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Wells Fargo Asset Securities Corp · 424B5 · Wells Fargo Home Equity Asset-Backed Securities 2005-1 Trust · On 6/29/05

Filed On 6/29/05 10:30am ET   ·   SEC Files 333-121654, -01   ·   Accession Number 1193125-5-134146

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 6/29/05  Wells Fargo Asset Securities Corp 424B5                  1:411  Wells Fargo Home Equity As..Trust 1193125

Prospectus   ·   Rule 424(b)(5)
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  WFHET 2005-1  

PROSPECTUS SUPPLEMENT

(To Prospectus Dated June 27, 2005)

Picture -- LOGO

 

Wells Fargo Home Equity Asset-Backed Securities 2005-1 Trust

Issuer

Picture -- LOGO

Depositor

$1,228,372,000

(Approximate)

Home Equity Asset-Backed Certificates, Series 2005-1

Principal and interest payable monthly, commencing in July 2005

 

You should carefully con
sider the risk factors be
ginning on page S-15 of
this prospectus supple
ment and on page 10 in
the accompanying pro
spectus.

 

Neither the offered certifi
cates nor the underlying
mortgage loans are insured
or guaranteed by any gov
ernmental agency or in
strumentality or any other
entity.

 

The offered certificates
represent interests in the
trust only and will not
represent interests in or
obligations of the depos
itor, any affiliate of the
depositor or any other
person.

 

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

 

 

The Trust Will Issue—

•   Three classes of senior Class A Certificates.
•   Fourteen classes of Class M Certificates, all of which are subordinated to, and
provide credit enhancement for, the Class A Certificates. Each class of Class M
Certificates is also subordinated to each class of Class M Certificates, if any,
with a lower number.

•   The Class CE Certificates, which are subordinated to the Class A and Class M
Certificates.

•   The Class P Certificates.
•   The Class R Certificates.

The classes of offered certificates are listed under the heading “Offered Certifi
cates”
in the table beginning on page S-5.

The Assets of the Trust Will Include—

•   Two loan groups of first lien residential mortgage loans. The mortgage loans will
consist of subprime, conventional fixed rate and adjustable rate mortgage loans.

Credit Enhancement Will Consist of—

•   Excess Interest – Certain excess interest received from the mortgage loans will
be used to cover losses.

•   Overcollateralization – As of the cut-off date, the assets of the trust will exceed
the aggregate principal balance of the certificates, which excess is referred to
as overcollateralization. Certain excess interest received from the mortgage
loans may also be applied as payments of principal on the certificates to main
tain a required level of overcollateralization.

•   Subordination – The subordinated certificates are subordinate in right of cer
tain payments to the senior certificates and to those classes of subordinated
certificates higher in order of payment priority.

•   Cross-Collateralization – Under certain circumstances, payments on the mort
gage loans in one loan group may be used to make certain distributions to
holders of senior certificates relating to the other loan group.

 

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

 

The underwriter will purchase the offered certificates from the depositor and will offer them to investors at varying prices to be determined at the time of sale. The offered certificates will be available for delivery to investors on or about June 29, 2005. Total proceeds to the depositor for the offered certificates will be approximately $1,262,152,230, plus applicable accrued interest, before deducting expenses estimated at $1,010,000.

 

Citigroup

 

The date of this prospectus supplement is June 27, 2005.

 

 

 


TABLE OF CONTENTS

 

     Page

SUMMARY INFORMATION

   S-7

RISK FACTORS

   S-15

Nature of subprime mortgage loans may increase risk of loss

   S-15

Prepayments may adversely affect yield

   S-15

There are risks relating to alternatives to foreclosure

   S-16

There is a risk that interest payments on the mortgage loans may be insufficient to maintain overcollateralization

   S-16

Effects of mortgage interest rates and other factors on the pass-through rates of the offered certificates

   S-17

There are risks relating to second lien mortgage loans

   S-17

There are risks in holding subordinated certificates

   S-18

There are additional risks in holding the Class AI-1B Certificates

   S-18

There is a risk that interest payments on the mortgage loans may be insufficient to pay interest on your certificates

   S-19

High loan-to-value ratios increase risk of loss

   S-19

There is a risk relating to the potential inadequacy of credit enhancement for the offered certificates

   S-19

Coverage under lender-paid primary mortgage insurance policies will be lost if Wells Fargo Bank, N.A. does not pay premiums

   S-19

The yield maintenance agreements are subject to counterparty risk

   S-20

There is a risk that there may be a delay in receipt of liquidation proceeds, and that liquidation proceeds may be less than the outstanding balance of the mortgage loan

   S-20

Geographic concentration may increase risk of loss because of adverse economic conditions or natural disasters

   S-20

Class M Certificates provide subordination for both certificate groups

   S-20

There are risks relating to balloon loans

   S-21

Violations of federal, state and local laws may cause losses on your certificates

   S-21

Rights of beneficial owners may be limited by book-entry system for certain classes of certificates

   S-21

Certificates may not be appropriate for certain individual investors

   S-22

United States military operations may increase risk of shortfalls in interest

   S-22

FORWARD LOOKING STATEMENTS

   S-23

DESCRIPTION OF THE CERTIFICATES

   S-23

General

   S-23

Allocation of Available Funds

   S-23

Interest Distributions

   S-24

Principal Distributions

   S-26

Allocation of Losses

   S-35

Application of Monthly Excess Cashflow Amounts

   S-36

Pass-Through Rates

   S-41

The Yield Maintenance Agreements

   S-42

Reserve Accounts

   S-44

DESCRIPTION OF THE MORTGAGE LOANS

   S-45

General

   S-45

Indexes

   S-46

Mortgage Loan Data Appearing in Appendix A

   S-47

Mortgage Loan Underwriting

   S-49

Mandatory Repurchase or Substitution of Mortgage Loans

   S-49

Optional Purchase or Substitution of Mortgage Loans

   S-49

PREPAYMENT AND YIELD CONSIDERATIONS

   S-49

Final Scheduled Distribution Dates

   S-55

WELLS FARGO BANK

   S-55

THE POOLING AND SERVICING AGREEMENT

   S-55

General

   S-55

Distributions

   S-56

Voting Interests

   S-56

The Trustee

   S-56

The Securities Administrator

   S-57

Custodian

   S-57

The Credit Risk Manager

   S-57

Optional Termination

   S-57

Amendment

   S-58

SERVICING OF THE MORTGAGE LOANS

   S-58

Servicing Compensation and Payment of Expenses

   S-58

DELINQUENCY, FORECLOSURE AND REO EXPERIENCE

   S-58

 

S-2


CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES

   S-59

General

   S-59

Taxation of Regular Interests

   S-59

Taxation of the Basis Risk Arrangements

   S-60

REMIC Taxes and Reporting

   S-61

ERISA CONSIDERATIONS

   S-61

LEGAL INVESTMENT

   S-62

SECONDARY MARKET

   S-62

UNDERWRITING

   S-62

LEGAL MATTERS

   S-63

USE OF PROCEEDS

   S-63

RATINGS

   S-63

INDEX OF SIGNIFICANT PROSPECTUS SUPPLEMENT DEFINITIONS

   S-64

Appendix A – Mortgage Loan Statistical Tables...

   A-1

Appendix B – Decrement Tables

   B-1

Appendix C – Assumed Mortgage Loan Characteristics

   C-1

Appendix D – Final Scheduled Distribution Dates

   D-1

ANNEX I –LOWER STRIKE RATE, UPPER STRIKE RATE AND NOTIONAL AMOUNT SCHEDULE

   I-1

 

S-3


IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS

PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS

 

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

 

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

 

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

 

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

 

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

 

You can find a listing of the pages where capitalized terms used in this prospectus supplement and the accompanying prospectus are defined under the caption “Index of Significant Prospectus Supplement Definitions” beginning on page S-64 in this document and under the caption “Index of Significant Definitions” beginning on page 124 in the accompanying prospectus. Any capitalized terms used but not defined in this prospectus supplement have the meanings assigned in the prospectus.

 

S-4


THE WFHET SERIES 2005-1 CERTIFICATES

 

                        Initial Ratings of Offered
Certificates(3)


              

Class


   Initial Principal
Balance(1)


   Pass-
Through
Rate


 

Principal Types(2)


  

Interest Types(2)


   S&P

   Moody’s

   Fitch

   Original
Form(4)


   Minimum
Denomination(5)


   Incremental
Denomination(5)


Offered
Certificates


                                                

AI-1A

   $ 532,610,000    (6)  

Senior, Pass-Through / Sequential Pay(7)

  

Floating Rate

   AAA    Aaa    AAA    BE    $ 25,000    $ 1,000

AI-1B

   $ 133,153,000    (6)  

Senior, Pass-Through / Sequential Pay(7)

  

Floating Rate

   AAA    Aaa    AAA    BE    $ 25,000    $ 1,000

AII-1

   $ 385,512,000    (6)  

Senior, Pass-Through

  

Floating Rate

   AAA    Aaa    AAA    BE    $ 25,000    $ 1,000

M-1

   $ 32,028,000    (6)  

Subordinated

  

Floating Rate

   AA+    Aa1    AA+    BE    $ 25,000    $ 1,000

M-2

   $ 30,145,000    (6)  

Subordinated

  

Floating Rate

   AA+    Aa2    AA+    BE    $ 25,000    $ 1,000

M-3

   $ 18,212,000    (6)  

Subordinated

  

Floating Rate

   AA    Aa3    AA    BE    $ 25,000    $ 1,000

M-4

   $ 15,700,000    (6)  

Subordinated

  

Floating Rate

   AA    A1    AA    BE    $ 25,000    $ 1,000

M-5

   $ 14,444,000    (6)  

Subordinated

  

Floating Rate

   AA-    A2    AA-    BE    $ 25,000    $ 1,000

M-6

   $ 12,560,000    (6)  

Subordinated

  

Floating Rate

   A+    A3    A+    BE    $ 25,000    $ 1,000

M-7

   $ 12,560,000    (6)  

Subordinated

  

Floating Rate

   A    Baa1    A    BE    $ 25,000    $ 1,000

M-8

   $ 8,792,000    (6)  

Subordinated

  

Floating Rate

   A-    Baa2    A-    BE    $ 25,000    $ 1,000

M-9

   $ 12,560,000    (6)  

Subordinated

  

Floating Rate

   BBB+    Baa3    BBB+    BE    $ 25,000    $ 1,000

M-10

   $ 12,560,000    (6)  

Subordinated

  

Floating Rate

   BBB    N/A    BBB    BE    $ 25,000    $ 1,000

M-11

   $ 7,536,000    (6)  

Subordinated

  

Floating Rate

   BBB-    N/A    BBB-    BE    $ 25,000    $ 1,000

Non-
Offered
Certificates


                                                

M-12

   $ 9,420,000    (6)  

Subordinated

  

Floating Rate

   N/A    N/A    N/A    N/A      N/A      N/A

M-13

   $ 5,024,000    (6)  

Subordinated

  

Floating Rate

   N/A    N/A    N/A    N/A      N/A      N/A

M-14

   $ 3,768,000    (6)  

Subordinated

  

Floating Rate

   N/A    N/A    N/A    N/A      N/A      N/A

CE

     N/A    N/A  

Subordinated

  

N/A

   N/A    N/A    N/A    N/A      N/A      N/A

P

     N/A    N/A  

N/A

  

N/A

   N/A    N/A    N/A    N/A      N/A      N/A

R

     N/A    N/A  

N/A

  

N/A

   N/A    N/A    N/A    N/A      N/A      N/A

(1) Approximate. The initial principal balances are subject to adjustment as described in this prospectus supplement.

 

(2) See “Description of the Securities—Categories of Classes of Securities” in the prospectus for a description of the principal and interest categories listed.

 

(3) A description of the ratings of the offered certificates is set forth under the headings “Summary Information—Ratings of Certificates” and “Ratings” in this prospectus supplement.

 

(4) See “Description of the Securities—Definitive Form” and “—Book-Entry Form” in the prospectus for a description of the forms of certificates. Book-entry form is designated as “BE” in the table above.

 

S-5


(5) If necessary, in order to aggregate the initial principal balance of a class, one certificate of the class will be issued in an incremental denomination of less than that shown.

 

(6) These certificates will accrue interest at a floating rate equal to (a) on or prior to the optional termination date, one-month LIBOR plus the certificate margins set forth below and (b) after the optional termination date, one-month LIBOR plus the “stepped up” certificate margins set forth below, in each case subject to the applicable maximum rate cap and the applicable group or pool cap, each as described under “Description of the Certificates—Pass-Through Rates” in this prospectus supplement.

 

Class


   Certificate Margin

    Stepped Up Certificate Margin

 

Class AI-1A

   0.220 %   0.440 %

Class AI-1B

   0.280 %   0.560 %

Class AII-1

   0.230 %   0.460 %

Class M-1

   0.410 %   0.615 %

Class M-2

   0.430 %   0.645 %

Class M-3

   0.480 %   0.720 %

Class M-4

   0.610 %   0.915 %

Class M-5

   0.630 %   0.945 %

Class M-6

   0.660 %   0.990 %

Class M-7

   1.050 %   1.575 %

Class M-8

   1.150 %   1.725 %

Class M-9

   1.700 %   2.550 %

Class M-10

   2.500 %   3.750 %

Class M-11

   2.500 %   3.750 %

Class M-12

   2.500 %   3.750 %

Class M-13

   2.500 %   3.750 %

Class M-14

   2.400 %   3.600 %

 

(7) These certificates have the characteristics of a pass-through security; provided, however, on any distribution date on which a sequential trigger event is in effect, these certificates have the characteristics of a sequential pay security.

 

S-6


SUMMARY INFORMATION

 

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

 

RELEVANT PARTIES

 

Issuer

 

Wells Fargo Home Equity Asset-Backed Securities 2005-1 Trust.

 

Depositor

 

Wells Fargo Asset Securities Corporation.

 

Servicer

 

Wells Fargo Bank, N.A.

 

Securities Administrator

 

Wells Fargo Bank, N.A.

 

Trustee

 

HSBC Bank USA, National Association.

 

Custodian

 

Wells Fargo Bank, N.A.

 

Credit Risk Manager

 

The Murrayhill Company.

 

Cap Provider

 

Bear Stearns Financial Products Inc.

 

RATINGS OF CERTIFICATES

 

The trust will not issue the offered certificates unless they have received at least the ratings set forth in the table beginning on page S-5.

 

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

 

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

 

    The ratings do not address the likelihood of the payment of any cap carryover amounts.

 

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

 

DESCRIPTION OF CERTIFICATES

 

The certificates consist of:

 

    the three classes of senior Class A Certificates designated as “Senior” certificates in the table beginning on page S-5;

 

    the fourteen classes of junior Class M Certificates designated as “Subordinated” certificates in the table beginning on page S-5; and

 

    the Class CE, Class P and Class R Certificates.

 

Only the Class A Certificates and the Class M Certificates (other than the Class M-12, Class M-13 and Class M-14 Certificates) are being offered by this prospectus supplement and the accompanying prospectus. The Class M-12, Class M-13, Class M-14, Class CE, Class P and Class R Certificates are not being offered pursuant to this prospectus supplement and the accompanying prospectus. Information provided with respect to the Class M-12, Class M-13, Class M-14, Class CE, Class P and Class R Certificates is included solely to aid your understanding of the offered certificates.

 

See the table beginning on page S-5 for more information with respect to each class of certificates.

 

Cut-off Date

 

June 1, 2005.

 

S-7


Closing Date

 

On or about June 29, 2005.

 

Distribution Dates

 

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

 

Final Scheduled Distribution Dates

 

The final scheduled distribution date, calculated based on certain assumptions, for each class of offered certificates is set forth in the table appearing in Appendix D.

 

Principal Balance of the Certificates

 

The certificates will have an approximate total initial principal balance of $1,246,584,000. Any difference between the total principal balance of the certificates as of the date of issuance of the certificates and the approximate total initial principal balance of the certificates as of the date of this prospectus supplement will not exceed 5% of the total initial principal balance of the certificates. Any such difference will be allocated among the various classes of certificates so as to materially retain the characteristics of the offered certificates described in this prospectus supplement.

 

Form of Certificates; Denominations

 

Your certificates will be issued initially in book-entry form and in the minimum denomination and the incremental denomination set forth in the table beginning on page S-5. The offered certificates are not intended to be directly or indirectly held or beneficially owned by anyone in amounts lower than such minimum denominations.

 

Distributions—General

 

Distributions will be made on each distribution date and will generally include scheduled payments due on the mortgage loans during the related collection period, prepayments (including liquidation proceeds) received by the servicer during the related prepayment period, any advances by the servicer with respect to such distribution date and under certain circumstances, payments received under the yield maintenance agreements. The collection period for any distribution date is the period from the second day of the calendar month preceding the month in which the distribution date occurs through the first day of the calendar month in which the distribution date occurs. The prepayment period for any distribution date is the preceding calendar month.

 

Interest Distributions

 

On each distribution date, you will be entitled to receive interest accrued on your certificate during the related interest accrual period and any interest which you earned previously but which you did not receive. The interest accrual period for the offered certificates is the period from the distribution date in the prior month (or the closing date, in the case of the first distribution date) through the day prior to the current distribution date. Interest will be calculated for the offered certificates on the basis of the actual number of days in the interest accrual period, based on a 360-day year.

 

There are certain circumstances which could reduce the amount of interest to which you are entitled. See “Description of the Certificates—Interest Distributions” in this prospectus supplement.

 

Pass-Through Rates

 

Interest will accrue on the offered certificates during each interest accrual period at the per annum rate for each class equal to the rate set forth and described in the table beginning on page S-5. The amount of interest that accrues on the offered certificates during each interest accrual period will be reduced, to the extent not covered by available excess interest for the applicable distribution date, by such class’s share of certain interest shortfalls arising from the timing of prepayments on the mortgage loans not covered by compensating interest and the application of the Servicemembers Civil Relief Act and comparable state legislation.

 

Principal Distributions

 

On each distribution date, you will receive the distribution of principal to which you are entitled if there are funds available on that date for your class of certificates. You should review the principal entitlements and priority of payments described under “Description of the Certificates—Principal Distributions” in this prospectus supplement.

 

MORTGAGE POOL

 

The assets of the trust are expected to consist of mortgage loans divided into two loan groups of approximately 6,008 mortgage loans in the first loan group with an aggregate unpaid principal balance as

 

S-8


of the cut-off date of approximately $795,416,120 and approximately 1,504 mortgage loans in the second loan group with an aggregate unpaid principal balance as of the cut-off date of approximately $460,588,497. The mortgage loans, which are the source of distributions to holders of the certificates, will consist of conventional, subprime, fixed and adjustable interest rate, monthly pay, one- to four-family, residential first lien mortgage loans. Certain of the mortgage loans are balloon loans.

 

The mortgage loans in the first loan group will consist of mortgage loans with original principal balances that conform to Fannie Mae and Freddie Mac guidelines. The mortgage loans in the second loan group will consist of mortgage loans with original principal balances that may or may not conform to Fannie Mae and Freddie Mac guidelines.

 

The mortgage loans with adjustable interest rates provide for a fixed interest rate during an initial period of approximately one to three years and thereafter provide for adjustments to that interest rate on either an annual or semi-annual basis. The interest rate of each adjustable rate mortgage loan will adjust equal to the sum of an index and a gross margin. Interest rate adjustments will be subject to certain limitations stated in the related mortgage note on increases and decreases for any adjustment date. In addition, interest rate adjustments will be subject to a lifetime rate ceiling and a minimum mortgage interest rate which will be the initial interest rate on the mortgage loan. The indexes applicable to the mortgage loans are described under “Description of the Mortgage Loans—Indexes” in this prospectus supplement.

 

The mortgage loans in the first loan group will be, except to the extent of cross-collateralization payments described herein, the primary source of distributions to the Class AI Certificates and the source of a portion of the distributions to the subordinated certificates. The mortgage loans in the second loan group will be, except to the extent of cross-collateralization payments described herein, the primary source of distributions to the Class AII Certificates and the source of a portion of the distributions to the subordinated certificates.

 

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

 

Changes to Mortgage Pool

 

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

 

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

 

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

 

CREDIT ENHANCEMENT

 

Credit enhancement increases the likelihood that holders of certificates will receive the distributions to which they are entitled. Credit enhancement can reduce the effect of shortfalls in payments received on the mortgage loans on all classes, or it can allocate these shortfalls so they affect some classes before others. This transaction employs the following forms of credit enhancement. See “Description of the Certificates” in this prospectus supplement.

 

Monthly Excess Interest. Because more interest is expected to be paid by the mortgagors than is necessary to pay the interest earned on the certificates, it is expected there will be excess interest each month. The excess interest will be used to maintain overcollateralization, to pay interest that was previously earned but not paid to the certificates and to reimburse the certificates for losses and certain shortfalls that they experienced previously.

 

Overcollateralization. If the total assets in the trust exceed the total principal balance of the certificates, there is overcollateralization available to absorb losses on the mortgage loans before such losses affect the certificates. On the closing date, the total initial principal balance of the mortgage loans will exceed the total initial principal balance of the certificates by approximately $9,420,616. This results in overcollateralization equal to approximately 0.75% of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date. If the level of overcollateralization falls below the targeted overcollateralization amount set forth under “Description of the Certificates—Principal Distributions,” the excess interest described in the previous section will be paid to the Class A and Class M Certificates as principal. This payment will have the effect of reducing the principal balance of the

 

S-9


certificates faster than the unpaid principal balance of the mortgage loans until the required level of overcollateralization is reached.

 

Subordination. On each distribution date, classes that are lower in order of payment priority will not receive payments until the classes that are higher in order of payment priority have been paid. If there are insufficient funds on a distribution date to pay all classes, the subordinate classes are the first to forego payment. In addition, the Class M Certificates are not expected to receive principal distributions until, at the earliest, July 2008 (unless the senior certificates are reduced to zero prior to such date).

 

Credit support for the senior certificates is provided by subordination of the subordinated certificates, and credit support for the subordinated certificates is provided by subordination of subordinated certificates with higher numerical designations, as follows:

 

    Priority    Class A         
    of    (Credit Support 16.30%)         
   

Payment

   Class M-1  

Picture -- LOGO

    
   

Picture -- LOGO

   (Credit Support 13.75%)       
       Class M-2       
       (Credit Support 11.35%)       
       Class M-3       
       (Credit Support 9.90%)       
       Class M-4       
       (Credit Support 8.65%)       
       Class M-5       
       (Credit Support 7.50%)       
       Class M-6       
       (Credit Support 6.50%)       
       Class M-7       
       (Credit Support 5.50%)       
       Class M-8       
       (Credit Support 4.80%)       
       Class M-9       
       (Credit Support 3.80%)         
         Class M-10         
         (Credit Support 2.80%)         
         Class M-11         
         (Credit Support 2.20%)         
         Class M-12         
         (Credit Support 1.45%)         
         Class M-13         
         (Credit Support 1.05%)   Order of     
         Class M-14   Loss     
         (Credit Support 0.75%)   Allocation     

 

The approximate initial credit support percentages set forth in the preceding chart show the sum of (i) the initial principal balance of the class or classes of certificates subordinate to a class or classes and (ii) the initial overcollateralization amount as a percentage of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date.

 

If, on any distribution date after the balances of the certificates have been reduced by the amount of cash paid on that date, the total principal balance of the certificates exceeds the total unpaid principal balance of the mortgage loans, the principal balance of the class or classes of subordinated certificates that are lowest in order of payment priority will be reduced by the amount of such excess. Realized losses will not be allocated directly to the Class A Certificates as reductions of their principal balances until the final distribution date. However, once the credit enhancements described herein are exhausted, the

 

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interest and principal collections on the mortgage loans may not be sufficient to make all required distributions on the Class A Certificates. As a result, these certificates may experience losses. On any date when a sequential trigger event is in effect, the Class AI-1B Certificates will not receive any payments of principal until the principal balance of the Class AI- 1A Certificates has been reduced to zero. This increases the likelihood that the Class AI-1B Certificates will not receive all distributions they are entitled to on any distribution date as a result of realized losses on the mortgage loans in the first loan group and, on the final distribution date, will have their principal balance reduced as a result of such realized losses.

 

Once the principal balance of a class of Class M Certificates is reduced by a realized loss, the principal balance of such class will not be increased unless there is a subsequent recovery allocated to such class. Notwithstanding the foregoing, once the principal balance of a class is reduced to zero, such class will not be entitled to any subsequent recoveries or cap carryover amount (if any).

 

If you are purchasing senior certificates, you should be aware that if the mortgage loans in the other loan group experience a disproportionate amount of losses, the principal balances of the Class M Certificates may be reduced to zero sooner than you anticipate, which increases the likelihood that your senior certificates, especially the Class AI-1B Certificates, may experience losses.

 

Cross-Collateralization. In certain circumstances payments on a loan group may be used to make certain distributions to the holders of the Class A Certificates of the unrelated group.

 

YIELD MAINTENANCE AGREEMENTS

 

In order to mitigate the effect of the applicable group cap or pool cap on the yield of the Class A and Class M Certificates, on the closing date, the securities administrator will enter into three yield maintenance agreements with Bear Stearns Financial Products Inc., as counterparty, for the benefit of certain classes of certificates.

 

The yield maintenance agreement for the benefit of (i) the Class AI Certificates is designated as the “Class AI yield maintenance agreement,” (ii) the Class AII Certificates is designated as the “Class AII yield maintenance agreement” and (iii) the Class M Certificates is designated as the “Class M yield maintenance agreement.”

 

In connection with any of the first 34 distribution dates, if one-month LIBOR as of two business days prior to the first day of the interest accrual period for the applicable certificates relating to such distribution date exceeds a specified rate for such distribution date, the counterparty will be obligated to pay to the securities administrator two business days prior to the end of the related interest accrual period, for deposit into the related reserve account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the applicable upper strike rate for such distribution date, over the lower strike rate for such distribution date, in each case as set forth in the applicable table on Annex I to this prospectus supplement, (b) the related notional amount, as set forth for such distribution date in the applicable table on Annex I to this prospectus supplement and (c) a fraction, the numerator of which is the actual number of days elapsed since the previous distribution date (or, in the case of the initial distribution date, the number of days elapsed since the closing date) to but excluding the current distribution date and the denominator of which is 360. There are certain periods prior to the expiration of the yield maintenance agreements when the related notional amount is zero and, as a result, the counterparty will not be required to make any payments under the related yield maintenance agreement for such periods.

