-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LIP8DLmgnZfMZ+fzPjKhluSTnH03djwjYTvGG8e7DtmQ9XuEN2h7Jxq7Rh2jwpi8 jo5Rqt+UQQ24uKYtIBIKqg== 0000914121-06-000748.txt : 20060320 0000914121-06-000748.hdr.sgml : 20060320 20060317174822 ACCESSION NUMBER: 0000914121-06-000748 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20060320 DATE AS OF CHANGE: 20060317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLS FARGO ASSET SECURITIES CORP CENTRAL INDEX KEY: 0001011663 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 521972128 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-131594 FILM NUMBER: 06697036 BUSINESS ADDRESS: STREET 1: 7485 NEW HORIZON WAY CITY: FREDERICK STATE: MD ZIP: 21703 BUSINESS PHONE: 3018468881 MAIL ADDRESS: STREET 1: 7485 NEW HORIZON WAY CITY: FREDERIDK STATE: MD ZIP: 21703 FORMER COMPANY: FORMER CONFORMED NAME: NORWEST ASSET SECURITIES CORP DATE OF NAME CHANGE: 19960717 S-3/A 1 we890449-s3a1.txt PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3 As Filed with the Securities and Exchange Commission on March 17, 2006 Registration No.: 333-131594 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------- Pre-Effective Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- WELLS FARGO ASSET SECURITIES CORPORATION (Exact name of Registrant as specified in its charter) Delaware 52-1972128 (State of Incorporation) (I.R.S. Employer Identification No.) 7430 New Technology Way Frederick, Maryland 21703 (301) 846-8881 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Lawrence D. Rubenstein, Esq. General Counsel Wells Fargo Asset Securities Corporation c/o Wells Fargo Bank, N.A. 530 Fifth Avenue, 15th Floor New York, New York 10036 (212) 805-1042 (Name, Address, Including Zip Code and Telephone Number, Including Area Code, of Agent for Service) ---------- Copies to: Jordan M. Schwartz, Esq. Cadwalader, Wickersham & Taft LLP One World Financial Center New York, New York 10281 (212) 504-6000 ---------- Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. ---------- If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ----------
CALCULATION OF REGISTRATION FEE ===================================================================================================================== Proposed Maximum Proposed Maximum Title Of Each Class Of Securities Amount Being Offering Price Per Aggregate Offering Amount Of To Be Registered Registered Unit(1) Price(1) Registration Fee - --------------------------------------------------------------------------------------------------------------------- Asset Backed Securities, issued in Series $1,000,000 100% $1,000,000 $107.00(2) =====================================================================================================================
(1) Estimated solely for the purposes of calculating the registration fee on the basis of the proposed maximum aggregate offering price. (2) Previously Filed. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION DATED MARCH 17, 2006 PROSPECTUS SUPPLEMENT (To Prospectus Dated , 200 ) Wells Fargo Asset Securities Corporation Depositor Wells Fargo Bank, N.A. Sponsor and Servicer Wells Fargo Home Equity Asset-Backed Securities 20 - Trust Issuing Entity $[ ] (Approximate) Home Equity Asset-Backed Certificates, Series 200 - Principal and interest payable monthly, commencing in 200 The information in this prospectus supplement is not complete and may be changed. We may not sell these offered certificates until we deliver a final prospectus supplement and prospectus. This prospectus supplement and prospectus are not an offer to sell these offered certificates and are not soliciting an offer to buy these offered certificates in any state where the offer or sale is not permitted. - -------------------------------------------------------------------------------- You should carefully consider the risk factors beginning on page S-17 of this prospectus supplement and on page 12 in the accompanying prospectus. Neither the offered certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency or instrumentality or any other entity. The offered certificates represent interests in the assets deposited with the issuing entity only and will not represent interests in or obligations of the depositor, the sponsor or any other entity. This prospectus supplement may be used to offer and sell the offered certificates only if accompanied by the prospectus. - -------------------------------------------------------------------------------- The Issuing Entity Will Issue-- o Five classes of senior Class A Certificates. o Thirteen classes of Class M Certificates, all of which are subordinated to, and provide credit enhancement for, the Class A Certificates. Each class of Class M Certificates is also subordinated to each class of Class M Certificates, if any, with a lower number. o The Class CE Certificates, which are subordinated to the Class A and Class M Certificates. o The Class P Certificates. o The Class R and Class R-X Certificates. The classes of offered certificates are listed and their sizes and basic payment characteristics are described under the heading "Offered Certificates" in the table beginning on page S-5. The Assets of the Issuing Entity Will Include-- o Two loan groups of first lien residential mortgage loans. The mortgage loans will consist of subprime, conventional fixed rate and adjustable rate mortgage loans. Credit Enhancement Will Consist of-- o Excess Interest - Certain excess interest received from the mortgage loans will be used to cover losses. o Overcollateralization - As of the cut-off date, the assets of the trust will exceed the aggregate principal balance of the certificates, which excess is referred to as overcollateralization. Certain excess interest received from the mortgage loans may also be applied as payments of principal on the certificates to maintain a required level of overcollateralization. o Subordination - Each class of subordinated certificates is subordinate to the senior certificates and to those classes of subordinated certificates higher in order of payment priority. o Cross-Collateralization - Under certain circumstances, payments on the mortgage loans in one loan group may be used to make certain distributions to holders of senior certificates relating to the other loan group. Neither the SEC nor any state securities commission has approved the certificates offered by this prospectus supplement or determined that this prospectus supplement or the prospectus is accurate or complete. Any representation to the contrary is a criminal offense. The underwriter will purchase the offered certificates from the depositor and will offer them to investors at varying prices to be determined at the time of sale. The offered certificates will be available for delivery to investors on or about [ ], 200 . Total proceeds to the depositor for the offered certificates will be approximately $[ ], plus applicable accrued interest, before deducting expenses estimated at $[ ]. [Underwriter] The date of this prospectus supplement is [ ], 200 . TABLE OF CONTENTS Page ---- SUMMARY INFORMATION..........................................................S-7 RISK FACTORS................................................................S-17 Prepayments May Adversely Affect Yield.................................S-17 There is a Risk That Interest Payments on the Mortgage Loans May Be Insufficient to Maintain Overcollateralization..................S-18 Effects of Mortgage Interest Rates and Other Factors on the Pass-Through Rates of the Offered Certificates.....................S-19 There Are Risks in Holding Subordinated Certificates...................S-19 There Are Additional Risks in Holding the Class AI-1B Certificates.....S-20 High Loan-to-Value Ratios Increase Risk of Loss........................S-20 Coverage Under Lender-Paid Primary Mortgage Insurance Policies Will Be Lost if Wells Fargo Bank, N.A. Does Not Pay Premiums.......S-20 The Yield Maintenance Agreement is Subject to Counterparty Risk........S-21 Geographic Concentration May Increase Risk of Loss Because of Adverse Economic Conditions or Natural Disasters...................S-21 Class M Certificates Provide Subordination For Both Certificate Groups.............................................................S-21 There Are Risks Relating to Balloon Loans..............................S-22 Residential Real Estate Values May Fluctuate and Adversely Affect Your Investment....................................................S-22 Delinquencies and Losses on the Mortgage Loans Will Adversely Affect Your Yield..................................................S-22 Interest Only Loans May Have Higher Risk of Default or Rates of Prepayment.........................................................S-22 The Rate of Default on Mortgage Loans that are Secured by Investor Properties May be Higher than on Other Mortgage Loans..............................................................S-23 FICO Scores May Not Accurately Predict the Likelihood of Default.......S-23 Decrement and Sensitivity Tables are Based Upon Assumptions and Models.............................................................S-23 United States Military Operations May Increase Risk of Shortfalls in Interest........................................................S-24 FORWARD LOOKING STATEMENTS..................................................S-25 THE SPONSOR.................................................................S-25 STATIC POOL INFORMATION.....................................................S-25 THE DEPOSITOR...............................................................S-26 THE ISSUING ENTITY..........................................................S-26 THE TRUSTEE.................................................................S-27 THE SECURITIES ADMINISTRATOR................................................S-27 PAYING AGENT................................................................S-27 THE SERVICER................................................................S-28 THE CUSTODIAN...............................................................S-28 ROLES OF WELLS FARGO BANK...................................................S-28 DESCRIPTION OF THE CERTIFICATES.............................................S-29 General................................................................S-29 Allocation of Available Funds..........................................S-29 Interest Distributions.................................................S-30 Principal Distributions................................................S-32 Allocation of Losses...................................................S-41 Application of Monthly Excess Cashflow Amounts.........................S-42 Pass-Through Rates.....................................................S-47 The Yield Maintenance Agreement........................................S-48 Reserve Account........................................................S-49 [The Financial Guaranty Insurance Policy...............................S-49 [The Certificate Insurer...............................................S-50 DESCRIPTION OF THE MORTGAGE LOANS...........................................S-51 General................................................................S-51 Indexes................................................................S-52 Mortgage Loan Data Appearing in Appendix A.............................S-53 Mortgage Loan Underwriting.............................................S-55 Mandatory Repurchase or Substitution of Mortgage Loans.................S-55 Optional Purchase of Mortgage Loans....................................S-56 PREPAYMENT AND YIELD CONSIDERATIONS.........................................S-56 Final Scheduled Distribution Dates.....................................S-61 THE POOLING AND SERVICING AGREEMENT.........................................S-61 General................................................................S-61 Compensation and Payment of Expenses of the Servicer, Securities Administrator and Trustee..........................................S-62 Voting Interests.......................................................S-63 The Credit Risk Manager................................................S-63 Optional Termination of the Trust......................................S-63 CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES............................S-64 General................................................................S-64 Taxation of Regular Interests..........................................S-64 Taxation of the Basis Risk Arrangements................................S-65 S-2 General............................................................S-65 Termination Payments...............................................S-65 REMIC Taxes and Reporting..............................................S-66 ERISA CONSIDERATIONS........................................................S-66 LEGAL INVESTMENT............................................................S-67 SECONDARY MARKET............................................................S-67 UNDERWRITING................................................................S-67 LEGAL MATTERS...............................................................S-68 USE OF PROCEEDS.............................................................S-68 RATINGS.....................................................................S-68 INDEX OF PROSPECTUS SUPPLEMENT DEFINITIONS..................................S-69 Appendix A - Mortgage Loan Statistical Tables................................A-1 Appendix B - Decrement Tables................................................B-1 Appendix C - Assumed Mortgage Loan Characteristics...........................C-1 Appendix D - Final Scheduled Distribution Dates..............................D-1 ANNEX I -LOWER STRIKE RATE , UPPER STRIKE RATE AND NOTIONAL AMOUNT SCHEDULE................................................................I-1 S-3 IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS Information is provided to you about the offered certificates in two separate documents that progressively provide more detail: o the accompanying prospectus, which provides general information, some of which may not apply to your certificates; and o this prospectus supplement, which incorporates and includes the appendices, and describes the specific terms of your certificates. 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 Prospectus Supplement Definitions" beginning on page S-68 in this document and under the caption "Index of Prospectus Definitions" beginning on page 144 in the accompanying prospectus. Any capitalized terms used but not defined in this prospectus supplement have the meanings assigned in the prospectus. S-4
THE WFHET SERIES 200 - CERTIFICATES Initial Ratings of Offered Certificates(3) ----------------------- Initial Pass- Principal Through Original Class Balance(1) Rate Principal Types(2) Interest Types(2) [ ] [ ] [ ] Form(4) - ---------------------------------------------------------------------------------------------------------------------- Offered Certificates - ------------ AI-1A (7) Senior, Pass-Through/ Floating Rate BE Sequential Pay(8) AI-1B (7) Senior, Pass-Through/ Floating Rate BE Sequential Pay(8) AII-1 (7) Senior, Sequential Floating Rate BE Pay/Pass-Through(9) AII-2 (7) Senior, Sequential Floating Rate BE Pay/Pass-Through(9) AII-3 (7) Senior, Sequential Floating Rate BE Pay/Pass-Through(9) M-1 (7) Subordinated Floating Rate BE M-2 (7) Subordinated Floating Rate BE M-3 (7) Subordinated Floating Rate BE M-4 (7) Subordinated Floating Rate BE M-5 (7) Subordinated Floating Rate BE M-6 (7) Subordinated Floating Rate BE M-7 (7) Subordinated Floating Rate BE M-8 (7) Subordinated Floating Rate BE M-9 (7) Subordinated Floating Rate BE M-10 (7) Subordinated Floating Rate BE M-11 (7) Subordinated Floating Rate BE Non-Offered Certificates - ------------ M-12 (7) Subordinated Floating Rate N/A N/A M-13 (7) Subordinated Floating Rate N/A N/A CE N/A Subordinated N/A N/A N/A P N/A N/A N/A N/A N/A R N/A N/A N/A N/A N/A R-X N/A N/A N/A N/A N/A Minimum Incremental Final Scheduled Class Denomination(5) Denomination(5) Distribution Date(6) - ---------------------------------------------------------------------- Offered Certificates - ------------ AI-1A $ $ [ ], 20 AI-1B $ $ [ ], 20 AII-1 $ $ [ ], 20 AII-2 $ $ [ ], 20 AII-3 $ $ [ ], 20 M-1 $ $ [ ], 20 M-2 $ $ [ ], 20 M-3 $ $ [ ], 20 M-4 $ $ [ ], 20 M-5 $ $ [ ], 20 M-6 $ $ [ ], 20 M-7 $ $ [ ], 20 M-8 $ $ [ ], 20 M-9 $ $ [ ], 20 M-10 $ $ [ ], 20 M-11 $ $ [ ], 20 Non-Offered Certificates - ------------ M-12 N/A N/A [ ], 20 M-13 N/A N/A [ ], 20 CE N/A N/A [ ], 20 P N/A N/A [ ], 20 R N/A N/A [ ], 20 R-X N/A N/A [ ], 20
(1) Approximate. The initial principal balances are subject to adjustment as described in this prospectus supplement. (2) See "Description of the Securities--Categories of Classes of Securities" in the prospectus for a description of the principal and interest categories listed. S-5 THE WFHET SERIES 200 - CERTIFICATES (3) A description of the ratings of the offered certificates is set forth under the headings "Summary Information--Ratings of Certificates" and "Ratings" in this prospectus supplement. (4) See "Description of the Securities--Definitive Form" and "--Book-Entry Form" in the prospectus for a description of the forms of certificates. Book-entry form is designated as "BE" in the table above. (5) If necessary, in order to aggregate the initial principal balance of a class, one certificate of the class will be issued in an incremental denomination of less than that shown. (6) The final scheduled distribution date has been calculated as described under "Prepayment and Yield Considerations-Final Scheduled Distribution Dates" in this prospectus supplement. (7) Interest will accrue on these certificates during each interest accrual period at a per annum rate equal to the sum of one-month LIBOR plus the margin set forth in the table below, subject to the applicable maximum rate cap and the applicable group cap or the pool cap, as described under "Description of the Certificates--Pass-Through Rates" in this prospectus supplement. During each interest accrual period relating to the distribution dates after the optional termination date, the margins will increase to margins set forth in the table below if the optional termination right is not exercised. Interest will be calculated based on the methodology in the table below. Margin after the Optional Interest Class Margin Termination Date Calculations ------------------------------------------------------ Class AI-1A * Class AI-1B * Class AII-1 * Class AII-2 * Class AII-3 * 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 * * Interest on these certificates will be calculated on the basis of the actual number of days in the interest accrual period, based on a 360-day year. (8) These certificates have characteristics of a pass-through security; provided, however, on any distribution date on which a sequential trigger event is in effect, these certificates have the characteristics of a sequential pay security. (9) These certificates have the characteristics of a sequential pay security; provided however, on any distribution date on or after the subordination depletion date, these certificates have the characteristics of a pass-through security. (10) The Class CE, Class P, Class R and Class R-X Certificates are entitled to certain distributions as specified in the pooling and servicing agreement. S-6 SUMMARY INFORMATION This summary highlights selected information from this document, but does not contain all of the information that you should consider in making your investment decision. Please read this entire prospectus supplement and the accompanying prospectus carefully for additional detailed information about the offered certificates. RELEVANT PARTIES Sponsor Wells Fargo Bank, N.A. Depositor Wells Fargo Asset Securities Corporation. Servicer Wells Fargo Bank, N.A. Issuing Entity Wells Fargo Home Equity Asset-Backed Securities 200 - Trust, a New York common law trust. Securities Administrator Wells Fargo Bank, N.A. Trustee HSBC Bank USA, National Association. Custodian Wells Fargo Bank, N.A. Paying Agent Wells Fargo Bank, N.A. Credit Risk Manager [ ] Yield Maintenance Agreement Counterparty [ ] AFFILIATIONS Wells Fargo Bank, which is the Sponsor, Custodian, Servicer and Paying Agent, is the direct parent of the Depositor. There are no relationships, agreements or arrangements outside of this transaction among the affiliated parties that are material to an understanding of the Offered Certificates. CUT-OFF DATE [ ], 20 . CLOSING DATE On or about [ ], 20 . DISTRIBUTION DATES The 25th day of each month, or the following business day if the 25th day is not a business day, commencing in [ ] 20 . DETERMINATION DATES With respect to each Distribution Date, the 17th day of each month or if such day is not a business day, the preceding business day. THE TRANSACTION PARTIES The sponsor originated or purchased and currently services the mortgage loans. On the closing date the sponsor will sell the mortgage loans to the depositor, who will in turn deposit them into a common law trust, which is the issuing entity. The trust will be formed by a pooling and servicing agreement, to be dated as of the closing date, among the depositor, the servicer and the trustee. The servicer will service the mortgage loans in accordance with the pooling agreement. The securities administrator will calculate distributions and other information regarding the certificates in accordance with the pooling and servicing agreement. The trustee will have limited administrative duties under the pooling and servicing agreement. The credit risk manager will monitor and make recommendations to the servicer regarding certain delinquent and defaulted mortgage loans, and will report on the performance of such mortgage loans. S-7 The transfers of the mortgage loans from the sponsor to the depositor to the issuing entity in exchange for the certificates is illustrated below: ----------- Sponsor ----------- | | ^ Mortgage Loans | | | | Cash v | Offered | Certificates ----------- ---------------> ----------- Depositor Underwriter ----------- <--------------- ----------- | Cash | | ^ | ^ Mortgage Loans | | Offered | | | | All Certificates | | Cash v | Certificates v | | | ----------- ----------- Issuing Investors Entity ----------- ----------- S-8 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. o The ratings of the rating agencies are not recommendations to buy, sell or hold the certificates rated. A rating may be revised or withdrawn at any time by the assigning rating agency. o The ratings do not address the possibility that, as a result of principal prepayments, the yield on your certificate may be lower than anticipated. o The ratings do not address the likelihood of the payment of any cap carryover amounts. See "Prepayment and Yield Considerations" and "Ratings" in this prospectus supplement and "Prepayment and Yield Considerations" in the prospectus. DESCRIPTION OF CERTIFICATES A summary chart of the initial principal balances, pass-through rates, principal types, interest types, ratings, original form, denominations and final scheduled distribution dates of the certificates is set forth in the table beginning on page S-5. The certificates consist of: o the five classes of senior Class A Certificates designated as "Senior" certificates in the table beginning on page S-5; o the thirteen classes of junior Class M Certificates designated as "Subordinated" certificates in the table beginning on page S-5; and o the Class CE, Class P, Class R and Class R-X Certificates. Only the Class A Certificates and the Class M Certificates (other than the Class M-12 and Class M-13 Certificates) are being offered by this prospectus supplement and the accompanying prospectus. The Class M-12, Class M-13, Class CE, Class P, Class R and Class R-X 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 CE, Class P, Class R and Class R-X 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. Principal Balance of the Certificates The certificates (other than the Class CE, Class P and Residual Certificates) will have an approximate total initial principal balance of $[ ]. 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 agreement. 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. The amount available for distribution to certificateholders will not include amounts used to pay the servicing fee. Such fee will be paid on each S-9 distribution date from interest payments received on the mortgage loans prior to any distributions on the certificates. The servicing fee for each distribution date is equal to the product of (i) one-twelfth of [ ]% and (ii) the aggregate scheduled principal balance of the mortgage loans as of the first day of the month of such distribution date. 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. Interest distributions will be made in the following order of priority: first, to the credit risk manager, the credit risk manager fees; second, to the senior certificates of the related group to pay interest; third, to the senior certificates of the related group to pay any interest previously earned but not paid; fourth, to the senior certificates of the other group to pay interest (to the extent not paid in priority second above); fifth, to the senior certificates of the other group to pay any interest previously earned but not paid (to the extent not paid in priority third above); sixth, from the interest collections for all loan groups, to each class of Class M Certificates in numerical order, beginning with the Class M-1 Certificates; and seventh, to be distributed as part of monthly excess cashflow. 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. Principal distributions, before the stepdown date or when a trigger event is in effect, will be made in the following order of priority: first, to the senior certificates of the related group to pay principal; second, to the senior certificates of the other group to pay principal (to the extent not paid in priority first above); third, from the principal collections for both loan groups, to each class of Class M Certificates in numerical order, beginning with the Class M-1 Certificates; and fourth, to be distributed as part of monthly excess cashflow. Principal distributions, after the stepdown date and as long as no trigger event is in effect, will be made in the following order of priority: first, to the senior certificates of the related group to pay principal, up to their principal distribution amount; second, to the senior certificates of the other group to pay principal (to the extent not paid in priority first above), up to their principal distribution amount; S-10 third, from the principal collections for both loan groups, to each class of Class M Certificates in numerical order, up to their principal distribution amount, beginning with the Class M-1 Certificates; and fourth, to be distributed as part of monthly excess cashflow. 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 [ ] mortgage loans in the first loan group with an aggregate unpaid principal balance as of the cut-off date of approximately $[ ] and approximately [ ] mortgage loans in the second loan group with an aggregate unpaid principal balance as of the cut-off date of approximately $[ ]. 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 with adjustable interest rates provide for a fixed interest rate during an initial period of approximately [ ] to [ ] years and thereafter provide for adjustments to that interest rate on either an [ ] or [ ] basis. The interest rate of each adjustable rate mortgage loan will adjust to equal 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 "Description of the Mortgage Loans" and "Appendix A" 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 purchase mortgage loans from the pool that have become delinquent or which are required to be transferred to the sponsor in order to permit the sponsor to exercise rights which it may have against the originator of the mortgage loans. In addition, the depositor will be required to repurchase or, at its election, if during the two year period following the closing date, substitute for, mortgage loans as a result of breaches of representations or warranties or as a result of defective documentation. 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. Information regarding repurchases of the mortgage loans after the closing date will be available on the trust's monthly distribution reports on Form 10-D. See "Reports to Securityholders" in the prospectus. 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. S-11 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 (other than the Class CE, Class P and Residual Certificates) by approximately $[ ]. This results in overcollateralization equal to approximately [ ]% 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 for that distribution date 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 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 subordinated classes are the first to forego payment. In addition, the Class M Certificates are not expected to receive principal distributions until, at the earliest, [ ] (unless the senior certificates are reduced to zero prior to such date). The chart below summarizes the relative seniority of the various classes of certificates and indicates the initial level of credit support provided to the various classes of certificates. The initial credit support percentage shown below is the sum of the aggregate initial principal balance of the class or classes of certificates subordinate to a class or classes plus the initial overcollateralization amount as a percentage of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date. ----------------------- Priority of Class A Payment (Credit Support [ ]%) ------------------------ Class M-1 ^ | (Credit Support [ ]%) | | ------------------------ | | Class M-2 | | (Credit Support [ ]%) | | ------------------------ | | Class M-3 | | (Credit Support [ ]%) | | ------------------------ | | Class M-4 | | (Credit Support [ ]%) | | ------------------------ | | Class M-5 | | (Credit Support [ ]%) | | ------------------------ | | Class M-6 | | (Credit Support [ ]%) | | ------------------------ | | Class M-7 | | (Credit Support [ ]%) | | ------------------------ | | Class M-8 | | (Credit Support [ ]%) | | ------------------------ | | Class M-9 | | (Credit Support [ ]%) | | ------------------------ | | Class M-10 | | (Credit Support [ ]%) | | ------------------------ | | Class M-11 | | (Credit Support [ ]%) | | ------------------------ | | Class M-12 | | (Credit Support [ ]%) | | ------------------------ | v Class M-13 Order of (Credit Support [ ]%) Loss ------------------------ Allocation 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 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 S-12 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 AGREEMENT In order to mitigate the effect of the pool cap on the yield of the Class M Certificates, on the closing date, the securities administrator, on behalf of the Trust, will enter into a yield maintenance agreement with [ ], as counterparty, for the benefit of the Class M Certificates. In connection with any of the first [ ] distribution dates (other than the initial distribution date), if one-month LIBOR calculated for the interest accrual period for the Class M Certificates relating to such distribution date exceeds a specified rate for such distribution date, the yield maintenance agreement 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 reserve account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the upper strike rate for such distribution date, over the lower strike rate for such distribution date, in each case as set forth in the table on Annex I to this prospectus supplement, (b) the notional amount, as set forth for such distribution date in the 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 to but excluding the current distribution date and the denominator of which is 360. Amounts, if any, payable under the yield maintenance agreement on any distribution date will be used solely to cover shortfalls in payments of interest on the Class M Certificates if the pass-through rates on those certificates are limited for any of the first [ ] distribution dates (other than the initial distribution date) due to the pool cap. The yield maintenance agreement counterparty's obligations under the Class M yield maintenance agreement will terminate following the distribution date in [ ]. EFFECTS OF PREPAYMENTS ON YOUR INVESTMENT EXPECTATIONS The rate of prepayments on the mortgage loans will affect the investment performance of the offered certificates. The offered certificates were structured assuming, among other things, that prepayments on the 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 S-13 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: o pass-through rate; o price paid; o absence or occurrence of interest shortfalls or losses; o absence or occurrence of principal losses; o rate and timing of principal prepayments; and o with respect to the Class M Certificates, amounts received under the yield maintenance agreement. If you purchase offered certificates, your yield, absent shortfalls or losses, will primarily be a function of the price paid and the rate and timing of prepayments on the mortgage loans. o If you pay less or more than the principal balance of your certificate -- that is, buy the certificate at a "discount" or "premium," respectively -- then your effective yield will be higher or lower, respectively, than the pass-through rate on the certificate, because such discount or premium will be amortized over the life of the certificate. o Any deviation in the actual rate of prepayments on the applicable mortgage loans from the rate you assumed will affect the period of time over which, or the rate at which, any discount or premium will be amortized and, consequently, will cause your actual yield to differ from that which you anticipated on the certificates you purchase at a "discount," "premium" or "par." The yield to maturity of classes subordinated to other classes will be more sensitive to losses due to liquidations of the mortgage loans and the timing thereof than the classes to which they are subordinated. If you are purchasing the Class AI-1B Certificates you should consider that on any distribution date on which a sequential trigger event is in effect, the Class AI-1B Certificates will not receive any payments of principal until the principal balance of the Class AI-1A Certificates has been reduced to zero. See "Description of the Certificates--Principal Distributions." If you are purchasing offered certificates at a discount, you should consider the risk that a slower than anticipated rate of principal payments on the applicable mortgage loans may have a negative effect on the yield to maturity of your certificates. If you are purchasing offered certificates at a premium, you should consider the risk that a faster than anticipated rate of principal payments on the applicable mortgage loans may have a negative effect on the yield to maturity of your certificates and that a rapid rate of principal payments on the applicable mortgage loans could result in the loss of all or part of your initial investment. Reinvestment Risk The total return on your investment will be reduced if principal distributions received on your certificates cannot be reinvested at a rate as high as the stated pass-through rate. 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 S-14 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. o The "weighted average life" of an offered certificate is the average amount of time that will elapse between the date of issuance of the certificate and the date on which each dollar in reduction of the principal balance of the certificate is distributed to the investor. Low rates of prepayment may result in the extension of the weighted average life of a certificate. High rates of prepayment may result in the shortening of the weighted average life of a certificate. In general, if you purchase your certificates at par and the weighted average life of your certificates is extended beyond your anticipated time period, the market value of your certificates may be adversely affected. The sensitivities of the weighted average lives of the offered certificates to prepayments is illustrated in the tables appearing in Appendix B. These illustrations are based on prepayment and other assumptions which are unlikely to match the actual experience on the mortgage loans. Therefore, your results will vary. See "Risk Factors--Prepayments May Adversely Affect Yield" and "Prepayment and Yield Considerations" in this prospectus supplement. OPTIONAL TERMINATION The majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the depositor, may, at its option, subject to certain conditions including the then-remaining size of the pool, purchase all the mortgage loans and any properties that the trust acquired in satisfaction of any of the mortgage loans and thereby effect early retirement of the certificates. See "The Pooling and Servicing Agreement--Optional Termination of the Trust" 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 [ ] 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 [ ] Certificates will not constitute "mortgage related securities" under this act. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities, you may be subject to restrictions on investment in the offered certificates and are encouraged to 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. S-15 PERIODIC REPORTS The securities administrator will file periodic reports with the SEC on behalf of the issuing entity under the name ["Wells Fargo Home-Equity Asset-Backed Securities 20 - Trust" [(File No. 333- )]]. See "Where You Can Find More Information" in the prospectus. S-16 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. 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 principal payments on the mortgage loans may be in the form of scheduled principal payments or principal prepayments (for this purpose, the term "principal prepayment" includes prepayments and any other recovery of principal in advance of the scheduled due date, including repurchases and liquidations due to default, casualty, condemnation and similar events). Any of these prepayments will result in distributions to you of amounts that would otherwise be distributed over the remaining term of the mortgage loans. The rate of principal payments on the mortgage loans will be affected by, among other things: o prepayment penalties on certain of the mortgage loans, which may discourage mortgagors from prepaying their mortgage loans during the applicable period; o the amortization schedules of the mortgage loans; o the rate of principal prepayments (including partial prepayments and those resulting from refinancing) thereon by mortgagors; o liquidations of defaulted mortgage loans; o repurchases of mortgage loans by the depositor as a result of defective documentation or breaches of representations and warranties; o optional purchases by the depositor of defaulted mortgage loans; o the optional purchase by the majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the depositor, of all of the mortgage loans in connection with the termination of the trust fund; and o general solicitations for refinancing by mortgage originators (including the sponsor). Prepayment penalty information with respect to the mortgage loans is set forth in the tables appearing in Appendix A hereto. The rate of payments (including prepayments) on pools of mortgage loans is influenced by a variety of economic, geographic and social factors and will depend greatly on the level of mortgage interest rates: o If prevailing rates for similar mortgage loans fall below the mortgage interest rates on the mortgage loans, the rate of prepayment would generally be expected to increase. o Conversely, if interest rates on similar mortgage loans rise above the mortgage interest rates on the mortgage loans, the rate of prepayment would generally be expected to decrease. o The prepayment behavior of the adjustable rate mortgage loans and of the fixed rate mortgage loans may respond to different factors, or may respond differently to the same factors. S-17 o Adjustable rate mortgage loans may also suffer an increase in defaults and liquidations following upward adjustments of their interest rates, especially following their initial adjustments. If the level of overcollateralization falls below what is required under the pooling and servicing agreement, excess interest will be paid to the certificates as principal. This will have the effect of reducing the principal balance of the certificates faster than the aggregate unpaid principal balance of the mortgage loans until the required level of overcollateralization is reached. If you are purchasing offered certificates at a discount, you should consider the risk that if principal payments on the mortgage loans in the related loan group, or either loan group in the case of the subordinated certificates, occur at a rate slower than you expected, there may be a negative effect on the yield to maturity of your certificates. If you are purchasing offered certificates at a premium, you should consider the risk that if principal payments on the mortgage loans in the related loan group, or either loan group in the case of the subordinated certificates, occur at a rate faster than you expected, there may be a negative effect on the yield to maturity of your certificates and that a rapid rate of principal payments on the applicable mortgage loans could result in a loss of all or part of your initial investment. You must make your own decisions as to the appropriate prepayment assumptions to be used in deciding whether to purchase the offered certificates. The timing of changes in the rate of prepayments may significantly affect the actual yield to you, even if the average rate of principal prepayments is consistent with your expectations. In general, the earlier the payment of principal of the mortgage loans, the greater the effect on your yield to maturity for certificates purchased at a price other than par. 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 Residual 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: o When a mortgage loan is prepaid in full or repurchased, excess interest will generally be reduced because the mortgage loan will no longer be outstanding and generating interest or, in the case of a partial prepayment, will be generating less interest. o Every time a mortgage loan is liquidated, excess interest will be reduced because such mortgage loan will no longer be outstanding and generating interest. o If the rates of delinquencies, defaults or losses on the mortgage loans are higher than expected, excess interest will be reduced by the amount necessary to compensate for any shortfalls in cash available on such date to pay certificateholders. o The pass-through rates of the certificates (other than the Class CE, Class P and Residual Certificates) are based on one-month LIBOR, while the adjustable rate mortgage loans have rates that are adjustable based on indices that are different from one-month LIBOR and the fixed rate mortgage loans have rates that do not adjust. As a result, the pass-through rates on the certificates (other than the Class CE, Class P and Residual Certificates) may increase relative to interest rates on the mortgage loans, thus requiring that more of the interest generated by the mortgage loans be applied to cover interest on such certificates. S-18 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 [ ] to [ ] years after the dates of their origination, while the pass-through rates on the certificates (other than the Class CE, Class P and Residual 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 Residual 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 Class M Certificates may also be covered by amounts payable under the yield maintenance agreement, to the extent that, with respect to any of the first [ ] distribution dates (other than the initial distribution date), the lesser of one-month LIBOR as of the related determination date and the applicable upper strike rate under the 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 Agreement" in this prospectus supplement. You should note, however, that if the formula rate for a class of 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 to be 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 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: o Because each class of subordinated certificates receives interest and principal distributions after the senior certificates and each lower-numbered class of subordinated certificates, if any, receive such distributions, there is a greater likelihood that the subordinated certificates will not receive the distributions to which they are entitled on any distribution date. o If the servicer determines not to advance a delinquent payment on a mortgage loan because such amount is not recoverable from a mortgagor, there may be a shortfall in distributions on the certificates which will disproportionately impact the subordinated certificates. o The subordinated certificates are not expected to receive principal distributions until, at the earliest, [ ] (unless the principal balance of the senior certificates is reduced to zero prior to such date) or such later S-19 date as provided in this prospectus supplement or during any period in which delinquencies or realized losses on the mortgage loans exceed certain levels described herein. As a result, the weighted average lives of such certificates will be longer than would be the case if distributions of principal were allocated among all of the certificates at the same time. As a result of the longer weighted average lives of such subordinated certificates, the holders of such certificates have a greater risk of suffering loss on their investments. o Losses resulting from the liquidation of defaulted mortgage loans will first reduce monthly excess cashflow and then reduce the level of overcollateralization, if any, for the certificates. If there is no or insufficient overcollateralization, losses will be allocated to the subordinated certificates in reverse order of payment priority. A loss allocation results in a reduction in a principal balance without a corresponding distribution of cash to the holder. A lower principal balance will result in less interest accruing on the certificate. o The earlier in the transaction that a loss on a mortgage loan occurs that results in a loss on a subordinated certificate, the greater the impact on the yield to such subordinated certificate. See "Description of the Certificates" and "Prepayment and Yield Considerations" in this prospectus supplement for more detail. There Are Additional Risks in Holding the Class AI-1B Certificates If you are considering purchasing the Class AI-1B Certificates, you should consider the risk that after the Class M Certificates are no longer outstanding, losses from the liquidation of defaulted mortgage loans in the first loan group in excess of any available monthly excess cashflow and overcollateralization will affect the amount available for distribution on the Class AI-1B Certificates. If a sequential trigger event is in effect, holders of the Class AI-1B Certificates will not receive any payments of principal until the principal balance of the Class AI-1A Certificates has been reduced to zero. This increases the likelihood that the Class AI-1B Certificates will not receive all distributions they are entitled to on any distribution date as a result of realized losses on the mortgage loans in the first loan group and, on the final distribution date, will have their principal balance reduced as a result of such realized losses. See "Description of the Certificates--Allocation of Losses" in this prospectus supplement. 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. Approximately [ ] the mortgage loans had loan-to-value ratios at origination in excess of 80.00%. No mortgage loan had an original loan-to-value ratio exceeding 100%. 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. Coverage Under Lender-Paid Primary Mortgage Insurance Policies Will Be Lost if Wells Fargo Bank, N.A. Does Not Pay Premiums Approximately [ ]% 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 servicer does not undertake to pay such premiums. In the event of a servicing transfer where the S-20 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 Agreement is Subject to Counterparty Risk The assets of the trust include the yield maintenance agreement which will require the yield maintenance agreement counterparty thereunder to make certain payments in the circumstances set forth herein under "Description of the Certificates--The Yield Maintenance Agreement" for the benefit of the holders of the 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 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 yield maintenance agreement counterparty. 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. Although mortgaged properties located in certain identified flood zones will be required to be covered, to the maximum extent available (currently $[ ]), by flood insurance, no mortgaged properties will otherwise be required to be insured against earthquake damage or any other loss not covered by standard hazard insurance policies. The following chart lists states with concentrations of mortgaged properties in excess of 10% in any loan group and the mortgage pool: Loan Group I Loan Group II Mortgage Pool [State] [State] [State] [State] [State] [State] 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. S-21 There Are Risks Relating to Balloon Loans Approximately [ ]% of the mortgage loans are 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. Residential Real Estate Values May Fluctuate and Adversely Affect Your Investment There can be no assurance that values of the mortgaged properties have remained or will remain at their levels on the dates of origination of the related mortgage loans. The value of any mortgaged property generally will change over time from its value on the appraisal or sales date. If residential real estate values generally or in a particular geographic area decline, the loan-to-value ratios shown in the tables in Appendix A might not be a reliable indicator of the rates of delinquencies, foreclosures and losses that could occur on the mortgage loans. If the residential real estate market should experience an overall decline in property values large enough to cause the outstanding balances of the mortgage loans and any secondary financing on the related mortgaged properties to equal or exceed the value of the mortgaged properties, delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry or in the sponsor's prior securitizations involving the depositor. In addition, adverse economic conditions and other factors (which may or may not affect real property values) may affect the mortgagors' timely payment of scheduled payments of principal and interest on the mortgage loans and, accordingly, the actual rates of delinquencies, foreclosures and losses with respect to any mortgage pool. These other factors could include excessive building resulting in an oversupply of housing in a particular area or a decrease in employment reducing the demand for housing in an area or zoning or environmental restrictions preventing additions to the housing supply in an area. To the extent that credit enhancements do not cover such losses, your yield may be adversely impacted. Delinquencies and Losses on the Mortgage Loans Will Adversely Affect Your Yield Delinquencies on the mortgage loans which are not advanced by the servicer (because the servicer has determined that these amounts, if advanced, would be nonrecoverable), will adversely affect the yield on the certificates. The servicer will determine that a proposed advance is nonrecoverable when, in the good faith exercise of its servicing judgment, it believes the proposed advance would not be ultimately recoverable from the related mortgagor, related liquidation proceeds, or other recoveries in respect of the mortgage loan. The servicer will be entitled to recover from amounts on deposit in the distribution account any advances previously made which it subsequently determines to be nonrecoverable prior to any distribution on the certificates. Because of the priority of distributions, shortfalls resulting from delinquencies that are not covered by advances or from the reimbursement of advances which the servicer determines to be nonrecoverable will be borne first by the excess cashflow and then by the subordinated certificates (in reverse numerical order), and then by the senior certificates. Current interest shortfalls in excess of the monthly excess interest amount will adversely affect the yields on the offered certificates. In addition, losses generally will be borne by the subordinated certificates, as described in this prospectus supplement under "Description of the Certificates - -- Allocation of Losses." As a result, the yields on the offered certificates will depend on the rate and timing of realized losses on the mortgage loans. Interest Only Loans May Have Higher Risk of Default or Rates of Prepayment Approximately [ ]% of the mortgage loans are interest only loans which require only the payment of interest for a term specified in the related mortgage note. See the tables with the heading "Remaining Interest Only Terms" appearing in Appendix A. At the end of the interest only term, the payments on each such mortgage loan will be recalculated to fully amortize its unpaid principal balance over the remaining life of such mortgage loan and the mortgagor will be required to make payments of both principal and interest. The required payment of principal will increase the burden on the mortgagor and may increase the risk of default under such mortgage loan. In underwriting an interest only loan, the ability of the mortgagor to make payments in respect of principal is not considered. S-22 For interest only mortgage loans that are adjustable rate mortgage loans, the increase in the mortgagor's monthly payment attributable to principal will occur when the mortgagor's monthly interest payment may also be increasing as a result of an increase in the mortgage interest rate on the related adjustment date. The combination of these two factors occurring simultaneously may significantly increase the risk of default under such mortgage loan. In addition, the increase in the monthly payment to be made by a mortgagor may induce the mortgagor to refinance such mortgage loan which would result in a prepayment of such loan. Information relating to interest only loans is set forth in Appendix A. The Rate of Default on Mortgage Loans that are Secured by Investor Properties May be Higher than on Other Mortgage Loans Approximately [ ]% of the mortgage loans are expected to be secured by investor properties. An investor property is a property which, at the time of origination, the mortgagor represented would not be used as the mortgagor's primary residence or second home. Because the mortgagor is not living on the property, the mortgagor may be more likely to default on the mortgage loan than on a comparable mortgage loan secured by a primary residence, or to a lesser extent, a second home. In addition, income expected to be generated from an investor property may have been considered for underwriting purposes in addition to the income of the mortgagor from other sources. Should this income not materialize, it is possible the mortgagor would not have sufficient resources to make payments on the mortgage loan. FICO Scores May Not Accurately Predict the Likelihood of Default The sponsor generally uses FICO scores as part of its underwriting process. The tables in Appendix A show FICO scores for the mortgagors obtained at the time of origination of their mortgage loans. 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 expected 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, FICO scores do not take into consideration the effect of mortgage loan characteristics on the probability of repayment by the borrower. Neither the depositor nor the sponsor makes any representations or warranties as to any borrower's current FICO score, the actual performance of any mortgage loan or that a particular FICO score should be relied upon as a basis for an expectation that a borrower will repay its mortgage loan according to its terms. Decrement and Sensitivity Tables are Based Upon Assumptions and Models The decrement tables set forth in Appendix B have been prepared on the basis of the modeling assumptions described under "Prepayment and Yield Considerations." There will likely be discrepancies between the characteristics of the actual mortgage loans included and the characteristics of the assumed mortgage loans used in preparing the decrement tables. Any such discrepancy may have an effect upon the percentages of initial principal balances outstanding set forth in the decrement tables (and the weighted average lives of the offered certificates). In addition, to the extent that the mortgage loans that actually are included have characteristics that differ from those assumed in preparing the decrement tables, the principal balance of a class of offered certificates could be reduced to zero earlier or later than indicated by the decrement tables. The models used in this prospectus supplement for prepayments also do not purport to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the mortgage loans contained in the trust. It is highly unlikely that the mortgage loans will prepay at any of the rates specified. The assumed percentages of the applicable prepayment assumptions shown in the Appendices are for illustrative purposes only. For a description of the prepayment assumptions, see "Prepayment and Yield Considerations" in this prospectus supplement. The actual rates of prepayment of the mortgage loans may not correspond to any of the assumptions made in this prospectus supplement. For these reasons, the weighted average lives of the offered certificates may differ from the weighted average lives shown in the tables in Appendix B. S-23 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 sponsor. 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. S-24 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. THE SPONSOR The Sponsor, Wells Fargo Bank, N.A. ("Wells Fargo Bank") is an indirect, wholly-owned subsidiary of Wells Fargo & Company. See "The Sponsor," "The Sponsor's Mortgage Loan Programs," and "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements" in the prospectus for more information about the Sponsor, its securitization programs, underwriting criteria and procedures used to originate the Mortgage Loans and its material roles and duties in this securitization. STATIC POOL INFORMATION Information concerning the Sponsor's prior originations and purchases of Fixed Rate First Lien Subprime Loans and Adjustable Rate First Lien Subprime Loans is available on the internet at http://www.securitieslink.com/staticpools. Without charge or registration, by clicking on the link in the row entitled "WFHET 200 - ," investors can view on this website the following information: o summary information regarding original characteristics of the Sponsor's prior originations and purchases of Fixed Rate First Lien Subprime Loans and Adjustable Rate First Lien Subprime Loans; and o delinquency, cumulative loss, and prepayment information by vintage year for the five years preceding the date of first use of this prospectus supplement regarding the Sponsor's prior originations and purchases of Fixed Rate First Lien Subprime Loans and Adjustable Rate First Lien Subprime Loans. In the event any changes or updates are made to the information available on the Sponsor's website, the Depositor will provide a copy of the original information upon request to any person who writes or calls the Depositor at 7430 New Technology Way, Frederick, Maryland 21703 Attention: Vice President, Structured Finance, telephone number (301) 846-8881. The static pool reports available on the Sponsor's website relating to any information prior to January 1, 2006 is not deemed to be part of this prospectus, the accompanying prospectus supplement or the Depositor's registration statement. S-25 Static pool performance may have been affected by various factors relating to the underlying borrower's personal circumstances, including, but not limited to, unemployment or change in employment (or in the case of self-employed mortgagors or mortgagors relying on commission income, fluctuations in income), marital separation and the mortgagor's equity in the related mortgaged property. In addition, static pool performance may be sensitive to adverse economic conditions, either nationally or regionally, may exhibit seasonal variations and may be influenced by the level of housing prices, the level of interest rates and changes in mortgage loan product features. In addition, changes over time in servicing practices or variations in mortgage loan underwriting guidelines or the application of such guidelines may affect the static pool performance. See "The Sponsor's Mortgage Loan Programs-Mortgage Loan Underwriting." Regional economic conditions (including declining real estate values) may particularly affect delinquency and cumulative loss experience on mortgage loans to the extent that mortgaged properties are concentrated in certain geographic areas. The historical pool performance information contained in the static pool reports may be attributable to factors such as those described above, although there can be no assurance as to whether this information is the result of any particular factor or a combination of factors. Due to all of these factors, the Sponsor's static pool performance data may not be indicative of the future performance of the Mortgage Loans. For additional information concerning the static pool information available on the website set forth above, see "Static Pool Information" in the prospectus. THE DEPOSITOR Wells Fargo Asset Securities Corporation (the "Depositor") is a direct, wholly owned subsidiary of Wells Fargo Bank, N.A. and an indirect, wholly owned subsidiary of Wells Fargo & Company. The Depositor was incorporated in the State of Delaware on March 28, 1996 as Norwest Asset Securities Corporation. On April 7, 2000, Norwest Integrated Structured Assets, Inc., an affiliate of the Depositor, was merged into and with the Depositor. On April 17, 2000, the Depositor changed its name from Norwest Asset Securities Corporation to Wells Fargo Asset Securities Corporation. The limited purposes of the Depositor are, in general, to acquire, own and sell mortgage loans; to issue, acquire, own, hold and sell mortgage pass-through securities and home equity asset-backed pass-through securities which represent ownership interests in mortgage loans, collections thereon and related properties; and to engage in any acts which are incidental to, or necessary, suitable or convenient to accomplish, the foregoing. The Depositor will have limited obligations and rights under the Pooling and Servicing Agreement after the Closing Date, including, but not limited to, repurchasing Mortgage Loans due to breaches of representations and warranties, repurchasing at its option certain defaulted Mortgage Loans or, in the circumstances described in the prospectus under "Description of the Securities--Termination" repurchasing all of the Mortgage Loans. The Depositor maintains its principal office at 7430 New Technology Way, Frederick, Maryland 21703. Its telephone number is (301) 846-8881. See "The Depositor" in the prospectus for more information about the Depositor. THE ISSUING ENTITY The Issuing Entity will be a New York common law trust (the "Trust"), formed on the Closing Date pursuant to the Pooling and Servicing Agreement. The Mortgage Loans will be deposited by the Depositor into the Trust under the Pooling and Servicing Agreement. The Trust will have no officers or directors and no continuing duties other than to hold the assets underlying the Certificates and to issue the Certificates. The fiscal year end of the Issuing Entity will be December 31. The Trust will be administered by the Trustee and the Securities Administrator pursuant to the terms of the Pooling and Servicing Agreement. S-26 THE TRUSTEE HSBC Bank USA, National Association, a national banking association, will act as the "Trustee" under the Pooling and Servicing Agreement. The corporate trust office of the Trustee is located at 452 Fifth Avenue, New York, New York 10018. The Trustee has limited administrative responsibilities under the terms of the Pooling and Servicing Agreement. The Trustee is not responsible for securities administration, does not monitor access to and activity in the Distribution Account, compliance with covenants in the Pooling and Servicing Agreement or the basis for the addition, substitution or removal of Mortgage Loans from the Mortgage Pool. Under the Pooling and Servicing Agreement, the Trustee will be required to make Periodic Advances to the limited extent described herein with respect to the Mortgage Loans serviced by Wells Fargo Bank if Wells Fargo Bank, as Servicer, fails to make a Periodic Advance required by the related Wells Fargo Underlying Servicing Agreement. See "Description of the Securities--Advances in Respect of Delinquencies" herein. The Trustee may appoint one or more co-trustees if necessary to comply with the fiduciary requirements imposed by any jurisdiction in which a Mortgaged Property is located. In the case of any appointment of a co-trustee, all rights, powers, duties and obligations conferred or imposed upon the Trustee will be conferred or imposed upon and exercised or performed by the Trustee and the co-trustee jointly, unless the law of a jurisdiction prohibits the Trustee from performing it duties under the Pooling and Servicing Agreement, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion of the Trust in any such jurisdiction) shall be exercised and performed by the co-trustee at the direction of the Trustee. See "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements--The Trustee" in the prospectus for more information about the Trustee and its obligations and rights (including the right to indemnity and reimbursement in certain circumstances) under the Pooling and Servicing Agreement. THE SECURITIES ADMINISTRATOR The Corporate Trust Services division of Wells Fargo Bank will act as securities administrator (the "Securities Administrator"). Wells Fargo Bank's principal office for purposes of securities administration is located at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 and the office for certificate transfer services is located at Sixth and Marquette, Minneapolis, Minnesota 55479 (together, the "Corporate Trust Office"). The telephone number of the Securities Administrator is (410) 884-2000. In such capacity, the Securities Administrator is responsible for pool performance calculation, distribution calculations, the preparation of monthly distribution reports and the preparation of tax returns on behalf of the Trust (unless the Trustee is required by law to prepare) and the preparation of monthly reports on Form 10-D (based on information included in the monthly distribution date statements) and annual reports on Form 10-K that are required to be filed with the SEC on behalf of the Trust. Under the Pooling and Servicing Agreement, any good faith interpretation of the Securities Administrator of any provisions of the Pooling and Servicing Agreement relating to the distributions to be made on or the allocation of any losses to the Certificates which the Securities Administrator concludes are ambiguous or unclear will be binding on Certificateholders. See "The Sponsor" in the prospectus for more information about Wells Fargo Bank. PAYING AGENT The Corporate Trust Services division of Wells Fargo Bank will also act as paying agent (the "Paying Agent") under the Pooling and Servicing Agreement. The Paying Agent is responsible for making distributions to Certificateholders and making available to Certificateholders certain reports as discussed under "Reports to Securityholders" in the prospectus. The Paying Agent will establish and maintain a separate trust account (the "Payment Account"). On the business day prior to each Distribution Date, the Securities Administrator will deposit funds from the Distribution Account into the Payment Account and the Paying Agent will make Payments to Certificateholders with the funds in the Payment Account on the related Distribution Date. S-27 See "The Sponsor" in the prospectus for more information about Wells Fargo Bank. THE SERVICER The Sponsor, as "Servicer," will service all of the Mortgage Loans in accordance with the terms of the Pooling and Servicing Agreement. Among other things, the Servicer is obligated under certain circumstances to advance delinquent payments of principal and interest with respect to the Mortgage Loans. As of the date of this prospectus supplement, the Servicer has not failed to make any required advance with respect to any issuance of residential mortgage backed securities. The Servicer may perform any of its obligations under the Pooling and Servicing Agreement through one or more subservicers, although the Servicer has not engaged any subservicers as of the date of this prospectus supplement. Despite the existence of subservicing arrangements, the Servicer will be liable for its servicing duties and obligations under the Pooling and Servicing Agreement as if the Servicer alone were servicing the Mortgage Loans. See "The Sponsor" and "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements" in the prospectus for more information about the Servicer, the Servicer's experience, it servicing procedures and its obligations under the Pooling and Servicing Agreement. All of the Mortgage Loans will be Type 1 Loans. See "Description of the Securities--Available Funds" in the prospectus. See "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements" in the prospectus. THE CUSTODIAN The Corporate Trust Services division of Wells Fargo Bank will act as custodian (the "Custodian") for the Mortgage Files pursuant to the custodial agreement, dated the Closing Date (the "Custodial Agreement") among the Trustee, the Depositor, the Servicer and the Custodian. Wells Fargo Bank has been engaged in the mortgage document custody business for more than 25 years. Wells Fargo Bank maintains document custody facilities in its Minneapolis, Minnesota headquarters and in three regional offices located in Richfield, Minnesota, Irvine, California, and Salt Lake City, Utah. The Custodian will be responsible to hold and safeguard the Mortgage Notes and other contents of the Mortgage Files on behalf of the Trustee and the Certificateholders. The Custodian will segregate the Mortgage Files by boarding each in an electronic tracking system, which identifies the owner of the Mortgage File and the Mortgage File's specific location in the Custodian's vault. See "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements--Assignment of Mortgage Loans; Representations and Warranties; Repurchases" in the prospectus for more information about the Custodian and its obligations and rights (including its right to indemnity and reimbursement in certain circumstances) under the Pooling and Servicing Agreement. ROLES OF WELLS FARGO BANK As discussed herein, Wells Fargo Bank is the Sponsor and will act as the Securities Administrator, the Paying Agent, the Custodian and the Servicer with respect to the Mortgage Loans. Even though Wells Fargo Bank will be acting in these multiple capacities, it is expected that with respect to the functions of Securities Administrator, Paying Agent and Custodian, on the one hand, and Servicer, on the other, different divisions within Wells Fargo Bank, acting through different personnel, will be performing these functions. See "Summary Information-Affiliations" in this prospectus supplement. S-28 DESCRIPTION OF THE CERTIFICATES General The Trust will issue five 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, Class AII-2 and Class AII-3 Certificates (collectively, the "Class AII Certificates"). The Trust will also issue (i) thirteen 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 and Class M-13 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 and Class R-X Certificates (collectively, 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 Paying Agent on the 25th day of each month, or if such day is not a business day, on the first business day thereafter, commencing in [ ] (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; (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 and excluding and Liquidation Profits, 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. S-29 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 Paying Agent 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) concurrently, from the Interest Remittance Amount for Group II, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata (based on the Accrued Certificate Interest for each such Class), the applicable 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) concurrently, from the Interest Remittance Amount for Group II, to the Class AII-1, Class AII-2 and Class AII-3 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; fourth, concurrently, as follows: (1) concurrently, from the Interest Remittance Amount for Group I, to the Class AII-1, Class AII-2 and Class AII-3 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; 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) concurrently, from the Interest Remittance Amount for Group I, to the Class AII-1, Class AII-2 and Class AII-3 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; and S-30 (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; and nineteenth, 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 "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 Residual 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 Residual Certificates do not accrue interest. S-31 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, amounts available for reimbursement of Advances and Servicing Advances with respect to such Mortgage Loans as described in the prospectus under "Description of the Securities-Advances in Respect of Delinquencies," amounts in respect of indemnification and 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. 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, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; second, concurrently, as follows: (i) the Group I Principal Distribution Amount remaining after priority first (i) above, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates and (b) with respect to each Distribution Date on or after the S-32 Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; 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 and Class M-13 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, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, up to an amount equal to the Group II Senior Principal Distribution Amount and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata, 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, up to an amount equal to the Group II Senior Principal Distribution Amount not paid pursuant to priority first (ii) above, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; 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; 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; S-33 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; and sixteenth, 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 [ ]% 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 [ ]% 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 [ ]% 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 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 S-34 (i) approximately [ ]% 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 [ ]% 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 [ ]% 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 [ ]% 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 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 S-35 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 [ ]% 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 [ ]% 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 [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (b) the Overcollateralization Floor. "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 S-36 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 [ ]% 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 [ ]% 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 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 S-37 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 [ ]% 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) [ ]% and (ii) the aggregate unpaid principal balance of the Group I Mortgage Loans on the Cut-off Date. "Group I Principal Distribution Amount" means with respect to any Distribution Date, the product of the Group I Principal Percentage and the Principal Distribution Amount. "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 [ ]% 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) [ ]% 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, the product of the Group II Principal Percentage and the Principal Distribution 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 aggregate Principal Balance of the Class AII Certificates immediately prior to such Distribution Date over (b) the lesser of (x) the product of (1) approximately [ ]% 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 S-38 (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) [ ]% and (ii) the Pool Balance on the Cut-off 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 Residual 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: o all amounts distributed on previous Distribution Dates on such Class on account of principal; and o any Applied Realized Loss Amounts allocated to such Class for previous Distribution Dates; and increased by: o any Subsequent Recoveries allocated to such Class for previous Distribution Dates. "Principal Distribution Amount" means as of any Distribution Date, (a) the sum of (i) the Principal Remittance Amount and (ii) the Extra Principal Distribution Amount, if any, minus (b) the Overcollateralization Release Amount, if any. "Principal Remittance Amount" means with respect to any Distribution Date, to the extent of funds available therefor as described herein, the amount equal to the sum (less amounts available for reimbursement of Advances and Servicing Advances as described in the prospectus under "Description of the Securities--Advances in Respect of Delinquencies," amounts in respect of indemnification and 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. S-39 "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 [ ]%. "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 [ ], 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 [ ]% or (c) with respect to any Distribution Date on or after the Distribution Date in [ ], a Trigger Event is in effect. "Subordination Depletion Date" means the Distribution Date on which the aggregate Principal Balance of the Class M Certificates is reduced to zero. "Stepdown Date" means the earlier to occur of (i) the Distribution Date following 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 [ ] 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 [ ]% 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 [ ]% of the Pool Balance as of the last day of the related Collection Period and (b) [ ]% 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. A "Trigger Event" has occurred on a Distribution Date if (i) the three-month rolling average of 60+ Day Delinquent Loans equals or exceeds [ ]% 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: S-40 Distribution Date Occurring In Percentage ----------------------------------- ---------- October 2007 through September 2008 [ ]% October 2008 through September 2009 [ ]% October 2009 through September 2010 [ ]% October 2010 through September 2011 [ ]% October 2011 and thereafter [ ]% 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-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 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, Class AII-2 and Class AII-3 Certificates, pro rata, until their respective Principal Balances are 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. S-41 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; (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; S-42 (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; (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; S-43 (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; (xli) to the Class M-13 Certificates, any Class M-13 Realized Loss Amortization Amount for such Distribution Date; (xlii) 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; (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 (xlii)(a) above) any remaining unpaid Cap Carryover Amount for such Class, after giving effect to any distributions pursuant to clause (xlii)(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 and Class M-13 Certificates, any Cap Carryover Amount for such Class, after giving effect to any amounts received from the Reserve Account; and (xliii) 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 S-44 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 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. "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 S-45 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 and the Class M-13 Realized Loss Amortization Amount. "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 beginning on page S-5, (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 beginning on page S-5 if the optional termination right is not exercised. The Formula Rate for each of the Offered Certificates will be determined by the Securities Administrator as described in the prospectus under "Description of the Securities-Pass-Through Rates and Interest Rates Based on LIBOR" and may be obtained by telephoning the Securities Administrator at (301) 815-6000. 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 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) 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 S-46 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 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 for any Class A Certificates will be paid on the same or future Distribution Dates from amounts that would otherwise be distributed on the Class CE Certificates. Any Cap Carryover Amount for the Class M Certificates will be paid on the same or future Distribution Dates from amounts in the Reserve Account as set forth herein under "--The Yield Maintenance Agreement," and then, to the extent remaining unpaid, from amounts that would otherwise be distributed on the Class CE Certificates, after the payment of any Cap Carryover Amounts to the Class A 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 Agreement The Securities Administrator on behalf of the Trust Fund will enter into a yield maintenance agreement with [ ], as counterparty (the "Yield Maintenance Agreement Counterparty"), which will be for the benefit of the Class M Certificates (the "Yield Maintenance Agreement"). Pursuant to the Yield Maintenance Agreement, if, with respect to any Distribution Date (other than the initial Distribution Date) on or prior to the Distribution Date in [ ], one-month LIBOR as calculated for the Interest Accrual Period for the Class M Certificates relating to such Distribution Date exceeds the lower strike rate for such Distribution Date, the Yield Maintenance Agreement Counterparty will be obligated to pay to the Securities Administrator two business days prior to such Distribution Date, for deposit into the Reserve Account, an amount equal to the product of (a) the excess of the lesser of (i) one-month LIBOR and (ii) the 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 to but excluding the current Distribution Date and the denominator of which is 360 (the "Yield Maintenance Agreement Payment"). The Yield Maintenance Agreement will terminate after the Distribution Date in [ ]. The upper strike rate, lower strike rate and notional amount applicable to the Yield Maintenance Agreement and each Distribution Date are set forth in the table in Annex I to this prospectus supplement. The Yield Maintenance Agreement will be governed by and construed in accordance with the law of the State of New York. [Description of the organizational form and general character of the business of the Yield Maintenance Agreement Counterparty and description of the other material terms of the Yield Maintenance Agreement, including, without limitation, conditions to payment or limits on the timing or amount of payments and material provisions relating to the termination or substitution of the Yield Maintenance Agreement. Disclosure of whether the significance percentage is less than 10%, at least 10% but less than 20%, or more than 20%, calculated in accordance with Item 1115 of Regulation AB (17 C.F.R. 229.1115).] [If the significance percentage is 10%, but less than 20%, add the financial information required by Item 1115(b)(1) of Regulation AB.] S-47 [If the significance percentage is 20% or more, add the financial information required by Item 1115(b)(2) of Regulation AB.] Reserve Account Pursuant to the Pooling and Servicing Agreement, the Securities Administrator will establish a separate trust account (the "Reserve Account") for deposit of any Yield Maintenance Agreement Payments received under the Yield Maintenance Agreement. Holders of the Class M Certificates will be entitled to receive the Yield Maintenance Agreement Payments, if any, deposited into the Reserve Account with respect to any Distribution Date to the extent of any Cap Carryover Amounts on such Certificates for any Distribution Date. The Reserve Account will be funded solely from amounts received by the Securities Administrator from the 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 Account will be made on the applicable Distribution Date in the following order of priority: (i) to the Class M Certificates, from the 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 and Class M-13 Certificates; (ii) to the Class M Certificates, from the 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 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 and Class M-13 Certificates, pro rata, based on their respective remaining Cap Carryover Amounts; and (iii) to the Class CE Certificates, any remaining amount on deposit in the Reserve Account. The "Cap Amount" for any Class of Class M Certificates and any Distribution Date is equal to (i) the 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. [The Financial Guaranty Insurance Policy The following summary of the material terms of the financial guaranty insurance policy to be issued by [ ] (the "Insurer"). The Insurer has made a commitment to issue a financial guaranty insurance policy (the "Policy") relating to the Class [ ] Certificates (the "Insured Certificates"), effective as of the date of issuance of the Insured Certificates. Under the terms of the Policy, the Insurer will unconditionally and irrevocably guarantee to pay each and every Insured Amount (as defined below) that shall become due for payment but shall be unpaid by reason of Nonpayment (as defined below). The Policy is non-cancelable for any reason. Principal payable by the Insurer under the Policy in respect of the Insured Certificates will in no event exceed the principal balance of the Insured Certificates as of the date of issuance, which is $[ ]. The Insurer will pay each Insured Amount that constitutes a Deficiency Amount to the Securities Administrator, as beneficiary of the Policy on behalf of the holders of the Insured Certificates, on the later of (i) the Distribution Date on which such Deficiency Amount becomes due for payment or (ii) the third business day following the day on which the Insurer receives notice of claim therefor in accordance with the terms of the Policy. The Insurer will pay each Insured Amount that constitutes a Preference Amount when due to be paid by or on behalf of the holders of the Insured Certificates S-48 pursuant to an applicable court order, but in any event no earlier than the fourth business day following receipt by the Insurer of the documentation required by the Insurer in accordance with the terms of the Policy. "Deficiency Amount" means, with respect to the Insured Certificates and any Distribution Date, the amount (if any) equal to (1) the sum of (a) any shortfall in amounts available in the Distribution Account to pay interest for the related Interest Accrual Period on the principal balance of the Insured Certificates at the then applicable Pass-Through Rate for such Distribution Date and (b) the amount of the principal portion of any Applied Realized Loss Amount allocated to the Insured Certificates on such Distribution Date and (2) on the Distribution Date in [ ] or, with the consent of the Insurer, upon the earlier of the termination of the Trust pursuant to the terms of the Pooling and Servicing Agreement, the principal balance of the Insured Certificates after giving effect to any distributions on such Distribution Date and, in the case of each of clauses (1) and (2), net of any Current Interest Shortfalls allocated to the Insured Certificates, or any shortfall attributable to the liability of the Trust, the REMIC or the Securities Administrator for withholding or other taxes, including interest and penalties in respect of such liabilities allocated to the Insured Certificates on such Distribution Date; provided, however, that "Deficiency Amount" shall not include any additional amounts owing by the Trust as a result of the failure by the Securities Administrator to pay such amount when due and payable, including, without limitation, any such additional amounts as may be attributable to penalties or default interest rates, amounts in respect of indemnification, or any other additional amounts payable by reason of such a default. "Insured Amount" means, with respect to any Distribution Date, the sum of any Deficiency Amount for such Distribution Date and any Preference Amount. "Insured Payment" means, with respect to any Distribution Date, the aggregate amount paid by the Insurer to the Securities Administrator in respect of (i) the Deficiency Amount for such Distribution Date and (ii) Preference Amounts for any given business day. "Nonpayment" means, with respect to any Distribution Date, an Insured Amount is due for payment but the funds, if any, remitted to the Securities Administrator pursuant to the Pooling and Servicing Agreement are insufficient for payment in full of such Insured Amount. "Preference Amount" means any payment of principal or interest previously distributed by or on behalf of the Trust to a holder of Insured Certificates, which would have been covered under the Policy as a Deficiency Amount if there had been a shortfall in funds available to make such a payment on the required Distribution Date for such payment, which has been deemed a preferential transfer and has been recovered from such holder pursuant to the United States Bankruptcy Code in accordance with a final nonappealable order of a court or other body exercising jurisdiction in an insolvency proceeding by or against the Trust. The Insurer shall be subrogated to the rights of the holders of the Insured Certificates to receive distributions in respect of the Insured Certificates to the extent of any payment by the Insurer under the Policy. The Policy is not covered by the property/casualty insurance fund specified in Article 76 of the New York Insurance Law. Capitalized terms used in the Policy and not otherwise defined in the Policy shall have the meanings set forth in the Pooling and Servicing Agreement as of the date of execution of the Policy, without giving effect to any subsequent amendment to or modification of the Pooling and Servicing Agreement unless such amendment or modification has been approved in writing by the Insurer.] [The Certificate Insurer [If the Insurer is liable or contingently liable to provide payments representing 10% or more of the cash flow supporting the Insured Certificates, insert description of the organizational form of the provider and the general character of the business of the provider. ] [If the Insurer is liable or contingently liable to provide payments representing 10% or more, but less than 20%, of the cash flow supporting the Insured Certificates, add the financial information required by Item 1114(b)(2)(i) of Regulation AB.] S-49 [If the Insurer is liable or contingently liable to provide payments representing 20% or more of the cash flow supporting the Insured Certificates, add the financial information required by Item 1114(b)(2)(ii) of Regulation AB (17 C.F.R. 229.1114).]] 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, 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 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 [ ] or [ ] years subsequent to the initial Due Date and thereafter at either [ ] or [ ] intervals (each such date, an "Adjustment Date") over the term of the Mortgage Loan. On each Adjustment Date, the Mortgage Interest Rate for such Mortgage Loan will adjust to the sum of the applicable Index and the number of basis points specified in the related Mortgage Note (the "Gross Margin"), rounded to the nearest one-eighth of one percent, subject to the limitation that with respect to each Adjustment Date, the interest rate after such adjustment may not vary from the Mortgage Interest Rate in effect prior to such adjustment by more than the amount specified in the Mortgage Note (the "Periodic Cap"). In addition, adjustments to the interest rate for each Mortgage Loan are subject to a lifetime rate ceiling (the "Rate Ceiling"). Appendix A contains a table of the Rate Ceilings for the Adjustable Rate Mortgage Loans. Generally, the minimum Mortgage Interest Rate for a Mortgage Loan will be such Mortgage Loan's initial Mortgage Interest Rate. Certain of the Mortgage Loans will not fully amortize by their respective maturity dates (each, a "Balloon Loan"). The Monthly Payment for each Balloon Loan is based on an amortization schedule of 360 months, except for the final payment (the "Balloon Payment") which is due and payable on the 180th month following origination of such Mortgage Loan. The amount of the Balloon Payment on each Balloon Loan is substantially in excess of the amount of the scheduled Monthly Payment for such Mortgage Loan. The Servicer will not make any advances with respect to the unpaid principal balance of a Balloon Loan remaining at maturity. See "Description of the - ------------------- (1) The descriptions in this prospectus supplement of the Trust and the properties securing the Mortgage Loans to be included in the Trust Fund are based upon the expected characteristics of the Mortgage Loans at the close of business on the Cut-off Date, as adjusted for the scheduled principal payments due on or before such date. Notwithstanding the foregoing, any of such Mortgage Loans may be excluded from the Trust Fund (i) as a result of principal prepayment thereof in full or (ii) if, as a result of delinquencies or otherwise, the Depositor otherwise deems such exclusion necessary or desirable. In either event, other Mortgage Loans may be included in the Trust Fund. The Depositor believes that the information set forth herein with respect to the expected characteristics of the Mortgage Loans on the Cut-off Date is representative of the characteristics as of the Cut-off Date of the Mortgage Loans to be included in the Trust Fund as it will be constituted at the time the Certificates are issued, although the aggregate unpaid principal balance of the Mortgage Loans included in the Trust Fund as of the Cut-off Date, the range of Mortgage Interest Rates and maturities, and certain other characteristics of the Mortgage Loans in the Trust Fund may vary. In the event that any of the characteristics as of the Cut-off Date of the Mortgage Loans that constitute the Trust Fund on the date of initial issuance of the Certificates vary materially from those described herein, revised information regarding such Mortgage Loans will be made available to purchasers of the Offered Certificates, on or before such issuance date, and a Current Report on Form 8-K containing such information will be filed with the Securities and Exchange Commission within 15 days following such date. S-50 Securities-Advances in Respect of Delinquencies" in the prospectus. Appendix A contains information relating to the amount of Balloon Loans. The Mortgage Loans were selected by the Sponsor from the Sponsor's first lien, subprime, fixed and adjustable rate mortgage loans, and were chosen to conform to the characteristics of mortgage loans eligible to be securitized in the Depositor's WFHET securitization program. See "The Sponsor" in the prospectus. Indexes The index for approximately [ ]% (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(R). Year --------------------------------------------- Month 2005 2004 2003 2002 2001 2000 - ----- ---- ---- ---- ---- ---- ---- January 2.89% 1.19% 1.37% 1.93% 5.53% 6.21% February 3.05 1.19 1.34 2.04 5.20 6.33 March 3.28 1.16 1.26 2.24 4.81 6.41 April 3.38 1.28 1.28 2.21 4.48 6.54 May 3.49 1.52 1.23 2.10 4.08 6.98 June 3.61 1.81 1.08 2.00 3.83 6.97 July 3.83 1.89 1.12 1.91 3.79 6.92 August 4.02 1.94 1.20 1.76 3.57 6.84 September 4.05 2.09 1.19 1.78 3.00 6.77 October 4.35 2.23 1.20 1.74 2.34 6.73 November 4.55 2.50 1.24 1.46 2.11 6.71 December 4.67 2.71 1.24 1.42 1.99 6.40 The index for approximately [ ]% (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(R). S-51 Year --------------------------------------------- Month 2005 2004 2003 2002 2001 2000 - ----- ---- ---- ---- ---- ---- ---- January 2.86% 1.24% 1.36% 2.16% 4.81% 6.12% February 3.03 1.24 1.30 2.23 4.68 6.22 March 3.30 1.19 1.24 2.57 4.30 6.22 April 3.32 1.43 1.27 2.48 3.98 6.15 May 3.33 1.78 1.18 2.35 3.78 6.33 June 3.36 2.12 1.01 2.20 3.58 6.17 July 3.64 2.10 1.12 1.96 3.62 6.08 August 3.87 2.02 1.31 1.76 3.47 6.18 September 3.85 2.12 1.24 1.72 2.82 6.13 October 4.18 2.23 1.25 1.65 2.33 6.01 November 4.33 2.50 1.34 1.49 2.18 6.09 December 4.35 2.67 1.31 1.45 2.22 5.60 Interest on the Mortgage Loans is calculated based on a 360-day year of twelve 30-day months. When a full prepayment of principal is made on a Mortgage Loan during a month, the mortgagor is charged interest only on the days of the month actually elapsed up to the date of such prepayment, at a daily interest rate that is applied to the principal amount of such prepaid mortgage loan. When a partial prepayment of principal is made on a Mortgage Loan during a month, the mortgagor generally is not charged interest on the amount of the partial prepayment during the month in which such prepayment is made. As of the Cut-off Date, none of the Mortgage Loans were Delinquent and none of the Adjustable Rate Mortgage Loans had Mortgage Interest Rates that may be converted to fixed Mortgage Interest Rates at the option of the related mortgagor. All of the Mortgage Loans have a Due Date on the first day of each month. Each of the Mortgage Loans is subject to a due-on-sale clause. See "Certain Legal Aspects of the Mortgage Loans--'Due-on-Sale' Clauses" and "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Due on Sale Provisions" in the prospectus. Mortgage Loan Data Appearing in Appendix A Appendix A contains tables setting forth certain characteristics of the Mortgage Loans. The balances and percentages set forth in such tables may not be exact due to rounding. The Mortgage Loans were originated by Wells Fargo Bank or its affiliates or purchased from other mortgage lenders. [Any originator or group of affiliated originators, apart from the Sponsor or its affiliates, that originated or is expected to originate 10% or more of the mortgage pool will be identified. For any originator or group of affiliated originators, apart from the Sponsor or its affiliates, that originated or is expected to originate 20% or more of the mortgage pool, the following information will be provided: (1) originator's form of organization and (2) to the extent material, a description of the originator's origination program and how long the originator has been engaged in originating assets, including a discussion of the originator's experience in originating assets of the type included in this transaction.] 