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Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-4 · FWP · Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-4 · On 6/11/07

Filed On 6/11/07, 9:11pm ET   ·   Accession Number 950123-7-8530   ·   SEC File 333-140436-18

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

 6/12/07  Merrill Lynch First Frank..2007-4 FWP                    1:39K  Merrill Lynch First Frank..2007-4 RR Donnelley/FA

Free Writing Prospectus   —   Rule 163/433
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: FWP         Free Writing Prospectus                               40     84K 

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FWP filed pursuant to Rule 433 Registration #333-140436 (FIRST FRANKLIN(R) LOGO) (LOGO) (FIRST FRANKLIN(R) LOGO) FIRST FRANKLIN COMPANY OVERVIEW Europe - June 2007 (MERRILL LYNCH LOGO) Global Markets & Investment Banking Group (LOGO)
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(FIRST FRANKLIN(R) LOGO) FIRST FRANKLIN PRESENTATION TABLE OF CONTENTS [Download Table] Page ---- 1. Company Overview 1 2. Product Overview 8 3. Underwriting Guidelines/ Risk Management 16 4. FFMER Securitization Program 23 5. Home Loan Services 25 Disclaimer 38 (LOGO)
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(LOGO) (FIRST FRANKLIN(R) LOGO) 1. COMPANY OVERVIEW
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW ORIGINATIONS AND SERVICING PLATFORM [Download Table] (FIRST FRANKLIN(R) LOGO) - Headquarters: San Jose, California - Founded: 1981 - Employees: 2,100 - CEO: Andy Pollock - Wholesale branches/sales offices: 33 - Approved mortgage brokers: ~26,000 - 2006 origination volume: $25.7 billion (92%) (NATIONPOINT(R) LOGO) - Headquarters: Lake Forest, California - Employees: 370 - President: Michael Petree - Retail channels: - Internet, phone, direct mail - Referrals, portfolio retention - 2006 origination volume: $2.3 billion (8%) (HOME LOAN SERVICES LOGO) - Headquarters: Pittsburgh, Pennsylvania - Employees: 750 - Managing Director: Nanette Stevens - 2006 servicing volume: $49 billion - Rating: RPS2-, SQ1- and Above Average (F/M/S) - Merrill Lynch's acquisition of First Franklin mortgage origination and Home Loan Services servicing franchise closed on December 30, 2006 - Will continue to operate business units with same management team, philosophy, and commitment to quality - Leverage financial strength and stability, established brand and global resources of a leading financial services firm - FFMER label replaced FFMLT for future securitizations beginning with January 2007 production (LOGO) 2
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW Synergies from the Merrill Lynch Acquisition MERRILL LYNCH - Financial Strength - $76.6Bn market cap - $68.6Bn in 2006 Revenues - $7.5Bn in 2006 Net Income - ROE: 21.3% in 2006 vs 16.0% in 2005 - 56,200 staff including 15,880 Financial Advisors covering over 2.5MM households managing $1.62T in assets - Issuer Rating: Aa3/AA-/AA- - Short Term Rating: P-1/A-1+/F1+ - Merrill Lynch Bank & Trust Co., Federal Savings Bank ("FSB") - $14Bn in AUM* (As of Full Year 2006) - All First Franklin activities regulated by OTS and governed by FSB Board of Directors - Merrill Lynch well diversified company with commitment to mortgages globally - Over 25 acquisitions across entire firm since 2004 * AUM - Assets Under Management HOME EQUITY LEAGUE TABLE - ADJUSTED FOR FF [Download Table] 2006 VOLUME MARKET NUMBER RANK MANAGER ($BN) SHARE (%) OF ISSUES ---- ------------------------------ ------ --------- --------- 1 Countrywide Securities Corp $ 65.7 10.7% 83 2 Merrill Lynch $ 59.4 9.6% 70 3 Royal Bank of Scotland Group $ 58.7 9.5% 81 4 Lehman Brothers $ 57.4 9.3% 145 5 Citigroup $ 39.9 6.5% 83 6 Deutsche Bank AG $ 39.6 6.4% 85 7 Credit Suisse $ 36.3 5.9% 72 8 Bear Stearns & Co Inc $ 36.3 5.9% 74 9 Morgan Stanley $ 34.9 5.7% 33 10 JP Morgan $ 32.1 5.2% 69 11 Barclays Capital $ 27.8 4.5% 49 12 Goldman Sachs & Co $ 25.0 4.1% 35 13 UBS $ 23.0 3.7% 66 14 HSBC Holdings PLC $ 14.4 2.3% 16 15 Banc of America Securities LLC $ 14.4 2.3% 32 ------ ----- ----- INDUSTRY TOTAL $617.4 100.0% 1,132 ====== ===== ===== * Source: Thomson Financial - Adjusted Using First Franklin Deals Done in 2006; Took First Franklin single seller deals from 2006 and added them into ML's total issuance if ML not previously involved; Deal issuance was subtracted from those managers previously receiving credit for leading a 2006-specific First Franklin deal CDO LEAGUE TABLE [Download Table] 2006 VOLUME MARKET RANK ORIGINATOR ($MM) SHARE (%) ---- ------------------------------ ---------- --------- 1 Merrill Lynch 50,073.6 15.0 2 Citigroup 36,442.6 10.9 3 Deutsche Bank AG 23,202.2 6.9 4 Wachovia Corp 22,820.6 6.8 5 Credit Suisse 22,731.5 6.8 6 UBS 22,293.8 6.7 7 Banc of America Securities LLC 20,342.8 6.1 8 Bear Stearns & Co Inc 19,720.1 5.9 9 Morgan Stanley 19,322.3 5.8 10 JP Morgan 14,939.1 4.5 ---------- ----- INDUSTRY TOTAL $334,802.7 100.0% ========== ===== * Source: Thomson Financial (LOGO) 3