 

Amounts, if any, payable under each of the Class AI yield maintenance agreement, the Class AII yield maintenance agreement and the Class M yield maintenance agreement on any distribution date will be used solely to cover shortfalls in payments of interest on the applicable certificates if the pass-through rates on those certificates are limited for any of the first 34 distribution dates due to the applicable group cap or the pool cap.

 

The counterparty’s obligations under the Class AI yield maintenance agreement, Class AII yield maintenance agreement and Class M yield maintenance agreement will terminate following the distribution date in April 2008.

 

EFFECTS OF PREPAYMENTS ON YOUR INVESTMENT EXPECTATIONS

 

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

 

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

 

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

 

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

 

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

 

Yield

 

The actual yield on your certificates depends on the:

 

    pass-through rate;

 

    price paid;

 

    absence or occurrence of interest shortfalls or losses;

 

    absence or occurrence of principal losses;

 

    rate and timing of principal prepayments; and

 

    amounts received under any applicable yield maintenance agreement.

 

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

 

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

 

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

 

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

 

If you are purchasing the Class AI-1B Certificates you should consider that on any distribution date on which a sequential trigger event is in effect, the Class AI-1B Certificates will not receive any payments of principal until the principal balance of the Class AI-1A Certificates has been reduced to zero. See “Description of the Certificates—Principal Distributions.”

 

If you are purchasing offered certificates at a discount, you should consider the risk that a slower than anticipated rate of principal payments on the applicable mortgage loans may have a negative effect on the yield to maturity of your certificates.

 

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

 

Reinvestment Risk

 

The total return on your investment will be reduced if principal distributions received on your certificates cannot be reinvested at a rate as high as the stated pass-through rate.

 

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

 

Moreover, some mortgagors who prefer the certainty provided by fixed rate mortgage loans may nevertheless obtain adjustable rate mortgage loans at a time when they regard the mortgage interest rates (and, therefore, the payments) on fixed rate mortgage loans as unacceptably high. These mortgagors may be induced to refinance adjustable rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed interest rate mortgage loans decline to levels which these mortgagors regard as acceptable, even if such mortgage interest rates and monthly payments may be significantly higher than current mortgage interest rates and monthly payments on the mortgagors’ adjustable rate mortgage loans.

 

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

 

Weighted Average Life Volatility

 

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

 

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

 

Low rates of prepayment may result in the extension of the weighted average life of a certificate. High rates of prepayment may result in the shortening of the weighted average life of a certificate.

 

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

 

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

 

See “Risk Factors—Prepayments may adversely affect yield” and “Prepayment and Yield Considerations” in this prospectus supplement.

 

OPTIONAL TERMINATION

 

The majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the depositor, may, at its option, subject to certain conditions including the then-remaining size of the pool, purchase all the mortgage loans and any properties that the trust acquired in satisfaction of any of the mortgage loans and thereby effect early retirement of the certificates. See “The Pooling and Servicing Agreement—Optional Termination” in this prospectus supplement.

 

FEDERAL INCOME TAX STATUS

 

The securities administrator will elect to treat the assets of the trust, exclusive of the arrangement intended to protect against basis risk for certain of the certificates, as comprised of multiple real estate mortgage investment conduits in a tiered structure for federal income tax purposes.

 

For further information regarding the federal income tax consequences of investing in the offered certificates, see “Certain Material Federal Income Tax Consequences” in this prospectus supplement and “Federal Income Tax Consequences” in the prospectus.

 

LEGAL INVESTMENT

 

The Class A, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization. The Class M-6, Class M-7, Class M-8, Class M-9, Class M-10 and Class M-11 Certificates will not

 

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constitute “mortgage related securities” under this act.

 

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

 

See “Legal Investment” in this prospectus supplement and in the prospectus.

 

ERISA CONSIDERATIONS

 

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

 

See “ERISA Considerations” in this prospectus supplement and in the prospectus.

 

MONTHLY REPORTS AND ADDITIONAL INFORMATION

 

The securities administrator will prepare and make available to certificateholders via the internet, the monthly report described under “Description of the Securities—Reports to Securityholders” in the prospectus. In addition, the depositor intends to make the information contained in the monthly report, together with certain additional information, available to any interested investor via the internet and other electronic means described under “Where You Can Find More Information” in the prospectus.

 

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RISK FACTORS

 

The following information, which you should carefully consider, identifies certain significant sources of risk associated with an investment in the certificates. You should also carefully consider the information set forth under “Risk Factors” in the prospectus.

 

Nature of subprime mortgage loans may increase risk of loss

 

All of the mortgage loans are of subprime credit quality; i.e., do not meet the customary credit standards of “prime” mortgage loans originated by Wells Fargo Bank, N.A. Borrowers under subprime mortgage loans typically have limited access to traditional mortgage financing for a variety of reasons, including impaired or limited past credit history, lower credit scores, high loan-to-value ratios or high debt-to-income ratios. As a result of these factors, delinquencies and liquidation proceedings are more likely with these mortgage loans than with mortgage loans that satisfy customary credit standards. In the event these mortgage loans do become delinquent or subject to liquidation, you may face delays in receiving payment and losses if the credit enhancements are insufficient to cover the delays and losses.

 

Prepayments may adversely affect yield

 

The rate of distributions of principal and the yield to maturity on your certificates will be directly related to the rate of payments of principal on the mortgage loans in the related loan group, or either loan group in the case of the subordinated certificates, and the amount and timing of mortgagor defaults resulting in realized losses. Mortgagors are permitted to prepay the mortgage loans, in whole or in part, at any time. The rate of principal payments on the mortgage loans will be affected by, among other things:

 

    prepayment penalties on certain of the mortgage loans, which may discourage mortgagors from prepaying their mortgage loans during the applicable period;

 

    the amortization schedules of the mortgage loans;

 

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

 

    liquidations of defaulted mortgage loans;

 

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

 

    optional purchases by the depositor of defaulted mortgage loans; and

 

    the optional purchase by the majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the depositor, of all of the mortgage loans in connection with the termination of the trust fund.

 

Prepayment penalty information with respect to the mortgage loans is set forth in the tables appearing in Appendix A hereto.

 

See “Prepayment and Yield Considerations” herein and “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Assignment of Mortgage Loans; Representations and Warranties; Repurchases,” “Description of the Securities—Termination” and “—Optional Purchases” in the prospectus.

 

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

 

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

 

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

 

    The prepayment behavior of the adjustable rate mortgage loans and of the fixed rate mortgage loans may respond to different factors, or may respond differently to the same factors.

 

    Adjustable rate mortgage loans may also suffer an increase in defaults and liquidations following upward adjustments of their interest rates, especially following their initial adjustments.

 

If the level of overcollateralization falls below what is required under the pooling and servicing agreement, excess interest will be paid to the certificates as principal. This will have the effect of reducing the principal balance of the certificates faster than the aggregate unpaid principal balance of the mortgage loans until the required level of overcollateralization is reached.

 

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

 

If you are purchasing offered certificates at a premium, you should consider the risk that if principal payments on the mortgage loans in the related loan group, or either loan group in the case of the subordinated certificates, occur at a rate faster than you expected, there may be a negative effect on the yield to maturity of your certificates and that a rapid rate of principal payments on the applicable mortgage loans could result in a loss of all or part of your initial investment.

 

See “Prepayment and Yield Considerations” for a description of factors that may influence the rate and timing of prepayments on the mortgage loans.

 

There are risks relating to alternatives to foreclosure

 

Certain mortgage loans may become delinquent after the cut-off date. The servicer may either foreclose on any such mortgage loan or work out an agreement with the mortgagor if the delinquency is not cured, which may involve modifying certain terms of the mortgage loan. If the servicer modifies such terms, your yield may be reduced.

 

There is a risk that interest payments on the mortgage loans may be insufficient to maintain overcollateralization

 

Because the weighted average of the interest rates on the mortgage loans is expected to be higher than the weighted average of the pass-through rates on the certificates (other than the Class CE, Class P and Class R Certificates), the mortgage loans are expected to generate more interest than is needed to pay interest owed on the certificates as well as certain fees and expenses of the trust. After these financial obligations of the trust are covered, the available excess interest will be used to maintain overcollateralization. Any remaining interest will then be used to compensate for losses that occur on the mortgage loans. We cannot assure you, however, that enough excess interest will be generated to maintain the required overcollateralization level. The factors described below, as well as the factors described in the next Risk Factor, will affect the amount of excess interest that the mortgage loans will generate:

 

    When a mortgage loan is prepaid in full or repurchased, excess interest will generally be reduced because the mortgage loan will no longer be outstanding and generating interest or, in the case of a partial prepayment, will be generating less interest.

 

    Every time a mortgage loan is liquidated, excess interest will be reduced because such mortgage loan will no longer be outstanding and generating interest.

 

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    If the rates of delinquencies, defaults or losses on the mortgage loans are higher than expected, excess interest will be reduced by the amount necessary to compensate for any shortfalls in cash available on such date to pay certificateholders.

 

    The pass-through rates of the certificates (other than the Class CE, Class P and Class R Certificates) are based on one-month LIBOR, while the adjustable rate mortgage loans have rates that are adjustable based on indices that are different from one-month LIBOR and the fixed rate mortgage loans have rates that do not adjust. As a result, the pass-through rates on the certificates (other than the Class CE, Class P and Class R Certificates) may increase relative to interest rates on the mortgage loans, thus requiring that more of the interest generated by the mortgage loans be applied to cover interest on such certificates.

 

Effects of mortgage interest rates and other factors on the pass-through rates of the offered certificates

 

The yields to maturity on the offered certificates may be affected by the inclusion of fixed rate mortgage loans in the mortgage pool and the resetting of the mortgage interest rates on the adjustable rate mortgage loans on their related adjustment dates due to the factors set forth below. The mortgage interest rates on the fixed rate mortgage loans are fixed and will not vary with any index and the mortgage interest rates on the adjustable rate mortgage loans are based on six-month LIBOR and one-year CMT and do not adjust for periods ranging from one to three years after the dates of their origination, while the pass-through rates on the certificates (other than the Class CE, Class P and Class R Certificates) are based on one-month LIBOR, are subject to the applicable maximum rate cap and the related group cap or the pool cap, as applicable, and are adjusted monthly. This mismatch of indices and adjustment frequency may cause the one-month LIBOR-based pass-through rates on the certificates (other than the Class CE, Class P and Class R Certificates) to increase relative to the mortgage interest rates on the mortgage loans, which would require a greater portion of the interest generated by the mortgage loans to be applied to cover interest accrued on those certificates, and could result in the limitation of the pass-through rates on some or all of those certificates by the related group cap or the pool cap, as applicable, and could therefore adversely affect the yield to maturity on such certificates. The group caps are equal to the weighted average of the interest rates on the mortgage loans in the related loan group, net of certain expenses of the trust. The pool cap is equal to the weighted average of the group caps, weighted on the basis of the group subordinate amount for each loan group. In addition, you should note that the group caps and the pool cap will decrease if the related mortgage loans, in the case of the group caps, or all the mortgage loans, in the case of the pool cap, with relatively high mortgage interest rates prepay at a faster rate than the other mortgage loans in the loan group or the pool, as applicable, with relatively low mortgage interest rates, which will increase the likelihood that the group caps or the pool cap will apply to limit the pass-through rates on one or more classes of the offered certificates.

 

If the pass-through rate on any class of the offered certificates is limited by a group cap or the pool cap for any distribution date, the resulting cap carryover amounts may be recovered by the holders of such classes of certificates on that same distribution date or on future distribution dates, to the extent that on that distribution date or future distribution dates there are any available funds remaining after certain other distributions on the certificates and the payment of certain fees and expenses of the trust. These cap carryover amounts for the certificates may also be covered by amounts payable under the applicable yield maintenance agreement, to the extent that, with respect to any of the first 34 distribution dates, the lesser of one-month LIBOR as of the related determination date and the applicable upper strike rate under the applicable yield maintenance agreement exceeds the lower strike rate for such distribution date. See “Description of the Certificates—Application of Monthly Excess Cashflow Amounts” and “—Yield Maintenance Agreements” in this prospectus supplement. You should note, however, that if the formula rate on the offered certificates is based on the applicable maximum rate cap, the amount of cap carryover will be less during such period on those certificates than if the formula rate were based on one-month LIBOR plus the applicable margin. The ratings on the offered certificates will not address the likelihood of any such recovery of cap carryover amounts by holders of such certificates.

 

There are risks relating to second lien mortgage loans

 

With respect to certain of the mortgage loans, at the time of origination of the first lien mortgage loan, the originator may have originated a second lien mortgage loan. With respect to mortgage loans that have second lien mortgage loans encumbering the same mortgaged property, foreclosure frequency may be increased relative to mortgage loans that do not have second lien mortgage loans behind them because mortgagors have less equity in the

 

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mortgaged property. Investors should also note that any mortgagor may obtain second lien mortgage loans at any time subsequent to the date of origination of their first lien mortgage loan from the originator or from any other lender. See the tables with the heading “Original Combined Loan-To-Value Ratios” appearing in Appendix A.

 

There are risks in holding subordinated certificates

 

The protections afforded the senior certificates in this transaction create risks for the subordinated certificates. Prior to any purchase of any subordinated certificates, consider the following factors that may adversely impact your yield or the weighted average life of your certificates:

 

    Because each class of subordinated certificates receives interest and principal distributions after the senior certificates and each lower-numbered class of subordinated certificates, if any, receive such distributions, there is a greater likelihood that the subordinated certificates will not receive the distributions to which they are entitled on any distribution date.

 

    If the servicer determines not to advance a delinquent payment on a mortgage loan because such amount is not recoverable from a mortgagor, there may be a shortfall in distributions on the certificates which will impact the subordinated certificates.

 

    The subordinated certificates are not expected to receive principal distributions until, at the earliest, July 2008 (unless the principal balance of the senior certificates is reduced to zero prior to such date) or such later date as provided in this prospectus supplement or during any period in which delinquencies or realized losses on the mortgage loans exceed certain levels described herein. As a result, the weighted average lives of such certificates will be longer than would be the case if distributions of principal were allocated among all of the certificates at the same time. As a result of the longer weighted average lives of such subordinated certificates, the holders of such certificates have a greater risk of suffering loss on their investments.

 

    Losses resulting from the liquidation of defaulted mortgage loans will first reduce monthly excess cashflow and then reduce the level of overcollateralization, if any, for the certificates. If there is no or insufficient overcollateralization, losses will be allocated to the subordinated certificates in reverse order of payment priority. A loss allocation results in a reduction in a principal balance without a corresponding distribution of cash to the holder. A lower principal balance will result in less interest accruing on the certificate.

 

    The earlier in the transaction that a loss on a mortgage loan occurs that results in a loss on a subordinated certificate, the greater the impact on the yield to such subordinated certificate.

 

See “Description of the Certificates” and “Prepayment and Yield Considerations” in this prospectus supplement for more detail.

 

There are additional risks in holding the Class AI-1B Certificates

 

If you are considering purchasing the Class AI-1B Certificates, you should consider the risk that after the Class M Certificates are no longer outstanding, losses from the liquidation of defaulted mortgage loans in the first loan group in excess of any available monthly excess cashflow and overcollateralization will affect the amount available for distribution on the Class AI-1B Certificates. If a sequential trigger event is in effect, holders of the Class AI-1B Certificates will not receive any payments of principal until the principal balance of the Class AI-1A Certificates has been reduced to zero. This increases the likelihood that the Class AI-1B Certificates will not receive all distributions they are entitled to on any distribution date as a result of realized losses on the mortgage loans in the first loan group and, on the final distribution date, will have their principal balance reduced as a result of such realized losses.

 

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

 

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There is a risk that interest payments on the mortgage loans may be insufficient to pay interest on your certificates

 

When a mortgage loan is prepaid in full, the mortgagor is charged interest only up to the date on which payment is made, rather than for an entire month. When a mortgagor makes a partial principal prepayment on a mortgage loan, the mortgagor is not charged interest on the prepayment for the month in which it is received. This may result in a shortfall in interest collections available for payment on the next distribution date. The servicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments in full (but not partial prepayments) on the mortgage loans, but only up to the servicing fee. If the monthly excess interest amount is insufficient to cover the interest shortfall due to prepayments on the mortgage loans in excess of the amount covered by the servicer, you may incur a loss.

 

In addition, the servicer will not cover shortfalls in interest collections arising from the application of the Servicemembers Civil Relief Act or similar state laws.

 

Any prepayment interest shortfalls resulting from prepayments in full in excess of compensating interest, any prepayment interest shortfalls resulting from partial principal prepayments and any shortfalls arising from the application of the Servicemembers Civil Relief Act or similar state laws will be borne first by any monthly excess interest amount and then pro rata by all classes of interest-bearing certificates.

 

High loan-to-value ratios increase risk of loss

 

Mortgage loans with high loan-to-value ratios leave the mortgagor with little to no equity in the related mortgaged property. Certain of the mortgage loans had loan-to-value ratios at origination in excess of 80.00%. No mortgage loan had a loan-to-value ratio exceeding 100% as of the cut-off date. An overall decline in the residential real estate market, a rise in interest rates over a period of time and the general condition of a mortgaged property, as well as other factors, may have the effect of reducing the value of such mortgaged property from the appraised value at the time the mortgage loan was originated. If there is a reduction in value of the mortgaged property, the loan-to-value ratio may increase over what it was at the time of origination. Such an increase may reduce the likelihood that liquidation proceeds or other proceeds will be sufficient to pay off the mortgage loan fully. There can be no assurance that the loan-to-value ratio of any mortgage loan determined at any time after origination is less than or equal to its original loan-to-value ratio. Additionally, the originator’s determination of the value of a mortgaged property used in the calculation of the loan-to-value ratios of the mortgage loans may differ from the appraised value of such mortgaged property or the actual value of such mortgaged property. Information with respect to loan-to-value ratios is set forth in the tables appearing in Appendix A hereto.

 

There is a risk relating to the potential inadequacy of credit enhancement for the offered certificates

 

The credit enhancement features described in the summary are intended to enhance the likelihood that holders of the offered certificates will receive regular payments of interest and principal.

 

If delinquencies or defaults occur on the mortgage loans, neither the servicer nor any other entity will advance scheduled monthly payments of interest and principal on delinquent or defaulted mortgage loans if such advances are not likely to be recovered. We cannot assure you that the applicable credit enhancement will adequately cover any shortfalls in cash available to pay your certificates as a result of such delinquencies or defaults.

 

If substantial losses occur as a result of defaults and delinquent payments on the mortgage loans, you may suffer losses.

 

Coverage under lender-paid primary mortgage insurance policies will be lost if Wells Fargo Bank, N.A. does not pay premiums

 

All of the mortgage loans with loan-to-value ratios over 80% are covered by existing lender-paid primary mortgage insurance policies. These policies were acquired by Wells Fargo Bank, N.A. from various providers and will be assigned by Wells Fargo Bank, N.A. to the trust on the closing date. Wells Fargo Bank, N.A., as servicer, will be obligated to pay the premiums on the primary mortgage insurance policies. Wells Fargo Bank, N.A. will covenant that in the event it is removed as servicer, it will continue to pay any such premiums if the successor

 

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servicer does not undertake to pay such premiums. In the event of a servicing transfer where the successor servicer does not assume the payment of such premiums, investors should consider that if Wells Fargo Bank, N.A. does not fulfill its covenant to pay the related premiums, the related primary mortgage insurance coverage will be cancelled.

 

The yield maintenance agreements are subject to counterparty risk

 

The assets of the trust include the yield maintenance agreements which will require the counterparties thereunder to make certain payments in the circumstances set forth herein under “Description of the Certificates—The Yield Maintenance Agreements” for the benefit of the holders of the related Class A and Class M Certificates. To the extent that payments on these certificates depend in part on payments to be received by the securities administrator under the related yield maintenance agreement, the ability of the securities administrator to make such payments on such certificates will be subject to the credit risk of the counterparty to such yield maintenance agreement.

 

There is a risk that there may be a delay in receipt of liquidation proceeds, and that liquidation proceeds may be less than the outstanding balance of the mortgage loan

 

Substantial delays could be encountered in connection with the liquidation of delinquent mortgage loans. Further, liquidation expenses such as legal fees, real estate taxes and maintenance and preservation expenses will reduce the portion of liquidation proceeds payable to you. If a mortgaged property fails to provide adequate security for the mortgage loan, you will incur a loss on your investment if the credit enhancements are insufficient to cover the loss.

 

Geographic concentration may increase risk of loss because of adverse economic conditions or natural disasters

 

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

 

Class M Certificates provide subordination for both certificate groups

 

Because the Class M Certificates provide credit support for both certificate groups, the principal balances of the Class M Certificates could be reduced to zero as a result of a disproportionate amount of realized losses on the mortgage loans in one loan group. Therefore, realized losses on the mortgage loans in one loan group, to the extent not covered by overcollateralization, will reduce the subordination provided by the Class M Certificates to the unrelated certificate group of senior certificates and increase the likelihood that realized losses may be allocated to such unrelated certificate group of senior certificates on the final distribution date.

 

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There are risks relating to balloon loans

 

Balloon loans pose a risk because a mortgagor must make a large lump sum payment of principal at the end of the loan term. If the mortgagor is unable to pay the lump sum or refinance such amount, you may suffer a loss. The ability of a mortgagor to refinance a balloon loan may be limited because the mortgagors are “subprime” borrowers who may not have many acceptable refinancing options available. In addition, the servicer will not make advances with respect to the unpaid principal balance remaining at maturity of a balloon loan. Information relating to balloon loans is set forth in Appendix A.

 

Violations of federal, state and local laws may cause losses on your certificates

 

Federal, state and local laws regulate the underwriting, origination, servicing and collection of the mortgage loans. These laws have changed over time and have become more restrictive or stringent with respect to specific activities of the servicer and originators of residential mortgage loans. Actual or alleged violations of these federal, state and local laws may, among other things:

 

    limit the ability of the servicer to collect principal or interest on the mortgage loans,

 

    provide the mortgagors with a right to rescind the mortgage loans,

 

    entitle the mortgagors to refunds of amounts previously paid or to set-off those amounts against their mortgage loan obligations,

 

    result in a litigation proceeding being brought against the trust, and

 

    subject the trust (and other assignees of the mortgage loans) to liability for expenses, penalties and damages resulting from the violations.

 

As a result, these violations or alleged violations could result in shortfalls in the distributions due on your certificates. In the past few years, a number of legislative proposals have been introduced at the federal, state and local level that are designed to discourage predatory lending practices. Some states have enacted, or may enact, laws or regulations that prohibit inclusion of some provisions in mortgage loans that have mortgage interest rates or origination costs in excess of prescribed levels, and require that borrowers be given certain disclosures prior to the consummation of such mortgage loans. In some cases, state law may impose requirements and restrictions greater than those in the federal Home Ownership and Equity Protection Act of 1994, as amended. Lawsuits have been brought in various states making claims against assignees of high cost loans for violations of state law. Named defendants in these cases include numerous participants within the secondary mortgage market, including some securitization trusts. See “Risk Factors—Violations of Federal, State and Local Laws May Adversely Affect Ability to Collect on Loans” and “Certain Legal Aspects of Mortgage Loans—Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders” in the prospectus.

 

The depositor will make representations and warranties with respect to each mortgage loan relating to compliance with applicable federal, state and local laws at the time of origination, that none of the mortgage loans are subject to the Home Ownership and Equity Protection Act of 1994, as amended, and that none of the mortgage loans are “high cost” loans within the meaning of such federal, state and local laws. In the event of a breach of any such representations, the depositor will be required to cure such breach or repurchase or replace the affected mortgage loan. In addition, the depositor will be required to reimburse the trust for any damages or costs incurred by the trust as a result of a breach of the representation as to compliance with federal, state and local laws.

 

Rights of beneficial owners may be limited by book-entry system for certain classes of certificates

 

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

 

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Certificates may not be appropriate for certain individual investors

 

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

 

    your yield to maturity will be sensitive to the uncertain rate and timing of principal prepayments on the applicable mortgage loans;

 

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

 

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

 

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

 

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

 

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

 

United States military operations may increase risk of shortfalls in interest

 

As a result of military operations in Afghanistan and Iraq, the United States has placed a substantial number of armed forces reservists and members of the National Guard on active duty status. It is possible that the number of reservists and members of the National Guard placed on active duty status may remain at high levels for an extended time. To the extent that a member of the military, or a member of the armed forces reserves or National Guard who is called to active duty, is a mortgagor of a mortgage loan in the trust, the interest rate limitation of the Servicemembers Civil Relief Act and any comparable state law, will apply. A substantial portion of the mortgage loans have mortgage interest rates which exceed such limitation, if applicable. This may result in interest shortfalls on the mortgage loans, which will be borne by all classes of interest-bearing certificates, to the extent not covered by the monthly excess interest amount for the applicable distribution date. None of the depositor, the servicer, the underwriter or any other party has taken any action to determine whether any of the mortgage loans would be affected by such interest rate limitation. See “Description of the Certificates—Interest Distributions” in this prospectus supplement and “Certain Legal Aspects of the Mortgage Loans—Servicemembers Civil Relief Act” in the prospectus.

