, before the related Credit Support Depletion Date, to the extent of the Available Distribution Amount for loan group 1 and loan group 2 for that Distribution Date, subject to the payment of the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1 and Class CX-2-PPP Certificates as described above in paragraphs (a), (b) and (h) and subject to any payments to the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1 and Class CX-2-PPP Certificates from amounts otherwise distributable to the Group L-B Certificates, as described in this prospectus supplement under “—Cross-Collateralization”:

 

(i)

 

 

 

first, to the Class L-B-1 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-1 Principal Balance;

 

(ii)

 

 

 

second, to the Class L-B-1 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(iii)

 

 

 

third, to the Class L-B-2 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-2 Principal Balance;

 

(iv)

 

 

 

fourth, to the Class L-B-2 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(v)

 

 

 

fifth, to the Class L-B-3 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-3 Principal Balance;

 

(vi)

 

 

 

sixth, to the Class L-B-3 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(vii)

 

 

 

seventh, to the Class L-B-4 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-4 Principal Balance;

 

(viii)

 

 

 

eighth, to the Class L-B-4 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(ix)

 

 

 

ninth, to the Class L-B-5 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-5 Principal Balance;

 

(x)

 

 

 

tenth, to the Class L-B-5 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xi)

 

 

 

eleventh, to the Class L-B-6 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-6 Principal Balance;

 

(xii)

 

 

 

twelfth, to the Class L-B-6 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xiii)

 

 

 

thirteenth, to the Class L-B-7 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-7 Principal Balance;

 

(xiv)

 

 

 

fourteenth, to the Class L-B-7 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xv)

 

 

 

fifteenth, to the Class L-B-8 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-8 Principal Balance;

 

(xvi)

 

 

 

sixteenth, to the Class L-B-8 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

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(xvii)

 

 

 

seventeenth, to the Class L-B-9 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-9 Principal Balance;

 

(xviii)

 

 

 

eighteenth, to the Class L-B-9 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xix)

 

 

 

nineteenth, to the Class L-B-10 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-10 Principal Balance;

 

(xx)

 

 

 

twentieth, to the Class L-B-10 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xxi)

 

 

 

twenty-first, to the Class L-B-11 Certificates, accrued and unpaid interest at their certificate interest rate on the Class L-B-11 Principal Balance;

 

(xxii)

 

 

 

twenty-second, to the Class L-B-11 Certificates, their pro rata share of the Group L-B Subordinate Principal Distribution Amount;

 

(xxiii)

 

 

 

twenty-third, to the Group L-B Junior Subordinate Certificates, interest and principal in the same manner as for the Group L-B Senior Subordinate Certificates, first to the Class L-B-12 Certificates, then to the Class L-B-13 Certificates and then to the Class L-B-14 Certificates;

 

(xxiv)

 

 

 

twenty-fourth, to each Class of Group L-B Certificates in order of seniority, the Carryover Shortfall Amount for each such class, from the aggregate Class CX-1 Distributable Interest and Class CX-2- PPP Distributable Interest (pro rata according to such aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest) for loan group 1 and loan group 2 remaining after the distributions pursuant to clause (h) above;

 

(xxv)

 

 

 

twenty-fifth, to each Class of Group L-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (i)(xxv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(xxvi)

 

 

 

twenty-sixth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class. In addition, notwithstanding the immediately preceding paragraph, on any Distribution Date on which the related Subordination Level for any Class or classes of Subordinate Certificates is less than the Subordination Level for that Class as of the Closing Date, a different distribution will be made. The amount of the Group L-B Subordinate Principal Prepayments Distribution Amount or Group M-B Subordinate Principal Prepayments Distribution Amount, if any, otherwise allocable to such Class or classes will be allocated to the more senior classes of the related Subordinate Certificates, pro rata according to the Class Principal Balances of those classes.

With respect to any Class of Group L-B Certificates, the “Subordination Level” on any specified date is the percentage obtained by dividing the sum of the Class Principal Balances of that Class and all classes of Group L-B Certificates that are subordinate in right of payment to that Class by the sum of the Class Principal Balances of all classes of Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP, Class R and Group L-B Certificates as of that date before giving effect to distributions and allocations of realized losses to those certificates on that date. With respect to any Class of Group M-B Certificates, the “Subordination Level” on any specified date is the percentage obtained by dividing the sum of the Class Principal Balances of that Class and all classes of Group M-B Certificates that are subordinate in right of payment to that Class by the sum of the Class Principal Balances of all classes of Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class 5X-PPP and Group M-B Certificates as of that date before giving effect to distributions and allocations of realized losses to those certificates on that date.

The “Credit Support Depletion Date” with respect to (i) the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1 and Class CX-2-PPP Certificates, is the first Distribution Date on which the aggregate Class Principal Balance of the Group L-B Certificates has been or will be reduced to zero and (ii) the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C,

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Class EX-PPP, Class FX and Class 5X-PPP Certificates, is the first Distribution Date on which the aggregate Class Principal Balance of the Group M-B Certificates has been or will be reduced to zero.

On each Distribution Date on or after the related Credit Support Depletion Date, distributions of the Available Distribution Amount for loan group 1 will be made with respect to the Class 1A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 1 and Class CA-1C Group 1 Components as follows:

 

(i)

 

 

 

first, to the Class 1A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 1 and Class CA-1C Group 1 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of (a) the Class CX-1 Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class CX-1 Accrued Interest” and (b) the Class CX-2-PPP Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class CX-2-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class CX-1 Distributable Interest and the Class CX-2-PPP Distributable Interest distributable pursuant to this paragraph (i) will be reduced to the extent necessary to pay any Carryover Shortfall Amounts to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates;

 

(ii)

 

 

 

second, to the Class 1A Certificates and the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components, pro rata, as principal, the Group 1 Senior Principal Distribution Amount;

 

(iii)

 

 

 

third, payments, if any, to the Class A and Class X Certificates (or components thereof, as applicable) related to loan group 2 as described in this prospectus supplement under
“—Cross-Collateralization”;

 

(iv)

 

 

 

fourth, to the Class 1A Certificates and the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components, pro rata, and then to each Class of Group L-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (iv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(v)

 

 

 

fifth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class.

On each Distribution Date on or after the related Credit Support Depletion Date, distributions of the Available Distribution Amount for loan group 2 will be made with respect to the Class 2A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 2 and Class CA-1C Group 2 Components as follows:

 

(i)

 

 

 

first, to the Class 2A, Class CX-1 and Class CX-2-PPP Certificates and the Class CA-1B Group 2 and Class CA-1C Group 2 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of (a) the Class CX-1 Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition of “Class CX-1 Accrued Interest” and (b) the Class CX-2-PPP Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition of “Class CX-2-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class CX-1 Distributable Interest and the Class CX-2-PPP Distributable Interest distributable pursuant to this paragraph (i) will be reduced to the extent necessary to pay any Carryover Shortfall Amounts to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates;

 

(ii)

 

 

 

second, to the Class 2A Certificates and the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components, pro rata, as principal, the Group 2 Senior Principal Distribution Amount;

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(iii)

 

 

 

third, payments, if any, to the Class A and Class X Certificates related to loan group 1 as described in this prospectus supplement under “—Cross-Collateralization”;

 

(iv)

 

 

 

fourth, to the Class 2A Certificates and the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components, pro rata, and then to each Class of Group L-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (iv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(v)

 

 

 

fifth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class.

On each Distribution Date on or after the related Credit Support Depletion Date, distributions of the Available Distribution Amount for loan group 3 will be made with respect to the Class 3A and Class EX- PPP Certificates and the Class DA-1B Group 3 and Class DA-1C Group 3 Components as follows:

 

(i)

 

 

 

first, to the Class 3A and Class EX-PPP Certificates and the Class DA-1B Group 3 and Class DA-1C Group 3 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance or Component Principal Balance, as applicable (or, in the case of the Class EX-PPP Certificates, accrued and unpaid interest calculated as described in clause (1) of the definition of “Class EX-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class EX-PPP Distributable Interest distributable pursuant to this paragraph (i) will be reduced to the extent necessary to pay any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates;

 

(ii)

 

 

 

second, to the Class 3A Certificates and the Class DA-1B Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components, pro rata, as principal, the Group 3 Senior Principal Distribution Amount;

 

(iii)

 

 

 

third, payments, if any, to the Class A and Class X Certificates related to loan group 4 and loan group 5 as described in this prospectus supplement under “—Cross-Collateralization”;

 

(iv)

 

 

 

fourth, to the Class 3A Certificates and the Class DA-1B Group 3, Class DA-1C Group 3 and Class EX-PPP Loan Group 3 PO Components, pro rata, and then to each Class of Group M-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (iv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(v)

 

 

 

fifth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class.