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 Sponsor's 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. S-52 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. 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 the Sponsor 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 the Sponsor or of which the Sponsor 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 the Sponsor or of which the Sponsor 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 the Sponsor is known by the Sponsor and therefore accurately reflected in the tables appearing in Appendix A. Mortgage Loans with Loan-to-Value Ratios in excess of 80% may or may not be covered by a primary mortgage insurance policy. Certain Mortgage Loans may be covered by a lender-paid primary mortgage insurance policies (each, an "LPMI Policy"). These LPMI Policies, if any, together with all borrower-paid primary mortgage insurance policies, will be assigned to the Trust on the Closing Date. The Sponsor is responsible for paying the premiums under the LPMI Policies and may assign such obligation only with the consent of the Rating Agencies and the respective LPMI Policy provider. The Sponsor will agree that in the event it is replaced as the servicer and the successor servicer does not undertake to pay such premiums, the Sponsor 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 S-53 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 the Sponsor makes any representations or warranties as to any borrower's current FICO Score, the actual performance of any Mortgage Loan or that a particular FICO Score should be relied upon as a basis for an expectation that the borrower will repay the Mortgage Loan according to its terms. Appendix A also contains a table of the credit levels of the Mortgage Loans. For a description of these credit levels, see "The Sponsor's 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. For purposes of Appendix A, "Debt-to-Income Ratio" is the ratio, expressed as a percentage, of (i) the amount of the monthly debt obligations (including the proposed new housing payment and related expenses such as property taxes and hazard insurance) over (ii) the mortgagor's gross monthly income. The data appearing in Appendix A may not be exact due to rounding. See "The Sponsor's 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 Sponsor's Mortgage Loan Programs" (the "Underwriting Standards"). In certain instances, exceptions to the Underwriting Standards may have been granted by Wells Fargo Bank. [To the extent that a transaction contains Mortgage Loans for which exceptions to Underwriting Standards were granted and the Sponsor concludes that such exceptions would be material to investors in the related Certificates, such exceptions to the Underwriting Standards will be described in the applicable prospectus supplement.] See "The Sponsor's 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 which materially adversely affects Certificateholders, 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. S-54 Optional Purchase 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. See "Prepayment and Yield Considerations" herein. PREPAYMENT AND YIELD CONSIDERATIONS The yields to maturity and weighted average lives of the Offered Certificates will depend upon, among other things, the price at which such Offered Certificates are purchased, the amount and timing of principal payments on the applicable Mortgage Loans, the allocation of Available Funds to various Classes of Certificates, the amount and timing of mortgagor delinquencies and defaults on the applicable Mortgage Loans, the rate of liquidations and Realized Losses and the allocation of Realized Losses to various Classes of Certificates. The rate of distributions in reduction of the Principal Balance of any Class of the Offered Certificates, the aggregate amount of distributions on any Class of the Offered Certificates and the Weighted Average Life and yield to maturity of any Class of the Offered Certificates purchased at a discount or premium will be directly related to the rate of payments of principal on the Mortgage Loans in the Trust Fund and the amount and timing of mortgagor defaults resulting in Realized Losses. Prepayments (which, as used herein, include all unscheduled payments of principal, including payments as the result of liquidations, purchases and repurchases) of the Mortgage Loans in the Trust Fund will result in distributions to Certificateholders then entitled to distributions in respect of principal in respect of such Mortgage Loans of amounts which would otherwise be distributed over the remaining terms of such Mortgage Loans. Since the rate of prepayment on the Mortgage Loans will depend on future events and a variety of factors (as described more fully below and in the prospectus under "Prepayment and Yield Considerations"), no assurance can be given as to such rate or the rate of principal payments or yield on, or Weighted Average Life of, any Class of the Offered Certificates or the aggregate amount of distributions on any Class of the Offered Certificates. In addition, if a purchaser of an Offered Certificate calculates its anticipated yield based on an assumed rate of default and amount of Realized Losses that is lower than the default rate and amount of losses actually incurred, its actual yield to maturity will be lower than that so calculated. The timing of Realized Losses will also affect an investor's actual yield to maturity, even if the average rate of defaults and severity of losses are consistent with an investor's expectations. In general, the earlier a loss occurs, the greater the effect on an investor's yield to maturity. There can be no assurance as to the delinquency, foreclosure or loss experience with respect to the Mortgage Loans. The Mortgage Loans may have a greater risk of future defaults and delinquencies, as compared to newly originated, high quality one- to four-family residential mortgage loans of comparable size and geographic concentration because the Mortgage Loans are of subprime credit quality. See "Risk Factors-Risks Associated with the Mortgage Loans--Subprime Mortgage Loans May Experience Greater Rates of Delinquency and Loss" in the supplement. The rate of principal payments on the Mortgage Loans will be affected by the amortization schedules of the Mortgage Loans, the rate of principal prepayments (including partial prepayments and those resulting from refinancing) thereon by mortgagors, liquidations of defaulted Mortgage Loans, repurchases by the Depositor of Mortgage Loans as a result of defective documentation or breaches of representations and warranties, optional and, under certain circumstances, required purchases by the Depositor (under limited circumstances) of certain Mortgage Loans, and the optional purchase of all of the Mortgage Loans in connection with the termination of the Trust Fund. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Assignment of Mortgage Loans; Representations and Warranties; Repurchases," "Description of the Securities--Optional Purchases" and "--Termination" in the prospectus and "The Pooling and Servicing Agreement-Optional Termination" in this prospectus supplement. Because certain of the Mortgage Loans contain prepayment penalties, the rate of principal payments may be less than the rate of principal payments for mortgage loans which did not have prepayment penalties. If prevailing rates for similar mortgage loans fall below the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to increase. Conversely, if interest rates on similar mortgage loans rise above the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to decrease. In addition, the Sponsor or third parties may enter into agreements with borrowers providing for the bi-weekly payment of principal and interest on the related Mortgage Loan, thereby accelerating payment of the Mortgage Loan resulting in partial prepayments. S-55 For further information regarding historical delinquency, cumulative loss and prepayment experience, see "Static Pool Information" in this prospectus supplement. The Mortgage Interest Rates on the Adjustable Rate Mortgage Loans will be fixed for periods ranging from [ ] to [ ] years after origination and thereafter will adjust [ ] and [ ] and may vary significantly over time. When a Mortgage Loan begins its adjustable period, increases and decreases in the Mortgage Interest Rate on that Mortgage Loan will be based on the applicable Index in effect 45 days prior to the related Adjustment Date plus the applicable Gross Margin and will be limited by the applicable Periodic Cap and Rate Ceiling. The applicable Index may not rise and fall consistently with mortgage interest rates. As a result, the Mortgage Interest Rates on the Mortgage Loans at any time may not equal the prevailing mortgage interest rates for similar adjustable rate mortgage loans, and accordingly the prepayment rate may be lower or higher than would otherwise be anticipated. Moreover, some mortgagors who prefer the certainty provided by fixed rate mortgage loans may nevertheless obtain adjustable rate mortgage loans at a time when they regard the mortgage interest rates (and, therefore, the payments) on fixed rate mortgage loans as unacceptably high. These mortgagors may be induced to refinance adjustable rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed rate mortgage loans decline to levels which these mortgagors regard as acceptable, even though such mortgage interest rates and monthly payments may be significantly higher than the current Mortgage Interest Rates and monthly payments on the mortgagors' Adjustable Rate Mortgage Loans. The Adjustable Rate Mortgage Loans may also be subject to greater rates of prepayments as they approach their initial Adjustment Dates even if market interest rates are only slightly higher or lower than the Mortgage Interest Rates on such Adjustable Rate Mortgage Loans as mortgagors seek to avoid changes in their monthly payments. In addition, the delinquency and loss experience of the Adjustable Rate Mortgage Loans may differ from that on the Fixed Rate Mortgage Loans because the amount of the monthly payments on the Adjustable Rate Mortgage Loans are subject to adjustment on each Adjustment Date. The ability to refinance a mortgage loan will depend on a number of factors prevailing at the time refinancing is desired, including, without limitation, real estate values, the mortgagor's financial situation, prevailing mortgage interest rates, the mortgagor's equity in the related mortgaged property, tax laws and prevailing general economic conditions. Due to the operation of the Rate Ceilings and the Periodic Caps, once the Mortgage Interest Rates on the Adjustable Rate Mortgage Loans begin to adjust, the Pass-Through Rate on each interest-bearing Certificate may be limited, notwithstanding increases in the applicable Index, if the Mortgage Interest Rate on any Adjustable Rate Mortgage Loan cannot increase due to a Rate Ceiling limitation or a Periodic Cap and the yield on such Certificates could be adversely affected. Other factors affecting prepayment of mortgage loans include changes in mortgagors' housing needs, job transfers, unemployment or substantial fluctuations in income, significant declines in real estate values and adverse economic conditions either generally or in particular geographic areas, mortgagors' equity in mortgaged properties, including the use of the properties as second or vacation homes, and servicing decisions, such as, without limitation, the decision as to whether to foreclose on a mortgage loan or to modify the terms of the related mortgage note and decisions as to the timing of any foreclosure. Furthermore, certain characteristics of mortgage loans are thought by some in the mortgage industry to be more likely to affect prepayments. These characteristics include, but are not limited to, unpaid principal balance, loan-to-value ratio, credit quality of borrowers and current mortgage interest rate higher than prevailing interest rates. No representation is made as to the rate of prepayment on the Mortgage Loans included in the Trust Fund having any particular characteristic. In addition, all of the Mortgage Loans contain due-on-sale clauses which will generally be exercised upon the sale of the related Mortgaged Properties. Consequently, acceleration of mortgage payments as a result of any such sale will affect the level of prepayments on the Mortgage Loans. The extent to which defaulted Mortgage Loans are assumed by transferees of the related Mortgaged Properties or are refinanced will also affect the rate of principal payments. The rate of prepayment and, therefore, the yield to maturity of the Offered Certificates will be affected by the extent to which (i) the Depositor elects to repurchase, rather than substitute for, Mortgage Loans which are found by the Trustee or Custodian to have defective documentation or with respect to which the Depositor has breached a representation or warranty, (ii) a substitute Mortgage Loan has an unpaid principal balance less than the Mortgage Loan for which it is substituted or (iii) the Servicer may take certain actions to mitigate losses on a defaulted Mortgage Loan which may include, but are not limited to, selling the Mortgaged Property of such Mortgage Loan for less than its unpaid principal balance or modifying the payment terms of a Mortgage Note. See "Description of the Agreements--Material Terms of the S-56 Pooling and Servicing Agreements and Underlying Servicing Agreements--Realization Upon Defaulted Mortgage Loans; Servicing Advances" and "--Due on Sale Provisions" in the prospectus. The yield to maturity of the Offered Certificates will be sensitive in varying degrees to the rate and timing of principal payments (including prepayments) on the Mortgage Loans. Investors in the Offered Certificates should consider the associated risks, including, in the case of Offered Certificates purchased at a discount, the risk that a slower than anticipated rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans may have a negative effect on the yield to maturity of such Certificates and, in the case of Offered Certificates purchased at a premium, the risk that a faster than anticipated rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans may have a negative effect on the yield to maturity of such Certificates. Investors purchasing Offered Certificates at a premium should also consider the risk that a rapid rate of payments in respect of principal (including prepayments) on the applicable Mortgage Loans could result in the failure of such investors to fully recover their initial investments. An investor is urged to make an investment decision with respect to any Class of Offered Certificates based on the anticipated yield to maturity of such Class resulting from its purchase price and such investor's own determination as to anticipated Mortgage Loan prepayment rates under a variety of scenarios. The timing of changes in the rate of prepayment on the Mortgage Loans may significantly affect the actual yield to maturity experienced by an investor who purchases an Offered Certificate at a price other than par, even if the average rate of principal payments experienced over time is consistent with such investor's expectation. In general, the earlier a prepayment of principal on the underlying Mortgage Loans, the greater the effect on such investor's yield to maturity. As a result, the effect on such investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Offered Certificates would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments. The yield to maturity on the Classes of Class M Certificates with higher numerical designations will generally be more sensitive to losses than the Classes with lower numerical designations if the credit enhancements are insufficient to cover such losses because such losses will be allocable to the Classes of Class M Certificates in reverse numerical order, except as provided herein. To the extent not covered by Advances, delinquencies on Mortgage Loans will also have a relatively greater effect on the yield to maturity on the Classes of Class M Certificates with higher numerical designations because amounts otherwise distributable to holders of the Class M Certificates will be made available to protect the holders of the Senior Certificates against interruptions in distributions due to such unadvanced mortgagor delinquencies. Such unadvanced delinquencies, even if subsequently cured, may affect the timing of the receipt of distributions by the holders of the Class M Certificates. When the Class M Certificates are no longer outstanding, the yield to maturity of the Class AI-1B Certificates will be more sensitive than the Class AI-1A Certificates to losses on the Group I Mortgage Loans. Interest and principal collections on the Group I Mortgage Loans will be reduced by losses and may not be sufficient to make all required distributions on the Class AI Certificates. The Class AI-1B Certificates will not be entitled to distributions of principal until the Principal Balance of the Class AI-1A Certificates has been reduced to zero and therefore they will bear all losses relating to Loan Group I before the Class AI-1A Certificates bear any losses relating to Loan Group I. The actual yield to maturity experienced by an investor may also be affected by the occurrence of Current Interest Shortfall to the extent not covered by the Monthly Excess Interest Amount. See "Description of the Securities--Distributions of Interest on the Securities" in the prospectus. The yield to maturity on the Offered Certificates and more particularly on the offered Class M Certificates, may be affected by the geographic concentration of the Mortgaged Properties securing the Mortgage Loans. Certain regions in the United States have experienced or may experience significant fluctuations in housing prices. In addition, certain regions have experienced or may experience natural disasters, including earthquakes, fires, floods and hurricanes, which may adversely affect property values. See "Description of the Mortgage Loans" herein. Any deterioration in housing prices in the regions in which there is a significant concentration of Mortgaged Properties, as well as other regions in which the Mortgaged Properties are located, and any deterioration of economic conditions in such regions which adversely affects the ability of borrowers to make payments on the Mortgage Loans, may S-57 increase the likelihood of delinquencies and losses on the Mortgage Loans. Such delinquencies and losses, if they occur, may have an adverse effect on the yield to maturity of the Offered Certificates and more particularly on the offered Class M Certificates. As to Mortgaged Properties in regions that have recently experienced natural disasters, neither the Depositor nor the Servicer has undertaken the physical inspection of such Mortgaged Properties. As a result, there can be no assurance that material damage to any Mortgaged Property in an affected region has not occurred. In the Pooling and Servicing Agreement, the Depositor will represent and warrant that, as of the date of issuance of the Certificates, each Mortgaged Property is undamaged by fire, earthquake or earth movement, windstorm, flood, tornado or other casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Depositor makes no representation) so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended. In the event of a breach of such representation with respect to a Mortgaged Property which materially and adversely affects the interests of Certificateholders in the related Mortgage Loan, the Depositor will be obligated to repurchase or substitute for such Mortgage Loan, as described under "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Assignment of Mortgage Loans; Representations and Warranties; Repurchases" in the prospectus. Repurchase of any such Mortgage Loan will affect in varying degrees the yields and weighted average lives of the related Classes of Offered Certificates and could adversely affect the yield of any related Offered Certificates purchased at a premium. No representation is made as to the rate of principal payments on the Mortgage Loans or as to the yield to maturity of any Class of Offered Certificates. An investor should consider the risk that rapid rates of prepayments on the Mortgage Loans, and therefore of amounts distributable in reduction of Principal Balance of the related Offered Certificates, may coincide with periods of low prevailing interest rates. During such periods, the effective interest rates on securities in which an investor may choose to reinvest amounts distributed in reduction of the Principal Balance of such investor's Offered Certificate may be lower than the applicable Pass-Through Rate or expected yield. Conversely, slower rates of prepayments on the Mortgage Loans, and therefore of amounts distributable in reduction of Principal Balance of the related Offered Certificates, may coincide with periods of high prevailing interest rates. During such periods, the amount of principal distributions available to an investor for reinvestment at such high prevailing interest rates may be relatively small. The Weighted Average Life and yield to maturity of each Class of Offered Certificates will also be influenced by the amount of Monthly Excess Cashflow Amounts generated by the Mortgage Loans and applied in reduction of the Principal Balances of such Certificates. The level of Monthly Excess Cashflow Amounts available on any Distribution Date to be applied in reduction of the Principal Balances of the Certificates will be influenced by, among other factors, (i) the overcollateralization level of the Mortgage Loans at such time (i.e., the extent to which interest on the Mortgage Loans is accruing on a higher principal balance than the aggregate Principal Balance of the Certificates); (ii) the delinquency and default experience of the Mortgage Loans; and (iii) the level of the applicable Index for the Adjustable Rate Mortgage Loans. To the extent that greater amounts of Monthly Excess Cashflow Amounts are distributed in reduction of the Principal Balance of a Class of Certificates, the Weighted Average Life thereof can be expected to shorten. No assurance can be given as to the amount of Monthly Excess Cashflow Amounts distributed at any time or in the aggregate. The Class M Certificates are not expected to receive any principal distributions until at least the Distribution Date in [ ] (unless the aggregate Principal Balance of the Senior Certificates is reduced to zero prior thereto). As a result, the weighted average lives of the Class M Certificates will be longer than would have been the case if principal distributions were to be made on a pro rata basis. The longer weighted average lives may increase the risk that an Applied Realized Loss Amount will be allocated to one or more Classes of Class M Certificates. The "Weighted Average Life" of any Class of Offered Certificates is the average amount of time that will elapse from the Closing Date, until each dollar of principal is distributed to the investors in such Class of Offered Certificates. Because it is expected that there will be prepayments and defaults on the Mortgage Loans, the actual weighted average lives of the Classes of Offered Certificates are expected to vary substantially from the weighted average remaining terms to stated maturity of the Mortgage Loans as set forth in the tables appearing in Appendix A. S-58 Prepayments on mortgage loans are commonly measured relative to a prepayment model or standard. The prepayment models used in this prospectus supplement (the "Prepayment Assumptions") are based on an assumed rate of prepayment each month of the then unpaid principal balance of mortgage loans similar to the Mortgage Loans. For the Adjustable Rate Mortgage Loans, the Prepayment Assumption is the "Adjustable Rate Prepayment Curve" or "ARM PPC," which assumes a prepayment rate of [ ]% CPR per annum of the then-outstanding principal balance of the adjustable rate mortgage loans in the first [ ] of the life of such mortgage loans and an additional approximate [ ]% per annum in each month thereafter until [ ]% CPR is reached in the [ ] month and remaining constant at [ ]% CPR until the [ ] month. From the [ ] month until the [ ] month, ARM PPC assumes a constant prepayment rate of [ ]% per annum. Beginning in the [ ] month and in each month thereafter during the life of such mortgage loans, ARM PPC assumes a constant prepayment rate of [ ]% CPR per annum each month. For the Fixed Rate Mortgage Loans, the Prepayment Assumption is the "Fixed Rate Prepayment Curve" or "FRM PPC," and, together with the ARM PPC, the "PPC," which assumes a prepayment rate of [ ]% CPR per annum of the then-outstanding unpaid principal balance of the fixed rate mortgage loans in the [ ] of the life of such mortgage loans and an additional [ ]% per annum in each month thereafter until [ ]% CPR is reached in the [ ] month. Beginning in the [ ] month and in each month thereafter during the life of such mortgage loans, FRM PPC assumes a constant prepayment rate of [ ]% CPR per annum each month. "CPR" represents a constant assumed rate of principal prepayment each month relative to the then-outstanding unpaid principal balance of a pool of mortgage loans for the life of such mortgage loans. A prepayment assumption of 5.000% CPR assumes constant prepayment rates of 5.000% per annum of the then-outstanding unpaid principal balance of such mortgage loans. Correspondingly, 20.000% assumes prepayments equal to 20.000% of CPR, and so forth. No Prepayment Assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the Mortgage Loans. Appendix B sets forth the decrement tables for the Offered Certificates. The tables appearing in Appendix B have been prepared assuming, among other things, the following (the "Structuring Assumptions"): (i) the Trust Fund consists of the "Assumed Mortgage Loans" set forth in the table appearing in Appendix C; (ii) the scheduled payment in each month for each Assumed Mortgage Loan has been based on its outstanding balance as of the first day of the month preceding the month of such payment, its Mortgage Interest Rate and its remaining term to stated maturity (beginning with the scheduled payment after the interest-only period in the case of the Assumed Mortgage Loans with Original Interest Only Months greater than zero in each Loan Group), so that such scheduled payments would amortize the remaining balance over its remaining term to maturity; (iii) scheduled monthly payments of principal (including any Balloon Payments) and interest on the Assumed Mortgage Loans will be timely received on the first day of each month (with no defaults), commencing in [ ]; (iv) the Depositor does not repurchase any of the Assumed Mortgage Loans and no optional termination right is exercised (except with respect to the entries identified by the row heading "Weighted Average Life to Optional Termination Date (years)" in the tables appearing in Appendix B); (v) principal payments on the Assumed Mortgage Loans representing principal prepayments in full of individual mortgage loans will be received on the last day of each month commencing in [ ] at the respective constant percentages of the applicable Prepayment Assumption set forth in the tables and there are no partial prepayments, Prepayment Interest Shortfalls or Relief Act Shortfalls; (vi) the Certificates will be issued on [ ]; (vii) distributions on the Certificates are made on the 25th day of each month, commencing in [ ]; (viii) with respect to the related Adjustable Rate Mortgage Loans, the Six-Month LIBOR Index is equal to [ ]% and the One-Year CMT Index is equal to [ ]%; S-59 (ix) (a) for the Assumed Mortgage Loans that adjust based on the One-Year CMT Index, the initial Periodic Cap and the Periodic Cap thereafter is [ ]% and (b) for the Assumed Mortgage Loans that adjust based on the Six-Month LIBOR Index, the initial Periodic Cap is [ ]% and the Periodic Cap thereafter is [ ]%; (x) the Assumed Mortgage Loans adjust on the first Adjustment Date and [ ] and [ ] thereafter; (xi) the initial Principal Balance of each Class of Certificates will be as set forth in the table beginning on page S-5 of this prospectus supplement; (xii) the Targeted Overcollateralization Amount is set initially as specified herein and thereafter decreases as described in the definition thereof; (xiii) one-month LIBOR is equal to [ ]%; (xiv) the Servicing Fee Rate is [ ]% per annum and the Credit Risk Manager Fee Rate is [ ]% per annum; and (xv) the Pass-Through Rates for the Certificates are as set forth or described above under "Description of the Certificates--Pass-Through Rates." It is highly unlikely that the Mortgage Loans in a Loan Group will prepay at any constant rate, that all of the Mortgage Loans in a Loan Group will prepay at the same rate or that the Mortgage Loans in a Loan Group will not experience any losses. In addition, there will be differences between the characteristics of the Mortgage Loans ultimately included in each Loan Group and the characteristics which are assumed in preparing the tables, as described above. Any difference may have an effect upon the actual percentages of initial Principal Balances of the Classes of Certificates outstanding, the actual Weighted Average Lives of the Classes of Certificates and the date on which the Principal Balance of any Class of Certificates is reduced to zero. Based upon the foregoing assumptions, the tables appearing in Appendix B indicate the Weighted Average Life of each Class of Offered Certificates to maturity and to the Optional Termination Date, and set forth the percentages of the initial Principal Balance of each such Class of Offered Certificates that would be outstanding after each of the dates shown at the applicable Prepayment Assumption. Interest accrued on the Offered Certificates will be reduced by the amount of any interest portions of realized losses allocated to such Certificates as described herein. Final Scheduled Distribution Dates The Final Scheduled Distribution Date of each Class of Offered Certificates is set forth in the table beginning on page S-5. The Final Scheduled Distribution Date for such Certificates has been calculated on the basis of the Structuring Assumptions and the assumption that there are no prepayments. Since the rate of distributions in reduction of the Principal Balance of each Class of Offered Certificates will depend on the rate of payment (including prepayments) of the Mortgage Loans, the Principal Balance of any such Class could be reduced to zero significantly earlier or later than the Final Scheduled Distribution Date. The rate of payments on the Mortgage Loans will depend on their particular characteristics, as well as on prevailing interest rates from time to time and other economic factors, and no assurance can be given as to the actual payment experience of the Mortgage Loans. THE POOLING AND SERVICING AGREEMENT General The Certificates will be issued pursuant to the Pooling and Servicing Agreement, to be dated as of the Closing Date (the "Pooling and Servicing Agreement"), among the Depositor, the Servicer, the Securities Administrator and the Trustee. Set forth below are summaries of the specific terms and provisions pursuant to which the Offered Certificates will be issued. Reference is made to the prospectus for important additional information regarding the terms and conditions of the Pooling and Servicing Agreement and the Certificates beyond the summaries below of S-60 certain provisions specific to this transaction. See "Description of the Securities" and "Description of the Agreements-- Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements" in the prospectus. The "Trust Fund" created under the Pooling and Servicing Agreement will consist of (i) the Mortgage Loans, (ii) such assets as from time to time are identified as deposited in any account held for the benefit of Certificateholders, (iii) any Mortgaged Properties acquired on behalf of Certificateholders by foreclosure or by deed in lieu of foreclosure after the Closing Date, (iv) the Reserve Account, (v) the rights of the Securities Administrator under the Yield Maintenance Agreement and (vi) the rights of the Trustee to receive the proceeds of all insurance policies (including the LPMI Policies) and performance bonds, if any, required to be maintained pursuant to the Pooling and Servicing Agreement. Compensation and Payment of Expenses of the Servicer, Securities Administrator and Trustee The primary compensation payable to the Servicer is the aggregate of the Servicing Fees applicable to the related Mortgage Loans. The Servicer will be entitled to a "Servicing Fee" payable monthly equal to (1)/12th of the Servicing Fee Rate. The Servicing Fee Rate (the "Servicing Fee Rate") is [ ]% per annum. The Servicing Fee will accrue on the scheduled principal balance of the Mortgage Loans serviced by the Servicer as of the first day of each month. The Servicing Fee Rate, the Securities Administrator Fee Rate, the Trustee Fee Rate and the Credit Risk Manager Fee Rate will be the per annum rate set forth in the table below: Fees Payable From the Trust Fund Securities Credit Risk Servicing Fee Rate Administrator Fee Rate Trustee Fee Rate Manager Fee Rate - ------------------ ---------------------- ---------------- ---------------- [ ]%(1) (2) (3) [ ]%(1) - ------------------------ (1) The Servicing Fee Rate and the Credit Risk Manager Fee Rate may not be changed without the consent of Certificateholders if such change adversely affects the interest of Certificateholders. (2) The fees of the Securities Administrator in connection with its responsibilities under the Pooling and Servicing Agreement will be earnings on eligible investments of funds in the Distribution Account (3) The fees of the Trustee incurred in connection with its responsibilities under the Pooling and Servicing Agreement will be payable by the Securities Administrator without reimbursement from the Trust Fund. The Servicing Fee for the Mortgage Loans are payable out of the interest payments on the mortgage loans, prior to any payments to Certificateholders. The Servicer is entitled to additional servicing compensation, as described under "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements--Fixed Retained Yield, Servicing Compensation and Payment of Expenses" in the prospectus. In the event that the Trustee succeeds to the role of the Servicer, it will be entitled to compensation for such duties not to exceed the compensation received by the predecessor servicer. In addition, if the Trustee appoints a successor servicer under the Pooling and Servicing Agreement, the Trustee may make arrangements for the compensation of such successor servicer, such compensation not to exceed the compensation received by the predecessor servicer. All costs of a transfer of servicing will be reimbursed to the party who incurred such costs as described under "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements-The Servicers" in the prospectus. The Securities Administrator will pay certain administrative expenses, including fees of the Trustee, incurred in connection with its responsibilities under the Pooling and Servicing Agreement. Some of these expenses of the Securities Administrator are subject to rights of reimbursement as described under "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing S-61 Agreements--The Trustee and Securities Administrator" in the prospectus. Any co-trustee, if applicable, will be paid by the Trustee, without reimbursement from the Trust. The servicing fees and other expenses of the REMIC will be allocated to the holders of the Class R Certificate. See "Federal Income Tax Considerations" herein and "Federal Income Tax Consequences--REMICs" in the prospectus. DTC will receive distributions on the Book-Entry Certificates from the Securities Administrator and transmit them to DTC Participants for distribution to Beneficial Owners or their nominees. Voting Interests With respect to any provisions of the Pooling and Servicing Agreement providing for the action, consent or approval of the holders of all Certificates evidencing specified Voting Interests in the Trust Fund, each of the Class CE and Class P Certificates will be entitled to 1% of the aggregate Voting Interest represented by all Certificates and each remaining Class of Certificates (other than the Residual Certificates) will be entitled to a pro rata portion of the remaining Voting Interest based on the outstanding Principal Balance of such Class. The Residual Certificates will not be entitled to any Voting Interests. Each Certificateholder of a Class will have a Voting Interest equal to the product of the Voting Interest to which such Class is collectively entitled and the Percentage Interest in such Class represented by such holder's Certificates. With respect to any provisions of the Pooling and Servicing Agreement providing for action, consent or approval of each Class of Certificates or specified Classes of Certificates, each Certificateholder of a Class will have a Voting Interest in such Class equal to such holder's Percentage Interest in such Class. Unless Definitive Certificates are issued as described under "Description of the Securities-Book-Entry Form" in the prospectus, Beneficial Owners of Book-Entry Certificates may exercise their voting rights only through DTC Participants. The Credit Risk Manager [ ] (the "Credit Risk Manager"), will monitor and make recommendations to the Servicer regarding certain delinquent and defaulted Mortgage Loans, and will report on the performance of such Mortgage Loans, including prepayment penalty collection analysis. The Credit Risk Manager will rely upon mortgage loan data that is provided to it by the Servicer in performing its advisory and monitoring functions. The Credit Risk Manager will be entitled to receive a fee (the "Credit Risk Manager Fee") until the termination of the Trust Fund or until its removal by a vote of at least 66-2/3% of the Certificateholders by Voting Interests. This fee will be paid monthly by the Trust Fund and will be equal to one-twelfth of the Credit Risk Manager Fee Rate multiplied by the unpaid principal balance of each Mortgage Loan. Optional Termination of the Trust The majority holder of the Class CE Certificates, or if there is no majority holder of the Class CE Certificates, the Depositor may, subject to certain conditions including the then-remaining size of the pool, purchase all outstanding mortgage loans in the pool and thereby effect early retirement of the certificates. See "Description of the Securities--Termination" in the prospectus. The exercise of this option will be in the sole discretion of the majority holder of the Class CE Certificates or the Depositor, as applicable. Without limitation, the majority holder of the Class CE Certificates or the Depositor may enter into agreements with third parties to (i) exercise such option at the direction of a third party or (ii) forebear from the exercise of such option. Any such purchase of the Mortgage Loans and REO Properties will result in the early retirement of the Certificates. CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES General The Pooling and Servicing Agreement provides that the Trust Fund, exclusive of the Basis Risk Arrangements (as defined below), will comprise multiple real estate mortgage investment conduits (each, a "REMIC") organized in a tiered REMIC structure consisting of one or more Lower Tier REMICs and one or more Upper Tier REMICs. S-62 Each Lower Tier REMIC will issue uncertificated regular interests and those interests will be held entirely by a REMIC above it in a tiered structure. Each of the Lower Tier REMICs and Upper Tier REMICs will designate a single Class of interests as the residual interest in that REMIC. Elections will be made to treat each Lower Tier REMIC and Upper Tier REMIC as a REMIC for federal income tax purposes. Except to the extent described in the next paragraph, each Class of Offered Certificates will represent beneficial ownership of the corresponding class of regular interests issued by the applicable Upper Tier REMIC. The Trust Fund will also include a grantor trust which will hold the uncertificated interests in each Upper Tier REMIC, the Basis Risk Arrangements, as defined below, the Yield Maintenance Agreement and the related accounts. The Offered Certificates and the Class M-12 and Class M-13 Certificates will represent (i) beneficial ownership of the corresponding class of regular interests issued by the applicable Upper Tier REMIC and (ii) the beneficial ownership of the right to receive Cap Carryover Amounts from the Yield Maintenance Agreement (in the case of the Class M Certificates) or from the Monthly Excess Cashflow Amount (in the case of the Class A Certificates and, to the extent that amounts received from the Yield Maintenance Agreement are insufficient, the Class M Certificates), to the extent available. Holders of the Offered Certificates must allocate their basis between their regular interest and their right to receive such Cap Carryover Amounts as set forth below under "--Taxation of the Basis Risk Arrangements." Upon the issuance of the Offered Certificates, Cadwalader, Wickersham & Taft LLP will deliver its opinion to the effect that, assuming compliance with the Pooling and Servicing Agreement, for federal income tax purposes, each Lower Tier REMIC and Upper Tier REMIC will qualify as a REMIC within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the "Code") and the portion of the Trust Fund exclusive of the REMICs will qualify as a grantor trust under subpart E, Part 1 of subchapter J of the Code. Taxation of Regular Interests For federal income tax reporting purposes, the regular interest portion of the Offered Certificates may be treated as having been issued with original issue discount. The Prepayment Assumption that will be used in determining the rate of accrual of original issue discount, premium and market discount, if any, for federal income tax purposes will be based on the assumption that subsequent to the date of any determination the Mortgage Loans will prepay at a constant rate of [ ]% ARM PPC with respect to the Adjustable Rate Mortgage Loans and [ ]% FRM PPC with respect to the Fixed Rate Mortgage Loans. No representation is made that the Mortgage Loans will prepay at such rate or at any other rate. See "Federal Income Tax Consequences--REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" in the prospectus. The IRS has issued regulations (the "OID Regulations") under Sections 1271 to 1275 of the Code generally addressing the treatment of debt instruments issued with original issue discount. Purchasers of the Offered Certificates should be aware that the OID Regulations do not adequately address certain issues relevant to, or are not applicable to, securities such as the Offered Certificates. Because of the uncertainty concerning the application of Section 1272(a)(6) of the Code to such Certificates, and because the rules of the OID Regulations are limited in their application in ways that could preclude their application to such Certificates even in the absence of Section 1272(a)(6) of the Code, the IRS could assert that the Offered Certificates should be treated as issued with original issue discount or should be governed by the rules applicable to debt instruments having contingent payments or by some other manner not yet set forth in regulations. Prospective purchasers of the Offered Certificates are advised to consult their tax advisors concerning the tax treatment of such Certificates. The Offered Certificates generally will be treated as assets described in Section 7701(a)(19)(C) of the Code for a domestic building and loan association and "real estate assets" under Section 856(c)(5)(B) of the Code for a real estate investment trust (a "REIT"), in the same proportion that the assets in the Trust Fund would be so treated. In addition, interest on the Offered Certificates generally will be treated as "interest on obligations secured by mortgages on real property" under Section 856(c)(3)(B) of the Code for a REIT, to the extent that the Offered Certificates are treated as "real estate assets" under Section 856(c)(5)(B) of the Code. See "Federal Income Tax Consequences--REMICs--Characterization of Investments in REMIC Securities" in the prospectus. If more than 95% of the regular interests and income qualify for these treatments, the regular interests generally will qualify for such treatments in their entirety. However, no portion of an Offered Certificateholder's basis or income allocable to S-63 a Basis Risk Arrangement will qualify for such treatment. As a result, the Offered Certificates may not be suitable investments for inclusion in another REMIC. Taxation of the Basis Risk Arrangements General Each holder of an Offered Certificate will be treated for federal income tax purposes as having entered into a notional principal contract pursuant to its rights to receive payment with respect to Cap Carryover Amounts on the date it purchases its Certificates. The rights to receive such payments (referred to as the "Basis Risk Arrangements") are beneficially owned by holders of Offered Certificates in the portion of the Trust Fund, exclusive of the REMICs, which is treated as a grantor trust for federal income tax purposes. The Internal Revenue Service (the "IRS") has issued final regulations under Section 446 of the Code relating to notional principal contracts (the "Swap Regulations"). In general, the holders of the Offered Certificates must allocate the price they pay for the Offered Certificates between their REMIC regular interest and the applicable Basis Risk Arrangement based on their relative fair market values. To the extent rights to receive payments are determined to have a value on the Closing Date that is greater than zero, a portion of such purchase price will be allocable to such rights, and such portion will be treated as a cap premium (the "Cap Premium") paid by the holders of Offered Certificates. A holder of an Offered Certificate will be required to amortize the Cap Premium under a level payment method as if the Cap Premium represented the present value of a series of equal payments made over the life of the applicable Basis Risk Arrangement (adjusted to take into account decreases in notional principal amount), discounted at a rate equal to the rate used to determine the amount of the Cap Premium (or some other reasonable rate). Prospective purchasers of Offered Certificates should consult their own tax advisors regarding the appropriate method of amortizing any Cap Premium. The Swap Regulations treat a nonperiodic payment made under a cap contract as a loan for federal income tax purposes if the payment is "significant." It is not anticipated that any Cap Premium would be treated in part as a loan under the Swap Regulations. Under the Swap Regulations (i) all taxpayers must recognize periodic payments with respect to a notional principal contract under the accrual method of accounting, and (ii) any periodic payments received under the applicable Basis Risk Arrangement must be netted against payments, if any, deemed made as a result of the Cap Premiums over the recipient's taxable year, rather than accounted for on a gross basis. Net income or deduction with respect to net payments under a notional principal contract for a taxable year should constitute ordinary income or ordinary deduction. The IRS could contend the amount is capital gain or loss, but such treatment is unlikely, at least in the absence of further regulations. Any regulations requiring capital gain or loss treatment presumably would apply only prospectively. Individuals may be limited in their ability to deduct any such net deduction and should consult their tax advisors prior to investing in the Offered Certificates. Any amount of proceeds from the sale, redemption or retirement of an Offered Certificate that is considered to be allocated to rights under a Basis Risk Arrangement would be considered a "termination payment" under the Swap Regulations. It is anticipated that the Securities Administrator will account for any termination payments for reporting purposes in accordance with the Swap Regulations, as described below. Termination Payments Any amount of sales proceeds that is considered to be allocated to the selling beneficial owner's rights under the applicable Basis Risk Arrangement in connection with the sale or exchange of an Offered Certificate would be considered a "termination payment" under the Swap Regulations allocable to that Offered Certificate. A holder of an Offered Certificate will have gain or loss from such a termination of a Basis Risk Arrangement equal to (i) any termination payment it received or is deemed to have received minus (ii) the unamortized portion of any Cap Premium paid (or deemed paid) by the beneficial owner upon entering into or acquiring its interest in a Basis Risk Arrangement. Gain or loss realized upon the termination of a Basis Risk Arrangement will generally be treated as capital gain or loss. Moreover, in the case of a bank or thrift institution, Code Section 582(c) would likely not apply to treat such gain or loss as ordinary. S-64 REMIC Taxes and Reporting It is not anticipated that the Trust Fund will engage in any transactions that would subject it to the prohibited transactions tax as defined in Section 860F(a)(2) of the Code, the contributions tax as defined in Section 860G(d) of the Code or the tax on net income from foreclosure property as defined in Section 860G(c) of the Code. However, in the event that any such tax is imposed on the Trust Fund, such tax will be borne (i) by the Securities Administrator, if the Securities Administrator has breached its obligations with respect to REMIC compliance under the Agreement, (ii) the Servicer, if the Servicer has breached its obligations with respect to REMIC compliance under the Agreement, and (iii) otherwise by the Trust Fund, with a resulting reduction in amounts otherwise distributable to Holders of the Offered Certificates. See "Description of the Securities--General" and "Federal Income Tax Consequences--REMICs--Taxes That May Be Imposed on the REMIC Pool--Prohibited Transactions" in the prospectus. The responsibility for filing annual federal information returns and other reports will be borne by the Securities Administrator. See "Federal Income Tax Consequences--REMICs--Taxes That May Be Imposed on the REMIC Pool--Administrative Matters" in the prospectus. For further information regarding the federal income tax consequences of investing in the Offered Certificates, see "Federal Income Tax Consequences--REMICs" in the prospectus. ERISA CONSIDERATIONS The following discussion applies to the Offered Certificates (collectively, the "ERISA Eligible Certificates") and does not purport to discuss the considerations under ERISA, Code Section 4975 or materially similar provisions of applicable federal, state or local law ("Similar Law") with respect to the purchase, acquisition or resale of a Class M-12, Class M-13, Class CE, Class P or Residual Certificates. As described in the prospectus under "ERISA Considerations," ERISA and the Code impose certain duties and restrictions on ERISA Plans and certain persons who perform services for ERISA Plans. Comparable duties and restrictions may exist under Similar Law on governmental plans and certain persons who perform services for governmental plans. For example, unless exempted, investment by a Plan in the ERISA Eligible Certificates may constitute a prohibited transaction under ERISA, the Code or Similar Law. There are certain exemptions issued by the United States Department of Labor (the "DOL") that may be applicable to an investment by an ERISA Plan in the ERISA Eligible Certificates, including the individual administrative exemption described below. For a further discussion of the individual administrative exemption, including the necessary conditions to its applicability, and other important factors to be considered by an ERISA Plan contemplating investing in the ERISA Eligible Certificates, see "ERISA Considerations" in the prospectus. The DOL issued to [ ] ("[ ]") an Underwriter Exemption. The Underwriter Exemption might apply to the acquisition, holding and resale of the ERISA Eligible Certificates by an ERISA Plan, provided that specified conditions are met. Among the conditions which would have to be satisfied for the Underwriter Exemption to apply to the acquisition by an ERISA Plan of the ERISA Eligible Certificates is the condition that the ERISA Plan investing in the Offered Certificates be an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"). Before purchasing an ERISA Eligible Certificate, whether on the Closing Date or in the secondary market, a fiduciary of an ERISA Plan should make its own determination as to the availability of the exemptive relief provided in the Underwriter Exemption or the availability of any other prohibited transaction exemptions, and whether the conditions of any such exemption will be applicable to the ERISA Eligible Certificates, and a fiduciary of a governmental plan should make its own determination as to the need for and availability of any exemptive relief under Similar Law. Any fiduciary of an ERISA Plan considering whether to purchase an ERISA Eligible Certificate should also carefully review with its own legal advisors the applicability of the fiduciary duty and prohibited transaction provisions of ERISA and the Code to such investment. See "ERISA Considerations" in the prospectus. S-65 LEGAL INVESTMENT The [ ] Certificates will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA") so long as they are rated in one of the two highest rating categories by at least one nationally recognized rating organization. The [ ] Certificates will not constitute "mortgage related securities" under SMMEA. Prospective purchasers whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities may be subject to restrictions on investment in the Offered Certificates and should consult their own legal, tax and accounting advisors in determining the suitability of and consequences to them of the purchase, ownership and disposition of the Offered Certificates. See "Legal Investment" in the prospectus. SECONDARY MARKET There will not be any market for the Offered Certificates prior to the issuance thereof. The Underwriter intends to act as a market maker in the Offered Certificates, subject to applicable provisions of federal and state securities laws and other regulatory requirements, but is under no obligation to do so. There can be no assurance that a secondary market in the Offered Certificates will develop or, if such a market does develop, that it will provide holders of Offered Certificates with liquidity of investment at any particular time or for the life of the Offered Certificates. UNDERWRITING Subject to the terms and conditions of the underwriting agreement dated [ ] and the terms agreement dated [ ] (together, the "Underwriting Agreement") among Wells Fargo Bank, the Depositor and [ ] (the "Underwriter"), the Underwriter has agreed to purchase and the Depositor has agreed to sell to the Underwriter the Offered Certificates. The Underwriter has advised the Depositor that it proposes to offer the Offered Certificates, from time to time, for sale in negotiated-transactions or otherwise at prices determined at the time of sale. Proceeds to the Depositor from the sale of the Offered Certificates are expected to be approximately $[ ], plus applicable accrued interest, before deducting expenses payable by the Depositor estimated to be $[ ]. The underwriting compensation of the Underwriter will consist of the difference between the amount paid by the Underwriter to the Depositor for the Offered Certificates and the aggregate amount received by the Underwriter upon sale by it of the Offered Certificates to investors. Any dealers that participate with the Underwriter in the distribution of the Offered Certificates will be underwriters, and any discounts or commissions received by them and any profit on the resale of Offered Certificates by them will be underwriting discounts or commissions under the Securities Act. The Underwriting Agreement provides that the Depositor or Wells Fargo Bank will indemnify the Underwriter against certain civil liabilities under the Securities Act or contribute to payments which the Underwriter may be required to make in respect thereof. LEGAL MATTERS The legality of the Offered Certificates and certain tax matters will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP, New York, New York. Certain legal matters will be passed upon for the Underwriter by McKee Nelson LLP, New York, New York. USE OF PROCEEDS The net proceeds to be received from the sale of the Offered Certificates will be applied by the Depositor to the purchase from Wells Fargo Bank of the Mortgage Loans underlying the Certificates. S-66 RATINGS It is a condition to the issuance of the Offered Certificates that the Certificates receive at least the respective ratings set forth in the table beginning on page S-5 from [ ] ("[ ]"), [ ] ("[ ]") and [ ] ("[ ]," and collectively with [ ] and [ ], the "Rating Agencies"). A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. Each security rating should be evaluated independently of any other security rating. The ratings of [ ] on home equity asset-backed certificates address the likelihood of the receipt by certificateholders of timely payments of interest and the ultimate return of principal. [ ] ratings take into consideration the credit quality of the mortgage pool, structural and legal aspects associated with the certificates, and the extent to which the payment stream on the mortgage pool is adequate to make payments required under the certificates. [ ]'s ratings on such certificates do not, however, constitute a statement regarding the likelihood of the payment of any Cap Carryover Amount, the frequency of prepayments on the mortgage loans, or the possibility that investors may suffer a lower than anticipated yield as a result of prepayments of the underlying mortgages. In addition, it should be noted that in some structures a default on a mortgage is treated as a prepayment and may have the same effect on yield as a prepayment. The ratings of [ ] on home equity asset-backed certificates address the likelihood of the receipt by certificateholders of all distributions of principal and interest to which such certificateholders are entitled. [ ] rating opinions address the structural, legal and issuer aspects associated with the certificates, including the nature of the underlying mortgage loans. [ ] ratings on home equity asset-backed certificates do not represent any assessment of the likelihood of the payment of any Cap Carryover Amount or that principal prepayments may differ from those originally anticipated and consequently any adverse effect the timing of such prepayments could have on an investor's anticipated yield. The ratings of [ ] on home equity asset-backed certificates address the likelihood of the receipt by certificateholders of all distributions to which such certificateholders are entitled. Fitch's rating opinions address the structural and legal aspects associated with the certificates, including the nature of the underlying mortgage loans. [ ] ratings on home equity asset-backed certificates do not represent any assessment of the likelihood of the payment of any Cap Carryover or the likelihood or rate of principal prepayments and consequently any adverse effect the timing of such prepayments could have on an investor's anticipated yield. S-67 INDEX OF PROSPECTUS SUPPLEMENT DEFINITIONS 60+ Day Delinquent Loan.....................................................S-40 Accrued Certificate Interest................................................S-31 Adjustable Rate Mortgage Loan...............................................S-50 Adjustable Rate Prepayment Curve............................................S-59 Adjustment Date.............................................................S-50 Applied Realized Loss Amount................................................S-41 ARM PPC.....................................................................S-59 Available Funds.............................................................S-29 Balloon Loan................................................................S-50 Balloon Payment.............................................................S-50 Basis Risk Arrangements.....................................................S-64 Cap.........................................................................S-46 Cap Amount..................................................................S-48 Cap Carryover Amount........................................................S-47 Cap Premium.................................................................S-64 Certificates................................................................S-29 Citigroup...................................................................S-65 Class A Certificates........................................................S-29 Class AI Certificates.......................................................S-29 Class AII Certificates......................................................S-29 Class M Certificates........................................................S-29 Class M-1 Principal Distribution Amount.....................................S-34 Class M-1 Realized Loss Amortization Amount.................................S-44 Class M-10 Principal Distribution Amount....................................S-36 Class M-10 Realized Loss Amortization Amount................................S-45 Class M-11 Principal Distribution Amount....................................S-36 Class M-11 Realized Loss Amortization Amount................................S-45 Class M-12 Principal Distribution Amount....................................S-37 Class M-12 Realized Loss Amortization Amount................................S-45 Class M-13 Principal Distribution Amount....................................S-37 Class M-13 Realized Loss Amortization Amount................................S-45 Class M-2 Principal Distribution Amount.....................................S-34 Class M-2 Realized Loss Amortization Amount.................................S-44 Class M-3 Principal Distribution Amount.....................................S-34 Class M-3 Realized Loss Amortization Amount.................................S-44 Class M-4 Principal Distribution Amount.....................................S-34 Class M-4 Realized Loss Amortization Amount.................................S-45 Class M-5 Principal Distribution Amount.....................................S-35 Class M-5 Realized Loss Amortization Amount.................................S-45 Class M-6 Principal Distribution Amount.....................................S-35 Class M-6 Realized Loss Amortization Amount.................................S-45 Class M-7 Principal Distribution Amount.....................................S-35 Class M-7 Realized Loss Amortization Amount.................................S-45 Class M-8 Principal Distribution Amount.....................................S-35 Class M-8 Realized Loss Amortization Amount.................................S-45 Class M-9 Principal Distribution Amount.....................................S-36 Class M-9 Realized Loss Amortization Amount.................................S-45 Class P Certificates........................................................S-29 CLTV........................................................................S-53 Code........................................................................S-63 Collection Period...........................................................S-30 Combined Loan-to-Value Ratio................................................S-53 Corporate Trust Office......................................................S-27 CPR.........................................................................S-59 Credit Risk Manager.........................................................S-62 Credit Risk Manager Fee.....................................................S-62 Current Interest Shortfall..................................................S-31 Custodial Agreement.........................................................S-28 Custodian...................................................................S-28 Debt-to-Income Ratio........................................................S-54 Deficiency Amount...........................................................S-49 Depositor...................................................................S-26 Distribution Date...........................................................S-29 DOL.........................................................................S-65 ERISA Eligible Certificates.................................................S-65 Extra Principal Distribution Amount.........................................S-38 FICO Scores.................................................................S-53 Fixed Rate Mortgage Loan....................................................S-50 Fixed Rate Prepayment Curve.................................................S-59 Formula Rate................................................................S-46 FRM PPC.....................................................................S-59 Gross Margin................................................................S-50 Group.......................................................................S-29 Group I.....................................................................S-29 Group I Cap.................................................................S-46 Group I Maximum Rate Cap....................................................S-46 Group I Mortgage Loans......................................................S-50 Group I Overcollateralization Floor.........................................S-38 Group I Principal Distribution Amount.......................................S-38 Group I Principal Percentage................................................S-38 Group I Senior Principal Distribution Amount................................S-38 Group II....................................................................S-29 Group II Cap................................................................S-46 Group II Maximum Rate Cap...................................................S-46 Group II Mortgage Loans.....................................................S-50 Group II Overcollateralization Floor........................................S-38 Group II Principal Distribution Amount......................................S-38 Group II Principal Percentage...............................................S-38 S-68 Group II Senior Principal Distribution Amount...............................S-38 Group Subordinate Amount....................................................S-46 Index.......................................................................S-51 Insured Amount..............................................................S-49 Insured Certificates........................................................S-48 Insured Payment.............................................................S-49 Insurer.....................................................................S-48 Interest Accrual Period.....................................................S-31 Interest Carry Forward Amount...............................................S-32 Interest Percentage.........................................................S-32 Interest Remittance Amount..................................................S-32 IRS.........................................................................S-64 Loan Group..................................................................S-50 Loan Group I................................................................S-50 Loan Group II...............................................................S-50 Loan-to-Value Ratio.........................................................S-53 LPMI Policy.................................................................S-53 Maximum Rate Cap............................................................S-47 Monthly Excess Cashflow Allocation..........................................S-42 Monthly Excess Cashflow Amount..............................................S-42 Monthly Excess Interest Amount..............................................S-41 Mortgage Loans..............................................................S-50 Mortgaged Properties........................................................S-50 Mortgages...................................................................S-50 Net Mortgage Interest Rate..................................................S-41 Net Rate Ceiling............................................................S-47 Nonpayment..................................................................S-49 Offered Certificates........................................................S-29 OID Regulations.............................................................S-63 One-Year CMT Index..........................................................S-51 Overcollateralization Amount................................................S-38 Overcollateralization Deficiency............................................S-38 Overcollateralization Floor.................................................S-39 Overcollateralization Release Amount........................................S-39 Pass-Through Rate...........................................................S-46 Paying Agent................................................................S-27 Payment Account.............................................................S-27 Periodic Cap................................................................S-50 Policy......................................................................S-48 Pool Cap....................................................................S-46 Pool Maximum Rate Cap.......................................................S-47 Pooling and Servicing Agreement.............................................S-60 PPC.........................................................................S-59 Preference Amount...........................................................S-49 Prepayment Assumptions......................................................S-59 Prepayment Period...........................................................S-30 Principal Balance...........................................................S-39 Principal Distribution Amount...............................................S-39 Principal Remittance Amount.................................................S-39 PUDs........................................................................S-53 Rate Ceiling................................................................S-50 Rating Agencies.............................................................S-67 Realized Loss Amortization Amount...........................................S-45 Record Date.................................................................S-29 REIT........................................................................S-63 Relief Act Shortfalls.......................................................S-32 REMIC.......................................................................S-62 Reserve Account.............................................................S-48 Residual Certificates.......................................................S-29 Securities Act..............................................................S-65 Securities Administrator....................................................S-27 Senior Certificates.........................................................S-29 Senior Enhancement Percentage...............................................S-39 Senior Principal Distribution Amount........................................S-40 Senior Specified Enhancement Percentage.....................................S-40 Sequential Trigger Event....................................................S-40 Servicer....................................................................S-28 Servicing Fee...............................................................S-61 Servicing Fee Rate..........................................................S-61 Similar Law.................................................................S-65 Six-Month LIBOR.............................................................S-51 Six-Month LIBOR Index.......................................................S-51 SMMEA.......................................................................S-66 Stepdown Date...............................................................S-40 Structuring Assumptions.....................................................S-59 Subordinated Certificates...................................................S-29 Subordination Depletion Date................................................S-40 Subsequent Recovery.........................................................S-40 Swap Regulations............................................................S-64 Targeted Overcollateralization Amount.......................................S-40 Trigger Event...............................................................S-40 Trust.......................................................................S-26 Trust Fund..................................................................S-61 Trustee.....................................................................S-27 Underwriter.................................................................S-66 Underwriting Agreement......................................................S-66 Underwriting Standards......................................................S-54 Unpaid Realized Loss Amount.................................................S-46 Weighted Average Life.......................................................S-58 Wells Fargo Bank............................................................S-25 Yield Maintenance Agreement.................................................S-47 Yield Maintenance Agreement Counterparty....................................S-47 Yield Maintenance Agreement Payment.........................................S-47 S-69
APPENDIX A SELECTED MORTGAGE LOAN DATA (as of the Cut-Off Date) Aggregate Group I Group II Mortgage Mortgage Mortgage Loans Loans Loans --------- --------- --------- Number of Mortgage Loans........................................................................ Aggregate Unpaid Principal Balance.............................................................. Range of Unpaid Principal Balances.............................................................. Average Unpaid Principal Balance................................................................ Range of Current Mortgage Interest Rates........................................................ Weighted Average Current Mortgage Interest Rate................................................. Weighted Average Current Net Mortgage Interest Rate............................................. Range of Remaining Terms to Stated Maturity..................................................... Weighted Average Remaining Term to Stated Maturity.............................................. Range of Original Loan-to-Value Ratios.......................................................... Weighted Average Original Loan-to-Value Ratio................................................... Range of Original Combined Loan-to-Value Ratios................................................. Weighted Average Original Combined Loan-to-Value Ratio.......................................... Number of Mortgage Loans with Original Loan-to-Value Ratios greater than 80% not covered by Primary Mortgage Insurance.................................................................. Mortgage Loans with Original Loan-to-Value Ratios greater than 80% not covered by Primary Mortgage Insurance as a Percentage of Aggregate Unpaid Principal Balance.................... Number of Mortgage Loans covered by an LPMI Policy.............................................. Mortgage Loans covered by an LPMI Policy as a Percentage of Aggregate Unpaid Principal Balance..................................................................................... Number of Interest Only Loans (1) .............................................................. Interest Only Loans(1) as a Percentage of Aggregate Unpaid Principal Balance.................... Range of Interest Only Term for Interest Only Mortgage Loans (1)................................ Weighted Average Remaining Interest Only Term for Interest Only Mortgage Loans (1).............. Range of Original Debt to Income Ratios......................................................... Weighted Average Original Total Debt to Income Ratio............................................ Range of Loan Age............................................................................... Weighted Average Loan Age....................................................................... Aggregate Original Unpaid Principal Balance..................................................... Weighted Average Original Loan-to-Value Ratio of Mortgage Loans with Original Principal Balances greater than $600,000.............................................................. Maximum Original Loan-to-Value Ratio of Mortgage Loans with Original Principal Balances greater than $600,000....................................................................... Geographic Concentration of Mortgaged Properties Securing Mortgage Loans in Excess of 5% of the Aggregate Unpaid Principal Balance [State]................................................................................... [State]................................................................................... Maximum Five-Digit Zip Code Concentration....................................................... Earliest Origination Month...................................................................... Latest Origination Month........................................................................ Latest Stated Maturity Date..................................................................... Number of Buy-Down Loans (2).................................................................... Buy-Down Loans(2) as a Percentage of Aggregate Unpaid Principal Balance......................... Range of Gross Margins.......................................................................... Weighted Average Gross Margin................................................................... Range of Rate Ceilings.......................................................................... Weighted Average Rate Ceiling................................................................... Range of Months to First Adjustment Date........................................................ Weighted Average Months to First Adjustment Date................................................ Number of Relocation Mortgage Loans (3)......................................................... Relocation Mortgage Loans(3) as a Percentage of Aggregate Unpaid Principal Balance.............. Number of Subsidy Loans(4)...................................................................... Subsidy Loans(4) as a Percentage of Aggregate Unpaid Principal Balance.......................... Number of LOC Pledged Asset Mortgage Loans(5)...................................................
A-1
Aggregate Group I Group II Mortgage Mortgage Mortgage Loans Loans Loans --------- --------- --------- LOC Pledged Asset Mortgage Loans(5) as a Percentage of Aggregate Unpaid Principal Balance....... Weighted Average Original FICO Score(6)......................................................... (1) For a description of Interest Only Loans, see "Description of the Trust Funds-Mortgage Loans" in the prospectus. (2) For a description of Buydown Loans, see "Description of the Trust Funds-Mortgage Loans" in the prospectus. (3) A Relocation Mortgage Loan is a mortgage loan originated in connection with the purchase of a residence of a relocated employee of various corporate employers that participated in the relocation program of Wells Fargo Bank and of various non-participant employers. (4) For a description of Subsidy Loans, see "Description of the Trust Funds-Mortgage Loans" in the prospectus. (5) For a description of LOC Pledged Asset Mortgage Loans, see "Description of the Trust Funds-Mortgage Loans" in the prospectus. (6) Does not include the Mortgage Loans for which FICO Scores are not available.
A-2 APPENDIX A (Continued) AGGREGATE MORTGAGE LOAN DATA
CURRENT MORTGAGE INTEREST RATES Aggregate Unpaid Principal Percentage of Total Aggregate Range of Current Mortgage Interest Rates Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
DOCUMENTATION LEVELS Aggregate Unpaid Principal Percentage of Total Aggregate Documentation Level Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING TERMS TO STATED MATURITY Remaining Stated Aggregate Unpaid Principal Percentage of Total Aggregate Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
YEARS OF ORIGINATION Aggregate Unpaid Principal Percentage of Total Aggregate Year of Origination Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PROPERTY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Property Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Single-family dwellings Two-to four-family units Condominiums High-rise (greater than four stories) Low-rise (four stories or less) Cooperative Units Manufactured Homes ------ -------------------------- ----------------------------- Total ====== ========================== =============================
GEOGRAPHIC AREAS Aggregate Unpaid Principal Percentage of Total Aggregate Geographic Area Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-3 APPENDIX A (Continued) AGGREGATE MORTGAGE LOAN DATA
ORIGINAL LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL COMBINED LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL PRINCIPAL BALANCES Range of Aggregate Unpaid Principal Percentage of Total Aggregate Principal Balance Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINATORS Aggregate Unpaid Principal Percentage of Total Aggregate Originator Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Wells Fargo Bank or Affiliate [10% Originators] [10% Originators] ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PURPOSES Aggregate Unpaid Principal Percentage of Total Aggregate Purpose Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Purchase Equity Take Out Refinance Rate/Term Refinance ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-4 APPENDIX A (Continued) AGGREGATE MORTGAGE LOAN DATA
OCCUPANCY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Occupancy Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Investment Property Primary Residence Second Home ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING INTEREST ONLY TERMS Remaining Interest Aggregate Unpaid Principal Percentage of Total Aggregate Only Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL DEBT TO INCOME RATIOS Range of Debt to Aggregate Unpaid Principal Percentage of Total Aggregate Income Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PREPAYMENT PENALTIES AT ORIGINATION (YEARS IN EFFECT) Aggregate Unpaid Principal Percentage of Total Aggregate Prepayment Penalty at Origination (in Years) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
UNDERWRITING GUIDELINE CREDIT LEVELS Aggregate Unpaid Percentage of Total Aggregate Underwriting Guideline Credit Levels Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Y9 Y8 Y7 Y6 Y5 Y4 Y3 Y2 Y1 ------ -------------------------- ----------------------------- Total ====== ========================== =============================
LOAN TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Loan Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS Percentage of Total Aggregate Unpaid Principal Balance Aggregate Unpaid Principal of the Adjustable Rate Range of Minimum Rates Number Balance Mortgage Loans - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-5 APPENDIX A (Continued) AGGREGATE MORTGAGE LOAN DATA RATE CEILINGS OF THE ADJUSTABLE RATE MORTGAGE LOANS
Aggregate Unpaid Principal Percentage of Total Aggregate Range of Rate Ceilings Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-6 APPENDIX A (Continued) GROUP I MORTGAGE LOAN DATA
CURRENT MORTGAGE INTEREST RATES Aggregate Unpaid Principal Percentage of Total Aggregate Range of Current Mortgage Interest Rates Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
DOCUMENTATION LEVELS Aggregate Unpaid Principal Percentage of Total Aggregate Documentation Level Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Full Documentation Stated Income, Stated Asset ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING TERMS TO STATED MATURITY Remaining Stated Aggregate Unpaid Principal Percentage of Total Aggregate Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
YEARS OF ORIGINATION Aggregate Unpaid Principal Percentage of Total Aggregate Year of Origination Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PROPERTY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Property Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Single-family dwellings Two-to four-family units Condominiums High-rise (greater than four stories) Low-rise (four stories or less) Cooperative Units Manufactured Homes ------ -------------------------- ----------------------------- Total ====== ========================== =============================
GEOGRAPHIC AREAS Aggregate Unpaid Principal Percentage of Total Aggregate Geographic Area Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Arizona California Colorado District of Columbia Florida Georgia Hawaii Illinois Iowa Maryland Massachusetts Michigan Minnesota Missouri Montana Nevada New Jersey New York North Dakota Ohio Oregon Pennsylvania Texas Virginia Washington Wisconsin ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-7 APPENDIX A (Continued) GROUP I MORTGAGE LOAN DATA
ORIGINAL LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL COMBINED LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL PRINCIPAL BALANCES Range of Aggregate Unpaid Principal Percentage of Total Aggregate Principal Balance Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINATORS Aggregate Unpaid Principal Percentage of Total Aggregate Originator Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Wells Fargo Bank or Affiliate Other Originators ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PURPOSES Aggregate Unpaid Principal Percentage of Total Aggregate Purpose Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Purchase Equity Take Out Refinance Rate/Term Refinance ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-8 APPENDIX A (Continued) GROUP I MORTGAGE LOAN DATA
OCCUPANCY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Occupancy Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Investment Property Primary Residence Second Home ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING INTEREST ONLY TERMS Remaining Interest Aggregate Unpaid Principal Percentage of Total Aggregate Only Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL DEBT TO INCOME RATIOS Range of Debt to Aggregate Unpaid Principal Percentage of Total Aggregate Income Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PREPAYMENT PENALTIES AT ORIGINATION (YEARS IN EFFECT) Aggregate Unpaid Percentage of Total Aggregate Prepayment Penalty at Origination (in Years) Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
UNDERWRITING GUIDELINE CREDIT LEVELS Aggregate Unpaid Percentage of Total Aggregate Underwriting Guideline Credit Levels Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Y9 Y8 Y7 Y6 Y5 Y4 Y3 Y2 Y1 ------ -------------------------- ----------------------------- Total ====== ========================== =============================
LOAN TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Loan Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS Aggregate Unpaid Principal Percentage of Total Aggregate Range of Minimum Rates Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-9 APPENDIX A (Continued) GROUP I MORTGAGE LOAN DATA RATE CEILINGS OF THE ADJUSTABLE RATE MORTGAGE LOANS
Aggregate Unpaid Principal Percentage of Total Aggregate Range of Rate Ceilings Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-10 APPENDIX A (Continued) GROUP II MORTGAGE LOAN DATA CURRENT MORTGAGE INTEREST RATES
Aggregate Unpaid Principal Percentage of Total Aggregate Range of Current Mortgage Interest Rates Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
DOCUMENTATION LEVELS Aggregate Unpaid Percentage of Total Aggregate Documentation Level Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Full Documentation Stated Income, Stated Asset ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING TERMS TO STATED MATURITY Remaining Stated Aggregate Unpaid Principal Percentage of Total Aggregate Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
YEARS OF ORIGINATION Aggregate Unpaid Principal Percentage of Total Aggregate Year of Origination Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PROPERTY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Property Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Single-family dwellings Two-to four-family units Condominiums High-rise (greater than four stories) Low-rise (four stories or less) Cooperative Units Manufactured Homes ------ -------------------------- ----------------------------- Total ====== ========================== =============================
GEOGRAPHIC AREAS Aggregate Unpaid Principal Percentage of Total Aggregate Geographic Area Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Arizona California Colorado District of Columbia Florida Georgia Hawaii Illinois Iowa Maryland Massachusetts Michigan Minnesota Missouri Montana Nevada New Jersey New York North Dakota Ohio Oregon Pennsylvania Texas Virginia Washington Wisconsin ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-11 APPENDIX A (Continued) GROUP II MORTGAGE LOAN DATA
ORIGINAL LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL COMBINED LOAN-TO-VALUE RATIOS Range of Original Aggregate Unpaid Principal Percentage of Total Aggregate Loan-to-Value Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL PRINCIPAL BALANCES Range of Aggregate Unpaid Principal Percentage of Total Aggregate Principal Balance Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINATORS Aggregate Unpaid Principal Percentage of Total Aggregate Originator Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Wells Fargo Bank or Affiliate Other Originators ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PURPOSES Aggregate Unpaid Principal Percentage of Total Aggregate Purpose Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Purchase Equity Take Out Refinance Rate/Term Refinance ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-12 APPENDIX A (Continued) GROUP II MORTGAGE LOAN DATA
OCCUPANCY TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Occupancy Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Investment Property Primary Residence Second Home ------ -------------------------- ----------------------------- Total ====== ========================== =============================
REMAINING INTEREST ONLY TERMS Remaining Interest Aggregate Unpaid Principal Percentage of Total Aggregate Only Term (Months) Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
ORIGINAL DEBT TO INCOME RATIOS Range of Debt to Aggregate Unpaid Principal Percentage of Total Aggregate Income Ratios Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
PREPAYMENT PENALTIES AT ORIGINATION (YEARS IN EFFECT) Aggregate Unpaid Percentage of Total Aggregate Prepayment Penalty at Origination (in Years) Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
UNDERWRITING GUIDELINE CREDIT LEVELS Aggregate Unpaid Percentage of Total Aggregate Underwriting Guideline Credit Levels Number Principal Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- Y9 Y8 Y7 Y6 Y5 Y4 Y3 Y2 Y1 ------ -------------------------- ----------------------------- Total ====== ========================== =============================
LOAN TYPES Aggregate Unpaid Principal Percentage of Total Aggregate Loan Type Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS Aggregate Unpaid Principal Percentage of Total Aggregate Range of Minimum Rates Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-13 APPENDIX A (Continued) GROUP II MORTGAGE LOAN DATA
RATE CEILINGS OF THE ADJUSTABLE RATE MORTGAGE LOANS Aggregate Unpaid Principal Percentage of Total Aggregate Range of Rate Ceilings Number Balance Unpaid Principal Balance - -------------------------------------------- ------ -------------------------- ----------------------------- ------ -------------------------- ----------------------------- Total ====== ========================== =============================
A-14 APPENDIX B - Decrement Tables Percentage of Initial Principal Balance Outstanding For:
Class AI-1A and Class AI-1B Certificates at the Class AII-1 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)...... Weighted Average Life to Optional Termination Date (years)(1)..........