 

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FORWARD LOOKING STATEMENTS

 

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

 

DESCRIPTION OF THE CERTIFICATES

 

General

 

The Trust will issue three Classes of senior certificates (the “Class A Certificates” or the “Senior Certificates”) divided into two certificate groups (each may be referred to as a “Group”). The first Group (“Group I”) will consist of the Class AI-1A and Class AI-1B Certificates (collectively, the “Class AI Certificates”). The second Group (“Group II”) will consist of the Class AII-1 Certificates (the “Class AII Certificates”). The Trust will also issue (i) fourteen Classes of mezzanine certificates (collectively, the “Class M Certificates”) designated as the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11, Class M-12, Class M-13 and Class M-14 Certificates, (ii) the Class CE Certificates (together with the Class M Certificates, the “Subordinated Certificates”), (iii) the Class P Certificates (the “Class P Certificates”) and (iv) the Class R Certificates (the “Residual Certificates”). The Senior Certificates, the Subordinated Certificates, the Class P Certificates and the Residual Certificates are collectively referred to herein as the Certificates.” Only the Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10 and Class M-11 Certificates are offered hereby (the “Offered Certificates”).

 

The Offered Certificates will have the respective original Principal Balances specified in the table beginning on page S-5 hereof, subject to a permitted variance due to an adjustment of the mortgage pool. The Offered Certificates will be issued initially in the forms and denominations set forth in the table beginning on page S-5.

 

Distributions on the Certificates will be made by the Securities Administrator on the 25th day of each month, or if such day is not a business day, on the first business day thereafter, commencing in July 2005 (each, a “Distribution Date”), to the persons in whose names such Certificates are registered at the close of business on the applicable Record Date. The “Record Date” with respect to each Distribution Date and the Offered Certificates is the business day immediately preceding such Distribution Date; provided, however, that if any Offered Certificates become Definitive Certificates, the Record Date for such Certificates will be the last business day of the preceding month.

 

Allocation of Available Funds

 

Distributions to holders of each Class of Certificates will be made on each Distribution Date from Available Funds. “Available Funds” will be equal to the sum of the following amounts with respect to the Mortgage Loans, net of amounts reimbursable or payable to the Servicer, including amounts in respect of indemnification of the Servicer, the Servicing Fee and any accrued and unpaid Servicing Fee and amounts payable to the Securities Administrator and the Trustee in respect of certain expenses and indemnification:

 

(i) the aggregate amount of monthly payments on the Mortgage Loans due during the related Collection Period and received by the Servicer on or prior to the related Determination Date;

 

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(ii) certain unscheduled payments in respect of the Mortgage Loans, including prepayments (but excluding any prepayment penalties), insurance proceeds (including any payments received under any LPMI Policy), condemnation proceeds, Subsequent Recoveries and liquidation proceeds, net of certain expenses, received during the related Prepayment Period;

 

(iii) payments from the Servicer in connection with Advances and Compensating Interest for such Distribution Date;

 

(iv) the Purchase Price for any repurchased Mortgage Loan deposited to the Distribution Account during the related Prepayment Period;

 

(v) any Substitution Adjustments deposited in the Distribution Account during the related Prepayment Period;

 

(vi) any Reimbursement Amount deposited to the Distribution Account during the related Prepayment Period; and

 

(vii) on the Distribution Date on which the Trust is to be terminated in accordance with the Pooling and Servicing Agreement, the Termination Price.

 

Available Funds excludes any prepayment penalties received by the Servicer with respect to the Mortgage Loans. Any such prepayment penalties will be distributed to the holders of the Class P Certificates and no other Class of Certificates will have any entitlement to receive such amounts under any circumstances.

 

The “Collection Period” with respect to any Distribution Date means the period from the second day of the calendar month preceding the month in which such Distribution Date occurs through the first day of the month in which such Distribution Date occurs.

 

The “Prepayment Period” with respect to any Distribution Date is a Prior Month Receipt Period. See “Description of the Securities—Available Funds” in the prospectus for a description of Prior Month Receipt Period.

 

Interest Distributions

 

On each Distribution Date, the Securities Administrator will distribute the aggregate of the Interest Remittance Amounts in the following order of priority to the extent available:

 

first, to the Credit Risk Manager, the Credit Risk Manager Fee;

 

second, concurrently, as follows:

 

(1) concurrently, from the Interest Remittance Amount for Group I, to the Class AI-1A and Class AI-1B Certificates, pro rata (based on the Accrued Certificate Interest for each such Class), the applicable Accrued Certificate Interest thereon for such Distribution Date; and

 

(2) from the Interest Remittance Amount for Group II, to the Class AII-1 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

third, concurrently, as follows:

 

(1) concurrently, from the Interest Remittance Amount for Group I, to the Class AI-1A and Class AI-1B Certificates, pro rata (based on the Interest Carry Forward Amount for each such Class), the applicable Interest Carry Forward Amount thereon for such Distribution Date; and

 

(2) from the Interest Remittance Amount for Group II, to the Class AII-1 Certificates, the Interest Carry Forward Amount thereon for such Distribution Date;

 

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fourth, concurrently, as follows:

 

(1) from the Interest Remittance Amount for Group I, to the Class AII-1 Certificates, any Accrued Certificate Interest for such Class for such Distribution Date, to the extent not distributed pursuant to priority second above; and

 

(2) concurrently, from the Interest Remittance Amount for Group II, to the Class AI-1A and Class AI-1B Certificates, pro rata (based on the Accrued Certificate Interest for each such Class), any Accrued Certificate Interest for such Classes for such Distribution Date, to the extent not distributed pursuant to priority second above;

 

fifth, concurrently, as follows:

 

(1) from the Interest Remittance Amount for Group I, to the Class AII-1 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date, to the extent not distributed pursuant to priority third above; and

 

(2) concurrently, from the Interest Remittance Amount for Group II, to the Class AI-1A and Class AI-1B Certificates, pro rata (based on the Interest Carry Forward Amount for each such Class), any Interest Carry Forward Amount for such Classes for such Distribution Date, to the extent not distributed pursuant to priority third above;

 

sixth, to the Class M-1 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

seventh, to the Class M-2 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

eighth, to the Class M-3 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

ninth, to the Class M-4 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

tenth, to the Class M-5 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

eleventh, to the Class M-6 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

twelfth, to the Class M-7 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

thirteenth, to the Class M-8 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

fourteenth, to the Class M-9 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

fifteenth, to the Class M-10 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

sixteenth, to the Class M-11 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

seventeenth, to the Class M-12 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

eighteenth, to the Class M-13 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

 

nineteenth, to the Class M-14 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; and

 

twentieth, the amount, if any, of the aggregate of the Interest Remittance Amounts remaining after application with respect to the priorities set forth above which is defined below as the “Monthly Excess Interest Amount” for such Distribution Date, will be applied as described below under “—Application of Monthly Excess Cashflow Amounts.”

 

On any Distribution Date, any shortfalls resulting from application of the Relief Act, any Prepayment Interest Shortfalls resulting from prepayments in full, to the extent not covered by Compensating Interest paid by the Servicer, and any Prepayment Interest Shortfalls resulting from partial principal prepayments, in each case regardless of which loan group experienced the shortfall (the total of such amounts for any Distribution Date, the

 

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Current Interest Shortfall”), will be allocated first, to reduce any Monthly Excess Interest Amount for such Distribution Date, and thereafter, to reduce the Accrued Certificate Interest with respect to the Class A and Class M Certificates on a pro rata basis based on the respective amounts of interest accrued on such Certificates for such Distribution Date without regard to the allocation of these shortfalls. The holders of the Class A and Class M Certificates will not be entitled to reimbursement for any such interest shortfalls.

 

Accrued Certificate Interest” for each Class of interest-bearing Certificates and each Distribution Date means an amount equal to the interest accrued during the related Interest Accrual Period at the applicable Pass-Through Rate on the Principal Balance of such Class of Certificates, minus such Class’s Interest Percentage of the excess of (i) the Current Interest Shortfall for such Distribution Date, if any, over (ii) the Monthly Excess Interest Amount for such Distribution Date.

 

The “Interest Accrual Period” for any Distribution Date and the Certificates (other than the Class CE, Class P and Class R Certificates) will be the period from and including the preceding Distribution Date, or in the case of the first Distribution Date, from the Closing Date, through and including the day prior to the current Distribution Date, and calculations of interest will be made on the basis of the actual number of days in the Interest Accrual Period and on a 360-day year. The Class CE, Class P and Class R Certificates do not accrue interest.

 

The “Interest Carry Forward Amount” means for any Class of interest-bearing Certificates and any Distribution Date, the sum of (a) the excess, if any, of the Accrued Certificate Interest for the prior Distribution Date and any Interest Carry Forward Amount for the prior Distribution Date, over the amount in respect of interest actually distributed on such Class on such prior Distribution Date and (b) interest on such excess at the applicable Pass-Through Rate on the basis of the actual number of days elapsed since the prior Distribution Date.

 

The “Interest Percentage” is, with respect to any Class of interest-bearing Certificates and any Distribution Date, the ratio of the Accrued Certificate Interest for such Class to the Accrued Certificate Interest for all Classes of interest-bearing Certificates, in each case with respect to such Distribution Date and without regard to any Current Interest Shortfall.

 

The “Interest Remittance Amount” means as of any Distribution Date and either Group, the sum, without duplication, of:

 

(i) all interest collected with respect to the related Collection Period on the Mortgage Loans of the related Loan Group received by the Servicer on or prior to the Determination Date for such Distribution Date and any interest advanced by the Servicer on the Mortgage Loans of such Loan Group with respect to the related Collection Period (less the Servicing Fee for such Mortgage Loans, certain amounts available for reimbursement of Advances and Servicing Advances with respect to such Mortgage Loans as described in the prospectus under “Advances in Respect of Delinquencies,” certain amounts in respect of indemnification and certain other reimbursable expenses pursuant to the Pooling and Servicing Agreement);

 

(ii) all Compensating Interest paid by the Servicer on such Distribution Date with respect to the Mortgage Loans of such Loan Group;

 

(iii) the portion of any payment in connection with any principal prepayment, substitution, Purchase Price, Termination Price, liquidation proceeds (net of certain expenses) or insurance proceeds (including any payments received under the LPMI Policies) relating to interest with respect to the Mortgage Loans of such Loan Group received during the related Prepayment Period; and

 

(iv) the portion of any Reimbursement Amount relating to interest on the Mortgage Loans of such Loan Group received during the related Prepayment Period.

 

Relief Act Shortfalls” are any interest shortfalls arising as a result of the reduction in the amount of monthly interest payments on any Mortgage Loans as a result of the application of the Relief Act or similar state laws.

 

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Principal Distributions

 

With respect to each Distribution Date (a) before the Stepdown Date or (b) as to which a Trigger Event is in effect, the Principal Distribution Amount will be allocated among and distributed in reduction of the Principal Balances of the Certificates in the following order of priority:

 

first, concurrently, as follows:

 

(i) the Group I Principal Distribution Amount, (a) with respect to each Distribution Date on which a Sequential Trigger Event is not in effect, concurrently, to the Class AI-1A and Class AI-1B Certificates, pro rata, and (b) with respect to each Distribution Date on which a Sequential Trigger Event is in effect, sequentially, to the Class AI-1A and Class AI-1B Certificates; and

 

(ii) the Group II Principal Distribution Amount, to the Class AII-1 Certificates;

 

second, concurrently, as follows:

 

(i) the Group I Principal Distribution Amount remaining after priority first (i) above, to the Class AII-1 Certificates; and

 

(ii) the Group II Principal Distribution Amount remaining after priority first (ii) above, (a) with respect to each Distribution Date on which a Sequential Trigger Event is not in effect, concurrently, to the Class AI-1A and Class AI-1B Certificates, pro rata, and (b) with respect to each Distribution Date on which a Sequential Trigger Event is in effect, sequentially, to the Class AI-1A and Class AI-1B Certificates;

 

third, sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11, Class M-12, Class M-13 and Class M-14 Certificates; and

 

fourth, any remaining Principal Distribution Amount will be distributed as part of the Monthly Excess Cashflow Amount as described below under “—Application of Monthly Excess Cashflow Amounts.”

 

With respect to each Distribution Date (a) on or after the Stepdown Date and (b) as long as a Trigger Event is not in effect, the Principal Distribution Amount will be allocated among and distributed in reduction of the Principal Balances of the Certificates in the following order of priority:

 

first, concurrently, as follows:

 

(i) from the Group I Principal Distribution Amount, (a) with respect to each Distribution Date on which a Sequential Trigger Event is not in effect, concurrently, to the Class AI-1A and Class AI-1B Certificates, pro rata, up to an amount equal to the Group I Senior Principal Distribution Amount, and (b) with respect to each Distribution Date on which a Sequential Trigger Event is in effect, sequentially, to the Class AI-1A and Class AI-1B Certificates, up to an amount equal to the Group I Senior Principal Distribution Amount; and

 

(ii) from the Group II Principal Distribution Amount, to the Class AII-1 Certificates, up to an amount equal to the Group II Senior Principal Distribution Amount;

 

second, concurrently, as follows:,

 

(i) the Group I Principal Distribution Amount remaining after priority first (i) above, to the Class AII-1 Certificates, up to an amount equal to the Group II Senior Principal Distribution Amount not paid pursuant to priority first (ii) above; and

 

(ii) the Group II Principal Distribution Amount remaining after priority first (ii) above, up to an amount equal to the Group I Senior Principal Distribution Amount not paid pursuant to priority first (i) above, (a) with respect to each Distribution Date on which a Sequential Trigger Event is not in effect, concurrently, to the Class AI-1A and Class AI-1B Certificates, pro rata, and (b) with respect to each Distribution Date on which a Sequential Trigger Event is in effect, sequentially, to the Class AI-1A and Class AI-1B Certificates;

 

third, to the Class M-1 Certificates, up to the Class M-1 Principal Distribution Amount;

 

fourth, to the Class M-2 Certificates, up to the Class M-2 Principal Distribution Amount;

 

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fifth, to the Class M-3 Certificates, up to the Class M-3 Principal Distribution Amount;

 

sixth, to the Class M-4 Certificates, up to the Class M-4 Principal Distribution Amount;

 

seventh, to the Class M-5 Certificates, up to the Class M-5 Principal Distribution Amount;

 

eighth, to the Class M-6 Certificates, up to the Class M-6 Principal Distribution Amount;

 

ninth, to the Class M-7 Certificates, up to the Class M-7 Principal Distribution Amount;

 

tenth, to the Class M-8 Certificates, up to the Class M-8 Principal Distribution Amount;

 

eleventh, to the Class M-9 Certificates, up to the Class M-9 Principal Distribution Amount;

 

twelfth, to the Class M-10 Certificates, up to the Class M-10 Principal Distribution Amount;

 

thirteenth, to the Class M-11 Certificates, up to the Class M-11 Principal Distribution Amount;

 

fourteenth, to the Class M-12 Certificates, up to the Class M-12 Principal Distribution Amount;

 

fifteenth, to the Class M-13 Certificates, up to the Class M-13 Principal Distribution Amount;

 

sixteenth, to the Class M-14 Certificates, up to the Class M-14 Principal Distribution Amount; and

 

seventeenth, any remaining Principal Distribution Amount will be distributed as part of the Monthly Excess Cashflow Amount as described below under “—Application of Monthly Excess Cashflow Amounts.”

 

For purposes of the foregoing, the following terms will have the respective meanings set forth below.

 

Class M-1 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date) and (ii) the Principal Balance of the Class M-1 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 72.50% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-2 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date) and (iii) the Principal Balance of the Class M-2 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 77.30% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-3 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date) and (iv) the Principal Balance of the Class M-3 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 80.20% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-4 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such

 

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Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date) and (v) the Principal Balance of the Class M-4 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 82.70% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-5 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date) and (vi) the Principal Balance of the Class M-5 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 85.00% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-6 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date) and (vii) the Principal Balance of the Class M-6 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 87.00% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-7 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date) and (viii) the Principal Balance of the Class M-7 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 89.00% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-8 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such

 

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Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking payments into account the payments of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking payments into account the payments of the Class M-7 Principal Distribution Amount on such Distribution Date) and (ix) the Principal Balance of the Class M-8 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 90.40% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-9 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date) and (x) the Principal Balance of the Class M-9 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 92.40% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-10 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (x) the Principal Balance of the Class M-9 Certificates (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Distribution Date) and (xi) the Principal Balance of the Class M-10 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 94.40% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

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Class M-11 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (x) the Principal Balance of the Class M-9 Certificates (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Distribution Date), (xi) the Principal Balance of the Class M-10 Certificates (after taking into account the payment of the Class M-10 Principal Distribution Amount on such Distribution Date) and (xii) the Principal Balance of the Class M-11 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 95.60% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-12 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (x) the Principal Balance of the Class M-9 Certificates (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Distribution Date), (xi) the Principal Balance of the Class M-10 Certificates (after taking into account the payment of the Class M-10 Principal Distribution Amount on such Distribution Date), (xii) the Principal Balance of the Class M-11 Certificates (after taking into account the payment of the Class M-11 Principal Distribution Amount on such Distribution Date) and (xiii) the Principal Balance of the Class M-12 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 97.10% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-13 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the

 

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payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (x) the Principal Balance of the Class M-9 Certificates (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Distribution Date), (xi) the Principal Balance of the Class M-10 Certificates (after taking into account the payment of the Class M-10 Principal Distribution Amount on such Distribution Date), (xii) the Principal Balance of the Class M-11 Certificates (after taking into account the payment of the Class M-11 Principal Distribution Amount on such Distribution Date), (xiii) the Principal Balance of the Class M-12 Certificates (after taking into account the payment of the Class M-12 Principal Distribution Amount on such Distribution Date) and (xiv) the Principal Balance of the Class M-13 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 97.90% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Class M-14 Principal Distribution Amount” means as of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (x) the sum of (i) the sum of the Principal Balances of the Class A Certificates (after taking into account the payment of the Senior Principal Distribution Amount on such Distribution Date), (ii) the Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (iii) the Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (v) the Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (vi) the Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (vii) the Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), (viii) the Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (ix) the Principal Balance of the Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (x) the Principal Balance of the Class M-9 Certificates (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Distribution Date), (xi) the Principal Balance of the Class M-10 Certificates (after taking into account the payment of the Class M-10 Principal Distribution Amount on such Distribution Date), (xii) the Principal Balance of the Class M-11 Certificates (after taking into account the payment of the Class M-11 Principal Distribution Amount on such Distribution Date), (xiii) the Principal Balance of the Class M-12 Certificates (after taking into account the payment of the Class M-12 Principal Distribution Amount on such Distribution Date), (xiv) the Principal Balance of the Class M-13 Certificates (after taking into account the payment of the Class M-13 Principal Distribution Amount on such Distribution Date) and (xv) the Principal Balance of the Class M-14 Certificates immediately prior to such Distribution Date over (y) the lesser of (a) the product of (i) approximately 98.50% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor.

 

Extra Principal Distribution Amount” means as of any Distribution Date, the lesser of (x) the Monthly Excess Interest Amount for such Distribution Date, after reduction (but not below zero) by any Current Interest Shortfall and (y) the Overcollateralization Deficiency for such Distribution Date.

 

Group I Overcollateralization Floor” means as of any Distribution Date, the amount by which the aggregate unpaid principal balance of the Group I Mortgage Loans as of the last day of the related Collection Period exceeds the product of (i) 0.50% and (ii) the aggregate unpaid principal balance of the Group I Mortgage Loans on the Cutoff Date.

 

Group I Principal Distribution Amount” means with respect to any Distribution Date, (a) the product of (i) the Group I Principal Percentage and (ii) the sum of (A) the Principal Remittance Amount and (B) the Extra Principal Distribution Amount minus (b) the Group I Principal Percentage of the Overcollateralization Release Amount.

 

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Group I Principal Percentage” means with respect to any Distribution Date and any Class AI Certificates, the percentage equivalent to a fraction, the numerator of which is the portion of the Principal Remittance Amount attributable to the Group I Mortgage Loans for such Distribution Date, and the denominator of which is equal to the Principal Remittance Amount for such Distribution Date.

 

Group I Senior Principal Distribution Amount” means as of any Distribution Date, the excess of (a) the aggregate Principal Balance of the Class AI Certificates immediately prior to such Distribution Date over (b) the lesser of (x) the product of (1) approximately 67.40% and (2) the aggregate unpaid principal balance of the Group I Mortgage Loans as of the last day of the related Collection Period and (y) the Group I Overcollateralization Floor.

 

Group II Overcollateralization Floor” means as of any Distribution Date, the amount by which the aggregate unpaid principal balance of the Group II Mortgage Loans as of the last day of the related Collection Period exceeds the product of (i) 0.50% and (ii) the aggregate unpaid principal balance of the Group II Mortgage Loans on the Cut-off Date.

 

Group II Principal Distribution Amount” means with respect to any Distribution Date, (a) the product of (i) the Group II Principal Percentage and (ii) the sum of (A) the Principal Remittance Amount and (B) the Extra Principal Distribution Amount minus (b) the Group II Principal Percentage of the Overcollateralization Release Amount.

 

Group II Principal Percentage” means with respect to any Distribution Date and the Class AII Certificates, the percentage equivalent to a fraction, the numerator of which is the portion of the Principal Remittance Amount attributable to the Group II Mortgage Loans for such Distribution Date, and the denominator of which is equal to the Principal Remittance Amount for such Distribution Date.

 

Group II Senior Principal Distribution Amount” means as of any Distribution Date, the excess of (a) the Principal Balance of the Class AII Certificates immediately prior to such Distribution Date over (b) the lesser of (x) the product of (1) approximately 67.40% and (2) the aggregate unpaid principal balance of the Group II Mortgage Loans as of the last day of the related Collection Period and (y) the Group II Overcollateralization Floor.

 

Overcollateralization Amount” means as of any Distribution Date the excess, if any, of (x) the Pool Balance as of the last day of the related Collection Period over (y) the aggregate Principal Balance of all Classes of Certificates (after taking into account all distributions of principal on such Distribution Date and the increase of any Principal Balance as a result of Subsequent Recoveries).

 

Overcollateralization Deficiency” means as of any Distribution Date, the excess, if any, of (x) the Targeted Overcollateralization Amount for such Distribution Date over (y) the Overcollateralization Amount for such Distribution Date, calculated for this purpose after taking into account the reduction on such Distribution Date of the Principal Balances of all Classes of Certificates resulting from the distribution of the Principal Distribution Amount (but not the Extra Principal Distribution Amount) on such Distribution Date, but prior to taking into account any Applied Realized Loss Amounts on such Distribution Date.

 

Overcollateralization Floor” means as of any Distribution Date, the amount by which the Pool Balance as of the last day of the related Collection Period exceeds the product of (i) 0.50% and (ii) the Pool Balance on the Cutoff Date.

 

Overcollateralization Release Amount” means with respect to any Distribution Date on or after the Stepdown Date on which a Trigger Event is not in effect, the lesser of (x) the Principal Remittance Amount and (y) the excess, if any, of (i) the Overcollateralization Amount for such Distribution Date, assuming that 100% of the Principal Remittance Amount is applied as a principal payment on the Certificates on such Distribution Date over (ii) the Targeted Overcollateralization Amount for such Distribution Date. With respect to any Distribution Date on which a Trigger Event is in effect, the Overcollateralization Release Amount will be zero.

 

The “Principal Balance” with respect to any Class of Certificates (other than the Class CE, Class P and Class R Certificates, which have no Principal Balance) and any Distribution Date, will equal the principal balance of such Class on the date of the initial issuance of the Certificates as reduced, but not below zero, by:

 

    all amounts distributed on previous Distribution Dates on such Class on account of principal; and

 

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    any Applied Realized Loss Amounts allocated to such Class for previous Distribution Dates; and increased by:

 

    any Subsequent Recoveries allocated to such Class for previous Distribution Dates.

 

Principal Distribution Amount” means as of any Distribution Date, (a) the sum of (i) the Principal Remittance Amount and (ii) the Extra Principal Distribution Amount, if any, minus (b) the Overcollateralization Release Amount, if any.

 

Principal Remittance Amount” means with respect to any Distribution Date, to the extent of funds available therefor as described herein, the amount equal to the sum (less certain amounts available for reimbursement of Advances and Servicing Advances as described in the prospectus under “Description of the Securities—Advances in Respect of Delinquencies,” certain amounts in respect of indemnification and certain other reimbursable expenses pursuant to the Pooling and Servicing Agreement) of the following amounts (without duplication) with respect to the Mortgage Loans and the immediately preceding Collection Period:

 

(i) each payment of principal on a Mortgage Loan due during such Collection Period and received by the Servicer on or prior to the Determination Date for such Distribution Date, including any Advances with respect thereto,

 

(ii) all full and partial principal prepayments received by the Servicer during the related Prepayment Period,

 

(iii) the insurance proceeds (including any amounts received under the LPMI Policies), Subsequent Recoveries and liquidation proceeds (net of certain expenses) allocable to principal actually collected by the Servicer during the related Prepayment Period,

 

(iv) the portion of the Purchase Price allocable to principal of all repurchased Defective Mortgage Loans with respect to such Prepayment Period,

 

(v) any Substitution Adjustments received during the related Prepayment Period, and

 

(vi) on the Distribution Date on which the Trust is to be terminated in accordance with the Pooling and Servicing Agreement, that portion of the Termination Price in respect of principal.

 

Senior Enhancement Percentage” for any Distribution Date is the percentage obtained by dividing (x) the sum of (i) the aggregate Principal Balance of the Class M Certificates before taking into account the distribution of the Principal Distribution Amount on such Distribution Date and (ii) the Overcollateralization Amount as of the prior Distribution Date by (y) the Pool Balance as of the last day of the related Collection Period.

 

Senior Principal Distribution Amount” means as of any Distribution Date, the sum of the Group I Senior Principal Distribution Amount for such Distribution Date and the Group II Senior Principal Distribution Amount for such Distribution Date.

 

Senior Specified Enhancement Percentage” means approximately 32.60%.

 

60+ Day Delinquent Loan” means each Mortgage Loan (including each Mortgage Loan in foreclosure and each Mortgage Loan for which the mortgagor has filed for bankruptcy after the Closing Date) with respect to which any portion of a Monthly Payment is, as of the last day of the prior Collection Period, two months or more past due and each Mortgage Loan relating to an REO Property.