On each Distribution Date on or after the related Credit Support Depletion Date, distributions of the Available Distribution Amount for loan group 4 will be made with respect to the Class 4A-1, Class 4A-2, Class 4A-B, Class EX-PPP and Class FX Certificates and the Class DA-1B Group 4 and Class DA-1C Group 4 Components as follows:

 

(i)

 

 

 

first, to the Class 4A-1, Class 4A-2, Class 4A-B, Class EX-PPP and Class FX Certificates and the Class DA-1B Group 4 and Class DA-1C Group 4 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance, Class Notional Amount or Component Principal Balance, as applicable (or, in the case of (a) the Class FX Certificates, accrued and unpaid interest calculated as described in the definition of “Class FX Subgroup 4-A Accrued Interest” and (b) the Class EX-PPP Certificates, accrued and unpaid interest calculated as described in clause (2) of the definition

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of “Class EX-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class EX-PPP Distributable Interest distributable pursuant to this paragraph (i) will be reduced to the extent necessary to pay any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates;

 

(ii)

 

 

 

second, to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and the Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components, pro rata, as principal, the Group 4 Senior Principal Distribution Amount;

 

(iii)

 

 

 

third, payments, if any, to the Class A and Class X Certificates related to loan group 3 and loan group 5 as described in this prospectus supplement under “—Cross-Collateralization”;

 

(iv)

 

 

 

fourth, to the Class 4A-1, Class 4A-2 and Class 4A-B Certificates and the Class DA-1B Group 4, Class DA-1C Group 4 and Class EX-PPP Loan Group 4 PO Components, pro rata, and then to each Class of Group M-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (iv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(v)

 

 

 

fifth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class.

On each Distribution Date on or after the related Credit Support Depletion Date, distributions of the Available Distribution Amount for loan group 5 will be made with respect to the Class 5A, Class 5X-PPP and Class FX Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components as follows:

 

(i)

 

 

 

first, to the Class 5A, Class FX and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, pro rata, accrued and unpaid interest at their respective certificate interest rate on their respective Class Principal Balance, Class Notional Amount or Component Principal Balance, as applicable (or, in the case of (a) the Class FX Certificates, accrued and unpaid interest calculated as described in the definition of “Class FX Subgroup 5-A Accrued Interest” and (b) the Class 5X-PPP Certificates, accrued and unpaid interest calculated as described in the definition of “Class 5X-PPP Accrued Interest”); provided, however, that, notwithstanding the foregoing, the Class 5X-PPP Distributable Interest distributable pursuant to this paragraph (i) will be reduced to the extent necessary to pay any Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates;

 

(ii)

 

 

 

second, to the Class 5A and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, pro rata, as principal, the Group 5 Senior Principal Distribution Amount;

 

(iii)

 

 

 

third, payments, if any, to the Class A and Class X Certificates related to loan group 3 and loan group 4 as described in this prospectus supplement under “—Cross-Collateralization”;

 

(iv)

 

 

 

fourth, to the Class 5A and Class 5X-PPP Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components, pro rata, and then to each Class of Group M-B Certificates in order of seniority, up to the amount of unreimbursed realized principal losses previously allocated to that class, if any; provided, however, that any amounts distributed pursuant to this clause (iv) will not cause a further reduction in the Class Principal Balances of any of the certificates; and

 

(v)

 

 

 

fifth, to the Class R Certificates.

Notwithstanding the above, amounts to be distributed to each Class of certificates in respect of accrued interest on any Distribution Date will be reduced by the amount of Net Negative Amortization, if any, allocated to that class.

In addition, on each Distribution Date on or after the related Credit Support Depletion Date, the (i) Class CA-1B and Class CA-1C Certificates will be entitled to receive their Carryover Shortfall Amounts,

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pro rata according to such Carryover Shortfall Amounts, from the aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest (pro rata according to such aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest) for loan group 1 and loan group 2 and (ii) Class DA-1B and Class DA-1C Certificates will be entitled to receive their Carryover Shortfall Amounts, pro rata according to such Carryover Shortfall Amounts, from the aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest (pro rata according to such aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest) for loan group 3, loan group 4 and loan group 5.

Distributions to the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates

The Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will receive distributions of interest and principal as described in this prospectus supplement. In addition, (i) the Class CX-2-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for subgroup 1-B and subgroup 2-B, (ii) the Class EX-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for loan group 3 and loan group 4 and (iii) the Class 5X-PPP Certificates are entitled to receive the Assigned Prepayment Penalties for loan group 5.

The “Assigned Prepayment Penalties” for a loan group or a subgroup and a Distribution Date will equal the sum of (a) all prepayment penalty payments remitted to the Trust with respect to voluntary full prepayments on those WMB Loans in that loan group or subgroup that have prepayment penalties during the period (the “Prepayment Penalty Period”) beginning on the 15th day of the immediately preceding calendar month (or, in the case of the first Distribution Date, beginning on the Cut-Off Date) and ending on the 14th day of the calendar month in which the Distribution Date occurs and (b) any amounts paid by WMB, as servicer, during the Prepayment Penalty Period pursuant to the pooling agreement if WMB, as servicer, waives a penalty on a voluntary full prepayment of a WMB Loan in that loan group or subgroup other than in accordance with the standards set forth in the pooling agreement, or paid by Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, during the Prepayment Penalty Period pursuant to the related mortgage loan sale agreement if it breaches certain representations and warranties with respect to WMB Loans in that loan group that require payment of a penalty on voluntary full prepayment.

In addition, under certain circumstances set forth in the pooling agreement, the payment of any otherwise applicable penalty for voluntary full prepayment by a mortgagor, on a WMB Loan may be waived by WMB, as servicer, and, if waived in accordance with the terms of the pooling agreement, the amount of the waived penalty will not be available for distribution to the holders of the Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates. Circumstances under which WMB, as servicer, may waive a prepayment penalty include, among other circumstances set forth in the pooling agreement, (i) some cases, for mortgage loans originated by Washington Mutual Bank or an affiliate thereof, where the mortgagor sells the mortgaged property and obtains a new mortgage loan originated and serviced by WMB to purchase another property, provided that the prepayment is made no earlier than one year after origination, (ii) some cases, for mortgage loans originated by Washington Mutual Bank or an affiliate thereof for mortgage loans with prepayment penalty terms longer than one year, where the mortgagor refinances the mortgage loan with a new mortgage loan originated and serviced by WMB, provided that 90 days or less remain in the prepayment penalty term or (iii) for prepayments of accrued but unpaid interest that has been added to principal as a result of negative amortization.

However, if WMB as servicer, waives a penalty on a voluntary full prepayment other than in accordance with the standards set forth in the pooling agreement, WMB, as servicer, will be obligated to pay, or if Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as a mortgage loan seller, as applicable, breaches certain representations and warranties in the related mortgage loan sale agreement with respect to WMB Loans that require payment of a penalty on voluntary full prepayment, Washington Mutual Mortgage Securities Corp. or Washington Mutual Bank, as applicable, will be obligated to pay, to the Trust an amount equal to the amount of the penalty on such voluntary full prepayment, for distribution to the holders of the related Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates.

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No prepayment penalty payments on any Countrywide Loan will be remitted to the Trust. All such payments on Countrywide Loans will be retained by Countrywide Home Loans and will not be payable to any Class of certificates.

Moreover, regardless of the terms of the mortgage note, the servicer will not collect prepayment penalties required to be paid more than three years after the origination of the mortgage loan.

Investors should conduct their own analysis of the effect that the payment of penalties for voluntary full prepayment of the related mortgage loans, or decisions by WMB, as servicer, with respect to waiver thereof, may have on the performance of the Class CX-2-PPP, Class EX-PPP or Class 5X-PPP Certificates. For additional information concerning the servicer’s ability to waive penalties for voluntary full prepayment, see the pooling agreement. No prepayment penalty payments will be available for distribution to holders of the other classes of certificates. See “Description of the Mortgage Pool” in this prospectus supplement and the “Prepayment Penalty Terms of the Subgroup 1-B Loans”, “Prepayment Penalty Terms of the Subgroup 2-B Loans,” “Prepayment Penalty Terms of the Loan Group 3 Loans”, “Prepayment Penalty Terms of the Loan Group 4 Loans” and “Prepayment Penalty Terms of the Loan Group 5 Loans” tables in Appendix B hereto for more information regarding the types of prepayment penalties. See also, “Material Federal Income Tax Consequences—Taxation of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Component Portion of the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates” in this prospectus supplement for important tax information regarding the Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates.

Distributions of Interest

For each Class of certificates, interest will be passed through monthly on each Distribution Date, beginning in April 2007. The amount of interest each Class of LIBOR Certificates (or component thereof, as applicable) accrues during each certificate accrual period will equal a ratio, the numerator of which is the actual number of days in that accrual period and the denominator of which is 360, multiplied by the annual certificate interest rate in effect for that accrual period for that Class (or component), and the amount of interest on the Class FX, each Class of MTA Certificates and COFI Certificates accrues during each certificate accrual period will equal 1/12th of the annual certificate interest rate in effect for that accrual period for that class, in each case, multiplied by the related Class Principal Balance (or Component Principal Balance) or Class Notional Amount, as applicable, and the amount of interest each Class of Class X Certificates accrues during each certificate accrual period will be the amount described below in “—Interest Distributions on the Class X Certificates”, in each case, less any prepayment interest shortfalls not covered by compensating interest (as described below in “—Compensating Interest”), any interest shortfalls relating to the Relief Act and any Net Negative Amortization allocated to that Class of certificates (or component thereof); provided, however, that the amount of interest to be distributed to the certificates may be adjusted as described in “—Carryover Shortfall Amounts” in this prospectus supplement.