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW Vertically Integrated Platform MERRILL LYNCH PLATFORM OVERVIEW [Enlarge/Download Table] VALUE CHAIN BENEFITS ACROSS THE CHAIN HEADCOUNT (1) GSFI PLATFORM -------------- ------------------------------------- ------------- ----------------------------------------- ORIGINATION "Access to assets" and singular vs. 2,470 - U.S.: First Franklin, NationPoint multiple interface to 3rd party mortgage loan originators - EMEA: Mortgages plc, Freedom, Irish Life JV, Oakwood Co's - PacRim: Peninsula, Nishon-Nippon City Bank JV, Shriram LENDING Secured lending to 3rd party 10 - Residential Real Estate Asset Based originators with advance levels based Lending (ABL) on whole loan and securitization market levels WHOLE LOAN Bid to market securitization 73 - Prime Whole Loan Trading CONDUIT execution with forward sales and internal residual takeout - Prime Portfolio - Sub-prime Whole Loan Trading - SURF SECURITIZATION Optimize structure and utilize 12 - Residential Real Estate Asset Based syndication / trading capabilities to Securitization (ABS) distribute bonds - Syndicate PRINCIPAL Asset management activity for 12 - Residential Opportunistic Investing INVESTING internally generated and 3rd party (ROI) residuals - Surveillance and Analytics SERVICING Servicing capabilities maximize 1,354 - U.S: Wilshire Credit Corp. (WCC), Home returns on retained positions with Loan Services (HLS) real-time performance data; utilized to adjust origination product - EMEA: Mortgages PLC, Freedom (Special offerings Servicing) ----- 3,931 - PacRim: Peninsula ===== ---------- (1) Reflects U.S. Residential Real Estate platform only. Headcount excluded from above data: EMEA - Mortgages plc (380), Freedom (90), Banking (26); PacRim - Peninsula, Banking. (LOGO) 4
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW FIRST FRANKLIN COMPANY TIMELINE - Company founded as conforming retail in 1981 - Rolled out FICO based, purchase money strategy in 1995 - Successfully managed through multiple acquisitions, cycles, and products - Acquired by Merrill Lynch December 2006 - Vertically integrated from origination through investment - Market consolidation drives need for internal originations - Provides best in class, consistent production - Committed to market share growth in profitable products - Will leverage platform to rollout products (Alt A - first) (PERFORMANCE GRAPH) [Download Table] 2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- Purchase 4.3 7.5 13.9 19.3 20.1 19.3 Refinance 2 3.2 6.2 9.9 9.4 8.6 (FLOWCHART) (LOGO) 5
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW STRATEGY - Benchmark Issuer - - Volume - #3 largest subprime wholesale originator as of Q4 2006* - Servicer - Highly ranked, servicing $50.52Bn** of First Franklin only originations - Performance - Consistently originates top quality products - Profitable products - - Granular analysis - Material product categories tested to discrete enhancement and performance expectations - Early Payment Default ("EPD") and performance supported by upfront Asset Quality ("AQ") and backend Quality Control ("QC") processes provide feedback loop - Servicer information from both HLS and Wilshire provide early performance information and ability to manage difficult vintages and geographies - All new products rolled out and tested through Product Development process before national rollout - Top credit- First Payment Default ("FPD") 1% goal (1/2007 - 1.47%, 2/2007 - 1.38%, 3/2007 - 1.25%, 4/2007 - 1.13% of origination) and maintenance of absolute and relative outperformance - Account Executive ("AE") increase - Continue to build out AE salesforce in order to increase market share - Low cost to produce given efficient operating systems, technology usage and highly variable cost structure - Sell to end user - Securitization program, development of residual liquidity, and whole loans to portfolio buyers - Transparency to investors and Rating Agencies - - Post monthly performance information through ABSNet and ML monthly First Franklin Monitor - Post monthly collateral tapes through trustee - Contribute to Loan Performance database * SOURCE: NATIONAL MORTGAGE NEWS; ** PORTFOLIO AS OF 1/31/2007 (LOGO) 6