 

A “Sequential Trigger Event” has occurred if (a) with respect to any Distribution Date, the Class M Certificates are no longer outstanding, (b) with respect to any Distribution Date on or prior to the Distribution Date in July 2007, the aggregate amount of Realized Losses incurred since the Cut-off Date through the last day of the related Collection Period (reduced by the aggregate amount of Subsequent Recoveries received since the Cut-off Date through the last day of the related Collection Period) divided by the Pool Balance on the Cut-off Date exceeds 1.25% or (c) with respect to any Distribution Date on or after the Distribution Date in July 2007, a Trigger Event is in effect.

 

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Stepdown Date” means the earlier to occur of (i) the Distribution Date on which the aggregate Principal Balance of the Class A Certificates is reduced to zero and (ii) the later to occur of (x) the Distribution Date in July 2008 and (y) the Distribution Date on which the Senior Enhancement Percentage is greater than or equal to the Senior Specified Enhancement Percentage.

 

Subsequent Recovery” means any amount (net of reimbursable expenses) received on a Mortgage Loan subsequent to such Mortgage Loan being determined to be a Liquidated Mortgage Loan that resulted in a Realized Loss in a prior month. If Subsequent Recoveries are received, they will be included as part of the Principal Remittance Amount for the Distribution Date relating to the Prepayment Period in which received and distributed in accordance with the priorities described herein. In addition, after giving effect to all distributions on a Distribution Date, the Unpaid Realized Loss Amount for the Class of Class M Certificates then outstanding with the highest distribution priority will be decreased by the amount of such Subsequent Recoveries until reduced to zero (with any remaining Subsequent Recoveries applied to reduce the Unpaid Realized Loss Amount of the Class with the next highest distribution priority), and the Principal Balance of such Class or Classes of the Class M Certificates will be increased by the same amount.

 

Targeted Overcollateralization Amount” means as of any Distribution Date, (x) prior to the Stepdown Date, approximately 0.75% of the Pool Balance on the Cut-off Date and (y) on and after the Stepdown Date, (i) if a Trigger Event has not occurred for such Distribution Date, the greater of (a) approximately 1.50% of the Pool Balance as of the last day of the related Collection Period and (b) 0.50% of the Pool Balance on the Cut-off Date and (ii) if a Trigger Event has occurred for such Distribution Date, the Targeted Overcollateralization Amount for the immediately preceding Distribution Date.

 

The level of overcollateralization for any Distribution Date is required to be equal to or greater than the Targeted Overcollateralization Amount. The Targeted Overcollateralization Amount is initially approximately $9,420,035.

 

A “Trigger Event” has occurred on a Distribution Date if (i) the three-month rolling average of 60+ Day Delinquent Loans equals or exceeds 41.00% of the Senior Enhancement Percentage or (ii) the aggregate amount of Realized Losses incurred since the Cut-off Date through the last day of the related Collection Period (reduced by the aggregate amount of Subsequent Recoveries received since the Cut-off Date through the last day of the related Collection Period) divided by the Pool Balance on the Cut-off Date exceeds the applicable percentages set forth below with respect to such Distribution Date:

 

Distribution Date Occurring In


   Percentage

 

July 2007 through June 2008

   1.25 %

July 2008 through June 2009

   2.50 %

July 2009 through June 2010

   4.00 %

July 2010 through June 2011

   4.75 %

July 2011 and thereafter

   5.00 %

 

Allocation of Losses

 

Realized Losses will, in effect, be absorbed first by the Class CE Certificates, through the application of the Monthly Excess Interest Amount, to the extent available, to fund such deficiency, as well as through a reduction in the Overcollateralization Amount.

 

If, after giving effect to the distribution of the Principal Distribution Amount on any Distribution Date and the increase of any Principal Balances as a result of Subsequent Recoveries, the aggregate Principal Balance of the Certificates exceeds the Pool Balance as of the end of the related Collection Period, such excess will be allocated to the Class M-14, Class M-13, Class M-12, Class M-11, Class M-10, Class M-9, Class M-8, Class M-7, Class M-6, Class M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, in that order, until their respective Principal Balances are reduced to zero. Any such reduction of a Principal Balance will not be reversed or reinstated unless there are Subsequent Recoveries; provided, however, that once the Principal Balance of a Class is reduced to zero, such Class will not be entitled to any Subsequent Recoveries. However, on future Distribution Dates, Certificateholders of the related Class may receive amounts in respect of prior reductions in the related Principal

 

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Balances as described below. The amount of any allocation of such excess in reduction of a Principal Balance of a Class M Certificate is referred to as an Applied Realized Loss Amount.” The Principal Balances of the Class A Certificates will not be reduced by any Applied Realized Loss Amounts; however, under certain loss scenarios, there will not be enough interest and principal on the Mortgage Loans to pay such Classes of Certificates all interest and principal amounts to which they are entitled, particularly with respect to the Class AI-1B Certificates, which, when a Sequential Trigger Event is in effect will not receive any payments of principal until the Principal Balance of the Class AI-1A Certificates has been reduced to zero.

 

If, on the final Distribution Date, after giving effect to the distribution of the Principal Distribution Amount and the increase of any Principal Balances as a result of Subsequent Recoveries, the Principal Balances of the Class M Certificates have been reduced to zero and (a) the aggregate Principal Balance of the Class AI Certificates exceeds the aggregate unpaid principal balance of the Group I Mortgage Loans as of the end of the related Collection Period, such excess will be allocated to the Class AI-1B and the Class AI-1A Certificates, in that order, until their respective Principal Balances are reduced to zero or (b) the Principal Balance of the Class AII Certificates exceeds the aggregate unpaid principal balance of the Group II Mortgage Loans as of the end of the related Collection Period, such excess will be allocated to the Class AII-1 Certificates until their Principal Balance is reduced to zero.

 

Application of Monthly Excess Cashflow Amounts

 

The interest rates on Mortgage Loans are generally expected to be higher than the interest rates on the Certificates, thus generating certain excess interest collections which, in the absence of losses, will not be necessary to fund interest distributions on the Certificates. This excess interest for a Collection Period, together with interest on the Overcollateralization Amount itself, is the Monthly Excess Interest Amount.”

 

The “Net Mortgage Interest Rate” for each Mortgage Loan is the applicable Mortgage Interest Rate less the sum of (i) the Servicing Fee Rate and (ii) the Credit Risk Manager Fee Rate.

 

If Realized Losses occur that are not covered by the Monthly Excess Cashflow Amount, such Realized Losses will result in an Overcollateralization Deficiency (since they will reduce the Pool Balance without giving rise to a corresponding reduction of the aggregate Principal Balance of the Certificates). The cashflow priorities of the Trust Fund in this situation increase the Extra Principal Distribution Amount (subject to the availability of any Monthly Excess Cashflow Amount in subsequent months) for the purpose of re-establishing the Overcollateralization Amount at the then-required Targeted Overcollateralization Amount.

 

On and after the Stepdown Date and assuming that a Trigger Event is not in effect, the Targeted Overcollateralization Amount may be permitted to decrease or “stepdown.” If the Targeted Overcollateralization Amount is permitted to stepdown on a Distribution Date, the Pooling and Servicing Agreement permits a portion of the Principal Remittance Amount for such Distribution Date not to be passed through as a distribution of principal on the Certificates on such Distribution Date. This has the effect of decelerating the amortization of the Certificates relative to the Pool Balance, thereby reducing the actual level of the Overcollateralization Amount to the new, lower Targeted Overcollateralization Amount. This portion of the Principal Remittance Amount not distributed as principal on the Certificates therefore releases overcollateralization from the Trust Fund.

 

On any Distribution Date, the sum of (a) the Monthly Excess Interest Amount remaining after the application of such amount to cover any Current Interest Shortfall and to fund the Extra Principal Distribution Amount, (b) the Overcollateralization Release Amount and (c) any portion of the Principal Distribution Amount (without duplication) remaining after principal distributions on the Certificates is the Monthly Excess Cashflow Amount,” which is required to be applied in the following order of priority (the “Monthly Excess Cashflow Allocation”) on such Distribution Date:

 

(i) to the Class A Certificates, pro rata, any remaining Accrued Certificate Interest for such Distribution Date;

 

(ii) to the Class A Certificates, pro rata, any Interest Carry Forward Amounts for such Classes for such Distribution Date;

 

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(iii) to the Class M-1 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(iv) to the Class M-1 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(v) to the Class M-1 Certificates, any Class M-1 Realized Loss Amortization Amount for such Distribution Date;

 

(vi) to the Class M-2 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(vii) to the Class M-2 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(viii) to the Class M-2 Certificates, any Class M-2 Realized Loss Amortization Amount for such Distribution Date;

 

(ix) to the Class M-3 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(x) to the Class M-3 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xi) to the Class M-3 Certificates, any Class M-3 Realized Loss Amortization Amount for such Distribution Date;

 

(xii) to the Class M-4 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xiii) to the Class M-4 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xiv) to the Class M-4 Certificates, any Class M-4 Realized Loss Amortization Amount for such Distribution Date;

 

(xv) to the Class M-5 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xvi) to the Class M-5 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xvii) to the Class M-5 Certificates, any Class M-5 Realized Loss Amortization Amount for such Distribution Date;

 

(xviii) to the Class M-6 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xix) to the Class M-6 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xx) to the Class M-6 Certificates, any Class M-6 Realized Loss Amortization Amount for such Distribution Date;

 

(xxi) to the Class M-7 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

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(xxii) to the Class M-7 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxiii) to the Class M-7 Certificates, any Class M-7 Realized Loss Amortization Amount for such Distribution Date;

 

(xxiv) to the Class M-8 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xxv) to the Class M-8 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxvi) to the Class M-8 Certificates, any Class M-8 Realized Loss Amortization Amount for such Distribution Date;

 

(xxvii) to the Class M-9 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xxviii) to the Class M-9 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxix) to the Class M-9 Certificates, any Class M-9 Realized Loss Amortization Amount for such Distribution Date;

 

(xxx) to the Class M-10 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xxxi) to the Class M-10 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxxii) to the Class M-10 Certificates, any Class M-10 Realized Loss Amortization Amount for such Distribution Date;

 

(xxxiii) to the Class M-11 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xxxiv) to the Class M-11 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxxv) to the Class M-11 Certificates, any Class M-11 Realized Loss Amortization Amount for such Distribution Date;

 

(xxxvi) to the Class M-12 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xxxvii) to the Class M-12 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xxxviii) to the Class M-12 Certificates, any Class M-12 Realized Loss Amortization Amount for such Distribution Date;

 

(xxxix) to the Class M-13 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xl) to the Class M-13 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

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(xli) to the Class M-13 Certificates, any Class M-13 Realized Loss Amortization Amount for such Distribution Date;

 

(xlii) to the Class M-14 Certificates, any remaining Accrued Certificate Interest for such Distribution Date;

 

(xliii) to the Class M-14 Certificates, any Interest Carry Forward Amount for such Class for such Distribution Date;

 

(xliv) to the Class M-14 Certificates, any Class M-14 Realized Loss Amortization Amount for such Distribution Date;

 

(xlv) sequentially, as follows:

 

(a) concurrently, to the Class A Certificates, pro rata (based on the outstanding Principal Balance of each such Class) any Cap Carryover Amount for such Class, after giving effect to any amounts received from the applicable Reserve Account;

 

(b) concurrently, to the Class A Certificates, pro rata (based on the remaining unpaid Cap Carryover Amount for each such Class after distributions pursuant to clause (xlv)(a) above) any remaining unpaid Cap Carryover Amount for such Class, after giving effect to any distributions pursuant to clause (xlv)(a) above; and

 

(c) sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11, Class M-12, Class M-13 and Class M-14 Certificates, any Cap Carryover Amount for such Class, after giving effect to any amounts received from the applicable Reserve Account; and

 

(xlvi) to the Class CE Certificates, in the amounts specified in the Pooling and Servicing Agreement.

 

Notwithstanding the foregoing, once the Principal Balance of a Class A or Class M Certificate is reduced to zero, it will not be entitled to any further distributions from the Monthly Excess Cashflow Amount.

 

For purposes of the foregoing, the following terms will have the respective meanings set forth below.

 

Class M-1 Realized Loss Amortization Amount” means as to the Class M-1 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-1 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (iv) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-2 Realized Loss Amortization Amount” means as to the Class M-2 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-2 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (vii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-3 Realized Loss Amortization Amount” means as to the Class M-3 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-3 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (x) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-4 Realized Loss Amortization Amount” means as to the Class M-4 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-4 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xiii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-5 Realized Loss Amortization Amount” means as to the Class M-5 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-5 Certificates as of such

 

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Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xvi) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-6 Realized Loss Amortization Amount” means as to the Class M-6 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-6 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xix) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-7 Realized Loss Amortization Amount” means as to the Class M-7 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-7 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-8 Realized Loss Amortization Amount” means as to the Class M-8 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amounts for the Class M-8 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxv) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-9 Realized Loss Amortization Amount” means as to the Class M-9 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-9 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxviii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-10 Realized Loss Amortization Amount” means as to the Class M-10 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-10 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxxi) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-11 Realized Loss Amortization Amount” means as to the Class M-11 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-11 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxxiv) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-12 Realized Loss Amortization Amount” means as to the Class M-12 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-12 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xxxvii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-13 Realized Loss Amortization Amount” means as to the Class M-13 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-13 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xl) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Class M-14 Realized Loss Amortization Amount” means as to the Class M-14 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for the Class M-14 Certificates as of such Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in clauses (i) through (xliii) of the Monthly Excess Cashflow Allocation for such Distribution Date.

 

Realized Loss Amortization Amount” means each of the Class M-1 Realized Loss Amortization Amount, the Class M-2 Realized Loss Amortization Amount, the Class M-3 Realized Loss Amortization Amount, the Class M-4 Realized Loss Amortization Amount, the Class M-5 Realized Loss Amortization Amount, the Class M-6 Realized Loss Amortization Amount, the Class M-7 Realized Loss Amortization Amount, the Class M-8 Realized Loss Amortization Amount, the Class M-9 Realized Loss Amortization Amount, the Class M-10 Realized Loss Amortization Amount, the Class M-11 Realized Loss Amortization Amount, the Class M-12 Realized Loss Amortization Amount, the Class M-13 Realized Loss Amortization Amount and the Class M-14 Realized Loss Amortization Amount.

 

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Unpaid Realized Loss Amount” means for any Class of Class M Certificates and as to any Distribution Date, the excess of (x) the cumulative amount of related Applied Realized Loss Amounts allocated to such Class for all prior Distribution Dates, as described under “—Allocation of Losses” above, over (y) the sum of (a) the cumulative amount of any Subsequent Recoveries allocated to such Class and (b) the cumulative amount of related Realized Loss Amortization Amounts with respect to such class for all prior Distribution Dates.

 

Pass-Through Rates

 

Interest for each Distribution Date will accrue on the interest-bearing Certificates during the related Interest Accrual Period at a per annum rate (the “Pass-Through Rate”) equal to the least of (i) one-month LIBOR plus the applicable certificate margin set forth in the table below, (ii) the applicable Maximum Rate Cap (the lesser of (i) and (ii) for each such Class, the “Formula Rate”) and (iii) the applicable Cap for such Distribution Date. During each Interest Accrual Period relating to the Distribution Dates after the optional termination date, each of the certificate margins will be “stepped-up” to the applicable margin set forth in the table below if the optional termination right is not exercised.

 

Class


   Certificate Margin

    Stepped Up Certificate
Margin


 

Class AI-1A

   0.220 %   0.440 %

Class AI-1B

   0.280 %   0.560 %

Class AII-1

   0.230 %   0.460 %

Class M-1

   0.410 %   0.615 %

Class M-2

   0.430 %   0.645 %

Class M-3

   0.480 %   0.720 %

Class M-4

   0.610 %   0.915 %

Class M-5

   0.630 %   0.945 %

Class M-6

   0.660 %   0.990 %

Class M-7

   1.050 %   1.575 %

Class M-8

   1.150 %   1.725 %

Class M-9

   1.700 %   2.550 %

Class M-10

   2.500 %   3.750 %

Class M-11

   2.500 %   3.750 %

Class M-12

   2.500 %   3.750 %

Class M-13

   2.500 %   3.750 %

Class M-14

   2.400 %   3.600 %

 

With respect to the Class A and Class M Certificates, interest in respect of any Distribution Date will accrue during the related Interest Accrual Period on the basis of a 360-day year and the actual number of days elapsed.

 

The “Group I Cap” for any Distribution Date and for the Class AI Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period) equal to the average of the Net Mortgage Interest Rates for the Group I Mortgage Loans, weighted on the basis of the unpaid principal balance of the Group I Mortgage Loans as of the first day of the related Collection Period.

 

The “Group II Cap” for any Distribution Date and for the Class AII Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period) equal to the average of the Net Mortgage Interest Rates for the Group II Mortgage Loans, weighted on the basis of the unpaid principal balance of the Group II Mortgage Loans as of the first day of the related Collection Period.

 

The “Pool Cap” for any Distribution Date and for the Class M Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period) equal to the weighted average of the Group I Cap and the Group II Cap, weighted on the basis of the related Group Subordinate Amount.

 

Each of the Group I Cap, the Group II Cap and the Pool Cap is sometimes referred to in this prospectus supplement as a Cap.”

 

The “Group I Maximum Rate Cap” for any Distribution Date and for the Class AI Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period)

 

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equal to the average of the Net Rate Ceilings for the Adjustable Rate Mortgage Loans in Loan Group I and the Net Mortgage Interest Rates for the Fixed Rate Mortgage Loans in Loan Group I, weighted on the basis of the unpaid principal balance of the Group I Mortgage Loans as of the first day of the related Collection Period.

 

The “Group II Maximum Rate Cap” for any Distribution Date and for the Class AII Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period) equal to the average of the Net Rate Ceilings for the Adjustable Rate Mortgage Loans in Loan Group II and the Net Mortgage Interest Rates for the Fixed Rate Mortgage Loans in Loan Group II, weighted on the basis of the unpaid principal balance of the Group II Mortgage Loans as of the first day of the related Collection Period.

 

The “Group Subordinate Amount” for any Distribution Date and (i) Loan Group I, will be equal to the greater of zero and the excess of the aggregate unpaid principal balance of the Group I Mortgage Loans as of the first day of the related Collection Period over the aggregate Principal Balance of the Class AI Certificates immediately prior to such Distribution Date and (ii) Loan Group II, will be equal to the greater of zero and the excess of the aggregate unpaid principal balance of the Group II Mortgage Loans as of the first day of the related Collection Period over the Principal Balance of the Class AII Certificates immediately prior to such Distribution Date.

 

The “Pool Maximum Rate Cap” for any Distribution Date and for the Class M Certificates will be a per annum rate (subject to adjustment based on the actual number of days elapsed in the related Interest Accrual Period) equal to the weighted average of the (i) the Group I Maximum Rate Cap and (ii) the Group II Maximum Rate Cap, weighted on the basis of the related Group Subordinate Amount.

 

Each of the Group I Maximum Rate Cap, the Group II Maximum Rate Cap and the Pool Maximum Rate Cap is sometimes referred to in this prospectus supplement as a Maximum Rate Cap.”

 

If on any Distribution Date, the Accrued Certificate Interest for any Certificate is based on a Cap, the excess of (i) the amount of interest such Certificate would have been entitled to receive on such Distribution Date if the Accrued Certificate Interest for such Certificate were not based on a Cap over (ii) the amount of interest such Certificate received on such Distribution Date based on the Cap, together with the unpaid portion of any such excess from prior Distribution Dates (and interest accrued thereon at the then applicable Formula Rate on such Certificate) will be the Cap Carryover Amount.” Any Cap Carryover Amount will be paid on the same or future Distribution Dates from amounts in the Reserve Accounts as set forth herein under “—The Yield Maintenance Agreements,” and then, to the extent remaining unpaid, from amounts that would otherwise be distributed on the Class CE Certificates.

 

The “Net Rate Ceiling” for each Adjustable Rate Mortgage Loan is the applicable Rate Ceiling less the sum of (i) the Servicing Fee Rate and (ii) the Credit Risk Manager Fee Rate.

 

The Yield Maintenance Agreements

 

The Securities Administrator on behalf of the Trust Fund will enter into (i) a yield maintenance agreement with Bear Stearns Financial Products Inc., as counterparty (the “Counterparty”), which will be for the benefit of the Class AI Certificates (the “Class AI Yield Maintenance Agreement”), (ii) a yield maintenance agreement with the Counterparty, which will be for the benefit of the Class AII Certificates (the “Class AII Yield Maintenance Agreement”) and (iii) a yield maintenance agreement with the Counterparty, which will be for the benefit of the Class M Certificates (the “Class M Yield Maintenance Agreement” and, collectively with the Class AI Yield Maintenance and the Class AII Yield Maintenance Agreement, the “Yield Maintenance Agreements”).

 

Pursuant to the Class AI Yield Maintenance Agreement, if, with respect to any Distribution Date on or prior to the Distribution Date in April 2008, one-month LIBOR as calculated for the Interest Accrual Period for the Class AI Certificates relating to such Distribution Date exceeds the applicable lower strike rate for such Distribution Date, the Counterparty will be obligated to pay to the Securities Administrator two business days prior to such Distribution Date, for deposit into the Class AI Reserve Account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the applicable upper strike rate for such Distribution Date over the lower strike rate for such Distribution Date, (b) the notional amount for such Distribution Date and (c) a fraction, the numerator of which is the actual number of days elapsed since the previous Distribution Date (or, in the case of the initial Distribution Date, the number of days elapsed since the Closing Date) to but excluding the current Distribution Date

 

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and the denominator of which is 360 (the “Class AI Yield Maintenance Agreement Payment”). The Class AI Yield Maintenance Agreement will terminate after the Distribution Date in April 2008.

 

Pursuant to the Class AII Yield Maintenance Agreement, if, with respect to any Distribution Date on or prior to the Distribution Date in April 2008, one-month LIBOR as calculated for the Interest Accrual Period for the Class AII Certificates relating to such Distribution Date exceeds the applicable lower strike rate for such Distribution Date, the Counterparty will be obligated to pay to the Securities Administrator two business days prior to such Distribution Date, for deposit into the Class AII Reserve Account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the applicable upper strike rate for such Distribution Date over the lower strike rate for such Distribution Date, (b) the notional amount for such Distribution Date and (c) a fraction, the numerator of which is the actual number of days elapsed since the previous Distribution Date (or, in the case of the initial Distribution Date, the number of days elapsed since the Closing Date) to but excluding the current Distribution Date and the denominator of which is 360 (the “Class AII Yield Maintenance Agreement Payment”). The Class AII Yield Maintenance Agreement will terminate after the Distribution Date in April 2008.

 

Pursuant to the Class M Yield Maintenance Agreement, if, with respect to any Distribution Date on or prior to the Distribution Date in April 2008, one-month LIBOR as calculated for the Interest Accrual Period for the Class M Certificates relating to such Distribution Date exceeds the applicable lower strike rate for such Distribution Date, the Counterparty will be obligated to pay to the Securities Administrator two business days prior to such Distribution Date, for deposit into the Class M Reserve Account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the applicable upper strike rate for such Distribution Date over the lower strike rate for such Distribution Date, (b) the notional amount for such Distribution Date and (c) a fraction, the numerator of which is the actual number of days elapsed since the previous Distribution Date (or, in the case of the initial Distribution Date, the number of days elapsed since the Closing Date) to but excluding the current Distribution Date and the denominator of which is 360 (the “Class M Yield Maintenance Agreement Payment”). The Class M Yield Maintenance Agreement will terminate after the Distribution Date in April 2008.

 

The upper strike rate, lower strike rate and notional amount applicable to each Yield Maintenance Agreement and each Distribution Date are set forth in the table for each Yield Maintenance Agreement in Annex I to this prospectus supplement.

 

There are certain periods prior to the expiration of each Yield Maintenance Agreement when the related notional amount is zero and, as a result, the Counterparty will not be required to make any payments under such Yield Maintenance Agreement for such periods.

 

The Class AI Yield Maintenance Agreement Payment, the Class AII Yield Maintenance Agreement Payment and the Class M Yield Maintenance Agreement Payment may each be referred to as a Yield Maintenance Agreement Payment.”

 

The Yield Maintenance Agreements will be governed by and construed in accordance with the law of the State of New York. The obligations of the Counterparty are limited to those specifically set forth in each Yield Maintenance Agreement.

 

The information set forth in this section with regard to Bear Stearns Financial Products Inc. and its affiliates has been provided to the Depositor or compiled from information provided to the Depositor by Bear Stearns Financial Products Inc. None of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Credit Risk Manager, the Underwriter or any of their respective affiliates has made any independent investigation of this information or has made or will make any representation as to the accuracy or completeness of this information.

 

The Counterparty, Bear Stearns Financial Products Inc. (“BSFP”), is a bankruptcy remote derivatives product company based in New York, New York that has been established as a wholly owned subsidiary of The Bear Stearns Companies, Inc. BSFP has a ratings classification of “AAA” from S&P and “Aaa” from Moody’s. BSFP will provide upon request, without charge, to each person to whom this prospectus supplement is delivered, a copy of (i) the ratings analysis from each of S&P and Moody’s evidencing those respective ratings or (ii) the most recent audited annual financial statements of BSFP. Request for information should be directed to the DPC Manager of Bear Stearns Financial Products Inc. at (212) 272-4009 or in writing at 383 Madison Avenue, Suite 2700, New York, New York 10179.

 

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Reserve Accounts

 

Pursuant to the Pooling and Servicing Agreement, the Securities Administrator will establish three separate trust accounts (the “Class AI Reserve Account,” the “Class AII Reserve Account” and the “Class M Reserve Account” and each, a “Reserve Account”) for deposit of the respective Yield Maintenance Agreement Payments received under each Yield Maintenance Agreement.

 

Holders of a Certificate entitled to receive payments under a Yield Maintenance Agreement will be entitled to receive the related Yield Maintenance Agreement Payments, if any, deposited into the related Reserve Account with respect to any Distribution Date to the extent of any Cap Carryover Amounts on such Certificate for any Distribution Date. Each Reserve Account will be funded solely from amounts received by the Securities Administrator from the related Yield Maintenance Agreement Payments. Once the Principal Balance of a Certificate is reduced to zero, such Certificate will not be entitled to any further payments of Cap Carryover Amounts.