The “Adjusted Cap Rate” for any Distribution Date and the Class 1A Certificates will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 1 at the Loan Group 1 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 1 and (ii) 12, and the denominator of which is the Loan Group 1 Balance.

The “Adjusted Cap Rate” for any Distribution Date and each of the Class CA-1B Group 1 and Class CA-1C Group 1 Component will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 1 at the Loan Group 1 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 1 and (ii) 12, and the denominator of which is the Loan Group 1 Balance, such fraction multiplied by a ratio, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Adjusted Cap Rate” for any Distribution Date and the Class 2A Certificates will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 2 at the Loan Group 2 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 2 and (ii) 12, and the denominator of which is the Loan Group 2 Balance.

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The “Adjusted Cap Rate” for any Distribution Date and each of the Class CA-1B Group 2 and Class CA-1C Group 2 Component will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 2 at the Loan Group 2 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 2 and (ii) 12, and the denominator of which is the Loan Group 2 Balance, such fraction multiplied by a ratio, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Adjusted Cap Rate” for any Distribution Date and the Class 3A Certificates will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 3 at the Loan Group 3 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 3 and (ii) 12, and the denominator of which is the Loan Group 3 Balance.

The “Adjusted Cap Rate” for any Distribution Date and each of the Class DA-1B Group 3 and Class DA-1C Group 3 Component will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 3 at the Loan Group 3 Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 3 and (ii) 12, and the denominator of which is the Loan Group 3 Balance, such fraction multiplied by a ratio, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Adjusted Cap Rate” for any Distribution Date and the Class 4A-1, Class 4A-2 and Class 4A-B Certificates will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 4 at the Loan Group 4 Net Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 4 and (ii) 12, and the denominator of which is the Loan Group 4 Balance.

The “Adjusted Cap Rate” for any Distribution Date and each of the Class DA-1B Group 4 and Class DA-1C Group 4 Component will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 4 at the Loan Group 4 Net Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 4 and (ii) 12, and the denominator of which is the Loan Group 4 Balance, such fraction multiplied by a ratio, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Adjusted Cap Rate” for any Distribution Date and the Class 5A Certificates will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 5 at the Loan Group 5 Net Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 5 and (ii) 12, and the denominator of which is the Loan Group 5 Balance.

The “Adjusted Cap Rate” for any Distribution Date and each of the Class DA-1B Group 5 and Class DA-1C Group 5 Component will equal a fraction, the numerator of which is equal to the product of (i) the amount of interest accrued on the mortgage loans in loan group 5 at the Loan Group 5 Net Weighted Average Pass-Through Rate for that Distribution Date less the Net Negative Amortization with respect to loan group 5 and (ii) 12, and the denominator of which is the Loan Group 5 Balance, such fraction multiplied by a ratio, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Adjusted Cap Rate” for any Distribution Date and any Class of Group L-B Certificates will equal the Group L-B Weighted Average Pass-Through Rate, computed for this purpose by (i) reducing the Loan Group 1 Weighted Average Pass-Through Rate by a per annum rate equal to a fraction, the numerator of which is the Net Negative Amortization with respect to loan group 1 multiplied by 12, and the denominator of which is the Loan Group 1 Balance and (ii) reducing the Loan Group 2 Weighted Average Pass-Through Rate by a per annum rate equal to a fraction, the numerator of which is the Net Negative Amortization with respect to loan group 2 multiplied by 12, and the denominator of which is the Loan Group 2 Balance.

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The “Adjusted Cap Rate” for any Distribution Date and any Class of Group M-B Certificates will equal the Group M-B Net Weighted Average Pass-Through Rate, computed for this purpose by (i) reducing the Loan Group 3 Weighted Average Pass-Through Rate by a per annum rate equal to a fraction, the numerator of which is the Net Negative Amortization with respect to loan group 3 multiplied by 12, and the denominator of which is the Loan Group 3 Balance, (ii) reducing the Loan Group 4 Net Weighted Average Pass-Through Rate by a per annum rate equal to a fraction, the numerator of which is the Net Negative Amortization with respect to loan group 4 multiplied by 12, and the denominator of which is the Loan Group 4 Balance and (iii) reducing the Loan Group 5 Net Weighted Average Pass-Through Rate by a per annum rate equal to a fraction, the numerator of which is the Net Negative Amortization with respect to loan group 5 multiplied by 12, and the denominator of which is the Loan Group 5 Balance.

The “Unadjusted Net Negative Amortization” for any Distribution Date and any subgroup will equal the excess, if any, of (i) the aggregate amount of negative amortization with respect to the mortgage loans in such subgroup during the prior calendar month over (ii) the aggregate amount of Payoffs and Curtailments received with respect to the mortgage loans in such subgroup during the related Prepayment Period.

The “Net Negative Amortization” for any Distribution Date and (a) any loan group will equal the excess, if any, of (i) the aggregate amount of negative amortization with respect to all mortgage loans in such loan group during the prior calendar month over (ii) the aggregate amount of Payoffs and Curtailments received with respect to all mortgage loans in such loan group during the related Prepayment Period and (b) any subgroup will equal the Net Negative Amortization for the related loan group, allocated to the related subgroup(s), pro rata according to such subgroup’s Unadjusted Net Negative Amortization.

For any Distribution Date, the Net Negative Amortization for each of subgroup 1-A, subgroup 1-B, subgroup 2-A, subgroup 2-B, loan group 1 and loan group 2 will be allocated among the certificates as follows:

 

(i)

 

 

 

first, (a) the Net Negative Amortization for subgroup 1-A, to the Class CX-1 Certificates in reduction of the interest otherwise payable in respect of their Class CX-1 Subgroup 1-A IO Component, until such interest is reduced to zero, (b) the Net Negative Amortization for subgroup 2-A, to the Class CX-1 Certificates in reduction of the interest otherwise payable in respect of their Class CX-1 Subgroup 2-A IO Component, until such interest is reduced to zero, (c) the Net Negative Amortization for subgroup 1-B, to the Class CX-2-PPP Certificates in reduction of the interest otherwise payable in respect of their Class CX-2-PPP Subgroup 1-B IO Component, until such interest is reduced to zero and (d) the Net Negative Amortization for subgroup 2-B, to the Class CX-2-PPP Certificates in reduction of the interest otherwise payable in respect of their Class CX-2-PPP Subgroup 2-B IO Component, until such interest is reduced to zero;

 

(ii)

 

 

 

second, (a) the Net Negative Amortization for subgroup 1-A remaining after the allocation pursuant to clause (i)(a) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 1-B IO Component, until such remaining interest is reduced to zero, (b) the Net Negative Amortization for subgroup 2-A remaining after the allocation pursuant to clause (i)(b) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 2-B IO Component, until such remaining interest is reduced to zero, (c) the Net Negative Amortization for subgroup 1-B remaining after the allocation pursuant to clause (i)(c) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 1-A IO Component, until such remaining interest is reduced to zero and (d) the Net Negative Amortization for subgroup 2-B remaining after the allocation pursuant to clause (i)(d) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 2-A IO Component, until such remaining interest is reduced to zero;

 

(iii)

 

 

 

third, (a) the Net Negative Amortization for subgroup 1-A remaining after the allocation pursuant to clauses (i)(a) and (ii)(a) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 2-A IO

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Component, until such remaining interest is reduced to zero, (b) the Net Negative Amortization for subgroup 2-A remaining after the allocation pursuant to clauses (i)(b) and (ii)(b) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 1-A IO Component, until such remaining interest is reduced to zero, (c) the Net Negative Amortization for subgroup 1-B remaining after the allocation pursuant to clauses (i)(c) and (ii)(c) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 2-B IO Component, until such remaining interest is reduced to zero and (d) the Net Negative Amortization for subgroup 2-B remaining after the allocation pursuant to clauses (i)(d) and (ii)(d) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 1-B IO Component, until such remaining interest is reduced to zero;

 

(iv)

 

 

 

fourth, (a) the Net Negative Amortization for subgroup 1-A remaining after the allocation pursuant to clauses (i)(a), (ii)(a) and (iii)(a) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 2-B IO Component, until such remaining interest is reduced to zero, (b) the Net Negative Amortization for subgroup 2-A remaining after the allocation pursuant to clauses (i)(b), (ii)(b) and (iii)(b) above, to the Class CX-2-PPP Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-2-PPP Subgroup 1-B IO Component, until such remaining interest is reduced to zero, (c) the Net Negative Amortization for subgroup 1-B remaining after the allocation pursuant to clauses (i)(c), (ii)(c) and (iii)(c) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 2-A IO Component, until such remaining interest is reduced to zero and (d) the Net Negative Amortization for subgroup 2-B remaining after the allocation pursuant to clauses (i)(d), (ii)(d) and (iii)(d) above, to the Class CX-1 Certificates in reduction of the remaining interest otherwise payable in respect of their Class CX-1 Subgroup 1-A IO Component, until such remaining interest is reduced to zero;