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(FIRST FRANKLIN(R) LOGO) COMPANY OVERVIEW DIVERSIFIED GEOGRAPHIC LENDING PRESENCE (MAP) - HUB - San Jose, CA - Wholesale - 33 branches/sales offices nationwide - Retail - NationPoint (Lake Forest, CA) 2006 PRODUCTION BY REGION [Download Table] REGION VOLUME ($) VOLUME (%) ------ ----------------- ---------- Northwest 4,325,189,156.55 15.63% West 5,526,670,398.50 19.98% Midwest 4,485,586,529.99 16.21% Southeast 6,168,528,925.13 22.30% Northeast 4,879,513,354.25 17.64% Retail 2,280,016,403.00 8.24% ----------------- ------ Total 27,665,504,767.42 100.00% ================= ====== MSA CONCENTRATION 2006 PRODUCTION [Download Table] MSA VOLUME ($) VOLUME (%) --- ----------------- ---------- Los Angeles-Long Beach, CA 1,533,060,120.00 5.54% Chicago, IL 1,460,034,395.40 5.28% Riverside-San Bernandino, CA 1,399,293,995.00 5.06% Atlanta, GA 802,106,242.18 2.90% Washington, DC-MD-VA-WV 756,519,991.00 2.73% New York, NY 751,314,744.00 2.72% San Diego, CA 605,789,606.00 2.19% Las Vegas, NV-AZ 518,629,324.00 1.87% Phoenix-Mesa, AZ 516,871,944.50 1.87% Orange County, CA 505,076,181.00 1.83% ----------------- ------ Top 10 MSAs 8,848,686,543.08 31.98% All Other MSAs 18,816,808,224.34 68.02% ----------------- ------ Total FF Production 27,665,494,767.42 100.00% ================= ====== (LOGO) 7
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(LOGO) (FIRST FRANKLIN(R) LOGO) 2. PRODUCT OVERVIEW
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW FIRST FRANKLIN SUBPRIME PRODUCTION CHARACTERISTICS [Enlarge/Download Table] 2003 2004 2005 2006 Q1 2007 APR-07 -------- -------- -------- -------- -------- -------- VOLUME ($BN) 20.1 29.2 29.5 28.0 6.0 1.86 AVERAGE LOAN AMOUNT $138,955 $150,567 $154,469 $148,645 $159,803 $177,996 WAC 7.05% 6.83% 7.25% 8.24% 8.45% 8.90% WAFICO 655 654 655 652 650 643 WALTV 82.78% 84.12% 83.27% 82.76% 83.23% 84.82% WACLTV 92.66% 92.69% 93.20% 93.56% 92.75% 90.93% WADTI 40.89% 42.93% 42.82% 43.11% 43.39% 43.87% CALIFORNIA 45.89% 38.76% 33.81% 23.95% 18.93% 18.91% INTEREST ONLY 31.25% 45.14% 51.11% 27.32% 15.44% 4.26% 40 YEAR N/A N/A 0.78% 10.82% 14.22% 13.64% 50 YEAR N/A N/A N/A 16.03% 33.17% 43.44% 40 /50 / IO 31.25% 45.14% 51.89% 54.17% 62.83% 61.34% PURCHASE 68.64% 66.17% 68.22% 69.23% 64.73% 54.75% RAPID REFI 1.14% 6.43% 10.57% 7.47% 11.14% 16.79% FULL DOC 91.59% 83.05% 67.65% 64.81% 66.06% 74.48% STATED 4.41% 2.63% 17.13% 25.90% 20.97% 7.04% NOO 2.78% 2.62% 2.13% 2.50% 3.09% 3.79% 2ND LIEN 9.93% 8.79% 10.11% 10.06% 9.75% 6.35% FTHB* N/A N/A N/A 34.89% 32.54% 26.40% OWNER OCC. 96.82% 96.90% 97.31% 96.98% 96.54% 95.73% * FTHB - First-Time Home Buyer (LOGO) 9
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW SIGNIFICANT GUIDELINE AND PRICING CHANGES INTRODUCED YEAR-TO-DATE (PERFORMANCE GRAPH) [Download Table] Apps Locks Funding Apps Vol Count Locks Vol Count Funding Vol Count ------------- ----- ------------- ----- ----------- ------- 1/5/2007 535,306,325 3,152 385,867,577 2,383 224,097,713 1,446 1/12/2007 881,153,098 5,158 628,008,786 3,771 369,030,431 2,309 1/19/2007 850,149,643 4,897 562,038,113 3,416 320,786,862 1,970 1/26/2007 1,048,159,464 5,985 831,889,563 4,987 420,716,942 2,698 2/2/2007 895,871,139 5,242 748,647,795 4,724 631,830,997 3,836 2/9/2007 931,602,599 5,496 602,645,794 3,673 337,495,305 2,180 2/16/2007 950,942,373 5,598 685,492,942 4,236 452,113,244 2,740 2/23/2007 949,914,232 5,578 710,712,692 4,252 368,364,279 2,464 3/2/2007 932,309,124 5,708 732,322,662 4,763 660,983,302 4,250 3/9/2007 1,091,394,517 6,043 873,965,522 5,032 357,956,489 2,316 3/16/2007 1,267,802,058 6,878 901,630,675 5,086 444,572,604 2,825 3/23/2007 1,319,184,739 6,986 1,119,299,079 6,123 457,892,982 2,856 3/30/2007 932,015,201 5,049 760,041,203 4,189 885,526,377 5,247 4/6/2007 688,807,696 3,634 518,789,274 2,842 248,712,122 1,437 4/13/2007 975,863,309 4,956 628,978,121 3,354 405,895,396 2,339 4/20/2007 872,327,836 4,501 595,828,580 3,151 417,368,573 2,392 4/27/2007 856,281,647 4,376 703,595,439 3,650 453,186,596 2,542 5/4/2007 767,852,931 3,925 576,500,714 3,024 507,379,244 2,784 5/11/2007 835,657,241 4,106 614,539,074 3,021 298,088,352 1,628 Volume impact typically lags product change announcement by 45-60 days (LOGO) 10