 

Any distribution by the Securities Administrator from amounts in the Reserve Accounts will be made on the applicable Distribution Date in the following order of priority:

 

(i) to the Class AI Certificates, from the Class AI Reserve Account, in each case only up to the Cap Amount for the related Class, any Cap Carryover Amounts for such Classes for such Distribution Date, distributed concurrently, to the Class AI-1A and Class AI-1B Certificates;

 

(ii) to the Class AII Certificates from the Class AII Reserve Account, any Cap Carryover Amounts for such Class for such Distribution Date;

 

(iii) to the Class AI Certificates, from the Class AI Reserve Account, without regard to the Cap Amount for the related Class, any remaining unpaid Cap Carryover Amounts for such Classes for such Distribution Date (after distributions pursuant to clause (i) above), distributed concurrently, to the Class AI-1A and Class AI-1B Certificates, pro rata (based on their respective remaining Cap Carryover Amounts);

 

(iv) to the Class M Certificates, from the Class M Reserve Account, in each case only up to the Cap Amount for the related Class, any Cap Carryover Amounts for such Classes for such Distribution Date, distributed concurrently, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11, Class M-12, Class M-13 and Class M-14 Certificates;

 

(v) to the Class M Certificates, from the Class M Reserve Account, without regard to the Cap Amount for the related Class, any remaining unpaid Cap Carryover Amounts for such Classes for such Distribution Date (after distributions pursuant to clause (iv) above), distributed concurrently, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11, Class M-12, Class M-13 and Class M-14 Certificates, pro rata, based on their respective remaining Cap Carryover Amounts; and

 

(vi) to the Class CE Certificates, any remaining amount on deposit in the Reserve Accounts.

 

The “Cap Amount” for (a) either Class of Class AI Certificates and any Distribution Date is equal to (i) the Class AI Yield Maintenance Agreement Payment for such Distribution Date multiplied by (ii) a fraction equal to (A) the Principal Balance of such Class immediately prior to such Distribution Date divided by (B) the sum of the Principal Balances of the Class AI Certificates immediately prior to such Distribution Date; and (b) any Class of Class M Certificates and any Distribution Date is equal to (i) the Class M Yield Maintenance Agreement Payment for such Distribution Date multiplied by (ii) a fraction equal to (A) the Principal Balance of such Class immediately prior to such Distribution Date divided by (B) the sum of the Principal Balances of the Class M Certificates immediately prior to such Distribution Date.

 

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DESCRIPTION OF THE MORTGAGE LOANS(1)

 

General

 

The mortgage loans to be included in the Trust Fund will be subprime, fixed rate and adjustable rate, conventional, monthly pay, one- to four-family, residential first lien mortgage loans (the “Mortgage Loans”). The Mortgage Loans will be divided into two loan groups (“Loan Group I” and “Loan Group II,” respectively, and each, a “Loan Group”). The Mortgage Loans in Loan Group I are sometimes referred to as the “Group I Mortgage Loans” and the Mortgage Loans in Loan Group II are sometimes referred to as the “Group II Mortgage Loans.” The Group I Mortgage Loans will consist of Fixed Rate Mortgage Loans and Adjustable Rate Mortgage Loans, with original principal balances that conform to Fannie Mae and Freddie Mac guidelines. The Group II Mortgage Loans will consist of Fixed Rate Mortgage Loans and Adjustable Rate Mortgage Loans with original principal balances that may or may not conform to Fannie Mae and Freddie Mac guidelines. The Mortgage Loans will have original terms to maturity ranging from approximately 15 to approximately 30 years. The Mortgage Loans are secured by first liens (the “Mortgages”) on one- to four-family residential properties (the “Mortgaged Properties”) and have the additional characteristics described herein and in the prospectus. The “Pool Balance” is equal to the aggregate unpaid principal balance of the Mortgage Loans.

 

A “Fixed Rate Mortgage Loan” is a Mortgage Loan with a fixed interest rate, providing level monthly payments of principal and interest and terms at origination or modification of not more than 30 years. An “Adjustable Rate Mortgage Loan” is a Mortgage Loan with an adjustable interest rate, having an original or modified term to maturity of not more than 30 years with a related Mortgage Interest Rate which generally adjusts at either one, two or three years subsequent to the initial Due Date and thereafter at either six-month or one-year intervals (each such date, an “Adjustment Date”) over the term of the Mortgage Loan. On each Adjustment Date, the Mortgage Interest Rate for such Mortgage Loan will adjust to the sum of the applicable Index and the number of basis points specified in the related Mortgage Note (the “Gross Margin”), rounded to the nearest one-eighth of one percent, subject to the limitation that with respect to each Adjustment Date, the interest rate after such adjustment may not vary from the Mortgage Interest Rate in effect prior to such adjustment by more than the amount specified in the Mortgage Note (the “Periodic Cap”). In addition, adjustments to the interest rate for each Mortgage Loan are subject to a lifetime rate ceiling (the “Rate Ceiling”). Appendix A contains a table of the Rate Ceilings for the Adjustable Rate Mortgage Loans. Generally, the minimum Mortgage Interest Rate for a Mortgage Loan will be such Mortgage Loan’s initial Mortgage Interest Rate.

 

Certain of the Mortgage Loans will not fully amortize by their respective maturity dates (each, a “Balloon Loan”). The Monthly Payment for each Balloon Loan is based on an amortization schedule of 360 months, except for the final payment (the “Balloon Payment”) which is due and payable on the 180th month following origination of such Mortgage Loan. The amount of the Balloon Payment on each Balloon Loan is substantially in excess of the amount of the scheduled Monthly Payment for such Mortgage Loan. The Servicer will not make any advances with respect to the unpaid principal balance of a Balloon Loan remaining at maturity. See “Description of the Securities—Advances in Respect of Delinquencies” in the prospectus. Appendix A contains information relating to the amount of Balloon Loans.


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

 

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Indexes

 

The index for approximately 98.94% (by aggregate unpaid principal balance as of the Cut-off Date) of the Adjustable Rate Mortgage Loans will be the six-month London interbank offered rate (the “Six-Month LIBOR Index”). “Six-Month LIBOR” is defined as is the average of interbank offered rates for six-month U.S. dollar deposits in the London market, as published in The Wall Street Journal and most recently available as of the date 45 days before the applicable Adjustment Date. In the event that the Six-Month LIBOR Index is no longer available, the Servicer will select a substitute index in accordance with the terms of the related mortgage note and in compliance with federal and state law.

 

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

 

     Year

 

Month


   2005

    2004

    2003

    2002

    2001

    2000

 

January

   2.89 %   1.19 %   1.37 %   1.93 %   5.53 %   6.21 %

February

   3.05     1.19     1.34     2.04     5.20     6.33  

March

   3.28     1.16     1.26     2.24     4.81     6.41  

April

   3.38     1.28     1.28     2.21     4.48     6.54  

May

   3.49     1.52     1.23     2.10     4.08     6.98  

June

         1.81     1.08     2.00     3.83     6.97  

July

         1.89     1.12     1.91     3.79     6.92  

August

         1.94     1.20     1.76     3.57     6.84  

September

         2.09     1.19     1.78     3.00     6.77  

October

         2.23     1.20     1.74     2.34     6.73  

November

         2.50     1.24     1.46     2.11     6.71  

December

         2.71     1.24     1.42     1.99     6.40  

 

The index for approximately 1.06% (by aggregate unpaid principal balance as of the Cut-off Date) of the Adjustable Rate Mortgage Loans will be the One-Year CMT Index (the “One-Year CMT Index” and, together with the Six-Month LIBOR Index, each an “Index”). “One-Year CMT” is defined to be the weekly average yield on United States Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve Board, published in the Federal Reserve Statistical Release H.15 (519) and most recently available as of the date 45 days before the applicable Adjustment Date. In the event that the One-year CMT Index is no longer available, the Servicer will select a substitute index in accordance with the terms of the related mortgage note and in compliance with federal and state law.

 

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

 

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     Year

 

Month


   2005

    2004

    2003

    2002

    2001

    2000

 

January

   2.86 %   1.24 %   1.36 %   2.16 %   4.81 %   6.12 %

February

   3.03     1.24     1.30     2.23     4.68     6.22  

March

   3.30     1.19     1.24     2.57     4.30     6.22  

April

   3.32     1.43     1.27     2.48     3.98     6.15  

May

   3.33     1.78     1.18     2.35     3.78     6.33  

June

         2.12     1.01     2.20     3.58     6.17  

July

         2.10     1.12     1.96     3.62     6.08  

August

         2.02     1.31     1.76     3.47     6.18  

September

         2.12     1.24     1.72     2.82     6.13  

October

         2.23     1.25     1.65     2.33     6.01  

November

         2.50     1.34     1.49     2.18     6.09  

December

         2.67     1.31     1.45     2.22     5.60  

 

Interest on the Mortgage Loans is calculated based on a 360-day year of twelve 30-day months. When a full prepayment of principal is made on a Mortgage Loan during a month, the mortgagor is charged interest only on the days of the month actually elapsed up to the date of such prepayment, at a daily interest rate that is applied to the principal amount of such prepaid mortgage loan. When a partial prepayment of principal is made on a Mortgage Loan during a month, the mortgagor generally is not charged interest on the amount of the partial prepayment during the month in which such prepayment is made.

 

As of the Cut-off Date, none of the Mortgage Loans were Delinquent and none of the Adjustable Rate Mortgage Loans had Mortgage Interest Rates that may be converted to fixed Mortgage Interest Rates at the option of the related mortgagor. All of the Mortgage Loans have a Due Date on the first day of each month.

 

Each of the Mortgage Loans is subject to a due-on-sale clause. See “Certain Legal Aspects of the Mortgage Loans—‘Due-on-Sale’ Clauses” and “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Due on Sale Provisions” in the prospectus.

 

Mortgage Loan Data Appearing in Appendix A

 

Appendix A contains tables setting forth certain characteristics of the Mortgage Loans. The balances and percentages set forth in such tables may not be exact due to rounding.

 

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

 

Wells Fargo Bank’s mortgage loan programs include a full documentation program and a “stated income, stated asset” program. For a description of these documentation programs, see “The Mortgage Loan Programs” in the prospectus.

 

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

 

The first table appearing in Appendix A sets forth certain characteristics of all of the Mortgage Loans, the Group I Mortgage Loans and the Group II Mortgage Loans. All weighted averages specified in the tables appearing in Appendix A are based on the unpaid principal balance of the Mortgage Loans in the aggregate or in the related Loan Group, as applicable, as of the Cut-off Date. References to percentages of the Mortgage Loans mean percentages based on the aggregate of the unpaid principal balance of the Mortgage Loans in the aggregate or in the related Loan Group as of the Cut-off Date, unless otherwise specified.

 

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

 

In addition, for purposes of Appendix A, the “Loan-to-Value Ratio” of a Mortgage Loan is calculated using the lesser of (i) the appraised value of the related Mortgaged Property, as established by an appraisal obtained by the originator from an appraiser at the time of origination and (ii) the sale price for such property. For the purpose of calculating the Loan-to-Value Ratio of any Mortgage Loan that is the result of the refinancing (including a refinancing for “equity take out” purposes) of an existing mortgage loan, the appraised value of the related Mortgaged Property is generally determined by reference to an appraisal. There can be no assurance that such appraisal, which is based on the independent judgment of an appraiser and not an arms-length sales transaction, is an accurate representation of the market value of a Mortgaged Property. See “Description of the Trust Funds—Mortgage Loans” in the prospectus. No assurance can be given that the values of the Mortgaged Properties securing the Mortgage Loans have remained or will remain at the levels used in calculating the Loan-to-Value Ratios shown in Appendix A. Neither the Depositor nor Wells Fargo Bank has taken any action to establish the current value of any Mortgaged Property. See “Risk Factors—Risks Associated with the Mortgage Loans—Real Estate Market Conditions Affect Mortgage Loan Performance” and “—Geographic Concentration May Increase Rates of Loss and Delinquency” in the prospectus.

 

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

 

All of the Mortgage Loans with Loan-to-Value Ratios in excess of 80% are covered by lender-paid primary mortgage insurance policies (each, an “LPMI Policy”). These LPMI Policies will be assigned to the Trust on the Closing Date. Wells Fargo Bank is responsible for paying the premiums under the LPMI Policies and may assign such obligation only with the consent of each Rating Agency and the respective LPMI Policy provider. Wells Fargo Bank will agree that in the event it is replaced as the servicer and the successor servicer does not undertake to pay such premiums, Wells Fargo Bank will pay any premiums on the LPMI Policies (which may include a one-time lump sum to the relevant LPMI Policy providers to continue the related LPMI Policies) until the applicable Mortgage Loans have been paid in full or otherwise liquidated. Information with respect to the Mortgage Loans covered by LPMI Policies is set forth in Appendix A.

 

FICO Scores” are statistical credit scores obtained by many mortgage lenders in connection with the loan application to help assess a borrower’s credit-worthiness. FICO Scores are generated by models developed by a third party and are made available to lenders through three national credit bureaus. The models were derived by analyzing data on consumers in order to establish patterns which are believed to be indicative of the borrower’s probability of default. The FICO Score is based on a borrower’s historical credit data, including, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience. FICO Scores generally range from approximately 300 to approximately 850, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. However, a FICO Score purports only to be a measurement of the relative degree of risk a borrower represents to a lender, i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. In addition, it should be noted that FICO Scores were developed to indicate a level of default probability over a two-year period which does not correspond to the life of a mortgage loan. Furthermore, FICO Scores were not developed specifically for use in connection with mortgage loans, but for consumer loans in general. Therefore, a FICO Score does not take into consideration the effect of mortgage loan characteristics on the probability of repayment by the borrower. Neither the Depositor nor Wells Fargo Bank makes any representations or warranties as to the actual performance of any Mortgage Loan or that a particular FICO Score

 

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should be relied upon as a basis for an expectation that the borrower will repay the Mortgage Loan according to its terms.

 

Appendix A also contains a table of the credit levels of the Mortgage Loans. For a description of these credit levels, see “The Mortgage Loan Programs” in the prospectus.

 

In addition, Appendix A contains a table of the months to the first Adjustment Date for the Adjustable Rate Mortgage Loans. With respect to each Adjustable Rate Mortgage Loan, “Months to First Adjustment Date” equals the number of months from the Cut-off Date to the month in which the mortgage interest rate applicable to such Adjustable Rate Mortgage Loan is initially adjusted.

 

The tables in Appendix A entitled “Initial Interest Rate Caps of the Adjustable Rate Mortgage Loans” and “Periodic Caps of the Adjustable Rate Mortgage Loans” were prepared assuming that the applicable caps were determined in accordance with Wells Fargo Bank’s underwriting guidelines, which provide that the initial interest rate cap and the Periodic Cap for a mortgage loan is set based on the loan type. It is possible that exceptions to the underwriting guidelines may have been granted by Wells Fargo Bank. These tables were not prepared taking into consideration any such exceptions, therefore, there is no assurance that all the information set forth in such tables accurately reflects all of the actual initial interest rate caps and Periodic Caps.

 

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

 

See “The Mortgage Loan Programs” in the prospectus.

 

Mortgage Loan Underwriting

 

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

 

Mandatory Repurchase or Substitution of Mortgage Loans

 

The Depositor is required, with respect to Mortgage Loans that are found by the Custodian to have defective documentation, or in respect of which the Depositor has breached a representation or warranty, either to repurchase such Mortgage Loans or, if within two years of the date of initial issuance of the Certificates, to substitute new Mortgage Loans therefor. See “Prepayment and Yield Considerations” herein and “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Assignment of Mortgage Loans; Representations and Warranties; Repurchases” in the prospectus.

 

Optional Purchase or Substitution of Mortgage Loans

 

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

 

PREPAYMENT AND YIELD CONSIDERATIONS

 

The yields to maturity and weighted average lives of the Offered Certificates will depend upon, among other things, the price at which such Offered Certificates are purchased, the amount and timing of principal payments on the applicable Mortgage Loans, the allocation of Available Funds to various Classes of Certificates, the amount and timing of mortgagor delinquencies and defaults on the applicable Mortgage Loans, the rate of liquidations and Realized Losses and the allocation of Realized Losses to various Classes of Certificates.

 

S-49


The rate of distributions in reduction of the Principal Balance of any Class of the Offered Certificates, the aggregate amount of distributions on any Class of the Offered Certificates and the Weighted Average Life and yield to maturity of any Class of the Offered Certificates purchased at a discount or premium will be directly related to the rate of payments of principal on the Mortgage Loans in the Trust Fund and the amount and timing of mortgagor defaults resulting in Realized Losses. Prepayments (which, as used herein, include all unscheduled payments of principal, including payments as the result of liquidations, purchases and repurchases) of the Mortgage Loans in the Trust Fund will result in distributions to Certificateholders then entitled to distributions in respect of principal in respect of such Mortgage Loans of amounts which would otherwise be distributed over the remaining terms of such Mortgage Loans. Since the rate of prepayment on the Mortgage Loans will depend on future events and a variety of factors (as described more fully below and in the prospectus under “Prepayment and Yield Considerations”), no assurance can be given as to such rate or the rate of principal payments or yield on, or Weighted Average Life of, any Class of the Offered Certificates or the aggregate amount of distributions on any Class of the Offered Certificates. In addition, if a purchaser of an Offered Certificate calculates its anticipated yield based on an assumed rate of default and amount of Realized Losses that is lower than the default rate and amount of losses actually incurred, its actual yield to maturity will be lower than that so calculated. The timing of Realized Losses will also affect an investor’s actual yield to maturity, even if the average rate of defaults and severity of losses are consistent with an investor’s expectations. In general, the earlier a loss occurs, the greater the effect on an investor’s yield to maturity. There can be no assurance as to the delinquency, foreclosure or loss experience with respect to the Mortgage Loans. The Mortgage Loans may have a greater risk of future defaults and delinquencies, as compared to newly originated, high quality one- to four-family residential mortgage loans of comparable size and geographic concentration because the Mortgage Loans are of subprime credit quality. See “Risk Factors—Nature of subprime mortgage loans may increase risk of loss” in this prospectus supplement.

 

The rate of principal payments on the Mortgage Loans will be affected by the amortization schedules of the Mortgage Loans, the rate of principal prepayments (including partial prepayments and those resulting from refinancing) thereon by mortgagors, liquidations of defaulted Mortgage Loans, repurchases by the Depositor of Mortgage Loans as a result of defective documentation or breaches of representations and warranties, optional and, under certain circumstances, required purchases by the Depositor (under limited circumstances) of certain Mortgage Loans, and the optional purchase of all of the Mortgage Loans in connection with the termination of the Trust Fund. See “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Assignment of Mortgage Loans; Representations and Warranties; Repurchases,” “Description of the Securities—Optional Purchases” and “—Termination” in the prospectus and “The Pooling and Servicing Agreement—Optional Termination” in this prospectus supplement. Because certain of the Mortgage Loans contain prepayment penalties, the rate of principal payments may be less than the rate of principal payments for mortgage loans which did not have prepayment penalties. If prevailing rates for similar mortgage loans fall below the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to increase. Conversely, if interest rates on similar mortgage loans rise above the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to decrease. In addition, Wells Fargo Bank or third parties may enter into agreements with borrowers providing for the bi-weekly payment of principal and interest on the related Mortgage Loan, thereby accelerating payment of the Mortgage Loan resulting in partial prepayments.

 

The Mortgage Interest Rates on the Adjustable Rate Mortgage Loans will be fixed for periods ranging from one to three years after origination and thereafter will adjust semi-annually (in the case of the Adjustable Rate Mortgage Loans with the Six-Month LIBOR Index) and annually (in the case of the Adjustable Rate Mortgage Loans with the One-Year CMT Index) and may vary significantly over time. When a Mortgage Loan begins its adjustable period, increases and decreases in the Mortgage Interest Rate on that Mortgage Loan will be based on the applicable Index in effect 45 days prior to the related Adjustment Date plus the applicable Gross Margin and will be limited by the applicable Periodic Cap and Rate Ceiling. The applicable Index may not rise and fall consistently with mortgage interest rates. As a result, the Mortgage Interest Rates on the Mortgage Loans at any time may not equal the prevailing mortgage interest rates for similar adjustable rate mortgage loans, and accordingly the prepayment rate may be lower or higher than would otherwise be anticipated. Moreover, some mortgagors who prefer the certainty provided by fixed rate mortgage loans may nevertheless obtain adjustable rate mortgage loans at a time when they regard the mortgage interest rates (and, therefore, the payments) on fixed rate mortgage loans as unacceptably high. These mortgagors may be induced to refinance adjustable rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed rate mortgage loans decline to levels which these mortgagors regard as acceptable, even though such mortgage interest rates and monthly payments may be significantly higher than the

 

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current Mortgage Interest Rates and monthly payments on the mortgagors’ Adjustable Rate Mortgage Loans. The Adjustable Rate Mortgage Loans may also be subject to greater rates of prepayments as they approach their initial Adjustment Dates even if market interest rates are only slightly higher or lower than the Mortgage Interest Rates on such Adjustable Rate Mortgage Loans as mortgagors seek to avoid changes in their monthly payments. In addition, the delinquency and loss experience of the Adjustable Rate Mortgage Loans may differ from that on the Fixed Rate Mortgage Loans because the amount of the monthly payments on the Adjustable Rate Mortgage Loans are subject to adjustment on each Adjustment Date. The ability to refinance a mortgage loan will depend on a number of factors prevailing at the time refinancing is desired, including, without limitation, real estate values, the mortgagor’s financial situation, prevailing mortgage interest rates, the mortgagor’s equity in the related mortgaged property, tax laws and prevailing general economic conditions.

 

Due to the operation of the Rate Ceilings and the Periodic Caps, once the Mortgage Interest Rates on the Adjustable Rate Mortgage Loans begin to adjust, the Pass-Through Rate on each interest-bearing Certificate may be limited, notwithstanding increases in the applicable Index, if the Mortgage Interest Rate on any Adjustable Rate Mortgage Loan cannot increase due to a Rate Ceiling limitation or a Periodic Cap and the yield on such Certificates could be adversely affected.

 

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

 

The yield to maturity of the Offered Certificates will be sensitive in varying degrees to the rate and timing of principal payments (including prepayments) on the Mortgage Loans. Investors in the Offered Certificates should consider the associated risks, including, in the case of Offered Certificates purchased at a discount, the risk that a slower than anticipated rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans may have a negative effect on the yield to maturity of such Certificates and, in the case of Offered Certificates purchased at a premium, the risk that a faster than anticipated rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans may have a negative effect on the yield to maturity of such Certificates. Investors purchasing Offered Certificates at a premium should also consider the risk that a rapid rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans could result in the failure of such investors to fully recover their initial investments.

 

An investor is urged to make an investment decision with respect to any Class of Offered Certificates based on the anticipated yield to maturity of such Class resulting from its purchase price and such investor’s own determination as to anticipated Mortgage Loan prepayment rates under a variety of scenarios.

 

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

 

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

 

When the Class M Certificates are no longer outstanding, the yield to maturity of the Class AI-1B Certificates will be more sensitive than the Class AI-1A Certificates to losses on the Group I Mortgage Loans. Interest and principal collections on the Group I Mortgage Loans will be reduced by losses and may not be sufficient to make all required distributions on the Class AI Certificates. The Class AI-1B Certificates will not be entitled to distributions of principal until the Principal Balance of the Class AI-1A Certificates has been reduced to zero and therefore they will bear all losses relating to Loan Group I before the Class AI-1A Certificates bear any losses relating to Loan Group I.

 

The actual yield to maturity experienced by an investor may also be affected by the occurrence of Current Interest Shortfall to the extent not covered by the Monthly Excess Interest Amount. See “Description of the Securities—Distributions of Interest on the Securities” in the prospectus.

 

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

 

As to Mortgaged Properties in regions that have recently experienced natural disasters, neither the Depositor nor the Servicer has undertaken the physical inspection of such Mortgaged Properties. As a result, there can be no assurance that material damage to any Mortgaged Property in an affected region has not occurred. In the Pooling and Servicing Agreement, the Depositor will represent and warrant that, as of the date of issuance of the Certificates, each Mortgaged Property is undamaged by fire, earthquake or earth movement, windstorm, flood, tornado or other casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Depositor makes no representation) so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended. In the event of a breach of such representation with respect to a Mortgaged Property which materially and adversely affects the interests of Certificateholders in the related Mortgage Loan, the Depositor will be obligated to repurchase or substitute for such Mortgage Loan, as described under “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Assignment of Mortgage Loans; Representations and Warranties; Repurchases” in the prospectus. Repurchase of any such Mortgage Loan will affect in varying degrees the yields and weighted average lives of the related Classes of Offered Certificates and could adversely affect the yield of any related Offered Certificates purchased at a premium.

 

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

 

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

 

The Weighted Average Life and yield to maturity of each Class of Offered Certificates will also be influenced by the amount of Monthly Excess Cashflow Amounts generated by the Mortgage Loans and applied in reduction of the Principal Balances of such Certificates. The level of Monthly Excess Cashflow Amounts available on any Distribution Date to be applied in reduction of the Principal Balances of the Certificates will be influenced by, among other factors, (i) the overcollateralization level of the Mortgage Loans at such time (i.e., the extent to which interest on the Mortgage Loans is accruing on a higher principal balance than the aggregate Principal Balance of the Certificates); (ii) the delinquency and default experience of the Mortgage Loans; and (iii) the level of the applicable Index for the Adjustable Rate Mortgage Loans. To the extent that greater amounts of Monthly Excess Cashflow Amounts are distributed in reduction of the Principal Balance of a Class of Certificates, the Weighted Average Life thereof can be expected to shorten. No assurance can be given as to the amount of Monthly Excess Cashflow Amounts distributed at any time or in the aggregate.