 

(v)

 

 

 

fifth, the Net Negative Amortization for loan group 1 remaining after the allocations pursuant to clauses (i), (ii), (iii) and (iv) above, to the Class 1A and Group L-B Certificates and the Class CA-1B Group 1 and Class CA-1C Group 1 Components in proportion to the excess, if any, for each such Class or component of (x) the current interest accrued at the applicable certificate interest rate for such Class or component over (y) the amount of current interest that would have accrued had the certificate interest rate for such Class or component equaled the related Adjusted Cap Rate for such Class or component and for such Distribution Date (such excess, in the case of each Class of Group L-B Certificates, multiplied by a fraction, the numerator of which is the Subordinate Component Balance for loan group 1 and the denominator of which is the aggregate Class Principal Balance of the Group L-B Certificates); and

 

(vi)

 

 

 

sixth, the Net Negative Amortization for loan group 2 remaining after the allocations pursuant to clauses (i), (ii), (iii) and (iv) above, to the Class 2A and Group L-B Certificates and the Class CA-1B Group 2 and Class CA-1C Group 2 Components in proportion to the excess, if any, for each such Class or component of (x) the current interest accrued at the applicable certificate interest rate for such Class or component over (y) the amount of current interest that would have accrued had the certificate interest rate for such Class or component equaled the related Adjusted Cap Rate for such Class or component and for such Distribution Date (such excess, in the case of each Class of Group L-B Certificates, multiplied by a fraction, the numerator of which is the Subordinate Component Balance for loan group 2 and the denominator of which is the aggregate Class Principal Balance of the Group L-B Certificates).

For any Distribution Date, the Net Negative Amortization for each of loan group 3, loan group 4 and loan group 5 will be allocated among the certificates as follows:

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(i)

 

 

 

first, (a) the Net Negative Amortization for loan group 3, to the Class EX-PPP Certificates in reduction of the interest otherwise payable to the Class EX-PPP Certificates in respect of their Class EX- PPP Loan Group 3 IO Component, until such amount is reduced to zero, (b) the Net Negative Amortization for loan group 4, to the Class EX-PPP Certificates in reduction of the interest otherwise payable to the Class EX-PPP Certificates in respect of their Class EX-PPP Loan Group 4 IO Component, until such amount is reduced to zero and (c) the Net Negative Amortization for loan group 5, to the Class 5X-PPP Certificates in reduction of the interest otherwise payable to the Class 5X-PPP Certificates, until such amount is reduced to zero;

 

(ii)

 

 

 

second, (a) the Net Negative Amortization for loan group 3 remaining after the allocation pursuant to clause (i)(a) above, to the Class EX-PPP Certificates in reduction of the remaining interest otherwise payable to the Class EX-PPP Certificates in respect of their Class EX-PPP Loan Group 4 IO Component, until such remaining amount is reduced to zero and (b) the Net Negative Amortization for loan group 4 remaining after the allocation pursuant to clause (i)(b) above, to the Class EX-PPP Certificates in reduction of the remaining interest otherwise payable to the Class EX- PPP Certificates in respect of their Class EX-PPP Loan Group 3 IO Component, until such remaining amount is reduced to zero;

 

(iii)

 

 

 

third, (a) the Net Negative Amortization for loan group 3 remaining after the allocation pursuant to clauses (i)(a) and (ii)(a) above, to the Class 5X-PPP Certificates (pro rata with the allocation in clause (iii)(b), if any) in reduction of the remaining interest otherwise payable to the Class 5X-PPP Certificates, until such remaining amount is reduced to zero, (b) the Net Negative Amortization for loan group 4 remaining after the allocation pursuant to clauses (i)(b) and (ii)(b) above, to the Class 5X-PPP Certificates (pro rata with the allocation in clause (iii)(a), if any) in reduction of the remaining interest otherwise payable to the Class 5X-PPP Certificates, until such remaining amount is reduced to zero and (c) the Net Negative Amortization for loan group 5 remaining after the allocation pursuant to clause (i)(c) above, to the Class EX-PPP Certificates in reduction of the remaining interest otherwise payable to the Class EX-PPP Certificates (pro rata according to the remaining interest amount for the Class EX-PPP Loan Group 3 IO and Class EX-PPP Loan Group 4 IO Components after the allocations in clauses (i) and (ii) above), until such remaining amount is reduced to zero;

 

(iv)

 

 

 

fourth, the Net Negative Amortization for loan group 3 remaining after the allocations pursuant to clauses (i), (ii) and (iii) above, to the Class 3A and Group M-B Certificates and the Class DA-1B Group 3 and Class DA-1C Group 3 Components in proportion to the excess, if any, for each such Class or component of (x) the current interest accrued at the applicable certificate interest rate for such Class or component over (y) the amount of current interest that would have accrued had the certificate interest rate for such Class or component equaled the related Adjusted Cap Rate for such Class or component and for such Distribution Date (such excess, in the case of each Class of Group M-B Certificates, multiplied by a fraction, the numerator of which is the Subordinate Component Balance for loan group 3 and the denominator of which is the aggregate Class Principal Balance of the Group M-B Certificates);

 

(v)

 

 

 

fifth, the Net Negative Amortization for loan group 4 remaining after the allocations pursuant to clauses (i), (ii) and (iii) above, to the Class 4A-1, Class 4A-2, Class 4A-B and Group M-B Certificates and the Class DA-1B Group 4 and Class DA-1C Group 4 Components in proportion to the excess, if any, for each such Class or component of (x) the current interest accrued at the applicable certificate interest rate for such Class or component over (y) the amount of current interest that would have accrued had the certificate interest rate for such Class or component equaled the related Adjusted Cap Rate for such Class or component and for such Distribution Date (such excess, in the case of each Class of Group M-B Certificates, multiplied by a fraction, the numerator of which is the Subordinate Component Balance for loan group 4 and the denominator of which is the aggregate Class Principal Balance of the Group M-B Certificates); and

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(vi)

 

 

 

sixth, the Net Negative Amortization for loan group 5 remaining after the allocations pursuant to clauses (i) and (iii) above, to the Class 5A and Group M-B Certificates and the Class DA-1B Group 5 and Class DA-1C Group 5 Components in proportion to the excess, if any, for each such Class or component of (x) the current interest accrued at the applicable certificate interest rate for such Class or component over (y) the amount of current interest that would have accrued had the certificate interest rate for such Class or component equaled the related Adjusted Cap Rate for such Class or component and for such Distribution Date (such excess, in the case of each Class of Group M-B Certificates, multiplied by a fraction, the numerator of which is the Subordinate Component Balance for loan group 5 and the denominator of which is the aggregate Class Principal Balance of the Group M-B Certificates).

The Class Principal Balance or Component Principal Balance of each Class of certificates or components thereof will be increased by the portion of the Net Negative Amortization allocated to such Class or component in reduction of interest distributable to such Class or component. As a result of the allocation of Net Negative Amortization, a portion of the interest accrued on the certificates may be distributed to the certificates later than otherwise anticipated.

Interest to be distributed on the applicable classes of certificates (or added to the Class Principal Balance of the certificates as a result of the allocation of Net Negative Amortization) on any Distribution Date will consist of accrued and unpaid interest as of previous Distribution Dates and interest accrued during the period beginning on the 25th day of the preceding calendar month (or, in the case of the first Distribution Date, the Closing Date) and ending on the 24th day of the month of that Distribution Date, except for the MTA Certificates, COFI Certificates and each Class of Class X Certificates, which accrue interest during the preceding calendar month. Interest to be distributed on the LIBOR Certificates will be calculated based on the actual number of days in the certificate accrual period and assuming a 360 day year. Interest to be distributed on the MTA Certificates, COFI Certificates and each Class of Class X Certificates will be calculated based on a year consisting of twelve thirty-day months. All distributions of interest for each Class of certificates will generally be made only to the extent of the Available Distribution Amount as described under “—Priority of Distributions” in this prospectus supplement.

The annual certificate interest rate for each Class of MTA Certificates for each Distribution Date will be determined based on the most recently available One-Year MTA figure as of 15 days before the beginning of the related interest accrual period. If One-Year MTA is no longer available, the index used to determine the annual certificate interest rates on the MTA Certificates will be the same index selected to determine the mortgage interest rates on those mortgage loans indexed, as of the Cut-Off Date, to One-Year MTA.

The annual certificate interest rate for each Class of COFI Certificates for each Distribution Date will be determined based on the most recently available COFI figure at the beginning of the related interest accrual period. If COFI is no longer available, the index used to determine the annual certificate interest rate on the COFI Certificates will be the same index selected to determine the mortgage interest rates on those mortgage loans indexed, as of the Cut-Off Date, to COFI.

The annual certificate interest rates for the offered certificates are listed in the table on pages S-7 and S-8 of this prospectus supplement and in the notes to that table.

The “Pass-Through Rate” for each (i) WMB Loan is equal to the per annum mortgage interest rate on that mortgage loan less the servicing fee rate (as described in footnote (1) to the table under “—Payment of Fees and Expenses” in this prospectus supplement) and (ii) Countrywide Loan is equal to the per annum mortgage interest rate on that mortgage loan less the servicing fee rate (as described in footnote (2) to the table under “—Payment of Fees and Expenses” in this prospectus supplement).