Class AI1-2 Certificates at the Class AII-3 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)... Weighted Average Life to Optional Termination Date (years)(1)............
- ---------- (1) The weighted average life of an Offered Certificate is determined by (i) multiplying the amount of net reduction of Principal Balance by the number of years from the date of the issuance of such Certificate to the related Distribution Date, (ii) adding the results and (iii) dividing the sum by the aggregate net reduction of Principal Balance referred to in clause (i). * Indicates a percentage greater than zero but less than 0.5% of the initial Principal Balance of such Class. APPENDIX B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class M-1 Certificates at the Class M-2 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)..... Weighted Average Life to Optional Termination Date (years)(1)............
Class M-3 Certificates at the Class M-4 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)..... Weighted Average Life to Optional Termination Date (years)(1)............
- ----------- (1) The weighted average life of an Offered Certificate is determined by (i) multiplying the amount of net reduction of Principal Balance by the number of years from the date of the issuance of such Certificate to the related Distribution Date, (ii) adding the results and (iii) dividing the sum by the aggregate net reduction of Principal Balance referred to in clause (i). * Indicates a percentage greater than zero but less than 0.5% of the initial Principal Balance of such Class. B-2 APPENDIX B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class M-5 Certificates at the Class M-6 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)..... Weighted Average Life to Optional Termination Date (years)(1)............
Class M-7 Certificates at the Class M-8 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)..... Weighted Average Life to Optional Termination Date (years)(1)............
- ---------- (1) The weighted average life of an Offered Certificate is determined by (i) multiplying the amount of net reduction of Principal Balance by the number of years from the date of the issuance of such Certificate to the related Distribution Date, (ii) adding the results and (iii) dividing the sum by the aggregate net reduction of Principal Balance referred to in clause (i). * Indicates a percentage greater than zero but less than 0.5% of the initial Principal Balance of such Class. B-3 APPENDIX B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class M-9 Certificates at the Class M-10 Certificates at the Following Percentages of PPC Following Percentages of PPC ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)..... Weighted Average Life to Optional Termination Date (years)(1).................
Class M-11 Certificates at the Following Percentages of PPC ---------------------------------------------- Distribution Date 0% 50% 75% 100% 125% 150% 175% - ----------------- ---- ---- ---- ---- ---- ---- ---- Weighted Average Life to maturity (years)(1)......................................................... Weighted Average Life to Optional Termination Date (years)(1)....................................................
- ---------- (1) The weighted average life of an Offered Certificate is determined by (i) multiplying the amount of net reduction of Principal Balance by the number of years from the date of the issuance of such Certificate to the related Distribution Date, (ii) adding the results and (iii) dividing the sum by the aggregate net reduction of Principal Balance referred to in clause (i). * Indicates a percentage greater than zero but less than 0.5% of the initial Principal Balance of such Class. B-4 APPENDIX C ASSUMED MORTGAGE LOAN CHARACTERISTICS APPENDIX D FINAL SCHEDULED DISTRIBUTION DATES Wells Fargo Asset Securities Corporation Depositor Wells Fargo Bank, N.A. Sponsor and Servicer Wells Fargo Home Equity Asset-Backed Securities 200 - Trust Issuing Entity $[ ] (Approximate) Home Equity Asset-Backed Certificates, Series 200 - ------------------------------------------ PROSPECTUS SUPPLEMENT ------------------------------------------ [Underwriter] You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. No one has been authorized to provide you with different information. The Offered Certificates are not being offered in any state where the offer is not permitted. The Depositor does not claim the accuracy of the information in this prospectus supplement and the accompanying prospectus as of any date other than the dates stated on their respective covers. Upon request, dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the Offered Certificates and with respect to their unsold allotments or subscriptions. In addition, upon request all dealers selling the Offered Certificates will be required to deliver a prospectus supplement and prospectus until ninety days following the date of this prospectus supplement. [ ], 200 SUBJECT TO COMPLETION DATED MARCH 17, 2006 PROSPECTUS WELLS FARGO ASSET SECURITIES CORPORATION Depositor WELLS FARGO BANK, N.A. Sponsor Asset Backed Certificates Asset Backed Notes (Issuable in Series) ----------------------------- You should carefully consider the risk factors beginning on page 12 of this prospectus. Neither the securities of any series nor the underlying mortgage loans will be insured or guaranteed by any governmental agency or instrumentality or any other entity. The securities of each series will represent interests in, or will represent debt obligations of, the related issuing entity only and will not represent interests in or obligations of the depositor, the sponsor or any affiliate of the depositor. This prospectus may be used to offer and sell any series of securities only if accompanied by the prospectus supplement for that series. Each Issuing Entity-- o will issue a series of asset-backed certificates or asset-backed notes, which will consist of one or more classes of certificates or notes; and o will own-- o a pool or pools of single family and/or multifamily mortgage loans, which may include subprime mortgage loans, which are secured by either first or junior liens on one- to four-family residential properties or primarily residential properties consisting of five or more residential dwelling units, which may include limited retail, office or other commercial space; and o other assets described in this prospectus and the accompanying prospectus supplement. Each Pool of Mortgage Loans-- o will be sold to the related issuing entity by the depositor, who will have in turn purchased them from the sponsor, one of its affiliates; o will be underwritten to the sponsor's standards or such other standards as described in this prospectus and the accompanying prospectus supplement; and o will be serviced by the sponsor individually or together with other servicers. Each Series of Securities-- o will represent ownership interests in the related issuing entity or will represent debt obligations of the related issuing entity; o may be entitled to one or more of the other types of credit support described in this prospectus; and o will be paid only from the assets of the related issuing entity. Neither the SEC nor any state securities commission has approved the securities or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is [ ], 200 . The information in this prospectus is not complete and may be changed. We may not sell these certificates until we deliver a final prospectus supplement and prospectus. This prospectus and the accompanying prospectus supplement are not an offer to sell these certificates and are not soliciting an offer to buy these certificates in any state where the offer or sale is not permitted. TABLE OF CONTENTS IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT......................................6 SUMMARY OF PROSPECTUS..........................................................7 RISK FACTORS..................................................................12 Risks Associated with the Securities.......................................12 Securities May Not be Liquid...........................................12 Limited Assets for Payment of Securities...............................12 Credit Enhancement is Limited in Amount and Coverage...................12 Cash Flow Agreements and External Credit Enhancements are Subject to Third-Party Risk...................................13 Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on the Securities.................13 Ratings Assigned to the Securities Will Have Limitations.......................................................14 Book-Entry System for Certain Classes of Securities May Decrease Liquidity and Delay Payment..........................14 Risk of Loss May Be Greater on Subordinated Securities.................15 There is a Risk That Interest Payments on the Mortgage Loans May be Insufficient to Pay Interest on Your Certificates.....................................15 Increase in Index May Adversely Affect Yield on Certain Securities of a Series....................................15 Exercise of Rights Under Special Servicing Agreements May Be Adverse to Other Securityholders...........................16 Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Securities...................................16 Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans.....................................17 Servicing Transfer Following Event of Default May Result in Payment Delays or Losses................................17 Risks Associated with the Mortgage Loans...................................18 Subprime Mortgage Loans May Experience Greater Rates of Delinquency and Foreclosure....................................18 Mortgage Loans Secured by Multifamily Properties May Experience Greater Rates of Delinquency and Foreclosure.......................................................18 General Economic Conditions Affect Mortgage Loan Performance.......................................................18 Real Estate Market Conditions Affect Mortgage Loan Performance.......................................................18 Geographic Concentration May Increase Rates of Loss and Delinquency...................................................18 Risk of Loss May Be Greater on Junior Mortgage Loans...................19 Special Risks of Certain Mortgage Loans................................19 Alternatives to Foreclosure May Adversely Affect Yield.................20 Defaulted Mortgage Loans May Experience Delays in Liquidation and Liquidation Proceeds May Be Less Than the Outstanding Principal Balance of the Mortgage Loans....................................................20 Liquidation Expenses May be Disproportionate...........................20 Defaults May Be More Likely on Newer Mortgage Loans....................20 Balloon Loans May Have a Greater Default Risk at Maturity..........................................................20 Texas Home Equity Loans Have Significant Limitations...................21 Increased Risk of Loss if Mortgage Loans are Delinquent........................................................21 The Inclusion of Subsidy Mortgage Loans in a Series May 2 Adversely Affect Yield of the Related Securities........................................................21 The Inclusion of Buy-Down Mortgage Loans in a Series May Adversely Affect Yield of the Related Securities........................................................21 Collateral Securing Cooperative Loans May Diminish in Value.............................................................22 Leaseholds May Be Subject to Default Risk on the Underlying Lease..................................................22 The Recording of the Mortgages of a Series in the Name of MERS May Affect the Yield on the Certificates......................................................22 Violations of Federal, State and Local Laws May Adversely Affect Ability to Collect on Loans......................23 DESCRIPTION OF THE TRUST FUNDS................................................24 Mortgage Loans.............................................................24 General................................................................24 Mortgage Loan Information in Prospectus Supplements....................29 Payment Provisions of the Mortgage Loans...............................29 Pre-Funding Account........................................................30 Accounts...................................................................30 Credit Support.............................................................31 Cash Flow Agreements.......................................................31 General................................................................31 Guaranteed Investment Contract.........................................31 Yield Maintenance Agreements...........................................31 Swap Agreements........................................................32 THE SPONSOR...................................................................32 THE SPONSOR'S MORTGAGE LOAN PROGRAMS..........................................34 Mortgage Loan Production Sources...........................................34 Acquisition of Mortgage Loans from Correspondents..........................35 Mortgage Loan Underwriting.................................................35 STATIC POOL INFORMATION.......................................................39 THE DEPOSITOR.................................................................39 DESCRIPTION OF THE SECURITIES.................................................40 General....................................................................40 Distributions..............................................................40 Available Funds............................................................41 Distributions of Interest on the Securities................................42 Distributions of Principal of the Securities...............................43 Categories of Classes of Securities........................................44 Principal Types........................................................44 Interest Types.........................................................45 Pass-Through Rates and Interest Rates Based on LIBOR.......................46 General................................................................46 Determination of LIBOR.................................................46 Distributions on the Securities of Prepayment Penalties....................47 Allocation of Losses and Shortfalls........................................47 Advances in Respect of Delinquencies.......................................48 Reports to Securityholders.................................................48 Termination................................................................50 Optional Purchases.........................................................51 Definitive Form............................................................51 Book-Entry Form............................................................51 Secondary Market Trading...............................................55 Certain U.S. Federal Income Tax Documentation Requirements of Book-Entry Securities.............................56 DESCRIPTION OF CREDIT SUPPORT.................................................56 General....................................................................56 Subordinated Securities....................................................57 Overcollateralization......................................................57 Excess Interest............................................................57 Cross-Collateralization....................................................57 Limited Guarantee..........................................................57 Financial Guaranty Insurance Policy or Surety Bond.........................58 Letter of Credit...........................................................58 Pool Insurance Policies....................................................58 Special Hazard Insurance Policies..........................................59 Mortgagor Bankruptcy Bond..................................................60 Reserve Funds..............................................................60 PREPAYMENT AND YIELD CONSIDERATIONS...........................................61 General....................................................................61 Pass-Through Rates and Interest Rates......................................61 Scheduled Delays in Distributions..........................................61 Effect of Principal Prepayments............................................61 Weighted Average Life of Securities........................................62 Refinancings...............................................................63 DESCRIPTION OF THE AGREEMENTS.................................................64 Agreements Applicable to a Series......................................... 64 3 REMIC Securities or Grantor Trust Securities...........................64 Securities That Are Partnership Interests for Tax Purposes and Notes...64 Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements........................................64 General................................................................64 Assignment of Mortgage Loans; Representations and Warranties; Repurchases............................................65 Collection Account, Distribution Account and Related Accounts..........67 Realization Upon Defaulted Mortgage Loans; Servicing Advances..........72 Hazard Insurance Policies..............................................74 Primary Mortgage Insurance Policies....................................75 Fidelity Bonds and Errors and Omissions Insurance......................76 Due-on-Sale Provisions.................................................76 Fixed Retained Yield; Servicing Compensation and Payment of Expenses...76 Evidence as to Compliance..............................................76 The Servicers..........................................................77 The Master Servicer....................................................81 Special Servicers......................................................83 Credit Risk Manager....................................................83 Events of Default under the Agreements.................................83 Rights Upon Event of Default under the Agreements......................84 Amendment..............................................................84 The Trustee and Securities Administrator...............................85 Material Terms of the Indenture............................................86 General................................................................86 Events of Default......................................................86 Discharge of Indenture.................................................88 Indenture Trustee's Annual Report......................................88 The Indenture Trustee..................................................88 CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS.......................................88 General....................................................................88 Condominiums...............................................................89 Cooperatives...............................................................89 Foreclosure................................................................90 Foreclosure on Shares of Cooperatives......................................91 Leaseholds.................................................................91 Junior Mortgages...........................................................92 Rights of Redemption.......................................................92 Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders.....................................................93 Forfeiture for Drug, RICO and Money Laundering Violations..................94 Homeowners Protection Act of 1998..........................................95 Texas Home Equity Loans....................................................95 Servicemembers Civil Relief Act............................................95 Environmental Considerations...............................................96 "Due-on-Sale" Clauses......................................................98 Alternative Mortgage Instruments...........................................98 Prepayment Penalties.......................................................99 Subordinate Financing......................................................99 Applicability of Usury Laws................................................99 Enforceability of Certain Provisions......................................100 FEDERAL INCOME TAX CONSEQUENCES..............................................101 General...................................................................101 Taxable Mortgage Pools................................................101 REMICS....................................................................101 Classification of REMICs..............................................101 Characterization of Investments in REMIC Securities...................103 Tiered REMIC Structures...............................................104 Taxation of Owners of Regular Securities..............................104 Election to Treat All Interest Under the Constant Yield Method........109 Taxation of Owners of Residual Securities.............................111 Taxes That May Be Imposed on the REMIC Pool...........................117 Taxation of Certain Foreign Investors.................................119 Grantor Trust Funds.......................................................121 Standard Securities.......................................................121 General...............................................................121 Tax Status............................................................122 Premium and Discount..................................................122 4 Recharacterization of Servicing Fees...............................123 Sale or Exchange of Standard Securities............................124 Stripped Securities......................................................124 General............................................................124 Status of Stripped Securities......................................125 Taxation of Stripped Securities....................................126 Reporting Requirements and Backup Withholding......................127 Taxation of Certain Foreign Investors..............................127 Partnership Trust Funds..................................................128 Classification of Partnership Trust Funds..........................128 Characterization of Investments in Partnership Securities and Debt Securities.............................................128 Taxation of Debt Securityholders...................................128 Taxation of Owners of Partnership Securities.......................129 STATE AND OTHER TAX CONSEQUENCES.............................................133 ERISA CONSIDERATIONS.........................................................134 General..................................................................134 Certain Requirements Under ERISA.........................................134 General............................................................134 Parties in Interest/Disqualified Persons...........................134 Delegation of Fiduciary Duty.......................................134 Administrative Exemptions................................................135 Individual Administrative Exemptions...............................135 PTE 83-1...........................................................137 Exempt Plans.............................................................138 Unrelated Business Taxable Income--Residual Securities...................138 LEGAL INVESTMENT.............................................................139 PLAN OF DISTRIBUTION.........................................................140 USE OF PROCEEDS..............................................................141 LEGAL MATTERS................................................................142 RATING.......................................................................142 REPORTS TO SECURITYHOLDERS...................................................142 WHERE YOU CAN FIND MORE INFORMATION..........................................143 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................143 INDEX OF PROSPECTUS DEFINITIONS..............................................144 5 IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT Information is provided to you about the securities in two separate documents that progressively provide more detail: (a) this prospectus, which provides general information, some of which may not apply to a particular series of securities, including your series, and (b) the accompanying prospectus supplement, which will describe the specific terms of your series of securities, including: o the principal balances and/or interest rates of each class; o the timing and priority of interest and principal payments; o statistical and other information about the mortgage loans; o information about credit enhancement, if any, for each class; o the ratings for each class; and o the method for selling the securities. You should rely only on the information provided in this prospectus and the accompanying prospectus supplement including the information incorporated by reference. No one has been authorized to provide you with different information. The securities are not being offered in any state where the offer is not permitted. The depositor does not claim the accuracy of the information in this prospectus or the accompanying prospectus supplement as of any date other than the dates stated on their respective covers. Cross-references are included in this prospectus and in the accompanying prospectus supplement 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 supplement provide the pages on which these captions are located. You can find a listing of the pages where capitalized terms used in this prospectus are defined under the caption "Index of Prospectus Definitions" beginning on page 144 in this prospectus. The depositor's principal executive office is located at 7430 New Technology Way, Frederick, Maryland 21703, and the depositor's telephone number is (301) 846-8881. 6 SUMMARY OF PROSPECTUS This summary highlights selected information from this document and does not contain all of the information that you need to consider in making an investment decision. Please read this entire prospectus and the accompanying prospectus supplement carefully to understand all of the terms of a series of securities. This summary provides an overview of certain calculations, cash flows and other information to aid your understanding of the terms of the securities and is qualified by the full description of these calculations, cash flows and other information in the prospectus and the prospectus supplement. RELEVANT PARTIES FOR EACH SERIES OF SECURITIES Issuing Entity Each series of securities will be issued by a separate common law trust. Each trust will be formed, and each series of securities will be issued, under a separate pooling and servicing agreement among the depositor, the servicer (or master servicer), the securities administrator and the trustee specified in the applicable prospectus supplement or a deposit trust agreement between the depositor and an owner trustee. Sponsor Wells Fargo Bank, N.A. will be the sponsor of each series of securities. The mortgage loans will either be originated by the sponsor or purchased by the sponsor from various entities that originated the mortgage loans to the sponsor's underwriting standards or as otherwise specified in the prospectus supplement. The sponsor will sell the mortgage loans to the depositor on the closing date specified in the applicable prospectus supplement by means of a mortgage loan purchase agreement between the sponsor and the depositor. Depositor Wells Fargo Asset Securities Corporation will act as depositor for each series of securities. The depositor will acquire the mortgage loans from the sponsor and will transfer the mortgage loans to each trust. The depositor is a direct, wholly-owned subsidiary of the sponsor which is a direct, wholly-owned subsidiary of Wells Fargo & Company. It is not expected that the depositor will have any business operations other than offering securities and related activities. Master Servicer If so specified in the applicable prospectus supplement, the sponsor will act as master servicer of a trust, supervise the servicers and perform certain other administrative and reporting duties with respect to a series of certificates and/or notes. Servicer The sponsor and/or, if specified in the applicable prospectus supplement, one or more other entities, will service the mortgage loans in the trust. Securities Administrator If so specified in the applicable prospectus supplement, the sponsor will act as securities administrator, will be responsible for calculating the amounts to be paid on the securities and for making available monthly reports to the trustee and securityholders, in each case based upon mortgage loan information provided by the servicer (or master servicer) with respect to a series of certificates and/or notes. Trustee / Indenture Trustee A trustee or indenture trustee for each trust will be named in the applicable prospectus supplement. The trustee or indenture trustee generally will be responsible under each pooling and servicing agreement or indenture for providing general administrative services on behalf of the trust for a series. To the extent specified in the applicable prospectus supplement, a securities administrator may perform certain of the duties of the trustee. Paying Agent A paying agent for each trust will be named in the applicable prospectus supplement. The paying agent generally will be responsible under each pooling and 7 servicing agreement or indenture for making distributions to securityholders of a series. Custodian The sponsor or another entity (which may be the trustee) named in the applicable prospectus supplement will act as custodian for each series of securities. Generally, the custodian will be responsible for holding and safeguarding the mortgage notes and other contents of the mortgage file on behalf of the securityholders of a series. THE MORTGAGE LOANS Each trust will own the related mortgage loans (other than the fixed retained yield. which is the portion of the mortgage interest rate, if any, not contained in the trust) and certain other related property, as specified in the applicable prospectus supplement. The mortgage loans in each trust fund: o will be fixed or adjustable interest rate, mortgage loans secured by first or junior liens on one- to four-family residential properties and/or multifamily mortgage loans and may include subprime mortgage loans; o will have been acquired by the depositor from the sponsor; o will have been originated by the sponsor or an affiliate or will have been acquired by the sponsor directly or indirectly from other mortgage loan originators; and o will have been underwritten either to the sponsor's standards or to other standards specified in the applicable prospectus supplement. See "Description of the Trust Funds" and "The Sponsor's Mortgage Loan Programs." You should refer to the applicable prospectus supplement for the precise characteristics or expected characteristics of the mortgage loans included in a particular trust fund. DISTRIBUTIONS ON THE SECURITIES Each series of securities will include one or more classes. A class of securities will be entitled, to the extent of funds available, to receive distributions from collections on the related mortgage loans and, to the extent specified in the applicable prospectus supplement, from any credit enhancements or cash flow agreements described in this prospectus. See "Description of the Securities" in this prospectus. Interest Distributions With respect to each series of securities, interest on each class of securities (other than a class of securities entitled to receive only principal) will accrue during each period specified in the prospectus supplement and will be distributed to the holders of the related classes of securities on each distribution date in accordance with the particular terms of each such class of securities. The terms of each such class of securities will be described in the applicable prospectus supplement. See "Description of the Securities--Distributions of Interest on the Securities" in this prospectus. Principal Distributions With respect to each series of securities, principal payments (including prepayments) on the related mortgage loans will be distributed to holders of the related securities (other than a class of securities entitled to receive only interest) or otherwise applied as described in the applicable prospectus supplement on each distribution date. Distributions in reduction of principal balance will be allocated among the classes of securities of a series in the manner specified in the applicable prospectus supplement. See "Description of the Securities--Distribution of Principal of the Securities" in this prospectus. Distribution Dates Distributions on the securities will be made on each distribution date which is generally the 25th day of each month, or, if such day is not a business day, the business day following the 25th day. If so specified in the applicable prospectus supplement, distributions on securities may be made on a different day of each month or may be made quarterly, or semi-annually, on the dates specified in such prospectus supplement. The cut-off date for each series will be the date specified in the applicable prospectus supplement. Record Dates Distributions will be made on each distribution date to security holders of record on the date specified in the applicable prospectus supplement. CREDIT ENHANCEMENT If so specified in the applicable prospectus supplement, the securities of any series, or any one or 8 more classes of a series, may be entitled to the benefits of other types of credit enhancement, including: o overcollateralization o excess interest o subordination o cross-collateralization o limited guaranty o financial guaranty insurance policy o reserve fund o spread account o mortgage pool insurance policy o letter of credit o special hazard insurance policy o cash collateral account Any credit support will be described in detail in the applicable prospectus supplement. In addition, if specified in the applicable prospectus supplement, amounts received under any cash flow agreement described under "Description of the Trust Funds--Cash Flow Agreements" may also be used to provide credit enhancement for one or more classes of securities. See "Description of Credit Support" in this prospectus. ADVANCES ON DELINQUENT PAYMENTS In the event that a payment on a mortgage loan is delinquent, the servicer of the mortgage loan will be obligated, to the extent specified in the pooling and servicing agreement or servicing agreement, to make cash advances if the servicer determines that it will be able to recover such amounts from future payments and collections on the mortgage loan. A servicer who makes advances will be reimbursed for these as described in this prospectus and in the applicable prospectus supplement. If a servicer fails to make the required principal or interest advance, the trustee (or master servicer, if any) will be required to make these advances from its own funds, unless such party determines that it will not be able to recover those amounts from future payments and collections on the mortgage loans. See "Description of the Securities--Advances in Respect of Delinquencies" in this prospectus. PREFUNDING ACCOUNT The applicable prospectus supplement may provide that the depositor deposit a specified amount in a pre-funding account on the date the securities are issued. In this case, the deposited funds may only be used to acquire additional mortgage loans for the trust during a set period after the initial issuance of the securities. Any amounts remaining in the account at the end of the period will be distributed as a prepayment of principal to the holders of the related securities. See "Description of the Trust Funds--Prefunding Account" in this prospectus. FORMS OF SECURITIES The securities will be issued either: o in book-entry form through the facilities of DTC; or o in fully registered, certificated form. If you own book-entry securities, you will not receive a physical certificate representing your ownership interest in such book-entry securities, except under extraordinary circumstances which are discussed in "Description of the Securities--Definitive Form" in this prospectus. Instead, DTC will effect payments and transfers by means of its electronic record keeping services, acting through certain participating organizations. This may result in certain delays in your receipt of distributions and may restrict your ability to pledge your securities. Your rights with respect to book-entry securities may generally only be exercised through DTC and its participating organizations. See "Description of the Securities--General," "--Book-Entry Form" and "--Definitive Form" in this prospectus. OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS If so specified in the prospectus supplement for a series, the depositor may, subject to the terms of the applicable pooling and servicing agreement or servicing agreement, purchase from the related trust: o any defaulted mortgage loan during the periods specified under "Description of the Securities-Optional Purchases"; and 9 o any mortgage loan as to which the originator of such mortgage loan breached a representation or warranty to the sponsor regarding the characteristics of such mortgage loan. See "Description of the Securities--Optional Purchases" in this prospectus. OPTIONAL PURCHASE OF ALL MORTGAGE LOANS AND TERMINATION OF THE TRUST The depositor, the sponsor, or such other party specified in the applicable prospectus supplement, may: o repurchase all of the assets in the trust fund and thereby cause early retirement of the securities under the circumstances and in the manner specified herein; and o repurchase a portion of such assets to retire a specified class or classes of securities under the circumstances and in the manner set forth in the applicable prospectus supplement. In the event that an election is made to treat the related trust fund or one or more segregated pools of assets in the trust fund as a REMIC, any such purchase will be effected only pursuant to a "qualified liquidation," as defined under Section 860F(a)(4)(A) of the Internal Revenue Code of 1986, as amended. See "Description of the Securities--Termination" in this prospectus. Exercise of the right of purchase will effect the early retirement of the securities of that series. See "Prepayment and Yield Considerations" in this prospectus. ERISA LIMITATIONS If you are a fiduciary of any employee benefit plan or arrangement, including an individual retirement account, subject to the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, as amended, or any federal, state or local law which is similar to ERISA or the Code, you should carefully review with your legal advisors whether the purchase or holding of securities could give rise to a transaction that is prohibited or not otherwise permissible under ERISA, Section 4975 of the Code or similar law. For additional information see "ERISA Considerations" in this prospectus and in the prospectus supplement. TAX STATUS The securities of each series offered will be either: o regular interests and residual interests in a trust fund treated as a REMIC; o interests in a trust fund treated as a grantor trust; o interests in a trust fund treated as a partnership; or o debt obligations secured by assets of a trust fund. For additional information see "Federal Income Tax Consequences" in this prospectus and "Certain Material Federal Income Tax Consequences" in the prospectus supplement. LEGAL INVESTMENT The applicable prospectus supplement will specify whether the class or classes of securities offered will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities, then you may be subject to restrictions on investment in the securities. You should consult your own legal advisors for assistance in determining the suitability of the securities for you and the consequences of the purchase, ownership and sale of the securities. For additional information see "Legal Investment" in this prospectus and in the prospectus supplement. RATINGS The securities of any series will not be offered pursuant to this prospectus and a prospectus supplement unless each offered security is rated in one of the four highest rating categories by at least one nationally recognized statistical rating agency. A security rating is not a recommendation to buy, sell or hold the securities on any series and is subject to revision or withdrawal at any time by the assigning rating agency. 10 Ratings do not address the effect of prepayments on the yield you may anticipate when you purchase your certificates. See "Risk Factors--Risks Associated with the Securities--Ratings Assigned to the Securities Will Have Limitations" and "Ratings" in this prospectus. 11 RISK FACTORS You should consider, among other things, the following factors in connection with the purchase of securities as well as the specific risks discussed in the applicable prospectus supplement under "Risk Factors." Risks Associated with the Securities Securities May Not be Liquid The liquidity of your securities may be limited. You should consider that: o a secondary market for the securities of any series may not develop, or if it does, it may not provide you with liquidity of investment, or it may not continue for the life of the securities of any series; o the prospectus supplement for any series of securities may indicate that an underwriter intends to establish a secondary market in such securities, but no underwriter will be obligated to do so; and o unless specified in the applicable prospectus supplement, the securities will not be listed on any securities exchange. In addition to these considerations, the secondary market for mortgage-backed securities has experienced periods of illiquidity and may do so in the future. Illiquidity means that there may not be any purchasers for your class of securities. Although any class of securities may experience illiquidity, it is more likely that classes of securities that are more sensitive to prepayment, credit or interest rate risk will experience illiquidity. Limited Assets for Payment of Securities Except for any related insurance policies, cash flow agreements and any reserve fund or credit enhancement described in the applicable prospectus supplement: o mortgage loans included in the related trust fund will be the sole source of payments on the securities of a series; o the securities of any series will not represent an interest in or obligation of the depositor, the sponsor, any servicer, the master servicer (if any), the securities administrator, the trustee, the paying agent or any of their affiliates, except for the depositor's limited obligations with respect to certain breaches of its representations and warranties, limited obligations of a servicer with respect to its servicing obligations and limited obligations of the securities administrator; and o neither the securities of any series nor the related mortgage loans will be guaranteed or insured by any governmental agency or instrumentality, the depositor, the sponsor, any servicer, the master servicer (if any), the securities administrator, the trustee, the paying agent any of their affiliates or any other person. Consequently, in the event that payments on the mortgage loans underlying your series of securities are insufficient or otherwise unavailable to make all payments required on your securities, there will be no recourse to the depositor, the sponsor, any servicer, the master servicer (if any), the securities administrator, the trustee, the paying agent or, except as specified in the applicable prospectus supplement, any other entity. Credit Enhancement is Limited in Amount and Coverage With respect to each series of securities, credit enhancement may be provided in limited amounts to cover certain types of losses on the underlying assets. Credit enhancement will be provided in one or more of the forms specified in the applicable prospectus supplement, including: subordination of other classes of securities of the same series; excess interest; overcollateralization; cross-collateralization; a financial guaranty insurance policy; a reserve 12 fund; a spread account; a mortgage pool insurance policy; a special hazard insurance policy; a cash collateral account; a letter of credit; or a limited guarantee. See "Description of Credit Support" in this prospectus. Regardless of the form of credit enhancement provided: o the amount of coverage will be limited in amount and in most cases will be subject to periodic reduction in accordance with a schedule or formula; and o the credit enhancement may provide only very limited coverage as to certain types of losses, and may provide no coverage as to certain types of losses. In the event losses exceed the amount of coverage provided by any credit enhancement or losses of a type not covered by any credit enhancement occur, such losses will be borne by the holders of the related securities (or certain classes of securities). None of the depositor, the sponsor, the securities administrator, the master servicer (if any), the servicer, the paying agent, nor any of their affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain any rating of any class of securities. See "Description of Credit Support." Cash Flow Agreements and External Credit Enhancements are Subject to Third-Party Risk The assets of a trust may, if specified in the applicable prospectus supplement, include cash flow agreements such as interest rate swap, cap, floor or similar agreements, which will require the provider of such instrument or counterparty to make payments to the trust under the circumstances described in the prospectus supplement. To the extent that payments on the securities of the related series depend in part on payments to be received under this type of agreement, the ability of the trust fund to make payments on the securities will be subject to the credit risk of the counterparty. In addition, the ratings assigned to the securities of a series may depend in part on the ratings assigned to the provider of certain types of external credit enhancement, such as a mortgage pool insurance policy, surety bond, financial guaranty insurance policy or limited guarantee. Any reduction in the ratings assigned to the provider of one of these types of external credit enhancement could result in the reduction of the ratings assigned to the securities of the series. A reduction in the ratings assigned to the securities of a series is likely to affect adversely the liquidity and market value of the securities. See "Description of Trust Funds--Cash Flow Agreements" and "Description of Credit Support" herein. Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on the Securities The yield on the securities of each series will depend in part on the rate of principal payment on the mortgage loans (including prepayments, liquidations due to defaults and mortgage loan repurchases). Such yield may be adversely affected, depending upon whether a particular security is purchased at a premium or a discount, by a higher or lower than anticipated rate of prepayments on the related mortgage loans. In particular: o the yield on principal-only or interest-only securities will be extremely sensitive to the rate of prepayments on the related mortgage loans; and o the yield on certain classes of securities may be relatively more sensitive to the rate of prepayments of specified mortgage loans than other classes of securities. The rate of prepayments on mortgage loans is influenced by a number of factors, including: o the prevailing mortgage market interest rates; o local and national economic conditions; 13 o homeowner mobility; and o the ability of the borrower to obtain refinancing. In addition, your yield may be adversely affected by interest shortfalls which may result from the timing of the receipt of prepayments or liquidations to the extent that such interest shortfalls are not covered by payments of compensating interest or other mechanisms specified in the applicable prospectus supplement. 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. This may result in a shortfall in interest collections available for payment on the next distribution date. The applicable prospectus supplement will set forth the amount and extent of compensating interest payments, if any, made by the servicer or master servicer (if any). Your yield also will be adversely affected if losses on the mortgage loans in the related trust are allocated to your securities and may be adversely affected to the extent of unadvanced delinquencies on the mortgage loans in the related trust. Classes of securities identified in the applicable prospectus supplement as subordinated certificates or notes are more likely to be affected by delinquencies and losses than other classes of securities. If you are purchasing certificates at a discount, and specifically if you are purchasing principal only certificates, you should consider the risk that if principal payments on the mortgage loans, or, in the case of any ratio strip certificates, the related mortgage loans, occur at a rate slower than you expected, your yield will be lower than you expected. Further information relating to yield on those certificates will be included in the applicable prospectus supplement. If you are purchasing certificates at a premium, or are purchasing an interest only certificate, you should consider the risk that if principal payments on the mortgage loans or, in the case of any interest only certificates entitled to a portion of interest paid on certain mortgage loans with higher mortgage interest rates, those mortgage loans, occur at a rate faster than you expected, your yield may be lower than you expected. If you are purchasing interest only certificates, you should consider the risk that a rapid rate of principal payments on the applicable mortgage loans could result in your failure to recover your initial investment. Further information relating to yield on those certificates will be included in the applicable prospectus supplement. Ratings Assigned to the Securities Will Have Limitations The ratings assigned to your securities will not: o assess the likelihood that principal prepayments (including those caused by defaults) on the related mortgage loans will be made, the degree to which the rate of such prepayments might differ from that originally anticipated or the likelihood of early optional termination or redemption of the series of securities; and o address the possibility that prepayments at higher or lower rates than anticipated by an investor may cause such investor to experience a lower than anticipated yield or that an investor purchasing a security at a premium might fail to recoup its initial investment under certain prepayment scenarios. In addition, the ratings of any series of securities by any applicable rating agency may be lowered following the initial issuance of the securities. The lowering of a rating on a series or class of securities may adversely affect the market value of such securities and the liquidity of such securities. Neither the depositor, the sponsor nor any of their affiliates will have any obligation to maintain any rating of any series of securities. Book-Entry System for Certain Classes of Securities May Decrease Liquidity and Delay Payment Since transactions in the classes of securities of a series issued in book-entry form can be effected only through The Depository Trust Company, Clearstream, the Euroclear, participating organizations, indirect participants and certain banks: o you may experience delays in your receipt of payments on book-entry securities because distributions will be made by the trustee or the securities administrator (or a paying agent on their behalf) to Cede & Co., as nominee for The Depository Trust Company, rather than directly to you; and 14 o your ability to pledge such securities to persons or entities that do not participate in The Depository Trust Company, Clearstream or the Euroclear may be limited due to the lack of a physical certificate. See "Description of the Securities--Book-Entry Form" and "--Definitive Form" in this prospectus. Risk of Loss May Be Greater on Subordinated Securities The rights of holders of subordinated securities will be subordinate: o to the rights of the servicer, the securities administrator and any master servicer (to the extent of amounts in respect of indemnification of the servicer, the servicing fee, any credit risk manager fee, any accrued and unpaid servicing fee, reimbursement for certain unreimbursed advances and unreimbursed liquidation expenses, any securities administrator fee, amounts payable to the securities administrator and the trustee in respect of certain expenses and indemnification and any amounts reimbursable or payable to any master servicer); and o to the holders of senior securities to the extent described in the applicable prospectus supplement. As a result of the foregoing, investors must be prepared to bear the risk that they may be subject to delays in payment and may not recover their initial investments in the subordinated securities. See "Description of Credit Support" in this prospectus. The yields on the subordinated securities may be extremely sensitive to the loss experience of the related mortgage loans and the timing of any such losses. If the actual rate and amount of losses experienced by the mortgage loans exceed the rate and amount of such losses assumed by an investor, the yield to maturity on the subordinated securities may be lower than anticipated. 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 available credit support for a series 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 may be borne by the securities of a series as described in the applicable prospectus supplement. Increase in Index May Adversely Affect Yield on Certain Securities of a Series Certain series of securities may contain inverse floating rate securities. If you are purchasing inverse floating rate securities of a series, you should consider the risk that a high rate of the applicable index may result in a lower actual yield than you expected or a negative yield. In particular, you should consider the risk that high constant rates of the applicable index or high constant prepayment rates on the mortgage loans may result in the failure to recover your initial investment. See "Prepayment and Yield Considerations" in the applicable prospectus supplement. 15 Exercise of Rights Under Special Servicing Agreements May Be Adverse to Other Securityholders The applicable agreement for a series will permit the servicer (or master servicer, if any) at the direction of the depositor to enter into a special servicing agreement with an unaffiliated holder of a class of subordinated securities or a class of securities representing interests in one or more classes of subordinated securities and/or other subordinated mortgage pass-through certificates, pursuant to which the holder may instruct the servicer (or instruct the master servicer to instruct the servicer to the extent provided in the related applicable agreement), to commence or delay foreclosure proceedings with respect to delinquent mortgage loans. This right is intended to permit the holder of a class of securities that is highly sensitive to losses on the mortgage loans to attempt to mitigate losses by exercising limited power of direction over servicing activities which accelerate or delay realization of losses on the mortgage loans. Such directions may, however, be adverse to the interest of those classes of senior securities that are more sensitive to prepayments than to losses on the mortgage loans. In particular, accelerating foreclosure will adversely affect the yield to maturity on interest only securities, while delaying foreclosure will adversely affect the yield to maturity of principal only securities. Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Securities The mortgage loans will be originated or acquired by the sponsor, a national bank whose deposits are insured to the applicable limits by the FDIC. If the sponsor becomes insolvent, is in an unsound condition or engages in violations of its bylaws or regulations applicable to it or if similar circumstances occur, the FDIC could act as conservator and, if a receiver were appointed, would act as a receiver for the sponsor. As receiver, the FDIC would have broad powers to: o require the trust, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the mortgage loans; or o request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against the sponsor, or o repudiate without compensation the sponsor's ongoing servicing and/or master servicing obligations under the applicable agreement, such as its duty to collect and remit payments or otherwise service the mortgage loans. If the FDIC were to take any of those actions, distributions on the securities could be delayed or reduced. By statute, the FDIC as conservator or receiver of the sponsor is authorized to repudiate any "contract" of the sponsor upon payment of "actual direct compensatory damages." This authority may be interpreted by the FDIC to permit it to repudiate the transfer of the mortgage loans to the depositor. Under an FDIC regulation, however, the FDIC as conservator or receiver of a bank has stated that it will not reclaim, recover or recharacterize a bank's transfer of financial assets in connection with a securitization or participation, provided that the transfer meets all conditions for sale accounting treatment under generally accepted accounting principles, other than the "legal isolation" condition as it applies to institutions for which the FDIC may be appointed as conservator or receiver, was made for adequate consideration and was not made fraudulently, in contemplation of insolvency, or with the intent to hinder, delay or defraud the bank or its creditors. For purposes of the FDIC regulation, the term securitization means, as relevant, the issuance by a special purpose entity of beneficial interests the most senior class of which at time of issuance is rated in one of the four highest categories assigned to long-term debt or in an equivalent short-term category (within either of which there may be sub-categories or gradations indicating relative standing) by one or more nationally recognized statistical rating organizations. A special purpose entity, as the term is used in the regulation, means a trust, corporation, or other entity demonstrably distinct from the insured depository institution that is primarily engaged in acquiring and holding (or transferring to another special purpose entity) financial assets, and in activities related or incidental to these actions, in connection with the issuance by the special purpose entity (or by another special purpose entity that acquires financial assets directly or indirectly from the special purpose entity) of beneficial interests. The transactions contemplated by this prospectus and the applicable prospectus supplement will be structured so that this FDIC regulation should apply to the transfer of the mortgage loans from the sponsor to the depositor. 16 If a condition required under the FDIC regulation, or other statutory or regulatory requirement applicable to the transaction, were found not to have been satisfied, the FDIC as conservator or receiver might refuse to recognize the sponsor's transfer of the mortgage loans to the depositor. In that event the depositor could be limited to seeking recovery based upon its security interest in the mortgage loans. The FDIC's statutory authority has been interpreted by the FDIC and at least one court to permit the repudiation of a security interest upon payment of actual direct compensatory damages measured as of the date of conservatorship or receivership. These damages do not include damages for lost profits or opportunity, and no damages would be paid for the period between the date of conservatorship or receivership and the date of repudiation. The FDIC could delay its decision whether to recognize the sponsor's transfer of the mortgage loans for a reasonable period following its appointment as conservator or receiver for the sponsor. If the FDIC were to refuse to recognize the sponsor's transfer of the mortgage loans, distributions on the securities could be delayed or reduced. If the FDIC acted as receiver for the sponsor after the sponsor's insolvency, the FDIC could prevent the termination of the sponsor as servicer (and, if applicable, master servicer) of the mortgage loans of a series, even if a contractual basis for termination exists. This inability to terminate the sponsor as servicer (and, if applicable, master servicer) could result in a delay or possibly a reduction in distributions on the securities of a series to the extent the sponsor, as servicer (and, if applicable, master servicer), received by did not remit to the mortgage loan collections before the date of insolvency or if the sponsor failed to make any required advances. Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans Neither the United States Bankruptcy Code nor similar applicable state laws prohibit the depositor from filing a voluntary application for relief under these laws. However, the transactions contemplated by this prospectus and the applicable prospectus supplement will be structured so that the voluntary or involuntary application for relief under the bankruptcy laws by the depositor is unlikely. The depositor is a separate, limited purpose subsidiary, the certificate of incorporation of which contains limitations on the nature of the depositor's business, including the ability to incur debt other than debt associated with the transactions contemplated by this prospectus, and restrictions on the ability of the depositor to commence voluntary or involuntary cases or proceedings under bankruptcy laws without the prior unanimous affirmative vote of all its directors (who are required to consider the interests of the depositor's creditors, in addition to the depositor's stockholders in connection the filing of a voluntary application for relief under applicable insolvency laws). Further, the transfer of the mortgage loans to the related trust will be structured so that the trustee has no recourse to the depositor, other than for breaches or representations and warranties about the mortgage loans. If the depositor were to become the subject of a proceeding under the bankruptcy laws, a court could conclude that the transfer of the mortgage loans from the depositor to the trust should not be characterized as an absolute transfer, and accordingly, that the mortgage loans should be included as part of the depositor's estate. Under these circumstances, the bankruptcy proceeding could delay or reduce distributions on the securities. In addition, a bankruptcy proceeding could result in the temporary disruption of distributions on the securities of a series. Servicing Transfer Following Event of Default May Result in Payment Delays or Losses Following the occurrence of an event of default under applicable agreement, the trustee for the related series may, in its discretion or pursuant to direction from securityholders, remove the defaulting master servicer or servicer, as applicable, and succeed to its responsibilities, or may petition a court to appoint a successor master servicer or servicer. The trustee or the successor master servicer or servicer will be entitled to reimbursement of its costs of effecting the servicing transfer from the predecessor master servicer or servicer, or from the assets of the related trust if the predecessor fails to pay. In the event that reimbursement to the trustee or the successor master servicer or servicer is made from trust assets, the resulting shortfall will be borne by holders of the related securities. In addition, during the pendency of a servicing transfer or for some time thereafter, mortgagors of the related mortgage loans may delay making their monthly payments or may inadvertently continue making payments to the predecessor servicer, potentially resulting in delays in distributions on the related securities. 17 Risks Associated with the Mortgage Loans Subprime Mortgage Loans May Experience Greater Rates of Delinquency and Foreclosure All or a portion of the mortgage loans underlying a series of securities may consist of subprime mortgage loans. A subprime mortgage loan is a mortgage loan that, due to borrower credit characteristics does not meet the sponsor's "prime" underwriting guidelines. As a consequence, delinquencies, foreclosures and losses may be expected to be more likely with respect to subprime mortgage loans than with respect to mortgage loans originated in accordance with the sponsor's "prime" underwriting guidelines. Mortgage Loans Secured by Multifamily Properties May Experience Greater Rates of Delinquency and Foreclosure The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower; thus, the value of an income-producing property typically is directly related to the net operating income derived from such property. If the net operating income of the property is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses increase), the borrower's ability to repay the loan may be impaired. In addition, the concentration of default, foreclosure and loss risk for a pool of mortgage loans secured by multifamily properties may be greater than for a pool of mortgage loans secured by single family properties of comparable aggregate principal balance because the pool of mortgage loans secured by multifamily properties is likely to consist of a smaller number of higher balance loans. General Economic Conditions Affect Mortgage Loan Performance General economic conditions have an impact on the ability of borrowers to repay mortgage loans. Loss of earnings, illness and other similar factors may lead to an increase in delinquencies and bankruptcy filings by borrowers. In the event of personal bankruptcy of a borrower under a mortgage loan, it is possible that the holders of the related securities could experience a loss with respect to such mortgagor's mortgage loan. In conjunction with a mortgagor's bankruptcy, a bankruptcy court may suspend or reduce the payments of principal and interest to be paid with respect to such mortgage loan, thus delaying the amount received by the holders of the related securities with respect to such mortgage loan. Moreover, if a bankruptcy court prevents the transfer of the related mortgaged property to the related trust, any remaining balance on such mortgage loan may not be recoverable. Real Estate Market Conditions Affect Mortgage Loan Performance An investment in the securities which are secured by or represent interests in mortgage loans may be affected by, among other things, a decline in real estate values. There is no assurance that the values of the mortgaged properties will remain at the levels existing on the dates of origination of the related mortgage loans. If the residential real estate market should experience an overall decline in property values such that the outstanding balances of the mortgage loans contained in a particular trust and any secondary financing on the mortgaged properties, become equal to or greater than the value of the mortgaged properties, delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry. Geographic Concentration May Increase Rates of Loss and Delinquency In addition to risk factors related to the residential real estate market generally, certain geographic regions of the United States from time to time will experience weaker regional economic conditions and housing markets or be directly or indirectly affected by natural disasters or civil disturbances such as earthquakes, hurricanes, floods, eruptions or riots. Mortgage loans in such areas will experience higher rates of loss and delinquency than on mortgage loans generally. Although mortgaged properties located in certain identified flood zones will be required to be covered by flood insurance, to the maximum amount available, as described under "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements-Hazard Insurance Policies," such maximum amount will generally be significantly smaller than the unpaid principal balance of the related mortgage loan. In addition, no mortgaged properties will otherwise be 18 required to be insured against earthquake damage or any other loss not covered by standard hazard insurance policies, as described under "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements-Hazard Insurance Policies." The ability of mortgagors to make payments on the mortgage loans may also be affected by factors which do not necessarily affect property values, such as adverse economic conditions generally, in particular geographic areas or industries, or affecting particular segments of the borrowing community (such as mortgagors relying on commission income and self-employed mortgagors). Such occurrences may accordingly affect the actual rates of delinquencies, foreclosures and losses with respect to any trust fund. The mortgage loans underlying certain series of securities may be concentrated in certain regions. Such concentration may present risk considerations in addition to those generally present for similar mortgage-backed securities without such concentration. See "The Sponsor's Mortgage Loan Programs-Mortgage Loan Underwriting." Risk of Loss May Be Greater on Junior Mortgage Loans Certain of the mortgage loans underlying the securities of a series may be secured by mortgages junior or subordinate to one or more other mortgages, and the related more senior mortgages may not be included in the trust fund. Although little data is available, the rate of default of second or more junior mortgage loans may be greater than that of mortgage loans secured by senior liens on comparable properties. A primary risk to holders of mortgage loans secured by junior mortgages is the possibility that adequate funds will not be received in connection with a foreclosure of the related senior mortgage to satisfy fully both the senior mortgage and the mortgage that is junior or subordinate. In such case, holders of the securities would bear: o the risk of delay in distributions while a deficiency judgment against the borrower is obtained; and o the risk of loss if the deficiency judgment is not realized upon. Moreover, deficiency judgments may not be available in certain jurisdictions. In addition, a junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the more senior mortgage. In servicing junior mortgages, it is generally the servicer's practice to advance funds to keep the senior mortgage current if the mortgagor is in default thereunder. The servicer intends to advance such amounts in accordance with its normal servicing procedures, but only to the extent that it determines such advances will be recoverable from future payments and collections on that mortgage loan or otherwise. Such practice may not be followed in servicing loans more junior than second mortgages or may be modified at any time. The related trust will have no source of funds to satisfy any senior mortgage or make payments due to any senior mortgagee. The junior mortgages securing the mortgage loans are subject and subordinate to any senior mortgage affecting the related mortgaged property, including limitations and prohibitions which may be contained in such senior mortgage upon subordinate financing. Special Risks of Certain Mortgage Loans Certain mortgage loans that may be included in the related trust may involve additional uncertainties not present in other types of mortgage loans. Certain of the mortgage loans may provide for escalating or variable payments that may be larger than the initial payment amount; however, the borrowers under such mortgage loans are generally approved on the basis of the initial payment amount and the borrower's income may not be sufficient to enable them to pay the increased payment amounts. Therefore, in such cases the likelihood of default may increase. Certain of the mortgage loans underlying a series of securities may be delinquent in respect of the payment of principal and interest. In addition, certain of the mortgagors under the mortgage loans underlying a series of securities may be subject to personal bankruptcy proceedings. Credit enhancement provided with respect to a particular series of securities may not cover all losses related to such mortgage loans. Prospective investors should consider the risk that the inclusion in a trust of delinquent mortgage loans with respect to which the mortgagor is the subject of bankruptcy proceedings may cause the rate of the defaults and prepayments on such mortgage loans to 19 increase and, in turn, may cause losses to exceed the available credit enhancement for such series and affect theyield on the securities of such series. See "Description of the Mortgage Loans" in the applicable prospectus supplement. Alternatives to Foreclosure May Adversely Affect Yield Certain mortgage loans underlying a series of securities may become delinquent after the closing date. The servicer may either foreclose on any such asset or work out an agreement with the borrower if the delinquency is not cured, which may involve waiving or modifying certain terms of the asset. If the servicer extends the payment period or accepts a lesser amount than stated in the note or contract in satisfaction of the note or contract, the yield on the related securities may be reduced. Defaulted Mortgage Loans May Experience Delays in Liquidation and Liquidation Proceeds May Be Less Than the Outstanding Principal Balance of the Mortgage Loans Even assuming the mortgaged properties provide adequate security for the mortgage loans underlying a series of securities, substantial delays could result in connection with the liquidation of defaulted mortgage loans. This could result in corresponding delays in the receipt of the related proceeds by the related trust. 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 the applicable mortgaged property fails to provide adequate security for the asset, you will incur a loss on your investment if the credit enhancements are insufficient to cover the loss. See "Certain Legal Aspects of Mortgage Loans--Foreclosure," "--Rights of Redemption" and "--Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders" in this prospectus. Liquidation Expenses May be Disproportionate Liquidation expenses with respect to defaulted mortgage loans do not vary directly with the outstanding principal balance of the mortgage loans at the time of default. Therefore, assuming that the servicer and any master servicer took the same steps in realizing upon a defaulted mortgage loans having a small remaining principal balance as they would in the case of a defaulted mortgage loan having a large remaining principal balance, the amount realized after expenses of liquidation would be smaller as a percentage of the outstanding principal balance of the small mortgage loan than would be the case with the defaulted mortgage loan having a large remaining principal balance. Defaults May Be More Likely on Newer Mortgage Loans Certain of the mortgage loans underlying a series of securities may be recently originated as of the date of the inclusion in the related trust fund. Although little data is available, defaults on mortgage loans are generally expected to occur with greater frequency in their early years. Balloon Loans May Have a Greater Default Risk at Maturity Certain of the mortgage loans underlying a series of securities may provide for a lump-sum payment of the unamortized principal balance of the mortgage loan at maturity. See "Description of the Mortgage Loans" in the applicable prospectus supplement. Because borrowers under this type of mortgage loan are required to make a relatively large single payment upon maturity, it is possible that the default risk associated with such mortgage loans is greater than that associated with fully-amortizing mortgage loans. The ability of a mortgagor on this type of mortgage loan to repay the mortgage loan upon maturity frequently depends upon the mortgagor's ability: o to refinance the mortgage loan, which will be affected by a number of factors, including, without limitation, the level of mortgage interest rates available in the primary mortgage market at the time, the mortgagor's equity in the related mortgaged property, the financial condition of the mortgagor, the condition of the mortgaged property, tax law, general economic conditions and the general willingness of financial institutions and primary mortgage bankers to extend credit; or 20 o to sell the related mortgaged property at a price sufficient to permit the mortgagor to make the lump-sum payment. Texas Home Equity Loans Have Significant Limitations Certain of the mortgage loans may be home equity loans secured by mortgaged properties located in Texas. The Texas Constitution permits this type of loan, but significant limitations are imposed on permitted terms, conditions and practices incident to their creation. For example, these loans must be made without recourse for personal liability against the homestead owner(s) or their spouse(s) (except in the case of actual fraud on their part in obtaining the loan) and may be foreclosed upon only by court order. Further, holders of these types of loans face unique legal risks and uncertainties that they do not customarily confront with equity take-out mortgages in other states. For example, if any of the requirements that are addressed in the Texas Constitution (such as limitations on fees charged to the borrower, disclosures to the borrower or matters to be provided for in the closing documents) are not met, the lien may be invalid. There are also similar risks involved in servicing these types of loans (such as the failure to comply with an obligation to the borrower within a reasonable time after receiving notification from the borrower) that can result in the forfeiture of all principal and interest due on the mortgage loan. Increased Risk of Loss if Mortgage Loans are Delinquent A portion of the mortgage loans may be delinquent upon the issuance of the related securities. Credit enhancement provided with respect to a particular series of securities may not cover all losses related thereto. You should consider the risk that the inclusion of such mortgage loans in the trust fund for a series may cause the rate of defaults and prepayments on the mortgage loans to increase and, in turn, may cause losses to exceed the available credit enhancement for such series and affect the yield on the securities of such series. The Inclusion of Subsidy Mortgage Loans in a Series May Adversely Affect Yield of the Related Securities If so specified in the applicable prospectus supplement, a trust fund may contain subsidy loans. The monthly payments made by the related mortgagors of a subsidy loan will be less than the scheduled monthly payments on such mortgage loans with the present value of the resulting difference in payment being provided by the employer of the mortgagor. Generally, employers may terminate subsidy programs in the event of (i) the mortgagor's death, retirement, resignation or termination of employment, (ii) the full prepayment of the subsidy loan by the mortgagor, (iii) the sale or transfer by the mortgagor of the related mortgaged property as a result of which the mortgagee is entitled to accelerate the subsidy loan pursuant to the "due-on-sale" clause contained in the mortgage, or (iv) the commencement of foreclosure proceedings or the acceptance of a deed in lieu of foreclosure. In addition, some subsidy programs provide that if prevailing market rates of interest on mortgage loans similar to a subsidy loan are less than the mortgage interest rate of such subsidy loan, the employer may request that the mortgagor refinance such subsidy loan and may terminate the related subsidy agreement if the mortgagor fails to do so. In the event that the mortgagor refinances a subsidy loan, the new loan will not be included in the trust fund and the resulting prepayment in full of the subsidy loan may adversely affect the yield on one or more classes of securities of the related series, particularly interest only securities or securities purchased at a premium over their principal balance. In the event a subsidy agreement is terminated, the amount remaining in the related subsidy account will be returned to the employer, and the mortgagor will be obligated to make the full amount of all remaining scheduled payments, if any. If the related mortgagor is unable to make the full amount of all remaining scheduled payments, the yield on the related classes of securities may be adversely affected. For a description of subsidy loans, see "Description of the Trust Funds-Mortgage Loans" herein. The Inclusion of Buy-Down Mortgage Loans in a Series May Adversely Affect Yield of the Related Securities If so specified in the applicable prospectus supplement, a trust fund may contain mortgage loans subject to temporary buy-down plans pursuant to which the monthly payments made by the mortgagor during the early years of the mortgage loan will be less than the scheduled monthly payments on such mortgage loan. The resulting difference in payment will be compensated for from an amount contributed by the seller of the related mortgaged 21 property or another source, including the originator of the mortgage loan (generally on a present value basis) and placed in a custodial account by the related servicer. If the mortgagor of a mortgage loan subject to a temporary buy-down plan is unable to make the increased monthly payment after the buy-down funds are exhausted, the yield on the related class of securities may be adversely affected. Collateral Securing Cooperative Loans May Diminish in Value If specified in the applicable prospectus supplement, certain of the mortgage loans may be cooperative loans. There are certain risks that differentiate cooperative loans from other types of mortgage loans. Ordinarily, the cooperative incurs a blanket mortgage in connection with the construction or purchase of the cooperative's apartment building and the underlying land. The interests of the occupants under proprietary leases or occupancy agreements to which the cooperative is a party are generally subordinate to the interest of the holder of the blanket mortgage. If the cooperative is unable to meet the payment obligations arising under its blanket mortgage, the mortgagee holding the blanket mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements. In addition, the blanket mortgage on a cooperative may provide financing in the form of a mortgage that does not fully amortize with a significant portion of principal being due in one lump sum at final maturity. The inability of the cooperative to refinance this mortgage and its consequent inability to make such final payment could lead to foreclosure by the mortgagee providing the financing. A foreclosure in either event by the holder of the blanket mortgage could eliminate or significantly diminish the value of the collateral securing the cooperative loans. Leaseholds May Be Subject to Default Risk on the Underlying Lease If specified in the applicable prospectus supplement, certain of the mortgage loans may be secured by leasehold mortgages. Leasehold mortgages are subject to certain risks not associated with mortgage loans secured by a fee estate of the mortgagor. The most significant of these risks is that the ground lease creating the leasehold estate could terminate, leaving the leasehold mortgagee without its security. The ground lease may terminate, if among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor. Any leasehold mortgages underlying a series of securities will contain provisions protective of the mortgagee as described under "Description of the Trust Funds--Mortgage Loans," such as the right of the leasehold mortgagee to receive notices from the ground lessor of any defaults by the mortgagor and to cure those defaults, with adequate cure periods; if a default is not susceptible of cure by the leasehold mortgagee, the right to acquire the leasehold estate through foreclosure or otherwise; the ability of the ground lease to be assigned to and by the leasehold mortgagee or purchaser at a foreclosure sale and for the simultaneous release of the ground lessee's liabilities under the new lease; and the right of the leasehold mortgagee to enter into a new ground lease with the ground lessor on the same terms and conditions as the old ground lease upon a termination. The Recording of the Mortgages of a Series in the Name of MERS May Affect the Yield on the Certificates The mortgages or assignments of mortgage for some of the mortgage loans of a series will have been recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, solely as nominee for the originator and its successors and assigns, including the applicable trust. Subsequent assignments of those mortgages are registered electronically through the MERS system. However, if MERS discontinues the MERS system and it becomes necessary to record an assignment of mortgage to the trustee of a series, any related expenses will be paid by the related trust and will reduce the amount available to make distributions on the securities. The recording of mortgages in the name of MERS is a relatively new practice in the mortgage lending industry. Public recording officers and others may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings and conducting foreclosure sales of the mortgaged properties could result. Those delays and the additional costs could in turn delay the distribution of liquidation proceeds to securityholders and increase the amount of losses on the mortgage loans for a series. In that regard, a Florida court recently ruled that MERS lacked standing to pursue foreclosure proceedings on behalf of the beneficial owners of several mortgage notes who were not named parties to the proceedings. 22 Violations of Federal, State and Local Laws May Adversely Affect Ability to Collect on Loans The mortgage loans may also be subject to federal, state and local laws, including: o the Federal Truth in Lending Act and Regulation Z promulgated under that act, which require certain disclosures to the borrowers regarding the terms of the residential loans; o the Equal Credit Opportunity Act and Regulation B promulgated under that act, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; o the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower's credit experience; and o for mortgage loans that were originated or closed after November 7, 1989, the Home Equity Loan Consumer Protection Act of 1988, which requires additional disclosures, limits changes that may be made to the loan documents without the borrower's consent. This act also restricts a lender's ability to declare a default or to suspend or reduce a borrower's credit limit to certain enumerated events. Certain mortgage loans are subject to the Riegle Community Development and Regulatory Improvement Act of 1994 which incorporates the Home Ownership and Equity Protection Act of 1994, as amended. These provisions may: o impose additional disclosure and other requirements on creditors with respect to non-purchase money mortgage loans with high interest rates or high up-front fees and charges; o apply on a mandatory basis to all mortgage loans originated on or after October 1, 1995; o impose specific statutory liabilities on creditors who fail to comply with their provisions; and o affect the enforceability of the related loans. 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 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. The depositor will make representations and warranties with respect to each mortgage loan relating to compliance with federal, state and local laws at the time of origination, that none of the mortgage loans is subject to the Home Ownership and Equity Protection Act of 1994, as amended, and that none of the mortgage loans is a "high cost" loan 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 sponsor will be required to pay the depositor and the depositor will be required to pay the applicable 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. However, if the depositor is unable to fulfill this reimbursement obligation for financial or other reasons, shortfalls in the distributions due on your certificates could occur. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Representations and Warranties; Repurchases" and see "Certain Legal Aspects of the Mortgage Loans" in this prospectus for other limitations on the enforceability of mortgage loans. 