 

The Class M Certificates are not expected to receive any principal distributions until at least the Distribution Date in July 2008 (unless the aggregate Principal Balance of the Senior Certificates is reduced to zero prior thereto). As a result, the weighted average lives of the Class M Certificates will be longer than would have been the case if principal distributions were to be made on a pro rata basis. The longer weighted average lives may increase the risk that an Applied Realized Loss Amount will be allocated to one or more Classes of Class M Certificates.

 

The “Weighted Average Life” of any Class of Offered Certificates is the average amount of time that will elapse from the Closing Date, until each dollar of principal is distributed to the investors in such Class of Offered Certificates. Because it is expected that there will be prepayments and defaults on the Mortgage Loans, the actual weighted average lives of the Classes of Offered Certificates are expected to vary substantially from the weighted average remaining terms to stated maturity of the Mortgage Loans as set forth in the tables appearing in Appendix A.

 

Prepayments on mortgage loans are commonly measured relative to a prepayment model or standard. The prepayment models used in this prospectus supplement (the “Prepayment Assumptions”) are based on an assumed rate of prepayment each month of the then unpaid principal balance of mortgage loans similar to the Mortgage Loans.

 

For the Adjustable Rate Mortgage Loans, the Prepayment Assumption is the “Adjustable Rate Prepayment Curve” or ARM PPC,” which assumes a prepayment rate of 5.000% CPR per annum of the then-outstanding principal balance of the adjustable rate mortgage loans in the first month of the life of such mortgage loans and an additional approximate 1/11th of 22% per annum in each month thereafter until 27.000% CPR is reached in the twelfth month and remaining constant at 27.000% CPR until the twenty-third month. From the twenty-fourth month until the twenty-seventh month, ARM PPC assumes a constant prepayment rate of 60.000% per annum. Beginning in the twenty-eighth month and in each month thereafter during the life of such mortgage loans, ARM PPC assumes a constant prepayment rate of 30.000% CPR per annum each month. For the Fixed Rate Mortgage Loans, the Prepayment Assumption is the “Fixed Rate Prepayment Curve” or FRM PPC,” and, together with the ARM PPC, the PPC,” which assumes a prepayment rate of 4.000% CPR per annum of the then-outstanding unpaid principal balance of the fixed rate mortgage loans in the first month of the life of such mortgage loans and an additional 1/11th of 19% per annum in each month thereafter until 23.000% CPR is reached in the twelfth month. Beginning in the twelfth month and in each month thereafter during the life of such mortgage loans, FRM PPC assumes a constant prepayment rate of 23.000% CPR per annum each month.

 

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CPR” represents a constant assumed rate of principal prepayment each month relative to the then-outstanding unpaid principal balance of a pool of mortgage loans for the life of such mortgage loans. A prepayment assumption of 5.000% CPR assumes constant prepayment rates of 5.000% per annum of the then-outstanding unpaid principal balance of such mortgage loans. Correspondingly, 20.000% assumes prepayments equal to 20.000% of CPR, and so forth. No Prepayment Assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the Mortgage Loans.

 

Appendix B sets forth the decrement tables for the Offered Certificates.

 

The tables appearing in Appendix B have been prepared assuming, among other things, the following (the “Structuring Assumptions”):

 

(i) the Trust Fund consists of the “Assumed Mortgage Loans” set forth in the table appearing in Appendix C;

 

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

 

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

 

(iv) the Depositor does not repurchase any of the Assumed Mortgage Loans and no optional termination right is exercised (except with respect to the entries identified by the row heading “Weighted Average Life to Optional Termination Date (years)” in the tables appearing in Appendix B);

 

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

 

(vi) the Certificates will be issued on June 29, 2005;

 

(vii) distributions on the Certificates are made on the 25th day of each month, commencing in July 2005;

 

(viii) with respect to the Adjustable Rate Mortgage Loans, the Six-Month LIBOR Index is equal to 3.62% and the One-Year CMT Index is equal to 3.36%;

 

(ix) (a) the initial Periodic Cap and the Periodic Cap thereafter for the Assumed Mortgage Loans that adjust based on the One-Year CMT Index is 2.00% and (b) the initial Periodic Cap is 3.00% and the Periodic Cap thereafter is 1.00% for the Assumed Mortgage Loans that adjust based on the Six-Month LIBOR Index;

 

(x) the Assumed Mortgage Loans adjust on the first Adjustment Date and annually (in the case of the Assumed Mortgage Loans based on the One-Year CMT Index) and semi-annually (in the case of the Assumed Mortgage Loans based on the Six-Month LIBOR Index) thereafter;

 

(xi) the initial Principal Balance of each Class of Certificates will be as set forth in the table beginning on page S-5 of this prospectus supplement;

 

(xii) the Targeted Overcollateralization Amount is set initially as specified herein and thereafter decreases as described in the definition thereof;

 

(xiii) the minimum Mortgage Interest Rate for each Assumed Mortgage Loan is the initial Gross Margin of such Mortgage Loan;

 

(xiv) one-month LIBOR is equal to 3.24%;

 

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(xv) the Servicing Fee Rate is 0.50% per annum and the Credit Risk Manager Fee Rate is 0.015% per annum; and

 

(xvi) the Pass-Through Rates for the Certificates are as set forth or described above under “Description of the Certificates—Pass-Through Rates.”

 

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

 

Based upon the foregoing assumptions, the tables appearing in Appendix B indicate the Weighted Average Life of each Class of Offered Certificates to maturity and to the Optional Termination Date, and set forth the percentages of the initial Principal Balance of each such Class of Offered Certificates that would be outstanding after each of the dates shown at the applicable Prepayment Assumption.

 

Interest accrued on the Offered Certificates will be reduced by the amount of any interest portions of realized losses allocated to such Certificates as described herein.

 

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

 

Final Scheduled Distribution Dates

 

The Final Scheduled Distribution Date of each Class of Offered Certificates is set forth in Appendix D.

 

The Final Scheduled Distribution Date for such Certificates has been calculated on the basis of the Structuring Assumptions and the assumption that there are no prepayments. Since the rate of distributions in reduction of the Principal Balance of each Class of Offered Certificates will depend on the rate of payment (including prepayments) of the Mortgage Loans, the Principal Balance of any such Class could be reduced to zero significantly earlier or later than the Final Scheduled Distribution Date. The rate of payments on the Mortgage Loans will depend on their particular characteristics, as well as on prevailing interest rates from time to time and other economic factors, and no assurance can be given as to the actual payment experience of the Mortgage Loans.

 

WELLS FARGO BANK

 

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

 

THE POOLING AND SERVICING AGREEMENT

 

General

 

The Certificates will be issued pursuant to the Pooling and Servicing Agreement, dated as of the Closing Date (the “Pooling and Servicing Agreement”), among the Depositor, the Servicer, the Securities Administrator and the

 

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Trustee. Set forth below are summaries of the specific terms and provisions pursuant to which the Offered Certificates will be issued. Reference is made to the prospectus for important additional information regarding the terms and conditions of the Pooling and Servicing Agreement and the Certificates. See “Description of the Securities” and “Description of the Agreements— Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements” in the prospectus. The following summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Pooling and Servicing Agreement.

 

The “Trust Fund” created under the Pooling and Servicing Agreement will consist of (i) the Mortgage Loans, (ii) such assets as from time to time are identified as deposited in any account held for the benefit of Certificateholders, (iii) any Mortgaged Properties acquired on behalf of Certificateholders by foreclosure or by deed in lieu of foreclosure after the Closing Date, (iv) the Reserve Accounts, (v) the rights of the Securities Administrator under the Yield Maintenance Agreements and (vi) the rights of the Trustee to receive the proceeds of all insurance policies (including the LPMI Policies) and performance bonds, if any, required to be maintained pursuant to the Pooling and Servicing Agreement.

 

Distributions

 

Distributions (other than the final distribution in retirement of the Offered Certificates of each Class) will be made by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. However, with respect to any holder of an Offered Certificate evidencing at least a $100,000 initial Principal Balance, distributions will be made on the Distribution Date by wire transfer in immediately available funds; provided that the Securities Administrator is furnished with appropriate wiring instructions not less than seven business days prior to the related Distribution Date. The final distribution in respect of each Class of Offered Certificates will be made only upon presentation and surrender of the related Certificate at the office or agency appointed by the Securities Administrator specified in the notice of final distribution with respect to the related Class. See “Description of the Securities—General” and “—Distributions” in the prospectus.

 

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

 

Voting Interests

 

With respect to any provisions of the Pooling and Servicing Agreement providing for the action, consent or approval of the holders of all Certificates evidencing specified Voting Interests in the Trust Fund, each of the Class CE and Class P Certificates will be entitled to 1% of the aggregate Voting Interest represented by all Certificates and each remaining Class of Certificates (other than the Class R Certificates) will be entitled to a pro rata portion of the remaining Voting Interest based on the outstanding Principal Balance of such Class. The Class R Certificates will not be entitled to any Voting Interests. Each Certificateholder of a Class will have a Voting Interest equal to the product of the Voting Interest to which such Class is collectively entitled and the Percentage Interest in such Class represented by such holder’s Certificates. With respect to any provisions of the Pooling and Servicing Agreement providing for action, consent or approval of each Class of Certificates or specified Classes of Certificates, each Certificateholder of a Class will have a Voting Interest in such Class equal to such holder’s Percentage Interest in such Class. Unless Definitive Certificates are issued as described under “Description of the Securities—Book-Entry Form” in the prospectus, Beneficial Owners of Book-Entry Certificates may exercise their voting rights only through DTC Participants.

 

The Trustee

 

The “Trustee” for the Certificates will be HSBC Bank USA, National Association, a national banking association. The corporate trust office of the Trustee is located at 452 Fifth Avenue, New York, New York 10018. The Trustee will be required to make Advances to the limited extent described in the prospectus if Wells Fargo Bank, as Servicer, fails to make an Advance required by the Pooling and Servicing Agreement. See “Description of the Securities—Advances in Respect of Delinquencies” in the prospectus. The compensation to be paid to the Trustee in respect of its obligations under the Pooling and Servicing Agreement will be paid by the Securities Administrator.

 

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The Securities Administrator

 

The “Securities Administrator” for the Certificates will be the corporate trust services division of Wells Fargo Bank, N.A. The Securities Administrator’s principal office for purposes of securities administration is located at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 and the office for certificate transfer services is located at Sixth and Marquette, Minneapolis, Minnesota 55479 (together, the “Corporate Trust Office”). The telephone number of the Securities Administrator is (410) 884-2000. Pursuant to the Pooling and Servicing Agreement, the Securities Administrator will be responsible for calculating the amounts of interest and principal required to be distributed on, and losses to be allocated to, each Class of Certificates on each Distribution Date, and for making available monthly reports to the Certificateholders, in each case based upon Mortgage Loan information provided by the Servicer. The Securities Administrator’s monthly compensation will be equal to the earnings on eligible investments of funds in the Distribution Account. The Securities Administrator will pay all routine expenses, including fees of the Trustee incurred in connection with their responsibilities under the Pooling and Servicing Agreement, subject to certain rights of reimbursement as described in the prospectus.

 

Custodian

 

The “Custodian” for the Mortgage Loans will be the corporate trust services division of Wells Fargo Bank, N.A. See “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Assignment of Mortgage Loans; Representations and Warranties; Repurchases” in the prospectus. The Servicer will pay all fees of the Custodian incurred in connection with its responsibilities under the Pooling and Servicing Agreement and the custodial agreement, subject to certain rights of reimbursement.

 

The Credit Risk Manager

 

The Murrayhill Company, a Colorado corporation (the “Credit Risk Manager”), will monitor and make recommendations to the Servicer regarding certain delinquent and defaulted Mortgage Loans, and will report on the performance of such Mortgage Loans, including prepayment penalty collection analysis. The Credit Risk Manager will rely upon mortgage loan data that is provided to it by the Servicer in performing its advisory and monitoring functions.

 

The Credit Risk Manager will be entitled to receive a fee (the “Credit Risk Manager Fee”) until the termination of the Trust Fund or until its removal by a vote of at least 66-2/3% of the Certificateholders by Voting Interests. This fee will be paid monthly by the Trust Fund and will be calculated as 0.015% annually (the “Credit Risk Manager Fee Rate”) of the unpaid principal balance of each Mortgage Loan.

 

Optional Termination

 

The majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the Depositor, will have the right to purchase all of the Mortgage Loans and REO Properties in the Trust Fund and thereby effect the early retirement of the Certificates, on any Distribution Date on which the aggregate unpaid principal balance of such Mortgage Loans and REO Properties is less than 10% of the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-off Date. The first Distribution Date on which such option could be exercised is referred to herein as the Optional Termination Date.” In the event that the option is exercised, the purchase will be made at a price (the “Termination Price”) generally equal to par plus accrued interest for each Mortgage Loan at the related Mortgage Interest Rate to but not including the first day of the month in which such purchase price is distributed plus the amount of any unpaid Servicing Fees and unreimbursed Advances and Servicing Advances made by the Servicer. If any of the parties indicated above is subject to regulation by the OCC, the FDIC, the Federal Reserve or the Office of Thrift Supervision, however, such entity may not exercise this option unless the aggregate fair market value of the Mortgage Loans and REO Properties is greater than or equal to the Termination Price. In addition, no option may be exercised until any due and unpaid Reimbursement Amounts have been paid to the Trust. Proceeds from such purchase will be included in Available Funds and will be distributed to the holders of the Certificates in accordance with the Pooling and Servicing Agreement. Any such purchase of Mortgage Loans and REO Properties will result in the early retirement of the Certificates.

 

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In connection with the issuance of any net interest margin securities secured by all or a portion of the Class CE and Class P Certificates, a party may agree to refrain from exercising this option while those securities are outstanding.

 

See “Description of the Securities—Termination” in the prospectus.

 

Amendment

 

The Pooling and Servicing Agreement may be amended by the Depositor, the Servicer, the Securities Administrator and the Trustee, without the consent of the holders of the Certificates, for any of the purposes set forth under “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Amendment” in the prospectus. In addition, the Pooling and Servicing Agreement may be amended by the Depositor, the Servicer, the Securities Administrator and the Trustee and the holders of a majority in interest of any class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Pooling and Servicing Agreement or of modifying in any manner the rights of the holders of any class of Certificates; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, distributions required to be made on any class of Certificates without the consent of the holders of such Certificates; (ii) adversely affect in any material respect the interests of the holders of any class of Certificates in a manner other than as described in clause (i) above, without the consent of the holders of such class evidencing percentage interests aggregating at least 66%; or (iii) reduce the aforesaid percentage of aggregate outstanding principal amounts of Certificates, the holders of which are required to consent to any such amendment, without the consent of the holders of all such Certificates.

 

SERVICING OF THE MORTGAGE LOANS

 

Wells Fargo Bank (the “Servicer”) will service the Mortgage Loans in accordance with the terms of the Pooling and Servicing Agreement. All of the Mortgage Loans will be Type 2 Loans. See “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements” in the prospectus.

 

Servicing Compensation and Payment of Expenses

 

The primary compensation payable to the Servicer is the aggregate of the Servicing Fees applicable to the related Mortgage Loans. The Servicing Fee applicable to each Mortgage Loan is expressed as a fixed percentage (the “Servicing Fee Rate”) of the unpaid principal balance of such Mortgage Loan as of the first day of each month. The Servicing Fee Rate for each Mortgage Loan is 0.50% per annum. The Servicer also is entitled to additional servicing compensation, as described in the prospectus under “Description of the Agreements—Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements—Fixed Retained Yield; Servicing Compensation and Payment of Expenses.”

 

DELINQUENCY, FORECLOSURE AND REO EXPERIENCE

 

Certain information concerning recent delinquency, foreclosure and REO experience on the portfolio of subprime mortgage loans serviced by Wells Fargo Bank, other than mortgage loans with respect to which the servicing rights were acquired in bulk, is set forth in the table under “Delinquency, Foreclosure and REO Experience of Wells Fargo Bank” in the prospectus. There can be no assurance that the delinquency, foreclosure and REO experience set forth in the table will be representative of the results that may be experienced with respect to the Mortgage Loans included in the Trust Fund. For example, although the portfolio of subprime mortgage loans included in the table was originated during various periods, Wells Fargo Bank implemented various changes to its underwriting standards for subprime mortgage loans in January 2004 which included the application of certain less restrictive underwriting criteria.

 

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

 

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CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES

 

General

 

The Pooling and Servicing Agreement provides that the Trust Fund, exclusive of the Basis Risk Arrangements (as defined below), will comprise two real estate mortgage investment conduits (each, a “REMIC”) organized in a tiered REMIC structure consisting of a Lower Tier REMIC and an Upper Tier REMIC. The Lower Tier REMIC will issue uncertificated regular interests and those interests will be held by the Upper Tier REMIC. Each of the Lower Tier REMIC and Upper Tier REMIC will designate a single Class of interests as the residual interest in that REMIC. Elections will be made to treat each of the Lower Tier REMIC and the Upper Tier REMIC as a REMIC for federal income tax purposes. Except to the extent described in the next paragraph, each Class of Offered Certificates will represent beneficial ownership of the corresponding class of regular interests issued by the Upper Tier REMIC. The Trust Fund will also include a grantor trust which will hold the uncertificated interests in the Upper Tier REMIC, the Basis Risk Arrangements, as defined below, the Yield Maintenance Agreements and the related accounts.

 

The Offered Certificates and the Class M-12, Class M-13 and Class M-14 Certificates will represent beneficial ownership of the corresponding class of regular interests issued by the Upper Tier REMIC and of the right to receive Cap Carryover Amounts from the related Yield Maintenance Agreement, if applicable, or, to the extent such amounts are insufficient, from the Monthly Excess Cashflow Amount, to the extent available. Holders of the Offered Certificates must allocate their basis between their regular interest and their right to receive such Cap Carryover Amounts as set forth below under “—Taxation of the Basis Risk Arrangements.”

 

Upon the issuance of the Offered Certificates, Cadwalader, Wickersham & Taft LLP will deliver its opinion to the effect that, assuming compliance with the Pooling and Servicing Agreement, for federal income tax purposes, each of the Lower Tier REMIC and the Upper Tier REMIC will qualify as a REMIC within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the “Code”) and the portion of the Trust Fund exclusive of the REMICs will qualify as a grantor trust under Subpart E, Part 1 of Subchapter J of the Code.

 

Taxation of Regular Interests

 

For federal income tax reporting purposes, the regular interest portion of the Offered Certificates may be treated as having been issued with original issue discount. The Prepayment Assumption that will be used in determining the rate of accrual of original issue discount, premium and market discount, if any, for federal income tax purposes will be based on the assumption that subsequent to the date of any determination the Mortgage Loans will prepay at a constant rate of 100% ARM PPC with respect to the Adjustable Rate Mortgage Loans and 100% FRM PPC with respect to the Fixed Rate Mortgage Loans. No representation is made that the Mortgage Loans will prepay at such rate or at any other rate. See “Federal Income Tax Consequences—REMICs—Taxation of Owners of Regular Securities—Original Issue Discount” in the prospectus.

 

The IRS has issued regulations (the “OID Regulations”) under Sections 1271 to 1275 of the Code generally addressing the treatment of debt instruments issued with original issue discount. Purchasers of the Offered Certificates should be aware that the OID Regulations do not adequately address certain issues relevant to, or are not applicable to, securities such as the Offered Certificates. Because of the uncertainty concerning the application of Section 1272(a)(6) of the Code to such Certificates, and because the rules of the OID Regulations are limited in their application in ways that could preclude their application to such Certificates even in the absence of Section 1272(a)(6) of the Code, the IRS could assert that the Offered Certificates should be treated as issued with original issue discount or should be governed by the rules applicable to debt instruments having contingent payments or by some other manner not yet set forth in regulations. Prospective purchasers of the Offered Certificates are advised to consult their tax advisors concerning the tax treatment of such Certificates.

 

The Offered Certificates generally will be treated as assets described in Section 7701(a)(19)(C) of the Code for a domestic building and loan association and “real estate assets” under Section 856(c)(5)(B) of the Code for a real estate investment trust (a “REIT”), in the same proportion that the assets in the Trust Fund would be so treated. In addition, interest on the Offered Certificates generally will be treated as “interest on obligations secured by mortgages on real property” under Section 856(c)(3)(B) of the Code for a REIT, to the extent that the Offered Certificates are treated as “real estate assets” under Section 856(c)(5)(B) of the Code. See “Federal Income Tax

 

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Consequences—REMICs—Characterization of Investments in REMIC Securities” in the prospectus. If more than 95% of the regular interests and income qualify for these treatments, the regular interests generally will qualify for such treatments in their entirety. However, no portion of an Offered Certificateholder’s basis or income allocable to a Basis Risk Arrangement will qualify for such treatment. As a result, the Offered Certificates may not be suitable investments for inclusion in another REMIC.

 

Taxation of the Basis Risk Arrangements

 

General

 

Each holder of an Offered Certificate will be treated for federal income tax purposes as having entered into a notional principal contract pursuant to its rights to receive payment with respect to Cap Carryover Amounts on the date it purchases its Certificates. The rights to receive such payments (referred to as the “Basis Risk Arrangements”) are beneficially owned by holders of Offered Certificates in the portion of the Trust Fund, exclusive of the REMICs, which is treated as a grantor trust for federal income tax purposes. The Internal Revenue Service (the “IRS”) has issued final regulations under Section 446 of the Code relating to notional principal contracts (the “Swap Regulations”).

 

In general, the holders of the Offered Certificates must allocate the price they pay for the Offered Certificates between their REMIC regular interest and the applicable Basis Risk Arrangement based on their relative fair market values. To the extent rights to receive payments are determined to have a value on the Closing Date that is greater than zero, a portion of such purchase price will be allocable to such rights, and such portion will be treated as a cap premium (the “Cap Premium”) paid by the holders of Offered Certificates. A holder of an Offered Certificate will be required to amortize the Cap Premium under a level payment method as if the Cap Premium represented the present value of a series of equal payments made over the life of the applicable Basis Risk Arrangement (adjusted to take into account decreases in notional principal amount), discounted at a rate equal to the rate used to determine the amount of the Cap Premium (or some other reasonable rate). Prospective purchasers of Offered Certificates should consult their own tax advisors regarding the appropriate method of amortizing any Cap Premium. The Swap Regulations treat a nonperiodic payment made under a cap contract as a loan for federal income tax purposes if the payment is “significant.” It is not anticipated that any Cap Premium would be treated in part as a loan under the Swap Regulations.

 

Under the Swap Regulations (i) all taxpayers must recognize periodic payments with respect to a notional principal contract under the accrual method of accounting, and (ii) any periodic payments received under the applicable Basis Risk Arrangement must be netted against payments, if any, deemed made as a result of the Cap Premiums over the recipient’s taxable year, rather than accounted for on a gross basis. Net income or deduction with respect to net payments under a notional principal contract for a taxable year should constitute ordinary income or ordinary deduction. The IRS could contend the amount is capital gain or loss, but such treatment is unlikely, at least in the absence of further regulations. Any regulations requiring capital gain or loss treatment presumably would apply only prospectively. Individuals may be limited in their ability to deduct any such net deduction and should consult their tax advisors prior to investing in the Offered Certificates.

 

Any amount of proceeds from the sale, redemption or retirement of an Offered Certificate that is considered to be allocated to rights under a Basis Risk Arrangement would be considered a “termination payment” under the Swap Regulations. It is anticipated that the Securities Administrator will account for any termination payments for reporting purposes in accordance with the Swap Regulations, as described below.

 

Termination Payments

 

Any amount of sales proceeds that is considered to be allocated to the selling beneficial owner’s rights under the applicable Basis Risk Arrangement in connection with the sale or exchange of an Offered Certificate would be considered a “termination payment” under the Swap Regulations allocable to that Offered Certificate. A holder of an Offered Certificate will have gain or loss from such a termination of a Basis Risk Arrangement equal to (i) any termination payment it received or is deemed to have received minus (ii) the unamortized portion of any Cap Premium paid (or deemed paid) by the beneficial owner upon entering into or acquiring its interest in a Basis Risk Arrangement.

 

S-60


Gain or loss realized upon the termination of a Basis Risk Arrangement will generally be treated as capital gain or loss. Moreover, in the case of a bank or thrift institution, Code Section 582(c) would likely not apply to treat such gain or loss as ordinary.

 

REMIC Taxes and Reporting

 

It is not anticipated that the Trust Fund will engage in any transactions that would subject it to the prohibited transactions tax as defined in Section 860F(a)(2) of the Code, the contributions tax as defined in Section 860G(d) of the Code or the tax on net income from foreclosure property as defined in Section 860G(c) of the Code. However, in the event that any such tax is imposed on the Trust Fund, such tax will be borne (i) by the Securities Administrator, if the Securities Administrator has breached its obligations with respect to REMIC compliance under the Agreement, (ii) the Servicer, if the Servicer has breached its obligations with respect to REMIC compliance under the Agreement, and (iii) otherwise by the Trust Fund, with a resulting reduction in amounts otherwise distributable to Holders of the Offered Certificates. See “Description of the Securities—General” and “Federal Income Tax Consequences—REMICs—Taxes That May Be Imposed on the REMIC Pool—Prohibited Transactions” in the prospectus.

 

The responsibility for filing annual federal information returns and other reports will be borne by the Securities Administrator. See “Federal Income Tax Consequences—REMICs—Taxes That May Be Imposed on the REMIC Pool—Administrative Matters” in the prospectus.

 

For further information regarding the federal income tax consequences of investing in the Offered Certificates, see “Federal Income Tax Consequences—REMICs” in the prospectus.

 

ERISA CONSIDERATIONS

 

The following discussion applies to the Offered Certificates (collectively, the “ERISA Eligible Certificates”) and does not purport to discuss the considerations under ERISA, Code Section 4975 or materially similar provisions of applicable federal, state or local law (“Similar Law”) with respect to the purchase, acquisition or resale of a Class M-12, Class M-13, Class M-14, Class CE, Class P or Class R Certificate.