The “Adjusted Loan Group 1 Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) the Loan Group 1 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Loan Group 1 Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in loan group 1 as of the second

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preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 1-A Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in subgroup 1-A as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 1-B Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in subgroup 1-B as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Adjusted Loan Group 2 Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) the Loan Group 2 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Loan Group 2 Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in loan group 2 as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 2-A Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in subgroup 2-A as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 2-B Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in subgroup 2-B as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Adjusted Loan Group 3 Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) the Loan Group 3 Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Loan Group 3 Weighted Average Pass-Through Rate” for any Distribution Date is the weighted average of the Pass-Through Rates of the mortgage loans in loan group 3 as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) the Loan Group 4 Net Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Loan Group 4 Net Weighted Average Pass-Through Rate” for any Distribution Date is (i) the weighted average of the Pass-Through Rates of the mortgage loans in loan group 4 as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date) reduced by (ii) a fraction, the numerator of which is the product of (a) the weighted average of an amount for that Distribution Date on each mortgage loan in Subgroup 4-A which is calculated as follows: (i) for each mortgage loan in Subgroup 4-A that was in its

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initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (ii) for each mortgage loan in Subgroup 4-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such Distribution Date, the excess, if any, of the initial Margin for such mortgage loan over 1.475% and (b) the Subgroup 4-A Balance and the denominator is the Loan Group 4 Balance.

The “Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) the Loan Group 5 Net Weighted Average Pass-Through Rate and (ii) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period.

The “Loan Group 5 Net Weighted Average Pass-Through Rate” for any Distribution Date is (i) the weighted average of the Pass-Through Rates of the mortgage loans in loan group 5 as of the second preceding Due Date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date) reduced by (ii) a fraction, the numerator of which is the product of (a) the weighted average of an amount for that Distribution Date on each mortgage loan in Subgroup 5-A which is calculated as follows: (i) for each mortgage loan in Subgroup 5-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (ii) for each mortgage loan in Subgroup 5-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such Distribution Date, the excess, if any, of the initial Margin for such mortgage loan over 2.125% and (b) the Subgroup 5-A Balance and the denominator is the Loan Group 5 Balance.

The “Group L-B Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period and (ii) the quotient expressed as a percentage of:

 

(a)

 

 

 

the sum of:

 

(i)

 

 

 

the product of (x) the Loan Group 1 Weighted Average Pass-Through Rate and (y) the Subordinate Component Balance for loan group 1 immediately before that Distribution Date; and

 

(ii)

 

 

 

the product of (x) the Loan Group 2 Weighted Average Pass-Through Rate and (y) the Subordinate Component Balance for loan group 2 immediately before that Distribution Date; and

divided by:

 

(b)

 

 

 

the sum of the Subordinate Component Balances for loan group 1 and loan group 2 immediately before that Distribution Date.

The “Maximum Group L-B Rate” for any Distribution Date is the Group L-B Weighted Average Pass-Through Rate modified as follows: for purposes of calculating the Pass-Through Rate for each mortgage loan, the Rate Ceiling for such mortgage loan will be substituted for the per annum mortgage interest rate for such mortgage loan.

The “Group M-B Net Weighted Average Pass-Through Rate” for any Distribution Date is the product of (i) a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related certificate accrual period and (ii) the quotient expressed as a percentage of:

 

(a)

 

 

 

the sum of:

 

(i)

 

 

 

the product of (x) the Loan Group 3 Weighted Average Pass-Through Rate and (y) the Subordinate Component Balance for loan group 3 immediately before that Distribution Date;

 

(ii)

 

 

 

the product of (x) the Loan Group 4 Net Weighted Average Pass-Through Rate and (y) the Subordinate Component Balance for loan group 4 immediately before that Distribution Date; and

 

(iii)

 

 

 

the product of (x) the Loan Group 5 Net Weighted Average Pass-Through Rate and (y) the Subordinate Component Balance for loan group 5 immediately before that Distribution Date; and

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divided by:

 

(b)

 

 

 

the sum of the Subordinate Component Balances for loan group 3, loan group 4 and loan group 5 immediately before that Distribution Date.

The “Maximum Group M-B Rate” for any Distribution Date is the Group M-B Net Weighted Average Pass-Through Rate modified as follows: for purposes of calculating the Pass-Through Rate for each mortgage loan, the Rate Ceiling for such mortgage loan will be substituted for the per annum mortgage interest rate for such mortgage loan.

The “Maximum Loan Group 1 Rate,” “Maximum Loan Group 2 Rate,” “Maximum Loan Group 3 Rate,” “Maximum Loan Group 4 Rate” and “Maximum Loan Group 5 Rate” for any Distribution Date is the Adjusted Loan Group 1 Weighted Average Pass-Through Rate, Adjusted Loan Group 2 Weighted Average Pass-Through Rate, Adjusted Loan Group 3 Weighted Average Pass-Through Rate, Adjusted Loan Group 4 Net Weighted Average Pass-Through Rate and Adjusted Loan Group 5 Net Weighted Average Pass-Through Rate, respectively, modified as follows: for purposes of calculating the Pass-Through Rate for each related mortgage loan, the Rate Ceiling for such mortgage loan will be substituted for the per annum mortgage interest rate for such mortgage loan.

Interest Distributions on the Class X Certificates

The amount of interest available for distribution to the Class CX-1 Certificates (the “Class CX-1 Accrued Interest”) on any Distribution Date (before giving effect to the allocation of any Net Negative Amortization and any shortfall in interest collections and payment of Carryover Shortfall Amounts) will equal, subject to the limitations described in this section, the sum of:

(1) interest associated with the Class CX-1 Subgroup 1-A IO Component, which is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Subgroup 1-A Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Subgroup 1-A Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 1 and the denominator of which is 12, and (ii) the Subgroup 1-A Balance reduced by the Class CX-1 Subgroup 1-A PO Component Principal Balance; and

(2) interest associated with the Class CX-1 Subgroup 2-A IO Component, which is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Subgroup 2-A Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Subgroup 2-A Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 2 and the denominator of which is 12, and (ii) the Subgroup 2-A Balance reduced by the Class CX-1 Subgroup 2-A PO Component Principal Balance;

provided, however, that if either loan group 1 or loan group 2 is an Overcollateralized Group, the amount of interest available for distribution for the Class CX-1 Certificates may be greater or less than it otherwise would be, as described in the pooling agreement.

Notwithstanding the foregoing, interest otherwise available for distribution to the Class CX-1 Certificates on any Distribution Date may instead be distributed as Carryover Shortfall Amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

The amount of interest available for distribution to the Class CX-2-PPP Certificates (the “Class CX-2-PPP Accrued Interest”) on any Distribution Date (before giving effect to the allocation of any Net Negative Amortization and any shortfall in interest collections and payment of Carryover Shortfall Amounts) will equal, subject to the limitations described in this section, the sum of:

(1) interest associated with the Class CX-2-PPP Subgroup 1-B IO Component, which is the excess, if any, of

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(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Subgroup 1-B Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Subgroup 1-B Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 1 and the denominator of which is 12, and (ii) the Subgroup 1-B Balance reduced by the Class CX-2-PPP Subgroup 1-B PO Component Principal Balance; and

(2) interest associated with the Class CX-2-PPP Subgroup 2-B IO Component, which is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Subgroup 2-B Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Subgroup 2-B Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 2 and the denominator of which is 12, and (ii) the Subgroup 2-B Balance reduced by the Class CX-2-PPP Subgroup 2-B PO Component Principal Balance;

provided, however, that if either loan group 1 or loan group 2 is an Overcollateralized Group, the amount of interest available for distribution for the Class CX-2-PPP Certificates may be greater or less than it otherwise would be, as described in the pooling agreement.

Notwithstanding the foregoing, interest otherwise available for distribution to the Class CX-2-PPP Certificates on any Distribution Date may instead be distributed as Carryover Shortfall Amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

Notwithstanding the foregoing, if the aggregate amount of interest available for distribution to the Class CX-1 and Class CX-2-PPP Certificates on any Distribution Date, calculated as described above, is greater than the Aggregate Maximum Class CX Interest Amount, then the aggregate amount of interest available for distribution to the Class CX-1 and Class CX-2-PPP Certificates will be capped at the Aggregate Maximum Class CX Interest Amount, and the amount of interest accrued on each of the Class CX-1 Subgroup 1-A IO, Class CX-1 Subgroup 2-A IO, Class CX-2-PPP Subgroup 1- B IO and Class CX-2-PPP Subgroup 2-B IO Components, if such amount is positive, will equal its pro rata portion of the related Loan Group 1 Maximum Class CX Interest Amount or Loan Group 2 Maximum Class CX Interest Amount (pro rata according to such amount, calculated as described above without giving effect to this sentence).