23 DESCRIPTION OF THE TRUST FUNDS Mortgage Loans General The assets underlying each Series of Securities will consist primarily of a pool (the "Mortgage Pool") of fixed or adjustable interest rate, first and/or junior mortgage loans ("Mortgage Loans") evidenced by promissory notes (the "Mortgage Notes") secured by mortgages, deeds of trust or other instruments creating first and/or junior liens (the "Mortgages") on some or all of the following eight types of property (as so secured, the "Mortgaged Properties"), to the extent set forth in the applicable prospectus supplement: (i) one- to four-family residences, (ii) condominium units, including those where features of the property may include maid service, a front desk or resident manager, rental pools and up to 20% of commercial space ("condotels"), (iii) units within planned unit developments, (iv) long-term leases with respect to any of the foregoing, (v) shares issued by private non-profit housing corporations ("cooperatives") and the related proprietary leases or occupancy agreements granting exclusive rights to occupy specified units in such cooperatives' buildings, (vi) manufactured homes, and (vii) primarily residential property which consists of five or more residential dwelling units, and which may include limited retail, office or other commercial space (a "Multifamily Property"). The Mortgage Loans may include revolving credit line loans or certain balances thereof. In addition, the assets underlying a Series of Securities will also include (i) amounts held from time to time in the related Collection Account, (ii) the Depositor's interest in any primary mortgage insurance, hazard insurance, title insurance or other insurance policies relating to a Mortgage Loan, (iii) any property which initially secured a Mortgage Loan and which has been acquired by foreclosure or trustee's sale or deed in lieu of foreclosure or trustee's sale, (iv) if applicable, and to the extent set forth in the applicable prospectus supplement, any reserve fund or funds and (v) if applicable, and to the extent set forth in the applicable prospectus supplement, contractual obligations of any person to make payments in respect of any form of credit enhancement, any cash flow agreement or any interest subsidy agreement. The Mortgage Loans will have been acquired by the Depositor from the Sponsor. The Mortgage Loans will have been originated by the Sponsor or will have been acquired by the Sponsor from other affiliated or unaffiliated mortgage loan originators. Each Mortgage Loan will have been underwritten either to the Sponsor's standards as set forth herein, or to such other standards set forth in the applicable prospectus supplement. See "The Sponsor's Mortgage Loan Programs." The prospectus supplement for each Series will set forth the respective number and principal amounts of Mortgage Loans (i) originated by the Sponsor or its affiliates and (ii) purchased by the Sponsor or its affiliates from unaffiliated mortgage loan originators through the Sponsor's mortgage loan purchase programs. If any originator or group of affiliated originators, apart from the Sponsor and its affiliates, originated 10% or more of the aggregate principal balance of the Mortgage Loans in a Trust Fund, the applicable prospectus supplement will disclose the identity of the originator and, if such originator or group of affiliated originators originated 20% or more of the aggregate principal balance of the Mortgage Loans, the applicable prospectus supplement will provide information about the originator's form of organization and, to the extent material, a description of the originator's origination program and how long it has been engaged in originating mortgage loans of the same type. The Mortgage Pool may be divided into two or more loan groups (each, a "Loan Group"). The Mortgage Loans in the Trust Fund for a Series will generally have monthly payments due on the first of each month (each, a "Due Date") but may, if so specified in the applicable prospectus supplement, have payments due on a different day of each month. Unless specified in the applicable prospectus supplement, monthly payments consisting of both principal and interest will be due on each Mortgage Loan in a Trust Fund. If specified in the applicable prospectus supplement, a percentage of the Mortgage Loans may be Delinquent. A Mortgage Loan is considered "Delinquent" if the scheduled monthly payment of principal and interest on such Mortgage Loan which is payable by the related mortgagor under the related Mortgage Note (the "Monthly Payment") due on a Due Date is not paid by the close of business on the next scheduled Due Date for such Mortgage Loan. Thus, a Mortgage Loan for which the mortgagor failed to make the Monthly Payment due on the first day of a month will be reported as Delinquent on the second day of the following month if the payment is not made by the close of business on the previous day. Each Mortgage Loan will be of one of the following types of mortgage loans: a. Fixed Rate Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Fund may include fixed-rate, fully-amortizing Mortgage Loans providing for level monthly payments of principal and 24 interest and terms at origination or modification of not more than 30 years. If specified in the applicable prospectus supplement, fixed rates on certain Mortgage Loans may be converted to adjustable rates after origination of such Mortgage Loans and upon the satisfaction of other conditions specified in the applicable prospectus supplement. If so specified in the applicable prospectus supplement, the applicable Agreement will require the Depositor or another party identified in the applicable prospectus supplement to repurchase each such converted Mortgage Loan at the Purchase Price. A Trust Fund containing fixed rate Mortgage Loans may contain convertible Mortgage Loans which have converted from an adjustable interest rate prior to the formation of the Trust Fund and which are subject to no further conversions. b. Adjustable Rate Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Fund may include adjustable rate, fully-amortizing Mortgage Loans having an original or modified term to maturity of not more than 30 years with a related Mortgage Interest Rate which generally adjusts initially either six months, one, two, three, five, seven or ten years subsequent to the initial Due Date, and thereafter at either six-month, one-year or other intervals over the term of the Mortgage Loan to equal the sum of a fixed percentage margin set forth in the related Mortgage Note and an index. The applicable prospectus supplement will set forth the relevant index and the highest, lowest and weighted average margin with respect to the adjustable rate mortgage loans in the related Trust Fund. Common indices include one-month, three-month, six-month and one-year LIBOR (an average of the interest rate on one-month, three-month, six-month or one-year dollar-denominated deposits traded between banks in London), CMT (weekly or monthly average yields of U.S. treasury short and long-term securities, adjusted to a constant maturity), COFI (an index of the weighted average interest rate paid by savings institutions in Nevada, Arizona and California), MTA (a one-year average of the monthly average yields of U.S. treasury securities) and the Prime Rate (an interest rate charged by banks for short-term loans to their most creditworthy customers). The applicable prospectus supplement will also indicate any initial, periodic or lifetime limitations on changes in any per annum Mortgage Interest Rate at the time of any adjustment. If specified in the applicable prospectus supplement, adjustable rates on certain Mortgage Loans may be converted to fixed rates after origination of such Mortgage Loans and upon the satisfaction of the conditions specified in the applicable prospectus supplement. If specified in the applicable prospectus supplement, the Depositor or another party will generally be required to repurchase each such converted Mortgage Loan at the Purchase Price. A Trust Fund containing adjustable rate Mortgage Loans may contain convertible Mortgage Loans which have converted from a fixed interest rate prior to the formation of the Trust Fund. The scheduled Monthly Payment for an adjustable rate Mortgage Loan will be adjusted as and when described in the applicable prospectus supplement to an amount that would fully amortize the Mortgage Loan over its remaining term on a level debt service basis; provided that increases in the scheduled Monthly Payment may be subject to certain limitations as specified in the applicable prospectus supplement. If the adjustments made to Monthly Payments for an adjustable rate Mortgage Loan are made at intervals different from the intervals at which the Mortgage Interest Rate is adjusted, "negative amortization" of principal may result with respect to such Mortgage Loan. Negative amortization will occur if an adjustment to the Mortgage Interest Rate on such a Mortgage Loan causes the amount of interest accrued thereon in any month to exceed the current scheduled Monthly Payment on such Mortgage Loan. The resulting amount of interest that has accrued but is not then payable ("Deferred Interest") will be added to the unpaid principal balance of such Mortgage Loan. c. Interest Only Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain (i) Mortgage Loans having an original term to maturity of not more than 30 years with a Mortgage Interest Rate which adjusts initially either six months, one, three, five, seven or ten years subsequent to the initial payment date, and thereafter at six-month, one-year or other intervals (with corresponding adjustments in the amount of monthly payments) over the term of the mortgage loan to equal the sum of the related gross margin and index, and providing for monthly payments of interest only prior to the date specified in the related Mortgage Note and monthly payments of principal and interest after the date specified in the related Mortgage Note sufficient to fully-amortize the Mortgage Loans over their remaining terms to maturity ("Adjustable-Rate Interest Only Mortgage Loans") or (ii) fixed-rate, fully-amortizing Mortgage Loans having an original term to maturity of not more than 30 years providing for monthly payments of interest only prior to a date specified in the Mortgage Note and monthly payments of principal and interest after such date sufficient to fully-amortize the Mortgage Loans over their remaining terms to maturity ("Fixed Rate Interest Only Mortgage Loans" and, together with Adjustable-Rate Interest Only Mortgage Loans, "Interest Only Mortgage Loans"). 25 d. Graduated Payment Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain fixed-rate, graduated payment Mortgage Loans having original or modified terms to maturity of not more than 30 years with monthly payments during the first year calculated on the basis of an assumed interest rate which is a specified percentage below the Mortgage Interest Rate on such Mortgage Loan. Such monthly payments increase at the beginning of the second year by a specified percentage of the monthly payment during the preceding year and each year specified thereafter to the extent necessary to amortize the Mortgage Loan over the remainder of its term or other shorter period. Mortgage Loans incorporating such graduated payment features may include (i) "Graduated Pay Mortgage Loans," pursuant to which amounts constituting Deferred Interest are added to the principal balances of such Mortgage Loans, (ii) "Tiered Payment Mortgage Loans," pursuant to which, if the amount of interest accrued in any month exceeds the current scheduled payment for such month, such excess amounts are paid from a subsidy account (usually funded by a home builder or family member) established at closing and (iii) "Growing Equity Mortgage Loans," for which the monthly payments increase at a rate which has the effect of amortizing the loan over a period shorter than the stated term. e. Subsidy Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain Mortgage Loans subject to temporary interest subsidy agreements ("Subsidy Loans") pursuant to which the monthly payments made by the related mortgagors will be less than the scheduled monthly payments on such Mortgage Loans with the present value of the resulting difference in payment ("Subsidy Payments") being provided by the employer of the mortgagor, generally on an annual or quarterly basis. Subsidy Payments will generally be placed in a custodial account ("Subsidy Account") by the Servicer. Despite the existence of a subsidy program, a mortgagor remains primarily liable for making all scheduled payments on a Subsidy Loan and for all other obligations provided for in the related Mortgage Note and Mortgage Loan. The terms of the subsidy agreements relating to Subsidy Loans generally range from one to ten years. Subsidy Loans are offered by employers generally through either a "graduated" or "fixed" subsidy loan program, or programs that combine features of graduated and fixed subsidy loan programs. The subsidy agreements relating to Subsidy Loans made under a graduated program generally will provide for subsidy payments that result in effective subsidized interest rates between three percentage points (3%) and five percentage points (5%) below the Mortgage Interest Rates specified in the related Mortgage Notes during the term of the subsidy agreement. Generally, under a graduated program, the subsidized rate for a Mortgage Loan will increase approximately one percentage point per year until it equals the full Mortgage Interest Rate. For example, if the initial subsidized interest rate is five percentage points below the Mortgage Interest Rate in year one, the subsidized rate will increase to four percentage points below the Mortgage Interest Rate in year two, and likewise until year six, when the subsidized rate will equal the Mortgage Interest Rate. Where the subsidy agreements relating to Subsidy Loans are in effect for longer than five years, the subsidized interest rates generally increase at smaller percentage increments for each year. The subsidy agreements relating to Subsidy Loans made under a fixed program generally will provide for subsidized interest rates at fixed percentages (generally one percentage point to two percentage points) below the Mortgage Interest Rates for the term of the subsidy agreements. The subsidy agreements relating to Subsidy Loans pursuant to combination fixed/graduated programs generally will provide for an initial fixed subsidy of up to five percentage points below the related Mortgage Interest Rate for up to five years, and then a periodic reduction in the subsidy for up to five years, at an equal fixed percentage per year until the subsidized rate equals the Mortgage Interest Rate. Generally, employers may terminate subsidy programs in the event of (i) the mortgagor's death, retirement, resignation or termination of employment, (ii) the full prepayment of the Subsidy Loan by the mortgagor, (iii) the sale or transfer by the mortgagor of the related Mortgaged Property as a result of which the mortgagee is entitled to accelerate the Subsidy Loan pursuant to the "due-on-sale" clause contained in the Mortgage, or (iv) the commencement of foreclosure proceedings or the acceptance of a deed in lieu of foreclosure. In addition, some subsidy programs provide that if prevailing market rates of interest on mortgage loans similar to a Subsidy Loan are less than the Mortgage Interest Rate of such Subsidy Loan, the employer may request that the mortgagor refinance such Subsidy Loan and may terminate the related subsidy agreement if the mortgagor fails to do so. In the event the mortgagor refinances a Subsidy Loan, the new loan will not be included in the Trust Fund. See "Prepayment and Yield Considerations" in this prospectus. In the event a subsidy agreement is terminated, the amount remaining in the Subsidy Account will be returned to the employer, and the mortgagor will be obligated to make the full amount of all remaining scheduled payments, if any. The mortgagor's reduced monthly housing expense as a consequence of payments under a subsidy agreement may be used by Wells Fargo Bank in determining certain expense-to- 26 income ratios utilized in underwriting a Subsidy Loan. See "The Sponsor's Mortgage Loan Programs" in this prospectus. f. Buy-Down Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain Mortgage Loans subject to temporary buy-down plans ("Buy-Down Loans") pursuant to which the monthly payments made by the mortgagor during the early years of the Mortgage Loan will be less than the scheduled monthly payments on the Mortgage Loan. The resulting difference in payment will be compensated for from an amount contributed by the depositor of the related Mortgaged Property or another source, including the originator of the Mortgage Loan (generally on a present value basis) and placed in a custodial account (the "Buy-Down Fund") by the Servicer. If the mortgagor on a Buy-Down Loan prepays such Mortgage Loan in its entirety, or defaults on such Mortgage Loan and the Mortgaged Property is sold in liquidation thereof, during the period when the mortgagor is not obligated, on account of the buy-down plan, to pay the full monthly payment otherwise due on such loan, the unpaid principal balance of such Buy-Down Loan will be reduced by the amounts remaining in the Buy-Down Fund with respect to such Buy-Down Loan, and such amounts will be deposited in the Collection Account, net of any amounts paid with respect to such Buy-Down Loan by any insurer, guarantor or other person pursuant to a credit enhancement arrangement described in the applicable prospectus supplement. g. Balloon Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain Mortgage Loans which are amortized over a fixed period not exceeding 30 years but which have shorter terms to maturity ("Balloon Loans") that causes the outstanding principal balance of the related Mortgage Loan to be due and payable at the end of a certain specified period (the "Balloon Period"). The borrower of such Balloon Loan will be obligated to pay the entire outstanding principal balance of the Balloon Loan at the end of the related Balloon Period. In the event the related mortgagor refinances a Balloon Loan at maturity, the new loan will not be included in the Trust Fund. See "Prepayment and Yield Considerations" in this prospectus. h. Pledged Asset Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Fund may contain fixed-rate mortgage loans having original terms to stated maturity of not more than 30 years which are either (i) secured by a security interest in additional collateral (normally securities) ("Additional Collateral") owned by the borrower, (ii) supported by a third party guarantee (usually a parent of the borrower) which is in turn secured by a security interest in Additional Collateral (usually securities) owned by such guarantor or (iii) supported by a third party letter of credit ("LOC") (any such loans supported by Additional Collateral, the "Additional Collateral Pledged Asset Mortgage Loans," any such loans supported by LOCs, the "LOC Pledged Asset Mortgage Loans" and together with the Additional Collateral Pledged Asset Mortgage Loans, the "Pledged Asset Mortgage Loans"). With respect to an Additional Collateral Pledged Asset Mortgage Loan, the amount of the Additional Collateral generally does not exceed 30% of the original principal balance of such Additional Collateral Pledged Asset Mortgage Loan. The requirement to maintain Additional Collateral terminates when the principal balance of an Additional Collateral Pledged Asset Mortgage Loan is paid down to a predetermined amount. The pledge agreement and the security interest in such Additional Collateral will be assigned to the Trustee. It is anticipated that, in the event of a loss upon the liquidation of an Additional Collateral Pledged Asset Mortgage Loan, Merrill Lynch Credit Corporation, which will administer the Additional Collateral, will attempt to realize on the related security interest. No assurance can be given as to the amount of proceeds, if any, that might be realized from such Additional Collateral. In no event will the Trust Fund be permitted to acquire ownership of the Additional Collateral. Ambac Assurance Corporation (the "Surety Bond Provider") has previously issued a limited purpose surety bond (the "Limited Purpose Surety Bond"), to cover the Additional Collateral Pledged Asset Mortgage Loans, which is intended to guarantee payment to the Trust Fund of certain shortfalls in the net proceeds realized from the liquidation of any required Additional Collateral (such amount not to exceed 30% of the original principal amount of an Additional Collateral Pledged Asset Mortgage Loan) to the extent any such shortfall results in a loss of principal on an Additional Collateral Pledged Asset Mortgage Loan upon liquidation. The Limited Purpose Surety Bond will not cover any payments on the Securities of the Servicer that are recoverable or sought to be recovered as voidable preferences under applicable law. Although the Limited Purpose Surety Bond is limited in amount (the "Maximum Amount"), the Depositor has been advised by the Surety Bond Provider that the Maximum Amount is, and will be, sufficient to cover all potential claims on behalf of the Trust Fund with respect to the Additional Collateral securing an Additional Collateral Pledged Asset Mortgage Loan and on behalf of other assignees of additional collateral securing similar mortgage loans covered by such Limited Purpose Surety Bond. 27 In connection with each LOC Pledged Asset Mortgage Loan, the borrower pledged securities it owns to UBS Financial Services Inc. as security for an LOC issued by UBS Financial Services Inc. in favor of Wells Fargo Bank, as originator of such Mortgage Loan. The amount which can be drawn under each LOC (the "Pledged Value") is equal to at least 20% of the purchase price or appraised value of the Mortgaged Property (whichever is less). Pursuant to an agreement between the borrower and Wells Fargo Bank, in the event that the borrower becomes ninety days or more delinquent on an LOC Pledged Asset Mortgage Loan, Wells Fargo Bank will have the right, at its option, to draw on all or a portion of the LOC for an amount up to the LOC's Pledged Value. Wells Fargo Bank, as Servicer, may then, at its discretion, either (i) immediately apply the proceeds from drawing on the LOC as a curtailment or partial prepayment of the unpaid principal balance of the LOC Pledged Asset Mortgage Loan or (ii) apply the proceeds from drawing on the LOC at a later date in accordance with Wells Fargo Bank's default and servicing procedures. With respect to some of the LOC Pledged Asset Mortgage Loans, on the Closing Date, Wells Fargo Bank will assign its right to receive the proceeds of the LOCs to the Depositor, which in turn, will assign such right to the Trust. However, Wells Fargo Bank will remain the beneficiary of the LOCs. Wells Fargo Bank will agree in the applicable Agreement to make all draws on the LOCs in accordance with their terms on behalf of the Trust. This obligation will continue even if Wells Fargo Bank is no longer the Servicer of the LOC Pledged Asset Mortgage Loans. With respect to the remaining LOC Pledged Asset Mortgage Loans, on the Closing Date, Wells Fargo Bank will assign the LOCs to the Depositor, which, in turn, will assign the LOCs to the Trust which will become the beneficiary thereunder. For these LOC Pledged Asset Mortgage Loans, Wells Fargo Bank (and any successor Servicer) will agree in the applicable Agreement to make claims on the LOCs in accordance with their terms on behalf of the Trust. No assurance can be given as to the amount of proceeds, if any, that might be realized from an LOC related to an LOC Pledged Asset Mortgage Loan. The Trust will not have any interest in the securities which a borrower has pledged to UBS Financial Services Inc. in connection with any LOC Pledged Asset Mortgage Loan. i. Revolving Credit Line Loans. As more fully described in the applicable prospectus supplement, the Mortgage Loans may consist, in whole or in part, of revolving credit line loans or certain balances thereof ("Revolving Credit Line Loans"). Interest on each Revolving Credit Line Loan, excluding introductory rates offered from time to time during promotional periods, may be computed and payable monthly on the average daily outstanding principal balance of such loan. From time to time prior to the expiration of the related draw period specified in a Revolving Credit Line Loan, principal amounts on such Revolving Credit Line Loan may be drawn down (up to a maximum amount as set forth in the applicable prospectus supplement) or repaid. If specified in the applicable prospectus supplement, new draws by borrowers under the Revolving Credit Line Loans will automatically become part of the Trust Fund described in such prospectus supplement. As a result, the aggregate balance of the Revolving Credit Line Loans will fluctuate from day to day as new draws by borrowers are added to the Trust Fund and principal payments are applied to such balances and such amounts will usually differ each day, as more specifically described in the applicable prospectus supplement. Under certain circumstances, under a Revolving Credit Line Loan, a borrower may, during the related draw period, choose an interest only payment option, during which the borrower is obligated to pay only the amount of interest which accrues on the loan during the billing cycle, and may also elect to pay all or a portion of the principal. An interest only payment option may terminate at the end of the related draw period, after which the borrower must begin paying at least a minimum monthly portion of the average outstanding principal balance of the loan. The Securities will be entitled to payment only from the assets of the related Trust Fund and will not be entitled to payments in respect of the assets of any other trust fund established by the Depositor. If specified in the applicable prospectus supplement, the assets of a Trust Fund may consist of certificates representing beneficial ownership interests in, or indebtedness of, another trust fund that contains the Mortgage Loans. Mortgage Loan Information in Prospectus Supplements The prospectus supplement will contain information in Appendix A thereto, as of the Cut-off Date or another specified date, to the extent known to the Depositor, detailing information about the Mortgage Loans in the Trust Fund including: (i) the geographic distribution of Mortgaged Properties, (ii) the number and aggregate unpaid principal balances of the Mortgage Loans by category of Mortgaged Property, (iii) the number and aggregate unpaid principal balances of the Mortgage Loans by remaining terms to maturity and the range and weighted average of remaining terms to maturity of the Mortgage Loans, (iv) the earliest and latest months of origination and the latest maturity date of the Mortgage Loans and the number and aggregate unpaid principal balances of the Mortgage 28 Loans by year of origination, (v) the range and weighted average of current Mortgage Interest Rates borne by the Mortgage Loans and the number and aggregate unpaid principal balances of the Mortgage Loans by range of current Mortgage Interest Rates, (vi) if such Mortgage Loans have varying Net Mortgage Interest Rates, the weighted average Net Mortgage Interest Rate of the Mortgage Loans, (vii) the range and weighted average of Loan-to-Value Ratios and combined Loan-to-Value Ratios at the time of origination of the Mortgage Loans and the number and aggregate unpaid principal balances of the Mortgage Loans by range of Loan-to-Value Ratio and combined Loan-to-Value Ratio at the time of origination of the Mortgage Loans, (viii) the range and weighted average of unpaid principal balances of the Mortgage Loans and the number and aggregate unpaid principal balances of the Mortgage Loans by range of original principal balances, (ix) the number and aggregate unpaid principal balances of the Mortgage Loans by documentation type, (x) the number and aggregate unpaid principal balances of the Mortgage Loans by original credit levels for the Mortgage Loans, (xi) the number and aggregate unpaid principal balances of the Mortgage Loans by purpose of each Mortgage Loan, (xii) the number and aggregate unpaid principal balances of the Mortgage Loans by occupancy type for each Mortgage Loan, (xiii) the number and aggregate unpaid principal balances of the Mortgage Loans by debt-to-income ratio at the time of origination of the Mortgage Loans, (xiv) the range of loan age and weighted average loan age of the Mortgage Loans and (xv) if the Trust Fund contains Interest Only Mortgage Loans, the number and aggregate unpaid principal balances of the Interest Only Mortgage Loans and the range of remaining interest only term and weighted average remaining interest only term for the Interest Only Mortgage Loans in the Trust Fund. If the Mortgage Loans include adjustable-rate Mortgage Loans, the applicable prospectus supplement will also set forth the following additional information: (i) the number and aggregate unpaid principal balances of the Mortgage Loans by range of gross margins, (ii) the number and aggregate unpaid principal balances of the Mortgage Loans by range of rate ceilings and (iii) the number and aggregate unpaid principal balances of the Mortgage Loans by months to first adjustment date. If specific information respecting the Mortgage Loans is not known to the Depositor at the time Securities are initially offered, more general information of the nature described above will be provided in the prospectus supplement, and specific information will be set forth in a report which will be available to purchasers of the related Securities at or before the initial issuance thereof and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission (the "Commission") after such initial issuance. Notwithstanding the foregoing, the Mortgage Loans included in a Trust Fund will not vary by more than five percent (by Principal Balance as of the Cut-off Date) from that described in the applicable prospectus supplement. The applicable prospectus supplement will specify whether the Mortgage Loans include Revolving Credit Line Loans, which may be secured by Mortgages that are junior to other liens on the related Mortgaged Property. Payment Provisions of the Mortgage Loans All of the Mortgage Loans will provide for payments of principal, interest or both, on Due Dates that occur monthly, quarterly or semi-annually or at such other interval as is specified in the applicable prospectus supplement or for payments in another manner described in the applicable prospectus supplement. Each Mortgage Loan may provide for no accrual of interest or for accrual of interest thereon at an interest rate (a "Mortgage Interest Rate") that is fixed over its term or that adjusts from time to time, or that may be converted from an adjustable to a fixed Mortgage Interest Rate or a different adjustable Mortgage Interest Rate, or from a fixed to an adjustable Mortgage Interest Rate, from time to time pursuant to an election or as otherwise specified on the related Mortgage Note, in each case as described in the applicable prospectus supplement. Each Mortgage Loan may provide for scheduled payments to maturity or payments that adjust from time to time to accommodate changes in the Mortgage Interest Rate or to reflect the occurrence of certain events or that adjust on the basis of other methodologies, and may provide for negative amortization or accelerated amortization, in each case as described in the applicable prospectus supplement. Each Mortgage Loan may be fully amortizing or require a balloon payment due on its stated maturity date, in each case as described in the applicable prospectus supplement. Each Mortgage Loan may contain prohibitions on prepayment (a "Lock-out Period" and, the date of expiration thereof, a "Lock-out Date") or require payment of a premium or a yield maintenance penalty (a "Prepayment Penalty") in connection with a prepayment, in each case as described in the applicable prospectus supplement. In the event that holders of any Class or Classes of Offered Securities will be entitled to all or a portion of any Prepayment Penalties collected in respect of Mortgage Loans, the applicable prospectus supplement will specify the method or methods by which any such amounts will be allocated. 29 Pre-Funding Account To the extent provided in a prospectus supplement, a portion of the proceeds of the issuance of Securities may be deposited into an account maintained with the Securities Administrator (a "Pre-Funding Account"). In such event, the Depositor will be obligated (subject only to the availability thereof) to sell at a predetermined price, and the Trust Fund for the related Series of Securities will be obligated to purchase (subject to the availability thereof), additional Mortgage Loans (the "Subsequent Mortgage Loans") from time to time (as frequently as daily) within the period (not to exceed three months if a REMIC election has been made or one year in all other cases) specified in the applicable prospectus supplement (the "Pre-Funding Period") after the issuance of such Series of Securities having an aggregate principal balance approximately equal to the amount on deposit in the Pre-Funding Account (the "Pre-Funded Amount") for such Series on the date of such issuance. The Pre-Funded Amount with respect to a Series will be specified in the applicable prospectus supplement and will not exceed 50% of the aggregate initial Principal Balance of the related Securities. Any Subsequent Mortgage Loans will be required to satisfy certain eligibility criteria more fully set forth in the applicable Agreement, which eligibility criteria will be consistent with the eligibility criteria of the Mortgage Loans initially included in the Trust Fund, subject to such exceptions as are expressly stated in the prospectus supplement. For example, the Subsequent Mortgage Loans will be subject to the same underwriting standards, representations and warranties as the Mortgage Loans initially included in the Trust Fund. In addition, certain conditions must be satisfied before the Subsequent Mortgage Loans are transferred into the Trust Fund such as the delivery to the Rating Agencies and the Trustee of certain opinions of counsel. Any portion of the Pre-Funded Amount remaining in the Pre-Funding Account at the end of the Pre-Funding Period will be used to prepay one or more Classes of Securities in the amounts and in the manner specified in the applicable prospectus supplement. In addition, if specified in the applicable prospectus supplement, the Depositor may be required to deposit cash into an account maintained by the Securities Administrator (the "Capitalized Interest Account") for the purpose of assuring the availability of funds to pay interest with respect to the Securities during the Pre-Funding Period. Any amount remaining in the Capitalized Interest Account at the end of the Pre-Funding Period will be remitted as specified in the applicable prospectus supplement. Accounts Each Trust Fund will include one or more accounts, established and maintained on behalf of the Securityholders into which the person or persons designated in the applicable prospectus supplement will, to the extent described herein and in such prospectus supplement deposit all payments and collections received or advanced with respect to the Mortgage Loans and other assets in the Trust Fund. Such an account may be maintained as an interest bearing or a non-interest bearing account, and funds held therein may be held as cash or invested in Eligible Investments, in each case as described in the applicable prospectus supplement. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Collection Account, Distribution Account and Related Accounts." Credit Support If so provided in the applicable prospectus supplement, partial or full protection against certain defaults and losses on the Mortgage Loans in the related Trust Fund may be provided to one or more Classes of Securities in the related Series in the form of subordination of one or more other Classes of Securities in such Series or by one or more other types of credit support, such as overcollateralization, excess interest, cross-collateralization, a reserve fund, a guarantee, a letter of credit, an insurance policy, a spread account, or a combination thereof (any such coverage with respect to the Securities of any Series, "Credit Support"). The amount and types of coverage, the identification of the entity providing the coverage (if applicable) and related information with respect to each type of Credit Support, if any, will be described in the prospectus supplement for a Series of Securities. See "Risk Factors--Risks Associated with the Securities--Credit Enhancement is Limited in Amount and Coverage" and "Description of Credit Support." 30 Cash Flow Agreements General If specified in the applicable prospectus supplement, the Trust Fund may include cash flow agreements consisting only of one or more guaranteed investment contracts, swap agreements or interest rate cap or floor agreements (also called yield maintenance agreements), each of which agreements is intended to reduce the effects of interest rate fluctuations on the assets or on one or more Classes of Securities (each, a "Cash Flow Agreement"). The applicable prospectus supplement will describe the name, organizational form and general character of the business of the counterparty under any Cash Flow Agreement. In addition, the prospectus supplement for the related Series of Securities will disclose whether the significance percentage is less than 10%, at least 10% but less than 20%, or more than 20%, calculated in accordance with Item 1115 of Regulation AB (17 CFR 229.1115). To the extent this percentage is (a) 10% or more but less than 20%, the applicable prospectus supplement will provide financial data required by Item 301 of Regulation S-K (17 CFR 229.301) or (b) greater than 20%, the related prospectus supplement will provide financial statements required by Item 1115(b)(2) of Regulation AB (17 CFR 229.1115) and, in either case, the applicable prospectus supplement will contain a description of the operation and material terms of the Cash Flow Agreement, including, without limitation, conditions to payment or limits on the timing or amount of payments and material provisions relating to the termination or substitution of the Cash Flow Agreement. Copies of the Cash Flow Agreement, if any, relating to a Series of Securities will be filed with the SEC as an exhibit to a Current Report on Form 8-K. Guaranteed Investment Contract If specified in the applicable prospectus supplement, the Trustee (or other party specified in the applicable prospectus supplement) on behalf of the Trust may enter into one or more guaranteed investment contracts. Guaranteed investment contracts are generally used to maximize the investment income on funds held between Distribution Dates pending distribution to Securityholders. Under a guaranteed investment contract, the issuer of the contract, which is typically a highly rated financial institution, guarantees a fixed or floating rate of interest over the life of the contract, as well as the ultimate return of the principal. Any payments received from the issuer of the contract by the Trust will be distributed to the related Class or Classes of Securities as specified in the applicable prospectus supplement. Yield Maintenance Agreements If specified in the applicable prospectus supplement, the Securities Administrator (or other party specified in the applicable prospectus supplement), on behalf of the Trust, will enter into one or more yield maintenance agreements in order to support the yield of one or more Classes of Securities. The counterpary to a yield maintenance agreement will receive an upfront payment and the Trust will have no ongoing payment obligations. Generally, if one-month LIBOR or another index specified in the applicable prospectus supplement exceeds a percentage for a particular date specified in the applicable prospectus supplement, the counterparty to the yield maintenance agreement will be required to pay to the Securities Administrator (or other party specified in the applicable prospectus supplement) an amount equal to that excess multiplied by a notional amount or the principal balance or balances of one or more Classes of Securities multiplied by one-twelfth. This amount may be adjusted to reflect the actual number of days in the Interest Accrual Period for the related Class or Classes of Securities and will be paid to the Class or Classes of Securities as specified in the applicable prospectus supplement. Swap Agreements If specified in the applicable prospectus supplement, the Securities Administrator (or other party specified in the applicable prospectus supplement), on behalf of the Trust, will enter into a swap agreement to support the yield on one or more Classes of Securities. Under the swap agreement, the Trust will be obligated to pay an amount equal to a certain percentage of a notional amount set forth in the applicable prospectus supplement to the counterparty and the Trust will be entitled to receive an amount equal to one-month LIBOR or another interest rate index specified in the applicable prospectus supplement on the notional amount from the counterparty, until the swap agreement is terminated. Only the net amount of the two obligations will be paid by the appropriate party. In the event that the Trust is required to make a payment to the counterparty, that payment will be paid on the related Distribution Date 31 prior to distributions to Securityholders. Generally, any payments received from the counterparty by the Trust will be distributed to cover certain shortfalls as set forth in the applicable prospectus supplement. If specified in the applicable prospectus supplement, the Securities Administrator (or other party specified in the applicable prospectus supplement), on behalf of the Trust, will enter into one or more interest rate swap agreements to cover any shortfalls on one or more Classes of Securities in the event those Securities are auctioned to third-party investors on a date specified in the applicable prospectus supplement and the proceeds from the auction are less than the outstanding principal balance of the applicable Class or Classes of Securities plus any accrued and unpaid interest. In the event the proceeds from the auction are greater than the outstanding principal balance of the applicable Class or Classes of Securities plus any accrued and unpaid interest, this excess will be paid to the counterparty or counterparties under the swap agreement(s). THE SPONSOR Wells Fargo Bank, N.A. ("Wells Fargo Bank") will be the sponsor (the "Sponsor") of each Series of Securities. Wells Fargo Bank may also be the Servicer (and if so specified in the applicable prospectus supplement, the Securities Administrator, the Paying Agent and/or Master Servicer) for each Series of Securities. Wells Fargo Bank is an indirect, wholly-owned subsidiary of Wells Fargo & Company. Wells Fargo Bank is a national banking association and is engaged in a wide range of activities typical of a national bank. On February 20, 2004, Wells Fargo Bank Minnesota, National Association was merged into Wells Fargo Bank. Wells Fargo Bank Minnesota, National Association was formerly called Norwest Bank Minnesota, National Association. Norwest Bank Minnesota, National Association changed its name to Wells Fargo Bank Minnesota, National Association on July 8, 2000. On May 8, 2004, Wells Fargo Home Mortgage, Inc., a wholly-owned subsidiary of Wells Fargo Bank, was merged into Wells Fargo Bank. Wells Fargo Home Mortgage, Inc. was engaged principally in the business of (i) originating, purchasing and selling residential mortgage loans in its own name and through certain of its affiliates (the "Wells Fargo Affiliates") and (ii) servicing residential mortgage loans for its own account or for the account of others. The origination and servicing activities formerly carried on by Wells Fargo Home Mortgage, Inc. are now performed by the Wells Fargo Home Mortgage division of Wells Fargo Bank. Wells Fargo Bank is an approved servicer of Fannie Mae, Freddie Mac and the Government National Mortgage Association. Wells Fargo Bank's principal office is located in San Francisco, California. Wells Fargo Bank has sponsored publicly offered securitization transactions since 1996. Wells Fargo Bank and it affiliates have originated residential mortgage loans, commercial mortgage loans, auto loans, home equity loans, credit card receivables and student loans. Wells Fargo Bank and it affiliates have also served as sponsors, issuers, master servicers, servicers and trustees in a wide array of securitization transactions. While Wells Fargo Bank currently does not rely on securitization as a material funding source, the Depositor's securitization programs are a material funding source for Wells Fargo Bank's residential mortgage loan production. The Sponsor conducts the securitization of residential mortgage loans originated by it or acquired by it from Correspondents through three securitization programs of the Depositor, which is a wholly-owned subsidiary of the Sponsor. The Depositor's Wells Fargo Home Equity Asset-Backed Securities ("WFHET") program is used to securitize the following types of residential mortgage loans that were originated or acquired by the Sponsor: 1. Fixed rate first lien mortgage loans having original terms to maturity from approximately fifteen years to approximately thirty years, and which mortgage loans were originated pursuant to the Sponsor's subprime underwriting guidelines ("Fixed Rate First Lien Subprime Loans"); 2. Adjustable rate first lien mortgage loans having original terms to maturity from approximately fifteen years to approximately thirty years, and which mortgage loans were originated pursuant to the Sponsor's subprime underwriting guidelines ("Adjustable Rate First Lien Subprime Loans" and, together with Fixed Rate First Lien Subprime Loans, "First Lien Subprime Loans"); 32 3. Fixed and adjustable rate second lien mortgage loans having original terms to maturity from approximately fifteen years to approximately thirty years, and which mortgage loans were originated pursuant to the Sponsor's subprime underwriting guidelines ("Second Lien Subprime Loans"); From and including 1996 and through 2005, the Sponsor and its affiliates and predecessors originated or acquired a total of $2.063 trillion of residential mortgage loans, which include the types of mortgage loans listed above as well as other types of residential mortgage loans originated or acquired by the Sponsor and its affiliates and predecessors. The table below sets forth for each of the periods indicated the number and aggregate original principal balance of subprime mortgage loans originated or acquired by the Sponsor (other than any mortgage loans sold to Fannie Mae, Freddie Mac and Federal Home Loan Banks or mortgage loans insured or guaranteed by the Government National Mortgage Association, Federal Housing Administration or Department of Veterans Affairs) for each of the different "asset types" set forth in the table:
2003 2004 2005 -------------------------- -------------------------- -------------------------- Aggregate Aggregate Aggregate Original Original Original No. Principal No. Principal Principal of Balance of of Balance of No. of Balance of Asset Type Loans Loans Loans Loans Loans Loans - ----------------- --------- -------------- --------- -------------- --------- -------------- Fixed Rate First Lien Subprime Loans 25,849 $3,770,962,229 27,103 $4,533,685,085 15,742 $2,296,906,596 Adjustable Rate First Lien Subprime Loans 37,642 $5,537,473,256 51,165 $7,899,330,509 71,018 $12,236,475,785 Second Lien Subprime Mortgage Loans * * 3 $120,000 9,383 $369,382,821
- ------------------------- * Wells Fargo Bank has not originated or acquired a significant number of Second Lien Subprime Loans for the periods indicated. Only Certificates backed by First Lien Subprime Loans and Second Lien Subprime Loans are securitized under the Depositor's WFHET securitization program and will be offered pursuant to this prospectus. The aggregate initial unpaid principal balance of residential mortgage-backed securities issued under the Depositor's WFHET securitization programs and those of its predecessors from and including 2004 through 2005 and backed by the foregoing asset types is $9.7 billion. The following table shows the aggregate initial principal balances of residential mortgage-backed securities which have been offered under the Depositor's WFHET securitization program during each of the years indicated and the total number of issuances of residential mortgage-backed securities which have been offered under the Depositor's WFHET securitization program for each of the years indicated: 2004 2005 ---------------------- ---------------------- Aggregate Initial Aggregate Initial Asset Type Principal Balance Principal Balance - ---------------------- ---------------------- ---------------------- First Lien Subprime Loans $4,952,478,384 $4,749,313,028 Second Lien Subprime Loans * * 2004 2005 Total Number of Issuances 1 4 ---------------------- * There were no Second Lien Subprime Loans offered under the Depositor's WFHET securitization program for the indicated year. 33 Under the Depositor's residential mortgage-backed securitization programs the mortgage loans either are originated by the Sponsor or purchased by the Sponsor or an affiliate of the Sponsor from various entities that originated the mortgage loans to the Sponsor's underwriting standards or other underwriting standards which will be described in the prospectus supplement. See "Description of the Trust Funds-Mortgage Loans-General" in this prospectus. The Sponsor sells the mortgage loans to the Depositor by means of a mortgage loan purchase agreement between the Sponsor and the Depositor. The Sponsor acts as servicer of some or all of the mortgage loans in each trust created under its securitization program. See "The Sponsor's Mortgage Loan Programs" and "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements" for more information about the Sponsor, its securitization programs and underwriting criteria used to originate the Mortgage Loans and its material roles and duties in each securitization. THE SPONSOR'S MORTGAGE LOAN PROGRAMS Mortgage Loan Production Sources Wells Fargo Bank originates and acquires subprime first lien mortgage loans ("First Lien Home Mortgage Loans") through a network of retail, wholesale, and correspondent offices located throughout all 50 states, the District of Columbia and the territories of the United States. Wells Fargo Bank also conducts a significant portion of its subprime mortgage loan originations through centralized production offices located in Fort Mill, South Carolina, Carlsbad, California and Bloomington, Minnesota. Wells Fargo Bank also receives applications for home mortgage loans on toll-free telephone numbers that can be called from anywhere in the United States. Wells Fargo Bank also provides information and accepts applications through the internet. The following are Wells Fargo Bank's primary sources of subprime mortgage loan originations: (i) direct contact with prospective borrowers (including borrowers with mortgage loans currently serviced by Wells Fargo Bank or borrowers referred by borrowers with mortgage loans currently serviced by Wells Fargo Bank), (ii) referrals from realtors, other real estate professionals and prospective borrowers, (iii) referrals from selected corporate clients, (iv) referrals from Wells Fargo Bank's Private Mortgage Banking division (including referrals from the private banking group of Wells Fargo Bank and other affiliated banks), (v) referrals from or originations by several joint ventures into which Wells Fargo Bank, through its wholly owned subsidiary, Wells Fargo Ventures, LLC, has entered with realtors and banking institutions (the "Joint Ventures") and (vi) referrals from mortgage brokers and similar entities. In addition to its own mortgage loan originations, Wells Fargo Bank acquires qualifying mortgage loans from other unaffiliated originators ("Correspondents"). See "--Acquisition of Mortgage Loans from Correspondents" below. The relative contribution of each of these sources to Wells Fargo Bank's origination business, measured by the volume of loans generated, tends to fluctuate over time. Wells Fargo Bank may directly contact prospective borrowers (including borrowers with mortgage loans currently serviced by Wells Fargo Bank) through general solicitations. Such solicitations are made through television, radio and print advertisements. See "Prepayment and Yield Considerations." Wells Fargo Ventures, LLC owns at least a 50% interest in each of the Joint Ventures, with the remaining ownership interest in each being owned by a realtor or a banking institution having significant contact with potential borrowers. Mortgage loans that are originated by Joint Ventures in which Wells Fargo Bank's partners are realtors are generally made to finance the acquisition of properties marketed by such Joint Venture partners. Applications for mortgage loans originated through Joint Ventures are generally taken by Joint Venture employees and underwritten by Wells Fargo Bank in accordance with its standard underwriting criteria. Such mortgage loans are then closed by the Joint Ventures in their own names and subsequently purchased by Wells Fargo Bank or affiliates of Wells Fargo Bank. Acquisition of Mortgage Loans from Correspondents In order to qualify for participation in Wells Fargo Bank's mortgage loan purchase programs, lending institutions must (i) meet and maintain certain net worth and other financial standards, (ii) demonstrate experience in originating residential mortgage loans, (iii) meet and maintain certain operational standards, (iv) evaluate each loan offered to Wells Fargo Bank for consistency with Wells Fargo Bank's underwriting guidelines or the standards of a pool insurer and represent that each loan was underwritten in accordance with Wells Fargo Bank standards or the standards of a pool insurer and (v) utilize the services of qualified appraisers. The contractual arrangements with Correspondents may involve the commitment by Wells Fargo Bank to accept delivery of a certain dollar amount of mortgage loans over a period of time. This commitment may be satisfied either by delivery of mortgage loans one at a time or in multiples as aggregated by the Correspondent. Wells Fargo Bank may also acquire mortgage loans in negotiated transactions under which the mortgage loans may have been originated by the seller or another third party according to underwriting standards that may have varied materially from Wells Fargo Bank's underwriting standards. To the extent that 20% or more of the aggregate principal balance of the Mortgage Loans in a Trust Fund are underwritten by a Correspondent whose underwriting 34 standards vary materially from Wells Fargo Bank's underwriting standards, the applicable prospectus supplement will describe such underwriting standards for such Mortgage Loans. Mortgage Loan Underwriting The underwriting functions of Wells Fargo Bank are performed in its Arizona, California, Iowa, Louisiana, Minnesota, North Carolina and South Carolina offices. Wells Fargo Bank does not delegate underwriting authority to any broker or correspondent. Wells Fargo Bank employs loan credit underwriters to scrutinize the applicant's credit profile and to evaluate whether an impaired credit history is a result of adverse circumstances or a continuing inability or unwillingness to meet credit obligations in a timely manner. Personal circumstances such as divorce, family illnesses or deaths and temporary job loss due to layoffs and corporate downsizing will often impair an applicant's credit record. The underwriting guidelines used by Wells Fargo Bank are primarily intended to evaluate the prospective borrower's credit standing and ability to repay the loan, as well as the value and adequacy of the proposed mortgaged property as collateral. A prospective borrower applying for a mortgage loan is required to complete a detailed application. The loan application elicits pertinent information about the applicant including, depending on the program, the applicant's financial condition (assets, liabilities, income and expenses), the property being financed and the type of loan desired. With respect to every applicant, a credit report summarizing the applicant's credit history with merchants and lenders is obtained. Significant unfavorable credit information reported by the applicant or by a credit reporting agency is taken into account in the credit decision. Loan applications are classified according to certain characteristics, including but not limited to: condition and location of the collateral, credit history of the applicant, ability to pay, loan-to-value ratio and general stability of the applicant in terms of employment history and time in residence. Wells Fargo Bank has established classifications with respect to the credit profile of the applicant, and each loan is placed into one of nine credit levels denoted as "Y9" through "Y1" (see table below). Terms of subprime mortgage loans made by Wells Fargo Bank, as well as maximum loan-to-value ratios, vary depending on the credit level classification of the applicant. Loan applicants with less favorable credit profiles generally are restricted to consideration for loans with higher interest rates, lower maximum loan amounts and lower loan-to-value ratios than applicants with more favorable credit profiles. Generally, the loan-to-value ratio is the ratio, expressed as a percentage, of the principal amount of the mortgage loan at origination to the lesser of (i) the appraised value of the related mortgaged property, as established by an appraisal obtained by the originator generally no more than 120 days prior to origination and (ii) the sale price for such property. In some instances, the loan-to-value ratio may be based on the value determined by an appraisal that was obtained by the originator more than 120 days prior to origination, provided that (i) an appraisal update is obtained and (ii) the original appraisal was obtained no more than 180 days prior to origination. Generally, the maximum total debt to gross income ratio for each credit level is 55%. Subject to the consideration of certain compensating factors described below, the general criteria used by Wells Fargo Bank's underwriting staff in classifying loan applicants are as follow: Bankruptcy Maximum Credit Filings/ Combined Credit Existing Bureau Foreclosure Loan to Level Mortgage History Score* Proceedings Value Ratio** - ----------- ------------------ ------------ ---------------- -------------- 0 x 30; Current 100% CLTV @ Y9 at application 660 or Discharged/ time and no higher completed more LTV < 80% mortgage or rent than three late payments in years ago. the last 12 95% CLTV @ months LTV > 80% - ----------- ------------------ ------------ ---------------- -------------- 1 x 30; Mortgage 100% CLTV @ Y8 or rent payments 640-659 Discharged/ no more than 30 completed more LTV < 80% days late at than three application time years ago. and a maximum of 95% CLTV @ one 30-day late payment in the LTV > 80% last 12 months - ----------- ------------------ ------------ ---------------- -------------- 35 Bankruptcy Maximum Credit Filings/ Combined Credit Existing Bureau Foreclosure Loan to Level Mortgage History Score* Proceedings Value Ratio** - ----------- ------------------ ------------ ---------------- -------------- 1 x 30; Mortgage 100% CLTV @ Y7 or rent payments 620-639 Discharged/ no more than 30 completed more LTV < 80% days late at than two years application time ago. and a maximum of 95% CLTV @ one 30-day late payment in the LTV > 80% last 12 months - ----------- ------------------ ------------ ---------------- -------------- 2 x 30; Mortgage Discharged/ 100% CLTV @ Y6 or rent payments 600-619 completed more no more than 30 than two years LTV < 80% days late at ago. application time and a maximum of 95% CLTV @ two 30-day late payments in the LTV > 80% last 12 months - ----------- ------------------ ------------ ---------------- -------------- 2 x 30; Mortgage Discharged/ 100% CLTV @ Y5 or rent payments 580-599 completed more no more than 30 than two years LTV < 80% days late at ago. application time and a maximum of 95% CLTV @ two 30-day late payments in the LTV > 80% last 12 months - ----------- ------------------ ------------ ---------------- -------------- 1 x 60; Mortgage 100% CLTV @ Y4 or rent payments 560-579 Discharged/ no more than 60 completed more LTV < 80% days late at than one year application time ago. and a maximum of 95% CLTV @ up to one 60-day late in the last LTV > 80% 12 months - ----------- ------------------ ------------ ---------------- -------------- 2 x 60 or 1 x 60 90% CLTV @ Y3 and 1 x 90; 540-559 Discharged/ Mortgage or rent completed more All LTV's payments no more than one year than 60 days ago. late at application time and a maximum of up to two 60-day late payments or one 60-day and one 90-day late payment. - ----------- ------------------ ------------ ---------------- -------------- 90+; Mortgage or Discharged/ 90% CLTV @ Y2 rent payments no 520-539 completed less more than 60 than 1 year All LTV's days late at ago. application time - ----------- ------------------ ------------ ---------------- -------------- 90+; Mortgage or 85% CLTV @ Y1 rent payments no 500-519 Discharged/ more than 60 completed less All LTV's days late at than 1 year application time. ago. - --------------------------------- 36 * Lower of two, middle of three credit bureau scores used. If only one credit bureau score is obtained, then borrower may have to satisfy additional requirements set forth in the underwriting guidelines. ** The maximum loan-to-value ratios and combined loan-to-value ratios are subject to downward adjustment based upon a number of factors including without limitation, mortgage loan amount, the mortgage loan program, the purpose of the mortgage loan, the level of documentation, the type of mortgaged property and whether or not the mortgaged property is owner-occupied. In addition, the combined loan-to-value ratio only reflects simultaneous secondary financing provided by Wells Fargo Bank or of which Wells Fargo Bank is aware at the time of funding of the related First Lien Home Mortgage Loan. Wells Fargo Bank does not restrict a borrower from obtaining secondary financing after the origination of the First Lien Home Mortgage Loan. For the purpose of placing a prospective mortgage loan in any of the credit levels, consecutive or "rolling" late payments having the same delinquency characterization (e.g., 30-day late or 60-day late) are counted as a single late payment of such delinquency characterization. Wells Fargo Bank uses the foregoing categories and characteristics as guidelines only. On a case-by-case basis, Wells Fargo Bank may make the determination that the prospective borrower warrants loan parameters beyond those shown above based upon the presence of acceptable compensating factors. Examples of compensating factors include, but are not limited to, loan-to-value ratio, debt-to-income ratio, long-term stability of employment and/or residence, statistical credit scores, verified cash reserves or reduction in overall monthly expenses. Wells Fargo permits debt-to-income ratios to exceed guidelines when the applicant has documented compensating factors for exceeding ratio guidelines such as documented excess funds in reserves after closing, a history of making a similar sized monthly debt payment on a timely basis, substantial residual income after monthly obligations are met, evidence that ratios will be reduced shortly after closing when a financed property under contract for sale is sold, or additional income has been verified for one or more applicants that is ineligible for consideration as qualifying income. Except for Balloon Loans, the subprime mortgage loans originated or acquired by Wells Fargo Bank generally have loan terms ranging from 15 to 30 years and fully amortize over such terms. The principal amounts of the loans originated or acquired by Wells Fargo Bank generally range from a minimum of $10,000 to a maximum of $950,000. Wells Fargo Bank generally does not originate or acquire any mortgage loans for which the loan-to-value ratio at origination exceeds 100% or for which the combined loan-to-value ratio at origination exceeds 100% in the event of concurrent secondary financing. In addition, the combined loan-to-value ratio only reflects simultaneous secondary financing provided by Wells Fargo Bank or of which Wells Fargo Bank is aware at the time of funding of the related First Lien Home Mortgage Loan. Wells Fargo Bank does not restrict a borrower from obtaining secondary financing after the origination of the First Lien Home Mortgage Loan. The loans originated or acquired by Wells Fargo Bank are generally secured by single-family dwellings, condominium units or two- to four-family residences, and such properties may or may not be occupied by the owner. It is Wells Fargo Bank's policy not to accept commercial properties or unimproved land as collateral for First Lien Home Mortgage Loans. Wells Fargo Bank will, however, accept mixed-use properties such as a property where more than 80% is used for residential purposes and the balance is used for commercial purposes. Wells Fargo Bank originates mortgage loans with loan-to-value ratios in excess of 80% without any requirement to obtain primary mortgage insurance. However, under certain circumstances, primary mortgage insurance may be obtained after the origination of the mortgage loan. In cases for which such primary mortgage insurance is obtained, the excess over 80% (or such lower percentage as Wells Fargo Bank may require) will be covered by primary mortgage insurance (subject to certain standard policy exclusions for default arising from, among other things, fraud or negligence in the origination or servicing of a Mortgage Loan, including misrepresentation by the mortgagor or other persons involved in the origination thereof) from an approved primary mortgage insurance company until the unpaid principal balance of the Mortgage Loan is reduced to an amount that will result in a loan-to-value ratio less than or equal to 80%. The prospectus supplement will specify the number and percentage of Mortgage Loans contained in the Trust Fund for a particular Series of Securities with loan-to-value ratios at origination in excess of 80% which are not covered by primary mortgage insurance. 37 Wells Fargo Bank's subprime mortgage loan programs include a full documentation program and a "stated income, stated asset" program. Under the full documentation program, loans to borrowers who are salaried employees generally must be supported by current employment information in the form of one current pay-stub with year-to-date information and W-2 tax forms for the last year (a complete verification of employment may be substituted for W-2 forms). As an alternative method of establishing income under the full documentation program, Wells Fargo Bank may review the deposit activity reflected in recent monthly bank statements of the applicant. Wells Fargo Bank may also perform a telephone verification of employment for salaried employees prior to funding. Under the full documentation program, borrowers who are self-employed generally must provide signed individual federal tax returns and, if applicable, signed year-to-date income statements and/or business federal tax returns. For borrowers who are 100% owners of a business and are classified in credit levels Y9 through Y4, monthly business bank statements may be provided in lieu of traditional employment/income documentation. In either case, evidence must be provided that the business has been in existence for at least one year. If the business has been in existence less than two years, evidence must be provided that the applicant had previously been in the same line of work for at least one year. Under the full documentation program, at certain loan-to-value ratio levels and under certain circumstances not all sources of funds for closing are verified as the borrower's. Under Wells Fargo Bank's "stated income, stated asset" program, the applicant's employment, income sources and assets must be stated on the initial signed application. The applicant's income as stated must be reasonable for the applicant's occupation as determined in the discretion of the loan underwriter; however, such income is not independently verified. Similarly, the applicant's assets as stated must be reasonable for the applicant's occupation as determined in the discretion of the loan underwriter; however, such assets are not independently verified. Maximum loan-to-value ratios within each credit level are lower under the stated income, stated asset program than under the full documentation program. Wells Fargo Bank's underwriting of every mortgage loan submitted consists of not only a credit review, but also a separate appraisal conducted by (i) a third-party appraiser, (ii) an appraiser approved by Valuation Information Technology, LLC (doing business as RELS Valuation) ("RELS"), an entity jointly owned by an affiliate of Wells Fargo Bank and an unaffiliated third party, or (iii) RELS itself. Appraisals generally conform to current Fannie Mae and Freddie Mac secondary market requirements for residential property appraisals. All appraisals are subject to an internal appraisal review by the loan underwriter irrespective of the loan-to-value ratio, the mortgage loan amount or the identity of the appraiser. Certain loans require a third party review in the form of either a desk review or field review. At the discretion of Wells Fargo Bank, any mortgage loan is subject to further review in the form of a desk review, field review or additional full appraisal. STATIC POOL INFORMATION Historical delinquency, cumulative loss and prepayment information for various "asset types" is available via a website established by the Sponsor. Such static pool performance information will relate to (1) prior subprime residential mortgage loan pools securitized by the Sponsor in registered offerings and/or (2) prior originations of, or purchases by, the Sponsor of subprime residential mortgage loans based on the vintage years of such prior originations or purchases. In the case of prior originations or purchases, such mortgage loans will not include any loans sold to Fannie Mae, Freddie Mac or the Federal Home Loan Banks, mortgage loans insured or guaranteed by the Government National Mortgage Association, Federal Housing Administration or Department of Veterans Affairs or mortgage loans sold by the Sponsor which are no longer serviced by the Sponsor. Such static pool performance information will be accompanied by a summary of original characteristics of the prior securitized pools and/or prior originations or purchases. Each prospectus supplement for a Series will provide the website and instructions regarding where an investor can find information relating to the specific asset type or types included in the applicable Trust. There can be no assurance that the information provided in the website will be representative of the results that may be experienced with respect to the Mortgage Loans included in the Trust Fund with respect to any Series. 38 THE DEPOSITOR Wells Fargo Asset Securities Corporation (the "Depositor") is a direct, wholly owned subsidiary of the Sponsor and an indirect, wholly owned subsidiary of Wells Fargo & Company. The Depositor was incorporated in the State of Delaware on March 28, 1996 as Norwest Asset Securities Corporation. On April 7, 2000, Norwest Integrated Structured Assets, Inc., an affiliate of the Depositor, was merged into and with the Depositor. On April 17, 2000, the Depositor changed its name from Norwest Asset Securities Corporation to Wells Fargo Asset Securities Corporation. The limited purposes of the Depositor are, in general, to acquire, own and sell mortgage loans; to issue, acquire, own, hold and sell mortgage pass-through securities and home equity asset-backed pass-through securities which represent ownership interests in mortgage loans, collections thereon and related properties; and to engage in any acts which are incidental to, or necessary, suitable or convenient to accomplish, the foregoing. The Depositor maintains its principal office at 7430 New Technology Way, Frederick, Maryland 21703. Its telephone number is (301) 846-8881. At the time of the formation of any Trust Fund, the Depositor will be the sole owner of all the related Mortgage Loans. The Depositor will have acquired the Mortgage Loans included in any Trust Fund from the Sponsor. The Depositor will have limited obligations and rights under the applicable Agreement after the Closing Date for any Series, including but not limited to, repurchasing or substituting Mortgage Loans in a Trust Fund in the event of defective documentation or upon the breach of certain representations and warranties made by the Depositor, and repurchasing at its option, certain defaulted Mortgage Loans or, in the circumstances described under "Description of the Securities--Termination" repurchasing all or a portion of the Mortgage Loans of a Series. The Depositor and any director, officer, employee or agent of the Depositor will be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to the applicable Agreement or the Securities, other than any loss, liability or expense incurred in connection with any legal action incurred by reason of misfeasance, bad faith, fraud or gross negligence, a breach of a representation or warranty under the applicable Agreement or by reason of negligent disregard of its obligations and duties under the applicable Agreement. DESCRIPTION OF THE SECURITIES General A separate common law trust will serve as the Issuing Entity and will issue the asset-backed certificates (the "Certificates") of a series (each, a "Series") (including any Class of Certificates not offered hereby) will represent the entire beneficial ownership interest in the trust fund (the "Trust" or the "Trust Fund") created pursuant to the applicable Agreement. If a Series of Securities includes asset-backed notes (the "Notes" and, together with the Certificates, the "Securities"), such Notes will represent indebtedness of the related Trust Fund and will be issued and secured pursuant to an Indenture. Each Series of Securities will consist of one or more classes (each, a "Class") of Securities that may (i) provide for the accrual of interest thereon based on fixed, variable or adjustable rates; (ii) be Senior Securities or Subordinated Securities to one or more other Classes of Securities in respect of certain distributions on the Securities; (iii) be entitled either to (A) principal distributions, with disproportionately low, nominal or no interest distributions or (B) interest distributions, with disproportionately low, nominal or no principal distributions (collectively, "Strip Securities"); (iv) provide for distributions of accrued interest thereon commencing only following the occurrence of certain events, such as the retirement of one or more other Classes of Securities of such Series; (v) provide for payments of principal as described in the applicable prospectus supplement, from all or only a portion of the Mortgage Loans in such Trust Fund, to the extent of available funds, in each case as described in the applicable prospectus supplement; and/or (vi) provide for distributions based on a combination of two or more components thereof with one or more of the characteristics described in this paragraph including a Strip Security component. If so specified in the applicable prospectus supplement, distributions on one or more Classes of a Series of Securities may be limited to collections from a designated portion of the Mortgage Loans in the related Trust Fund (each such portion of Mortgage Loans, a "Mortgage Loan Group"). Any such Classes may include Classes 39 of Securities of a Series offered pursuant to this prospectus and a applicable prospectus supplement (the "Offered Securities" ). Each Class of Offered Securities of a Series will be issued in minimum denominations corresponding to the Principal Balances or, in the case of certain Classes of Strip Securities, notional amounts or percentage interests specified in the applicable prospectus supplement. The transfer of any Offered Securities may be registered and such Securities may be exchanged without the payment of any service charge payable in connection with such registration of transfer or exchange, but the Depositor or the Securities Administrator or any agent thereof may require payment of a sum sufficient to cover any tax or other governmental charge. One or more Classes of Securities of a Series may be issued in fully registered, certificated form ("Definitive Securities") or in book-entry form ("Book-Entry Securities"), as provided in the applicable prospectus supplement. See "Risk Factors--Risks Associated with the Securities--Book-Entry System for Certain Classes of Securities May Decrease Liquidity and Delay Payment" and "Description of the Securities--Book-Entry Form" and "--Definitive Form." Definitive Securities will be exchangeable for other Securities of the same Class and Series of a like aggregate Principal Balance, notional amount or percentage interest but of different authorized denominations. See "Risk Factors--Risks Associated with the Securities--Securities May Not be Liquid." Distributions Distributions on the Securities of each Series will be made by or on behalf of the Securities Administrator on each monthly, quarterly or other periodic date specified in the applicable prospectus supplement on which distributions will be made to holders of Securities (a "Distribution Date") from Available Funds for such Series and such Distribution Date. Distributions (other than the final distribution) will be made to the persons in whose names the Securities are registered at the close of business on the date specified in the applicable prospectus supplement, and the amount of each distribution will be determined as of the close of business on the Determination Date. The "Determination Date" with respect to any Distribution Date will be the day of the month specified in the applicable prospectus supplement or, if such day is not a business day, the immediately preceding business day. All distributions with respect to each Class of Securities on each Distribution Date will be allocated pro rata among the outstanding Securityholders in such Class or by random selection or as described in the applicable prospectus supplement. Payments (other than the final distribution in retirement of the applicable Securities) will be made by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. However, with respect to any holder of an Offered Security evidencing at least a $100,000 initial Principal Balance, distributions will be made on the Distribution Date by wire transfer in immediately available funds; provided that the Securities Administrator is furnished with appropriate wiring instructions not less than seven business days prior to the related Distribution Date. The final distribution in respect of each Class of Offered Securities will be made only upon presentation and surrender of the related Security at the office or agency appointed by the Securities Administrator specified in the notice of final distribution with respect to the related Class. Available Funds All distributions on the Securities of each Series on each Distribution Date will be made from Available Funds described below, in accordance with the terms described in the applicable prospectus supplement. Generally, the "Available Funds" for each Distribution Date equals the sum of the following amounts with respect to the Mortgage Loans, net of amounts reimbursable or payable to any Servicer, including amounts in respect of indemnification of the Servicer, the Servicing Fee and any accrued and unpaid Servicing Fee, the Securities Administrator fee (if any), Trustee fee (if any), amounts payable to the Securities Administrator and the Trustee in respect of certain expenses and indemnification and any amounts reimbursable or payable to any Master Servicer: (i) the aggregate amount of monthly payments on the Mortgage Loans due during the related Collection Period (unless a different period is specified in the applicable prospectus supplement, a "Collection Period" with respect to any Distribution Date will commence on the second day of the month in which the immediately preceding Distribution Date occurs, or the day after the Cut-off Date in the case of the first Collection Period, and will end on the first day of the month of the related Distribution Date) and received by the Servicer on or prior to the related Determination Date; 40 (ii) certain unscheduled payments in respect of the Mortgage Loans, including prepayments (but excluding any Prepayment Penalties), all proceeds of any insurance policies to be maintained in respect of each Mortgage Loan (to the extent such proceeds are not applied to the restoration of the Mortgage Loan or released in accordance with the normal servicing procedures of a Servicer, subject to the terms and conditions applicable to the related Mortgage Loan) (collectively, "Insurance Proceeds"), condemnation proceeds, subsequent recoveries and all other amounts received and retained in connection with the liquidation of Mortgage Loans in default in the Trust Fund, including any PMI Advances ("Liquidation Proceeds"), net of certain expenses and excluding any Liquidation Profits, 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 Collection Account or Distribution Account during the related Prepayment Period; (v) any Substitution Adjustments deposited in the Collection Account or Distribution Account during the related Prepayment Period; (vi) any Reimbursement Amount deposited to the Collection Account or Distribution Account during the related Prepayment Period; (vii) on the Distribution Date on which the Trust is to be terminated in accordance with the applicable Agreement, the Termination Price; (viii) if the applicable prospectus supplement so provides, interest or investment income on amounts on deposit in the Collection Account or the Distribution Account, including any net amounts paid under any Cash Flow Agreements; (ix) if the applicable prospectus supplement so provides, to the extent not on deposit in the related Collection Account or the Distribution Account as of the corresponding Determination Date, any amounts collected under, from or in respect of any Credit Support with respect to such Distribution Date; and (x) any other amounts required to be deposited in the Collection Account or Distribution Account as described in the applicable prospectus supplement. The applicable Agreement for each Series will specify a period (the "Prepayment Period") during which all unscheduled principal payments received by the Servicer will be distributed to Securityholders on the related Distribution Date. Each Prepayment Period will either be (i) the one month period ending on the last day of the calendar month preceding the month in which the applicable Distribution Date occurs (such period a "Prior Month Receipt Period") or (ii) the one month period ending on the day preceding the Determination Date in the calendar month in which such Distribution Date occurs (such period a "Mid-Month Receipt Period"). With respect to certain of the Mortgage Loans ("Type 1 Loans"), the Prepayment Period is a Mid-Month Receipt Period. With respect to certain other Mortgage Loans ("Type 2 Loans"), the Prepayment Period is a Prior Month Receipt Period. As described below, Available Funds will be distributed among the related Securities (including any Securities not offered hereby) on each Distribution Date, and accordingly will be released from the Trust Fund and will not be available for any future distributions. The applicable prospectus supplement for a Series of Securities will describe any variation in the calculation of Available Funds for such Series. Distributions of Interest on the Securities Each Class of Securities (other than Classes of Strip Securities that have no Pass-Through Rate or interest rate) may have a different Pass-Through Rate or interest rate, which will be a fixed, variable or adjustable rate at which 41 interest will accrue on such Class or a component thereof (the "Pass-Through Rate"). The applicable prospectus supplement will specify the Pass-Through Rate or interest rate for each Class or component or, in the case of a variable or adjustable Pass-Through Rate or interest rate, the method for determining the Pass-Through Rate or interest rate. The applicable prospectus supplement will specify whether calculations of interest will be made on the basis of the actual number of days in the period in which interest accrues (each, an "Interest Accrual Period") and on a 360-day year or on the basis of a 360-day year assumed to consist of twelve 30-day months or another method specified in the applicable prospectus supplement. Distributions of interest in respect of the Securities of any Class will be made on each Distribution Date (other than any Class of Accrual Securities, which will be entitled to distributions of accrued interest commencing only on the Distribution Date, or under the circumstances, specified in the applicable prospectus supplement, and any Class of Strip Securities that are not entitled to any distributions of interest) based on the Accrued Security Interest for such Class and such Distribution Date, subject to the sufficiency of the portion of Available Funds allocable to such Class on such Distribution Date. Prior to the time interest is distributable on any Class of Accrual Securities, the amount of Accrued Security Interest otherwise distributable on such Class will be added to the Principal Balance thereof on each Distribution Date. With respect to each Class of Securities and each Distribution Date (other than certain Classes of Strip Securities), "Accrued Security Interest" will be equal to interest accrued during the related Interest Accrual Period on the Principal Balance thereof immediately prior to the Distribution Date, at the applicable Pass-Through Rate or interest rate, reduced as described below. Accrued Security Interest on certain Classes of Strip Securities will be equal to interest accrued during the related Interest Accrual Period on the outstanding notional amount thereof immediately prior to each Distribution Date, at the applicable Pass-Through Rate or interest rate, reduced as described below, or interest accrual in the manner described in the applicable prospectus supplement. The method of determining the notional amount for a certain Class of Strip Securities will be described in the applicable prospectus supplement. Reference to notional amount is solely for convenience in certain calculations and does not represent the right to receive any distributions of principal. If so provided in the applicable prospectus supplement, the Accrued Security Interest on a Series of Securities will be reduced by Prepayment Interest Shortfalls with respect to the related Prepayment Period to the extent not offset by Compensating Interest and any other interest shortfalls specified in the applicable prospectus supplement. The particular manner in which such Prepayment Interest Shortfalls are to be allocated among some or all of the Classes of Securities of that Series will be specified in the applicable prospectus supplement. The applicable prospectus supplement will also describe the extent to which the amount of Accrued Security Interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the Principal Balance of) a Class of Offered Securities may be reduced as a result of any other contingencies, including delinquencies, losses and Deferred Interest on or in respect of the Mortgage Loans in the related Trust Fund. Unless otherwise provided in the applicable prospectus supplement, any reduction in the amount of Accrued Security Interest otherwise distributable on a Class of Securities by reason of the allocation to such Class of a portion of any Deferred Interest on the Mortgage Loans in the related Trust Fund will result in a corresponding increase in the Principal Balance of such Class. See "Risk Factors--Risk Associated with the Securities--Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on the Securities" and "Prepayment and Yield Considerations." When mortgagors prepay principal, or when principal is recovered through foreclosure sales or other liquidations of defaulted Mortgage Loans, or when other unscheduled principal payments are received, a full month's interest for the month of payment or recovery may not be paid or recovered, resulting in interest shortfalls to the extent that such payment or recovery is not included in the distribution to Securityholders made in the month in which it is received. Such interest shortfalls are referred to herein as "Prepayment Interest Shortfalls." The Servicer will be obligated, on or before each Distribution Date, to pay to the Securities Administrator for the benefit of Securityholders an amount (such amount, "Compensating Interest") equal to (a) the lesser of (i) the aggregate Prepayment Interest Shortfall attributable to prepayments in full with respect to such Distribution Date and (ii) the Servicing Fee for such Distribution Date or (b) such other amount described in the applicable prospectus supplement. Except as otherwise specified in the applicable prospectus supplement, any interest shortfalls arising from unscheduled principal payments in full that are not prepayments in full and any interest shortfalls resulting from the timing of the receipt of partial principal prepayments by mortgagors or of other partial unscheduled principal payments with respect to the Mortgage Loans will not be offset by Compensating Interest. 42 For any Series of Securities for which there is a Master Servicer, the Master Servicer may be required to pay Compensating Interest. The amount of Compensating Interest payable by the Master Servicer will be described in the applicable prospectus supplement. Distributions of Principal of the Securities The Securities of each Series, other than certain Classes of Strip Securities, will have a stated principal balance (the "Principal Balance") which, at any time, will equal the then maximum amount that the holder will be entitled to receive in respect of principal out of the future cash flow on the Mortgage Loans and other assets included in the related Trust Fund. The Principal Balance of a Security will be reduced to the extent of distributions of principal thereon from time to time and, if and to the extent so provided in the applicable prospectus supplement, by the amount of losses incurred in respect of the related Mortgage Loans. The Principal Balance of a Security may be increased in respect of Deferred Interest on the related Mortgage Loans to the extent provided in the applicable prospectus supplement and, in the case of Accrual Securities prior to the Distribution Date on which distributions of interest are required to commence, will be increased by any related Accrued Security Interest. If so specified in the applicable prospectus supplement, the initial aggregate Principal Balance of all Classes of Securities of a Series will be greater than the outstanding aggregate unpaid principal balance of the related Mortgage Loans as of the applicable Cut-off Date. The initial aggregate Principal Balance of a Series and each Class thereof will be specified in the applicable prospectus supplement. Distributions of principal will be made on each Distribution Date to the Class or Classes of Securities in the amounts and in accordance with the priorities specified in the applicable prospectus supplement. Certain Classes of Strip Securities with no Principal Balance are not entitled to any distributions of principal. Categories of Classes of Securities The Securities of any Series may be comprised of one or more Classes. Such Classes, in general, fall into different categories. Certain of the more typical categories are defined below. The prospectus supplement for a Series of Securities may identify the Classes which comprise such Series by reference to the following categories or another category specified in the applicable prospectus supplement. Principal Types "Accretion Directed Securities" are Securities that receives principal payments from amounts that would otherwise be distributed as interest on specified Accrual Securities. Such principal payments may be in lieu of or in addition to principal payments from principal receipts on the Mortgage Loans for the related Series. "Companion Securities" (also sometimes referred to as a "Support Securities") are Securities that are entitled to receive principal payments on any Distribution Date only if scheduled payments have been made on specified Planned Amortization Securities, Targeted Amortization Securities and/or Scheduled Amortization Securities. "Component Securities" are Securities consisting of two or more specified components (each, a "Component") as described in the applicable prospectus supplement. The Components of a Class of Component Securities may have different principal and/or interest payment characteristics but together constitute a single class and do not represent severable interests. Each Component of a Class of Component Securities may be identified as falling into one or more of the categories described herein. "Lockout Securities" are Senior Securities that are designed not to participate in, or to participate to a limited extent in (i.e., to be "locked out" of), for a specified period, the receipt of (1) principal prepayments on the Mortgage Loans that are allocated disproportionately to the Classes of Senior Securities of such Series as a group pursuant to a "shifting interest" structure and/or (2) scheduled principal payments on the Mortgage Loans that are allocated to the Senior Securities as a group. A Class of Lockout Securities will typically not be entitled to receive, or will be entitled to receive only a restricted portion of, distributions of principal prepayments and/or scheduled principal payments, as applicable, for a period of several years, during which time all or a portion of such principal payments that it would otherwise be entitled to receive in the absence of a "lockout" structure will be distributed in reduction of the Principal Balances of other Senior Securities. Lockout Securities are designed to minimize weighted average life volatility during the lockout period. 43 "Notional Amount Securities" are Securities having no Principal Balance and bearing interest on the related notional amount. The notional amount is a hypothetical amount used for calculating interest distributions. "Pass-Through Securities" are Senior Securities that are entitled to receive a specified percentage of the principal payments that are distributable to the Senior Securities or applicable group of Senior Securities (other than any Ratio Strip Class) in the aggregate on each Distribution Date until the principal balances of all the Senior Securities or applicable group of Senior Securities are reduced to zero and that is not designated as a Class of Sequential Pay Securities. "Planned Amortization Securities" (also sometimes referred to as "PAC Securities") are Securities that are designed to receive principal payments using a predetermined principal balance schedule derived by assuming two constant prepayment rates for the underlying Mortgage Loans. These two rates are the endpoints for the "structuring range" for a Class of Planned Amortization Securities. The Planned Amortization Securities in any Series may be subdivided into different categories (e.g., Planned Amortization Securities I ("PAC I") Planned Amortization Securities II ("PAC II") and so forth) derived using different structuring ranges and/or payment priorities. A Class of PAC Securities is designed to provide protection against volatility of weighted average life if prepayments occur at a constant rate within the structuring range. "Ratio Strip Securities" are Securities that are entitled to receive a constant proportion, or "ratio strip," of the principal payments on the underlying Mortgage Loans. "Scheduled Amortization Securities" (also sometimes referred to as "Scheduled Securities") are Securities that are designed to receive principal payments using a predetermined principal balance schedule but are not designated as Planned Amortization Securities or Targeted Amortization Securities. The schedule is derived by assuming either two constant prepayment rates or a single constant prepayment rate for the underlying Mortgage Loans. In the former case, the two rates are the endpoints for the "structuring range" for the Scheduled Amortization Securities and such range generally is narrower than that for a Class of Planned Amortization Securities. Typically, the Support Securities for the applicable Series of Securities generally will represent a smaller percentage of the Class of Scheduled Amortization Securities than Support Securities generally would represent in relation to a Class of Planned Amortization Securities or Targeted Amortization Securities. A Class of Scheduled Amortization Securities is generally less sensitive to weighted average life volatility as a result of prepayments than a Class of Support Securities but more sensitive than a Class of Planned Amortization Securities or Targeted Amortization Securities. "Senior Securities" are Securities that are entitled to receive payments of principal and interest on each Distribution Date prior to the Classes of Subordinated Securities. "Sequential Pay Securities" are Securities that are entitled to receive principal payments in a prescribed sequence, that do not have a predetermined principal balance schedule and that, in most cases, are entitled to receive payments of principal continuously from the first Distribution Date on which it receives principal until they are retired. A Class of Sequential Pay Securities may receive principal payments concurrently with one or more other Classes of Sequential Pay Classes. A single Class that is entitled to receive principal payments before or after other Classes in the same Series of Securities may be identified as a Class of Sequential Pay Securities. "Subordinated Securities" are Securities that are entitled to receive payments of principal and interest on each Distribution Date only after the Senior Securities and Classes of Subordinated Securities with higher priority of distributions, if any, have received their full principal and interest entitlements. "Subordinated Senior Securities" are Securities that are entitled to receive payments of principal and interest on each Distribution Date only after the Senior Securities have received their full principal and interest entitlements. "Super Senior Securities" are Senior Securities that will not bear their share of certain losses after the Classes of Subordinated Securities are no longer outstanding for so long as one or more specified Classes of Super Senior Support Securities are outstanding. "Super Senior Support Securities" are Senior Securities that bear certain losses allocated to one or more Classes of Super Senior Securities after the Classes of Subordinated Securities are no longer outstanding. 