 

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

 

The DOL issued to Citigroup Global Markets Inc. (“Citigroup”) an Underwriter Exemption. An Underwriter Exemption might apply to the acquisition, holding and resale of the ERISA Eligible Certificates by an ERISA Plan, provided that specified conditions are met.

 

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

 

Before purchasing an ERISA Eligible Certificate, whether on the Closing Date or in the secondary market, a fiduciary of an ERISA Plan should make its own determination as to the availability of the exemptive relief provided in an Underwriter Exemption or the availability of any other prohibited transaction exemptions, and whether the conditions of any such exemption will be applicable to the ERISA Eligible Certificates, and a fiduciary of a governmental plan should make its own determination as to the need for and availability of any exemptive relief

 

S-61


under Similar Law. Any fiduciary of an ERISA Plan considering whether to purchase an ERISA Eligible Certificate should also carefully review with its own legal advisors the applicability of the fiduciary duty and prohibited transaction provisions of ERISA and the Code to such investment. See “ERISA Considerations” in the prospectus.

 

LEGAL INVESTMENT

 

The Class A, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”) so long as they are rated in one of the two highest rating categories by at least one nationally recognized rating organization. The Class M-6, Class M-7, Class M-8, Class M-9, Class M-10 and Class M-11 Certificates will not constitute “mortgage related securities” under SMMEA.

 

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

 

SECONDARY MARKET

 

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

 

UNDERWRITING

 

Subject to the terms and conditions of the underwriting agreement dated May 19, 2005 and the terms agreement dated May 19, 2005 (together, the “Underwriting Agreement”) among Wells Fargo Bank, the Depositor and Citigroup Global Markets Inc. (the “Underwriter”), the Underwriter has agreed to purchase and the Depositor has agreed to sell to the Underwriter the Offered Certificates.

 

The Underwriter has advised the Depositor that it proposes to offer the Offered Certificates, from time to time, for sale in negotiated-transactions or otherwise at prices determined at the time of sale. Proceeds to the Depositor from the sale of the Offered Certificates are expected to be approximately $1,262,152,230, plus applicable accrued interest, before deducting expenses payable by the Depositor estimated to be $1,010,000. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Offered Certificates may be deemed to be underwriters, and any discounts or commissions received by them and any profit on the resale of Offered Certificates by them may be deemed to be underwriting discounts or commissions, under the Securities Act.

 

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

 

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

 

S-62


LEGAL MATTERS

 

Certain matters relating to the validity of the Offered Certificates and certain tax matters will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP, New York, New York. Certain legal matters will be passed upon for the Underwriter by McKee Nelson LLP, New York, New York.

 

USE OF PROCEEDS

 

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

 

RATINGS

 

It is a condition to the issuance of the Offered Certificates that the Certificates receive at least the respective ratings set forth in the table beginning on page S-5 from Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) and Fitch Ratings (“Fitch,” and collectively with S&P and Moody’s, the “Rating Agencies”). A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. Each security rating should be evaluated independently of any other security rating.

 

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

 

The ratings of Moody’s on home equity asset-backed certificates address the likelihood of the receipt by certificateholders of all distributions of principal and interest to which such certificateholders are entitled. Moody’s rating opinions address the structural, legal and issuer aspects associated with the certificates, including the nature of the underlying mortgage loans and the credit quality of the credit support provider, if any. Moody’s ratings on home equity asset-backed certificates do not represent any assessment of the likelihood of the payment of any Cap Carryover Amount or that principal prepayments may differ from those originally anticipated and consequently any adverse effect the timing of such prepayments could have on an investor’s anticipated yield.

 

The ratings of Fitch on home equity asset-backed certificates address the likelihood of the receipt by certificateholders of all distributions to which such certificateholders are entitled. Fitch’s rating opinions address the structural and legal aspects associated with the certificates, including the nature of the underlying mortgage loans. Fitch’s ratings on home equity asset-backed certificates do not represent any assessment of the likelihood of the payment of any Cap Carryover or the likelihood or rate of principal prepayments and consequently any adverse effect the timing of such prepayments could have on an investor’s anticipated yield.

 

S-63


INDEX OF SIGNIFICANT PROSPECTUS SUPPLEMENT DEFINITIONS

 

60+ Day Delinquent Loan

   S-34

Accrued Certificate Interest

   S-26

Adjustable Rate Mortgage Loan

   S-45

Adjustable Rate Prepayment Curve

   S-53

Adjustment Date

   S-45

Applied Realized Loss Amount

   S-36

ARM PPC

   S-53

Assumed Mortgage Loans

   S-54

Available Funds

   S-23

Balloon Loan

   S-45

Balloon Payment

   S-45

Basis Risk Arrangements

   S-60

BSFP

   S-43

Cap

   S-41

Cap Amount

   S-44

Cap Carryover Amount

   S-42

Cap Premium

   S-60

Certificates

   S-23

Citigroup

   S-61

Class A Certificates

   S-23

Class AI Certificates

   S-23

Class AI Reserve Account

   S-44

Class AI Yield Maintenance Agreement

   S-42

Class AI Yield Maintenance Agreement Payment

   S-43

Class AII Certificates

   S-23

Class AII Reserve Account

   S-44

Class AII Yield Maintenance Agreement

   S-42

Class AII Yield Maintenance Agreement Payment

   S-43

Class M Certificates

   S-23

Class M Reserve Account

   S-44

Class M Yield Maintenance Agreement

   S-42

Class M Yield Maintenance Agreement Payment

   S-43

Class M-1 Principal Distribution Amount

   S-28

Class M-1 Realized Loss Amortization Amount

   S-39

Class M-2 Principal Distribution Amount

   S-28

Class M-2 Realized Loss Amortization Amount

   S-39

Class M-3 Principal Distribution Amount

   S-28

Class M-3 Realized Loss Amortization Amount

   S-39

Class M-4 Principal Distribution Amount

   S-28

Class M-4 Realized Loss Amortization Amount

   S-39

Class M-5 Principal Distribution Amount

   S-29

Class M-5 Realized Loss Amortization Amount

   S-39

Class M-6 Principal Distribution Amount

   S-29

Class M-6 Realized Loss Amortization Amount

   S-40

Class M-7 Principal Distribution Amount

   S-29

Class M-7 Realized Loss Amortization Amount

   S-40

Class M-8 Principal Distribution Amount

   S-29

Class M-8 Realized Loss Amortization Amount

   S-40

Class M-9 Principal Distribution Amount

   S-30

Class M-9 Realized Loss Amortization Amount

   S-40

Class M-10 Principal Distribution Amount

   S-30

Class M-10 Realized Loss Amortization Amount

   S-40

Class M-11 Principal Distribution Amount

   S-31

Class M-11 Realized Loss Amortization Amount

   S-40

Class M-12 Principal Distribution Amount

   S-31

Class M-12 Realized Loss Amortization Amount

   S-40

Class M-13 Principal Distribution Amount

   S-31

Class M-13 Realized Loss Amortization Amount

   S-40

Class M-14 Principal Distribution Amount

   S-32

Class M-14 Realized Loss Amortization Amount

   S-40

Class P Certificates

   S-23

CLTV

   S-48

Code

   S-59

Collection Period

   S-24

Combined Loan-to-Value Ratio

   S-48

Corporate Trust Office

   S-57

Counterparty

   S-42

CPR

   S-54

Credit Risk Manager

   S-57

Credit Risk Manager Fee

   S-57

Credit Risk Manager Fee Rate

   S-57

Current Interest Shortfall

   S-26

Custodian

   S-57

Distribution Date

   S-23

DOL

   S-61

ERISA Eligible Certificates

   S-61

Extra Principal Distribution Amount

   S-32

FICO Scores

   S-48

Fitch

   S-63

Fixed Rate Mortgage Loan

   S-45

Fixed Rate Prepayment Curve

   S-53

Formula Rate

   S-41

FRM PPC

   S-53

Gross Margin

   S-45

Group

   S-23

 

S-64


Group I

   S-23

Group I Cap

   S-41

Group I Maximum Rate Cap

   S-41

Group I Mortgage Loans

   S-45

Group I Overcollateralization Floor

   S-32

Group I Principal Distribution Amount

   S-32

Group I Principal Percentage

   S-33

Group I Senior Principal Distribution Amount

   S-33

Group II

   S-23

Group II Cap

   S-41

Group II Maximum Rate Cap

   S-42

Group II Mortgage Loans

   S-45

Group II Overcollateralization Floor

   S-33

Group II Principal Distribution Amount

   S-33

Group II Principal Percentage

   S-33

Group II Senior Principal Distribution Amount

   S-33

Group Subordinate Amount

   S-42

Index

   S-46

Interest Accrual Period

   S-26

Interest Carry Forward Amount

   S-26

Interest Percentage

   S-26

Interest Remittance Amount

   S-26

IRS

   S-60

Loan Group

   S-45

Loan Group I

   S-45

Loan Group II

   S-45

Loan-to-Value Ratio

   S-48

LPMI Policy

   S-48

Maximum Rate Cap

   S-42

Monthly Excess Cashflow Allocation

   S-36

Monthly Excess Cashflow Amount

   S-36

Monthly Excess Interest Amount

   S-36

Moody’s

   S-63

Mortgage Loans

   S-45

Mortgaged Properties

   S-45

Mortgages

   S-45

Net Mortgage Interest Rate

   S-36

Net Rate Ceiling

   S-42

Offered Certificates

   S-23

OID Regulations

   S-59

One-Year CMT

   S-46

One-Year CMT Index

   S-46

Optional Termination Date

   S-57

Overcollateralization Amount

   S-33

Overcollateralization Deficiency

   S-33

Overcollateralization Floor

   S-33

Overcollateralization Release Amount

   S-33

Pass-Through Rate

   S-41

Periodic Cap

   S-45

Pool Balance

   S-45

Pool Cap

   S-41

Pool Maximum Rate Cap

   S-42

Pooling and Servicing Agreement

   S-55

PPC

   S-53

Prepayment Assumptions

   S-53

Prepayment Period

   S-24

Principal Balance

   S-33

Principal Distribution Amount

   S-34

Principal Remittance Amount

   S-34

PUDs

   S-48

Rate Ceiling

   S-45

Rating Agencies

   S-63

Realized Loss Amortization Amount

   S-40

Record Date

   S-23

REIT

   S-59

Relief Act Shortfalls

   S-26

REMIC

   S-59

Reserve Account

   S-44

Residual Certificates

   S-23

S&P

   S-63

Securities Act

   S-61

Securities Administrator

   S-57

Senior Certificates

   S-23

Senior Enhancement Percentage

   S-34

Senior Principal Distribution Amount

   S-34

Senior Specified Enhancement Percentage

   S-34

Sequential Trigger Event

   S-34

Servicer

   S-58

Servicing Fee Rate

   S-58

Similar Law

   S-61

Six-Month LIBOR

   S-46

Six-Month LIBOR Index

   S-46

SMMEA

   S-62

Stepdown Date

   S-35

Structuring Assumptions

   S-54

Subordinated Certificates

   S-23

Subsequent Recovery

   S-35

Swap Regulations

   S-60

Targeted Overcollateralization Amount

   S-35

Termination Price

   S-57

Trigger Event

   S-35

Trust Fund

   S-56

Trustee

   S-56

Underwriter

   S-62

Underwriting Agreement

   S-62

Underwriting Standards

   S-49

Unpaid Realized Loss Amount

   S-41

Weighted Average Life

   S-53

Wells Fargo Bank

   S-55

Yield Maintenance Agreement Payment

   S-43

Yield Maintenance Agreements

   S-42

 

S-65


APPENDIX A

 

SELECTED MORTGAGE LOAN DATA

(as of the Cut-Off Date)

 

    

Aggregate
Mortgage Loans


  

Group I
Mortgage Loans


  

Group II

Mortgage Loans


Number of Mortgage Loans

   7,512   

6,008

  

1,504

Aggregate Unpaid Principal Balance

   $1,256,004,617   

$795,416,120

  

$460,588,497

Range of Unpaid Principal Balances

   $10,516 to $947,965   

$10,516 to $530,749

  

$155,059 to $947,965

Average Unpaid Principal Balance

   $167,200   

$132,393

  

$306,242

Range of Current Mortgage Interest Rates

   3.950% to 12.250%   

3.950% to 12.250%

  

3.950% to 10.750%

Weighted Average Current Mortgage Interest Rate

   6.742%   

6.919%

  

6.435%

Weighted Average Current Net Mortgage Interest Rate

   6.227%   

6.404%

  

5.920%

Range of Remaining Terms to Stated Maturity

   173 to 360 Months   

173 to 360 Months

  

177 to 360 Months

Weighted Average Remaining Term to Stated Maturity

   351 Months   

350 Months

  

354 Months

Range of Original Loan-to-Value Ratios

   8.56% to 100.00%   

8.56% to 100.00%

  

20.33% to 100.00%

Weighted Average Original Loan-to-Value Ratio

   79.70%   

77.87%

  

82.85%

Range of Original Combined Loan-to-Value Ratios

   8.56% to 100.00%   

8.56% to 100.00%

  

20.33% to 100.00%

Weighted Average Original Combined Loan-to-Value Ratio

   83.56%   

80.79%

  

88.34%

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

   0   

0

  

0

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

   0.00%   

0.00%

  

0.00%

Number of Mortgage Loans covered by an LPMI Policy

   2,983   

2,292

  

691

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

   39.85%   

38.00%

  

43.04%

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

   73.98%   

N/A

  

73.98%

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

   90.00%   

N/A

  

90.00%

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

              

California

   22.00%    16.10%    32.18%

Maryland

   6.36%    5.52%    7.80%

Virginia

   *       *       6.07%

Florida

   5.26%    *       5.88%

Arizona

   *       5.41%    *   

Maximum Five-Digit Zip Code Concentration

  

0.33%

  

0.22%

  

0.67%

Earliest Origination Month

  

June 2004

  

June 2004

  

October 2004

Latest Origination Month

  

May 2005

  

May 2005

  

May 2005

Latest Stated Maturity Date

  

June 1, 2035

  

June 1, 2035

  

June 1, 2035

Range of Gross Margins

  

0.375% to 8.250%

  

1.625% to 8.250%

  

0.375% to 7.750%

Weighted Average Gross Margin

  

3.544%

  

3.712%

  

3.277%

Range of Rate Ceilings

  

9.950% to 18.125%

  

9.950% to 18.125%

  

9.950% to 16.750%

Weighted Average Rate Ceiling

  

12.741%

  

12.933%

  

12.438%

Range of Months to First Adjustment Date

  

9 to 36 Months

  

9 to 36 Months

  

9 to 36 Months

Weighted Average Months to First Adjustment Date

  

23 Months

  

23 Months

  

23 Months

Number of Relocation Mortgage Loans

  

12

  

5

  

7

Relocation Mortgage Loans as a Percentage of Aggregate Unpaid Principal Balance

  

0.19%

  

0.07%

  

0.40%

Number of Subsidy Loans

  

1

  

0

  

1

Subsidy Loans as a Percentage of Aggregate
Unpaid Principal Balance

  

0.03%

  

0.00%

  

0.09%

Number of Buy-Down Loans

  

0

  

0

  

0

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

  

0.00%

  

0.00%

  

0.00%

Weighted Average FICO Score(1)

  

622

  

615

  

635

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

 

A-1


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

 

CURRENT MORTGAGE INTEREST RATES

 

Range of Current
Mortgage

Interest Rates


   Number

  

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

3.750% to 3.999%

   4    $ 918,202.57    0.07 %

4.000% to 4.249%

   2      749,408.76    0.06  

4.250% to 4.499%

   15      3,266,697.07    0.26  

4.500% to 4.749%

   29      6,920,465.42    0.55  

4.750% to 4.999%

   161      41,561,497.01    3.31  

5.000% to 5.249%

   79      19,432,993.07    1.55  

5.250% to 5.499%

   260      57,902,349.89    4.61  

5.500% to 5.749%

   355      80,543,542.58    6.41  

5.750% to 5.999%

   798      174,706,334.14    13.91  

6.000% to 6.249%

   253      50,656,885.12    4.03  

6.250% to 6.499%

   563      105,649,201.21    8.41  

6.500% to 6.749%

   608      109,265,137.53    8.70  

6.750% to 6.999%

   1,062      178,328,335.29    14.20  

7.000% to 7.249%

   228      35,326,189.20    2.81  

7.250% to 7.499%

   494      74,810,213.42    5.96  

7.500% to 7.749%

   456      72,089,918.85    5.74  

7.750% to 7.999%

   604      86,279,190.37    6.87  

8.000% to 8.249%

   135      16,926,194.58    1.35  

8.250% to 8.499%

   317      38,040,308.40    3.03  

8.500% to 8.749%

   264      28,139,860.38    2.24  

8.750% to 8.999%

   327      33,654,401.74    2.68  

9.000% to 9.249%

   67      5,685,516.62    0.45  

9.250% to 9.499%

   122      10,517,446.00    0.84  

9.500% to 9.749%

   72      6,837,554.02    0.54  

9.750% to 9.999%

   94      7,796,995.86    0.62  

10.000% to 10.249%

   12      988,340.19    0.08  

10.250% to 10.499%

   36      2,455,805.75    0.20  

10.500% to 10.749%

   34      2,917,609.55    0.23  

10.750% to 10.999%

   33      2,195,469.39    0.17  

11.000% to 11.249%

   2      97,793.27    0.01  

11.250% to 11.499%

   16      808,879.02    0.06  

11.500% to 11.749%

   2      47,553.69    0.00  

11.750% to 11.999%

   5      250,129.68    0.02  

12.000% to 12.249%

   2      94,275.46    0.01  

12.250% to 12.250%

   1      143,921.64    0.01  
    
  

  

Total

   7,512    $ 1,256,004,616.74    100.00 %
    
  

  

 

DOCUMENTATION LEVELS

 

Documentation Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Full Documentation*

  7,512   $ 1,256,004,616.74   100.00 %

Stated Income, Stated Asset

  0     0.00   0.00  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

  Includes mortgage loans with respect to which borrower income has been established using alternative methods. See “The Mortgage Loan Programs” in the prospectus.

 

REMAINING TERMS TO STATED

MATURITY

 

Range of

Remaining Stated

Terms (Months)


   Number

  

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

173

   1    $ 55,732.35    0.00 %

174

   1      38,327.12    0.00  

175

   2      164,980.46    0.01  

176

   2      424,110.78    0.03  

177

   11      2,094,910.54    0.17  

178

   168      22,568,453.18    1.80  

179

   172      22,639,802.77    1.80  

180

   6      514,786.41    0.04  

349

   1      24,714.40    0.00  

350

   1      87,218.54    0.01  

351

   2      226,435.10    0.02  

353

   3      813,934.76    0.06  

354

   10      1,541,689.14    0.12  

355

   29      5,629,034.06    0.45  

356

   22      5,030,558.33    0.40  

357

   247      44,612,499.70    3.55  

358

   3,425      571,633,226.38    45.51  

359

   3,335      566,473,048.45    45.10  

360

   74      11,431,154.27    0.91  
    
  

  

Total

   7,512    $ 1,256,004,616.74    100.00 %
    
  

  

 

YEARS OF ORIGINATION

 

Year of Origination


   Number

  

Aggregate

Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2004

   50    $ 8,617,660.46    0.69 %

2005

   7,462      1,247,386,956.28    99.31  
    
  

  

Total

   7,512    $ 1,256,004,616.74    100.00 %
    
  

  

 

PROPERTY TYPES

 

Property Type


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Single-family dwellings

  6,949   $ 1,161,017,992.23   92.44 %

Two-to four-family units

  135     27,318,823.65   2.18  

Condominium

               

High-rise (greater than four stories)

  19     3,334,458.95   0.27  

Low-rise (four stories or less)

  409     64,333,341.91   5.12  

Cooperative Units

  0     0.00   0.00  

Manufactured Homes

  0     0.00   0.00  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

A-2


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

GEOGRAPHIC AREAS

 

Geographic Area


  Number

 

Aggregate
Unpaid

Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Alabama

  58   $ 7,441,470.30   0.59 %

Alaska

  46     7,354,941.72   0.59  

Arizona

  358     60,097,838.50   4.78  

Arkansas

  65     6,735,498.69   0.54  

California

  989     276,288,371.71   22.00  

Colorado

  166     32,413,970.74   2.58  

Connecticut

  30     6,366,297.64   0.51  

Delaware

  38     6,654,547.52   0.53  

District of Columbia

  38     8,586,032.20   0.68  

Florida

  383     66,070,790.93   5.26  

Georgia

  182     29,567,671.85   2.35  

Hawaii

  26     7,313,463.43   0.58  

Idaho

  68     7,808,685.06   0.62  

Illinois

  345     45,475,728.75   3.62  

Indiana

  118     10,918,816.50   0.87  

Iowa

  189     18,006,865.20   1.43  

Kansas

  77     7,608,856.70   0.61  

Kentucky

  39     4,838,272.56   0.39  

Louisiana

  145     16,801,575.60   1.34  

Maine

  27     3,177,785.17   0.25  

Maryland

  383     79,829,673.44   6.36  

Massachusetts

  80     19,171,910.14   1.53  

Michigan

  121     13,145,722.62   1.05  

Minnesota

  226     34,695,843.46   2.76  

Mississippi

  76     8,001,638.98   0.64  

Missouri

  216     23,015,770.29   1.83  

Montana

  28     3,387,804.29   0.27  

Nebraska

  107     11,170,203.34   0.89  

Nevada

  173     38,169,950.82   3.04  

New Hampshire

  37     6,491,082.94   0.52  

New Jersey

  162     35,715,953.11   2.84  

New Mexico

  77     10,203,633.67   0.81  

New York

  194     42,780,486.94   3.41  

North Carolina

  204     27,538,803.14   2.19  

North Dakota

  15     1,269,633.33   0.10  

Ohio

  184     20,190,878.27   1.61  

Oklahoma

  86     7,301,449.81   0.58  

Oregon

  105     19,592,140.85   1.56  

Pennsylvania

  165     20,261,292.59   1.61  

Rhode Island

  9     1,912,686.71   0.15  

South Carolina

  81     12,145,263.59   0.97  

South Dakota

  43     4,747,846.84   0.38  

Tennessee

  157     15,873,227.05   1.26  

Texas

  494     46,015,945.14   3.66  

Utah

  63     9,765,189.84   0.78  

Vermont

  4     573,774.34   0.05  

Virginia

  255     52,863,162.68   4.21  

Washington

  206     38,928,251.37   3.10  

West Virginia

  70     8,826,239.65   0.70  

Wisconsin

  44     5,621,343.63   0.45  

Wyoming

  60     7,270,333.10   0.58  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

ORIGINAL LOAN-TO-VALUE RATIOS

 

Range of
Original
Loan-to-Value
Ratios


  Number

 

Aggregate
Unpaid

Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

  376   $ 46,950,370.25   3.74 %

50.01% to 55.00%

  158     26,157,307.82   2.08  

55.01% to 60.00%

  205     33,875,707.07   2.70  

60.01% to 65.00%

  246     39,727,138.50   3.16  

65.01% to 70.00%

  527     90,626,356.00   7.22  

70.01% to 75.00%

  640     111,316,111.79   8.86  

75.01% to 80.00%

  2,377     406,885,613.49   32.40  

80.01% to 85.00%

  771     131,246,935.48   10.45  

85.01% to 90.00%

  1,069     189,886,973.26   15.12  

90.01% to 95.00%

  545     88,374,517.21   7.04  

95.01% to 100.00%

  598     90,957,585.87   7.24  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

ORIGINAL COMBINED

LOAN-TO-VALUE RATIOS

 

Range of Original
Combined Loan-to-Value
Ratios


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

  372   $ 46,209,228.35   3.68 %

50.01% to 55.00%

  152     24,121,017.48   1.92  

55.01% to 60.00%

  198     31,961,976.12   2.54  

60.01% to 65.00%

  243     38,406,809.88   3.06  

65.01% to 70.00%

  511     88,652,963.00   7.06  

70.01% to 75.00%

  584     100,216,153.85   7.98  

75.01% to 80.00%

  955     181,006,481.71   14.41  

80.01% to 85.00%

  764     131,917,718.93   10.50  

85.01% to 90.00%

  1,105     200,875,633.12   15.99  

90.01% to 95.00%

  666     111,239,240.18   8.86  

95.01% to 100.00%

  1,962     301,397,394.12   24.00  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

A-3


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

ORIGINAL PRINCIPAL BALANCES

 

Range of Original
Principal Balances


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Less than or equal to $50,000

  536   $ 19,945,878.68   1.59 %

$50,001 to $100,000

  1,827     138,828,723.98   11.05  

$100,001 to $150,000

  1,718     212,681,794.53   16.93  

$150,001 to $200,000

  1,365     236,352,744.86   18.82  

$200,001 to $250,000

  754     168,361,727.64   13.40  

$250,001 to $300,000

  481     131,630,092.56   10.48  

$300,001 to $350,000

  296     96,377,268.57   7.67  

$350,001 to $400,000

  193     72,096,521.24   5.74  

$400,001 to $450,000

  130     54,569,833.38   4.34  

$450,001 to $500,000

  58     27,456,348.14   2.19  

$500,001 to $550,000

  41     21,417,926.79   1.71  

$550,001 to $600,000

  27     15,489,865.94   1.23  

$600,001 to $650,000

  29     18,221,422.77   1.45  

$650,001 to $700,000

  20     13,477,547.79   1.07  

$700,001 to $750,000

  13     9,571,077.06   0.76  

$750,001 to $800,000

  16     12,611,985.48   1.00  

$800,001 to $850,000

  4     3,288,542.85   0.26  

$850,001 to $900,000

  2     1,758,341.12   0.14  

$900,001 to $950,000

  2     1,866,973.36   0.15  

$950,001 to $1,000,000

  0     0.00   0.00  

Over $1,000,000

  0     0.00   0.00  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

ORIGINATORS

 

Originator


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Wells Fargo Bank or Affiliate

  7,512   $ 1,256,004,616.74   100.00 %

Other Originators .