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW PRODUCTION CUTS [Enlarge/Download Table] Product Terminated Rationale ------------------ --------- Mar. 2007 - Less than 620 FICO for LTV>95% and all combos - Credit Risk for full/rapid/blended - Stated Doc Loans with LTV>95% and all combos - Credit Risk - Stated and Stated Plus loans >90%LTV with - Credit Risk less than 18 months of 0x30 - FTHB 100% Stated - Credit Risk - 3 Tradelines rated 6 months each with 1 - Credit Risk opened for more than 24 months required for all LTV/CLTVs Feb. 2007 - Interest Only qualifying on non-amortizing - Federal regulatory guidance (borrowers now payment qualified at principal and the fully-indexed interest rate and margin) - Interest Only Loans qualifying at IO payment at note rate Jan. 2007 - Stated and FTHB increased Source and - Credit Risk Seasoning - No less than $50,000 original loan balance - Loss Severity Dec. 2006 - Less than 60 day seasoned/sourced reserves - Credit Risk for stated doc wages Aug. 2006 - HELOC - Insufficient market demand - 103% Mortgage with 3% for Closing Costs - Insufficient market demand - 580-619 FICO to 100% ARMS - Credit Risk; Lack of Performance Mar. 2006 - 580 to 100% Combos - Credit Risk; Lack of Performance (LOGO) 11
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW PRODUCTS LAUNCHED [Enlarge/Download Table] Product Launched Description ---------------- ----------- Sept. 2006 - Temporary Buydowns - Seller contributions subsidizing payments for first 2 years. Aug. 2006 - 40-year Second Liens - Able to piggyback with 40 or 50 year first liens. - Lite Credit - Allows minimal tradelines with no derogatory credit. June 2006 - Best Score - Uses co-borrower score with joint household financial history. May 2006 - 50 Year Loan - 50 year amortization with balloon at year 30. Feb. 2006 - Rapid Purchase - Streamlined documentation with 18 month mortgage history. Jan. 2006 - No Prepayment Penalty Pilot - Lower margin and no PPP for high quality borrowers. Dec. 2005 - Non-Traditional Credit (ANTHEM) Pilot - Requires FICO but substitutes Anthem score for limited tradelines. Nov. 2005 - 40 Year Loan - 40 year amortization with balloon at year 30. Sept. 2005 - Non-Owner Occupied DA Enhancements - Increase loan amounts July 2005 - 100% 3-4 Units Pilot - NY and Boston branches May 2005 - HELOC Behind Interest Only - Changed policy to allow HELOC behind IO first lien. - Interest Only on NIV - Allowed IO on stated product. - Interest Only on Rapid Refi - Allowed IO on streamlined product up to 90% LTV. - NIV Second Liens - Introduced stated second liens to piggyback with stated first leins. (LOGO) 12
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW CHANGES IN PRODUCT MIX AND EXPECTATIONS GOING FORWARD Stated Doc: 2/3 Reduction Since '06 [Download Table] FULL-YEAR-06 23% MAY FORWARD PROJECTIONS 9% 2nd Lien: Over 50% Reduction Since '06 [Download Table] FULL-YEAR-06 11% MAY FORWARD PROJECTIONS 5% Purchase: Key Focus with Less as a Percentage Overall [Download Table] FULL-YEAR-06 69% MAY FORWARD PROJECTIONS 45% Rapid Refi: 3 Times More than '06 [Download Table] FULL-YEAR -06 7% MAY FORWARD PROJECTIONS 22% (LOGO) 13
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW Full and Stated Income Product Migration GUIDELINE AND PRICING REVISIONS TO STATED INCOME AND 100% LTV/CLTV - DRAMATIC REDUCTION IN 100% LTV/CLTV OVERALL (PERFORMANCE GRAPH) [Download Table] 2006 JAN-07 FEB-07 MAR-07 APR-07 MAY ONWARDS ----- ------ ------ ------ ------ ----------- Stated 100% 21.50% 20.40% 16.44% 12.69% 2.92% Full and Ltd Doc 100% 41.91% 37.81% 39.53% 39.33% 32.81% 31.06% Stated w/ Equity 4.40% 5.04% 4.09% 4.90% 4.13% 6.96% Full and Ltd Doc w/ Equity 32.19% 36.74% 39.93% 43.07% 60.14% 61.98% (LOGO) 14
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(FIRST FRANKLIN(R) LOGO) PRODUCT OVERVIEW 4TH CONSECUTIVE MONTH OF DECREASING FIRST PAYMENT DEFAULTS; WELL BELOW INDUSTRY HIGHLIGHTS: - FPDs have exceeded our internal target of 1%. - Tightly managed and integrated process with Home Loan Services - Corrective action plan for any branch >1% for rolling 90 days and adjusted compensation for FPDs - Maintain high profile metric for both FF and HLS - 100% of all First Payment Defaults are Audited FIRST PAYMENT DEFAULT TRENDS 18 MONTHS (PERFORMANCE GRAPH) [Download Table] % of % Without Month Number Num of Defaults Originations Hurricane Defaults ------ ------ --------------- ------------ ------------------ Nov-05 17,330 132 0.76% 0.59% Dec-05 16,477 140 0.85% 0.82% Jan-06 14,062 111 0.79% 0.00% Feb-06 14,806 110 0.74% 0.00% Mar-06 11,641 116 1.00% 0.00% Apr-06 12,372 123 0.99% 0.00% May-06 13,915 161 1.16% 0.00% Jun-06 13,048 117 0.90% 0.00% Jul-06 15,753 205 1.30% 0.00% Aug-06 17,990 212 1.18% 0.00% Sep-06 17,697 231 1.31% 0.00% Oct-06 19,153 239 1.25% 0.00% Nov-06 16,351 254 1.55% 0.00% Dec-06 17,603 289 1.64% 0.00% Jan-07 15,666 230 1.47% 0.00% Feb-07 15,092 209 1.38% 0.00% Mar-07 11,555 145 1.25% 0.00% APR-07 11,667 131 1.12% 0.00% (LOGO) 15