44 "Targeted Amortization Securities" (also sometimes referred to as "TAC Securities") are Securities that are designed to receive principal payments using a predetermined principal balance schedule derived by assuming a single constant prepayment rate for the underlying Mortgage Loans. A Class of TAC Securities is designed to provide some protection against shortening of weighted average life if prepayments occur at a rate exceeding the assumed constant prepayment rate used to derive the principal balances schedule of such Class of Securities. Interest Types "Accrual Securities" are Securities that accrete the amount of Accrued Security Interest otherwise distributable on such Securities, which amount will be added as principal to the Principal Balance of such Securities on each applicable Distribution Date. Such accretion may continue until some specified event has occurred or until such Accrual Securities are retired. "Fixed Rate Securities" are Securities with an interest rate that is fixed throughout the life of the Class. "Floating Rate Securities" are Securities with an interest rate that resets periodically based upon a designated index and that varies directly with changes in such index. "Interest Only Securities" are Securities that are entitled to receive some or all of the interest payments made on the Mortgage Loans and little or no principal. Interest Only Securities have either a nominal Principal Balance or a notional amount. A nominal Principal Balance represents actual principal that will be paid on the Securities. It is referred to as nominal since it is extremely small compared to other Classes. A notional amount is the amount used as a reference to calculate the amount of interest due on a Class of Interest Only Securities that is not entitled to any distributions in respect of principal. "Inverse Floating Rate Securities" are Securities with an interest rate that resets periodically based upon a designated index and that varies inversely with changes in such index and with changes in the interest rate payable on the related Class of Floating Rate Securities. "Principal Only Securities" are Securities that do not bear interest and are entitled to receive only distributions in respect of principal. "Step Coupon Securities" are Securities with a fixed interest rate that is reduced or increased (other than an increase in interest rate after the Optional Termination Date) to a different fixed rate after a specified period of time. The difference between the initial interest rate and the subsequent interest rate may be supported by a reserve fund established on the Closing Date. "Variable Rate Securities" are Securities with an interest rate that resets periodically and is calculated by reference to the rate or rates of interest applicable to the Mortgage Loans. Pass-Through Rates and Interest Rates Based on LIBOR General The index used to determine the Pass-Through Rates or interest rates for Floating Rate and Inverse Floating-Rate Securities will be set forth in the applicable prospectus supplement. The index used may be the London interbank offered rate quotation for one-month U.S. dollar deposits ("LIBOR"). The Pass-Through Rates or interest rates based on LIBOR for an Interest Accrual Period for Floating Rate and Inverse Floating Rate Securities after the initial Interest Accrual Period will be determined on the second LIBOR Business Day preceding the commencement of each Interest Accrual Period (each, a "Rate Determination Date"). A "LIBOR Business Day" is a day on which banks are open for dealing in foreign currency and exchange in London, New York and the city in which the main office of the Securities Administrator is located. 45 Determination of LIBOR On each Rate Determination Date, the Securities Administrator will determine LIBOR for the succeeding Interest Accrual Period for the Floating Rate and Inverse Floating Rate Securities of a Series on the basis of the British Banker's Association ("BBA") "Interest Settlement Rate" for one-month deposits in U.S. dollars as found on Telerate page 3750 as of 11:00 A.M. London time on such Rate Determination Date. Such Interest Settlement Rates currently are based on rates quoted by 16 BBA designated banks as being, in the view of such banks, the offered rate at which deposits are being quoted to prime banks in the London interbank market. Such Interest Settlement Rates are calculated by eliminating the four highest rates and the four lower rates, averaging the eight remaining rates, carrying the result (expressed as a percentage) out to six decimal places, and rounding to five decimal places. As used therein, "Telerate page 3750" means the display designated as page 3750 on the Moneyline Telerate Service (or such other page as may replace the Telerate page 3750 page in the Moneyline Telerate Service for purpose of displaying London interbank offered rates of major banks). If on any Rate Determination Date the Securities Administrator is unable to determine LIBOR on the basis of the method set forth in the preceding paragraph. LIBOR for the next Interest Accrual Period will be the higher of (x) LIBOR as determined on the previous Rate Determination Date or (y) the Reserve Interest Rate. The "Reserve Interest Rate" will be the rate per annum which the Securities Administrator determines to be either (A) the arithmetic mean (rounding such arithmetic mean upwards if necessary to the nearest whole multiple of 1/16%) of the one-month U.S. dollar lending rate that the banks set forth in the applicable Agreement are quoting on the relevant Rate Determination Date, to the principal London offices of at least two leading banks in the London interbank market or (B) in the event that the Securities Administrator can determine no such arithmetic mean, the lowest one-month U.S. lending rate that the banks set forth in the applicable Agreement are quoting on such Rate Determination Date to leading European banks. If on any Rate Determination Date the Securities Administrator is required but is unable to determine the Reserve Interest Rate in the manner provided in the preceding paragraph, LIBOR for the next Interest Accrual Period will be LIBOR as determined on the previous Rate Determination Date, or in the case of the first Rate Determination Date, the rate specified in the applicable Agreement. The establishment of LIBOR by the Securities Administrator and the Securities Administrator's subsequent calculation of the Pass-Through Rates or interest rates applicable to the Floating Rate and Inverse Floating Rate Securities for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding. Distributions on the Securities of Prepayment Penalties If so provided in the applicable prospectus supplement, Prepayment Penalties that are collected on the Mortgage Loans in the related Trust Fund will be distributed on each Distribution Date to the Class or Classes of Securities entitled thereto in accordance with the provisions set forth in the applicable Agreement. Allocation of Losses and Shortfalls If so provided in the prospectus supplement for a Series of Securities consisting of one or more Classes of Subordinated Securities, on any Distribution Date in respect of which Realized Losses or shortfalls in collections on the Mortgage Loans have been incurred, the amount of such Realized Losses or shortfalls will be borne first by a Class of Subordinated Securities in the priority and manner and subject to the limitations specified in such prospectus supplement. See "Description of Credit Support" for a description of the types of protection that may be included in a Trust Fund against losses and shortfalls on Mortgage Loans comprising such Trust Fund. A "Realized Loss" is: o as to any Liquidated Mortgage Loan, the unpaid principal balance thereof, plus accrued interest thereon at the Net Mortgage Interest Rate through the last day of the month in which the Mortgage Loan was liquidated, less the net proceeds from the liquidation of, and any insurance proceeds from, such Mortgage Loan and the related Mortgaged Property which are applied to the unpaid principal balance of such Mortgage Loan. 46 o as to any Mortgage Loan, a Deficient Valuation or a Debt Service Reduction. A "Liquidated Mortgage Loan" is any defaulted Mortgage Loan as to which the Servicer has determined that all amounts which it expects to recover from or on account of such Mortgage Loan have been recovered. A Realized Loss may result from the personal bankruptcy of a mortgagor if the bankruptcy court establishes the value of the Mortgaged Property at an amount less than the then unpaid principal balance of the Mortgage Loan secured by such Mortgaged Property and reduces the secured debt to such value. In such case, the applicable Trust, as the holder of such Mortgage Loan, would become an unsecured creditor to the extent of the difference between the unpaid principal balance of such mortgage loan and such reduced secured debt (such difference, a "Deficient Valuation"). In addition, a Realized Loss may result from certain other modifications of the terms of a Mortgage Loan in a bankruptcy proceeding, including the reduction (a "Debt Service Reduction") of the amount of the Monthly Payment on the related Mortgage Loan. The holders of Subordinated Securities will not be required to refund any amounts previously properly distributed to them, regardless of whether there are sufficient funds on a subsequent Distribution Date to make a full distribution to holders of each Class of Senior Securities of the same Series. Advances in Respect of Delinquencies Subject to the following limitations, the Servicer will be obligated to advance or cause to be advanced at least one business day prior to each Distribution Date from its own funds, or funds in the Collection Account that are not included in the Available Funds for such Distribution Date, or a combination of both, an amount equal to the aggregate of all payments of principal (other than any balloon payment) and interest, net of the Servicing Fee and any Fixed Retained Yield, that were due during the related Collection Period on the Mortgage Loans and that were not received by the related Determination Date (any such advance, an "Advance"). Advances with respect to Mortgage Loans are required to be made only to the extent the Servicer deems them to be recoverable from related late collections, Insurance Proceeds, condemnation proceeds or Liquidation Proceeds. The purpose of making such Advances is to maintain a regular cash flow to the Securityholders, rather than to guarantee or insure against losses. The Servicer will not be required, however, to make any Advances with respect to reductions in the amount of the monthly payments on the Mortgage Loans due to bankruptcy proceedings or the application of the Relief Act or similar state laws. Subject to the recoverability standard above, the Servicer's obligation to make Advances as to any Mortgage Loan will continue until such Mortgage Loan is paid in full by the mortgagor or until the Mortgage Loan (or the related Mortgage Property) is disposed of by the Trust Fund. All Advances will be reimbursable to the Servicer from late collections, Insurance Proceeds, condemnation proceeds and Liquidation Proceeds from the Mortgage Loan as to which such unreimbursed Advance was made. In addition, any Advances previously made in respect of any Mortgage Loan that the Servicer deems to be nonrecoverable from related late collections, Insurance Proceeds, condemnation proceeds or Liquidation Proceeds may be reimbursed to the Servicer out of general funds in the Collection Account or Distribution Account prior to the distributions on the Securities. In addition, the Servicer may withdraw from the Collection Account funds that were not included in Available Funds for the preceding Distribution Date to reimburse itself for Advances previously made. In the event the Servicer fails in its obligation to make any such Advance, the Master Servicer (if any) or the Trustee, in its capacity as successor servicer, will be obligated to make any such Advance, to the extent required in the applicable Agreement and as described in the applicable prospectus supplement. If the Servicer has recovered all Liquidation Proceeds with respect to a Mortgage Loan other than amounts it expects to receive from a primary mortgage insurer, the Servicer may advance the amount expected to be received from the primary mortgage insurer (a "PMI Advance"). If a PMI Advance is made, the Mortgage Loan will be considered a Liquidated Mortgage Loan and the PMI Advance will be considered a part of the Liquidation Proceeds. The Servicer will be entitled to reimbursement for the PMI Advance from the amounts received from the primary mortgage insurer. In the event that the amount received from the primary mortgage insurer is less than the related PMI Advance, the Servicer will be entitled to recover the amount of the unreimbursed PMI Advance from any other funds on deposit in the Collection Account. 47 If so specified in the applicable prospectus supplement, the obligations of the Servicer (or another entity) to make Advances may be secured by a cash advance reserve fund, an advance facility, a surety bond, a letter of credit or another form of limited guaranty. If applicable, information regarding the characteristics of, and the identity of any obligor on, any such surety bond, will be set forth in the applicable prospectus supplement. If and to the extent so provided in the applicable prospectus supplement, the Servicer (or another entity) will be entitled to receive interest at the rate specified therein on its outstanding Advances and will be entitled to pay itself such interest periodically from general collections on the Mortgage Loans prior to any payment to Securityholders or as otherwise provided in the applicable Agreement and described in such prospectus supplement. Reports to Securityholders The Securities Administrator, based on the information provided by the Servicer, will prepare and make available for each distribution to Securityholders of record of such Series a statement setting forth the following information, if applicable: (i) the applicable Determination Date, applicable record date and interest accrual period (if any) for calculating the distribution and the actual Distribution Date for the distribution; (ii) the amount of such distribution allocable to principal of the related Mortgage Loans, separately identifying the aggregate amount of any principal prepayments and Liquidation Proceeds and the amount of such distribution allocable to interest on the related Mortgage Loans; (iii) if the distribution to Securityholders is less than the full amount that would be distributable if there were sufficient funds available, the amount of the shortfall, the allocation of the shortfall between principal and interest and the aggregate amount of unpaid shortfalls with respect to the applicable Distribution Date and all prior Distribution Dates; (iv) the amount of principal and interest paid on each Class of Securities and the principal balance of each Class of Securities prior to and after giving effect to the distributions of principal on the Distribution Date; (v) the amount of servicing compensation (and, if applicable, master servicing compensation) with respect to the related Trust Fund and such other customary information as is required to enable Securityholders to prepare their tax returns; (vi) the amount of the aggregate Servicing Fees paid to each Servicer and, if applicable, Master Servicing fees paid to the Master Servicer and the amount by which the servicing compensation for the related Distribution Date has been reduced by interest shortfalls due to prepayments; (vii) the amount of the aggregate Securities Administrator fees (if any), Trustee fees (if any) and/or fees of a credit risk manager (if any); (viii) the amount of any Advances by the Servicer, the Master Servicer (if any) or the Trustee included in the amounts actually distributed to the Securityholders; (ix) to each holder of a Certificate entitled to the benefits of payments under any form of credit enhancement or from any Reserve Fund: (a) the amounts so distributed under any such form of credit enhancement or from any such Reserve Fund on the applicable Distribution Date; and (b) the amount of coverage remaining under any such form of credit enhancement and the balance in any such Reserve Fund, after giving effect to any payments thereunder and other amounts charged thereto on the Distribution Date; (x) any payments made or accrued relating to credit enhancement provided by a party, identifying the general purpose of the payments and the party receiving the payments; 48 (xi) the Pass-Through Rate (if any) for each Class of Securities; (xii) the total number and principal balance of any REO Properties (and market value, if available) as of the close of business on the Determination Date preceding the Distribution Date; (xiii) the aggregate amount of Realized Losses incurred during the preceding calendar month; (xiv) any expenses or indemnification amounts paid by the related Trust Fund, the specific purpose of each payment and the parties to whom these payments are made; (xv) the number and total principal balance of the Mortgage Loans as of the previous Distribution Date and related Distribution Date, and the weighted average mortgage interest rate and weighted average remaining term to maturity of the Mortgage Loans and cumulative prepayment amounts for the related Distribution Date; (xvi) the beginning and ending balances of the Distribution Account and any reserve fund for a Series; (xvii) any material modifications, extensions or waivers to Mortgage Loan terms, fees, penalties or payments since the previous Distribution Date or cumulatively since the Closing Date; (xviii) any material breaches of representations and warranties relating to the Mortgage Loans or material breaches of transaction covenants; (xix) the number and aggregate principal amounts of Mortgage Loans (A) delinquent (exclusive of Mortgage Loans in foreclosure or bankruptcy), (B) in foreclosure, as of the close of business on the last day of the calendar month preceding the Distribution Date and (C) in bankruptcy as of the close of business on the last day of the calendar month preceding the Distribution Date; (xx) the number and aggregate unpaid principal balances of the Mortgage Loans by range of current Mortgage Interest Rates; (xxi) pool factors for the related Distribution Date; (xi) the amount of Prepayment Penalties for each Distribution Date; (xii) the amount of excess cash flow (if any), for the related Distribution Date; (xiii) during the Pre-Funding Period, the remaining Pre-Funded Amount and the portion of the Pre-Funding Amount used to acquire Subsequent Mortgage Loans since the preceding Distribution Date; and (xiv) during the Pre-Funding Period, the amount remaining in the Capitalized Interest Account. In addition, within a reasonable period of time after the end of each calendar year, the Securities Administrator will furnish either directly, or through the Trustee, a report to each Securityholder of record at any time during such calendar year such information as required by the Code and applicable regulations thereunder to enable Securityholders to prepare their tax returns. In the event that an election has been made to treat the Trust Fund (or one or more segregated pools of assets therein) as a REMIC, the Trustee will be required to sign the federal and applicable state and local income tax returns of the REMIC (which will be prepared by the Securities Administrator). See "Federal Income Tax Consequences--REMICS--Taxes That May Be Imposed on the REMIC Pool--Administrative Matters." Termination The Depositor or such other party specified in the applicable prospectus supplement will have the right to purchase all of the Mortgage Loans and REO Properties in the Trust Fund and thereby effect the early retirement of the Securities, on any Distribution Date on which the aggregate principal balance of such Mortgage Loans is less than 10% (or such other percentage specified in the applicable prospectus supplement) of the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-off Date. The first Distribution Date on which such option could be exercised is referred to as the "Optional Termination Date." In the event that the option is exercised, the 49 purchase will be made at a price (the "Termination Price") generally equal to (a) the unpaid principal balance of each Mortgage Loan plus (b) the fair market value of other property (including any REO Property) in the Trust Fund plus accrued and unpaid interest. If the Depositor or such other party exercising such purchase right is subject to regulation by the OCC, the FDIC, the Federal Reserve or the Office of Thrift Supervision, however, the option may not be exercised unless the aggregate fair market value of the Mortgage Loans and REO Properties is greater than or equal to the Termination Price. In addition, no option may be exercised until any due and unpaid Reimbursement Amounts have been paid to the Trust Fund. Proceeds from such purchase will be included in Available Funds and will be distributed to the holders of the Securities in accordance with the applicable Agreement. For any Series of Securities for which an election has been made to treat the Trust Fund (or one or more segregated pools of assets therein) as a REMIC, any such purchase may be effected only pursuant to a "qualified liquidation," as defined in Code Section 860F(a)(4)(A). Any such purchase of Mortgage Loans and REO Properties will result in the early retirement of the Securities. In connection with the issuance of any net interest margin securities secured by all or a portion of certain Securities of a Series, the party with the right to exercise the option may agree to refrain from exercising this option while those securities are outstanding. In addition, the obligations created by the applicable Agreement for each Series of Securities will terminate upon the payment to Securityholders of that Series of all amounts held in the Distribution Account or by a Servicer, the Master Servicer, if any, and required to be paid to them pursuant to such Agreement following the earlier of (i) the final payment or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property acquired upon foreclosure of any Mortgage Loan subject thereto and (ii) the purchase or auction of some or all of the assets of the Trust Fund by the Depositor or other party specified in the applicable prospectus supplement, under the circumstances and in the manner set forth above. In no event, however, will the Trust Fund continue beyond the expiration of 21 years from the death of the last survivor of certain persons named in such applicable Agreement. Written notice of termination of the applicable Agreement will be given to each Securityholder, and the final distribution will be made only upon presentation and surrender of the Securities at the location to be specified in the notice of termination. If so provided in the applicable prospectus supplement, certain Classes of Securities may be purchased or redeemed in the manner set forth therein. Optional Purchases To the extent specified in the applicable prospectus supplement and subject to the provisions of the applicable Agreement, the Depositor, the Servicer or any Master Servicer may, at such party's option, repurchase (i) any Mortgage Loan which is in default during the one or more thirty-day periods specified in the applicable Agreement and (ii) any Mortgage Loan as to which the originator of such Mortgage Loan breached a representation or warranty to Wells Fargo Bank regarding the characteristics of such Mortgage Loan, at the Purchase Price. Definitive Form Distributions of principal of, and interest on, the Definitive Securities will be made directly to holders of Definitive Securities in accordance with the procedures set forth in the applicable Agreement. The Definitive Securities of a Series offered hereby and by means of the applicable prospectus supplement will be transferable and exchangeable at the office or agency maintained by the Securities Administrator or such other entity for such purpose set forth in the applicable prospectus supplement. No service charge will be made for any transfer or exchange of Definitive Securities, but the Securities Administrator or such other entity may require payment of a sum sufficient to cover any tax or other governmental charge in connection with such transfer or exchange. In the event that an election is made to treat the Trust Fund (or one or more segregated pools of assets therein) as a REMIC, the Residual Securities thereof will be issued as Definitive Securities. No legal or beneficial interest in all or any portion of any Residual Security may be transferred without the receipt by the transferor and the Securities Administrator of an affidavit signed by the transferee stating, among other things, that the transferee (i) is not a disqualified organization within the meaning of Code Section 860E(e) or an agent (including a broker, nominee, or middleman) thereof and (ii) understands that it may incur tax liabilities in excess of any cash flows generated by the residual interest. Further, the transferee must state in the affidavit that it (x) historically has paid its debts as they 50 have come due, (y) intends to pay its debts as they come due in the future and (z) intends to pay taxes associated with holding the residual interest as they become due. The transferor must certify to the Securities Administrator that, as of the time of the transfer, it has no actual knowledge that any of the statements made in the transferee affidavit are false and no reason to know that the statements made by the transferee pursuant to clauses (x), (y) and (z) of the preceding sentence are false. See "Federal Income Tax Consequences--REMICS--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities." Book-Entry Form Each Class of Book-Entry Securities initially will be represented by one or more physical certificates registered in the name of Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC"), which will be the "holder" or Securityholder of such Securities, as such terms are used herein. Any person acquiring an interest in a Book-Entry Security (a "Beneficial Owner") will hold such Securities through DTC in the United States, or, if specified in the applicable prospectus supplement, Clearstream or Euroclear in Europe, if they are participants of such systems (the "Participants"), or indirectly through organizations which are Participants in such systems (the "Indirect Participants"). Clearstream and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositaries which in turn will hold such positions in customers' securities accounts in the depositaries' names on the books of DTC. Citibank will act as depositary for Clearstream and JPMorgan Chase Bank will act as depositary for Euroclear (in such capacities, individually the "Relevant Depositary" and collectively the "European Depositaries"). No Beneficial Owner will be entitled to receive a Definitive Security representing such person's interest in the Book-Entry Security, except as set forth below. Unless and until Definitive Securities are issued under the limited circumstances described herein, all references to actions taken by Securityholders or holders, in the case of the Book-Entry Securities, refer to actions taken by DTC upon instructions from its DTC Participants, and all references herein to distributions, notices, reports and statements to Securityholders or holders, in the case of the Book-Entry Securities, refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the Book-Entry Securities, as the case may be, for distribution to Beneficial Owners in accordance with DTC procedures. DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities for its participating organizations ("DTC Participants") and to facilitate the clearance and settlement of securities transactions among DTC Participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers (which may include any underwriter identified in the prospectus supplement applicable to any Series), banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to Indirect Participants, including banks, brokers, dealers, trust companies and other institutions that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly. The brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary") that maintains a Beneficial Owner's account will record the Beneficial Owner's ownership of a Book-Entry Security in its records for such purpose. In turn, the Financial Intermediary's ownership of such Book-Entry Security will be recorded on the records of DTC (or of a DTC Participant that acts as agent for the Financial Intermediary, whose interest will in turn be recorded on the records of DTC, if the Beneficial Owner's Financial Intermediary is not a DTC Participant, and, if applicable, on the records of Clearstream or Euroclear, as appropriate). Beneficial Owners will receive all distributions of principal of and interest on the Book-Entry Securities from the Paying Agent through DTC and DTC Participants. While the Book-Entry Securities are outstanding, under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among DTC Participants on whose behalf it acts with respect to the Book-Entry Securities and is required to receive and transmit distributions of principal of, and interest on, the Book-Entry Securities. Participants and Indirect Participants with whom Beneficial Owners have accounts with respect to Book- Entry Securities are similarly required to make book-entry transfers and receive and transmit such distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates 51 representing their respective interests in the Book-Entry Securities, the Rules provide a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. Unless and until Definitive Securities are issued, Beneficial Owners who are not Participants may transfer ownership of Book-Entry Securities only through Participants and Indirect Participants by instructing such Participants and Indirect Participants to transfer Book-Entry Securities, by book-entry transfer, through DTC, for the account of the purchasers of such Book-Entry Securities, which account is maintained with their respective Participants. Under the Rules and in accordance with DTC's normal procedures, transfers of ownership of Book-Entry Securities will be executed through DTC and the accounts of the respective Participants at DTC will be debited and credited. Similarly, the Participants and Indirect Participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing Beneficial Owners. Beneficial Owners will not be recognized by the Trustee or Securities Administrator as Securityholders and Beneficial Owners will be permitted to exercise the rights of Securityholders only indirectly through DTC and its DTC Participants. Because DTC can only act on behalf of DTC Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a Beneficial Owner to pledge Book-Entry Securities to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Book-Entry Securities, may be limited due to the lack of a physical certificate for such Book-Entry Securities. If specified in the applicable prospectus supplement, the Book-Entry Securities will be offered globally and may be held by investors through any of DTC, Clearstream or Euroclear. These Book-Entry Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Non-U.S. holders (as described below) of Book-Entry Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Investors electing to hold their Book-Entry Securities through DTC with respect to such global offering will follow the settlement practices applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Book-Entry Securities through Clearstream or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no 'lock-up' or restricted period. Book-Entry Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. Clearstream International, L-2967 Luxembourg ("Clearstream"), a Luxembourg limited liability company, was formed in January 2000 through the merger of Cedel International and Deutsche Boerse Clearing. Clearstream is registered as a bank in Luxembourg, and as such is subject to regulation by the Luxembourg Monetary Authority, which supervises Luxembourg banks. Clearstream holds securities for its customers ("Clearstream Participants") and facilitates the clearance and settlement of securities transactions by electronic book-entry transfers between their accounts. Clearstream provides various services, including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream also deals with domestic securities markets in several countries through established depository and custodial relationships. Clearstream has established an electronic bridge with the Euroclear Operator in Brussels to facilitate settlement of trades between systems. Clearstream currently accepts over 200,000 securities issues on its books. Clearstream's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream's United States customers are limited to securities brokers and dealers and banks. Currently, Clearstream has approximately 2,500 customers located in over 80 countries, including all major European countries, Canada and the United States. Indirect access to Clearstream 52 is available to other institutions which clear through or maintain a custodial relationship with an account holder of Clearstream. The Euroclear System ("Euroclear") was created in 1968 to hold securities for its participants ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may be settled in a variety of currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator. Euroclear plc establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions on the Book-Entry Securities will be made on each Distribution Date to Cede, as nominee of DTC. DTC will be responsible for crediting the amount of such payments to the accounts of the applicable DTC Participants in accordance with DTC's normal procedures. Each DTC Participant will be responsible for disbursing such payments to the Beneficial Owners of the Book-Entry Securities that it represents and to each Financial Intermediary for which it acts as agent. Each such Financial Intermediary will be responsible for disbursing funds to the Beneficial Owners of the Book-Entry Securities that it represents. Under a book-entry format, Beneficial Owners of the Book-Entry Securities may experience some delay in their receipt of payments, since such payments will be forwarded by the Paying Agent to Cede. Distributions with respect to Securities held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by the Relevant Depositary. Such distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Federal Income Tax Consequences--REMICS--Taxation of Certain Foreign Investors" and "--Backup Withholding" herein. DTC has advised the Depositor that, unless and until Definitive Securities are issued, DTC will take any action the holders of the Book-Entry Securities are permitted to take under the Pooling and Servicing Agreement only at the direction of one or more DTC Participants to whose DTC accounts the Book-Entry Securities are credited, to the extent that such actions are taken on behalf of Financial Intermediaries whose holdings include such Book-Entry Securities. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Securityholder under the Pooling and Servicing Agreement on behalf of a Clearstream Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to the ability of the Relevant Depositary to effect such actions on its behalf through DTC. DTC may take actions, at the direction of the related DTC Participants, with respect to some Book-Entry Securities which conflict with actions taken with respect to other Book-Entry Securities. Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Book-Entry Securities among Participants, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. 53 None of the Depositor, the Sponsor, the Servicer, the Securities Administrator or the Trustee will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Securities held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. In the event of the insolvency of DTC, a Participant or an Indirect Participant in whose name Book-Entry Securities are registered, the ability of the Beneficial Owners of such Book-Entry Securities to obtain timely payment and, if the limits of applicable insurance coverage by the Securities Investor Protection Corporation are exceeded or if such coverage is otherwise unavailable, ultimate payment, of amounts distributable with respect to such Book-Entry Securities may be impaired. The Book-Entry Securities will be converted to Definitive Securities and reissued to Beneficial Owners or their nominees, rather than to DTC or its nominee, only if (i) the Securities Administrator is advised in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the Book-Entry Securities and the Depositor or the Securities Administrator is unable to locate a qualified successor or (ii) after the occurrence of any other event specified in the applicable prospectus supplement. Upon the occurrence of any event described in the immediately preceding paragraph, the Securities Administrator will be required to notify all Beneficial Owners through DTC Participants of the availability of Definitive Securities. Upon surrender by DTC of the physical certificates representing the Book-Entry Securities and receipt of instructions for re-registration, the Securities Administrator will reissue the Book-Entry Securities as Definitive Securities to Beneficial Owners. The procedures relating to payment on and transfer of Securities initially issued as Definitive Securities will thereafter apply to those Book-Entry Securities that have been reissued as Definitive Securities. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. Trading between DTC Participants. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage loan asset backed certificates issues in same-day funds. Trading between Clearstream and/or Euroclear Participants. Secondary market trading between Clearstream Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC Seller and Clearstream or Euroclear Purchaser. When Book-Entry Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream or Euroclear through a Clearstream Participant or Euroclear Participant at least one business day prior to settlement. Clearstream or Euroclear will instruct the respective Depositary, as the case may be, to receive the Book-Entry Securities against payment. Payment will include interest accrued on the Book-Entry Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of either a 360-day year comprised of 30-day months or the actual number of days in such interest accrual period and a year assumed to consist of 360 days, as applicable. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Book-Entry Securities. After settlement has been completed, the Book-Entry Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Book-Entry Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to 54 preposition funds for settlement, either from cash on hand or existing line of credit, as they would for any settlement occurring within Clearstream or Euroclear. Under this approach, they may take on credit exposure to Clearstream or Euroclear until the Book-Entry Securities are credited to their accounts one day later. As an alternative, if Clearstream or Euroclear has extended a line of credit to them, Clearstream Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream Participants or Euroclear Participants purchasing Book-Entry Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Book-Entry Securities would accrue from the value date. Therefore, in many cases the investment income on the Book-Entry Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each Clearstream Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Book-Entry Securities to the respective European Depositary for the benefit of Clearstream Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between Clearstream or Euroclear Seller and DTC Purchaser. Due to time zone differences in their favor, Clearstream Participants and Euroclear Participants may employ their customary procedures for transactions in which Book-Entry Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream or Euroclear through a Clearstream Participant or Euroclear Participant at least one business day prior to settlement. In these cases Clearstream or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Book-Entry Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Book-Entry Securities from and including the last coupon payment to and excluding the settlement date on the basis of either a 360-day year comprised of 30-day months or the actual number of days in such interest accrual period and a year assumed to consist of 360 days, as applicable. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream or Euroclear and that purchase Book-Entry Securities from DTC Participants for delivery to Clearstream Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques, as set forth below, should be readily available to eliminate this potential problem: (a) borrowing through Clearstream or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream or Euroclear accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Book-Entry Securities in the U.S. from a Participant no later than one day prior to settlement, which would give the Book-Entry Securities sufficient time to be reflected in their Clearstream or Euroclear account in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Participant or Euroclear Participant. 55 Certain U.S. Federal Income Tax Documentation Requirements of Book-Entry Securities A Beneficial Owner of Book-Entry Securities holding securities through Clearstream or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption from non-U.S. Persons (Form W-8BEN) Beneficial Owners of Book-Entry Securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of such change. Exemption from non-U.S. Persons with effectively connected income (Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or reduced rate for non-U.S. Persons resident in treaty countries (Form W-8BEN). Non-U.S. Persons that are Beneficial Owners residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form W-8BEN. Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The Beneficial Owner of a Book-Entry Security or, in the case of a Form W-8ECI filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed. See "Federal Income Tax Consequences--REMICS--Taxation of Certain Foreign Investors" in this prospectus. Neither this discussion nor the discussion under "Federal Income Tax Consequences" herein covers all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders in Book-Entry Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their purchase, holding and disposing of the Book-Entry Securities. DESCRIPTION OF CREDIT SUPPORT General Credit support may be provided with respect to any Series of Securities in one or more of the methods described below. The applicable prospectus supplement will describe the material terms of such credit enhancement, including any limits on the timing or amount of such credit enhancement or any conditions that must be met before such credit enhancement may be accessed. If the provider of the credit enhancement is liable or contingently liable to provide payments representing 10% or more of the cash flow supporting any offered Class of Securities, the applicable prospectus supplement will disclose the name of the provider, the organizational form of the provider, the general character of the business of the provider and the financial information required by Item 1114(b)(2) of Regulation AB (17 C.F.R. 229.1114). Copies of the limited guarantee, financial guaranty insurance policy, surety bond, letter of credit, pool insurance policy, mortgagor bankruptcy bond, special hazard insurance policy or Cash Flow Agreement, if any, relating to a Series of Securities will be filed with the SEC as an exhibit to a Current Report on Form 8-K. 56 Subordinated Securities If so specified in the applicable prospectus supplement, one or more Classes of Securities of a Series may be Subordinated Securities. To the extent specified in the applicable prospectus supplement, the rights of the holders of Subordinated Securities to receive distributions of principal and interest from the Distribution Account on any Distribution Date will be subordinated to such rights of the holders of Senior Securities. If so provided in the applicable prospectus supplement, the subordination of a Class may apply only in the event of (or may be limited to) certain types of losses or shortfalls. The applicable prospectus supplement will set forth information concerning the amount of subordination of a Class or Classes of Subordinated Securities in a Series, the circumstances in which such subordination will be applicable and the manner, if any, in which the amount of subordination will be effected. Overcollateralization If specified in the applicable prospectus supplement, subordination provisions of a Series may be used to accelerate to a limited extent the amortization of one or more Classes of Securities relative to the amortization of the related Mortgage Loans. The accelerated amortization is achieved by the application of certain excess interest to the payment of principal of one or more Classes of Securities. This acceleration feature creates, with respect to the Mortgage Loans or a group of Mortgage Loans, overcollateralization which results from the excess of the aggregate principal balance of the related Mortgage Loans, or group of Mortgage Loans, over the Principal Balance of the related Class or Classes of Securities. This acceleration may continue for the life of the related Securities, or may have a shorter duration. In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to certain provisions specified in the applicable prospectus supplement, this limited acceleration feature may cease, unless necessary to maintain the required level of overcollateralization. In addition to overcollateralization which is built up during the life of the related Series as discussed in the preceding paragraph, if specified in the applicable prospectus supplement, a Series may contain overcollateralization at the initial issuance of the Securities of such Series. Subject to certain provisions specified in the applicable prospectus supplement, the level of overcollateralization at initial issuance may increase, decrease or remain constant for the life of the related Securities. Excess Interest If specified in the applicable prospectus supplement, the Mortgage Loans in a Trust Fund may generate more interest than is necessary to pay the interest earned on the Classes of Securities each month. The excess interest may be used to maintain overcollateralization, to pay interest that was previously earned but not paid to certain Classes of Securities and to reimburse certain Classes of Securities for losses and certain shortfalls that they experienced previously. Cross-Collateralization If specified in the applicable prospectus supplement, the beneficial ownership of separate groups of Mortgage Loans included in a Trust Fund may be evidenced by separate Classes of Securities. In this case, credit support may be provided by a cross collateralization feature which requires that distributions be made to certain Classes from Mortgage Loan payments that would otherwise be distributed to Subordinated Securities evidencing a beneficial ownership interest in other loan groups within the same Trust Fund. As a result, the amount of credit enhancement available to a Class of Securities against future losses on the Mortgage Loans in which that Class represents an interest may be reduced as the result of losses on a group of Mortgage Loans in which that Class has no interest. The applicable prospectus supplement for a Series that includes a cross collateralization feature will describe its specific operation. Limited Guarantee If specified in the prospectus supplement with respect to a Series of Securities, credit enhancement may be provided in the form of a limited guarantee issued by a guarantor named in such prospectus supplement. The limited guarantee may cover deficiencies in amounts otherwise payable on some or all of the Securities of a Series. The limited guarantee may cover timely distributions of interest or full distributions of principal or both on the basis 57 of a schedule of principal distributions set forth in or determined in the manner specified in the applicable prospectus supplement. The limited guarantee may provide additional protection against losses on the Mortgage Loans included in a Trust Fund, provide payment of administrative expenses, or establish a minimum reinvestment rate on the payments made on the Mortgage Loans or principal payment rate on the Mortgage Loans. A limited guarantee will be limited in amount to the dollar amount or percentage of the principal balance of the Mortgage Loans or Securities specified in the applicable prospectus supplement. Financial Guaranty Insurance Policy or Surety Bond If specified in the prospectus supplement with respect to a Series of Securities, credit enhancement may be provided in the form of a financial guaranty insurance policy or a surety bond issued by one or more insurers named in such prospectus supplement. The financial guaranty insurance policy will guarantee, with respect to one or more Classes of Securities of the related Series, timely distributions of interest and ultimate distributions of principal at the dates set forth in or determined in the manner specified in the prospectus supplement. If specified in the prospectus supplement, the financial guaranty insurance policy will also guarantee against any payment made to a Securityholder that is subsequently recovered as a preferential transfer under the Bankruptcy Code. Letter of Credit If specified in the prospectus supplement for a Series of Securities, credit enhancement may be provided by a letter of credit issued by a bank or other financial institution specified in the applicable prospectus supplement. Under the letter of credit, the provider will be obligated to pay up to an aggregate fixed dollar amount, net of previous drawings on the letter, equal to the percentage specified in the prospectus supplement of the unpaid principal balance of the Mortgage Loans or of one or more Classes of Securities. If specified in the prospectus supplement, the letter of credit may permit drawings in the event of losses not covered by insurance policies or other credit support, such as losses arising from damage not covered by standard hazard insurance policies, losses resulting from the bankruptcy of a borrower and the application of certain provisions of the Bankruptcy Code, or losses resulting from denial of insurance coverage due to misrepresentations in connection with the origination of a Mortgage Loan. The amount available under the letter of credit will, in all cases, be reduced to the extent of the unreimbursed payments previously paid. The obligations of the provider under the letter of credit for each Series of Securities will expire at the earlier of the date specified in the prospectus supplement or the termination of the Trust. Pool Insurance Policies If specified in the prospectus supplement relating to a Series of Securities, credit enhancement may be provided by a mortgage pool insurance policy for the Mortgage Loans in the related Trust Fund. Each mortgage pool insurance policy, in accordance with the limitations described in this prospectus and in the prospectus supplement, if any, will cover any loss by reason of default on a Mortgage Loan in an amount equal to a percentage specified in the applicable prospectus supplement of the unpaid principal balance of the Mortgage Loans. As described under "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements-Realization of Defaulted Mortgage Loans; Servicing Advances," the Servicer generally will be required to use its best efforts to maintain the mortgage pool insurance policy and to present claims to the pool insurer. The mortgage pool insurance policies, however, are not blanket policies against loss, since claims may only be made respecting particular defaulted Mortgage Loans and only upon satisfaction of specified conditions precedent described below. The mortgage pool insurance policies will generally not cover losses due to a failure to pay or denial of a claim under a primary mortgage insurance policy, regardless of the reason for nonpayment. As more specifically provided in the applicable prospectus supplement, each mortgage pool insurance policy will provide for conditions under which claims may be presented and covered under the policy. Upon satisfaction of these conditions, the pool insurer will have the option either (a) to purchase the property securing the defaulted Mortgage Loan at a price equal to its unpaid principal balance plus accrued and unpaid interest at the applicable Mortgage Interest Rate to the date of purchase plus certain Advances, or (b) to pay the amount by which the sum of the unpaid principal balance of the defaulted Mortgage Loan plus accrued and unpaid interest at the Mortgage Interest Rate to the date of payment of the claim plus certain Advances exceeds the proceeds received from an approved sale of the Mortgaged Property, in either case net of certain amounts paid or assumed to have been paid under any related primary mortgage insurance policy. 58 Certificateholders may experience a shortfall in the amount of interest payable on the related Securities in connection with the payment of claims under a mortgage pool insurance policy because the pool insurer is only required to remit unpaid interest through the date a claim is paid rather than through the end of the month in which the claim is paid. In addition, Securityholders may also experience losses with respect to the related Securities in connection with payments made under a mortgage pool insurance policy to the extent that the related Servicer expends funds to cover unpaid real estate taxes or to repair the related Mortgaged Property in order to make a claim under a mortgage pool insurance policy, as those amounts will not be covered by payments under the policy and will be reimbursable to the related Servicer from funds otherwise payable to the Securityholders. If any Mortgaged Property securing a defaulted Mortgage Loan is damaged and proceeds, if any from the related hazard insurance policy or applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the mortgage pool insurance policy, a Servicer will generally not be required to expend its own funds to restore the damaged property unless it determines that (a) restoration will increase the proceeds to one or more Classes of Securities on liquidation of the Mortgage Loan after reimbursement of the related Servicer for its expenses and (b) the expenses will be recoverable by it through Liquidation Proceeds or insurance proceeds. A mortgage pool insurance policy and some primary mortgage insurance policies will generally not insure against loss sustained by reason of a default arising from, among other things, fraud or negligence in the origination or servicing of a Mortgage Loan, including misrepresentation by the mortgagor, the seller or other persons involved in the origination of the Mortgage Loan, failure to construct a mortgaged property in accordance with plans and specifications or bankruptcy, unless as specified in the applicable prospectus supplement, an endorsement to the mortgage pool insurance policy provides for insurance against that type of loss. The original amount of coverage under each mortgage pool insurance policy will be reduced over the life of the related Series of Securities by the aggregate amount of claims paid less the aggregate of the net amounts realized by the pool insurer upon disposition of all foreclosed properties. The amount of claims paid includes some expenses incurred by the related Servicer or Master Servicer (if any) as well as accrued interest on delinquent Mortgage Loans to the date of payment of the claim. Accordingly, if aggregate net claims paid under any mortgage pool insurance policy reach the original policy limit, coverage under that mortgage pool insurance policy will be exhausted and any further losses will be borne by the related Securities, to the extent not covered by other credit enhancements. Special Hazard Insurance Policies If specified in the prospectus supplement relating to a Series of Securities, any insurance policy covering special hazard losses obtained for a Trust will be issued by the insurer named in the applicable prospectus supplement. Each special hazard insurance policy will be subject to limitations described in this paragraph and in the applicable prospectus supplement, if any, and will protect the related Securityholders from special hazard losses. Aggregate claims under a special hazard insurance policy will be limited to the amount set forth in the applicable Agreement and will be subject to reduction as described in the applicable Agreement. A special hazard insurance policy will provide that no claim may be paid unless hazard and, if applicable, flood insurance on the Mortgaged Property securing the Mortgage Loan has been kept in force and other protection and preservation expenses have been paid by the related Servicer or Master Servicer, as the case may be. In accordance with the foregoing limitations, a special hazard insurance policy will provide that, where there has been damage to the Mortgaged Property securing a foreclosed Mortgage Loan, title to which has been acquired by the insured, and to the extent the damage is not covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the related Servicer or Master Servicer, as the case may be, the insurer will pay the lesser of (i) the cost of repair or replacement of the related Mortgaged Property or (ii) upon transfer of the property to the insurer, the unpaid principal balance of the Mortgage Loan at the time of acquisition of the related property by foreclosure or deed in lieu of foreclosure, plus accrued interest at the Mortgage Interest Rate to the date of claim settlement and certain expenses incurred by the related Servicer or Master Servicer, as the case may be, with respect to the related Mortgaged Property. If the Mortgaged Property is transferred to a third party in a sale approved by the special hazard insurer, the amount that the special hazard insurer will pay will be the amount under (ii) above reduced by the net proceeds of the sale of the Mortgaged Property. If the unpaid principal balance plus accrued interest and certain Advances is 59 paid by the special hazard insurer, the amount of further coverage under the related special hazard insurance policy will be reduced by that amount less any net proceeds from the sale of the Mortgaged Property. Any amount paid as the cost of repair of the property will further reduce coverage by that amount. Restoration of the property with the proceeds described under (i) above will satisfy the condition under any mortgage pool insurance policy that the property be restored before a claim under the policy may be validly presented with respect to the defaulted Mortgage Loan secured by the related Mortgaged Property. The payment described under (ii) above will render presentation of a claim relating to a Mortgage Loan under the related mortgage pool insurance policy unnecessary. Therefore, so long as a mortgage pool insurance policy remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or of the unpaid principal balance of the related Mortgage Loan plus accrued interest and certain Advances will not affect the total insurance proceeds paid to Securityholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and mortgage pool insurance policy. Mortgagor Bankruptcy Bond If specified in the applicable prospectus supplement, a bankruptcy bond to cover losses resulting from proceedings under the federal Bankruptcy Code with respect to a Mortgage Loan will be issued by an insurer named in the applicable prospectus supplement. Each bankruptcy bond will cover, to the extent specified in the applicable prospectus supplement, certain losses resulting from a reduction by a bankruptcy court of scheduled payments of principal and interest on a Mortgage Loan or a reduction by the court of the unpaid principal balance of a Mortgage Loan and will cover certain unpaid interest on the amount of a principal reduction from the date of the filing of a bankruptcy petition. The required amount of coverage under each bankruptcy bond will be set forth in the applicable prospectus supplement. Reserve Funds If specified in the applicable prospectus supplement, credit enhancement with respect to a Series of Securities may be provided by the establishment of one or more reserve funds for the Series. Any reserve fund for a Series may be funded (i) by a deposit of cash, U.S. Treasury securities or instruments evidencing entitlements to principal or interest payments, letters of credit, demand notes, certificates of deposit or a combination thereof in the aggregate amount specified in the applicable prospectus supplement or (ii) by the deposit from time to time of certain amounts received on or in respect of the related Mortgage Loans, as specified in the applicable prospectus supplement. Reserve funds may be established to provide limited protection, in an amount satisfactory to each Rating Agency, against certain interest shortfalls arising from the timing of principal prepayments, certain types of losses not covered by insurance policies or other credit support, such as losses arising from damage not covered by standard hazard insurance policies, losses resulting from the bankruptcy of a borrower and the application of certain provisions of the Bankruptcy Code or losses resulting from denial of insurance coverage due to fraud or misrepresentation in connection with the origination of a Mortgage Loan. Following each Distribution Date amounts in a reserve fund in excess of any required reserve fund amount may be released from the reserve fund under the conditions and to the extent specified in the applicable prospectus supplement and will not be available for further application to the related Securities. If specified in the prospectus supplement, any reinvestment income or other gain from investments in Eligible Investments will be credited to the related reserve fund for the Series, and any loss resulting from the investments will be charged to the reserve fund. If specified in the applicable prospectus supplement, amounts received by the Trustee (or other party specified in the applicable prospectus supplement) under any Cash Flow Agreement as described above under "Description of the Trust Funds-Cash Flow Agreements" may also be used to provide credit enhancement for one or more Classes of Securities. 60 PREPAYMENT AND YIELD CONSIDERATIONS General The yield on any Offered Security will depend on the price paid by the holder of the Security (the "Securityholder"), the Pass-Through Rate or interest rate of the Security, the receipt and timing of receipt of distributions on the Security and the weighted average life of the Mortgage Loans in the related Trust Fund (which may be affected by prepayments, defaults, liquidations or repurchases). See "Risk Factors--Risks Associated with the Securities--Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on the Securities." Pass-Through Rates and Interest Rates Any Class of Securities of a Series may have a fixed Pass-Through Rate or interest rate, or a Pass-Through Rate or interest rate which varies based on changes in an index or based on changes with respect to the underlying Mortgage Loans (such as, for example, varying on the basis of changes in the weighted average Mortgage Interest Rate of the underlying Mortgage Loans). The prospectus supplement for each Series will specify the range and the weighted average of the Mortgage Interest Rates and, if applicable, Mortgage Interest Rates for the Mortgage Loans underlying such Series as of the Cut-off Date. If the Trust Fund includes adjustable rate Mortgage Loans or includes Mortgage Loans with different Mortgage Interest Rates, the weighted average Mortgage Interest Rate may vary from time to time as set forth below. See "Description of the Trust Funds." The prospectus supplement for a Series will also specify the initial Pass-Through Rate or interest rate for each Class of Securities of such Series and will specify whether each such Pass-Through Rate or interest rate is fixed or is variable. The Mortgage Interest Rate for any adjustable rate Mortgage Loan will change with any changes in the index specified in the applicable prospectus supplement on which such Mortgage Interest Rate adjustments are based, subject to any applicable periodic or aggregate caps or floors on the related Mortgage Interest Rate. The weighted average Mortgage Interest Rate with respect to any Series may vary due to changes in the Mortgage Interest Rates of adjustable rate Mortgage Loans, to the timing of the Mortgage Interest Rate readjustments of such Mortgage Loans and to different rates of payment of principal of fixed rate Mortgage Loans or adjustable rate Mortgage Loans bearing different Mortgage Interest Rates. Scheduled Delays in Distributions At the date of initial issuance of the Securities of each Series offered hereby, the initial purchasers of a Class of Securities may be required to pay accrued interest at the applicable Pass-Through Rate or interest rate for such Class from the Cut-off Date for such Series to, but not including, the date of issuance. The effective yield to Securityholders will be below the yield otherwise produced by the applicable Pass-Through Rate or interest rate because the distribution of principal and interest which is due on each Due Date will not be made until the 25th day (or, if such day is not a business day, the first business day following the 25th day) of the month in which such Due Date occurs (or until such other Distribution Date specified in the applicable prospectus supplement). Effect of Principal Prepayments When a Mortgage Loan is prepaid in full, the mortgagor pays interest on the amount prepaid only to the date of prepayment and not thereafter. Liquidation Proceeds and amounts received in settlement of insurance claims are also likely to include interest only to the time of payment or settlement. When a Mortgage Loan is prepaid in full or in part, an interest shortfall may result depending on the timing of the receipt of the prepayment and the timing of when those prepayments are passed through to Securityholders. To partially mitigate this reduction in yield with respect to prepayments in full, the Servicer (or, if so specified in the applicable prospectus supplement, the Master Servicer) will be obligated, on or before each Distribution Date, to pay Compensating Interest. No comparable interest shortfall coverage will be provided by the Servicer with respect to liquidations of any Mortgage Loans or partial principal payments. Any interest shortfall arising from prepayments not so covered or from liquidations will 61 be covered as provided in the applicable prospectus supplement. See "Description of the Securities--Distributions of Interest on the Securities." A lower rate of principal prepayments than anticipated would negatively affect the total return to investors in any Securities of a Series that are offered at a discount to their principal amount and a higher rate of principal prepayments than anticipated would negatively affect the total return to investors in the Securities of a Series that are offered at a premium to their principal amount. The yield on Securities that are entitled solely or disproportionately to distributions of principal or interest may be particularly sensitive to prepayment rates, and further information with respect to yield on such Securities will be included in the applicable prospectus supplement. Weighted Average Life of Securities The Mortgage Loans may be prepaid in full or in part at any time. Mortgage Loans with a Lock-out Period or a Prepayment Penalty provision, to the extent enforceable, generally would be expected to experience a lower rate of principal prepayments than otherwise identical Mortgage Loans without such provisions, with shorter Lock-out Periods or with lower Prepayment Penalties. Fixed rate Mortgage Loans generally will contain due-on-sale clauses permitting the mortgagee to accelerate the maturities of the Mortgage Loans upon conveyance of the related Mortgaged Properties, and adjustable rate Mortgage Loans generally will permit creditworthy borrowers to assume the then-outstanding indebtedness on the Mortgage Loans. Prepayments on Mortgage Loans are commonly measured relative to a prepayment standard or model. The prospectus supplement for each Series of Securities may describe one or more such prepayment standards or models and contain tables setting forth the weighted average life of each Class and the percentage of the original aggregate Principal Balance of each Class that would be outstanding on specified Distribution Dates for such Series and the projected yields to maturity on certain Classes thereof, in each case based on the assumptions stated in such prospectus supplement, including assumptions that prepayments on the Mortgage Loans are made at rates corresponding to various percentages of the prepayment standard or model specified in such prospectus supplement. There is no assurance that prepayment of the Mortgage Loans underlying a Series of Securities will conform to any level of the prepayment standard or model specified in the applicable prospectus supplement. A number of factors, including but not limited to homeowner mobility, economic conditions, natural disasters, changes in mortgagors' housing needs, job transfers, unemployment or, in the case of borrowers relying on commission income and self-employed borrowers, significant fluctuations in income or adverse economic conditions, mortgagors' net equity in the properties securing the mortgage loans, including the use of second or "home equity" mortgage loans by mortgagors or the use of the properties as second or vacation homes, servicing decisions, enforceability of due-on-sale clauses, mortgage market interest rates, mortgage recording taxes, competition among mortgage loan originators resulting in reduced refinancing costs, reduction in documentation requirements and willingness to accept higher loan-to-value ratios, and the availability of mortgage funds, may affect prepayment experience. In general, however, if prevailing mortgage interest rates fall below the Mortgage Interest Rates borne by the Mortgage Loans underlying a Series of Securities, the prepayment rates of such Mortgage Loans are likely to be higher than if prevailing rates remain at or above the rates borne by such Mortgage Loans. Conversely, if prevailing mortgage interest rates rise above the Mortgage Interest Rates borne by the Mortgage Loans, the Mortgage Loans are likely to experience a lower prepayment rate than if prevailing rates remain at or below such Mortgage Interest Rates. However, there can be no assurance that prepayments will rise or fall according to such changes in mortgage interest rates. It should be noted that Securities of a Series may evidence an interest in a Trust Fund with different Mortgage Interest Rates. Accordingly, the prepayment experience of such Securities will to some extent be a function of the mix of interest rates of the Mortgage Loans. The amount of equity in a Mortgaged Property may also affect the rate of prepayments because as the amount of equity in the Mortgaged Property increases, the related borrower is more likely to enter into a "cash-out" refinancing of the Mortgaged Property, which will result in a prepayment in full of the Mortgage Loan. In addition, the terms of the applicable Agreement will require the Servicer to enforce any due-on-sale clause to the extent it has knowledge of the conveyance or the proposed conveyance of the underlying Mortgaged Property; provided, however, that any enforcement action that the Servicer determines would jeopardize any recovery under any related primary mortgage insurance policy will not be required and provided, further, that the Servicer may permit the assumption of defaulted Mortgage Loans. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Realization Upon Defaulted Mortgage Loans; Servicing Advances," "--Due-on-Sale Provisions" and "Certain Legal Aspects of the 62 Mortgage Loans--'Due-on-Sale' Clauses" for a description of certain provisions of the Agreements and certain legal developments that may affect the prepayment experience on the Mortgage Loans. Prepayments on the Mortgage Loans are also affected by the obligation or right of the Depositor, Servicer or other party specified in the applicable prospectus supplement to repurchase or purchase certain or all of the Mortgage Loans under certain circumstances. The Depositor will be obligated, under certain circumstances, to repurchase certain of the Mortgage Loans. In addition, if specified in the applicable prospectus supplement, the applicable Agreement will permit, but not require, the Depositor, and the terms of certain insurance policies relating to the Mortgage Loans may permit the applicable insurer, to purchase any Mortgage Loan which is in default or as to which default is reasonably foreseeable. The proceeds of any such purchase or repurchase will be deposited in the related Collection Account or Distribution Account (as specified in the applicable Agreement) and such purchase or repurchase will have the same effect as a prepayment in full of the related Mortgage Loan. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Assignment of Mortgage Loans; Representations and Warranties; Repurchases" and "Description of the Securities--Optional Purchases." The Depositor or such other party as specified in the applicable prospectus supplement will have the option to purchase all, but not less than all, of the Mortgage Loans in any Trust Fund under the limited conditions specified herein under "Description of the Securities--Termination." In addition, if so specified in the applicable prospectus supplement, the Depositor or another person identified therein will have the option to purchase certain classes of Securities under the limited conditions specified in such prospectus supplement. For any Series of Securities for which an election has been made to treat the Trust Fund (or one or more segregated pools of assets therein) as a REMIC, any such purchase or repurchase may be effected only pursuant to a "qualified liquidation," as defined in Code Section 860F(a)(4)(A). See "Description of the Securities--Termination." Refinancings At the request of the mortgagor, a Servicer, including Wells Fargo Bank, may allow the refinancing of a Mortgage Loan in any Trust Fund serviced by such Servicer by accepting prepayments thereon and permitting a new loan secured by a Mortgage on the same property. Upon such refinancing, the new loan will not be included in the Trust Fund. A mortgagor may be legally entitled to require the Servicer to allow such a refinancing. Any such refinancing will have the same effect as a prepayment in full of the related Mortgage Loan. 63 DESCRIPTION OF THE AGREEMENTS Agreements Applicable to a Series REMIC Securities or Grantor Trust Securities Securities representing interests in a Trust Fund, or a portion thereof, that the Securities Administrator will elect to have treated as REMIC Securities or Grantor Trust Securities will be issued, and the related Trust Fund will be created, pursuant to a pooling and servicing agreement (a "Pooling and Servicing Agreement") among the Depositor, the Trustee, the Securities Administrator and the Servicer or Master Servicer, as applicable. The Mortgage Loans of such Trust Fund will be transferred to the Trust Fund and thereafter serviced in accordance with the terms of the Pooling and Servicing Agreement. In the event there are multiple Servicers of the Mortgage Loans of such Trust Fund, each Servicer will perform its servicing functions pursuant to a servicing agreement (each, an "Underlying Servicing Agreement"). Securities That Are Partnership Interests for Tax Purposes and Notes Partnership Securities that are partnership interests for tax purposes will be issued, and the related Trust Fund will be created, pursuant to a Pooling and Servicing Agreement. A Series of Notes issued by a Trust Fund will be issued pursuant to an indenture (the "Indenture") between the related Trust Fund and the Indenture Trustee named in the applicable prospectus supplement. The Trust Fund will be established pursuant to a deposit trust agreement (each, a "Deposit Trust Agreement") between the Depositor and an owner trustee specified in the prospectus supplement relating to such Series of Notes. The Mortgage Loans securing payment on the Notes will be serviced in accordance with a servicing agreement (each, an "Indenture Servicing Agreement") between the related Trust Fund as issuer of the Notes, the Servicer and the Indenture Trustee. The Pooling and Servicing Agreements, the Indenture Servicing Agreements, the Underlying Servicing Agreements and the Indenture are referred to each as an "Agreement." Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements General The following summaries describe the material provisions that may appear in each Pooling and Servicing Agreement and Underlying Servicing Agreement. The prospectus supplement for a Series of Securities will describe the specific provisions of the applicable Agreement relating to such Series. The provisions of each Agreement will vary depending upon the nature of the Securities to be issued thereunder and the nature of the related Trust Fund. As used herein with respect to any Series, the term "Security" refers to all of the Securities of that Series, whether or not offered hereby and by the applicable prospectus supplement, unless the context otherwise requires. A form of a Pooling and Servicing Agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The trustee (the "Trustee") or indenture trustee (the "Indenture Trustee"), as applicable, with respect to any Series of Securities will be named in the applicable prospectus supplement. Wells Fargo Bank, as securities administrator (the "Securities Administrator") will perform certain administration, calculation and reporting functions with respect to each Trust Fund. Wells Fargo Bank, as Master Servicer, may supervise one or more Servicers pursuant to a Pooling and Servicing Agreement. With respect to Series involving a Master Servicer, references in this prospectus to the Servicer will apply to the Master Servicer where non-servicing obligations are described. If so specified in the applicable prospectus supplement, certain administrative functions described herein which would otherwise be performed by the Trustee may be performed by the Securities Administrator and certain administrative functions described herein which would otherwise be performed by the Securities Administrator, the Servicer or the Master Servicer may be performed by the Trustee or another party named in such prospectus supplement. 64 Assignment of Mortgage Loans; Representations and Warranties; Repurchases The Depositor will have acquired the Mortgage Loans included in each Trust Fund from the Sponsor pursuant to a mortgage loan purchase agreement. In connection with the conveyance of the Mortgage Loans to the Depositor, the Sponsor will (i) agree to deliver to the Depositor all of the documents which the Depositor is required to deliver to the Trustee; (ii) make certain representations and warranties to the Depositor which will be the basis of certain of the Depositor's representations and warranties to the Trustee or assign the representations and warranties made by an originator or prior seller to the Sponsor; and (iii) agree to repurchase or substitute (or assign rights to a comparable agreement of an originator or seller) for any Mortgage Loan for which any document is not delivered or is found to be defective in any material respect, or which Mortgage Loan is discovered at any time not to be in conformance with any representation and warranty the Sponsor has made to the Depositor if the Sponsor cannot deliver such document or cure such defect or breach within 60 days after notice thereof. In the event of a breach of a representation or warranty, generally there is no obligation to repurchase the affected Mortgage Loan or substitute a new mortgage loan therefor unless the breach materially and adversely affects the interests of the Securityholders in the related Mortgage Loan. Such agreement will inure to the benefit of the Trustee and is intended to help ensure the Depositor's performance of its limited obligation to repurchase, cure or substitute for Mortgage Loans. In addition, in the case of a breach of the representation that a Mortgage Loan at the time of its origination complied with any applicable federal, state or local predatory or abusive lending laws, the Sponsor will be required to pay to the Depositor any amount that the Depositor is required to pay pursuant to the applicable Agreement due to any costs or damages incurred by the Trust as a result of the violation of such laws. At the time of issuance of any Series of Securities, the Depositor will assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to be included in the related Trust Fund, together with all principal and interest received on or with respect to such Mortgage Loans after the Cut-off Date, other than principal and interest due on or before the Cut-off Date and other than any Fixed Retained Yield. The Securities Administrator (or other party specified in the applicable prospectus supplement) or such party's agent will, concurrently with such assignment, authenticate and deliver the Securities to the Depositor in exchange for the Mortgage Loans and the other assets comprising the Trust Fund for such Series. Each Mortgage Loan will be identified in a schedule (the "Mortgage Loan Schedule") delivered to the Trustee pursuant to the applicable Agreement. Such Mortgage Loan Schedule will include, among other things, the unpaid principal balance as of the close of business on the applicable Cut-off Date, the maturity date and the Mortgage Interest Rate for each Mortgage Loan in the related Trust Fund. In addition, with respect to each Mortgage Loan in a Trust Fund, the mortgage or other promissory note or a lost note affidavit executed by the applicable Servicer, any assumption, consolidation, modification or conversion to fixed interest rate agreement and a mortgage assignment in recordable form (or other documents as are required under applicable law to create perfected security interest in the Mortgaged Property in favor of the Trustee) (collectively, the "Related Documents") will be delivered to the Trustee or, if indicated in the applicable prospectus supplement, to a custodian. The corporate trust services division of Wells Fargo Bank may act as custodian for the Related Documents. Unless otherwise required by the Rating Agencies, assignments of the Mortgage Loans to the Trustee (or its nominee) will not be recorded in any jurisdiction, but will be delivered to the Trustee (or a custodian indicated in the applicable prospectus supplement) in recordable form, so that they can be recorded in the event recordation is necessary in connection with the servicing of a Mortgage Loan. Notwithstanding the preceding paragraph, with respect to any Mortgage Loan which has been recorded in the name of Mortgage Electronic Registration Systems, Inc. ("MERS") or its designee, no mortgage assignment in favor of the Trustee (or custodian) will be required to be prepared or delivered. Instead, the Servicer (or, if specified in the applicable prospectus supplement, the Master Servicer) will be required to take all actions as are necessary to cause the applicable Trust Fund to be shown as the owner of the related Mortgage Loan on the records of MERS for purposes of the system of recording transfers of beneficial ownership of mortgages maintained by MERS. The Trustee or custodian will hold all Related Documents delivered to it in trust for the benefit of Securityholders of the related Series and will review such documents within 45 days of the applicable Closing Date. If any document is not delivered or is found to be defective in any material respect, or if the Depositor is in breach of any of its representations and warranties, and such breach (other than certain breaches with respect to the principal balance of a Mortgage Loan) materially and adversely affects the interests of the Securityholders in a Mortgage Loan, and the Depositor cannot deliver such document or cure such defect or breach within 60 days after written notice thereof, the Depositor will, within 60 days of such notice, either repurchase the related Mortgage 65 Loan from the Trustee at a price (the "Purchase Price") equal to the then unpaid principal balance thereof, plus accrued and unpaid interest at the applicable Mortgage Interest Rate (minus any Fixed Retained Yield) through the last day of the month in which such repurchase takes place, or (in the case of a Series for which one or more REMIC elections have been or will be made, unless the maximum period as may be provided by the Code or applicable regulations of the Department of the Treasury ("Treasury Regulations") shall have elapsed since the Closing Date) substitute for such Mortgage Loan a new mortgage loan having characteristics such that the representations and warranties of the Depositor made pursuant to the applicable Agreement (except for representations and warranties as to the correctness of the applicable Mortgage Loan Schedule) would not have been incorrect had such substitute Mortgage Loan originally been a Mortgage Loan. In the case of a repurchased Mortgage Loan, the Purchase Price will be deposited by the Depositor in the related Distribution Account. In the case of a substitute Mortgage Loan, the mortgage file relating thereto will be delivered to the Trustee or the custodian and the Depositor will be required to deposit in the Distribution Account an amount (the "Substitution Adjustment") equal to the excess of (i) the unpaid principal balance of the Mortgage Loan which is substituted for, over (ii) the unpaid principal balance of the substitute Mortgage Loan, together with interest on such excess at the Mortgage Interest Rate (minus any Fixed Retained Yield) to the next scheduled Due Date of the Mortgage Loan which is being substituted for. In no event will any substitute Mortgage Loan have an unpaid principal balance greater than the unpaid principal balance of the Mortgage Loan for which it is substituted (after giving effect to the scheduled principal payment due in the month of substitution on the Mortgage Loan substituted for), or a term greater than, a Mortgage Interest Rate different than or a Loan-to-Value Ratio greater than, the Mortgage Loan for which it is substituted. If substitution is to be made for an adjustable rate Mortgage Loan, the substitute Mortgage Loan will have an unpaid principal balance no greater than the unpaid principal balance of the Mortgage Loan for which it is substituted (after giving effect to the scheduled principal payment due in the month of substitution on the Mortgage Loan substituted for), a Loan-to-Value Ratio less than or equal to, and a Mortgage Interest Rate equal to, that of the Mortgage Loan for which it is substituted, and will bear interest based on the same index, gross margin and frequency of adjustment as the substituted Mortgage Loan. The repurchase obligation and the mortgage substitution referred to above will constitute the sole remedies available to the Securityholders or the Trustee with respect to missing or defective documents or breach of the Depositor's representations and warranties. However, the Depositor may be required to pay additional amounts to the Trust upon the breach of the representation that a Mortgage Loan at the time of its origination complied with any applicable federal, state or local predatory or abusive lending laws. In connection with the transfer of the Mortgage Loans related to any Series by the Depositor to the Trust Fund, the Depositor will generally make certain representations and warranties as of the Closing Date regarding the Mortgage Loans. In certain cases where Wells Fargo Bank acquired some or all of the Mortgage Loans related to a Series from a Correspondent, if so indicated in the applicable prospectus supplement, the Depositor may, rather than itself making representations and warranties, cause the representations and warranties made by the Correspondent in connection with its sale of Mortgage Loans to the Sponsor to be assigned to the Trust Fund. In such cases, the Correspondent's representations and warranties may have been made as of a date prior to the Closing Date. Unless otherwise provided in the applicable prospectus supplement, such representations and warranties (whether made by the Depositor or another party) will generally include the following with respect to the Mortgage Loans, or each Mortgage Loan, as the case may be: (i) the Mortgage Loan Schedule is correct in all material respects at the date or dates respecting which such information is furnished as specified therein; (ii) immediately prior to the transfer and assignment contemplated by the applicable Agreement, the Depositor is the sole owner and holder of the Mortgage Loan, free and clear of any and all liens, pledges, charges or security interests of any nature and has full right and authority to sell and assign the same; (iii) no Mortgage Note or Mortgage is subject to any right of rescission, set-off, counterclaim or defense; (iv) the Mortgage Loan is covered by a title insurance policy (or in the case of any Mortgage Loan secured by a Mortgaged Property located in a jurisdiction where such policies are generally not available, an opinion of counsel of the type customarily rendered in such jurisdiction in lieu of title insurance is instead received); 66 (v) the Mortgage is a valid, subsisting and enforceable first or junior lien on the related Mortgaged Property and the Mortgaged Property is free and clear of all encumbrances and liens having a priority over the lien of the Mortgage (subject, in the case of a Mortgage which is a junior lien, to the lien of the related first lien) except for those liens set forth in the applicable Agreement; (vi) the Mortgaged Property is undamaged by water, fire, earthquake or earth movement, windstorm, flood, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which no representation is made), in a manner which would adversely affect the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended; (vii) each Mortgage Loan at the time it was originated complied in all material respects with applicable federal, state and local laws including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, predatory and abusive lending laws and disclosure laws; (viii) no Mortgage Loan is subject to the Home Ownership and Equity Protection Act of 1994, as amended; and (ix) no Mortgage Loan is a "high cost" loan as defined under any federal, state or local law applicable to such Mortgage Loan at the time of its origination. No representations or warranties are made by the Depositor or any other party as to the environmental condition of any Mortgaged Property including the absence, presence or effect of hazardous wastes or hazardous substances on such Mortgaged Property or any effect from the presence or effect of hazardous wastes or hazardous substances on, near or emanating from such Mortgaged Property. See "Certain Legal Aspects of the Mortgage Loans--Environmental Considerations." In addition, no representations or warranties are made by the Depositor or any other party with respect to the absence or effect of fraud in the origination of any Mortgage Loan, and any loss or liability resulting from the presence or effect of fraud will be borne solely by Securityholders. In addition to the foregoing, if a breach of the representation set forth in clause (vii) above occurs, the Depositor will be obligated to reimburse the Trust for all costs or damages incurred by the Trust Fund as a result of the violation of such representation (such amount, the "Reimbursement Amount"). Mortgage Loans required to be transferred to the Depositor as described in the preceding paragraphs are referred to as "Defective Mortgage Loans." Collection Account, Distribution Account and Related Accounts General The Servicer will, as to each Trust Fund, establish and maintain or cause to be maintained a separate trust account (the "Collection Account") for the benefit of the holders of the Securities. The Collection Account will be an Eligible Account and limited to funds held with respect to a particular Series, unless the applicable Agreement specifies that the Servicer may establish an account which is an Eligible Account to serve as a unitary Collection Account both for such Series and for other Series of Securities for which Wells Fargo Bank is the Master Servicer and having the same financial institution acting as Trustee and to be maintained in the name of such financial institution, in its respective capacities as Trustee for each such Series. Notwithstanding the foregoing, the Sponsor will be permitted to commingle funds in its Collection Account with its general assets until such time as such funds are required to be remitted to the Distribution Account for so long as (i) a master guarantee of the Sponsor's remittance obligation has been issued by its parent, Wells Fargo & Company for the benefit of the Securityholders and is currently in force and (ii) the short-term debt or long-term debt of Wells Fargo & Company is rated by the Rating Agencies in their highest short-term or highest long-term category or in such lower rating category that would not result in a downgrading or withdrawal of the rating then assigned to any class of Securities by the Rating Agencies or result in any rated class of Securities being placed on credit review status by the Rating Agencies. Funds on deposit in the Collection Account may be invested in certain investments acceptable to the Rating 67 Agencies ("Eligible Investments") maturing in general not later than the business day preceding the day the funds are required to be remitted to the Securities Administrator unless such Eligible Investments are invested in investments managed or advised by the Servicer or an affiliate thereof, in which case such Eligible Investments may mature on day the funds are required to be remitted to the Securities Administrator. Unless otherwise specified in the applicable prospectus supplement, all income and gain realized from any such investment in the Collection Account will be for the account of the Servicer as compensation and all losses from any such investment will be deposited by the Servicer out of its own funds to the Collection Account immediately as realized. Upon receipt by the Servicer of amounts in respect of the Mortgage Loans (excluding amounts representing the Servicing Fee or other servicing compensation, reimbursement for Advances, Servicing Advances and PMI Advances, Insurance Proceeds to be applied to the restoration or repair of a Mortgaged Property or similar items), the Servicer will be required to deposit such amounts in the Collection Account. Amounts so deposited may be invested in Eligible Investments maturing no later than one business day prior to the Remittance Date. Unless otherwise specified in the applicable prospectus supplement, any interest or other income earned on funds in the Collection Account will be paid to the Servicer or its designee as additional servicing compensation. The "Remittance Date" with respect to any Distribution Date generally will be (i) for any Mortgage Loan serviced by a Servicer other than the Sponsor, the 18th day of each month, or if any such day is not a business day, the preceding business day and (ii) for any Mortgage Loan serviced by the Sponsor, the day specified in the applicable Agreement, which will be a day not more than five business day prior to the related Distribution Date. The Securities Administrator will establish an account (the "Distribution Account") into which the Servicer will deposit, on or prior to the applicable Distribution Date, amounts withdrawn from the Collection Account for distribution to Securityholders on such Distribution Date. The Distribution Account will be an Eligible Account. Funds on deposit in the Distribution Account may be invested in Eligible Investments maturing in general not later than the business day preceding the next Distribution Date unless such Eligible Investments are invested in investments managed or advised by the Securities Administrator or an affiliate thereof, in which case such Eligible Investments may mature on the related Distribution Date. In the event that an election has been made to treat the Trust Fund (or one or more segregated pools of assets therein) with respect to a Series as a REMIC, no such Eligible Investments will be sold or disposed of at a gain prior to maturity unless the Securities Administrator has received an opinion of counsel or other evidence satisfactory to it that such sale or disposition will not cause the Trust Fund (or segregated pool of assets) to be subject to the tax on "prohibited transactions" imposed by Code Section 860F(a)(1), otherwise subject the Trust Fund (or segregated pool of assets) to tax, or cause the Trust Fund (or any segregated pool of assets) to fail to qualify as a REMIC while any Securities of the Series are outstanding. Unless otherwise specified in the applicable prospectus supplement, all income and gain realized from any such investment in the Distribution Account will be for the account of the Securities Administrator as compensation and all losses from any such investment will be deposited by the Securities Administrator out of its own funds to the Distribution Account immediately as realized. In the event that there is a Master Servicer, the Servicer may be required to deposit, on or prior to the applicable Remittance Date, amounts drawn from the Collection Account to an account established by the Master Servicer (the "Master Servicer Custodial Account"). The Master Servicer will then deposit, on or prior to the applicable Distribution Date, such amounts to the Distribution Account as are required for distribution to Securityholders on such Distribution Date. The Master Servicer Custodial Account will be an Eligible Account and will be subject to the same requirements set forth in the immediately preceding paragraph. An "Eligible Account" is an account that is (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the short-term unsecured debt obligations of such holding company) are rated "A-1" (or the equivalent) by each Rating Agency or Agencies rating any Class of Securities of such Series at the time any amounts are held on deposit therein, (ii) an account or accounts the deposits in which are fully insured by the Federal Deposit Insurance Corporation (to the limits established by such corporation), (iii) a trust account or accounts maintained with the trust department of a federal or state chartered depository institution, national banking association or trust company acting in its fiduciary capacity or (iv) otherwise acceptable to each Rating Agency without reduction or withdrawal of their then current ratings of the Securities of such Series as evidenced by a letter from each Rating Agency to the Securities Administrator and the Trustee. 