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

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

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Wfhet 2005-1                                        HTML  2,819K 

PROSPECTUS SUPPLEMENT

(To Prospectus Dated June 27, 2005)

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

Issuer

Depositor

$1,228,372,000

(Approximate)

Home Equity Asset-Backed Certificates, Series 2005-1

Principal and interest payable monthly, commencing in July 2005

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

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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:

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.

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THE WFHET SERIES 2005-1 CERTIFICATES

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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.

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:

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.

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Closing Date

On or about June 29, 2005.

Distribution Dates

The 25^th day of each month, or the following business day if the 25^th 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

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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

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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:

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:

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.

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.

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 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 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:

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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:

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:

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:

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:

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“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:

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.

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 180^th 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.

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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^®.

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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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