  0     0.00   0.00  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

PURPOSES

 

Purpose


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Purchase

  3,196   $ 499,694,198.20   39.78 %

Equity Take Out Refinance

  3,784     677,159,885.41   53.91  

Rate/Term Refinance

  532     79,150,533.13   6.30  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

OCCUPANCY TYPES

 

Occupancy Type


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Investment Property .

  224   $ 25,815,285.00   2.06 %

Primary Residence .

  7,214     1,216,589,591.76   96.86  

Second Home .

  74     13,599,739.98   1.08  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

PREPAYMENT PENALTIES AT ORIGINATION (YEARS IN EFFECT)

 

Prepayment Penalty at
Origination (in Years)


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

No Prepayment Penalty

  1,832   $ 337,514,718.08   26.87 %

2.000

  4,771     763,062,433.34   60.75  

3.000

  909     155,427,465.32   12.37  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

UNDERWRITING GUIDELINE CREDIT LEVELS

 

Underwriting Guideline
Credit Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Y9

  1,282   $ 253,636,735.54   20.19 %

Y8

  835     157,583,894.66   12.55  

Y7

  1,105     199,608,208.08   15.89  

Y6

  1,154     195,617,805.27   15.57  

Y5

  947     150,231,124.76   11.96  

Y4

  1,040     152,510,142.80   12.14  

Y3

  446     63,780,833.58   5.08  

Y2

  535     64,499,778.42   5.14  

Y1

  168     18,536,093.63   1.48  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

LOAN TYPES

 

Loan Type


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Fixed Rate

  908   $ 137,090,437.75   10.91 %

Fixed Rate (Balloon)

  129     26,081,146.51   2.08  

1 Year ARM (One-Year CMT)

  48     11,539,649.18   0.92  

2/28 ARM (Six-Month LIBOR)

  6,274     1,049,109,140.30   83.53  

3/27 ARM (Six-Month LIBOR)

  153     32,184,243.00   2.56  
   
 

 

Total

  7,512   $ 1,256,004,616.74   100.00 %
   
 

 

 

A-4


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

GROSS MARGINS OF THE

ADJUSTABLE RATE MORTGAGE LOANS

 

Gross Margin


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage of
Total Aggregate
Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

0.250% to 0.499%

  1   $ 600,315.53   0.05 %

0.500% to 0.749%

  0     0.00   0.00  

0.750% to 0.999%

  0     0.00   0.00  

1.000% to 1.249%

  0     0.00   0.00  

1.250% to 1.499%

  0     0.00   0.00  

1.500% to 1.749%

  2     339,013.45   0.03  

1.750% to 1.999%

  41     15,311,250.32   1.40  

2.000% to 2.249%

  208     50,685,399.28   4.64  

2.250% to 2.499%

  335     71,567,590.86   6.55  

2.500% to 2.749%

  470     99,549,589.35   9.11  

2.750% to 2.999%

  699     128,549,166.25   11.76  

3.000% to 3.249%

  728     118,061,901.53   10.80  

3.250% to 3.499%

  506     91,229,250.16   8.35  

3.500% to 3.749%

  442     79,720,230.56   7.29  

3.750% to 3.999%

  434     78,219,069.72   7.16  

4.000% to 4.249%

  448     71,284,886.18   6.52  

4.250% to 4.499%

  395     59,599,980.48   5.45  

4.500% to 4.749%

  352     58,734,557.83   5.37  

4.750% to 4.999%

  468     57,615,592.27   5.27  

5.000% to 5.249%

  263     33,275,642.29   3.04  

5.250% to 5.499%

  178     22,032,662.83   2.02  

5.500% to 5.749%

  121     17,283,871.24   1.58  

5.750% to 5.999%

  159     15,826,994.68   1.45  

6.000% to 6.249%

  49     7,504,724.79   0.69  

6.250% to 6.499%

  38     4,943,420.23   0.45  

6.500% to 6.749%

  113     7,715,700.56   0.71  

6.750% to 6.999%

  11     1,761,366.33   0.16  

7.000% to 7.249%

  12     1,098,975.01   0.10  

7.250% to 7.499%

  0     0.00   0.00  

7.500% to 7.749%

  0     0.00   0.00  

7.750% to 7.999%

  1     297,166.35   0.03  

8.000% to 8.249%

  0     0.00   0.00  

8.250% to 8.250%.

  1     24,714.40   0.00  
   
 

 

Total

  6,475   $ 1,092,833,032.48   100.00 %
   
 

 

 

 

RATE CEILINGS OF THE

ADJUSTABLE RATE MORTGAGE LOANS

 

Range of Rate Ceilings


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage of
Total Aggregate
Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

9.750% to 9.999%

  4   $ 918,202.57   0.08 %

10.000% to 10.249%

  2     749,408.76   0.07  

10.250% to 10.499%

  15     3,266,697.07   0.30  

10.500% to 10.749%

  29     6,920,465.42   0.63  

10.750% to 10.999%

  156     40,275,836.77   3.69  

11.000% to 11.249%

  76     18,888,364.29   1.73  

11.250% to 11.499%

  248     55,442,894.21   5.07  

11.500% to 11.749%

  331     75,579,741.92   6.92  

11.750% to 11.999%

  673     145,314,005.25   13.30  

12.000% to 12.249%

  218     43,811,055.26   4.01  

12.250% to 12.499%

  468     87,263,309.86   7.99  

12.500% to 12.749%

  492     87,634,167.67   8.02  

12.750% to 12.999%

  849     143,747,571.68   13.15  

13.000% to 13.249%

  183     29,115,024.64   2.66  

13.250% to 13.499%

  432     67,029,614.51   6.13  

13.500% to 13.749%

  410     64,777,911.00   5.93  

13.750% to 13.999%

  529     77,541,078.41   7.10  

14.000% to 14.249%

  118     15,639,110.71   1.43  

14.250% to 14.499%

  287     34,825,596.20   3.19  

14.500% to 14.749%

  237     25,960,929.87   2.38  

14.750% to 14.999%

  286     31,029,250.20   2.84  

15.000% to 15.249%

  61     5,213,251.45   0.48  

15.250% to 15.499%

  109     9,712,080.19   0.89  

15.500% to 15.749%

  64     6,267,131.83   0.57  

15.750% to 15.999%

  77     6,904,893.13   0.63  

16.000% to 16.249%

  10     907,192.57   0.08  

16.250% to 16.499%

  30     2,228,798.37   0.20  

16.500% to 16.749%

  28     2,596,357.24   0.24  

16.750% to 16.999%

  29     2,085,741.03   0.19  

17.000% to 17.249%

  1     64,954.67   0.01  

17.250% to 17.499%

  16     808,879.02   0.07  

17.500% to 17.749%

  1     19,074.80   0.00  

17.750% to 17.999%

  4     200,166.45   0.02  

18.000% to 18.125%

  2     94,275.46   0.01  
   
 

 

Total

  6,475   $ 1,092,833,032.48   100.00 %
   
 

 

 

A-5


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

 

MONTHS TO FIRST ADJUSTMENT DATE

OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Range of Months
to First Adjustment
Date


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage of
Total Aggregate

Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

9

  3   $ 710,450.08   0.07 %

10

  28     6,910,435.17   0.63  

11

  16     3,858,763.93   0.35  

12

  1     60,000.00   0.01  

13

  1     24,714.40   0.00  

14

  1     87,218.54   0.01  

15

  1     152,041.45   0.01  

17

  3     813,934.76   0.07  

18

  9     1,378,971.03   0.13  

19

  28     5,291,963.17   0.48  

20

  18     4,002,201.21   0.37  

21

  221     39,258,257.74   3.59  

22

  3,020     498,864,383.23   45.65  

23

  2,904     488,820,200.50   44.73  

24

  68     10,415,254.27   0.95  

32

  1     258,906.34   0.02  

33

  4     1,007,618.39   0.09  

34

  76     15,230,148.42   1.39  

35

  70     15,175,969.85   1.39  

36

  2     511,600.00   0.05  
   
 

 

Total

  6,475   $ 1,092,833,032.48   100.00 %
   
 

 

 

INITIAL INTEREST RATE CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Initial Interest

Rate Cap


   Number

  

Aggregate

Unpaid

Principal

Balance


  

Percentage of
Total Aggregate

Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

2.000%

   48    $ 11,539,649.18    1.06 %

3.000%

   6,427      1,081,293,383.30    98.94  
    
  

  

Total

   6,475    $ 1,092,833,032.48    100.00 %
    
  

  

 

PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Periodic Cap


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage of
Total Aggregate

Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

1.000%

  6,427   $ 1,081,293,383.30   98.94 %

2.000%

  48     11,539,649.18   1.06  
   
 

 

Total

  6,475   $ 1,092,833,032.48   100.00 %
   
 

 

 

 

MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Range of
Minimum Rates


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage of
Total Aggregate

Adjustable Rate
Mortgage Loan
Unpaid Principal
Balance


 

3.750% to 3.999%

  4   $ 918,202.57   0.08 %

4.000% to 4.249%

  2     749,408.76   0.07  

4.250% to 4.499%

  15     3,266,697.07   0.30  

4.500% to 4.749%

  29     6,920,465.42   0.63  

4.750% to 4.999%

  156     40,275,836.77   3.69  

5.000% to 5.249%

  76     18,888,364.29   1.73  

5.250% to 5.499%

  248     55,442,894.21   5.07  

5.500% to 5.749%

  331     75,579,741.92   6.92  

5.750% to 5.999%

  673     145,314,005.25   13.30  

6.000% to 6.249%

  218     43,811,055.26   4.01  

6.250% to 6.499%

  468     87,263,309.86   7.99  

6.500% to 6.749%

  492     87,634,167.67   8.02  

6.750% to 6.999%

  849     143,747,571.68   13.15  

7.000% to 7.249%

  183     29,115,024.64   2.66  

7.250% to 7.499%

  432     67,029,614.51   6.13  

7.500% to 7.749%

  410     64,777,911.00   5.93  

7.750% to 7.999%

  529     77,541,078.41   7.10  

8.000% to 8.249%

  118     15,639,110.71   1.43  

8.250% to 8.499%

  287     34,825,596.20   3.19  

8.500% to 8.749%

  237     25,960,929.87   2.38  

8.750% to 8.999%

  286     31,029,250.20   2.84  

9.000% to 9.249%

  61     5,213,251.45   0.48  

9.250% to 9.499%

  109     9,712,080.19   0.89  

9.500% to 9.749%

  64     6,267,131.83   0.57  

9.750% to 9.999%

  77     6,904,893.13   0.63  

10.000% to 10.249%

  10     907,192.57   0.08  

10.250% to 10.499%

  30     2,228,798.37   0.20  

10.500% to 10.749%

  28     2,596,357.24   0.24  

10.750% to 10.999%

  29     2,085,741.03   0.19  

11.000% to 11.249%

  1     64,954.67   0.01  

11.250% to 11.499%

  16     808,879.02   0.07  

11.500% to 11.749%

  1     19,074.80   0.00  

11.750% to 11.999%

  4     200,166.45   0.02  

12.000% to 12.125%

  2     94,275.46   0.01  
   
 

 

Total

  6,475   $ 1,092,833,032.48   100.00 %
   
 

 

 

A-6


A-7

 

APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

CURRENT MORTGAGE INTEREST RATES

 

Range of
Current Mortgage
Interest Rates


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

3.750% to 3.999%

  3   $ 483,834.93   0.06 %

4.000% to 4.249%

  0     0.00   0.00  

4.250% to 4.499%

  10     1,900,619.16   0.24  

4.500% to 4.749%

  13     2,387,736.02   0.30  

4.750% to 4.999%

  89     16,564,029.00   2.08  

5.000% to 5.249%

  44     9,213,359.63   1.16  

5.250% to 5.499%

  166     29,418,578.94   3.70  

5.500% to 5.749%

  232     37,185,442.18   4.67  

5.750% to 5.999%

  580     98,342,555.42   12.36  

6.000% to 6.249%

  190     29,745,250.35   3.74  

6.250% to 6.499%

  438     68,093,360.67   8.56  

6.500% to 6.749%

  490     70,399,911.24   8.85  

6.750% to 6.999%

  889     123,474,704.84   15.52  

7.000% to 7.249%

  185     23,851,206.11   3.00  

7.250% to 7.499%

  400     50,486,315.24   6.35  

7.500% to 7.749%

  368     46,743,540.41   5.88  

7.750% to 7.999%

  484     55,921,870.30   7.03  

8.000% to 8.249%

  118     13,157,586.37   1.65  

8.250% to 8.499%

  281     29,843,094.32   3.75  

8.500% to 8.749%

  246     23,833,277.75   3.00  

8.750% to 8.999%

  303     27,690,825.94   3.48  

9.000% to 9.249%

  66     5,529,784.05   0.70  

9.250% to 9.499%

  119     9,915,668.64   1.25  

9.500% to 9.749%

  68     5,897,892.62   0.74  

9.750% to 9.999%

  89     6,658,390.41   0.84  

10.000% to 10.249%

  11     683,321.63   0.09  

10.250% to 10.499%

  34     2,128,759.50   0.27  

10.500% to 10.749%

  33     2,620,443.20   0.33  

10.750% to 10.999%

  31     1,802,208.59   0.23  

11.000% to 11.249%

  2     97,793.27   0.01  

11.250% to 11.499%

  16     808,879.02   0.10  

11.500% to 11.749%

  2     47,553.69   0.01  

11.750% to 11.999%

  5     250,129.68   0.03  

12.000% to 12.249%

  2     94,275.46   0.01  

12.250% to 12.250%

  1     143,921.64   0.02  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

DOCUMENTATION LEVELS

 

Documentation Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Full Documentation*

  6,008   $ 795,416,120.22   100.00 %

Stated Income, Stated Asset

  0     0.00   0.00  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

*   Includes mortgage loans with respect to which borrower income has been established using alternative methods. See “Mortgage Loan Programs” in the prospectus.

REMAINING TERMS TO STATED MATURITY

 

Range of
Remaining Stated

Terms (Months)


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

173

  1   $ 55,732.35   0.01 %

174

  1     38,327.12   0.00  

175

  2     164,980.46   0.02  

176

  2     424,110.78   0.05  

177

  8     855,147.31   0.11  

178

  152     16,105,327.07   2.02  

179

  159     18,013,977.53   2.26  

180

  6     514,786.41   0.06  

349

  1     24,714.40   0.00  

350

  1     87,218.54   0.01  

351

  2     226,435.10   0.03  

353

  1     119,013.31   0.01  

354

  8     1,080,049.02   0.14  

355

  16     2,092,023.28   0.26  

356

  16     2,485,705.79   0.31  

357

  190     26,354,037.44   3.31  

358

  2,740     364,614,256.54   45.84  

359

  2,650     355,790,443.77   44.73  

360

  52     6,369,834.00   0.80  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

YEARS OF ORIGINATION

 

Year of Origination


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2004

  33   $ 3,924,088.11   0.49 %

2005

  5,975     791,492,032.11   99.51  
   
 

 

Total .

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

PROPERTY TYPES

 

Property Type


  Number

 

Aggregate

Unpaid
Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Single-family dwellings

  5,572   $ 733,420,612.59   92.21 %

Two-to four-family units

  121     23,032,404.20   2.90  

Condominiums

               

High-rise (greater than four stories)

  12     1,239,499.97   0.16  

Low-rise (four stories or less)

  303     37,723,603.46   4.74  

Cooperative Units

  0     0.00   0.00  

Manufactured Homes

  0     0.00   0.00  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

GEOGRAPHIC AREAS

 

Geographic Area


  Number

  Aggregate
Unpaid
Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Alabama

  49   $ 5,123,533.86   0.64 %

Alaska

  42     6,581,778.78   0.83  

Arizona

  301     43,043,708.14   5.41  

Arkansas

  59     5,312,145.14   0.67  

California

  615     128,069,181.86   16.10  

Colorado

  112     17,862,025.93   2.25  

Connecticut

  23     3,961,639.03   0.50  

Delaware

  29     4,201,148.81   0.53  

District of Columbia

  31     5,900,083.92   0.74  

Florida

  280     38,994,581.65   4.90  

Georgia

  142     19,541,384.11   2.46  

Hawaii

  19     4,573,748.37   0.58  

Idaho

  62     6,445,660.62   0.81  

Illinois

  287     31,598,777.50   3.97  

Indiana

  110     9,096,588.13   1.14  

Iowa

  181     16,575,001.90   2.08  

Kansas

  70     6,344,649.54   0.80  

Kentucky

  34     3,700,598.97   0.47  

Louisiana

  126     12,143,721.02   1.53  

Maine

  26     2,898,220.30   0.36  

Maryland

  260     43,898,379.25   5.52  

Massachusetts

  52     10,734,300.85   1.35  

Michigan

  113     11,121,863.35   1.40  

Minnesota

  195     26,273,617.45   3.30  

Mississippi

  66     5,749,678.52   0.72  

Missouri

  203     20,683,246.42   2.60  

Montana

  26     3,049,694.04   0.38  

Nebraska

  98     8,938,792.89   1.12  

Nevada

  120     20,814,815.64   2.62  

New Hampshire

  29     4,509,352.47   0.57  

New Jersey

  124     23,584,834.19   2.97  

New Mexico

  71     8,299,899.94   1.04  

New York

  160     28,055,045.16   3.53  

North Carolina

  170     19,350,529.42   2.43  

North Dakota

  15     1,269,633.33   0.16  

Ohio

  163     15,797,582.23   1.99  

Oklahoma

  85     7,131,639.39   0.90  

Oregon

  77     12,000,348.32   1.51  

Pennsylvania

  143     14,560,850.49   1.83  

Rhode Island

  7     1,501,093.78   0.19  

South Carolina

  69     8,044,836.89   1.01  

South Dakota

  41     4,367,008.49   0.55  

Tennessee

  149     14,107,869.66   1.77  

Texas

  456     37,119,595.88   4.67  

Utah

  53     7,481,807.91   0.94  

Vermont

  4     573,774.34   0.07  

Virginia

  163     24,925,122.84   3.13  

Washington

  146     23,420,177.26   2.94  

West Virginia

  58     5,546,662.06   0.70  

Wisconsin

  41     4,768,309.71   0.60  

Wyoming

  53     5,767,580.47   0.73  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

ORIGINAL LOAN-TO-VALUE RATIOS

 

Range of
Original
Loan-to-Value
Ratios


  Number

  Aggregate
Unpaid
Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

  364   $ 41,229,969.37   5.18 %

50.01% to 55.00%

  147     21,445,431.99   2.70  

55.01% to 60.00%

  188     27,409,055.66   3.45  

60.01% to 65.00%

  223     31,020,994.40   3.90  

65.01% to 70.00%

  483     70,105,379.59   8.81  

70.01% to 75.00%

  570     79,752,779.86   10.03  

75.01% to 80.00%

  1,741     222,224,363.29   27.94  

80.01% to 85.00%

  658     91,774,592.47   11.54  

85.01% to 90.00%

  849     119,839,824.17   15.07  

90.01% to 95.00%

  417     52,671,056.33   6.62  

95.01% to 100.00%

  368     37,942,673.09   4.77  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

ORIGINAL COMBINED

LOAN-TO-VALUE RATIOS

 

Range of

Original Combined

Loan-to-Value

Ratios


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage

of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

  360   $ 40,488,827.47   5.09 %

50.01% to 55.00%

  145     21,187,874.06   2.66  

55.01% to 60.00%

  184     26,658,967.74   3.35  

60.01% to 65.00%

  222     30,653,572.87   3.85  

65.01% to 70.00%

  469     69,150,559.77   8.69  

70.01% to 75.00%

  527     75,275,438.18   9.46  

75.01% to 80.00%

  771     113,323,474.94   14.25  

80.01% to 85.00%

  651     91,254,586.65   11.47  

85.01% to 90.00%

  870     122,325,852.61   15.38  

90.01% to 95.00%

  509     64,807,108.36   8.15  

95.01% to 100.00%

  1,300     140,289,857.57   17.64  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

ORIGINAL PRINCIPAL BALANCES

 

Range of Original
Principal Balances


  Number

 

Aggregate

Unpaid
Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Less than or equal to $50,000

  536   $ 19,945,878.68   2.51 %

$50,001 to $100,000

  1,827     138,828,723.98   17.45  

$100,001 to $150,000

  1,718     212,681,794.53   26.74  

$150,001 to $200,000

  907     155,339,232.48   19.53  

$200,001 to $250,000

  482     107,722,339.03   13.54  

$250,001 to $300,000

  313     85,683,648.02   10.77  

$300,001 to $350,000

  187     60,783,262.82   7.64  

$350,001 to $400,000

  28     10,155,471.94   1.28  

$400,001 to $450,000

  8     3,294,359.20   0.41  

$450,001 to $500,000

  1     450,661.40   0.06  

$500,001 to $550,000

  1     530,748.14   0.07  

$550,001 to $600,000

  0     0.00   0.00  

$600,001 to $650,000

  0     0.00   0.00  

$650,001 to $700,000

  0     0.00   0.00  

$700,001 to $750,000

  0     0.00   0.00  

$750,001 to $800,000

  0     0.00   0.00  

$800,001 to $850,000

  0     0.00   0.00  

$850,001 to $900,000

  0     0.00   0.00  

$900,001 to $950,000

  0     0.00   0.00  

$950,001 to $1,000,000

  0     0.00   0.00  

Over $1,000,000

  0     0.00   0.00  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

A-8


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

ORIGINATORS

 

Originator


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Wells Fargo Bank or Affiliate

  6,008   $ 795,416,120.22   100.00 %

Other Originators

  0     0.00   0.00  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

PURPOSES

 

Purpose


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Purchase

  1,995   $ 186,429,114.96   23.44 %

Equity Take Out Refinance

  3,497     539,128,334.27   67.78  

Rate/Term Refinance

  516     69,858,670.99   8.78  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

OCCUPANCY TYPES

 

Occupancy Type


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Investment Property

  218   $ 23,186,478.01   2.92 %

Primary Residence

  5,725     763,086,090.80   95.94  

Second Home

  65     9,143,551.41   1.15  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

PREPAYMENT PENALTIES AT ORIGINATION (YEARS IN EFFECT)

 

Prepayment Penalty at
Origination (in Years)


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

No Prepayment Penalty

  1,418   $ 196,112,441.96   24.66 %

2.000

  3,802     487,805,248.54   61.33  

3.000

  788     111,498,429.72   14.02  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

UNDERWRITING GUIDELINE CREDIT LEVELS

 

Underwriting Guideline

Credit Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Y9

  906   $ 133,895,328.22   16.83 %

Y8

  623     90,653,325.50   11.40  

Y7

  834     116,910,586.99   14.70  

Y6

  902     118,792,219.56   14.93  

Y5

  777     100,598,579.09   12.65  

Y4

  898     111,620,287.33   14.03  

Y3

  402     49,241,782.74   6.19  

Y2

  506     56,846,276.96   7.15  

Y1

  160     16,857,733.83   2.12  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

LOAN TYPES

 

Loan Type


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage
of Total

Aggregate

Unpaid

Principal

Balance


 

Fixed Rate

  832   $ 109,263,790.94   13.74 %

Fixed Rate (Balloon)

  102     16,179,131.00   2.03  

1 Year ARM (One-Year CMT)

  34     5,430,085.66   0.68  

2/28 ARM (Six-Month LIBOR)

  4,929     647,326,415.88   81.38  

3/27 ARM (Six-Month LIBOR)

  111     17,216,696.74   2.16  
   
 

 

Total

  6,008   $ 795,416,120.22   100.00 %
   
 

 

 

INITIAL INTEREST RATE CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Initial Interest

Rate Cap


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Adjustable
Rate
Mortgage
Loan
Unpaid
Principal
Balance


 

2.000%

  34   $ 5,430,085.66   0.81 %

3.000%

  5,040     664,543,112.62   99.19  
   
 

 

Total

  5,074   $ 669,973,198.28   100.00 %
   
 

 

 

A-9


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS

 

Periodic Cap


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Adjustable
Rate
Mortgage
Loan
Unpaid
Principal
Balance


 

1.000%

  5,040   $ 664,543,112.62   99.19 %

2.000%

  34     5,430,085.66   0.81  
   
 

 

Total

  5,074   $ 669,973,198.28   100.00 %
   
 

 

 

MONTHS TO FIRST ADJUSTMENT DATE OF ADJUSTABLE RATE MORTGAGE LOANS

 

Months to First

Adjustment Date


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage

of Total
Aggregate
Adjustable
Rate
Mortgage
Loan
Unpaid
Principal
Balance


 

9

  2   $ 341,279.85   0.05 %

10

  21     3,151,444.22   0.47  

11

  10     1,877,361.59   0.28  

12

  1     60,000.00   0.01  

13

  1     24,714.40   0.00  

14

  1     87,218.54   0.01  

15

  1     152,041.45   0.02  

17

  1     119,013.31   0.02  

18

  7     917,330.91   0.14  

19

  16     2,092,023.28   0.31  

20

  12     1,457,348.67   0.22  

21

  169     22,736,015.18   3.39  

22

  2,401     315,747,370.07   47.13  

23

  2,273     298,477,806.07   44.55  

24

  47     5,515,534.00   0.82  

32

  1     258,906.34   0.04  

33

  3     651,047.25   0.10  

34

  55     8,752,870.22   1.31  

35

  51     7,203,872.93   1.08  

36

  1     350,000.00   0.05  
   
 

 

Total

  5,074   $ 669,973,198.28   100.00 %
   
 

 

 

RATE CEILINGS OF ADJUSTABLE RATE MORTGAGE LOANS

 

Range of

Rate Ceilings


  Number

 

Aggregate

Unpaid

Principal

Balance


 

Percentage

of Total
Aggregate
Adjustable
Rate
Mortgage
Loan
Unpaid
Principal
Balance


 

9.750% to 9.999%

  3   $ 483,834.93   0.07 %

10.000% to 10.249%

  0     0.00   0.00  

10.250% to 10.499%

  10     1,900,619.16   0.28  

10.500% to 10.749%

  13     2,387,736.02   0.36  

10.750% to 10.999%

  86     15,819,022.55   2.36  

11.000% to 11.249%

  42     8,905,512.36   1.33