The “Aggregate Maximum Class CX Interest Amount” for any Distribution Date is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the weighted average of the Loan Group 1 Weighted Average Pass-Through Rate and the Loan Group 2 Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the aggregate of the Loan Group 1 Balance and Loan Group 2 Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Aggregate Class CX Weighted Average Certificate Interest Rate and the denominator of which is 12, and (ii) the aggregate of the Loan Group 1 Balance and Loan Group 2 Balance reduced by the aggregate Class Principal Balance of the Class CX-1 and Class CX-2-PPP Certificates.

The “Loan Group 1 Maximum Class CX Interest Amount” for any Distribution Date is the lesser of (1) the excess, if any, of (x) the product of (i) a fraction, the numerator of which is the Loan Group 1 Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Loan Group 1 Balance over (y) the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 1 and the denominator of which is 12, and (ii) the Loan Group 1 Balance reduced by the aggregate Component Principal Balance of the Class CX-1 Subgroup 1-A PO and Class CX-2- PPP Subgroup 1-B PO Components and (2) the Aggregate Maximum Class CX Interest Amount.

The “Loan Group 2 Maximum Class CX Interest Amount” for any Distribution Date is lesser of (1) the excess, if any, of (x) the product of (i) a fraction, the numerator of which is the Loan Group 2 Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Loan Group 2

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Balance over (y) the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 2 and the denominator of which is 12, and (ii) the Loan Group 2 Balance reduced by the aggregate Component Principal Balance of the Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components and (2) the Aggregate Maximum Class CX Interest Amount.

The amount of interest available for distribution to the Class FX Certificates (the “Class FX Subgroup 4-A Accrued Interest”) on any Distribution Date will equal the product of (a) the weighted average of an amount on each mortgage loan in Subgroup 4-A which is calculated as follows: (i) for each mortgage loan in Subgroup 4-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (ii) for each mortgage loan in Subgroup 4-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin for such mortgage loan over 1.475% and (b) the Subgroup 4-A Balance.

The amount of interest available for distribution to the Class FX Certificates (the “Class FX Subgroup 5-A Accrued Interest”) on any Distribution Date will equal the product of (a) the weighted average of an amount on each mortgage loan in Subgroup 5-A which is calculated as follows: (a) for each mortgage loan in Subgroup 5-A that was in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, 0.00% and (b) for each mortgage loan in Subgroup 5-A that was not in its initial three month fixed rate period in the calendar month immediately preceding such distribution date, the excess, if any, of the initial Margin for such mortgage loan over 2.125% and (b) the Subgroup 5-A Balance.

The amount of interest available for distribution to the Class EX-PPP Certificates (the “Class EX-PPP Accrued Interest”) on any Distribution Date (before giving effect to the allocation of any Net Negative Amortization and any shortfall in interest collections and payment of Carryover Shortfall Amounts) will equal, subject to the limitations described in this section, the sum of:

(1) interest associated with the Class EX-PPP Loan Group 3 IO Component, which is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Loan Group 3 Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Loan Group 3 Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 3 and the denominator of which is 12, and (ii) the Loan Group 3 Balance reduced by the Class EX-PPP Loan Group 3 PO Component Principal Balance; and

(2) interest associated with the Class EX-PPP Loan Group 4 IO Component, which is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Loan Group 4 Net Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Loan Group 4 Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 4 and the denominator of which is 12, and (ii) the Loan Group 4 Balance reduced by the Class EX-PPP Loan Group 4 PO Component Principal Balance;

provided, however, that if any of loan group 3, loan group 4 or loan group 5 is an Overcollateralized Group, the amount of interest available for distribution for the Class EX-PPP Certificates may be greater or less than it otherwise would be, as described in the pooling agreement.

Notwithstanding the foregoing, interest otherwise available for distribution to the Class EX-PPP Certificates on any Distribution Date may instead be distributed as Carryover Shortfall Amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

The amount of interest available for distribution to the Class 5X-PPP Certificates (the “Class 5X-PPP Accrued Interest”) on any Distribution Date (before giving effect to the allocation of any Net Negative Amortization and any shortfall in interest collections and payment of Carryover Shortfall Amounts) will equal, subject to the limitations described in this section, the excess, if any, of

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(x)

 

 

 

the product of (i) a fraction, the numerator of which is the Loan Group 5 Net Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the Loan Group 5 Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Weighted Average Certificate Interest Rate for loan group 5 and the denominator of which is 12, and (ii) the Loan Group 5 Balance reduced by the Class 5X-PPP Principal Balance.

provided, however, that if any of loan group 3, loan group 4 or loan group 5 is an Overcollateralized Group, the amount of interest available for distribution for the Class 5X-PPP Certificates may be greater or less than it otherwise would be, as described in the pooling agreement.

Notwithstanding the foregoing, interest otherwise available for distribution to the Class 5X-PPP Certificates on any distribution date may instead be distributed as carryover shortfall amounts. See “Description of the Certificates—Distributions of Interest” in this prospectus supplement.

Notwithstanding the foregoing, if the aggregate amount of interest available for distribution to the Class EX-PPP and Class 5X-PPP Certificates on any Distribution Date, calculated as described above, is greater than the Aggregate Maximum Class EX-PPP and Class 5X-PPP Interest Amount, then the aggregate amount of interest available for distribution to the Class EX-PPP and Class 5X-PPP Certificates will be capped at the Aggregate Maximum Class EX-PPP and Class 5X-PPP Interest Amount, and the amount of interest accrued on each of the Class EX-PPP Loan Group 3 IO, Class EX-PPP Loan Group 4 IO and Class 5X-PPP Certificates, if such amount is positive, will equal its pro rata portion of the Aggregate Maximum Class EX-PPP and Class 5X-PPP Interest Amount (pro rata according to such amount, calculated as described above without giving effect to this sentence).

The “Aggregate Maximum Class EX-PPP and Class 5X-PPP Interest Amount” for any Distribution Date is the excess, if any, of

 

(x)

 

 

 

the product of (i) a fraction, the numerator of which is the weighted average of the Loan Group 3 Weighted Average Pass-Through Rate, the Loan Group 4 Net Weighted Average Pass-Through Rate and the Loan Group 5 Net Weighted Average Pass-Through Rate and the denominator of which is 12, and (ii) the aggregate of the Loan Group 3 Balance, Loan Group 4 Balance and Loan Group 5 Balance over

 

(y)

 

 

 

the product of (i) a fraction, the numerator of which is the Aggregate Groups 3-5 Weighted Average Certificate Interest Rate and the denominator of which is 12, and (ii) the aggregate of the Loan Group 3 Balance, Loan Group 4 Balance and Loan Group 5 Balance reduced by the aggregate Class Principal Balance of the Class EX-PPP and Class 5X-PPP Certificates.

The “Loan Group 1 Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in loan group 1 as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 1-A Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 1-A as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 1-B Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 1-B as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Loan Group 2 Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in loan group 2 as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 2-A Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 2-A as of the second preceding due date (after giving effect to (a) the

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payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 2-B Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 2-B as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Loan Group 3 Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in loan group 3 as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Loan Group 4 Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in loan group 4 as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 4-A Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 4-A as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Loan Group 5 Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in loan group 5 as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Subgroup 5-A Balance” for any Distribution Date is the aggregate principal balance of the mortgage loans in subgroup 5-A as of the second preceding due date (after giving effect to (a) the payments due on those mortgage loans on that Due Date and (b) except for the first Distribution Date, any Payoffs on WMB Loans received on or before the 14th day of the calendar month of that Due Date).

The “Aggregate Class CX Weighted Average Certificate Interest Rate” for any Distribution Date is the weighted average (weighted according to Class Principal Balance or Component Principal Balance, as applicable) of the annual certificate interest rates on the Class 1A, Class 2A, Class CA-1B, Class CA-1C, Class CX-1, Class CX-2-PPP and Group L-B Certificates (or components thereof, as applicable) (each of which annual certificate interest rates, in the case of the LIBOR Certificates (or components thereof), will be multiplied by a fraction, the numerator of which is the actual number of days in the related certificate accrual period and the denominator of which is 30).

The “Aggregate Groups 3-5 Weighted Average Certificate Interest Rate” for any Distribution Date is the weighted average (weighted according to Class Principal Balance or Component Principal Balance, as applicable) of the annual certificate interest rates on the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B, Class DA-1C, Class EX-PPP, Class FX, Class 5X-PPP and Group M-B Certificates (or components thereof, as applicable) (each of which annual certificate interest rates, in the case of the LIBOR Certificates (or components thereof), will be multiplied by a fraction, the numerator of which is the actual number of days in the related certificate accrual period and the denominator of which is 30).

The “Weighted Average Certificate Interest Rate” for any loan group for any Distribution Date is the weighted average of the annual certificate interest rates on the Class A and Class B Certificates (or components thereof, as applicable) related to such loan group (each of which annual certificate interest rates, in the case of the LIBOR Certificates (or components thereof), will be multiplied by a fraction, the numerator of which is the actual number of days in the related certificate accrual period and the denominator of which is 30) (such rates weighted, (i) in the case of the Class A Certificates related to such loan group, according to the Class Principal Balance or Component Principal Balance thereof, as applicable, and (ii) in the case of each Class of Group L-B Certificates, according to the product of the Class Principal Balance thereof and a fraction, the numerator of which is the Subordinate Component Balance for such loan group and the denominator of which is the aggregate Class Principal Balance of all the Group L-B Certificates).