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(LOGO) (FIRST FRANKLIN(R) LOGO) 3. UNDERWRITING GUIDELINES/ RISK MANAGEMENT
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT HIGHLIGHTS OF UNDERWRITING, APPRAISAL, AND ASSET QUALITY PROCESS - 100% credit underwriting performed prior to funding - 100% loan by loan fraud prevention due diligence - 100% automated underwriting to leverage technology and mitigate risk - Escalated appraisal and collateral review process - Decentralized underwriting and centralized post-funding Quality Control ("QC")/Asset Quality ("AQ") process - Production/sales compensation directly impacted by QC/AQ and loan performance results - Responsible lending policy and bank regulatory compliance oversight - Additional emphasis on post securitization settlement QC efforts (LOGO) 17
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT ROBUST REGULATORY RISK AND COMPLIANCE CULTURE WITH OVERSIGHT BY THE OTS STRICT POLICIES AND OVERSIGHT - REGULATED BY THE OTS, oversight and examinations are performed on a regular basis STRONG RESPONSIBLE LENDING POLICY FOR YEARS - DO NOT SELL INSURANCE - Interest RATES DO NOT INCREASE upon default - PREPAYMENT PENALTIES ARE LIMITED to 3 years - Broker compensation is capped at 5% - NO NEGATIVE AMORTIZATION provision in our Core DA loans - We do not offer SHORT TERM BALLOON payment loans (less than 5 years) - WE DO NOT ORIGINATE HIGH COST LOANS as defined by federal or applicable state rules - We cap the amount of FEES AND POINTS THAT CAN BE FINANCED INTO THE LOAN - We do not include MANDATORY ARBITRATION clauses TANGIBLE NET BENEFIT TEST FOR ALL REFINANCES The borrower situation and loan terms are reviewed to ensure BORROWER BENEFIT is evident (LOGO) 18
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT MEANINGFUL FEEDBACK LOOPS ARE BUILT INTO OUR PROCESS TO MANAGE RISK AND QUALITY (FLOWCHART) (LOGO) 19
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT Asset Quality Program ASSET QUALITY - UPFRONT, CENTRALIZED SAMPLING PROGRAM - Post Funding Audits - Non Prime Audit = 5% audit of the underwriting guidelines, calculations and process - Broker on Watch = 100% audit of all funded loans when broker is on watch - Pilot Audits - Approved statistical selection model - Utilizes past quarters initial critical errors to determine statistical audit selection number - 5% of each production office or a minimum of 10 loans per audit period selected - All funded loans are available for selection - Consistent selection process ASSET QUALITY CONTROL - Management's compensation is reduced if greater than 10% of the files reviewed have critical errors. - Critical errors include but are not limited to guideline exceptions without appropriate approval or delegation authority, assets not verified, income not documented properly, etc. AQ Audit Trend 2006-2007 YTD (PERFORMANCE GRAPH) [Download Table] Jan '06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb '07 ------- --- --- --- --- --- --- --- --- --- --- --- --- ------- 2006 12% 14% 11% 8% 10% 6% 10% 8% 9% 9% 9% 10% 9% 11% (LOGO) 20
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT DILIGENT BROKER MONITORING AND A STRINGENT APPROVAL PROCESS USING THIRD PARTY INFORMATION (FLOWCHART) (LOGO) 21
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(FIRST FRANKLIN(R) LOGO) UNDERWRITING GUIDELINES/ RISK MANAGEMENT BROKER AND BRANCH QUALITY CONTROL - Training and field management initiatives include: - In addition to the changes to guidelines we also implemented changes to field management compensation for any branch that has an FPD rate greater then 1%. - All branches have recommended corrective action plans with goal of maximum 1% FPD rate - Created training module for stated borrowers - Refresher training on use of our collateral quality tools: LoanSafe(TM), IdentityPro and GEO AVMs(TM) - Updated training module for underwriting income: Full Doc and bank statements. - Created training module for understanding assets and reserves. BROKER MANAGEMENT - 26 STAFF - Nearly 1,500 brokers rejected with approximately 250 on watch (Over 60,000 terminated since 2000). - Pre-screening of new brokers prior to accepting broker applications - Ongoing monitoring of current brokers through MARI - Annual re-certification of active brokers through Firstline Data - Brokers placed on watch due to suspicious activity or industry alerts - additional due diligence is required & 100% of loans are audited by AQ BROKER SURVEILLANCE (PERFORMANCE GRAPH) [Download Table] 1 2 ----- ---- Funding Status 25448 834 Non Funding Status 62587 1473 - We have the following statuses: FUNDING STATUS - Approved (A) - Certain brokers in APPROVED status may have a WATCH flag - Interim Approved (I) NON FUNDING STATUS - Denied (D) - Terminated (T) - Rejected (R) - Database has been in existence since 1996 - If a BROKER was ever on 'WATCH', the reasons for watch are ALWAYS MAINTAINED to keep us ALERTED (LOGO) 22