68 Deposits The Servicer will deposit or cause to be deposited in the Distribution Account or, if applicable, the Master Servicer Custodial Account, for the Trust Fund on the Remittance Date, or such other time specified in the applicable Agreement, the following payments and collections received, or Advances, Servicing Advances or PMI Advances made, by the Servicer, the Master Servicer (if any) or the Trustee or on their behalf subsequent to the Cut-off Date (other than (a) payments due on or before the Cut-off Date, (b) amounts representing Fixed Retained Yield, (c) amounts held for future distribution, (d) amounts representing certain expenses reimbursable to the Servicer (e) amounts representing reimbursement for Advances made by the Servicer and (f) other amounts permitted to be retained by the Servicer pursuant to the applicable Agreement): (i) all payments on account of principal, including principal prepayments, on the Mortgage Loans; (ii) all payments on account of interest on the Mortgage Loans, including any default interest collected, in each case net of any portion thereof retained by a Servicer as its servicing compensation and net of any Fixed Retained Yield; (iii) Liquidation Proceeds and Insurance Proceeds, together with the net proceeds on a monthly basis with respect to any Mortgage Loans acquired for the benefit of Securityholders; (iv) any amounts paid under any instrument or drawn from any fund that constitutes Credit Support for the related Series of Securities as described under "Description of Credit Support"; (v) any Advances and PMI Advances made as described under "Description of the Securities--Advances in Respect of Delinquencies"; (vi) any amounts paid under any Cash Flow Agreement, as described under "Description of the Trust Funds--Cash Flow Agreements"; (vii) all proceeds of any Mortgage Loan or, with respect to a Mortgage Loan, property acquired in respect thereof purchased by the Depositor, the Sponsor, the Servicer or any other specified person as described under "--Assignment of Mortgage Loans; Representations and Warranties; Repurchases," all proceeds of any defaulted Mortgage Loan purchased as described under "--Realization Upon Defaulted Mortgage Loans; Servicing Advances," and all proceeds of any Mortgage Loan purchased as described under "Description of the Securities--Termination"; (viii) any Compensating Interest as described under "Description of the Securities--Distributions of Interest on the Securities"; (ix) to the extent that any such item does not constitute additional servicing compensation to the Servicer, any payments on account of modification or assumption fees, late payment charges or Prepayment Penalties on the Mortgage Loans; (x) all payments required to be paid by the Servicer with respect to any deductible clause in any blanket insurance policy described under "--Hazard Insurance Policies"; (xi) all amounts withdrawn from Buy-Down Funds or Subsidy Funds, if any, with respect to the Mortgage Loans, in accordance with the terms of the respective agreements applicable thereto; (xii) any amount required to be deposited by the Servicer or the Securities Administrator in connection with losses realized on investments for the benefit of the Servicer or the Securities Administrator, as the case may be, of funds held in the Collection Account or Distribution Account; and (xiii) any other amounts required to be deposited in the Distribution Account or, if applicable, the Master Servicer Custodial Account, as provided in the applicable Agreement. Withdrawals 69 The Securities Administrator may, from time to time, make withdrawals from the Distribution Account for each Trust Fund for any of the following purposes: (i) to make distributions to Securityholders on each Distribution Date; (ii) to reimburse the Servicer, Master Servicer or the Trustee for unreimbursed Advances, PMI Advances or Servicing Advances (to the extent not previously retained by the Servicer or Master Servicer or reimbursed to the Servicer, the Master Servicer or the Trustee from the Collection Account or, if applicable, the Master Servicer Custodial Account); (iii) to reimburse the Servicer, the Master Servicer or the Depositor, or any of their respective directors, officers, employees and agents, as the case may be, for certain expenses, costs and liabilities incurred thereby, as and to the extent described under "--Certain Matters Regarding the Servicer, the Master Servicer and the Depositor"; (iv) to pay the Securities Administrator's fees, if any, and the Trustee's fees, if any; (v) to pay the Servicer, the Master Servicer and the Securities Administrator from net Liquidation Proceeds allocable to interest, the amount of any unpaid Servicing Fee or unpaid Master Servicing Fee (if any) or unpaid Securities Administrator's fees (if any) and any unpaid assumption fees, late payment charges or other mortgagor charges on the related Mortgage Loan; (vi) to reimburse the Securities Administrator or the Trustee or any of their respective directors, officers, employees and agents, as the case may be, for certain expenses, costs and liabilities incurred thereby; (vii) to pay the Servicer or the Master Servicer, as additional servicing compensation, interest and investment income earned in respect of amounts held in the Distribution Account; (viii) to pay the person entitled thereto any amounts deposited in the Distribution Account that were identified and applied by the Servicer or Master Servicer as recoveries of Fixed Retained Yield; (ix) if one or more elections have been made to treat the Trust Fund or designated portions thereof as a REMIC, to pay any federal, state or local taxes imposed on the Trust Fund or its assets or transactions, as and to the extent described under "Federal Income Tax Consequences--REMICS--Taxes That May Be Imposed on the REMIC Pool"; (x) to pay the person entitled thereto any amounts deposited in the Distribution Account in error, including amounts received on any Mortgage Loan after its removal from the Trust Fund whether by reason of purchase or substitution as contemplated by "--Assignment of Mortgage Loans; Representations and Warranties; Repurchases" or otherwise; (xi) to make any other withdrawals permitted by the applicable Agreement; and (xii) to clear and terminate the Distribution Account at the termination of the Trust Fund. The Trustee or the Securities Administrator will appoint a paying agent, who may be the Trustee or the Securities Administrator (the "Paying Agent") to make distributions to Securityholders of a Series. If the Paying Agent for a Series is the Trustee of such Series, such Paying Agent will be authorized to make withdrawals from the Distribution Account in order to make distributions to Securityholders. If the Paying Agent for a Series is not the Trustee for such Series, the Securities Administrator will, on each Distribution Date, make withdrawals from the Distribution Account to deposit in immediately available funds in an account designated (the "Payment Account") by any such Paying Agent the amount required to be distributed to the Securityholders on such Distribution Date. The Trustee will cause any Paying Agent that is not the Trustee or the Securities Administrator to execute and deliver to the Trustee an instrument in which such Paying Agent agrees with the Trustee that such Paying Agent will: 70 (i) hold all amounts deposited with it by the Securities Administrator for distribution to Securityholders in trust for the benefit of Securityholders until such amounts are distributed to Securityholders or otherwise disposed of as provided in the applicable Agreement; (ii) give the Trustee notice of any default by the Securities Administrator in remitting any required amount; (iii) at any time during the continuance of any such default, upon written request to the Trustee, forthwith pay to the Trustee all amounts held in trust by such Paying Agent. (iv) provide the Depositor and the Securities Administrator the assessment of compliance by such entity with the servicing criteria set forth in Item 1122(d) of Regulation AB (17 C.F.R. 229.1122) applicable to its duties and the related attestation reports. Collection and Other Servicing Obligations The Servicer will be required by the related Agreement to make reasonable efforts to collect all payments called for under the Mortgage Loans and, consistent with the applicable Agreement and any related hazard insurance policy or instrument of Credit Support, if any, included in the related Trust Fund described herein or under "Description of Credit Support," to follow such collection procedures as it follows with respect to mortgage loans serviced by it that are comparable to the Mortgage Loans. Consistent with the above, the Servicer may, in its discretion, (i) waive any late payment charge or penalty interest in respect of a late payment on a Mortgage Loan, subject to the terms and conditions of the applicable Agreement and (ii) arrange with a mortgagor a schedule for the liquidation of deficiencies running for a period conforming to acceptable servicing practices (or such shorter period provided by the applicable Agreement); provided that, with respect to a Series as to which a REMIC election has been made, that such period will not result in a "significant modification" of the Mortgage Loan under the REMIC provisions. Under the applicable Agreement, the Servicer, to the extent permitted by law, will establish and maintain one or more escrow accounts (each such account, a "Servicing Account") in which the Servicer will be required to deposit any payments made by mortgagors in advance for taxes, assessments, primary mortgage (if applicable) and hazard insurance premiums and other similar items. Withdrawals from the Servicing Account may be made to effect timely payment of taxes, assessments, mortgage and hazard insurance, to refund to mortgagors amounts determined to be overages, to pay interest to mortgagors on balances in the Servicing Account, if required, and to clear and terminate such account. The Servicer will be obligated to advance certain amounts which are not timely paid by the mortgagors, to the extent that it determines, in good faith, that they will be recoverable out of insurance proceeds, liquidation proceeds, or otherwise. Alternatively, in lieu of establishing a Servicing Account, the Servicer may procure a performance bond or other form of insurance coverage, in an amount acceptable to each Rating Agency rating the related Series of Securities, covering loss occasioned by the failure to escrow such amounts. Notwithstanding the foregoing to the contrary, in the event of a voluntary principal prepayment in full of a Mortgage Loan, a Servicer may not waive any Prepayment Penalty or portion thereof required by the terms of the related Mortgage Note unless (i)(a) the Servicer determines that such waiver is standard and customary in servicing similar mortgage loans, (b) such waiver relates to a default or a reasonably foreseeable default and (c) would, in the reasonable judgment of the Servicer, maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into account the value of such Prepayment Penalty, or (ii) the enforceability thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or other similar law relating to creditors' rights generally or (2) due to acceleration in connection with a foreclosure or other involuntary payment. Unless otherwise specified in the applicable prospectus supplement, if the Servicer waives or does not collect all or a portion of a Prepayment Penalty relating to a voluntary principal prepayment in full due to any action or omission of the Servicer, other than as provided above, the Servicer will, on the date on which the principal prepayment in full is remitted to the Securities Administrator, deliver to the Securities Administrator the amount of the Prepayment Penalty from its own funds for distribution in accordance with the terms of the applicable Agreement. 71 Realization Upon Defaulted Mortgage Loans; Servicing Advances Each Agreement with respect to a Series will require the Servicer to present claims to the insurer under any insurance policy applicable to the Mortgage Loans included in the Trust Fund for such Series and to take such reasonable steps as are necessary to permit recovery under such insurance policies with respect to defaulted Mortgage Loans, or losses on the Mortgaged Property securing the Mortgage Loans. The Servicer is obligated under the applicable Agreement for each Series to realize upon defaulted Mortgage Loans in accordance with its normal servicing practices, which will conform generally to those of prudent mortgage lending institutions which service mortgage loans of the same type in the same jurisdictions. The Servicer may exercise its discretion to enter into forbearance arrangements with borrowers for specified time periods, however, during such time periods the Servicer will report the related mortgage loan to be in a delinquent status. In addition, the Servicer is authorized under the applicable Agreement to permit the assumption of a defaulted Mortgage Loan rather than to foreclose or accept a deed-in-lieu of foreclosure if, in the Servicer's judgment, the default is unlikely to be cured and the assuming borrower meets Wells Fargo Bank's applicable underwriting guidelines. In connection with any such assumption, the Mortgage Interest Rate and the payment terms of the related Mortgage Note will not be changed. The Servicer may also modify the payment terms of Mortgage Loans that are in default, or as to which default is reasonably foreseeable, that remain in the Trust Fund rather than foreclose on such Mortgage Loans; provided that no such modification shall forgive principal owing under such Mortgage Loan or permanently reduce the Mortgage Interest Rate on such Mortgage Loan. Any such modification will be made only upon the determination by the Servicer that such modification is likely to increase the proceeds of such Mortgage Loan over the amount expected to be collected pursuant to foreclosure. The Servicer may permit the capitalization of the interest portion of unreimbursed Advances and the amount of any unreimbursed Servicing Advances previously made by the Servicer in connection with the modification of a delinquent Mortgage Loan. The Servicer will be entitled to retain the portions of any modified Monthly Payment subsequently made by the borrower which represent (i) the amount so capitalized together with interest thereon and (ii) the principal portion of Advances unreimbursed to the Servicer as of the date of the modification, together with interest thereon. In the event of a subsequent uncured default by the borrower under the related modification agreement, the Servicer will be entitled to recover, from Liquidation Proceeds on the related Mortgage Loan, the amount of all its Periodic Advances and/or Servicing Advances, including those that were capitalized at the time of the modification, without interest on such advances except to the extent previously paid by the borrower. See also "Description of the Securities--Optional Purchases" above, with respect to the Depositor's right to repurchase Mortgage Loans that are in default, or as to which default is reasonably foreseeable. Further, the Servicer may encourage the refinancing of such defaulted Mortgage Loans, including Mortgage Loans that would permit creditworthy borrowers to assume the outstanding indebtedness. In connection with the decision of the Servicer regarding the foreclosure or assumption of a Mortgage Loan, the modification of the related Mortgage Note or any other action to be taken with respect to a defaulted Mortgage Loan, the Servicer is expressly permitted by the applicable Agreement to take into account the interests of the borrower. The Servicer may also make other modifications if an opinion of counsel is delivered to the Trustee to the effect that such modification will not give rise to a new debt instrument for federal income tax purposes. However, no opinion is required to be delivered in connection with the reamortization of a Mortgage Loan over the remaining original term after the outstanding principal balance of the Mortgage Loan has been reduced by a partial principal prepayment. In the case of foreclosure or of damage to a Mortgaged Property from an uninsured cause, the Servicer will not be required to expend its own funds to foreclose or restore any damaged property, unless it reasonably determines (i) that such foreclosure or restoration will increase the proceeds to Securityholders of such Series of liquidation of the Mortgage Loan after reimbursement to the related Servicer for its expenses and (ii) that such expenses will be recoverable to it through Liquidation Proceeds or any applicable insurance policy in respect of such Mortgage Loan. In the event that the Servicer has expended its own funds for foreclosure or to restore damaged property, it will be entitled to be reimbursed from the Collection Account for such Series an amount equal to all costs and expenses incurred by it. The Sponsor, as the Servicer, will not be obligated to foreclose on any Mortgaged Property which it believes may be contaminated with or affected by hazardous wastes or hazardous substances. See "Certain Legal Aspects of Mortgage Loans--Environmental Considerations." If the Servicer does not foreclose on a Mortgaged Property, the Securityholders of the related Series may experience a loss on the related Mortgage Loan. The Servicer will not be 72 liable to the Securityholders if it fails to foreclose on a Mortgaged Property which it believes may be so contaminated or affected, even if such Mortgaged Property is, in fact, not so contaminated or affected. Conversely, the Servicer will not be liable to the Securityholders if, based on its belief that no such contamination or effect exists, the Servicer forecloses on a Mortgaged Property and takes title to such Mortgaged Property, and thereafter such Mortgaged Property is determined to be so contaminated or affected. In the case of Multifamily Mortgage Loans, a mortgagor's failure to make required Mortgage Loan payments may mean that operating income is insufficient to service the Mortgage Loan debt, or may reflect the diversion of that income from the servicing of the Mortgage Loan debt. In addition, a mortgagor under a Multifamily Mortgage Loan that is unable to make Mortgage Loan payments may also be unable to make timely payment of all required taxes and otherwise to maintain and insure the related Mortgaged Property. In general, the Servicer will be required to monitor any Multifamily Mortgage Loan that is in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the value of the related Mortgaged Property, initiate corrective action in cooperation with the mortgagor if cure is likely, inspect the related Multifamily Property and take such other actions as are consistent with the applicable Agreement. A significant period of time may elapse before the Servicer is able to assess the success of any such corrective action or the need for additional initiatives. The time within which the Servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional initiatives, institute foreclosure proceedings and actually foreclose may vary considerably depending on the particular Multifamily Mortgage Loan, the Multifamily Property, the mortgagor, the presence of an acceptable party to assume the Multifamily Mortgage Loan and the laws of the jurisdiction in which the Multifamily Property is located. The Servicer may foreclose against property securing a defaulted Mortgage Loan either by foreclosure, by sale or by strict foreclosure and in the event a deficiency judgment is available against the mortgagor or other person (see "Certain Legal Aspects of Mortgage Loans--Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders" for a discussion of the availability of deficiency judgments), may proceed for the deficiency. It is anticipated that in most cases the Servicer will not seek deficiency judgments and will not be required to seek deficiency judgments. In lieu of foreclosure, the Servicer may arrange for the sale by the borrower of the Mortgaged Property related to a defaulted Mortgage Loan to a third party, rather than foreclosing upon and selling such Mortgaged Property. With respect to a Trust Fund (or any segregated pool of assets therein) as to which a REMIC election has been made, if the Trustee acquires ownership of any Mortgaged Property as a result of a default or reasonably foreseeable default of any Mortgage Loan secured by such Mortgaged Property, the Servicer will be required to dispose of such property prior to the close of the third calendar year following the year the Trust Fund acquired such property (or such shorter period as is provided in the applicable Agreement) unless the Trustee (a) receives an opinion of counsel to the effect that the holding of the Mortgaged Property by the Trust Fund will not cause the Trust Fund to be subject to the tax on "prohibited transactions" imposed by Code Section 860F(a)(1) or cause the Trust Fund (or any segregated pool of assets therein as to which one or more REMIC elections have been made or will be made) to fail to qualify as a REMIC or (b) applies for and the Internal Revenue Service (the "IRS") grants an extension of the applicable period in the manner contemplated by Code Section 856(e)(3). The Servicer also will be required to administer the Mortgaged Property in a manner which does not cause the Mortgaged Property to fail to qualify as "foreclosure property" within the meaning of Code Section 860G(a)(8) or result in the receipt by the Trust Fund of any "net income from foreclosure property" within the meaning of Code Section 860G(c)(2), respectively. In general, this would preclude the holding of the Mortgaged Property by a party acting as a dealer in such property or the receipt of rental income based on the profits of the lessee of such property. See "Federal Income Tax Consequences." The limitations imposed by the applicable Agreement and the REMIC provisions of the Code (if a REMIC election has been made with respect to the related Trust Fund) on the ownership and management of any Mortgaged Property acquired on behalf of the Trust Fund may result in the recovery of an amount less than the amount that would otherwise be recovered. See "Certain Legal Aspects of Mortgage Loans--Foreclosure." If recovery on a defaulted Mortgage Loan under any related instrument of Credit Support is not available, the Servicer nevertheless will be obligated to follow or cause to be followed such normal practices and procedures as it deems necessary or advisable to realize upon the defaulted Mortgage Loan. If the proceeds of any liquidation of the property securing the defaulted Mortgage Loan are less than the outstanding principal balance of the defaulted 73 Mortgage Loan plus interest accrued thereon at the applicable interest rate, plus the aggregate amount of expenses incurred by the Servicer in connection with such proceedings and which are reimbursable under the applicable Agreement, the Trust Fund will realize a loss in the amount of such difference. The Servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of the Liquidation Proceeds recovered on any defaulted Mortgage Loan, prior to the distribution of such Liquidation Proceeds to Securityholders, amounts representing its normal servicing compensation on the Mortgage Loan, unreimbursed Servicing Advances incurred with respect to the Mortgage Loan, any unreimbursed PMI Advances with respect to the Mortgage Loan and any unreimbursed Advances of delinquent payments made with respect to the Mortgage Loan. If the proceeds of any liquidation of the property securing the defaulted Mortgage Loan exceed the outstanding principal balance thereof plus accrued interest thereon at the applicable interest rate ("Liquidation Profits"), the Servicer may retain such excess as additional servicing compensation. In the course of performing its servicing obligations, the Servicer will pay all reasonable and customary "out-of-pocket" costs and expenses incurred in the performance of its servicing obligations, including, but not limited to, the cost of (i) the preservation, restoration, inspection and protection of the Mortgaged Properties, (ii) payment of taxes, insurance premiums and similar items with respect to any Mortgaged Property, (iii) any enforcement or judicial proceedings, including foreclosures and (iv) the management and liquidation of Mortgaged Properties acquired in satisfaction of the related mortgage. Each such expenditure will constitute a "Servicing Advance." The Servicer's right to reimbursement for Servicing Advances is limited to late collections on the related Mortgage Loan, including Liquidation Proceeds, released mortgaged property proceeds, Insurance Proceeds, condemnation proceeds and such other amounts the Servicer may collect from the related mortgagor or otherwise relating to the Mortgage Loan in respect of which such unreimbursed amounts are owed, unless such amounts are deemed to be nonrecoverable by the Servicer, in which event reimbursement will be made to the Servicer from general funds in the Collection Account. If the Servicer or its designee recovers payments under any instrument of Credit Support with respect to any defaulted Mortgage Loans, the Servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of such proceeds, prior to distribution thereof to Securityholders, amounts representing its normal servicing compensation on such Mortgage Loan, unreimbursed Servicing Advances incurred with respect to the Mortgage Loan and any unreimbursed Advances of delinquent payments made with respect to the Mortgage Loan. See "--Hazard Insurance Policies" and "Description of Credit Support." Hazard Insurance Policies Generally, each Agreement for a Trust Fund comprised of Mortgage Loans will require the Servicer to cause to be maintained for each Mortgage Loan a hazard insurance policy issued by a generally acceptable insurer insuring the improvements on the Mortgaged Property underlying such Mortgage Loan against loss by fire, with extended coverage. Such coverage will be in an amount at least equal to the lesser of 100% of the insurable value of the improvements on the Mortgaged Property or the principal balance of such Mortgage Loan; provided, however, that such insurance may not be less than the minimum amount required to fully compensate for any damage or loss on a replacement cost basis. The Servicer will also maintain on property acquired upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, a hazard insurance policy in an amount that is at least equal to the lesser of 100% of the insurable value of the improvements which are a part of such property or the principal balance of such Mortgage Loan plus accrued interest and liquidation expenses; provided, however, that such insurance may not be less than the minimum amount required to fully compensate for any damage or loss on a replacement cost basis. All amounts collected by the Servicer under any such policy (except for amounts to be applied to the restoration or repair of the Mortgaged Property or released to the mortgagor in accordance with the Servicer's normal servicing procedures, subject to the terms and conditions of the related Mortgage and Mortgage Note) will be deposited in the Collection Account. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy. Because the policies relating to such Mortgage Loans will be underwritten by different insurers and will cover Mortgaged Properties located in various states, such policies will not contain identical terms and conditions. The most significant terms thereof, however, 74 generally will be determined by state law and generally will be similar. Most such policies typically will not cover any physical damage resulting from the following: war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or domestic animals, hazardous wastes or hazardous substances, theft and, in certain cases, vandalism. The foregoing list is merely indicative of certain kinds of uninsured risks and is not all-inclusive. In general, if the improvements on a Mortgaged Property are located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) each applicable Agreement will require the Servicer to cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier. Generally, the applicable Agreement will require that such flood insurance be in an amount not less than the least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the full insurable value of the improvements, or (iii) the maximum amount of insurance which is available under the National Flood Insurance Act of 1968, as amended. The Sponsor does not provide financing for flood zone properties located in communities not participating in the National Flood Insurance Program or if available insurance coverage is, in its judgment, unrealistically low. Wells Fargo Bank will not require that a standard hazard or flood insurance policy be maintained on the cooperative dwelling relating to any cooperative loan. Generally, the Cooperative itself is responsible for maintenance of hazard insurance for the property owned by the Cooperative and the tenant-stockholders of that Cooperative do not maintain individual hazard insurance policies. To the extent, however, that a Cooperative and the related borrower on a Mortgage Loan that is a cooperative loan do not maintain such insurance or do not maintain adequate coverage or any insurance proceeds are not applied to the restoration of damaged property, any damage to such borrower's cooperative dwelling or such Cooperative's building could significantly reduce the value of the collateral securing such Mortgage Loan that is a cooperative loan to the extent not covered by other credit support. The Servicer may maintain a blanket policy insuring against hazard losses on all of the Mortgaged Properties in lieu of maintaining the required hazard insurance policies and may maintain a blanket policy insuring against special hazards in lieu of maintaining any required flood insurance. The Servicer will be liable for the amount of any deductible under a blanket policy if such amount would have been covered by a required hazard insurance policy or flood insurance, had it been maintained. Under the terms of the Mortgage Loans, mortgagors will generally be required to present claims to insurers under hazard insurance policies maintained on the related Mortgaged Properties. The Servicer, on behalf of the Trustee and Securityholders, is obligated to present or cause to be presented claims under any blanket insurance policy insuring against hazard losses on Mortgaged Properties securing the Mortgage Loans. However, the ability of the Servicer to present or cause to be presented such claims is dependent upon the extent to which information in this regard is furnished to the Servicer by mortgagors. Any losses incurred with respect to Mortgage Loans due to uninsured risks (including earthquakes, mudflows, floods and hazardous wastes or hazardous substances) or insufficient hazard insurance proceeds will adversely affect distributions to the Securityholders. Primary Mortgage Insurance Policies If so specified in the applicable prospectus supplement, the Servicer will maintain or cause to be maintained, as the case may be, in full force and effect, a primary mortgage insurance policy with regard to each Mortgage Loan for which such coverage is required. Primary mortgage insurance policies reimburse certain losses sustained by reason of defaults in payments by borrowers. The Servicer will not cancel or refuse to renew any such primary mortgage insurance policy in effect at the time of the initial issuance of a Series of Securities that is required to be kept in force under the applicable Agreement unless the replacement primary mortgage insurance policy for such cancelled or nonrenewed policy is maintained with an insurer whose claims-paying ability is sufficient to maintain the current rating of the classes of Securities of such Series that have been rated. 75 Fidelity Bonds and Errors and Omissions Insurance Each Agreement will require that the Servicer obtain and maintain in effect a fidelity bond or similar form of insurance coverage (which may provide blanket coverage) or any combination thereof insuring against loss occasioned by fraud, theft or other intentional misconduct of the officers, employees and agents of the Servicer. The applicable Agreement will allow the Servicer to self-insure against loss occasioned by the errors and omissions of the officers, employees and agents of the Servicer so long as certain criteria set forth in such Agreement are met. Due-on-Sale Provisions With respect to each Mortgage Loan, the applicable Agreement will generally provide that, when any Mortgaged Property is about to be conveyed by the mortgagor, the Servicer will, to the extent it has knowledge of such prospective conveyance, exercise its rights to accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause applicable thereto, if any, unless (i) such exercise is not permissible under applicable law; (ii) such exercise would result in loss of insurance coverage with respect to such Mortgage Loan or would, in the Servicer's judgment, be reasonably likely to result in litigation by the mortgagor; or (iii) in the case of a Mortgage Loan having an adjustable interest rate, (a) the mortgagor causes to be submitted to the Servicer information required by the Servicer to evaluate the intended transferee as if a new loan were being made to the transferee; and (b) the Servicer reasonably determines that the Servicer's security will not be impaired by the loan assumption and that the risk of a breach of any covenant or agreement in the Mortgage Note or the Mortgage is acceptable to the Servicer. In any case, the Servicer is authorized to take or enter into an assumption and modification agreement from or with the person to whom such Mortgaged Property has been or is about to be conveyed, pursuant to which such person becomes liable under the Mortgage Note and, unless prohibited by applicable state law, the mortgagor remains liable thereon, provided that the Mortgage Loan will continue to be covered by any pool insurance policy and any related primary mortgage insurance policy and the Mortgage Interest Rate with respect to such Mortgage Loan and the payment terms shall remain unchanged. The Servicer will also be authorized, with the prior approval of the pool insurer and the primary mortgage insurer, if any, to enter into a substitution of liability agreement with such person, pursuant to which the original mortgagor is released from liability and such person is substituted as mortgagor and becomes liable under the Mortgage Note. Fixed Retained Yield; Servicing Compensation and Payment of Expenses The principal compensation (the "Servicing Fee") to be paid to the Servicer in respect of its servicing activities for the Securities will be at the "Servicing Fee Rate" on each Mortgage Loan of 0.50% per annum (or such other amount specified in the applicable prospectus supplement) on the same principal balance on which interest on such Mortgage Loan accrues for such calendar month. As additional servicing compensation, the Servicer is entitled to retain all service-related fees, including assumption fees, modification fees, extension fees, bad check fees and late payment charges, to the extent collected from mortgagors, together with any interest or other income earned on funds held in the Collection Account and any escrow accounts and any Liquidation Profits. The Servicer is obligated to pay certain insurance premiums and certain ongoing expenses associated with the Mortgage Pool and incurred by the Servicer in connection with its responsibilities under the applicable Agreement and is entitled to reimbursement therefor as provided in the applicable Agreement. If there will be any Fixed Retained Yield in the Mortgage Loans for a Series of Securities, the applicable prospectus supplement will specify the amount and the initial owner thereof. If so, the Fixed Retained Yield will be established on a loan-by-loan basis and will be specified on an exhibit to the applicable Agreement. "Fixed Retained Yield" in a Mortgage Loan represents a specified portion of the interest payable thereon. The Fixed Retained Yield will be deducted from mortgagor payments as received and will not be part of the related Trust Fund. Evidence as to Compliance Each Servicer will deliver annually to the Securities Administrator, and the Securities Administrator will deliver or make available annually to the Depositor (and for any Series for which there is a Master Servicer, the Master Servicer will deliver to the Depositor), on or before the date specified in the applicable Agreement, an officer's certificate stating that (i) a review of the activities of the Servicer and the Securities Administrator (and Master 76 Servicer, if applicable) during the preceding calendar year and of performance under the applicable Agreement has been made under the supervision of such officer, and (ii) to the best of such officer's knowledge, based on such review, the Servicer and the Securities Administrator (and Master Servicer, if any) have fulfilled all their respective obligations under the applicable Agreement in all material respects throughout such year, or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such officer and the nature and status of the failure. In addition, the Master Servicer (if any), each Servicer and any other party that participates in the servicing and administration of more than 5% of the Mortgage Loans and other assets comprising a Trust will deliver annually to the Securities Administrator, and the Securities Administrator will deliver to the Depositor, a report that assesses compliance by that party, on a "servicing platform" level, with the servicing criteria set forth in Item 1122(d) of Regulation AB (17 C.F.R. 229.1122) (an "Assessment of Compliance") and each such Assessment of Compliance will contain the following: o a statement of the party's responsibility for assessing compliance with the servicing criteria applicable to it; o a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria; o the party's Assessment of Compliance for and as of the end of the prior calendar year, setting forth any material instance of noncompliance identified by the party; and o a statement that a registered public accounting firm has issued an attestation report on the party's Assessment of Compliance for and as of the end of the prior calendar year. Each party that is required to deliver an Assessment of Compliance will also be required to simultaneously deliver a report (an "Attestation Report") of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board, that expresses an opinion, or states that an opinion cannot be expressed, concerning the party's Assessment of Compliance. The Servicers General For each Series of Securities, the Sponsor and/or, if so specified in the applicable prospectus supplement, one or more other entities, will act as servicer ("Servicer") of the Mortgage Loans and will provide certain customary servicing functions with respect to Mortgage Loans pursuant to the applicable Agreement. If so specified in the applicable prospectus supplement, any Series for which Wells Fargo Bank is acting as Master Servicer may have one or more Servicers who will provide certain customary servicing functions with respect to Mortgage Loans pursuant to separate servicing agreements with the Master Servicer and such Servicer or an affiliate thereof (each, an "Underlying Servicing Agreement"). The rights of the Master Servicer and the Servicer or such affiliate under the applicable Underlying Servicing Agreements in respect of the Mortgage Loans included in the Trust Fund for any such Series will be assigned (directly or indirectly) to the Trustee for such Series. The Servicers may be entitled to withhold their Servicing Fees and certain other fees and charges from remittances of payments received on Mortgage Loans serviced by them. The duties to be performed by each Servicer include collection and remittance of principal and interest payments on the Mortgage Loans, administration of mortgage escrow accounts, collection of insurance claims, foreclosure procedures, and, if necessary, the advance of funds to the extent certain payments are not made by the mortgagor and have not been determined by the Servicer to be not recoverable under the applicable insurance policies with respect to such Series, from proceeds of liquidation of such Mortgage Loans or otherwise. Each Servicer also will provide such accounting and reporting services as are necessary to provide required information to the Securities Administrator or Paying Agent with respect to the Mortgage Loans included in the Trust Fund for such Series. Each Servicer is entitled to a periodic Servicing Fee equal to a specified percentage of the outstanding principal balance of each Mortgage Loan serviced by such Servicer. Any of the servicing obligations of a Servicer may be delegated to another person who agrees to conduct such duties in accordance with the applicable Agreement. 77 In the case of any Series with a Master Servicer, the consent of the Master Servicer may be required. In the event a Servicer delegates obligations to a subservicer that meets the thresholds provided in Item 1108(a)(3) of Regulation AB (17 C.F.R. 229.1108), the applicable prospectus supplement will provide the disclosure required by Item 1108(b) and (c) of Regulation AB (17 C.F.R. 229.1108). In the event that such appointment occurs after the issuance of the related Series of Securities, the Securities Administrator will report such appointment on Form 8-K. The Trustee or a successor servicer is entitled to be reimbursed for its costs in effecting a servicing transfer from the predecessor servicer. In the event that the predecessor servicer fails to reimburse the Trustee or successor servicer, the Trustee or successor servicer will be entitled to reimbursement from the assets of the related Trust. The applicable Agreement will provide that the Servicer may resign from its obligations and duties thereunder only (i) upon a determination that its duties under such Agreement are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it, the other activities of the Servicer so causing such a conflict being of a type and nature carried on by the Servicer at the date of such Agreement or (ii) upon satisfaction of the following conditions: (a) the Servicer has proposed a successor servicer to the Trustee or Master Servicer, as applicable, in writing and such proposed successor servicer is reasonably acceptable to the Trustee; and (b) each Rating Agency shall have delivered a letter to the Trustee, prior to the appointment of the successor servicer, stating that the proposed appointment of such successor servicer as Servicer will not result in a reduction of the then-current ratings of the Securities. No such resignation will become effective until the Trustee, Master Servicer or a successor servicer has assumed the Servicer's obligations and duties under the applicable Agreement. Each Agreement will also provide that neither the Servicer nor any director, officer, employee or agent of the Servicer, will be under any liability to the Trust Fund or the Securityholders, for the taking of any action or for refraining from the taking of any action in good faith pursuant to such Agreement, or for errors in judgment; provided, however, that neither the Servicer, any subcontractor, nor any such person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties or by reason of reckless disregard of his or its obligations and duties thereunder. Each Agreement will further provide that the Servicer, director, officer, employee or agent of the Servicer shall be entitled to indemnification by the Trust Fund and will be held harmless against any loss, liability or expense incurred in connection with the performance of its duties and obligations and any legal action relating to such Agreement or the Securities, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties thereunder or by reason of reckless disregard of his or its obligations and duties thereunder. In addition, each Agreement will provide that the Servicer will not be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its duties under such Agreement and that in its opinion may involve it in any expense or liability; provided, however, that the Servicer may in its discretion undertake any action related to its obligations under the applicable Agreement which it may deem necessary or desirable with respect to the applicable Agreement and the rights and duties of the parties under such Agreement and the interests of the Securityholders. The Servicer may, however, in its discretion, undertake any such action deemed by it necessary or desirable with respect to each Agreement and the rights and duties of the parties thereto and the interests of the Securityholders thereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom will be expenses, costs and liabilities of the Trust Fund and the Servicer will be entitled to be reimbursed therefor out of the Distribution Account, and any loss to the Trust Fund arising from such right of reimbursement will be allocated as specified in the applicable Agreement. Any person into which the Servicer may be merged or consolidated, or any person resulting from any merger, conversion or consolidation to which the Servicer is a party, or any organization succeeding to the business through the transfer of substantially all of its assets or all assets relating to such business, or otherwise, of the Servicer will be the successor of the Servicer under the applicable Agreement for each Series provided that such successor or resulting entity has a net worth of not less than $50,000,000 and meets other requirements set forth in the applicable Agreement. The Servicer also has the right to assign its rights and delegate its duties and obligations under the applicable Agreement for each Series; provided that, if the Servicer desires to be released from its obligations under the Pooling and Servicing Agreement, (i) the purchaser or transferee accepting such assignment or delegation is qualified to service mortgage loans for Fannie Mae or Freddie Mac, (ii) the purchaser is satisfactory to the Trustee for such Series, in the reasonable exercise of its judgment, and executes and delivers to the Trustee an agreement, in 78 form and substance reasonably satisfactory to the Trustee, which contains an assumption by such purchaser or transferee of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Servicer under the applicable Agreement from and after the date of such agreement; and (iii) each applicable Rating Agency's rating of any Securities for such Series in effect immediately prior to such assignment, sale or transfer would not be qualified, downgraded or withdrawn as a result of such assignment, sale or transfer and the Securities would not be placed on credit review status by any such Rating Agency. The Servicer will be released from its obligations under the applicable Agreement upon any such assignment and delegation, except that the Servicer will remain liable for all liabilities and obligations incurred by it prior to the time that the conditions contained in clauses (i), (ii) and (iii) above are met. The information provided in this section entitled "-General" generally describes provisions relating to the Sponsor acting as Servicer pursuant to the applicable Pooling and Servicing Agreement. For any Series for which there is a Master Servicer, any provisions of the Underlying Servicing Agreements of the Servicers that are not substantially similar to the provisions set forth above will be described in the applicable prospectus supplement. Servicing Experience and Procedures of Wells Fargo Bank Servicing Experience. Wells Fargo Bank, including its predecessors, has many years of experience in servicing residential mortgage loans, commercial mortgage loans, auto loans, home equity loans, credit card receivables and student loans. Wells Fargo Bank, including its predecessors, has been servicing residential mortgage loans since 1974 and has been servicing subprime residential mortgage loans since 1996. These servicing activities, which include collections, loss mitigation, default reporting, bankruptcy, foreclosure and REO Property management, are handled at various Wells Fargo Bank locations including Frederick, Maryland, Fort Mill, South Carolina and other mortgage loan servicing centers. Wells Fargo Bank's servicing portfolio of residential mortgage loans (which includes First Lien Subprime Loans and Second Lien Subprime Loans as well as other types of residential mortgage loans serviced by Wells Fargo Bank) has grown from approximately $450 billion as of the end of 2000 to approximately $745.5 billion as of the end of 2004. The table below sets forth for each of the periods indicated the number and aggregate original principal balance of mortgage loans serviced by Wells Fargo Bank (other than any mortgage loans serviced for Fannie Mae, Freddie Mac and Federal Home Loan Banks; mortgage loans insured or guaranteed by the Government National Mortgage Association, Federal Housing Administration or Department of Veterans Affairs; or mortgage loans with respect to which Wells Fargo Bank has acquired the servicing rights, acts as subservicer, or acts as special servicer) for First Lien Subprime Loans and Second Lien Subprime Loans:
As of As of As of December 31, 2003 December 31, 2004 December 31, 2005 --------------------- --------------------- ---------------------- Aggregate Aggregate Aggregate Original Original Original Principal Principal Principal Balance Balance Balance Asset No. of No. of No. of No. of No. of No. of Type Loans Loan Loans Loans Loans Loans - ------------------------- ------ -------------- ------ --------------- ------- --------------- First Lien Subprime Loans 91,491 $12,527,230,580 136,814 $19,729,933,615 174,704 $26,301,059,617 Second Lien Subprime Loans * * * * 9,116 $353,218,934
--------------------- * Wells Fargo Bank does not have a material servicing portfolio of Second Lien Subprime Loans for the periods indicated. Servicing Procedures. Shortly after the funding of a loan, various types of loan information are loaded into Wells Fargo Bank's automated loan servicing system. Wells Fargo Bank then makes reasonable efforts to collect all payments called for under the Mortgage Loan documents and will, consistent with the applicable Agreement and any pool insurance policy, primary mortgage insurance policy, bankruptcy bond or alternative arrangements, follow such collection procedures as are customary with respect to loans that are comparable to the Mortgage Loans. Wells Fargo Bank may, in its discretion, (i) waive any assumption fee, late payment or other charge in connection with a Mortgage Loan and (ii) to the extent not inconsistent with the coverage of such Mortgage Loan by a pool insurance policy, primary mortgage insurance policy, bankruptcy bond or alternative arrangements, if applicable, waive, vary 79 or modify any term of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in any matter grant indulgence to any borrower, subject to the limitations set forth in the applicable Agreement. Wells Fargo Bank's collections policy is designed to identify payment problems sufficiently early to permit Wells Fargo Bank to address such delinquency problems and, when necessary, to act to preserve equity in a pre-foreclosure Mortgaged Property. Borrowers are billed on a monthly basis in advance of the due date. If a borrower attempts to use Wells Fargo Bank's Voice Response Unit ("VRU") to obtain loan information on or after a date on which a late charge is due, the VRU automatically transfers the call to the collection area. Collection procedures commence upon identification of a past due account by Wells Fargo Bank's automated servicing system. If timely payment is not received, Wells Fargo Bank's automated loan servicing system automatically places the Mortgage Loan in the assigned collection queue and collection procedures are generally initiated on the 5th day of delinquency. The account remains in the queue unless and until a payment is received, at which point Wells Fargo Bank's automated loan servicing system automatically removes the Mortgage Loan from that collection queue. When a Mortgage Loan appears in a collection queue, a collector will telephone to remind the borrower that a payment is due. Follow-up telephone contacts with the borrower are attempted until the account is current or other payment arrangements have been made. When contact is made with a delinquent borrower, collectors present such borrower with alternative payment methods, such as Western Union, Phone Pay and Quick Collect, in order to expedite payments. Standard form letters are utilized when attempts to reach the borrower by telephone fail and/or in some circumstances, to supplement the phone contacts. Company collectors have computer access to telephone numbers, payment histories, loan information and all past collection notes. Wells Fargo Bank supplements the collectors' efforts with advanced technology such as predictive dialers and statistical behavioral software used to determine the optimal times to call a particular customer. Additionally, collectors may attempt to mitigate losses through the use of behavioral or other models that are designed to assist in identifying workout options in the early stages of delinquency. For those loans in which collection efforts have been exhausted without success, Wells Fargo Bank determines whether foreclosure proceedings are appropriate. The course of action elected with respect to a delinquent Mortgage Loan generally will be guided by a number of factors, including the related borrower's payment history, ability and willingness to pay, the condition and occupancy of the Mortgaged Property, the amount of borrower equity in the Mortgaged Property and whether there are any junior liens. Regulations and practices regarding the liquidation of properties (e.g., foreclosure) and the rights of a borrower in default vary greatly from state to state. As such, all foreclosures are assigned to outside counsel, licensed to practice in the same state as the Mortgaged Property. Bankruptcies filed by borrowers are similarly assigned to appropriate local counsel. Communication with foreclosure and bankruptcy attorneys is maintained through the use of a software program, thus reducing the need for phone calls and faxes and simultaneously creating a permanent record of communication. Attorney timeline performance is managed using quarterly report cards. The status of foreclosures and bankruptcies is monitored by Wells Fargo Bank through its use of such software system. Bankruptcy filing and release information is received electronically from a third-party notification vendor. Prior to a foreclosure sale, Wells Fargo Bank performs a market value analysis. This analysis includes: (i) a current valuation of the Mortgaged Property obtained through a drive-by appraisal or broker's price opinion conducted by an independent appraiser and/or a broker from a network of real estate brokers, complete with a description of the condition of the Mortgaged Property, as well as other information such as recent price lists of comparable properties, recent closed comparables, estimated marketing time and required or suggested repairs, and an estimate of the sales price; (ii) an evaluation of the amount owed, if any, for real estate taxes; and (iii) estimated carrying costs, brokers' fees, repair costs and other related costs associated with real estate owned properties. Wells Fargo Bank bases the amount it will bid at foreclosure sales on this analysis. In the case of second lien loans, Wells Fargo Bank performs a net present value analysis to determine whether to refer the second lien loan to foreclosure or to charge it off. If Wells Fargo Bank acquires title to a property at a foreclosure sale or otherwise, it obtains an estimate of the sale price of the property and then hires one or more real estate brokers to begin marketing the property. If the Mortgaged Property is not vacant when acquired, local eviction attorneys are hired to commence eviction proceedings and/or negotiations are held with occupants in an attempt to get them to vacate without incurring the additional time and cost of eviction. Repairs are performed if it is determined that they will increase the net liquidation proceeds, taking into consideration the cost of repairs, the carrying costs during the repair period and the marketability of the property both before and after the repairs. 80 Wells Fargo Bank's loan servicing software also tracks and maintains tax and homeowners' insurance information and tax and insurance escrow information. Expiration reports are generated periodically listing all policies scheduled to expire. When policies lapse, a letter is automatically generated and issued advising the borrower of such lapse and notifying the borrower that Wells Fargo Bank will obtain lender-placed insurance at the borrower's expense. Any material changes from the servicing policies and procedures of Wells Fargo Bank set forth herein will be described in the applicable prospectus supplement. The Master Servicer General If so specified in the applicable prospectus supplement, the Sponsor may act as master servicer (the "Master Servicer") for a Series. See "The Sponsor." Wells Fargo Bank conducts its master servicing services at its offices in Columbia, Maryland. Its address there is 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 and its telephone number is (410) 884-2000. The Master Servicer may (a) be responsible under the applicable Agreement for providing general administrative services for the Trust Fund for any such Series, including, among other things, administering and supervising the performance by the Servicers of their duties and responsibilities under the Underlying Servicing Agreements and performing certain of the servicing obligations of a terminated Servicer; (b) maintain any mortgage pool insurance policy, mortgagor bankruptcy bond, special hazard insurance policy or other form of credit support that may be required with respect to any Series and (c) make advances of delinquent payments of principal and interest on the Mortgage Loans to the limited extent described herein under the heading "Description of the Securities--Advances in Respect of Delinquencies," if such amounts are not advanced by a Servicer (other than the Sponsor as a Servicer). The Master Servicer will also perform additional duties as described in the applicable Agreement. The compensation payable to the Master Servicer for a Series will be set forth in the applicable prospectus supplement. The Master Servicer may subcontract with any entity the obligations of the Master Servicer under the applicable Agreement. The Master Servicer will remain primarily liable for any such contractor's performance in accordance with the applicable Agreement. The Master Servicer may be released from its obligations in certain circumstances. The Master Servicer may be required to pay certain expenses incurred in connection with the administration of the Trust Fund, which may include, fees or other amounts payable pursuant to any applicable agreement for the provision of credit enhancement for such Series, the fees and disbursements of any custodian, the fees of the Trustee, fees due to the independent accountants and expenses incurred in connection with distributions and reports to Securityholders. Certain of these expenses will be reimbursable to the Master Servicer pursuant to the terms of the applicable Agreement. Expenses that are reimbursable to the Master Servicer include, but are not limited to, legal expenses incurred in connection with the prosecution or defense of any legal action (including any such expenses incurred by the Trustee), expenses incurred as a result of a transfer of servicing and certain taxes incurred by the Master Servicer. Any loss to the Trust Fund as a result of such reimbursement will be allocated first to the Subordinated Securities of a Series before being allocated to the related Senior Securities, or if such Series does not contain Subordinated Securities, pro rata among the various Classes of Securities or in another manner specified in the applicable prospectus supplement. The Master Servicer may not resign from its obligations and duties under the applicable Agreement for each Series, except (i) upon the appointment of a successor and the receipt by the Trustee and Securities Administrator of a letter from each Rating Agency rating the affected Series of Securities that its resignation and the appointment of a successor will not result in a downgrade of such Securities or (ii) upon its determination that its duties thereunder are no longer permissible under applicable law. No such resignation will become effective until the Trustee for such Series or a successor master servicer has assumed the Master Servicer's responsibilities, duties, liabilities and obligations under the applicable Agreement. If the Master Servicer resigns for any of the foregoing reasons and the Trustee is unable or unwilling to assume responsibility for its duties under the applicable Agreement, it may appoint another institution to so act. The applicable Agreement will also provide that neither the Master Servicer nor any subcontractor, nor any partner, director, officer, employee or agent of any of them, will be under any liability to the Trust Fund or the Securityholders, for the taking of any action or for refraining from the taking of any action in good faith pursuant to 81 the applicable Agreement, or for errors in judgment; provided, however, that neither the Master Servicer, any subcontractor, nor any such person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties or by reason of reckless disregard of his or its obligations and duties thereunder. The applicable Agreement will further provide that the Master Servicer, any subcontractor, and any partner, director, officer, employee or agent of either of them shall be entitled to indemnification by the Trust Fund and will be held harmless against any loss, liability or expense incurred in connection with the performance of their duties and obligations and any legal action relating to the applicable Agreement or the Securities, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties thereunder or by reason of reckless disregard of his or its obligations and duties thereunder. In addition, the applicable Agreement will provide that the Master Servicer will not be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its duties under the applicable Agreement and that in its opinion may involve it in any expense or liability. The Master Servicer may, however, in its discretion, undertake any such action deemed by it necessary or desirable with respect to the applicable Agreement and the rights and duties of the parties thereto and the interests of the Securityholders thereunder if the Securityholders offer the Master Servicer reasonable security or indemnity against the costs, expenses and liabilities that may be incurred. In such event, the legal expenses and costs of such action and any liability resulting therefrom will be expenses, costs and liabilities of the Trust Fund and the Master Servicer will be entitled to be reimbursed therefor out of the Distribution Account, and any loss to the Trust Fund arising from such right of reimbursement will be allocated first to the Subordinated Securities of a Series before being allocated to the related Senior Securities, or if such Series does not contain Subordinated Securities, pro rata among the various Classes of Securities or in another manner specified in the applicable Agreement. Any person into which the Master Servicer may be merged or consolidated, or any person resulting from any merger, conversion or consolidation to which the Master Servicer is a party, or any person succeeding to the business through the transfer of substantially all of its assets or all assets relating to such business, or otherwise, of the Master Servicer will be the successor of the Master Servicer under the applicable Agreement for each Series provided that such successor or resulting entity has a net worth of not less than $15,000,000 and is qualified to service mortgage loans for Fannie Mae or Freddie Mac. The Master Servicer also has the right, without the prior written consent of the Trustee or the Securities Administrator, to assign its rights and delegate its duties and obligations under the applicable Agreement for each Series; provided that, if the Master Servicer desires to be released from its obligations under the applicable Agreement, (i) the purchaser or transferee accepting such assignment or delegation is qualified to service mortgage loans for Fannie Mae or Freddie Mac, (ii) the purchaser is satisfactory to the Trustee and the Securities Administrator for such Series, in the reasonable exercise of its judgment, and executes and delivers to the Trustee and the Securities Administrator an agreement, in form and substance reasonably satisfactory to the Trustee and the Securities Administrator, which contains an assumption by such purchaser or transferee of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Master Servicer under the applicable Agreement from and after the date of such agreement; and (iii) each applicable Rating Agency's rating of any Securities for such Series in effect immediately prior to such assignment, sale or transfer would not be qualified, downgraded or withdrawn as a result of such assignment, sale or transfer and the Securities are not reasonably likely to be placed on credit review status by any such Rating Agency. The Master Servicer will be released from its obligations under the applicable Agreement upon any such assignment and delegation, except that the Master Servicer will remain liable for all liabilities and obligations incurred by it prior to the time that the conditions contained in clauses (i), (ii) and (iii) above are met. In addition, the Master Servicer shall have the right, without the written consent of the Trustee or the Securities Administrator, to delegate to, subcontract with, authorize, or appoint an affiliate of the Master Servicer to perform and carry out any duties, covenants or obligations to be performed and carried out by the Master Servicer under the applicable Agreement and will so to delegate, subcontract, authorize or appoint to an affiliate of the Master Servicer any duties, covenants or obligations to be performed and carried out by the Master Servicer to the extent that such duties, covenants or obligations are to be performed in any state or states in which the Master Servicer is not authorized to do business as a foreign corporation but in which the affiliate is so authorized. In the event of any assignment or delegation of duties by the Master Servicer, the Depositor will report such event on Form 8-K. The Trustee or a successor master servicer is entitled to be reimbursed for its costs in effecting a master servicing transfer from the Master Servicer. In the event that the predecessor master servicer fails to reimburse the 82 Trustee or successor master servicer, as applicable, the Trustee or successor master servicer, as applicable, will be entitled to reimbursement from the assets of the related Trust. Master Servicing Experience and Procedures of Wells Fargo Bank Wells Fargo Bank, including its predecessors, has been involved with the master servicing of residential mortgage loans since 1989. These master servicing activities include independently calculating monthly loan balances based on servicer data, comparing its results to servicer loan-level reports and reconciling any discrepancies with the servicers. The master servicing activities also include reviewing the servicing of defaulted loans for compliance with the terms of the applicable Agreement. The master servicing activities are handled at Wells Fargo Bank's location in Columbia, Maryland. The following table shows the number of issuances and the aggregate initial principal balances of residential mortgage-backed securities for which Wells Fargo Bank acted as master servicer during each of the periods indicated:
2003 2004 2005 -------------------------- -------------------------- ----------------------------- Aggregate Aggregate Aggregate Issuances Initial Initial Initial No. of Principal No. of Principal No. of Principal Issuances Balance Issuances Balance Issuances Balance - ---------- --------------- --------- --------------- ---------- ---------------- 643 $210,199,085,957 735 $347,601,679,698 1,096 $542,500,639,530
Special Servicers If and to the extent specified in the applicable prospectus supplement, a special servicer (a "Special Servicer") may be a party to the applicable Agreement or may be appointed by the Servicer or another specified party to perform certain specified duties in respect of servicing the related Mortgage Loans that would otherwise be performed by the Servicer (for example, the workout and/or foreclosure of defaulted Mortgage Loans). The rights and obligations of any Special Servicer will be specified in the related Agreement. The Servicer will be liable for the performance of a Special Servicer only if, and to the extent, set forth in such Agreement. Each Special Servicer will be required to deliver, to the extent applicable, documents described under "-Evidence as to Compliance." Credit Risk Manager If and to the extent specified in the applicable prospectus supplement, a credit risk manager may monitor and make recommendations to the Servicer or the Master Servicer regarding certain delinquent and defaulted Mortgage Loans. Events of Default under the Agreements "Events of Default" under the applicable Agreement for each Series will include (i) any failure by the Servicer to make (a) a required deposit which continues unremedied for three business days after the giving of written notice of such failure to the Servicer or (b) any Advance or to pay Compensating Interest which continues unremedied on the business day immediately following the Distribution Date following such failure; (ii) any failure by the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the applicable Agreement, which continues unremedied for 60 days after (a) the giving of written notice of such failure to the Servicer by the Trustee, the Securities Administrator or the holders of Securities aggregating not less than 25% of the Voting Interests or (b) actual knowledge of such failure by a servicing officer of the Servicer or, which continues unremedied for a lesser number of days set forth in the applicable Agreement in the case of a failure to perform any covenants or agreements relating to the requirements of Regulation AB (17 C.F.R. 229), (iii) certain bankruptcy events of the Servicer and (iv) the Servicer becoming ineligible to service for both Fannie Mae and Freddie Mac (unless remedied within 90 days). 83 The manner of determining the "Voting Interests" of a Security or Class or Classes of Securities will be specified in the applicable prospectus supplement. Rights Upon Event of Default under the Agreements So long as an Event of Default remains unremedied under the applicable Agreement for a Series, the Trustee for such Series or holders of Securities of such Series evidencing not less than 66 ?% of the Voting Interests in the Trust Fund for such Series may terminate all of the rights and obligations of the Servicer under the applicable Agreement and in and to the Mortgage Loans (other than the Servicer's right to recovery of the aggregate Servicing Fees due prior to the date of termination, and other expenses and amounts advanced pursuant to the terms of the applicable Agreement, which rights the Servicer will retain under all circumstances), whereupon the Master Servicer or the Trustee (as specified in the applicable Agreement), will succeed to (or the Trustee will appoint a successor servicer to assume) all of the responsibilities, duties and liabilities of the Servicer under the applicable Agreement and will be entitled to similar compensation arrangements. In the event that the Master Servicer or the Trustee (as specified in the applicable Agreement), is unwilling or unable so to act, the Trustee may select, pursuant to the public bid procedure described in the applicable Agreement, or petition a court of competent jurisdiction to appoint, a housing and home finance institution, bank or mortgage servicing institution with a net worth of at least $50,000,000 to act as successor to the Servicer under the provisions of the applicable Agreement; provided however, that until such a successor Servicer is appointed and has assumed the responsibilities, duties and liabilities of the Servicer under the applicable Agreement, the Master Servicer or the Trustee shall act as successor Servicer. In the event such public bid procedure is utilized, the successor would be entitled to compensation in an amount equal to the aggregate Servicing Fees, together with the other compensation to which the Servicer is entitled under the applicable Agreement, and the Servicer would be entitled to receive the net profits, if any, realized from the sale of its rights and obligations under the applicable Agreement. During the continuance of any Event of Default under the applicable Agreement for a Series, the Trustee for such Series will have the right to take action to enforce its rights and remedies and to protect and enforce the rights and remedies of the Securityholders of such Series, and holders of Securities evidencing not less than 25% of the Voting Interests for such Series may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred upon the Trustee. However, the Trustee will not be under any obligation to pursue any such remedy or to exercise any of such trusts or powers unless such Securityholders have offered the Trustee reasonable security or indemnity against the cost, expenses and liabilities which may be incurred by the Trustee thereby. Also, the Trustee may decline to follow any such direction if the Trustee determines that the action or proceeding so directed may not lawfully be taken or would involve it in personal liability or be unjustly prejudicial to the non-assenting Securityholders. No Securityholder of a Series, solely by virtue of such holder's status as a Securityholder, will have any right under the applicable Agreement for such Series to institute any proceeding with respect to the such Agreement, unless such holder previously has given to the Trustee for such Series written notice of default and continuance thereof and unless the holders of Securities evidencing not less than 25% of the Voting Interests for such Series have made written request upon the Trustee to institute such proceeding in its own name as Trustee thereunder and have offered to the Trustee reasonable indemnity and the Trustee for 60 days has neglected or refused to institute any such proceeding. Amendment Each Agreement may be amended by the parties thereto, without the consent of any Securityholders covered by the applicable Agreement, (i) to cure any ambiguity or mistake, (ii) to correct, modify or supplement any provision therein which may be inconsistent with any other provision therein or with the applicable prospectus supplement, (iii) to make any other provisions with respect to matters or questions arising under the applicable Agreement which are not materially inconsistent with the provisions thereof or the applicable prospectus supplement, (iv) to conform the obligations of the parties under the applicable Agreement, or to add obligations of the parties to the applicable Agreement, if necessary, to comply with the requirements of Regulation AB (17 C.F.R. 229), or (v) to comply with any requirements imposed by the Code; provided that, in the case of clause (iii), such amendment will not adversely affect in any material respect the interests of any Securityholders covered by the applicable Agreement as evidenced either by an opinion of counsel to such effect or the delivery to the Trustee and any other parties specified in the 84 applicable Agreement of written notification from each Rating Agency that provides, at the request of the Depositor, a rating for the Offered Securities of the related Series to the effect that such amendment or supplement will not cause such Rating Agency to lower or withdraw the then current rating assigned to such Securities. Each Agreement may also be amended by the parties thereto with the consent of the holders of Securities evidencing interests aggregating not less than 51% of the Voting Interests evidenced by the Securities of each Class affected thereby, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Agreement or of modifying in any manner the rights of the Securityholders; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, any payments received on or with respect to Mortgage Loans that are required to be distributed on any Securities, without the consent of the holder of such Security, (ii) adversely affect in any material respect the interests of the holders of a Class of Securities of a Series in a manner other than that set forth in (i) above without the consent of the holders of Securities aggregating not less than 66 ?% of the Voting Interests evidenced by such Class, or (iii) reduce the aforesaid percentage of Securities of any Class, the holders of which are required to consent to such amendment, without the consent of the holders of all Securities of such Class affected then outstanding. However, with respect to any Series of Securities as to which a REMIC election is to be made, the Securities Administrator will not consent to any amendment of the applicable Agreement unless it shall first have received an opinion of counsel to the effect that such amendment will not result in the imposition of a tax on the related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC at any time that the related Securities are outstanding. The Trustee and Securities Administrator General Wells Fargo Bank will act as Securities Administrator for each Series of Securities and the Trustee for each Series of Securities will be named in the applicable prospectus supplement. The commercial bank or trust company serving as Trustee may have normal banking relationships with the Depositor or any of its affiliates. The Trustee or Securities Administrator may resign at any time, in which event the Depositor will be obligated to appoint a successor trustee or securities administrator, as applicable. The Depositor or the Servicer may also remove the Trustee or Securities Administrator if the Trustee or Securities Administrator, as applicable, ceases to be eligible to act in its capacity under the Agreement, if the Trustee or Securities Administrator becomes insolvent or in order to change the situs of the Trust Fund for state tax reasons. Upon becoming aware of such circumstances, the Depositor or the Servicer may remove the Trustee or Securities Administrator, as applicable, and will become obligated to appoint a successor trustee. The Trustee or the Securities Administrator may also be removed at any time by the holders of Securities evidencing not less than 51% of the Voting Interests in the Trust Fund, except that, any Security registered in the name of the Depositor, the Servicer, the Trustee or the Securities Administrator or any affiliate thereof (of any other parties specified in the applicable Agreement) will not be taken into account in determining whether the requisite Voting Interests in the Trust Fund necessary to effect any such removal has been obtained. Any resignation and removal of the Trustee or Securities Administrator, and the appointment of a successor, will not become effective until acceptance of such appointment by the successor trustee or securities administrator, as applicable. The Trustee or the Securities Administrator, and any successor, will have a combined capital and surplus of at least $50,000,000, or will be a member of a bank holding system, the aggregate combined capital and surplus of which is at least $50,000,000 and have the ratings specified in the applicable Agreement; provided that the Trustee's or the Securities Administrator's and any such successor trustee's or securities administrator's separate capital and surplus shall at all times be at least the amount specified in Section 310(a)(2) of the Trust Indenture Act of 1939, and will be subject to supervision or examination by federal or state authorities. Each Agreement will also provide that none of the Trustee, the Securities Administrator nor any subcontractor, nor any partner, director, officer, employee or agent of either of them, will be under any liability to the Trust Fund or the Securityholders, for the taking of any action or for refraining from the taking of any action in good faith pursuant to such Agreement, or for errors in judgment; provided, however, that none of the Trustee, the Securities Administrator, any subcontractor, nor any such person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties or by reason of reckless disregard of his or its obligations and duties thereunder. Each Agreement will further provide that the Trustee, the Securities Administrator, any subcontractor, and any partner, director, officer, employee or agent of either of them shall be entitled to indemnification by the Trust Fund and will be held harmless against any loss, liability or expense incurred in connection with the performance of their duties and obligations and any legal action 85 relating to such Agreement or the Securities, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties thereunder or by reason of reckless disregard of his or its obligations and duties thereunder. Securities Administration Experience of Wells Fargo Bank Wells Fargo Bank will be the securities administrator (the "Securities Administrator") of each Trust. Wells Fargo Bank conducts its securities administration activities at its offices in Columbia, Maryland. Its address there is 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 and its telephone number is (410) 884-2000. Wells Fargo Bank, including its predecessors, has been involved with the securities administration of residential mortgage loans, commercial mortgage loans, auto loans, student loans and collateralized debt obligations. Wells Fargo Bank, including its predecessors, has been involved in the securities administration of residential mortgage loans since 1989. These securities administration activities, which include calculations of payments on securities are handled at Wells Fargo Bank's location in Columbia, Maryland. The following table shows the number of issuances and the aggregate initial principal balances of residential mortgage-backed securities which Wells Fargo Bank acted as securities administrator during each of the periods indicated:
2003 2004 2005 ----------------------------- --------------------------- ----------------------------- Aggregate Aggregate Aggregate Issuances Initial Initial Initial No. of Principal No. of Principal No. of Principal Issuances Balance Issuances Balance Issuances Balance - ---------- ---------------- --------- ---------------- ---------- ---------------- 1,231 $251,288,485,527 1,510 $495,339,300,548 2,131 $766,507,104,520