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Class X Notional Amounts and Class X Principal Balances

The Class FX Certificates will accrue interest on the Class FX Notional Amount.

The “Class FX Notional Amount” for any Distribution Date will equal the sum of the Subgroup 4-A Balance and Subgroup 5-A Balance for that Distribution Date. The Class FX Notional Amount as of the Closing Date will equal approximately $120,727,725.

Solely for purposes of calculating distributions of principal and interest and the allocation of losses realized on the mortgage loans, (i) the Class CX-1 Certificates will be deemed to be comprised of two interest-only components, the Class CX-1 Subgroup 1-A IO Component and the Class CX-1 Subgroup 2-A IO Component, and two principal-only components, the Class CX-1 Subgroup 1-A PO Component and the Class CX-1 Subgroup 2-A PO Component, (ii) the Class CX-2-PPP Certificates will be deemed to be comprised of two interest-only components, the Class CX-2-PPP Subgroup 1-B IO Component and the Class CX- 2-PPP Subgroup 2-B IO Component, and two principal-only components, the Class CX-2-PPP Subgroup 1-B PO Component and the Class CX-2-PPP Subgroup 2-B PO Component, (iii) the Class EX-PPP Certificates will be deemed to be comprised of two interest-only components, the Class EX-PPP Loan Group 3 IO Component and the Class EX-PPP Loan Group 4 IO Component, and two principal-only components, the Class EX-PPP Loan Group 3 PO Component and the Class EX-PPP Loan Group 4 PO Component and (iv) the Class 5X-PPP Certificates will be deemed to be comprised of an interest-only component and a principal-only component. Interest, if any, will be payable with respect to each Class X IO Component, calculated as described in this prospectus supplement under “—Distributions of Interest—Interest Distributions on the Class X Certificates.” In addition, the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates each will have a Class Principal Balance, which will be the sum of the Component Principal Balances of the related Class X PO Components and which will initially equal zero. In the event that interest otherwise payable with respect to a Class X IO Component and derived from a loan group or a subgroup, as applicable, is reduced as a result of the allocation of Net Negative Amortization, the amount of such reduction will be added to the Component Principal Balance of the related Class X PO Component. Interest will not accrue on any Class X Principal Balance.

The Class FX Certificates will not have a Class Principal Balance and will not receive distributions of principal.

Solely for purposes of determining the percentage interest of each Class X Certificate in distributions to the related Class of Class X Certificates and the percentage voting right of each Class X Certificate, each Class of Class X Certificates will have a Class Notional Amount. Distributions of principal and interest to each Class of Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates will not be calculated based on the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Notional Amounts, respectively. The “Class CX-1 Notional Amount” will equal the aggregate principal balance of the mortgage loans in subgroup 1-A and subgroup 2-A as of the Cut-Off Date after giving effect to the payments due on those mortgage loans on that date. The “Class CX-2-PPP Notional Amount” will equal the aggregate principal balance of the mortgage loans in subgroup 1-B and subgroup 2-B as of the Cut-Off Date after giving effect to the payments due on those mortgage loans on that date. The “Class EX-PPP Notional Amount” will equal the aggregate principal balance of the mortgage loans in loan group 3 and loan group 4 as of the Cut-Off Date after giving effect to the payments due on those mortgage loans on that date. The “Class 5X- PPP Notional Amount” will equal the aggregate principal balance of the mortgage loans in loan group 5 as of the Cut-Off Date after giving effect to the payments due on those mortgage loans on that date. The Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Notional Amount will be approximately $76,043,343, $736,050,685, $1,212,205,012 and $347,660,219, respectively.

Compensating Interest

As a result of the delay in distribution of Payoffs and Curtailments to certificateholders, the interest collected on mortgage loans with respect to which Payoffs and Curtailments are received is not sufficient to pay the full amount of interest accrued on the certificates. To reduce this interest shortfall, each of WMB and Countrywide Home Loans is required to pay compensating interest with respect to the mortgage loans it services. The amount of compensating interest is calculated differently with respect to the WMB Loans and the Countrywide Loans.

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WMB is obligated to remit to the Trust before each Distribution Date compensating interest with respect to the WMB Loans in each loan group in an amount equal to the least of (a) any shortfall for the previous month in interest collections resulting from the delay in distribution of Payoffs made on WMB Loans in that loan group during the period from the 15th day through the last day of the calendar month preceding the Distribution Date, (b) the sum of (i) 1/12 of 0.050% of the aggregate Stated Principal Balance of the WMB Loans in that loan group, (ii) any reinvestment income realized by WMB relating to Payoffs made on WMB Loans in that loan group during the applicable Prepayment Period and (iii) interest payments on Payoffs made on WMB Loans in that loan group during the period of the first day through the 14th day of the month of the Distribution Date and (c) 1/12 of 0.125% of the aggregate Stated Principal Balance of the WMB Loans in that loan group.

Countrywide Home Loans is obligated to remit to the custodial account maintained by Countrywide Home Loans before each Distribution Date compensating interest with respect to Countrywide Loans in an amount equal to the lesser of (a) any shortfall for the previous month in interest collections resulting from the delay in distribution of Payoffs and Curtailments made on Countrywide Loans in the calendar month preceding the Distribution Date and (b) the servicing fee payable to Countrywide for that month. The compensating interest remitted by Countrywide Home Loans for each Distribution Date will be allocated among the loan groups, pro rata according to interest shortfall, in reduction of that shortfall.

Any remaining shortfall in interest collections resulting from the delay in distribution of Payoffs and Curtailments in a loan group, and any shortfall resulting from application of the Relief Act in a loan group, will be allocated among the related classes of certificates (or components thereof, as applicable) pro rata according to the amount of interest to which each such Class (or component) (or, in the case of the Class B Certificates, only the portion of those certificates that derives its interest from the related loan group) would otherwise be entitled (before giving effect to the payment of Carryover Shortfall Amounts), in reduction of that amount.

See “Yield and Prepayment Considerations” in this prospectus supplement.

Carryover Shortfall Amounts

For the initial Distribution Date and the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2 and Class 4A-B Certificates, the “Carryover Shortfall Amount” for such Class will equal the excess, if any, of (a) the amount of interest that would have accrued on such Class at a certificate interest rate equal to One-Year MTA plus the related margin, over (b) the actual amount of interest accrued on such Class for the initial Distribution Date.

For the initial Distribution Date and the Class 5A Certificates, the “Carryover Shortfall Amount” for such Class will equal the excess, if any, of (a) the amount of interest that would have accrued on such Class at a certificate interest rate equal to COFI plus the related margin, over (b) the actual amount of interest accrued on such Class for the initial Distribution Date.

For the Class CA-1B Certificates and for any Distribution Date (unless their Class Principal Balance has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of the carryover shortfall amount for each Class CA-1B Component, each calculated as the sum of:

 

(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class CA-1B Component at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the maximum rate described in clause (z) of the applicable paragraph of note (9) to the table on pages S-7 and S-8 of this prospectus supplement over (b) the actual amount of interest accrued on such Class CA-1B Component for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For the Class CA-1C Certificates and for any Distribution Date (unless their Class Principal Balance has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of the carryover shortfall amount for each Class CA-1C Component, each calculated as the sum of:

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(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class CA-1C Component at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the maximum rate described in clause (z) of the applicable paragraph of note (11) to the table on pages S-7 and S-8 of this prospectus supplement over (b) the actual amount of interest accrued on such Class CA-1C Component for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For the Class DA-1B Certificates and for any Distribution Date (unless their Class Principal Balance has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of the carryover shortfall amount for each Class DA-1B Component, each calculated as the sum of:

 

(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class DA-1B Component at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the maximum rate described in clause (z) of the applicable paragraph of note (13) to the table on pages S-7 and S-8 of this prospectus supplement over (b) the actual amount of interest accrued on such Class DA-1B Component for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For the Class DA-1C Certificates and for any Distribution Date (unless their Class Principal Balance has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of the carryover shortfall amount for each Class DA-1C Component, each calculated as the sum of:

 

(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class DA-1C Component at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the maximum rate described in clause (z) of the applicable paragraph of note (15) to the table on pages S-7 and S-8 of this prospectus supplement over (b) the actual amount of interest accrued on such Class DA-1C Component for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For any Distribution Date and for any Class of Group L-B Certificates (unless the Class Principal Balance of such Class has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of:

 

(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the Maximum Group L-B Rate over (b) the actual amount of interest accrued on such Class for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For any Distribution Date and for any Class of Group M-B Certificates (unless the Class Principal Balance of such Class has been reduced to zero), the “Carryover Shortfall Amount” for such Class will equal the sum of:

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(i)

 

 

 

the excess, if any, of (a) the amount of interest that would have accrued on such Class at a certificate interest rate equal to the lesser of (1) LIBOR plus the related margin and (2) the Maximum Group M-B Rate over (b) the actual amount of interest accrued on such Class for such Distribution Date;

 

(ii)

 

 

 

the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and

 

(iii)

 

 

 

one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

For any Distribution Date (or, in the case of the Class 1A and Class 2A Certificates, for the initial Distribution Date only), Carryover Shortfall Amounts for the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates will be paid to those classes, pro rata based on Carryover Shortfall Amounts, to the extent of the aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest for that Distribution Date. For any Distribution Date (or, in the case of the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B and Class 5A Certificates, for the initial Distribution Date only), Carryover Shortfall Amounts for the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates will be paid to those classes, pro rata based on Carryover Shortfall Amounts, to the extent of the aggregate Class EX- PPP Distributable Interest and Class 5X-PPP Distributable Interest for that Distribution Date. Carryover Shortfall Amounts will only be paid to the Class 1A, Class 2A, Class 3A, Class 4A-1, Class 4A-2, Class 4A-B and Class 5A Certificates on the initial Distribution Date.