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(LOGO) (FIRST FRANKLIN(R) LOGO) 4. FFMER SECURITIZATION PROGRAM
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(FIRST FRANKLIN(R) LOGO) FFMER SECURITIZATION PROGRAM SECURITIZATION STRATEGY - 100% of loans fully credit underwritten prior to funding at the local offices by an appropriately delegated underwriter - Current EPD and repurchase reserve levels expected to be maintained at same levels - Loans originated and sold into the trust with zero seasoning - No delinquent loans included - Will track all repurchase activity on trustee reports SECURITIZATION PROGRAMS - FFMER 2007-#: 1st lien Core program - FFMER 2007-X: 2nd lien Core program - FFMER 2007-H# - 1st lien HLTV program - FFMER 2007-A#: 1st and 2nd lien Alt A Program - FFMER 2007-SD#: Scratch and Dent Program SECURITIZATION TIMELINES - 1ST LIEN EXAMPLE - Provide indicative tape Mar 15th - Receive loss coverage & enhancement levels Mar 22nd - Finalize structure & Rating Agency signoff Mar 29th - Market transaction April 1st - Provide final tape April 20th - Settle Securitization April 27th - First Franklin will deliver final tape consistent in all material respects to the indicative tape SECURITIZATION CONTACTS - Trustees - Wells Fargo - www.ctslink.com - Deutsche Bank - http://www.tss.db.com - LaSalle Bank - http://www.etrustee.net - US Bank - https://trustinvestorreporting.usbank.com - FFML Monitor - Access thru www.mlx.ml.com - ABSInvestor-http://wholeloand.worldnet.ml.com/absinvestor (LOGO) 24
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(LOGO) (FIRST FRANKLIN(R) LOGO) 4. HOME LOAN SERVICES
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES PARTNERSHIP WITH FIRST FRANKLIN AND NATIONPOINT (FLOWCHART) (LOGO) 26
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES AGENCY RATINGS [Download Table] 2004 2005 2006 ---------- ---------- ----------- MOODY'S RATINGS (2007 REVIEW 5/07) Primary Servicer (Subprime) SQ2 SQ2+ SQ1- Primary Servicer (Prime) -- -- SQ2 Primary Servicer (Second Liens) SQ2 SQ2 SQ2 Special Servicer SQ3 SQ2- SQ2+ FITCHRATINGS (2007 REVIEW 4/07) Primary Servicer (Alt-A) RSP2- RSP2- RSP2 Primary Servicer (Subprime) RSP2- RSP2- RSP2 Special Servicer RSS3+ RSS3+ RSS2- S&P RATINGS (REAFFIRMED 10/05 - 2006 SITE REVIEW 10/06) Residential Subprime Mortgage Servicer Above Avg. Above Avg. In Progress Alternative Residential Mortgage Servicer Above Avg. Above Avg. In Progress Residential Prime Mortgage Servicer* -- -- In Progress * Added to S&P Approved List of Residential Mortgage Servicers for Prime/Alt-A - 1/07 (LOGO) 27
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES SERVICING LEVERS OF DIFFERENTIATION LOAN BOARDING - Loans boarded electronically within 48 hours of closing by First Franklin and ready to service COLLECTION PHILOSOPHY - Employ integrated collection approach featuring behavioral prioritization of delinquent accounts and seamless partnership with Loss Mitigation EARLY INTERVENTION - Loan modifications with low re-default rates, ARM payment shock program that centers on borrower contact and counseling, Pre-Foreclosure sales and Cross Selling to reduce expenses and increase income DEFAULT MANAGEMENT - Strong default time-line management to control costs and loss severity RISK MANAGEMENT AND CONTROLS - Culture of compliance BORROWER FOCUS - High call center service standards and a focus on listening to the borrower and tracking concerns ENGAGED WORKFORCE - Robust training programs for both new hires and current staff and turnover well below industry average MANAGED GROWTH - Focus on forecasting to avoid surprises and enable company to stay ahead of servicing growth SYSTEM FLEXIBILITY AND RELIABILITY - Status as remote Fidelity MSP client limits any servicing system capability concerns COST MANAGEMENT - Success with controlling cost to service over time (LOGO) 28
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES HLS IMPACT ON FIRST / EARLY PAYMENT DEFAULTS - All loans due for first contractual payment are managed by the First Payment Default team. - All loans that miss payments within the first 90 days are managed by the Early Payment Default team. (FLOWCHART) (LOGO) 29
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES DEFAULT TIMELINE (FLOWCHART) (LOGO) 30
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES LOSS MITIGATION EARLY INTERVENTION ARM SHOCK - Automated system identification to help recognize customers experiencing ARM shock - Proactive call campaigns prior to ARM reset - Letter campaigns offering assistance on 30+ delinquent ARM reset loans - Multiple modification options available CROSS SELLING - Counseling ideas offered to help retain home ownership through reducing expenses and increasing income - Repayment plans designed to build pay history before completing a modification - Counsel to market property if home ownership is not financially feasible LOAN MODIFICATIONS - Low re-default rate - - 60+ delinquent loans modified in the past 12 months = 13% - 60+ delinquent loans modified since program inception (2001) = 18% - Offer a multitude of modification products: - Extend fixed period before next ARM adjustment - 40 year modification - Interest only modification - Add another co-signor to strengthen the loan - Modify long term repayment plans - Maximize cash flow for investor PRE-FORECLOSURE SALES - Track delinquent properties for sale to ensure marketing efforts are strong and pricing is appropriate based on FMV - Work with customers through redemption period to avoid losses to the trust - Negotiate strongest net proceeds and closing costs to decrease losses (LOGO) 31
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES RESULTS OF LOSS MITIGATION EFFORTS LOSS MITIGATION ROLLING 12-MONTH CLOSING RESULTS (PERFORMANCE GRAPH) [Enlarge/Download Table] May Jun Jul Aug Sep Oct Nov Dec Jan Feb March April ----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ----- ----- Presales 92 101 101 102 136 130 140 176 179 180 270 236 Modifications 87 66 57 87 89 113 88 85 101 84 79 103 Completed Plans 321 279 193 187 127 210 206 230 291 272 345 235 Total Loss Mit Efforts 500 446 351 376 352 453 434 491 571 536 694 574 Workout Ratio 74.11% 73.30% 63.48% 59.97% 53.57% 59.76% 55.26% 59.08% 54.49% 54.85% 56.94% 53.22% Delinquency 60+ 6357 6909 7070 7748 8422 8690 9,013 9,068 9,389 11,401 Fannie Mae Workout Ratio Definition: (Completed Repay Plans + Presales + Modifications + Deeds) Divided by (Completed Repay Plans + Presales + Modifications minus Deeds + REO Ins) (LOGO) 32
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES LOSS SEVERITY SERVICED FOR NATIONAL CITY HLS ALL-IN SEVERITY BY TYPE BY QUARTER (PERFORMANCE GRAPH) [Enlarge/Download Table] 01-03 02-03 03-03 04-03 01-04 02-04 03-04 04-04 01-05 02-05 03-05 04-05 01-06 02-06 03-06 04-06 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- REO 18.2% 22.2% 24.4% 27.4% 23.8% 23.6% 25.9% 26.3% 25.0% 24.0% 23.1% 25.3% 24.5% 23.5% 23.5% 24.4% 3RD PARTY 5.5% 2.8% 6.6% 7.1% 7.9% 7.0% 6.4% 6.1% 7.6% 7.1% 6.7% 4.6% 3.8% 9.2% 4.4% 4.5% PRESALES 8.9% 7.7% 6.5% 11.6% 8.8% 12.2% 10.4% 9.3% 12.1% 12.2% 11.0% 9.2% 10.3% 13.0% 9.3% 11.0% ALL TYPES 12.9% 13.0% 14.3% 17.9% 14.5% 16.4% 17.2% 17.4% 18.5% 17.7% 17.0% 17.2% 17.4% 16.8% 17.3% 16.6% SERVICED FOR SECURITIZATION TRUSTS SERVICING BOOK ALL IN SEVERITY BY TYPE BY QUARTER (PERFORMANCE GRAPH) [Download Table] 03-05 04-05 01-06 02-06 03-06 04-06 01-07 ----- ----- ----- ----- ----- ----- ----- 1sts - REO 36.7% 42.1% 34.8% 28.4% 30.5% 1sts - PRESALE 15.8% 20.5% 18.8% 19.1% 21.6% 22.4% 1sts - 3rd Party Sales 21.6% 28.2% 32.5% 29.2% 2nds - Full Charge 100.5% 103.7% 103.7% 104.1% 104.2% 104.0% 106.9% 2nds - PRESALE 68.5% 45.6% 68.7% 56.7% 65.5% 76.5% 67.5% - The term "all in" refers to principal loss plus all expenses related to the liquidation of the property, as well as lost interest on the securitized portfolio. (i.e. the total loss taken divided by the balance at foreclosure). - Segregated severity calculations for the NCC portfolio end 4th quarter 2006. That calculation was driven by NCC management to conform timing of loss to banking regulations. All loss tracking is now based upon net proceeds at disposition. (LOGO) 33