Carryover Shortfall Amounts for the Group L-B Certificates for any Distribution Date will be paid to those classes, in order of seniority, to the extent of the aggregate Class CX-1 Distributable Interest and Class CX-2-PPP Distributable Interest remaining after the distributions of Carryover Shortfall Amounts to the Class 1A, Class 2A, Class CA-1B and Class CA-1C Certificates for that Distribution Date. Carryover Shortfall Amounts for the Group M-B Certificates for any Distribution Date will be paid to those classes, in order of seniority, to the extent of the aggregate Class EX-PPP Distributable Interest and Class 5X-PPP Distributable Interest remaining after the distributions of Carryover Shortfall Amounts to the Class 3A, Class 4A-1, Class 4A-2, Class 4A-B, Class 5A, Class DA-1B and Class DA-1C Certificates for that Distribution Date. See “—Priority of Distributions” in this prospectus supplement.

The amount of interest otherwise available for distribution to the Class CX-1, Class CX-2-PPP, Class EX-PPP and Class 5X-PPP Certificates on any Distribution Date will be reduced by the Carryover Shortfall Amounts paid to the holders of the related Class A and Class B Certificates, as applicable, on that Distribution Date.

Calculation of LIBOR

The annual certificate interest rates of the LIBOR Certificates are based on the London Interbank Offered Rate for one-month United States dollar deposits (“LIBOR”) as determined by the administrative agent on behalf of WMB on the basis of quotations as described below. The administrative agent will determine LIBOR for each certificate accrual period on the second business day prior to the day on which that accrual period begins (each, a “LIBOR Determination Date”). For this purpose a “business day” is any day on which banks in London are open for conducting transactions in foreign currency and exchange.

On each LIBOR Determination Date, the administrative agent will determine LIBOR based on the “Interest Settlement Rate” for United States dollar deposits of one-month maturity set by the British Bankers’ Association (the “BBA”) as of 11:00 a.m. (London time) on such LIBOR Determination Date. Interest Settlement Rates currently are based on rates quoted by sixteen BBA designated banks as being, in the view of such banks, the offered rate at which deposits are being quoted to prime banks in the London interbank market. Such Interest Settlement Rates are calculated by eliminating the four highest rates and the four lowest rates, averaging the eight remaining rates, carrying the result (expressed as a percentage) out to six decimal places, and rounding to five decimal places.

The BBA’s Interest Settlement Rates are currently displayed on each of the Dow Jones Telerate Service page 3750, Reuters Monitor Money Rates Service page “LIBOR01” and Bloomberg L.P. page “BBAM” (each such page, or such other page as may replace any of the foregoing on such service or such

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other service as may be nominated by the BBA as the information vendor for the purpose of displaying the BBA’s Interest Settlement Rates for deposits in United States dollars, each, a “Designated Rate Page”).

If on any LIBOR Determination Date, such Interest Settlement Rates are not available from any Designated Rate Page, LIBOR for the related accrual period will be the most recently published Interest Settlement Rate. In the event that the BBA no longer sets an Interest Settlement Rate, the administrative agent will calculate LIBOR for the immediately following accrual period as follows: the administrative agent will determine LIBOR by reference to the quotations offered by the principal London office of each of the designated reference banks meeting the criteria set forth below for making one-month United States dollar deposits in leading banks in the London Interbank market, as of 11:00 a.m. (London time) on the LIBOR Determination Date.

Under this method LIBOR will be established by the administrative agent on each LIBOR Determination Date as follows:

 

(a)

 

 

 

If on any LIBOR Determination Date two or more reference banks provide offered quotations, LIBOR for the next interest accrual period will be the arithmetic mean of the offered quotations, carrying the result (expressed as a percentage) out to six decimal places, and rounding to five decimal places.

 

(b)

 

 

 

If on any LIBOR Determination Date only one or none of the reference banks provides offered quotations, LIBOR for the next interest accrual period will be the greater of:

 

 

 

 

LIBOR as determined on the previous LIBOR Determination Date or

 

 

 

 

the reserve interest rate.

The reserve interest rate will be the rate per annum that the administrative agent determines to be either:

 

 

 

 

the arithmetic mean, (expressed as a percentage) carried out to six decimal places, and rounded to five decimal places, of the one-month United States dollar lending rates that New York City banks selected by the administrative agent are quoting, on the relevant LIBOR Determination Date, to the principal London offices of at least two of the reference banks to which the quotations are, in the opinion of the administrative agent, being so made, or

 

 

 

 

if the administrative agent cannot determine the arithmetic mean, the lowest one-month United States dollar lending rate which New York City banks selected by the administrative agent are quoting on the LIBOR Determination Date to leading European banks.

 

(c)

 

 

 

If on any LIBOR Determination Date the administrative agent is required but is unable to determine the reserve interest rate in the manner provided in paragraph (b) above, LIBOR for the next interest accrual period will be LIBOR as determined on the preceding LIBOR Determination Date, or, in the case of the first LIBOR Determination Date, LIBOR will be considered to be the per annum rate specified as such herein, if so specified.

Each reference bank (i) will be a leading bank engaged in transactions in Eurodollar deposits in the international Eurocurrency market, (ii) will not control, be controlled by, or be under common control with, the servicer and (iii) will have an established place of business in London. If any reference bank should be unwilling or unable to act as such or if the servicer should terminate the designation of any such reference bank, the servicer will promptly designate another leading bank meeting the criteria specified above.

The establishment of LIBOR on each LIBOR Determination Date by the servicer for the related accrual period will, in the absence of manifest error, be final and binding.

Calculation of Indexes for MTA and COFI Certificates

The applicable Index for the MTA Certificates and COFI Certificates will be calculated as described in “Description of the Certificates—Distributions of Interest” in this prospectus supplement. For more information on the Indexes, see “Description of the Mortgage Pool—The Indexes” in this prospectus supplement.

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Cross-Collateralization

Cross-Collateralization of Loan Groups 1 and 2 Due to Rapid Prepayments in One Loan Group

The priority of distributions described in this prospectus supplement under “—Priority of Distributions” will change if all of the following conditions are met:

 

 

 

 

either (i) the sum of the Class 1A Principal Balance and the Component Principal Balances of the Class CA-1B Group 1, Class CA-1C Group 1, Class CX-1 Subgroup 1-A PO and Class CX-2-PPP Subgroup 1-B PO Components or (ii) the sum of the Class 2A Principal Balance and the Component Principal Balances of the Class CA-1B Group 2, Class CA-1C Group 2, Class CX-1 Subgroup 2-A PO and Class CX-2-PPP Subgroup 2-B PO Components has been reduced to zero;

 

 

 

 

there are still Group L-B Certificates outstanding; and

 

 

 

 

either (i) the Group L-B Percentage on that date is less than 200% of the Group L-B Percentage as of the Closing Date or (ii) the outstanding principal balance of the mortgage loans in either of loan group 1 or loan group 2 delinquent 60 days or more averaged over the last six months, as a percentage of the related Subordinate Component Balance, is greater than or equal to 50%.

When all three conditions are met, all principal received or advanced with respect to the mortgage loans in the loan group relating to these Class A and Class X Certificates (or components thereof) that have been paid in full (less any amount of negative amortization allocated to such mortgage loans) will be paid as principal to the remaining Class A and Class X Certificates (or components thereof) related to loan group 1 or loan group 2, as applicable, rather than to the Group L-B Certificates. That principal will be distributed in the same priority as those Class A and Class X Certificates (or components thereof) would receive other distributions of principal.

The “Group L-B Percentage” as of any date of determination will equal the aggregate Class Principal Balance of the Group L-B Certificates divided by the then outstanding aggregate Stated Principal Balance of the mortgage loans in loan group 1 and loan group 2.

The “Subordinate Component Balance” for either loan group 1 or loan group 2 as of any date of determination will equal the product of (i) the aggregate Class Principal Balance of the Group L-B Certificates and (ii) a fraction, the numerator of which is equal to the excess, if any, of (a) the aggregate Stated Principal Balance of the mortgage loans in that loan group over (b) the aggregate Class Principal Balance or Component Principal Balance of the Class A and Class X Certificates (or components thereof) related to such loan group (and, in the case of loan group 1, the Class R Certificates) and the denominator of which is equal to the excess, if any, of (a) the aggregate Stated Principal Balance of all of the mortgage