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES SERVICING STATISTICS ACCOUNTS SERVICE PERIOD END (PERFORMANCE GRAPH) [Download Table] 2007 2003 2004 2005 2006 (Forecast) ------- ------- ------- ------- ---------- Interim 32,301 20,738 15,571 16,421 15,824 Permanent 121,211 159,142 258,940 341,151 383,907 Alt-A 15,661 HEADCOUNT GROWTH THROUGH 2007 (CHART) OUTSTANDINGS SERVICED ($000S) PERIOD END (PERFORMANCE GRAPH) [Download Table] 2007 2003 2004 2005 2006 (Forecast) ---------- ---------- ---------- ---------- ---------- Interim 3,828,203 2,782,850 2,469,559 2,700,955 2,511,907 Permanent 14,546,858 20,198,668 35,104,018 46,812,831 52,014,144 Alt-A 508,201 - As of 4/30/07, HLS serviced 378,141 accounts for $53.3 billion of which $38.9 billion was serviced for securitizations; $7.9 billion for National City; $3.5 billion for First Franklin balance sheet and the remainder for other investors. - HLS has been servicing FFMLT Shelf since December, 2004. - 2007 and beyond: HLS will continue to service originations of First Franklin and NationPoint. Wilshire Credit Corporation will service MLMI and SURF originations. (LOGO) 34
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES RATE SHOCK TRENDS RATE SHOCK TRENDING - INITIAL ADJUSTMENTS (INCLUDES CURRENT LOANS) (ALL SERVICED AS OF MARCH 2007) *excludes Interim Servicing (PERFORMANCE GRAPH) [Enlarge/Download Table] RESET PERIOD BY QTR --------------------------------------------------------------------------------------------------------- % OF PAYMENT CHARGE 1 2007 2 2007 3 2007 4 2007 1 2008 2 2008 3 2008 4 2008 1 2009 2 2009 3 2009 4 2009 ------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Avg. % of Pmt_Change 34.0% 34.1% 39.4% 33.7% 31.8% 30.8% 33.3% 33.0% 29.7% 28.8% 28.2% 27.8% % of Rate Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Avg. Pmt Change Amt $ 391 $ 361 $ 448 $ 447 $ 436 $ 415 $ 428 $ 390 $ 359 $ 351 $ 359 $ 329 (LOGO) 35
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES STAFFING GROWTH TRAJECTORY (PERFORMANCE GRAPH) [Download Table] Headcount # of Accounts --------- ------------- 12/31/2003 443 153,512 12/31/2004 384 179,880 12/31/2005 525 274,511 12/31/2006 697 357,572 12/31/2007 1024 462,797 (LOGO) 36
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(FIRST FRANKLIN(R) LOGO) HOME LOAN SERVICES LOW TURNOVER COMPARED TO THE INDUSTRY (PERFORMANCE GRAPH) [Download Table] 2002 2003 2004 2005 2006 ----- ----- ----- ----- ----- HLS 14.56% 14.56% 17.61% 14.90% 19.41% Industry Average 25% (LOGO) 37
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(FIRST FRANKLIN(R) LOGO) DISCLAIMER The depositor has filed a registration statement (including a prospectus) with the SEC (File no. 333-140436) for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus when it is available if you request it by calling the toll-free number at 1-800-248-3580. The information in this free writing prospectus, if conveyed prior to the time of your commitment to purchase, supersedes any inconsistent information contained in any prior similar free writing prospectus relating to these securities. Numerous assumptions were used in preparing the Free Writing Prospectus which may or may not be stated therein. The Free Writing Prospectus should not be construed as either projections or predictions or as legal, tax, financial or accounting advice. In addition, it is possible that prepayments on the underlying assets will occur at rates slower or faster than the rates assumed in the Free Writing Prospectus. Furthermore, unless otherwise provided, the Free Writing Prospectus assumes no losses on the underlying assets and no interest shortfall. The specific characteristics of the securities may differ from those shown in the Free Writing Prospectus due to differences between the actual underlying assets and the hypothetical assets used in preparing the Free Writing Prospectus. This communication shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of the securities discussed in this Free Writing Prospectus in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Please be advised that asset-backed securities may not be appropriate for all investors. Potential investors must be willing to assume, among other things, market price volatility, prepayments, yield curve and interest rate risk. Investors should fully consider the risk of an investment in these securities. Merrill Lynch prohibits (a) employees from, directly or indirectly, offering a favorable research rating or specific price target, or offering to change such rating or price target, as consideration or inducement for the receipt of business or for compensation, and (b) Research Analysts from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit investor clients. (LOGO) 38

Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This FWP Filing   Date First   Last      Other Filings
12/30/064
Corrected On6/11/07
Filed On / Filed As Of6/12/07
 
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