Material Terms of the Indenture General The following summary describes the material provisions that may appear in each Indenture. The prospectus supplement for a Series of Notes will describe the specific provisions of the Indenture relating to such Series. The provisions of each Indenture will vary depending upon the nature of the Securities to be issued thereunder and the nature of the related Trust Fund. A form of an Indenture has been filed as an exhibit to the Registration Statement of which this prospectus is a part. Unless otherwise specified in the applicable prospectus supplement for a Series of Notes, certain administrative functions of the Indenture Trustee described in this prospectus supplement will be performed by the Securities Administrator pursuant to an administrative agreement between such Indenture Trustee and the Securities Administrator. Events of Default Events of default under the Indenture for each Series of Notes will generally include: (i) a default for thirty (30) days (or such other number of days specified in such prospectus supplement) or more in the payment of any principal of or interest on any Note of such Series; (ii) failure to perform any other covenant of the Depositor or the Trust Fund in the Indenture which continues for a period of sixty (60) days (or (a) a shorter time period set forth in the applicable Agreement for failure to perform any covenants or agreements relating to the requirements of Regulation AB (17 CFR 229) or (b) such other number of days specified in such prospectus supplement) after notice thereof is given in accordance with the procedures described in the applicable prospectus supplement; (iii) any representation or warranty made by the Depositor or the Trust Fund in the Indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith with respect to or affecting such Series having been incorrect in a material respect as of the time made, and such breach is not cured within sixty (60) days (or such other number of days specified in such prospectus supplement) after notice thereof is given in accordance with the procedures described in the applicable prospectus supplement; (iv) certain events of bankruptcy, insolvency, 86 receivership or liquidation of the Depositor or the Trust Fund; or (v) any other event of default provided with respect to Notes of that Series. If an event of default with respect to the Notes of any Series at the time outstanding occurs and is continuing, either the Indenture Trustee or the Securityholders of a majority of the then aggregate outstanding amount of the Notes of such Series may declare the principal amount (or, if the Notes of that Series are Accrual Securities, such portion of the principal amount as may be specified in the terms of that Series, as provided in the applicable prospectus supplement) of all the Notes of such Series to be due and payable immediately. Such declaration may, under certain circumstances, be rescinded and annulled by the Securityholders of a majority in aggregate outstanding amount of the Notes of such Series. If, following an event of default with respect to any Series of Notes, the Notes of such Series have been declared to be due and payable, the Indenture Trustee may, in its discretion, notwithstanding such acceleration, elect to maintain possession of the collateral securing the Notes of such Series and the Securities Administrator will continue to apply distributions on such collateral as if there had been no declaration of acceleration if such collateral continues to provide sufficient funds for the payment of principal of and interest on the Notes of such Series as they would have become due if there had not been such a declaration. In addition, the Indenture Trustee may not sell or otherwise liquidate the collateral securing the Notes of a Series following an event of default, other than a default in the payment of any principal or interest on any Note of such Series for thirty (30) days or more, unless (a) the Securityholders of 100% (or such other percentage specified in the applicable prospectus supplement) of the then aggregate outstanding amount of the Notes of such Series consent to such sale, (b) the proceeds of such sale or liquidation are sufficient to pay in full the principal of and accrued interest, due and unpaid, on the outstanding Notes of such Series at the date of such sale or (c) the Indenture Trustee determines that such collateral would not be sufficient on an ongoing basis to make all payments on such Notes as such payments would have become due if such Notes had not been declared due and payable, and the Indenture Trustee obtains the consent of the Securityholders of 66 (2)/3% (or such other percentage specified in the applicable prospectus supplement) of the then aggregate outstanding amount of the Notes of such Series. In the event that the Indenture Trustee liquidates the collateral in connection with an event of default involving a default for thirty (30) days (or such other number of days specified in the applicable prospectus supplement) or more in the payment of principal of or interest on the Notes of a Series, the Indenture provides that the Indenture Trustee will have a prior lien on the proceeds of any such liquidation for unpaid fees and expenses. As a result, upon the occurrence of such an event of default, the amount available for distribution to the Securityholders would be less than would otherwise be the case. However, the Indenture Trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the lien of the Indenture for the benefit of the Securityholders after the occurrence of such an event of default. To the extent provided in the applicable prospectus supplement, in the event the principal of the Notes of a Series is declared due and payable, as described above, the Securityholders of any such Notes issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount thereof less the amount of such discount which is unamortized. Subject to the provisions of the Indenture relating to the duties of the Indenture Trustee, in case an event of default shall occur and be continuing with respect to a Series of Notes, the Indenture Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Securityholders of such Series, unless such holders offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in complying with such request or direction. Subject to such provisions for indemnification and certain limitations contained in the Indenture, the Securityholders of a majority of the then aggregate outstanding amount of the Notes of such Series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee with respect to the Notes of such Series, and the Securityholders of a majority of the then aggregate outstanding amount of the Notes of such Series may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the Indenture that cannot be modified without the waiver or consent of all the Securityholders of the outstanding Notes of such Series affected thereby. 87 Discharge of Indenture The Indenture will be discharged with respect to a Series of Notes (except with respect to certain continuing rights specified in the Indenture) upon the delivery to the Indenture Trustee for cancellation of all the Notes of such Series or, with certain limitations, upon deposit with the Indenture Trustee of funds sufficient for the payment in full of all of the Notes of such Series. In addition to such discharge with certain limitations, the Indenture will provide that, if so specified with respect to the Notes of any Series, the related Trust Fund will be discharged from any and all obligations in respect of the Notes of such Series (except for certain obligations relating to temporary Notes and exchange of Notes, to register the transfer of or exchange Notes of such Series, to replace stolen, lost or mutilated Notes of such Series, to maintain paying agencies and to hold monies for payment in trust) upon the deposit with the Indenture Trustee, in trust, of money and/or direct obligations of or obligations guaranteed by the United States of America which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of and each installment of interest on the Notes of such Series on the maturity date for such Notes and any installment of interest on such Notes in accordance with the terms of the Indenture and the Notes of such Series. In the event of any such defeasance and discharge of Notes of such Series, holders of Notes of such Series would be able to look only to such money and/or direct obligations for payment of principal and interest, if any, on their Notes until maturity. Indenture Trustee's Annual Report The Indenture Trustee for each Series of Notes will be required to mail each year to all related Securityholders a brief report relating to its eligibility and qualification to continue as Indenture Trustee under the related Indenture, any amounts advanced by the Securities Administrator pursuant to the Indenture, the amount, interest rate and maturity date of certain indebtedness owing by such Trust to the applicable Indenture Trustee in its individual capacity, the property and funds physically held by such Indenture Trustee as such and any action taken by it that materially affects such Notes and that has not been previously reported. The Indenture Trustee The Indenture Trustee for a Series of Notes will be specified in the applicable prospectus supplement. The Indenture Trustee for any Series may resign at any time, in which event the Depositor will be obligated to appoint a successor trustee for such Series. The Depositor may also remove any such Indenture Trustee if such Indenture Trustee ceases to be eligible to continue as such under the related Indenture or if such Indenture Trustee becomes insolvent. In such circumstances the Depositor will be obligated to appoint a successor trustee for the applicable Series of Notes. Any resignation or removal of the Indenture Trustee and appointment of a successor trustee for any Series of Notes does not become effective until acceptance of the appointment by the successor trustee for such Series. The bank or trust company serving as Indenture Trustee may have a banking relationship with the Depositor, the Servicer, the Master Servicer, the Securities Administrator or any of their affiliates. CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS The following discussion contains summaries of certain legal aspects of mortgage loans which are general in nature. Because such legal aspects are governed by applicable state law (which laws may differ substantially), the summaries do not purport to be complete or to reflect the laws of any particular state, nor to encompass the laws of all states in which the security for the Mortgage Loans is situated. The summaries are qualified in their entirety by reference to the applicable federal and state laws governing the Mortgage Loans. General The Mortgage Loans will, in general, be secured by either mortgages or deeds of trust, depending upon the prevailing practice in the state in which the underlying property is located. A mortgage creates a lien upon the real property described in the mortgage. There are two parties to a mortgage: the mortgagor, who is the borrower (or, in 88 the case of a Mortgage Loan secured by a property that has been conveyed to an inter vivos revocable trust, the settlor of such trust); and the mortgagee, who is the lender. In a mortgage instrument state, the mortgagor delivers to the mortgagee a note or bond evidencing the loan and the mortgage. Although a deed of trust is similar to a mortgage, a deed of trust has three parties: a borrower called the trustor (similar to a mortgagor), a lender called the beneficiary (similar to a mortgagee), and a third-party grantee called the trustee. Under a deed of trust, the borrower grants the property, irrevocably until the debt is paid, in trust, generally with a power of sale, to the trustee to secure payment of the loan. The trustee's authority under a deed of trust and the mortgagee's authority under a mortgage are governed by the express provisions of the deed of trust or mortgage, applicable law, and, in some cases, with respect to the deed of trust, the directions of the beneficiary. The Mortgages that encumber Multifamily Properties may contain an assignment of rents and leases, pursuant to which the mortgagor assigns to the lender the mortgagor's right, title and interest as landlord under each lease and the income derived therefrom, while retaining a revocable license to collect the rents for so long as there is no default. If the mortgagor defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents. Condominiums Certain of the Mortgage Loans may be loans secured by condominium units. The condominium building may be a multi-unit building or buildings, or a group of buildings whether or not attached to each other, located on property subject to condominium ownership. Condominium ownership is a form of ownership of real property as to which each owner is entitled to the exclusive ownership and possession of his or her individual condominium unit. The owner also owns a proportionate undivided interest in all parts of the condominium building (other than the other individual condominium units) and all areas or facilities, if any, for the common use of the condominium units. The condominium unit owners appoint or elect the condominium association to govern the affairs of the condominium. Cooperatives Certain of the Mortgage Loans may be cooperative loans. The Cooperative either owns all the real property that comprises the project, including the land and the apartment building comprised of separate dwelling units and common areas or leases the land generally by a long term ground lease and owns the apartment building. The Cooperative is directly responsible for project management and, in most cases, payment of real estate taxes and hazard and liability insurance. If there is a blanket mortgage on the property and/or underlying land, as is generally the case, the Cooperative, as project mortgagor, is also responsible for meeting these mortgage obligations. Ordinarily, the Cooperative incurs a blanket mortgage in connection with the construction or purchase of the Cooperative's apartment building. The interest of the occupants under proprietary leases or occupancy agreements to which the Cooperative is a party are generally subordinate to the interest of the holder of the blanket mortgage in that building. See "Risk Factors-Risks Associated With the Mortgage Loans-Collateral Securing Cooperative Loans May Diminish in Value" in this prospectus. The Cooperative is owned by tenant stockholders who, through ownership of stock, shares or membership certificates in the corporation, receive proprietary leases or occupancy agreements which confer exclusive rights to occupy specific units. Generally, a tenant stockholder of a Cooperative must make a monthly payment to the Cooperative representing such tenant stockholder's pro rata share of the Cooperative's payments for its blanket mortgage, real property taxes, maintenance expenses and other capital or ordinary expenses. An ownership interest in a Cooperative and accompanying rights is financed through a cooperative share loan evidenced by a promissory note and secured by a security interest in the occupancy agreement or proprietary lease and in the related cooperative shares. The lender takes possession of the share certificate and a counterpart of the proprietary lease or occupancy agreement, and typically a financing statement covering the proprietary lease or occupancy agreement and the cooperative shares is filed in the appropriate state and local offices to perfect the lender's interest in its collateral. Subject to the limitations discussed below, upon default of the tenant stockholder, the lender may sue for judgment on the promissory note, dispose of the collateral at a public or private sale or otherwise proceed against the collateral or tenant stockholder as an individual as provided in the security agreement covering the assignment of the proprietary lease or occupancy agreement and the pledge of cooperative shares. 89 Foreclosure Foreclosure of a mortgage is generally accomplished by judicial action. Generally, the action is initiated by the service of legal pleadings upon all parties having an interest of record in the real property. Delays in completion of the foreclosure occasionally may result from difficulties in locating necessary parties defendant. When the mortgagee's right of foreclosure is contested, the legal proceedings necessary to resolve the issue can be time-consuming. After the completion of a judicial foreclosure proceeding, the court may issue a judgment of foreclosure and appoint a receiver or other officer to conduct the sale of the property. In some states, mortgages may also be foreclosed by advertisement, pursuant to a power of sale provided in the mortgage. Foreclosure of a mortgage by advertisement is essentially similar to foreclosure of a deed of trust by non-judicial power of sale. Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale under a specific provision in the deed of trust that authorizes the trustee to sell the property to a third party upon any default by the borrower under the terms of the note or deed of trust. In certain states, such foreclosure also may be accomplished by judicial action in the manner provided for foreclosure of mortgages. In some states, the trustee must record a notice of default and send a copy to the borrower-trustor and to any person who has recorded a request for a copy of a notice of default and notice of sale. In addition, the trustee must provide notice in some states to any other individual having an interest of record in the real property, including any junior lienholders. If the deed of trust is not reinstated within any applicable cure period, a notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. In addition, some state laws require that a copy of the notice of sale be posted on the property and sent to all parties having an interest of record in the property. In some states, the borrower-trustor has the right to reinstate the loan at any time following default until shortly before the trustee's sale. In general, the borrower, or any other person having a junior encumbrance on the real estate, may, during a reinstatement period, cure the default by paying the entire amount in arrears plus the costs and expenses incurred in enforcing the obligation. Certain state laws control the amount of foreclosure expenses and costs, including attorneys' fees, which may be recovered by a lender. In case of foreclosure under either a mortgage or a deed of trust, the sale by the receiver or other designated officer, or by the trustee, is a public sale. However, because of the difficulty a potential buyer at the sale would have in determining the exact status of title and because the physical condition of the property may have deteriorated during the foreclosure proceedings, it is uncommon for a third party to purchase the property at the foreclosure sale. Rather, it is common for the lender to purchase the property from the trustee or receiver for an amount equal to the unpaid principal amount of the note, accrued and unpaid interest and the expenses of foreclosure. Thereafter, subject to the right of the borrower in some states to remain in possession during the redemption period, the lender will assume the burdens of ownership, including obtaining hazard insurance and making such repairs at its own expense as are necessary to render the property suitable for sale. The lender commonly will obtain the services of a real estate broker and pay the broker a commission in connection with the sale of the property. Depending upon market conditions, the ultimate proceeds of the sale of the property may not equal the lender's investment in the property. Any loss may be reduced by the receipt of mortgage insurance proceeds, if any, or by judicial action against the borrower for the deficiency, if such action is permitted by law. See "--Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders" below. A junior mortgagee may not foreclose on the property securing the junior mortgage unless it forecloses subject to senior mortgages and any other prior liens, in which case it may be obliged to make payments on the senior mortgages to avoid their foreclosure. In addition, in the event that the foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale" clause contained in a senior mortgage, the junior mortgagee may be required to pay the full amount of the senior mortgage to avoid its foreclosure. Accordingly, with respect to those Mortgage Loans, if any, that are junior mortgage loans, if the lender purchases the property the lender's title will be subject to all senior mortgages, prior liens and certain governmental liens. The proceeds received by the referee or trustee from the sale are applied first to the costs, fees and expenses of sale and then in satisfaction of the indebtedness secured by the mortgage under which the sale was conducted. Any proceeds remaining after satisfaction of senior mortgage debt are generally payable to the holders of junior mortgages and other liens and claims in order of their priority, whether or not the mortgagor is in default. Any additional proceeds are generally payable to the mortgagor. The payment of the proceeds to the holders of junior 90 mortgages may occur in the foreclosure action of the senior mortgage or a subsequent ancillary proceeding or may require the institution of separate legal proceedings by such holders. Foreclosure on Shares of Cooperatives The cooperative shares owned by the tenant-stockholder and pledged to the lender are, in almost all cases, subject to restrictions on transfer as set forth in the cooperative's certificate of incorporation and by-laws, as well as in the proprietary lease or occupancy agreement, and may be cancelled by the cooperative for failure by the tenant-stockholder to pay rent or other obligations or charges owed by such tenant-stockholder, including mechanics' liens against the cooperative apartment building incurred by such tenant-stockholder. The proprietary lease or occupancy agreement generally permits the cooperative to terminate such lease or agreement in the event an obligor fails to make payments or defaults in the performance of covenants required thereunder. Typically, the lender and the cooperative enter into a recognition agreement which establishes the rights and obligations of both parties in the event of a default by the tenant-stockholder on its obligations under the proprietary lease or occupancy agreement. A default by the tenant-stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the security agreement between the lender and the tenant-stockholder. The recognition agreement generally provides that, in the event that the tenant-stockholder has defaulted under the proprietary lease or occupancy agreement, the cooperative will take no action to terminate such lease or agreement until the lender has been provided an opportunity to cure the default. The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the cooperative will recognize the lender's lien against proceeds from a sale of the cooperative apartment, subject, however, to the cooperative's right to sums due under such proprietary lease or occupancy agreement. The total amount owed to the cooperative by the tenant-stockholder, which the lender generally cannot restrict and does not monitor, could reduce the value of the collateral below the outstanding principal balance of the cooperative loan and accrued and unpaid interest thereon. Recognition agreements also provide that in the event of a foreclosure on a cooperative loan, the lender must obtain the approval or consent of the cooperative as required by the proprietary lease before transferring the cooperative shares or assigning the proprietary lease. Generally, the lender is not limited by the agreement in any rights it may have to dispossess the tenant-stockholders. Foreclosure on the cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the Uniform Commercial Code (the "UCC") and the security agreement relating to those shares. Article 9 of the UCC requires that a sale be conducted in a "commercially reasonable" manner. Whether a foreclosure sale has been conducted in a "commercially reasonable" manner will depend on the facts in each case. In determining commercial reasonableness, a court will look to the notice given the debtor and the method, manner, time, place and terms of the foreclosure. Generally, a sale conducted according to the usual practice of banks selling similar collateral will be considered reasonably conducted. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender's security interest. The recognition agreement, however, generally provides that the lender's right to reimbursement is subject to the right of the cooperative corporation to receive sums due under the proprietary lease or occupancy agreement. If there are proceeds remaining, the lender must account to the tenant-stockholder for the surplus. Conversely, if a portion of the indebtedness remains unpaid, the tenant-stockholder is generally responsible for the deficiency. See "--Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders" below. Leaseholds Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold mortgages are subject to certain considerations not associated with mortgage loans secured by the fee estate of the mortgagor. The most significant of these consideration is that the ground lease creating the leasehold estate could terminate, leaving the leasehold mortgagee without its security. The ground lease may terminate, if among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor. This possibility may be minimized if the ground lease contains certain provisions protective of the mortgagee, but the ground leases that secure Mortgage Loans may not contain some of these protective provisions, 91 and mortgages may not contain the other protection discussed in the next paragraph. Protective ground lease provisions include the right of the leasehold mortgagee to receive notices from the ground lessor of any defaults by the mortgagor; the right to cure those defaults, with adequate cure periods; if a default is not susceptible of cure by the leasehold mortgagee, the right to acquire the leasehold estate through foreclosure or otherwise; the ability of the ground lease to be assigned to and by the leasehold mortgagee or purchaser at a foreclosure sale and for the simultaneous release of the ground lessee's liabilities under the new lease; and the right of the leasehold mortgagee to enter into a new ground lease with the ground lessor on the same terms and conditions as the old ground lease upon a termination. In addition to the preceding protections, a leasehold mortgagee may require that the ground lease or leasehold mortgage prohibit the ground lessee from treating the ground lease as terminated in the event of the ground lessor's bankruptcy and rejection of the ground lease by the trustee for the debtor-ground lessor. As further protection, a leasehold mortgage may provide for the assignment of the debtor-ground lessee's right to reject a lease pursuant to Section 365 of the Bankruptcy Code, although the enforceability of that clause has not been established. Without the protections described in the preceding paragraph, a leasehold mortgagee may lose the collateral securing its leasehold mortgage. In addition, terms and conditions of a leasehold mortgage are subject to the terms and conditions of the ground lease. Although certain rights given to a ground lessee can be limited by the terms of a leasehold mortgage, the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation will be governed by the provisions of the ground lease. Junior Mortgages Some of the Mortgage Loans may be secured by junior mortgages or deeds of trust, which are subordinate to first or other senior mortgages or deeds of trust held by other lenders. The rights of the Trust Fund as the holder of a junior deed of trust or a junior mortgage are subordinate in lien and in payment to those of the holder of the senior mortgage or deed of trust, including the prior rights of the senior mortgagee or beneficiary to receive and apply hazard insurance and condemnation proceeds and, upon default of the mortgagor, to cause a foreclosure on the property. Upon completion of the foreclosure proceedings by the holder of the senior mortgage or the sale pursuant to the deed of trust, the junior mortgagee's or junior beneficiary's lien will be extinguished unless the junior lienholder satisfies the defaulted senior loan or asserts its subordinate interest in a property in foreclosure proceedings. See "--Foreclosure" herein. Furthermore, because the terms of the junior mortgage or deed of trust are subordinate to the terms of the first mortgage or deed of trust, in the event of a conflict between the terms of the first mortgage or deed of trust and the junior mortgage or deed of trust, the terms of the first mortgage or deed of trust will generally govern. Upon a failure of the mortgagor or trustor to perform any of its obligations, the senior mortgagee or beneficiary, subject to the terms of the senior mortgage or deed of trust, may have the right to perform the obligation itself. Generally, all sums so expended by the mortgagee or beneficiary become part of the indebtedness secured by the mortgage or deed of trust. To the extent a first mortgagee expends such sums, such sums will generally have priority over all sums due under the junior mortgage. Rights of Redemption In some states, after sale pursuant to a deed of trust and/or foreclosure of a mortgage, the borrower and certain foreclosed junior lienors are given a statutory period in which to redeem the property from the foreclosure sale. In most states where the right of redemption is available, statutory redemption may occur upon payment of the foreclosure purchase price, accrued interest and taxes. In some states, the right to redeem is an equitable right. The effect of a right of redemption is to delay the ability of the lender to sell the foreclosed property. The exercise of a right of redemption would defeat the title of any purchaser at a foreclosure sale, or of any purchaser from the lender subsequent to judicial foreclosure or sale under a deed of trust. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has run. 92 Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders Certain states have imposed statutory prohibitions which limit the remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some states, statutes limit the right of the beneficiary or mortgagee to obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust. A deficiency judgment would be a personal judgment against the former borrower equal in most cases to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Other statutes require the beneficiary or mortgagee to exhaust the security afforded under a deed of trust or mortgage by foreclosure in an attempt to satisfy the full debt before bringing a personal action against the borrower. Finally, other statutory provisions limit any deficiency judgment against the former borrower following a judicial sale to the excess of the outstanding debt over the fair market value of the property at the time of public sale. The purpose of these statutes is generally to prevent a beneficiary or a mortgagee from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the judicial sale. Generally, Article 9 of the UCC governs foreclosure on cooperative shares and the related proprietary lease or occupancy agreement and foreclosure on the beneficial interest in a land trust. Some courts have interpreted Section 9-504 of the UCC to prohibit a deficiency award unless the creditor establishes that the sale of the collateral (which, in the case of a Mortgage Loan secured by shares of a cooperative, would be such shares and the related proprietary lease or occupancy agreement) was conducted in a commercially reasonable manner. In addition to anti-deficiency and related legislation, numerous other federal and state statutory provisions, including the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code"), and state laws affording relief to debtors may interfere with or affect the ability of a secured mortgage lender to obtain payment of a mortgage loan, to realize upon collateral and/or enforce a deficiency judgment. For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and, usually, no interest or principal payments are made during the course of the bankruptcy case. Foreclosure of an interest in real property of a debtor in a case under the Bankruptcy Code can typically occur only if the bankruptcy court vacates the stay, an action, the court may be reluctant to take, particularly if the debtor has the prospect of restructuring his or her debts and the mortgage collateral is not deteriorating in value. The delay and the consequences thereof caused by such automatic stay can be significant. Also, under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a junior lienor (a subordinate lender secured by a mortgage on the property) may stay a senior lender from taking action to foreclose. A homeowner may file for relief under the Bankruptcy Code under any of three different chapters of the Bankruptcy Code. Under Chapter 7, the assets of the debtor are liquidated and a lender secured by a lien may "bid in" (i.e., bid up to the amount of the debt) at the sale of the asset. See "--Foreclosure." A homeowner may also file for relief under Chapter 11 of the Bankruptcy Code and reorganize his or her debts through his or her reorganization plan. Alternatively, a homeowner may file for relief under Chapter 13 of the Bankruptcy Code and address his or her debts in a rehabilitation plan. (Chapter 13 is often referred to as the "wage earner chapter" or "consumer chapter" because most individuals seeking to restructure their debts file for relief under Chapter 13 rather than Chapter 11). The Bankruptcy Code permits a mortgage loan that is secured by property that does not consist solely of the debtor's principal residence to be modified without the consent of the lender provided certain substantive and procedural safeguards are met. Under the Bankruptcy Code, the lender's security interest may be reduced to the then-current value of the property as determined by the court if the value is less than the amount due on the loan, thereby leaving the lender as a general unsecured creditor for the difference between the value of the collateral and the outstanding balance of the mortgage loan. A borrower's unsecured indebtedness will typically be discharged in full upon payment of a substantially reduced amount. Other modifications to a mortgage loan may include a reduction in the amount of each scheduled payment, which reduction may result from a reduction in the rate of interest, an alteration of the repayment schedule, an extension of the final maturity date, and/or a reduction in the outstanding balance of the secured portion of the loan. In certain circumstances, subject to the court's approval, a debtor in a case under Chapter 11 of the Bankruptcy Code may have the power to grant liens senior to the lien of a mortgage. 93 A reorganization plan under Chapter 11 and a rehabilitation plan under Chapter 13 of the Bankruptcy Code may each allow a debtor to cure a default with respect to a mortgage loan on such debtor's residence by paying arrearages over a period of time and to deaccelerate and reinstate the original mortgage loan payment schedule, even though the lender accelerated the loan and a final judgment of foreclosure had been entered in state court (provided no sale of the property had yet occurred) prior to the filing of the debtor's petition under the Bankruptcy Code. Under a Chapter 13 plan, curing of defaults must be accomplished within the five year maximum term permitted for repayment plans, such term commencing when repayment plan becomes effective, while defaults may be cured over a longer period of time under a Chapter 11 plan of reorganization. Generally, a repayment plan in a case under Chapter 13 and a plan of reorganization under Chapter 11 may not modify the claim of a mortgage lender if the borrower elects to retain the property, the property is the borrower's principal residence and the property is the lender's only collateral. Certain courts have allowed modifications when the mortgage loan is secured both by the debtor's principal residence and by collateral that is not "inextricably bound" to the real property, such as appliances, machinery, or furniture. The general protection for mortgages secured only by the debtor's principal residence is not applicable in a case under Chapter 13 if the last payment on the original payment schedule is due before the final date for payment under the debtor's Chapter 13 plan (which date could be up to five years after the debtor emerges from bankruptcy). Under several recently decided cases, the terms of such a loan can be modified in the manner described above. While these decisions are contrary to the holding in a prior case by a senior appellate court, it is possible that the later decisions will become the accepted interpretation in view of the language of the applicable statutory provision. If this interpretation is adopted by a court considering the treatment in a Chapter 13 repayment plan of a Mortgage Loan, it is possible that the Mortgage Loan could be modified. State statutes and general principles of equity may also provide a mortgagor with means to halt a foreclosure proceeding or sale and to force a restructuring of a mortgage loan on terms a lender would not otherwise accept. In a bankruptcy or similar proceeding of a mortgagor, action may be taken seeking the recovery, as a preferential transfer or on other grounds, of any payments made by the mortgagor under the related mortgage loan prior to the bankruptcy or similar proceeding. Payments on long-term debt may be protected from recovery as preferences if they are payments in the ordinary course of business made on debts incurred in the ordinary course of business or if the value of the collateral exceeds the debt at the time of payment. Whether any particular payment would be protected depends upon the facts specific to a particular transaction. A trustee in bankruptcy, in some cases, may be entitled to collect its costs and expenses in preserving or selling the mortgaged property ahead of a payment to the lender. Moreover, the laws of certain states also give priority to certain tax and mechanics liens over the lien of a mortgage. Under the Bankruptcy Code, if the court finds that actions of the mortgagee have been unreasonable and inequitable, the lien of the related mortgage may be subordinated to the claims of unsecured creditors. The Code provides priority to certain tax liens over the lien of the mortgage. In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws include the federal Trust-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act, and related statutes. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the applicable laws. In some cases, this liability may affect assignees of the Mortgage Loans. Forfeiture for Drug, RICO and Money Laundering Violations Federal law provides that property purchased or improved with assets derived from criminal activity or otherwise tainted, or used in the commission of certain offenses, can be seized and ordered forfeited to the United States of America. The offenses which can trigger such a seizure and forfeiture include, among others, violations of the Racketeer Influenced and Corrupt Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and regulations, including the USA Patriot Act of 2001 and the regulations issued thereunder, as well as the narcotic drug laws. In many instances, the United States may seize the property even before a conviction occurs. 94 In the event of a forfeiture proceeding, a lender may be able to establish its interest in the property by proving that (i) its mortgage was executed and recorded before the commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or (2) the lender, at the time of the execution of the mortgage, "did not know or was reasonably without cause to believe that the property was subject to forfeiture." However, there can be no assurance that such a defense will be successful. Homeowners Protection Act of 1998 The Homeowners Protection Act of 1998 ("HOPA") provides for certain disclosure and termination requirements for primary mortgage insurance ("PMI"). The termination provisions of HOPA apply only to mortgage loans relating to single-family primary residences originated on or after July 29, 1999. Such termination provisions govern when a mortgagor may cancel the requirement to maintain PMI and when the requirement to maintain PMI is automatically terminated. In general, voluntary termination is permitted and automatic termination occurs when the principal balance of the mortgage loan is reduced to 80% or 78%, respectively, of the original property value. The disclosure requirements of HOPA vary depending on whether the mortgage loan was originated before or after July 29, 1999. Such disclosure requirements include notification of the circumstances whereby a mortgagor may cancel PMI, the date when PMI automatically terminates and servicer contact information. In addition, HOPA provides that no later than 30 days after cancellation or termination of PMI, the servicer shall provide written notification that such PMI is terminated and no further payments are due or payable. Any servicer, mortgagee or mortgage insurer that violates provisions of HOPA is subject to possible liability which includes, but is not limited to, actual damages, statutory damages and reasonable attorney's fees. Texas Home Equity Loans Generally, any "cash-out" refinance or other non-purchase money transaction (except for rate/term refinance loans and certain other narrow exceptions) secured by a Texas resident's principal residence is subject to the provisions set forth in Section 50(a)(6) of Article XVI of the Constitution of Texas and its implementing statutes and regulations (the "Texas Home Equity Laws"). The Texas Home Equity Laws provide for certain disclosure requirements, caps on allowable fees, required loan closing procedures and other restrictions. Failure, inadvertent or otherwise, to comply with any requirement may render the Mortgage Loan unenforceable and/or the lien on the Mortgaged Property voidable unless cured within 60 days after the borrower provides notice of the defect to the lender. Because mortgage loans which are subject to the Texas Home Equity Laws can be foreclosed only pursuant to court order, rather than non-judicial foreclosure as is available for other types of mortgage loans in Texas, delays and increased losses may result in connection with foreclosures of such loans. If a court were to find that any requirement of the Texas Home Equity Laws was not complied with, the court could refuse to allow foreclosure to proceed, declare the lien on the Mortgaged Property to be invalid, and/or require the originating lender or the holder of the note to forfeit some or all principal and interest of the related Mortgage Loan. Title insurance generally available on such Mortgage Loans may exclude coverage for some of the risks described in this paragraph. Servicemembers Civil Relief Act Generally, under the terms of the Servicemembers Civil Relief Act (the "Relief Act"), a borrower who enters military service after the origination of such borrower's Mortgage Loan (including a borrower who is a member of the National Guard or is in reserve status at the time of the origination of the Mortgage Loan and is later called to active duty) may not be charged interest, including fees and charges, above an annual rate of 6% during the period of such borrower's active duty status. In addition to adjusting the interest, the lender must forgive any such interest in excess of 6% per annum, unless a court or administrative agency orders otherwise upon application of the lender. It is possible that such action could have an effect, for an indeterminate period of time, on the ability of the Servicer to collect full amounts of interest on certain of the Mortgage Loans in a Trust Fund. Any shortfall in interest collections resulting from the application of the Relief Act or any amendment thereto could result in losses to the holders of the Securities of the related Series. Further, the Relief Act imposes limitations which would impair the ability of the Servicer to foreclose on an affected Mortgage Loan during the borrower's period of active duty status. Thus, in the event that such a Mortgage Loan goes into default, there may be delays and losses occasioned by the inability to realize upon the Mortgaged Property in a timely fashion. In addition, the Relief Act provides broad discretion for a court to modify a Mortgage Loan upon application of the Mortgagor. Certain states have enacted 95 comparable legislation which may lead to the modification of a Mortgage Loan or interfere with or affect the ability of the Servicer to timely collect payments of principal and interest on, or to foreclose on, Mortgage Loans of borrowers in such states who are active or reserve members of the armed services or national guard. For example, California has enacted legislation providing protection substantially similar to that provided by the Relief Act to California national guard members called up for active service by the Governor or President and reservists called to active duty. Environmental Considerations A lender may be subject to unforeseen environmental risks when taking a security interest in real or personal property. Property subject to such a security interest may be subject to federal, state, and local laws and regulations relating to environmental protection. Such laws may regulate, among other things: emissions of air pollutants; discharges of wastewater or storm water; generation, transport, storage or disposal of hazardous waste or hazardous substances; operation, closure and removal of underground storage tanks; removal and disposal of asbestos-containing materials; management of electrical or other equipment containing polychlorinated biphenyls ("PCBs"). Failure to comply with such laws and regulations may result in significant penalties, including civil and criminal fines. Under the laws of certain states, environmental contamination on a property may give rise to a lien on the property to ensure the availability and/or reimbursement of cleanup costs. Generally all subsequent liens on such property are subordinated to such a lien and, in some states, even prior recorded liens are subordinated to such liens ("Superliens"). In the latter states, the security interest of the Trustee in a property that is subject to such a Superlien could be adversely affected. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), and under state law in certain states, a secured party which takes a deed in lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, operates a mortgaged property or undertakes certain types of activities that may constitute management of the mortgaged property may become liable in certain circumstances for the costs of remedial action ("Cleanup Costs") if hazardous wastes or hazardous substances have been released or disposed of on the property. Such Cleanup Costs may be substantial and could exceed the value of the property and the aggregate assets of the owner or operator. CERCLA imposes strict, as well as joint and several liability for environmental remediation and/or damage costs on several classes of "potentially responsible parties," including current "owners and/or operators" of property, irrespective of whether those owners or operators caused or contributed to contamination on the property. In addition, owners and operators of properties that generate hazardous substances that are disposed of at other "off-site" locations may be held strictly, jointly and severally liable for environmental remediation and/or damages at those off-site locations. Many states also have laws that are similar to CERCLA. Liability under CERCLA or under similar state law could exceed the value of the property itself as well as the aggregate assets of the property owner. The law is unclear as to whether and under what precise circumstances cleanup costs, or the obligation to take remedial actions, could be imposed on a secured lender such as the Trust Fund. Under the laws of some states and under CERCLA, a lender may be liable as an "owner or operator" for costs of addressing releases or threatened releases of hazardous substances on a mortgaged property if such lender or its agents or employees have "participated in the management" of the operations of the borrower, even though the environmental damage or threat was caused by a prior owner or current owner or operator or other third party. Excluded from CERCLA's definition of "owner or operator," is a person "who without participating in the management of . . . [the] facility, holds indicia of ownership primarily to protect his security interest" (the "secured-creditor exemption"). This exemption for holders of a security interest such as a secured lender applies only to the extent that a lender seeks to protect its security interest in the contaminated facility or property. Thus, if a lender's activities begin to encroach on the actual management of such facility or property, the lender faces potential liability as an "owner or operator" under CERCLA. Similarly, when a lender forecloses and takes title to a contaminated facility or property, the lender may incur potential CERCLA liability in various circumstances including, among others, when it holds the facility or property as an investment (including leasing the facility or property to a third party), fails to market the property in a timely fashion or fails to properly address environmental conditions at the property or facility. The Resource Conservation and Recovery Act, as amended ("RCRA"), contains a similar secured-creditor exemption for those lenders who hold a security interest in a petroleum underground storage tank ("UST") or in real estate containing a UST, or that acquire title to a petroleum UST or facility or property on which such a UST is 96 located. As under CERCLA, a lender may lose its secured-creditor exemption and be held liable under RCRA as a UST owner or operator if such lender or its employees or agents participate in the management of the UST. In addition, if the lender takes title to or possession of the UST or the real estate containing the UST, under certain circumstances the secured-creditor exemption may be deemed to be unavailable. A decision in May 1990 of the United States Court of Appeals for the Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly construed CERCLA's secured-creditor exemption. The court's opinion suggested that a lender need not have involved itself in the day-to-day operations of the facility or participated in decisions relating to hazardous waste to be liable under CERCLA, rather, liability could attach to a lender if its involvement with the management of the facility were broad enough to support the inference that the lender had the capacity to influence the borrower's treatment of hazardous waste. The court added that a lender's capacity to influence such decisions could be inferred from the extent of its involvement in the facility's financial management. A subsequent decision by the United States Court of Appeals for the Ninth Circuit in In re Bergsoe Metal Corp., apparently disagreeing with, but not expressly contradicting, the Fleet Factors court, held that a secured lender had no liability absent "some actual management of the facility" on the part of the lender. Court decisions have taken varying views of the scope of the secured-creditor exemption, leading to administrative and legislative efforts to provide guidance to lenders on the scope of activities that would trigger CERCLA and/or RCRA liability. Until recently, these efforts have failed to provide substantial guidance. On September 30, 1996, however, the President signed into law the Asset Conservation Lender Liability and Deposit Insurance Protection Act of 1996 (the "Asset Conservation Act"). The Asset Conservation Act was intended to clarify the scope of the secured-creditor exemption under both CERCLA and RCRA. The Asset Conservation Act more explicitly defined the kinds of "participation in management" that would trigger liability under CERCLA and specified certain activities that would not constitute "participation in management" or otherwise result in a forfeiture of the secured-creditor exemption prior to foreclosure or during a workout period. The Asset Conservation Act also clarified the extent of protection against liability under CERCLA in the event of foreclosure and authorized certain regulatory clarifications of the scope of the secured-creditor exemption for purposes of RCRA, similar to the statutory protections under CERCLA. However, since the courts have not yet had the opportunity to interpret the new statutory provisions, the scope of the additional protections offered by the Asset Conservation Act is not fully defined. It also is important to note that the Asset Conservation Act does not offer complete protection to lenders and that the risk of liability remains. If a secured lender does become liable, it may be entitled to bring an action for contribution against the owner or operator who created the environmental contamination or against some other liable party, but that person or entity may be bankrupt or otherwise judgment-proof. It is therefore possible that cleanup or other environmental liability costs could become a liability of the Trust Fund and occasion a loss to the Trust Fund and to Securityholders in certain circumstances. The new secured creditor amendments to CERCLA, also, would not necessarily affect the potential for liability in actions by either a state or a private party under other federal or state laws which may impose liability on "owners or operators" but do not incorporate the secured-creditor exemption. Traditionally, residential mortgage lenders have not taken steps to evaluate whether hazardous wastes or hazardous substances are present with respect to any mortgaged property prior to the origination of the mortgage loan or prior to foreclosure or accepting a deed-in-lieu of foreclosure. Accordingly, neither the Depositor nor Wells Fargo Bank has made such evaluations prior to the origination of the Mortgage Loans, nor does Wells Fargo Bank require that such evaluations be made by originators who have sold the Mortgage Loans to it. Neither the Depositor nor Wells Fargo Bank is required to undertake any such evaluations prior to foreclosure or accepting a deed-in-lieu of foreclosure. Neither the Depositor nor the Servicer makes any representations or warranties or assumes any liability with respect to: the environmental condition of such Mortgaged Property; the absence, presence or effect of hazardous wastes or hazardous substances on any Mortgaged Property; any casualty resulting from the presence or effect of hazardous wastes or hazardous substances on, near or emanating from such Mortgaged Property; the impact on Securityholders of any environmental condition or presence of any substance on or near such Mortgaged Property; or the compliance of any Mortgaged Property with any environmental laws, nor is any agent, person or entity otherwise affiliated with the Depositor authorized or able to make any such representation, warranty or assumption of liability relative to any such Mortgaged Property. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Assignment of Mortgage 97 Loans; Representations and Warranties; Repurchases," "--Realization Upon Defaulted Mortgage Loans; Servicing Advances" and "--Due-on-Sale Provisions" above. "Due-on-Sale" Clauses The forms of note, mortgage and deed of trust relating to conventional Mortgage Loans may contain a "due-on-sale" clause permitting acceleration of the maturity of a loan if the borrower transfers its interest in the property. In recent years, court decisions and legislative actions placed substantial restrictions on the right of lenders to enforce such clauses in many states. However, effective October 15, 1982, Congress enacted the Garn-St Germain Depository Institutions Act of 1982 (the "Garn Act") which purports to preempt state laws which prohibit the enforcement of "due-on-sale" clauses by providing among other matters, that "due-on-sale" clauses in certain loans (which loans may include the Mortgage Loans) made after the effective date of the Garn Act are enforceable, within certain limitations as set forth in the Garn Act and the regulations promulgated thereunder. "Due-on-sale" clauses contained in mortgage loans originated by federal savings and loan associations or federal savings banks are fully enforceable pursuant to regulations of the Office of Thrift Supervision ("OTS"), as successor to the Federal Home Loan Bank Board ("FHLBB"), which preempt state law restrictions on the enforcement of such clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national banks and federal credit unions are now fully enforceable pursuant to preemptive regulations of the Comptroller of the Currency and the National Credit Union Administration, respectively. The Garn Act created a limited exemption from its general rule of enforceability for "due-on-sale" clauses in certain mortgage loans ("Window Period Loans") which were originated by non-federal lenders and made or assumed in certain states ("Window Period States") during the period, prior to October 15, 1982, in which that state prohibited the enforcement of "due-on-sale" clauses by constitutional provision, statute or statewide court decision (the "Window Period"). Though neither the Garn Act nor the OTS regulations actually names the Window Period States, Freddie Mac has taken the position, in prescribing mortgage loan servicing standards with respect to mortgage loans which it has purchased, that the Window Period States were: Arizona, Arkansas, California, Colorado, Georgia, Iowa, Michigan, Minnesota, New Mexico, Utah and Washington. Under the Garn Act, unless a Window Period State took action by October 15, 1985, the end of the Window Period, to further regulate enforcement of "due-on-sale" clauses in Window Period Loans, "due-on-sale" clauses would become enforceable even in Window Period Loans. Five of the Window Period States (Arizona, Minnesota, Michigan, New Mexico and Utah) have taken actions which restrict the enforceability of "due-on-sale" clauses in Window Period Loans beyond October 15, 1985. The actions taken vary among such states. By virtue of the Garn Act, the Servicer may generally be permitted to accelerate any conventional Mortgage Loan which contains a "due-on-sale" clause upon transfer of an interest in the property subject to the mortgage or deed of trust. With respect to any Mortgage Loan secured by a residence occupied or to be occupied by the borrower, this ability to accelerate will not apply to certain types of transfers, including (i) the granting of a leasehold interest which has a term of three years or less and which does not contain an option to purchase, (ii) a transfer to a relative resulting from the death of a borrower, or a transfer where the spouse or children become an owner of the property in each case where the transferee(s) will occupy the property, (iii) a transfer resulting from a decree of dissolution of marriage, legal separation agreement or from an incidental property settlement agreement by which the spouse becomes an owner of the property, (iv) the creation of a lien or other encumbrance subordinate to the lender's security instrument which does not relate to a transfer of rights of occupancy in the property (provided that such lien or encumbrance is not created pursuant to a contract for deed), (v) a transfer by devise, descent or operation of law on the death of a joint tenant or tenant by the entirety, (vi) a transfer into an inter vivos trust in which the borrower is the beneficiary and which does not relate to a transfer of rights of occupancy; and (vii) other transfers as set forth in the Garn Act and the regulations thereunder. Regulations promulgated under the Garn Act also prohibit the imposition of a prepayment penalty upon the acceleration of a loan pursuant to a due-on-sale clause. The extent of the effect of the Garn Act on the average lives and delinquency rates of the Mortgage Loans cannot be predicted. See "Prepayment and Yield Considerations." Alternative Mortgage Instruments Alternative mortgage instruments, including adjustable rate mortgage loans and early ownership mortgage loans, originated by non-federally chartered lenders have historically been subject to a variety of restrictions. Such 98 restrictions differed from state to state, resulting in difficulties in determining whether a particular alternative mortgage instrument originated by a state-chartered lender was in compliance with applicable law. These difficulties were alleviated substantially as a result of the enactment of Title VIII of the Garn-St. Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any state law to the contrary, state-chartered banks may originate alternative mortgage instruments in accordance with regulations promulgated by the Comptroller of the Currency with respect to origination of alternative mortgage instruments by national banks; state-chartered credit unions may originate alternative mortgage instruments in accordance with regulations promulgated by the National Credit Union Administration with respect to origination of alternative mortgage instruments by federal credit unions; and all other non-federally chartered housing creditors, including state-chartered savings and loan associations, state-chartered savings banks and mutual savings banks and mortgage banking companies, may originate alternative mortgage instruments in accordance with the regulations promulgated by the Federal Home Loan Bank Board, predecessor to the Office of Thrift Supervision, with respect to origination of alternative mortgage instruments by federal savings and loan associations. Title VIII provides that any state may reject applicability of the provisions of Title VIII by adopting, prior to October 15, 1985, a law or constitutional provision expressly rejecting the applicability of such provisions. Certain states have taken such action. Prepayment Penalties Some state laws restrict the imposition of Prepayment Penalties and late fees even when the mortgage loans expressly provide for the collection of those charges. Although the Alternative Mortgage Transaction Parity Act of 1982 (the "Parity Act" ), permits the collection of Prepayment Penalties and late fees in connection with some types of eligible mortgage loans preempting any contrary state law prohibitions, some states may not recognize the preemptive authority of the Parity Act or have formally opted out of the Parity Act. As a result, it is possible that Prepayment Penalties and late fees may not be collected even on loans that provide for the payment of those charges. The OTS, the agency that administers the Parity Act for unregulated, non-federally chartered housing creditors, withdrew its favorable Parity Act regulations and Chief Counsel Opinions that previously authorized state-chartered housing creditors to charge prepayment charges and late fees in certain circumstances notwithstanding contrary state law, effective with respect to mortgage loans originated on or after July 1, 2003. However, the OTS's ruling does not retroactively affect mortgage loans originated by such entities before July 1, 2003. Subordinate Financing Where a mortgagor encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional risk. First, the mortgagor may have difficulty servicing and repaying multiple loans. In addition, if the junior loan permits recourse to the mortgagor (as junior loans often do) and the senior loan does not, a mortgagor may be more likely to repay sums due on the junior loan than those on the senior loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender's security may create a superior equity in favor of the junior lender. For example, if the mortgagor and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the mortgagor is additionally burdened. Third, if the mortgagor defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender. Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender. Applicability of Usury Laws Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("Title V"), provides that state usury limitations shall not apply to certain types of residential first mortgage loans originated by certain lenders after March 31, 1980. The OTS as successor to the FHLBB is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V. The statute authorized any state to reimpose interest rate limits by adopting before April 1, 1983, a law or constitutional provision which expressly rejects application of the federal law. Fifteen states have adopted laws reimposing or reserving the right to reimpose interest rate limits. In addition, even where Title V is not so rejected, any state is authorized to adopt a provision limiting certain other loan charges. 99 The Depositor will represent and warrant in the applicable Agreement to the Trustee for the benefit of Securityholders that all Mortgage Loans are originated in full compliance with applicable state laws, including usury laws. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Assignment of Mortgage Loans; Representations and Warranties; Repurchases." Enforceability of Certain Provisions Standard forms of note, mortgage and deed of trust generally contain provisions obligating the borrower to pay a late charge if payments are not timely made and in some circumstances may provide for prepayment fees or penalties if the obligation is paid prior to maturity. In certain states, there are or may be specific limitations upon late charges which a lender may collect from a borrower for delinquent payments. Certain states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid. Courts have imposed general equitable principles upon foreclosure. These equitable principles are generally designed to relieve the borrower from the legal effect of defaults under the loan documents. Examples of judicial remedies that may be fashioned include judicial requirements that the lender undertake affirmative and expensive actions to determine the causes for the borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's judgment and have required lenders to reinstate loans or recast payment schedules to accommodate borrowers who are suffering from temporary financial disability. In some cases, courts have limited the right of lenders to foreclose if the default under the mortgage instrument is not monetary, such as the borrower failing to adequately maintain the property or the borrower executing a second mortgage or deed of trust affecting the property. In other cases, some courts have been faced with the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that borrowers under the deeds of trust receive notices in addition to the statutorily-prescribed minimum requirements. For the most part, these cases have upheld the notice provisions as being reasonable or have found that the sale by a trustee under a deed of trust or under a mortgage having a power of sale does not involve sufficient state action to afford constitutional protections to the borrower. 100 FEDERAL INCOME TAX CONSEQUENCES General The following discussion represents the opinion of Cadwalader, Wickersham & Taft LLP as to the anticipated material federal income tax consequences of the purchase, ownership and disposition of the Securities offered hereunder. This discussion is directed solely to Securityholders that hold the Securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") and does not purport to discuss all federal income tax consequences that may be applicable to particular categories of investors, some of which (such as banks, insurance companies and foreign investors) may be subject to special rules. Further, the authorities on which this discussion, and the opinion referred to below, are based are subject to change or differing interpretations, which could apply retroactively. In addition to the federal income tax consequences described herein, potential investors should consider the state and local tax consequences, if any, of the purchase, ownership and disposition of the Securities. See "State and Other Tax Consequences." Securityholders are encouraged to consult their own tax advisors concerning the federal, state, local or other tax consequences to them of the purchase, ownership and disposition of the Securities offered hereunder. The following discussion addresses securities of four general types: (i) securities ("REMIC Securities") representing interests in a Trust Fund, or a portion thereof, that the Securities Administrator will elect to have treated as a real estate mortgage investment conduit ("REMIC" ) under Sections 860A through 860G (the "REMIC Provisions") of the Code, (ii) securities ("Grantor Trust Securities") representing interests in a Trust Fund ("Grantor Trust Fund") as to which no such election will be made, (iii) securities ("Partnership Securities") representing interests in a Trust Fund ("Partnership Trust Fund") which is treated as a partnership for federal income tax purposes, and (iv) securities ("Debt Securities") representing indebtedness of a Partnership Trust Fund for federal income tax purposes. The prospectus supplement for each Series of Securities will indicate which of the foregoing treatments will apply to such Series and, if a REMIC election (or elections) will be made for the related Trust Fund, will identify all "regular interests" and "residual interests" in the REMIC. For purposes of this tax discussion, (i) references to a "Securityholder" or a "holder" are to the Beneficial Owner of a Security, (ii) references to "REMIC Pool" are to an entity or portion thereof as to which a REMIC election will be made and (iii) references to "Mortgage Loans" include Contracts. Generally, no REMIC election will be made with respect to Unsecured Home Improvement Loans. The following discussion is based in part upon the rules governing original issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and in the Treasury regulations issued thereunder (the "OID Regulations"), and in part upon the REMIC Provisions and the Treasury regulations issued thereunder (the "REMIC Regulations"). The OID Regulations do not adequately address certain issues relevant to, and in some instances provide that they are not applicable to, securities such as the Securities. Taxable Mortgage Pools Corporate income tax can be imposed on the net income of certain entities issuing non-REMIC debt obligations secured by real estate mortgages ("Taxable Mortgage Pools"). Any entity other than a REMIC will be considered a Taxable Mortgage Pool if (i) substantially all of the assets of the entity consist of debt obligations and more than 50% of such obligations consist of "real estate mortgages," (ii) such entity is the obligor under debt obligations with two or more maturities, and (iii) under the terms of the debt obligations on which the entity is the obligor, payments on such obligations bear a relationship to payments on the obligations held by the entity. Furthermore, a group of assets held by an entity can be treated as a separate Taxable Mortgage Pool if the assets are expected to produce significant cash flow that will support one or more of the entity's issues of debt obligations. The Depositor generally will structure offerings of non-REMIC Securities to avoid the application of the Taxable Mortgage Pool rules. 101 REMICS Classification of REMICs With respect to each Series of REMIC Securities, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the related Trust Fund (or each applicable portion thereof) will qualify as a REMIC and the REMIC Securities offered with respect thereto will be considered to evidence ownership of "regular interests" ("Regular Securities") or "residual interests" ("Residual Securities") in that REMIC within the meaning of the REMIC Provisions. In order for the REMIC Pool to qualify as a REMIC, there must be ongoing compliance on the part of the REMIC Pool with the requirements set forth in the Code. The REMIC Pool must fulfill an asset test, which requires that no more than a de minimis portion of the assets of the REMIC Pool, as of the close of the third calendar month beginning after the "Startup Day" (which for purposes of this discussion is the date of issuance of the REMIC Securities) and at all times thereafter, may consist of assets other than "qualified mortgages" and "permitted investments." The REMIC Regulations provide a safe harbor pursuant to which the de minimis requirement will be met if at all times the aggregate adjusted basis of the nonqualified assets is less than 1% of the aggregate adjusted basis of all the REMIC Pool's assets. An entity that fails to meet the safe harbor may nevertheless demonstrate that it holds no more than a de minimis amount of nonqualified assets. A REMIC Pool also must provide "reasonable arrangements" to prevent its residual interests from being held by "disqualified organizations" or agents thereof and must furnish applicable tax information to transferors or agents that violate this requirement. The Pooling and Servicing Agreement with respect to each Series of REMIC Securities will contain provisions meeting these requirements. See "--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities--Disqualified Organizations." A qualified mortgage is any obligation that is principally secured by an interest in real property and that (i) is either transferred to the REMIC Pool on the Startup Day, (ii) is purchased by the REMIC Pool within a three-month period thereafter pursuant to a fixed price contract in effect on the Startup Day or (iii) represents an increase in the principal amount of the obligation under the terms of such obligation described in (i) or (ii) above if such increase is attributable to an advance made to the obligor pursuant to the original terms of the obligation, occurs after the Startup Day of the REMIC and is purchased by the REMIC pursuant to a fixed price contract in effect on the Startup Day. Qualified mortgages include whole mortgage loans, such as the Mortgage Loans, and, generally, certificates of beneficial interest in a grantor trust that holds mortgage loans and regular interests in another REMIC, such as lower-tier regular interests in Tiered REMICs. The REMIC Regulations specify that loans secured by timeshare interests, shares held by a tenant stockholder in a cooperative housing corporation, and manufactured housing that qualifies as a "single family residence" under Code Section 25(e)(10) can be qualified mortgages. A qualified mortgage includes a qualified replacement mortgage, which is any property that would have been treated as a qualified mortgage if it were transferred to the REMIC Pool on the Startup Day and that is received either (i) in exchange for any qualified mortgage within a three-month period thereafter or (ii) in exchange for a "defective obligation" within a two-year period thereafter. A "defective obligation" includes (i) a mortgage in default or as to which default is reasonably foreseeable, (ii) a mortgage as to which a customary representation or warranty made at the time of transfer to the REMIC Pool has been breached, (iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a mortgage that was not in fact principally secured by real property (but only if such mortgage is disposed of within 90 days of discovery). A mortgage loan that is "defective" as described in clause (iv) that is not sold or, if within two years of the Startup Day, exchanged, within 90 days of discovery, ceases to be a qualified mortgage after such 90-day period. Permitted investments include cash flow investments, qualified reserve assets, and foreclosure property. A cash flow investment is an investment, earning a return in the nature of interest, of amounts received on or with respect to qualified mortgages for a temporary period, not exceeding 13 months, until the next scheduled distribution to holders of interests in the REMIC Pool. A qualified reserve asset is any intangible property held for investment that is part of any reasonably required reserve maintained by the REMIC Pool (i) to provide for payments of expenses of the REMIC Pool or amounts due on the regular or residual interests in the event of defaults (including delinquencies) on the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and certain other contingencies or (ii) to provide a source of funding for the purchase of additional mortgage loans pursuant to a qualifying fixed price or additional draws made by mortgagors under the terms of loans held by the 102 related REMIC. The aggregate fair market value of any such reserve cannot exceed 50% of the aggregate fair market value of all assets of the REMIC on the Startup Day. The reserve fund will be disqualified if more than 30% of the gross income from the assets in such fund for the year is derived from the sale or other disposition of property held for less than three months, unless required to prevent a default on the regular interests caused by a default on one or more qualified mortgages. A reserve fund must be reduced "promptly and appropriately" as payments on the Mortgage Loans are received. Foreclosure property is real property acquired by the REMIC Pool in connection with the default or imminent default of a qualified mortgage and generally may not be held beyond the close of the third calendar year beginning after the taxable year of acquisition unless an extension is granted by the IRS. In addition to the foregoing requirements, the various interests in a REMIC Pool also must meet certain requirements. All of the interests in a REMIC Pool must be either of the following: (i) one or more Classes of regular interests or (ii) a single class of residual interests on which distributions, if any, are made pro rata. A regular interest is an interest in a REMIC Pool that is issued on the Startup Day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on qualified mortgages. Such a specified portion may consist of a fixed number of basis points, a fixed percentage of the total interest, or a qualified variable rate, inverse variable rate or difference between two fixed or qualified variable rates on some or all of the qualified mortgages. The specified principal amount of a regular interest that provides for interest payments consisting of a specified, nonvarying portion of interest payments on qualified mortgages may be zero. A residual interest is an interest in a REMIC Pool other than a regular interest that is issued on the Startup Day and that is designated as a residual interest. An interest in a REMIC Pool may be treated as a regular interest even if payments of principal with respect to such interest are subordinated to payments on other regular interests or the residual interest in the REMIC Pool, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, unanticipated expenses incurred by the REMIC Pool or prepayment interest shortfalls. Accordingly, the Regular Securities of a Series will constitute one or more Classes of regular interests, and the Residual Securities with respect to that Series will constitute a single Class of residual interests with respect to each REMIC Pool. If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for such status during any taxable year, the Code provides that the entity will not be treated as a REMIC for such year and thereafter. In that event, such entity may be taxable as a corporation under Treasury regulations, and the related REMIC Securities may not be accorded the status or given the tax treatment described below. Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, no such regulations have been issued. Any such relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the Trust Fund's income for the period in which the requirements for such status are not satisfied. The Pooling and Servicing Agreement with respect to each REMIC Pool will include provisions designed to maintain the Trust Fund's status as a REMIC under the REMIC Provisions. It is not anticipated that the status of any Trust Fund as a REMIC will be terminated. Characterization of Investments in REMIC Securities In general, the REMIC Securities will be treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC Pool underlying such Securities would be so treated. Moreover, if 95% or more of the assets of the REMIC Pool qualify for either of the foregoing treatments at all times during a calendar year, the REMIC Securities will qualify for the corresponding status in their entirety for that calendar year. If the assets of the REMIC Pool include Buy-Down Loans, it is possible that the percentage of such assets constituting "loans . . . secured by an interest in real property which is . . . residential real property" for purposes of Code Section 7701(a)(19)(C)(v) may be required to be reduced by the Buy-Down Funds. Interest (including original issue discount) on the Regular Securities and income allocated to the Class of Residual Securities will be interest described in Section 856(c)(3)(B) of the Code to the extent that such Securities are treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, the Regular Securities generally will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if transferred to another REMIC on its Startup Day in exchange for regular or residual interests therein. The determination as to the percentage of the REMIC Pool's assets that constitute assets described in the foregoing sections of the Code will be made with respect 103 to each calendar quarter based on the average adjusted basis of each category of the assets held by the REMIC Pool during such calendar quarter. The REMIC will report those determinations to Securityholders in the manner and at the times required by applicable Treasury regulations. The assets of the REMIC Pool will include, in addition to Mortgage Loans, payments on Mortgage Loans held pending distribution on the REMIC Securities and property acquired by foreclosure held pending sale, and may include amounts in reserve accounts. It is unclear whether property acquired by foreclosure held pending sale and amounts in reserve accounts would be considered to be part of the Mortgage Loans, or whether such assets (to the extent not invested in assets described in the foregoing sections) otherwise would receive the same treatment as the Mortgage Loans for purposes of all of the foregoing sections. The REMIC Regulations do provide, however, that payments on Mortgage Loans held pending distribution are considered part of the Mortgage Loans for purposes of Section 856(c)(4)(A) of the Code. Furthermore, foreclosure property generally will qualify as "real estate assets" under Section 856(c)(4)(A) of the Code. Tiered REMIC Structures For certain Series of REMIC Securities, two or more separate elections may be made to treat designated portions of the related Trust Fund as REMICs ("Tiered REMICs") for federal income tax purposes. Upon the issuance of any such Series of REMIC Securities, Cadwalader, Wickersham & Taft LLP will deliver its opinion generally to the effect that, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the Tiered REMICs will each qualify as a REMIC and the REMIC Securities issued by the Tiered REMICs will be considered to evidence ownership of Regular Securities or Residual Securities in the related REMIC within the meaning of the REMIC Provisions. Solely for purposes of determining whether the REMIC Securities will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code, and whether the income on such Securities is interest described in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one REMIC. Taxation of Owners of Regular Securities General In general, interest, original issue discount, and market discount on a Regular Security will be treated as ordinary income to a holder of the Regular Security (the "Regular Securityholder"), and principal payments on a Regular Security will be treated as a return of capital to the extent of the Regular Securityholder's basis in the Regular Security allocable thereto. Regular Securityholders must use the accrual method of accounting with regard to Regular Securities, regardless of the method of accounting otherwise used by such Regular Securityholder. Original Issue Discount Accrual Securities will be, and other Classes of Regular Securities may be, issued with "original issue discount" within the meaning of Code Section 1273(a). Holders of any Class or subclass of Regular Securities having original issue discount generally must include original issue discount in ordinary income for federal income tax purposes as it accrues, in accordance with a constant yield method that takes into account the compounding of interest, in advance of the receipt of the cash attributable to such income. The following discussion is based in part on OID Regulations issued under Code Sections 1271 through 1273 and 1275 and in part on the provisions of the 1986 Act. Regular Securityholders should be aware, however, that the OID Regulations do not adequately address certain issues relevant to prepayable securities, such as the Regular Securities. To the extent such issues are not addressed in such regulations, the Depositor intends to apply the methodology described in the Conference Committee Report to the 1986 Act. No assurance can be provided that the IRS will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to apply or depart from the OID Regulations where necessary or appropriate to ensure a reasonable tax result in light of the applicable statutory provisions. A tax result will not be considered unreasonable under the anti-abuse rule in the absence of a substantial effect on the present value of a taxpayer's tax liability. Investors are advised to consult their own tax advisors as to the discussion therein and the appropriate method for reporting interest and original issue discount with respect to the Regular Securities. 104 Each Regular Security (except to the extent described below with respect to a Regular Security on which principal is distributed in a single installment or by lots of specified principal amounts upon the request of a Securityholder or by random lot (a "Non-Pro Rata Security")) will be treated as a single installment obligation for purposes of determining the original issue discount includable in a Regular Securityholder's income. The total amount of original issue discount on a Regular Security is the excess of the "stated redemption price at maturity" of the Regular Security over its "issue price." The issue price of a Class of Regular Securities offered pursuant to this prospectus generally is the first price at which a substantial amount of such Class is sold to the public (excluding bond houses, brokers and underwriters). Although unclear under the OID Regulations, it is anticipated that the Securities Administrator will treat the issue price of a Class as to which there is no substantial sale as of the issue date or that is retained by the Depositor as the fair market value of the Class as of the issue date. The issue price of a Regular Security also includes any amount paid by an initial Regular Securityholder for accrued interest that relates to a period prior to the issue date of the Regular Security, unless the Regular Securityholder elects on its federal income tax return to exclude such amount from the issue price and to recover it on the first Distribution Date. The stated redemption price at maturity of a Regular Security always includes the original principal amount of the Regular Security, but generally will not include distributions of interest if such distributions constitute "qualified stated interest." Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate (as described below), provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the Regular Security. Because there is no penalty or default remedy in the case of nonpayment of interest with respect to a Regular Security, it is possible that no interest on any Class of Regular Securities will be treated as qualified stated interest. However, except as provided in the following three sentences or in the applicable prospectus supplement, because the underlying Mortgage Loans provide for remedies in the event of default, it is anticipated that the Securities Administrator will treat interest with respect to the Regular Securities as qualified stated interest. Distributions of interest on an Accrual Security, or on other Regular Securities with respect to which deferred interest will accrue, will not constitute qualified stated interest, in which case the stated redemption price at maturity of such Regular Securities includes all distributions of interest as well as principal thereon. Likewise, it is anticipated that the Securities Administrator will treat an interest-only Class or a Class on which interest is substantially disproportionate to its principal amount (a so-called "super-premium" Class) as having no qualified stated interest. Where the interval between the issue date and the first Distribution Date on a Regular Security is shorter than the interval between subsequent Distribution Dates, the interest attributable to the additional days will be included in the stated redemption price at maturity. Under a de minimis rule, original issue discount on a Regular Security will be considered to be zero if such original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Security multiplied by the weighted average maturity of the Regular Security. For this purpose, the weighted average maturity of the Regular Security is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the Regular Security and the denominator of which is the stated redemption price at maturity of the Regular Security. The Conference Committee Report to the 1986 Act provides that the schedule of such distributions should be determined in accordance with the assumed rate of prepayment of the Mortgage Loans (the "Prepayment Assumption") and the anticipated reinvestment rate, if any, relating to the Regular Securities. The Prepayment Assumption with respect to a Series of Regular Securities will be set forth in the applicable prospectus supplement. Holders generally must report de minimis original issue discount pro rata as principal payments are received, and such income will be capital gain if the Regular Security is held as a capital asset. Under the OID Regulations, however, Regular Securityholders may elect to accrue all de minimis original issue discount as well as market discount and market premium, under the constant yield method. See "--Election to Treat All Interest Under the Constant Yield Method." A Regular Securityholder generally must include in gross income for any taxable year the sum of the "daily portions," as defined below, of the original issue discount on the Regular Security accrued during an interest accrual period for each day on which it holds the Regular Security, including the date of purchase but excluding the date of disposition. The Securities Administrator will treat the monthly period ending on the day before each Distribution Date as the accrual period. With respect to each Regular Security, a calculation will be made of the original issue discount that accrues during each successive full accrual period (or shorter period from the date of original issue) that ends on the day before the related Distribution Date on the Regular Security. The Conference Committee Report to the 1986 Act states that the rate of accrual of original issue discount is intended to be based on the 105 Prepayment Assumption. The original issue discount accruing in a full accrual period would be the excess, if any, of (i) the sum of (a) the present value of all of the remaining distributions to be made on the Regular Security as of the end of that accrual period, and (b) the distributions made on the Regular Security during the accrual period that are included in the Regular Security's stated redemption price at maturity, over (ii) the adjusted issue price of the Regular Security at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence is calculated based on (i) the yield to maturity of the Regular Security at the issue date, (ii) events (including actual prepayments) that have occurred prior to the end of the accrual period, and (iii) the Prepayment Assumption. For these purposes, the adjusted issue price of a Regular Security at the beginning of any accrual period equals the issue price of the Regular Security, increased by the aggregate amount of original issue discount with respect to the Regular Security that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Security's stated redemption price at maturity that were made on the Regular Security in such prior periods. The original issue discount accruing during any accrual period (as determined in this paragraph) will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period. With respect to an initial accrual period shorter than a full accrual period, the daily portions of original issue discount must be determined according to an appropriate allocation under any reasonable method. Under the method described above, the daily portions of original issue discount required to be included in income by a Regular Securityholder generally will increase to take into account prepayments on the Regular Securities as a result of prepayments on the Mortgage Loans that exceed the Prepayment Assumption, and generally will decrease (but not below zero for any period) if the prepayments are slower than the Prepayment Assumption. An increase in prepayments on the Mortgage Loans with respect to a Series of Regular Securities can result in both a change in the priority of principal payments with respect to certain Classes of Regular Securities and either an increase or decrease in the daily portions of original issue discount with respect to such Regular Securities. In the case of a Non-Pro Rata Security, it is anticipated that the Securities Administrator will determine the yield to maturity of such Security based upon the anticipated payment characteristics of the Class as a whole under the Prepayment Assumption. In general, the original issue discount accruing on each Non-Pro Rata Security in a full accrual period would be its allocable share of the original issue discount with respect to the entire Class, as determined in accordance with the preceding paragraph. However, in the case of a distribution in retirement of the entire unpaid principal balance of any Non-Pro Rata Security (or portion of such unpaid principal balance), (a) the remaining unaccrued original issue discount allocable to such Security (or to such portion) will accrue at the time of such distribution, and (b) the accrual of original issue discount allocable to each remaining Security of such Class will be adjusted by reducing the present value of the remaining payments on such Class and the adjusted issue price of such Class to the extent attributable to the portion of the unpaid principal balance thereof that was distributed. The Depositor believes that the foregoing treatment is consistent with the "pro rata prepayment" rules of the OID Regulations, but with the rate of accrual of original issue discount determined based on the Prepayment Assumption for the Class as a whole. Investors are advised to consult their tax advisors as to this treatment. The Treasury Department proposed regulations on August 24, 2004 that create a special rule for accruing original issue discount on Regular Securities providing for a delay between Record Dates and Distribution Dates. Under the proposed regulations, the period over which original issue discount accrues would coincide with the period over which the right of Regular Securityholders to interest payments accrues under the Pooling and Servicing Agreement or Indenture rather than over the period between Distribution Dates. If the proposed regulations are adopted in the same form as proposed, Regular Securityholders would be required to accrue interest from the Closing Date to the first Record Date, but would not be required to accrue interest after the last Record Date. The proposed regulations are limited to Regular Securities with delayed payment for periods of fewer than 32 days. The proposed regulations are proposed to apply to any Regular Securities issued after the date the final regulations are published in the Federal Register. Acquisition Premium A purchaser of a Regular Security having original issue discount at a price greater than its adjusted issue price but less than its stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Security reduced pro rata by a fraction, the numerator of which is the excess of its purchase price over such adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, such a subsequent 106 purchaser may elect to treat all such acquisition premium under the constant yield method, as described below under the heading "--Election to Treat All Interest Under the Constant Yield Method." Variable Rate Regular Securities Regular Securities may provide for interest based on a variable rate. Under the OID Regulations, interest is treated as payable at a variable rate if, generally, (i) the issue price does not exceed the original principal balance by more than a specified amount and (ii) the interest compounds or is payable at least annually at current values of (a) one or more "qualified floating rates," (b) a single fixed rate and one or more qualified floating rates, (c) a single "objective rate," or (d) a single fixed rate and a single objective rate that is a "qualified inverse floating rate." A floating rate is a qualified floating rate if variations can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds. A multiple of a qualified floating rate is considered a qualified floating rate only if the rate is equal to either (a) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (b) the product of a qualified floating rate and a fixed multiple that is greater that 0.65 but not more than 1.35, increased or decreased by a fixed rate. Such rate may also be subject to a fixed cap or floor, or a cap or floor that is not reasonably expected as of the issue date to affect the yield of the instrument significantly. An objective rate is any rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided that such information is not (i) within the control of the issuer or a related party or (ii) unique to the circumstances of the issuer or a related party. A qualified inverse floating rate is a rate equal to a fixed rate minus a qualified floating rate that inversely reflects contemporaneous variations in the cost of newly borrowed funds; an inverse floating rate that is not a qualified inverse floating rate may nevertheless be an objective rate. A Class of Regular Securities may be issued under this prospectus that does not have a variable rate under the foregoing rules, for example, a Class that bears different rates at different times during the period it is outstanding such that it is considered significantly "front-loaded" or "back-loaded" within the meaning of the OID Regulations. It is possible that such a Class may be considered to bear "contingent interest" within the meaning of the OID Regulations. The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to Regular Securities. However, if final regulations dealing with contingent interest with respect to Regular Securities apply the same principles as the OID Regulations, such regulations may lead to different timing of income inclusion that would be the case under the OID Regulations. Furthermore, application of such principles could lead to the characterization of gain on the sale of contingent interest Regular Securities as ordinary income. Investors should consult their tax advisors regarding the appropriate treatment of any Regular Security that does not pay interest at a fixed rate or variable rate as described in this paragraph. Under the REMIC Regulations, a Regular Security (i) bearing interest at a rate that qualifies as a variable rate under the OID Regulations that is tied to current values of a variable rate (or the highest, lowest or average of two or more variable rates, including a rate based on the average cost of funds of one or more financial institutions), or a positive or negative multiple of such a rate (plus or minus a specified number of basis points), or that represents a weighted average of rates on some or all of the Mortgage Loans, including such a rate that is subject to one or more caps or floors, or (ii) bearing one or more such variable rates for one or more periods, or one or more fixed rates for one or more periods, and a different variable rate or fixed rate for other periods, qualifies as a regular interest in a REMIC. Accordingly, it is anticipated that the Securities Administrator will treat Regular Securities that qualify as regular interests under this rule in the same manner as obligations bearing a variable rate for original issue discount reporting purposes. The amount of original issue discount with respect to a Regular Security bearing a variable rate of interest will accrue in the manner described above under "Original Issue Discount," with the yield to maturity and future payments on such Regular Security generally to be determined by assuming that interest will be payable for the life of the Regular Security based on the initial rate (or, if different, the value of the applicable variable rate as of the pricing date) for the relevant Class. Unless required otherwise by applicable final regulations, it is anticipated that the Securities Administrator will treat such variable interest as qualified stated interest, other than variable interest on an interest-only or super-premium Class, which will be treated as non-qualified stated interest includable in the stated redemption price at maturity. Ordinary income reportable for any period will be adjusted based on subsequent changes in the applicable interest rate index. Although unclear under the OID Regulations, unless required otherwise by applicable final regulations, the Depositor intends to treat Regular Securities bearing an interest rate that is a weighted average of the net interest 107 rates on Mortgage Loans as having qualified stated interest, except to the extent that initial "teaser" rates cause sufficiently "back-loaded" interest to create more than de minimis original issue discount. The yield on such Regular Securities for purposes of accruing original issue discount will be a hypothetical fixed rate based on the fixed rates, in the case of fixed-rate Mortgage Loans, and initial "teaser rates" followed by fully indexed rates, in the case of adjustable rate Mortgage Loans. In the case of adjustable rate Mortgage Loans, the applicable index used to compute interest on the Mortgage Loans in effect on the pricing date (or possibly the issue date) will be deemed to be in effect beginning with the period in which the first weighted average adjustment date occurring after the issue date occurs. Adjustments will be made in each accrual period either increasing or decreasing the amount of ordinary income reportable to reflect the actual Pass-Through Rate on the Regular Securities. Market Discount A subsequent purchaser of a Regular Security also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these sections and the principles applied by the OID Regulations in the context of original issue discount, "market discount" is the amount by which the purchaser's original basis in the Regular Security (i) is exceeded by the remaining outstanding principal payments and interest payments other than qualified stated interest payments due on a Regular Security, or (ii) in the case of a Regular Security having original issue discount, is exceeded by the adjusted issue price of such Regular Security at the time of purchase. Such purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on such Regular Security as distributions includable in the stated redemption price at maturity thereof are received, in an amount not exceeding any such distribution. Such market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until such regulations are issued, such market discount would accrue either (i) on the basis of a constant interest rate, or (ii) in the ratio of stated interest allocable to the relevant period to the sum of the interest for such period plus the remaining interest as of the end of such period, or in the case of a Regular Security issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for such period plus the remaining original issue discount as of the end of such period. Such purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Security as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. Such purchaser will be required to defer deduction of a portion of the excess of the interest paid or accrued on indebtedness incurred to purchase or carry a Regular Security over the interest distributable thereon. The deferred portion of such interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Security for such year. Any such deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized or the Regular Security is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Securityholder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such Regular Securityholder in that taxable year or thereafter, in which case the interest deferral rule will not apply. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which such election may be deemed to be made. A person who purchases a Regular Security at a price lower than the remaining amounts includable in the stated redemption price at maturity of the security, but higher than its adjusted issue price, does not acquire the Regular Security with market discount, but will be required to report original issue discount, appropriately adjusted to reflect the excess of the price paid over the adjusted issue price. Market discount with respect to a Regular Security will be considered to be zero if such market discount is less than 0.25% of the remaining stated redemption price at maturity of such Regular Security (or, in the case of a Regular Security having original issue discount, the adjusted issue price of such Regular Security) multiplied by the weighted average maturity of the Regular Security (determined as described above in the third paragraph under "--Original Issue Discount") remaining after the date of purchase. It appears that de minimis market discount would be reported in a manner similar to de minimis original issue discount. See "--Original Issue Discount" above. Under provisions of the OID Regulations relating to contingent payment obligations, a secondary purchaser of a Regular Security that has "contingent interest" at a discount generally would continue to accrue interest and determine adjustments on the Regular Security based on the original projected payment schedule devised by the 108 issuer of the Security. The holder of such a Regular Security would be required, however, to allocate the difference between the adjusted issue price of the Regular Security and its basis in the Regular Security as positive adjustments to the accruals or projected payments on the Regular Security over the remaining term of the Regular Security in a manner that is reasonable (e.g., based on a constant yield to maturity). Treasury regulations implementing the market discount rules have not yet been issued, and uncertainty exists with respect to many aspects of those rules. Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for a given Class of Regular Securities. Prospective investors in Regular Securities should consult their own tax advisors regarding the application of the market discount rules to the Regular Securities. Investors should also consult Revenue Procedure 92-67 concerning the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method. Amortizable Premium A Regular Security purchased at a cost greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular Securityholder holds such Regular Security as a "capital asset" within the meaning of Code Section 1221, the Regular Securityholder may elect under Code Section 171 to amortize such premium under a constant yield method that reflects compounding based on the interval between payments on the Regular Security. Such election will apply to all taxable debt obligations (including REMIC regular interests) acquired by the Regular Securityholder at a premium held in that taxable year or thereafter, unless revoked with the permission of the IRS. Final Treasury regulations have been issued with respect to amortizable bond premiums which do not by their terms apply to prepayable debt instruments such as the Regular Securities. However, the Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that apply to the accrual of market discount on installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations such as the Regular Securities, although it is unclear whether the alternatives to the constant interest method described above under "--Market Discount" are available. Amortizable bond premium generally will be treated as an offset to interest income on a Regular Security, rather than as a separate deduction. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which the Code Section 171 election may be deemed to be made. Amortizable premium on a Regular Security that is subject to redemption at the option of the issuer generally must be amortized as if the optional redemption price and date were the Security's principal amount and maturity date if doing so would result in a smaller amount of premium amortization during the period ending with the optional redemption date. Thus, a holder of a Regular Security would not be able to amortize any premium on a Regular Security that is subject to optional redemption at a price equal to or greater than the Securityholder's acquisition price unless and until the redemption option expires. A Regular Security subject to redemption at the option of the issuer described in the preceding sentence will be treated as having matured on the redemption date for the redemption price and then as having been reissued on that date for that price. Any premium remaining on the Regular Security at the time of the deemed reissuance will be amortized on the basis of (i) the original principal amount and maturity date or (ii) the price and date of any succeeding optional redemption, under the principles described above. Election to Treat All Interest Under the Constant Yield Method A holder of a debt instrument such as a Regular Security may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to such an election, (i) "interest" includes stated interest, original issue discount, de minimis original issue discount, market discount and de minimis market discount, as adjusted by any amortizable bond premium or acquisition premium and (ii) the debt instrument is treated as if the instrument were issued on the holder's acquisition date in the amount of the holder's adjusted basis immediately after acquisition. It is unclear whether, for this purpose, the initial Prepayment Assumption would continue to apply or if a new prepayment assumption as of the date of the holder's acquisition would apply. A holder generally may make such an election on an instrument by instrument basis or for a Class or group of debt instruments. However, if the holder makes such an election with respect to a debt instrument with amortizable bond premium or with market discount, the holder is deemed to have made elections to amortize bond premium or to 109 report market discount income currently as it accrues under the constant yield method, respectively, for all premium bonds held or market discount bonds acquired by the holder in the same taxable year or thereafter. The election is made on the holder's federal income tax return for the year in which the debt instrument is acquired and is irrevocable except with the approval of the IRS. Investors should consult their own tax advisors regarding the advisability of making such an election. Treatment of Losses Regular Securityholders will be required to report income with respect to Regular Securities on the accrual method of accounting, without giving effect to delays or reductions in distributions attributable to defaults or delinquencies on the Mortgage Loans, except to the extent it can be established that such losses are uncollectable. Accordingly, the holder of a Regular Security, particularly a Subordinated Security, may have income, or may incur a diminution in cash flow as a result of a default or delinquency, but may not be able to take a deduction (subject to the discussion below) for the corresponding loss until a subsequent taxable year. In this regard, investors are cautioned that while they may generally cease to accrue interest income if it reasonably appears that the interest will be uncollectable, the IRS may take the position that original issue discount must continue to be accrued in spite of its uncollectibility until the debt instrument is disposed of in a taxable transaction or becomes worthless in accordance with the rules of Code Section 166. Under Code Section 166, it appears that Regular Securityholders that are corporations or that otherwise hold the Regular Securities in connection with a trade or business should in general be allowed to deduct as an ordinary loss such loss with respect to principal sustained during the taxable year on account of any such Regular Securities becoming wholly or partially worthless, and that, in general, Regular Securityholders that are not corporations and do not hold the Regular Securities in connection with a trade or business should be allowed to deduct as a short-term capital loss any loss sustained during the taxable year on account of a portion of any such Regular Securities becoming wholly worthless. Although the matter is not free from doubt, such non-corporate Regular Securityholders should be allowed a bad debt deduction at such time as the principal balance of such Regular Securities is reduced to reflect losses resulting from any liquidated Mortgage Loans. The IRS, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect such losses only after all the Mortgage Loans remaining in the Trust Fund have been liquidated or the applicable Class of Regular Securities has been otherwise retired. The IRS could also assert that losses on the Regular Securities are deductible based on some other method that may defer such deductions for all holders, such as reducing future cashflow for purposes of computing original issue discount. This may have the effect of creating "negative" original issue discount which would be deductible only against future positive original issue discount or otherwise upon termination of the Class. Regular Securityholders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained with respect to such Regular Securities. While losses attributable to interest previously reported as income should be deductible as ordinary losses by both corporate and non-corporate holders, the IRS may take the position that losses attributable to accrued original issue discount may only be deducted as capital losses in the case of non-corporate holders who do not hold the Regular Securities in connection with a trade or business. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. Such taxpayers are advised to consult their tax advisors regarding the treatment of losses on Regular Securities. Sale or Exchange of Regular Securities If a Regular Securityholder sells or exchanges a Regular Security, the Regular Securityholder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Security. The adjusted basis of a Regular Security generally will equal the original cost of the Regular Security to the seller, increased by any original issue discount or market discount previously included in the seller's gross income with respect to the Regular Security and reduced by amounts included in the stated redemption price at maturity of the Regular Security that were previously received by the seller, by any amortized premium, and by any recognized losses. Except as described above with respect to market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a Regular Security realized by an investor who holds the Regular Security as a capital asset will be capital gain or loss and will be long-term or short-term depending on whether the Regular Security has been held for the long-term capital gain holding period (currently, more than one year). Such gain will be treated as ordinary income (i) if a Regular Security is held as part of a "conversion transaction" as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the Regular Securityholder's net 110 investment in the conversion transaction at 120% of the appropriate applicable Federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as part of such transaction, (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates, or (iii) to the extent that such gain does not exceed the excess, if any, of (a) the amount that would have been includable in the gross income of the holder if its yield on such Regular Security were 110% of the applicable Federal rate as of the date of purchase, over (b) the amount of income actually includable in the gross income of such holder with respect to such Regular Security. In addition, gain or loss recognized from the sale of a Regular Security by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Long-term capital gains of certain noncorporate taxpayers generally are subject to a lower maximum tax rate than ordinary income or short-term capital gains of such taxpayers for property held for more than one year. Currently, the maximum tax rate for corporations is the same with respect to both ordinary income and capital gains. Taxation of Owners of Residual Securities Taxation of REMIC Income Generally, the "daily portions" of REMIC taxable income or net loss will be includable as ordinary income or loss in determining the federal taxable income of holders of Residual Securities ("Residual Holders"), and will not be taxed separately to the REMIC Pool. The daily portions of REMIC taxable income or net loss of a Residual Holder are determined by allocating the REMIC Pool's taxable income or net loss for each calendar quarter ratably to each day in such quarter and by allocating such daily portion among the Residual Holders in proportion to their respective holdings of Residual Securities in the REMIC Pool on such day. REMIC taxable income is generally determined in the same manner as the taxable income of an individual using the accrual method of accounting, except that (i) the limitations on deductibility of investment interest expense and expenses for the production of income do not apply, (ii) all bad loans will be deductible as business bad debts, and (iii) the limitation on the deductibility of interest and expenses related to tax-exempt income will apply. The REMIC Pool's gross income includes interest, original issue discount income and market discount income, if any, on the Mortgage Loans, reduced by amortization of any premium on the Mortgage Loans, plus income from amortization of issue premium, if any, on the Regular Securities, plus income on reinvestment of cash flows and reserve assets, plus any cancellation of indebtedness income upon allocation of realized losses to the Regular Securities. The REMIC Pool's deductions include interest and original issue discount expense on the Regular Securities, servicing fees on the Mortgage Loans, other administrative expenses of the REMIC Pool and realized losses on the Mortgage Loans. The requirement that Residual Holders report their pro rata share of taxable income or net loss of the REMIC Pool will continue until there are no Securities of any Class of the related Series outstanding. The taxable income recognized by a Residual Holder in any taxable year will be affected by, among other factors, the relationship between the timing of recognition of interest, original issue discount or market discount income or amortization of premium with respect to the Mortgage Loans, on the one hand, and the timing of deductions for interest (including original issue discount) or income from amortization of issue premium on the Regular Securities, on the other hand. In the event that an interest in the Mortgage Loans is acquired by the REMIC Pool at a discount, and one or more of such Mortgage Loans is prepaid, the prepayment may be used in whole or in part to make distributions in reduction of principal on the Regular Securities, and (ii) the discount on the Mortgage Loans which is includable in income may exceed the deduction allowed upon such distributions on those Regular Securities on account of any unaccrued original issue discount relating to those Regular Securities. When there is more than one Class of Regular Securities that distribute principal sequentially, this mismatching of income and deductions is particularly likely to occur in the early years following issuance of the Regular Securities when distributions in reduction of principal are being made in respect of earlier Classes of Regular Securities to the extent that such Classes are not issued with substantial discount or are issued at a premium. If taxable income attributable to such a mismatching is realized, in general, losses would be allowed in later years as distributions on the later maturing Classes of Regular Securities are made. Taxable income may also be greater in earlier years than in later years as a result of the fact that interest expense deductions, expressed as a percentage of the outstanding principal amount of such a Series of Regular Securities, may increase over time as distributions in reduction of principal are made on the lower yielding Classes of Regular Securities, whereas, to the extent the REMIC Pool consists of fixed rate Mortgage Loans, interest income with respect to any given Mortgage Loan will remain constant over time as a 111 percentage of the outstanding principal amount of that loan. Consequently, Residual Holders must have sufficient other sources of cash to pay any federal, state, or local income taxes due as a result of such mismatching or unrelated deductions against which to offset such income, subject to the discussion of "excess inclusions" below under "--Limitations on Offset or Exemption of REMIC Income." The timing of such mismatching of income and deductions described in this paragraph, if present with respect to a Series of Securities, may have a significant adverse effect upon a Residual Holder's after-tax rate of return. A portion of the income of a Residual Securityholder may be treated unfavorably in three contexts: (i) it may not be offset by current or net operating loss deductions; (ii) it will be considered unrelated business taxable income to tax-exempt entities; and (iii) it is ineligible for any statutory or treaty reduction in the 30% withholding tax otherwise available to a foreign Residual Securityholder. See "--Limitations on Offset or Exemption of REMIC Income" below. In addition, a Residual Holder's taxable income during certain periods may exceed the income reflected by such Residual Holders for such periods in accordance with generally accepted accounting principles. Investors should consult their own accountants concerning the accounting treatment of their investment in Residual Securities. Basis and Losses The amount of any net loss of the REMIC Pool that may be taken into account by the Residual Holder is limited to the adjusted basis of the Residual Security as of the close of the quarter (or time of disposition of the Residual Security if earlier), determined without taking into account the net loss for the quarter. The initial adjusted basis of a purchaser of a Residual Security is the amount paid for such Residual Security. Such adjusted basis will be increased by the amount of taxable income of the REMIC Pool reportable by the Residual Holder and will be decreased (but not below zero), first, by a cash distribution from the REMIC Pool and, second, by the amount of loss of the REMIC Pool reportable by the Residual Holder. Any loss that is disallowed on account of this limitation may be carried over indefinitely with respect to the Residual Holder as to whom such loss was disallowed and may be used by such Residual Holder only to offset any income generated by the same REMIC Pool. A Residual Holder will not be permitted to amortize directly the cost of its Residual Security as an offset to its share of the taxable income of the related REMIC Pool. However, the taxable income will not include cash received by the REMIC Pool that represents a recovery of the REMIC Pool's basis in its assets. Although the law is unclear in certain respects, such recovery of basis by the REMIC Pool will have the effect of amortization of the issue price of the Residual Securities over their life. However, in view of the possible acceleration of the income of Residual Holders described above under "--Taxation of REMIC Income," the period of time over which such issue price is effectively amortized may be longer than the economic life of the Residual Securities. A Residual Security may have a negative value if the net present value of anticipated tax liabilities exceeds the present value of anticipated cash flows. The REMIC Regulations appear to treat the issue price of such a residual interest as zero rather than such negative amount for purposes of determining the REMIC Pool's basis in its assets. Regulations have been issued addressing the federal income tax treatment of "inducement fees" received by transferees of noneconomic residual interests. The regulations require inducement fees to be included in income over a period reasonably related to the period in which a Residual Security is expected to generate taxable income or net loss to its holder. Under two safe harbor methods, inducement fees are permitted to be included in income: (i) in the same amounts and over the same period that the holder uses for financial reporting purposes, provided that such period is not shorter than the period the related REMIC is expected to generate taxable income or (ii) ratably over the remaining anticipated weighted average life of all the regular and residual interests issued by the related REMIC, determined based on actual distributions projected as remaining to be made on such interests under the applicable prepayment assumption. If a Residual Holder sells or otherwise disposes of the residual interest, any unrecognized portion of the inducement fee is required to be taken into account at the time of the sale or disposition. Further, to the extent that the initial adjusted basis of a Residual Holder (other than an original holder) in the Residual Security is greater than the corresponding portion of the REMIC Pool's basis in the Mortgage Loans, the Residual Holder will not recover a portion of such basis until termination of the REMIC Pool unless future Treasury regulations provide for periodic adjustments to the REMIC income otherwise reportable by such holder. The REMIC Regulations currently in effect do not so provide. See "--Treatment of Certain Items of REMIC Income and Expense--Market Discount" below regarding the basis of Mortgage Loans to the REMIC Pool and "--Sale or 112 Exchange of a Residual Security" below regarding possible treatment of a loss upon termination of the REMIC Pool as a capital loss. Treatment of Certain Items of REMIC Income and Expense Although it is anticipated that the Securities Administrator will compute REMIC income and expense in accordance with the Code and applicable regulations, the authorities regarding the determination of specific items of income and expense are subject to differing interpretations. The Depositor makes no representation as to the specific method that will be used for reporting income with respect to the Mortgage Loans and expenses with respect to the Regular Securities, and different methods could result in different timing or reporting of taxable income or net loss to Residual Holders or differences in capital gain versus ordinary income. Original Issue Discount and Premium. Generally, the REMIC Pool's deductions for original issue discount and income from amortization of premium will be determined in the same manner as original issue discount income on Regular Securities as described above under "--Taxation of Owners of Regular Securities--Original Issue Discount" and "--Variable Rate Regular Securities," without regard to the de minimis rule described therein, and "--Taxation of Owners of Regular Securities--Amortizable Premium." Market Discount. The REMIC Pool will have market discount income in respect of Mortgage Loans if, in general, the basis of the REMIC Pool in such Mortgage Loans is exceeded by their unpaid principal balances. The REMIC Pool's basis in such Mortgage Loans is generally the fair market value of the Mortgage Loans immediately after the transfer thereof to the REMIC Pool. The REMIC Regulations provide that such basis is equal in the aggregate to the issue prices of all regular and residual interests in the REMIC Pool. The accrued portion of such market discount would be recognized currently as an item of ordinary income in a manner similar to original issue discount. Market discount income generally should accrue in the manner described above under "--Taxation of Owners of Regular Securities--Market Discount." Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans exceeds the unpaid principal balances thereof, the REMIC Pool will be considered to have acquired such Mortgage Loans at a premium equal to the amount of such excess. As stated above, the REMIC Pool's basis in Mortgage Loans is the fair market value of the Mortgage Loans, based on the aggregate of the issue prices of the regular and residual interests in the REMIC Pool immediately after the transfer thereof to the REMIC Pool. In a manner analogous to the discussion above under "--Taxation of Owners of Regular Securities--Amortizable Premium," a person that holds a Mortgage Loan as a capital asset under Code Section 1221 may elect under Code Section 171 to amortize premium on Mortgage Loans originated after September 27, 1985 under the constant yield method. Amortizable bond premium will be treated as an offset to interest income on the Mortgage Loans, rather than as a separate deduction item. Because substantially all of the mortgagors on the Mortgage Loans are expected to be individuals, Code Section 171 will not be available for premium on Mortgage Loans originated on or prior to September 27, 1985. Premium with respect to such Mortgage Loans may be deductible in accordance with a reasonable method regularly employed by the holder thereof. The allocation of such premium pro rata among principal payments should be considered a reasonable method; however, the IRS may argue that such premium should be allocated in a different manner, such as allocating such premium entirely to the final payment of principal. Limitations on Offset or Exemption of REMIC Income A portion (or all) of the REMIC taxable income includable in determining the federal income tax liability of a Residual Holder will be subject to special treatment. That portion, referred to as the "excess inclusion," is equal to the excess of REMIC taxable income for the calendar quarter allocable to a Residual Security over the daily accruals for such quarterly period of (i) 120% of the long-term applicable Federal rate that would have applied to the Residual Security (if it were a debt instrument) on the Startup Day under Code Section 1274(d), multiplied by (ii) the adjusted issue price of such Residual Security at the beginning of such quarterly period. For this purpose, the adjusted issue price of a Residual Security at the beginning of a quarter is the issue price of the Residual Security, plus the amount of such daily accruals of REMIC income described in this paragraph for all prior quarters, decreased by any distributions made with respect to such Residual Security prior to the beginning of such quarterly period. Accordingly, the portion of the REMIC Pool's taxable income that will be treated as excess inclusions will be a larger portion of such income as the adjusted issue price of the Residual Securities diminishes. 113 The portion of a Residual Holder's REMIC taxable income consisting of the excess inclusions generally may not be offset by other deductions, including net operating loss carryforwards, on such Residual Holder's return. However, net operating loss carryovers are determined without regard to excess inclusion income. Further, if the Residual Holder is an organization subject to the tax on unrelated business income imposed by Code Section 511, the Residual Holder's excess inclusions will be treated as unrelated business taxable income of such Residual Holder for purposes of Code Section 511. In addition, REMIC taxable income is subject to 30% withholding tax with respect to certain persons who are not U.S. Persons (as defined below under "--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors"), and the portion thereof attributable to excess inclusions is not eligible for any reduction in the rate of withholding tax (by treaty or otherwise). See "--Taxation of Certain Foreign Investors--Residual Securities" below. Finally, if a real estate investment trust or a regulated investment company owns a Residual Security, a portion (allocated under Treasury regulations yet to be issued) of dividends paid by the real estate investment trust or regulated investment company could not be offset by net operating losses of its shareholders, would constitute unrelated business taxable income for tax-exempt shareholders, and would be ineligible for reduction of withholding to certain persons who are not U.S. Persons. There are three rules for determining the effect of excess inclusions on the alternative minimum taxable income of a Residual Holder. First, alternative minimum taxable income for a Residual Holder is determined without regard to the special rule, discussed above, that taxable income cannot be less than excess inclusions. Second, a Residual Holder's alternative minimum taxable income for a taxable year cannot be less than the excess inclusions for the year. Third, the amount of any alternative minimum tax net operating loss deduction must be computed without regard to any excess inclusions. Tax-Related Restrictions on Transfer of Residual Securities Disqualified Organizations. If any legal or beneficial interest in a Residual Security is transferred to a Disqualified Organization (as defined below), a tax would be imposed in an amount equal to the product of (i) the present value of the total anticipated excess inclusions with respect to such Residual Security for periods after the transfer and (ii) the highest marginal federal income tax rate applicable to corporations. The REMIC Regulations provide that the anticipated excess inclusions are based on actual prepayment experience to the date of the transfer and projected payments based on the Prepayment Assumption. The present value rate equals the applicable Federal rate under Code Section 1274(d) as of the date of the transfer for a term ending with the last calendar quarter in which excess inclusions are expected to accrue. Such rate is applied to the anticipated excess inclusions from the end of the remaining calendar quarters in which they arise to the date of the transfer. Such a tax generally would be imposed on the transferor of the Residual Security, except that where such transfer is through an agent (including a broker, nominee, or other middleman) for a Disqualified Organization, the tax would instead be imposed on such agent. However, a transferor of a Residual Security would in no event be liable for such tax with respect to a transfer if the transferee furnished to the transferor an affidavit stating that the transferee is not a Disqualified Organization and, as of the time of the transfer, the transferor does not have actual knowledge that such affidavit is false. The tax also may be waived by the IRS if the Disqualified Organization promptly disposes of the Residual Security and the transferor pays income tax at the highest corporate rate on the excess inclusion for the period the Residual Security is actually held by the Disqualified Organization. In addition, if a Pass-Through Entity (as defined below) has excess inclusion income with respect to a Residual Security during a taxable year and a Disqualified Organization is the record holder of an equity interest in such entity, then a tax is imposed on such entity equal to the product of (i) the amount of excess inclusions that are allocable to the interest in the Pass-Through Entity during the period such interest is held by such Disqualified Organization, and (ii) the highest marginal federal corporate income tax rate. Such tax would be deductible from the ordinary gross income of the Pass-Through Entity for the taxable year. The Pass-Through Entity would not be liable for such tax if it has received an affidavit from such record holder that it is not a Disqualified Organization or stating such holder's taxpayer identification number and, during the period such person is the record holder of the Residual Security, the Pass-Through Entity does not have actual knowledge that such affidavit is false. If an "electing large partnership" holds a Residual Security, all interests in the electing large partnership are treated as held by Disqualified Organizations for purposes of the tax imposed upon a Pass-Through Entity by section 860E(c) of the Code. An exception to this tax, otherwise available to a Pass-Through Entity that is furnished certain affidavits by record holders of interests in the entity and that does not know such affidavits are false, is not available to an electing large partnership. 114 For these purposes, (i) "Disqualified Organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (provided, that such term does not include an instrumentality if all of its activities are subject to tax and a majority of its board of directors in not selected by any such governmental entity), any cooperative organization furnishing electric energy or providing telephone service or persons in rural areas as described in Code Section 1381(a)(2)(C), and any organization (other than a farmers' cooperative described in Code Section 531) that is exempt from taxation under the Code unless such organization is subject to the tax on unrelated business income imposed by Code Section 511, (ii) "Pass-Through Entity" means any regulated investment company, real estate investment trust, common trust fund, partnership, trust or estate and certain corporations operating on a cooperative basis. Except as may be provided in Treasury regulations, any person holding an interest in a Pass-Through Entity as a nominee for another will, with respect to such interest, be treated as a Pass-Through Entity, and (iii) an "electing large partnership" means any partnership having more than 100 members during the preceding tax year (other than certain service partnerships and commodity pools), which elect to apply simplified reporting provisions under the Code. The Pooling and Servicing Agreement with respect to a Series will provide that no legal or beneficial interest in a Residual Security may be transferred or registered unless (i) the proposed transferee furnished to the transferor and the Securities Administrator an affidavit providing its taxpayer identification number and stating that such transferee is the Beneficial Owner of the Residual Security and is not a Disqualified Organization and is not purchasing such Residual Security on behalf of a Disqualified Organization (i.e., as a broker, nominee or middleman thereof) and (ii) the transferor provides a statement in writing to the Trustee that it has no actual knowledge that such affidavit is false. Moreover, the Pooling and Servicing Agreement will provide that any attempted or purported transfer in violation of these transfer restrictions will be null and void and will vest no rights in any purported transferee. Each Residual Security with respect to a Series will bear a legend referring to such restrictions on transfer, and each Residual Holder will be deemed to have agreed, as a condition of ownership thereof, to any amendments to the related Pooling and Servicing Agreement required under the Code or applicable Treasury regulations to effectuate the foregoing restrictions. Information necessary to compute an applicable excise tax must be furnished to the IRS and to the requesting party within 60 days of the request, and the Depositor or the Securities Administrator may charge a fee for computing and providing such information. Noneconomic Residual Interests. The REMIC Regulations would disregard certain transfers of Residual Securities, in which case the transferor would continue to be treated as the owner of the Residual Securities and thus would continue to be subject to tax on its allocable portion of the net income of the REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual interest" (as defined below) to a Residual Holder (other than a Residual Holder who is not a U.S. Person as defined below under "--Foreign Investors") is disregarded for all federal income tax purposes if a significant purpose of the transfer is to impede the assessment or collection of tax. A residual interest in a REMIC (including a residual interest with a positive value at issuance) is a "noneconomic residual interest" unless, at the time of the transfer, (i) the present value of the expected future distributions on the residual interest at least equals the product of the present value of the anticipated excess inclusions and the highest corporate income tax rate in effect for the year in which the transfer occurs, and (ii) the transferor reasonably expects that the transferee will receive distributions from the REMIC at or after the time at which taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes on each excess inclusion. The anticipated excess inclusions and the present value rate are determined in the same manner as set forth above under "--Disqualified Organizations." The REMIC Regulations explain that a significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC. Under the REMIC Regulations, as amended on July 19, 2002, a safe harbor is provided if (i) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee historically had paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they came due in the future, (ii) the transferee represents to the transferor that it understands that, as the holder of the non-economic residual interest, the transferee may incur liabilities in excess of any cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest as they become due and (iii) the transferee represents to the transferor that it will not cause income from the Residual Security to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the transferee or any other person. The Pooling and Servicing Agreement with respect to each Series of Certificates will require the transferee of a Residual 115 Security to certify to the matters in the preceding sentence as part of the affidavit described above under the heading "Disqualified Organizations." In addition to the three conditions set forth above for the transferor of a noneconomic residual interest to be presumed not to have knowledge that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC, the REMIC Regulations contain a fourth condition for the transferor to be presumed to lack such knowledge. This fourth condition requires that one of the two following tests be satisfied: Either (a) the present value of the anticipated tax liabilities associated with holding the noneconomic residual interest not exceed the sum of: (i) the present value of any consideration given to the transferee to acquire the interest; (ii) the present value of the expected future distributions on the interest; and (iii) the present value of the anticipated tax savings associated with holding the interest as the REMIC generates losses. For purposes of these computations, the transferee is assumed to pay tax at the highest corporate rate of tax specified in the Code or, in certain circumstances, the alternative minimum tax rate. Further, present values generally are computed using a discount rate equal to the short-term Federal rate set forth in Section 1274(d) of the Code for the month of the transfer and the compounding period used by the transferee; or (b) (i) the transferee must be a domestic "C" corporation (other than a corporation exempt from taxation or a regulated investment company or real estate investment trust) that meets certain asset tests; (ii) the transferee must agree in writing that any subsequent transfer of the residual interest would be to an eligible "C" corporation and would meet the requirements for a safe harbor transfer; and (iii) the facts and circumstances known to the transferor on or before the date of the transfer must not reasonably indicate that the taxes associated with ownership of the residual interest will not be paid by the transferee. The Pooling and Servicing Agreement will not require that transfers of the Residual Securities meet the fourth requirement above, and thus meet the safe harbor. Persons considering the purchase of the Residual Securities should consult their advisors regarding the advisability of meeting the safe harbor in any transfer of the Residual Securities. Foreign Investors. The REMIC Regulations provide that the transfer of a Residual Security that has "tax avoidance potential" to a "foreign person" will be disregarded for all federal tax purposes. This rule appears intended to apply to a transferee who is not a U.S. Person within the meaning of Section 7701(a)(30) of the Code (a "Non-U.S. Holder") and to United States partnerships that have any partners that are Non-U.S. Holders, unless such transferee's income is effectively connected with the conduct of a trade or business within the United States. A Residual Security is deemed to have tax avoidance potential unless, at the time of the transfer, (i) the future value of expected distributions equals at least 30% of the anticipated excess inclusions after the transfer, and (ii) the transferor reasonably expects that the transferee will receive sufficient distributions from the REMIC Pool at or after the time at which the excess inclusions accrue and prior to the end of the next succeeding taxable year for the accumulated withholding tax liability to be paid. If the Non-U.S. Holder transfers the Residual Security back to a U.S. Person, the transfer will be disregarded and the foreign transferor will continue to be treated as the owner unless arrangements are made so that the transfer does not have the effect of allowing the transferor to avoid tax on accrued excess inclusions. The prospectus supplement relating to the Securities of a Series may provide that a Residual Security may not be purchased by or transferred to any person that is not a U.S. Person or may describe the circumstances and restrictions pursuant to which such a transfer may be made. The term "U.S. Person" means a citizens or resident of the United States, a corporation or partnership (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes, an estate that is subject to U.S. federal income tax regardless of the source of its income, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more such U.S. 116 Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as U.S. Persons). Sale or Exchange of a Residual Security Upon the sale or exchange of a Residual Security, the Residual Holder will recognize gain or loss equal to the excess, if any, of the amount realized over the adjusted basis (as described above under "--Taxation of Owners of Residual Securities--Basis and Losses") of such Residual Holder in such Residual Security at the time of the sale or exchange. In addition to reporting the taxable income of the REMIC Pool, a Residual Holder will have taxable income to the extent that any cash distribution to it from the REMIC Pool exceeds such adjusted basis on that Distribution Date. Such income will be treated as gain from the sale or exchange of the Residual Holder's Residual Security, in which case, if the Residual Holder has an adjusted basis in its Residual Security remaining when its interest in the REMIC Pool terminates, and if it holds such Residual Security as a capital asset under Code Section 1221, then it will recognize a capital loss at that time in the amount of such remaining adjusted basis. Any gain on the sale of a Residual Security will be treated as ordinary income (i) if a Residual Security is held as part of a "conversion transaction" as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the Residual Holder's net investment in the conversion transaction at 120% of the appropriate applicable Federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as a part of such transaction or (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates. In addition, gain or loss recognized from the sale of a Residual Security by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). The Conference Committee Report to the 1986 Act provides that, except as provided in Treasury regulations yet to be issued, the wash sale rules of Code Section 1091 will apply to dispositions of Residual Securities where the seller of the Residual Security, during the period beginning six months before the sale or disposition of the Residual Security and ending six months after such sale or disposition, acquires (or enters into any other transaction that results in the application of Code Section 1091) any residual interest in any REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that is economically comparable to a Residual Security. Mark to Market Regulations The IRS has issued final regulations (the "Mark to Market Regulations") under Code Section 475 relating to the requirement that a securities dealer mark to market securities held for sale to customers. This mark-to-market requirement applies to all securities of a dealer, except to the extent that the dealer has specifically identified a security as held for investment. The Mark to Market Regulations provide that, for purposes of this mark to market requirement, a Residual Security is not treated as a security and thus may not be marked to market. Taxes That May Be Imposed on the REMIC Pool Prohibited Transactions Income from certain transaction by the REMIC Pool, called prohibited transactions, will not be part of the calculation of income or loss includable in the federal income tax returns of Residual Holders, but rather will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions generally include (i) the disposition of a qualified mortgages other than for (a) substitution within two years of the Startup Day for a defective (including a defaulted) obligation (or repurchase in lieu of substitution of a defective (including a defaulted) obligation at any time) or for any qualified mortgage within three months of the Startup Day, (b) foreclosure, default, or imminent default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC Pool, or (d) a qualified (complete) liquidation, (ii) the receipt of income from assets that are not the type of mortgages or investments that the REMIC Pool is permitted to hold, (iii) the receipt of compensation for services, or (iv) the receipt of gain from disposition of cash flow investments other than pursuant to a qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction to sell a qualified mortgage or cash flow investment held by a REMIC Pool to prevent a default on Regular Securities as a result of a default on qualified mortgages or to facilitate a clean-up call (generally, 117 an optional termination to save administrative costs when no more than a small percentage of the Securities is outstanding). The REMIC Regulations indicate that the modification of a Mortgage Loan generally will not be treated as a disposition if it is occasioned by a default or reasonably foreseeable default, an assumption of the Mortgage Loan, the waiver of a due-on-sale or due-on-encumbrance clause, or the conversion of an interest rate by a mortgagor pursuant to the terms of a convertible adjustable rate Mortgage Loan. Contributions to the REMIC Pool After the Startup Day In general, the REMIC Pool will be subject to a tax at a 100% rate on the value of any property contributed to the REMIC Pool after the Startup Day. Exceptions are provided for cash contributions to the REMIC Pool (i) during the three months following the Startup Day, (ii) made to a qualified reserve fund by a Residual Holder, (iii) in the nature of a guarantee, (iv) made to facilitate a qualified liquidation or clean-up call, and (v) as otherwise permitted in Treasury regulations yet to be issued. It is not anticipated that there will be any contributions to the REMIC Pool after the Startup Day. Net Income from Foreclosure Property The REMIC Pool will be subject of federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. Generally, property acquired by deed in lieu of foreclosure would be treated as "foreclosure property" for a period ending with the close of the third calendar year beginning after the year in which the REMIC Pool acquires such property, with a possible extension. Net income from foreclosure property generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust. It is not anticipated that the REMIC Pool will have any taxable net income from foreclosure property. Liquidation of the REMIC Pool If a REMIC Pool adopts a plan of complete liquidation, within the meaning of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the REMIC Pool's final tax return a date on which such adoption is deemed to occur, and sells all of its assets (other than cash) within a 90-day period beginning on such date, the REMIC Pool will not be subject to the prohibited transaction rules on the sale of its assets, provided that the REMIC Pool credits or distributes in liquidation all of the sale proceeds plus its cash (other than amounts retained to meet claims) to holders of Regular Securities and Residual Holders within the 90-day period. Administrative Matters The REMIC Pool will be required to maintain its books on a calendar year basis and to file federal income tax returns for federal income tax purposes in a manner similar to a partnership. The form for such income tax return is Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The Securities Administrator will be required to sign the REMIC Pool's returns. Treasury regulations provide that, except where there is a single Residual Holder for an entire taxable year, the REMIC Pool will be subject to the procedural and administrative rules of the Code applicable to partnerships, including the determination by the IRS of any adjustments to, among other things, items of REMIC income, gain, loss, deduction, or credit in a unified administrative proceeding. The Securities Administrator (or other entity specified in the applicable Agreement) will be obligated to act as "tax matters person," as defined in applicable Treasury regulations, with respect to the REMIC Pool as agent of the Residual Holders holding the largest percentage interest in the Residual Securities. If the Code or applicable Treasury regulations do not permit the Servicer to act as tax matters person in its capacity as agent of such Residual Holder, such Residual Holder or such other person specified pursuant to Treasury regulations will be required to act as tax matters person. The tax matters person generally has responsibility for overseeing and providing notice to the other Residual Holders of certain administrative and judicial proceedings regarding the REMIC Pool's tax affairs, although other holders of the Residual Securities of the same Series would be able to participate in such proceedings in appropriate circumstances. 118 Limitations on Deduction of Certain Expenses An investor who is an individual, estate, or trust will be subject to limitation with respect to certain itemized deductions described in Code Section 67, to the extent that such itemized deductions, in the aggregate, do not exceed 2% of the investor's adjusted gross income. In addition, Code Section 68 provides that itemized deductions otherwise allowable for a taxable year of an individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of adjusted gross income over a statutory threshold amount or (ii) 80% of the amount of itemized deductions otherwise allowable for such year. Under current law, the applicable limitation is reduced by one third for taxable years beginning in 2006 and 2007, and by two thirds in taxable years beginning in 2008 and 2009. For taxable years beginning after December 31, 2009 the overall limitation on itemized deductions is repealed. In the case of a REMIC Pool, such deductions may include deductions under Code Section 212 for the Servicing Fee and all administrative and other expenses relating to the REMIC Pool, or any similar expenses allocated to the REMIC Pool with respect to a regular interest it holds in another REMIC. Such investors who hold REMIC Securities either directly or indirectly through certain pass-through entities may have their pro rata share of such expenses allocated to them as additional gross income, but may be subject to such limitation on deductions. In addition, such expenses are not deductible at all for purposes of computing the alternative minimum tax, and may cause such investors to be subject to significant additional tax liability. Temporary Treasury regulations provide that the additional gross income and corresponding amount of expenses generally are to be allocated entirely to the holders of Residual Securities in the case of a REMIC Pool that would not qualify as a fixed investment trust in the absence of a REMIC election. With respect to a REMIC Pool that would be classified as an investment trust in the absence of a REMIC election or that is substantially similar to an investment trust, any holder of a Regular Security that is an individual, trust, estate, or pass-through entity also will be allocated its pro rata share of such expenses and a corresponding amount of income and will be subject to the limitations or deductions imposed by Code Sections 67 and 68, as described above. All such expenses will be allocable to the Residual Securities. In general, such allocable portion will be determined based on the ratio that a REMIC Securityholder's income, determined on a daily basis, bears to the income of all holders of Regular Securities and Residual Securities with respect to a REMIC Pool. As a result, individuals, estates or trusts holding REMIC Securities (either directly or indirectly through a grantor trust, partnership, S corporation, REMIC, or certain other pass-through entities described in the foregoing temporary Treasury regulations) may have taxable income in excess of the interest income at the pass-through rate on Regular Securities that are issued in a single Class or otherwise consistently with fixed investment trust status or in excess of cash distributions for the related period on Residual Securities. Taxation of Certain Foreign Investors Regular Securities Interest, including original issue discount, distributable to Regular Securityholders who are non-resident aliens, foreign corporations, or other Non-U.S. Holders, generally will be considered "portfolio interest" and, therefore, generally will not be subject to 30% United States withholding tax, provided that (i) such interest is not effectively connected with the conduct of a trade or business in the United States of the Securityholder, and (ii) such Non-U.S. Holder is not a "10-percent shareholder" within the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code Section 881(c)(3)(C). To avoid withholding tax, a Securityholder must provide certain documentation. The appropriate documentation includes Form W-8BEN, if the Non-U.S. Holder is a corporation or individual eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; Form W-8ECI if the Non-U.S. Holder is eligible for an exemption on the basis of its income from the REMIC Security being effectively connected to a United States trade or business; Form W-8BEN or Form W-8IMY if the Non-U.S. Holder is a trust, depending on whether such trust is classified as the Beneficial Owner of the Regular Security; and Form W-8IMY, with supporting documentation as specified in the Treasury Regulations, required to substantiate exemptions from withholding on behalf of its partners, if the Non-U.S. Holder is a partnership. An intermediary (other than a partnership) must provide Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country under the laws of which it is created, and certification that it is not acting for its own account. A "qualified intermediary" must certify that it has provided, or will provide, a withholding statement as required under Treasury Regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its Form W-8IMY, and may certify its account holders' status without including each Beneficial Owner's certification. A non-"qualified intermediary" must additionally certify that it has provided, or will provide, a withholding statement that is associated with the 119 appropriate Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its Beneficial Owners. The term "intermediary" means a person acting as a custodian, a broker, nominee or otherwise as an agent for the Beneficial Owner of a Regular Security. A "qualified intermediary" is generally a foreign financial institution or clearing organization or a non-United States branch or office of a United States financial institution or clearing organization that is a party to a withholding agreement with the IRS. If such statement, or any other required statement, is not provided, 30% withholding will apply unless reduced or eliminated pursuant to an applicable tax treaty or unless the interest on the Regular Security is effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Holder. In the latter case, such Non-U.S. Holder will be subject to United States federal income tax at regular rates. Investors who are Non-U.S. Holders should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Security. Residual Securities The Conference Committee Report to the 1986 Act indicates that amounts paid to Residual Holders who are Non-U.S. Holders generally should be treated as interest for purposes of the 30% (or lower treaty rate) United States withholding tax. Treasury regulations provide that amount distributed to Residual Holders may qualify as "portfolio interest," subject to the conditions described in "--Regular Securities" above, but only to the extent that (i) the Mortgage Loans were issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of assets therein (as to which a separate REMIC election will be made), to which the Residual Security relates, consists of obligations issued in "registered form" within the meaning of Code Section 163(f)(1). Generally, Mortgage Loans will not be, but regular interests in another REMIC Pool will be, considered obligations issued in registered form. Furthermore, Residual Holders will not be entitled to any exemption from the 30% withholding tax (or lower treaty rate) to the extent of that portion of REMIC taxable income that constitutes an "excess inclusion." See "--Taxation of Owners of Residual Securities--Limitations on Offset or Exemption of REMIC Income." If the amounts paid to Residual Holders who are Non-U.S. Holders are effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Holders, 30% (or lower treaty rate) withholding will not apply. Instead, the amounts paid to such Non-U.S. Holders will be subject to United States federal income tax at regular rates. If 30% (or lower treaty rate) withholding is applicable, such amounts generally will be taken into account for purposes of withholding only when paid or otherwise distributed (or when the Residual Security is disposed of) under rules similar to withholding upon disposition of debt instruments that have original issue discount. See "--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors" above concerning the disregard of certain transfers having "tax avoidance potential." Investors who are Non-U.S. Holders should consult their own tax advisors regarding the specific tax consequences to them of owning Residual Securities. Backup Withholding Distributions made on the Regular Securities, and proceeds from the sale of the Regular Securities to or through certain brokers, may be subject to a "backup" withholding tax under Code Section 3406 of 28% (increasing to 31% after 2010) on "reportable payments" (including interest distributions, original issue discount, and, under certain circumstances, principal distributions) unless the Regular Holder is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; is a Non-U.S. Holder and provides IRS Form W-8BEN identifying the Non-U.S. Holder and stating that the Beneficial Owner is not a U.S. Person; or can be treated as an exempt recipient within the meaning of Treasury Regulations Section 1.6049-4(c)(1)(ii). Information reporting requirements may also apply regardless of whether withholding is required. Any amounts to be withheld from distribution on the Regular Securities would be refunded by the IRS or allowed as a credit against the Regular Holder's federal income tax liability. Non-U.S. Holders are urged to contact their own tax advisors regarding the application to them of backup withholding and information reporting. Reporting Requirements Reports of accrued interest, original issue discount and information necessary to compute the accrual of market discount will be made annually to the IRS and to individuals, estates, non-exempt and non-charitable trusts, and partnerships who are either holders of record of Regular Securities or Beneficial Owners who own Regular Securities through a broker or middleman as nominee. All brokers, nominees and all other non-exempt holders of record of Regular Securities (including corporations, non-calendar year taxpayers, securities or commodities dealers, real estate investment trusts, investment companies, common trust funds, thrift institutions and charitable trusts) may 120 request such information for any calendar quarter by telephone or in writing by contacting the person designated in Internal Revenue Service Publication 938 with respect to a particular Series of Regular Securities. Holders through nominees must request such information from the nominee. The IRS's Form 1066 has an accompanying Schedule Q, Quarterly Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation. Treasury regulations require that Schedule Q be furnished by the REMIC Pool to each Residual Holder by the end of the month following the close of each calendar quarter (41 days after the end of a quarter under proposed Treasury regulations) in which the REMIC Pool is in existence). Treasury regulations require that, in addition to the foregoing requirements, information must be furnished quarterly to Residual Holders, furnished annually, if applicable, to holders of Regular Securities, and filed annually with the IRS concerning Code Section 67 expenses (see "--Taxes That May Be Imposed on the REMIC Pool--Limitations on Deduction of Certain Expenses" above) allocable to such holders. Furthermore, under such regulations, information must be furnished quarterly to Residual Holders, furnished annually to holders of Regular Securities, and filed annually with the IRS concerning the percentage of the REMIC Pool's assets meeting the qualified asset tests described above under "Characterization of Investments in REMIC Securities." Residual Holders should be aware that their responsibilities as holders of the residual interest in a REMIC Pool, including the duty to account for their shares of the REMIC Pool's income or loss on their returns, continue for the life of the REMIC Pool, even after the principal and interest on their Residual Securities have been paid in full. Treasury regulations provide that a Residual Holder is not required to treat items on its return consistently with their treatment on the REMIC Pool's return if the Holder owns 100% of the Residual Securities for the entire calendar year. Otherwise, each Residual Holder is required to treat items on its returns consistently with their treatment on the REMIC Pool's return, unless the Holder either files a statement identifying the inconsistency or establishes that the inconsistency resulted from incorrect information received from the REMIC Pool. The IRS may assess a deficiency resulting from a failure to comply with the consistency requirement without instituting an administrative proceeding at the REMIC Pool level. Any person that holds a Residual Security as a nominee for another person may be required to furnish the related REMIC Pool, in a manner to be provided in Treasury regulations, with the name and address of such person and other specified information. Grantor Trust Funds Classification of Grantor Trust Funds With respect to each Series of Grantor Trust Securities, assuming compliance with all provisions of the applicable Agreement, the related Grantor Trust Fund will be classified as a grantor trust under subpart E, part I of subchapter J of the Code and not as a partnership, an association taxable as a corporation, or a "taxable mortgage pool" within the meaning of Code Section 7701(i). Accordingly, each holder of a Grantor Trust Security generally will be treated as the Beneficial Owner of an undivided interest in the Mortgage Loans included in the Grantor Trust Fund. Standard Securities General Where there is no Fixed Retained Yield or "excess" servicing with respect to the Mortgage Loans underlying the Securities of a Series, and where such Securities are not designated as "Stripped Securities," the holder of each such Security in such Series (referred to herein as "Standard Securities") will be treated as the owner of a pro rata undivided interest in the ordinary income and corpus portions of the Grantor Trust Fund represented by its Standard Security and will be considered the Beneficial Owner of a pro rata undivided interest in each of the Mortgage Loans, subject to the discussion below under "--Recharacterization of Servicing Fees." Accordingly, the holder of a Standard Security of a particular Series will be required to report on its federal income tax return its pro rata share of the entire income from the Mortgage Loans represented by its Standard Security, including interest at the coupon rate on such Mortgage Loans, original issue discount (if any), prepayment fees, assumption fees, and late payment charges received by the Servicer, in accordance with such Securityholder's method of accounting. A Securityholder generally will be able to deduct its share of the Servicing Fee and all administrative and other expenses of the Trust Fund in accordance with its method of accounting, provided that such amounts are reasonable compensation for 121 services rendered to that Grantor Trust Fund. However, investors who are individuals, estates or trusts who own Securities, either directly or indirectly through certain pass-through entities, will be subject to limitations with respect to certain itemized deductions described in Code Section 67, including deductions under Code Section 212 for the Servicing Fee and all such administrative and other expenses of the Grantor Trust Fund, to the extent that such deductions, in the aggregate, do not exceed two percent of an investor's adjusted gross income. In addition, Code Section 68 provides that itemized deductions otherwise allowable for a taxable year of an individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of adjusted gross income over a statutory threshold amount or (ii) 80% of the amount of itemized deductions otherwise allowable for such year. Under current law, the applicable limitation is reduced by one third for taxable years beginning in 2006 and 2007, and by two thirds in taxable years beginning in 2008 and 2009. For taxable years beginning after December 31, 2009 the overall limitation on itemized deductions is repealed. As a result, such investors holding Standard Securities, directly or indirectly through a pass-through entity, may have aggregate taxable income in excess of the aggregate amount of cash received on such Standard Securities with respect to interest at the pass-through rate or as discount income on such Standard Securities. In addition, such expenses are not deductible at all for purposes of computing the alternative minimum tax, and may cause such investors to be subject to significant additional tax liability. Moreover, where there is Fixed Retained Yield with respect to the Mortgage Loans underlying a Series of Securities or where the servicing fees are in excess of reasonable servicing compensation, the transaction will be subject to the application of the "stripped bond" and "stripped coupon" rules of the Code, as described below under "--Stripped Securities" and "--Recharacterization of Servicing Fees," respectively. Holders of Standard Securities, particularly any Class of a Series which is a Subordinated Security, may incur losses of interest or principal with respect to the Mortgage Loans. Such losses would be deductible generally only as described above under "--REMICs--Taxation of Owners of Regular Securities--Treatment of Losses," except that Securityholders on the cash method of accounting would not be required to report qualified stated interest as income until actual receipt. Tax Status With respect to a Series, Cadwalader, Wickersham & Taft LLP has advised the Depositor that, except with respect to a Trust Fund consisting of Unsecured Home Improvement Loans: o A Standard Security owned by a "domestic building and loan association" within the meaning of Code Section 7701(a)(19) will be considered to represent "loans . . . secured by an interest in real property which is . . . residential real property" within the meaning of Code Section 7701(a)(19)(C)(v), provided that the real property securing the Mortgage Loans represented by that Standard Security is of the type described in such section of the Code. o A Standard Security owned by a real estate investment trust will be considered to represent "real estate assets" within the meaning of Code Section 856(c)(4)(A) to the extent that the assets of the related Grantor Trust Fund consist of qualified assets, and interest income on such assets will be considered "interest on obligations secured by mortgages on real property" to such extent within the meaning of Code Section 856(c)(3)(B). o A Standard Security owned by a REMIC will be considered to represent an "obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property" within the meaning of Code Section 860G(a)(3)(A) to the extent that the assets of the related Grantor Trust Fund consist of "qualified mortgages" within the meaning of Code Section 860G(a)(3). An issue arises as to whether Buydown Mortgage Loans may be characterized in their entirety under the Code provisions cited in the first two bullet points above or whether the amount qualifying for such treatment must be reduced by the amount of the Buydown Funds. There is indirect authority supporting treatment of an investment in a Buydown Mortgage Loan as entirely secured by real property if the fair market value of the real property securing the loan exceeds the principal amount of the loan at the time of issuance or acquisition, as the case may be. There is no assurance that the treatment described above is proper. Accordingly, Securityholders are urged to consult their own tax advisors concerning the effects of such arrangements on the characterization of such Securityholder's investment for federal income tax purposes. 122 Premium and Discount Securityholders are advised to consult with their tax advisors as to the federal income tax treatment of premium and discount arising either upon initial acquisition of Standard Securities or thereafter. Premium The treatment of premium incurred upon the purchase of a Standard Security will be determined generally as described above under "--REMICs--Taxation of Owners of Residual Securities--Premium." The rules allowing for the amortization of premium are available with respect to Mortgage Loans originated after September 27, 1985. Original Issue Discount The original issue discount rules of Code Section 1271 through 1275 will be applicable to a Securityholder's interest in those Mortgage Loans as to which the conditions for the application of those sections are met. Rules regarding periodic inclusion of original issue discount income generally are applicable to mortgages originated after March 2, 1984. Under the OID Regulations, original issue discount could arise by the charging of points by the originator of the mortgages in an amount greater than the statutory de minimis exception, including a payment of points that is currently deductible by the borrower under applicable Code provisions or, under certain circumstances, by the presence of "teaser" rates on the Mortgage Loans. See "--Stripped Securities" below regarding original issue discount on Stripped Securities. Original issue discount generally must be reported as ordinary gross income as it accrues under a constant interest method that takes into account the compounding of interest, in advance of the cash attributable to such income. Generally no prepayment assumption will be assumed for purposes of such accrual. However, Code Section 1272 provides for a reduction in the amount of original issue discount includable in the income of a holder of an obligation that acquires the obligation after its initial issuance at a price greater than the sum of the original issue price and the previously accrued original issue discount, less prior payments of principal. Accordingly, if such Mortgage Loans acquired by a Securityholder are purchased at a price equal to the then unpaid principal amount of such Mortgage Loans, no original issue discount attributable to the difference between the issue price and the original principal amount of such Mortgage Loans (i.e., points) will be includable by such holder. Market Discount Securityholders also will be subject to the market discount rules to the extent that the conditions for application of those sections are met. Market discount on the Mortgage Loans will be determined and will be reported as ordinary income generally in the manner described above under "--REMICs--Taxation of Owners of Regular Securities--Market Discount," except that the ratable accrual methods described therein will not apply. Rather, the holder will accrue market discount pro rata over the life of the Mortgage Loans, unless the constant yield method is elected. Generally no prepayment assumption will be assumed for purposes of such accrual. Recharacterization of Servicing Fees If the servicing fees paid to a Servicer were deemed to exceed reasonable servicing compensation, the amount of such excess would represent neither income nor a deduction to Securityholders. In this regard, there are no authoritative guidelines for federal income tax purposes as to either the maximum amount of servicing compensation that may be considered reasonable in the context of this or similar transactions or whether, in the case of Standard Securities, the reasonableness of servicing compensation should be determined on a weighted average or loan-by-loan basis. If a loan-by-loan basis is appropriate, the likelihood that such amount would exceed reasonable servicing compensation as to some of the Mortgage Loans would be increased. IRS guidance indicates that a servicing fee in excess of reasonable compensation ("excess servicing") will cause the Mortgage Loans to be treated under the "stripped bond" rules. Such guidance provides safe harbors for servicing deemed to be reasonable and requires taxpayers to demonstrate that the value of servicing fees in excess of such amounts is not greater than the value of the services provided. Accordingly, if the IRS's approach is upheld, a Servicer who receives a servicing fee in excess of such amounts would be viewed as retaining an ownership interest in a portion of the interest payments on the Mortgage Loans. 123 Under the rules of Code Section 1286, the separation of ownership of the right to receive some or all of the interest payments on an obligation from the right to receive some or all of the principal payments on the obligation would result in treatment of such Mortgage Loans as "stripped coupons" and "stripped bonds." Subject to the de minimis rule discussed below under "Stripped Securities," each stripped bond or stripped coupon could be considered for this purpose as a non-interest bearing obligation issued on the date of issue of the Standard Securities, and the original issue discount rules of the Code would apply to the holder thereof. While Securityholders would still be treated as owners of beneficial interests in a grantor trust for federal income tax purposes, the corpus of such trust could be viewed as excluding the portion of the Mortgage Loans the ownership of which is attributed to the Servicer, or as including such portion as a second Class of equitable interest. Applicable Treasury regulations treat such an arrangement as a fixed investment trust, since the multiple Classes of trust interests should be treated as merely facilitating direct investments in the trust assets and the existence of multiple Classes of ownership interests is incidental to that purpose. In general, such a recharacterization should not have any significant effect upon the timing or amount of income reported by a Securityholder, except that the income reported by a cash method holder may be slightly accelerated. See "--Stripped Securities" below for a further description of the federal income tax treatment of stripped bonds and stripped coupons. Sale or Exchange of Standard Securities Upon sale or exchange of a Standard Securities, a Securityholder will recognize gain or loss equal to the difference between the amount realized on the sale and its aggregate adjusted basis in the Mortgage Loans and other assets represented by the Security. In general, the aggregate adjusted basis will equal the Securityholder's cost for the Standard Security, exclusive of accrued interest, increased by the amount of any income previously reported with respect to the Standard Security and decreased by the amount of any losses previously reported with respect to the Standard Security and the amount of any distributions (other than accrued interest) received thereon. Except as provided above with respect to market discount on any Mortgage Loans, and except for certain financial institutions subject to the provisions of Code Section 582(c), any such gain or loss generally would be capital gain or loss if the Standard Security was held as a capital asset. However, gain on the sale of a Standard Security will be treated as ordinary income (i) if a Standard Security is held as part of a "conversion transaction" as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the Securityholder's net investment in the conversion transaction at 120% of the appropriate applicable Federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as part of such transaction or (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates. Long-term capital gains of certain noncorporate taxpayers generally are subject to a lower maximum tax rate than ordinary income or short-term capital gains of such taxpayers for property held for more than one year. The maximum tax rate for corporations currently is the same with respect to both ordinary income and capital gains. Stripped Securities General Pursuant to Code Section 1286, the separation of ownership of the right to receive some or all of the principal payments on an obligation from ownership of the right to receive some or all of the interest payments results in the creation of "stripped bonds" with respect to principal payments and "stripped coupons" with respect to interest payments. For purposes of this discussion, Securities that are subject to those rules will be referred to as "Stripped Securities." The Securities will be subject to those rules if (i) the Depositor or any of its affiliates retains (for its own account or for purposes of resale), in the form of Fixed Retained Yield or otherwise, an ownership interest in a portion of the payments on the Mortgage Loans, (ii) the Depositor or any of its affiliates is treated as having an ownership interest in the Mortgage Loans to the extent it is paid (or retains) servicing compensation in an amount greater than reasonable consideration for servicing the Mortgage Loans (see "--Standard Securities--Recharacterization of Servicing Fees" above), and (iii) a Class of Securities are issued in two or more Classes or subclasses representing the right to non-pro-rata percentages of the interest and principal payments on the Mortgage Loans. 124 In general, a holder of a Stripped Security will be considered to own "stripped bonds" with respect to its pro rata share of all or a portion of the principal payments on each Mortgage Loan and/or "stripped coupons" with respect to its pro rata share of all or a portion of the interest payments on each Mortgage Loan, including the Stripped Security's allocable share of the servicing fees paid to a Servicer, to the extent that such fees represent reasonable compensation for services rendered. See the discussion above under "--Standard Securities--Recharacterization of Servicing Fees." Although not free from doubt, for purposes of reporting to Stripped Securityholders, the servicing fees will be allocated to the Classes of Stripped Securities in proportion to the distributions to such Classes for the related period or periods. The holder of a Stripped Security generally will be entitled to a deduction each year in respect of the servicing fees, as described above under "--Standard Securities--General," subject to the limitation described therein. Code Section 1286 treats a stripped bond or a stripped coupon generally as an obligation issued at an original issue discount on the date that such stripped interest is purchased. Although the treatment of Stripped Securities for federal income tax purposes is not clear in certain respects, particularly where such Stripped Securities are issued with respect to a Mortgage Pool containing variable-rate Mortgage Loans, the Depositor has been advised by counsel that (i) the Grantor Trust Fund will be treated as a grantor trust under subpart E, part I of subchapter J of the Code and not as an association taxable as a corporation or a "taxable mortgage pool" within the meaning of Code Section 7701(i), and (ii) each Stripped Security should be treated as a single installment obligation for purposes of calculating original issue discount and gain or loss on disposition. This treatment is based on the interrelationship of Code Section 1286, Code Sections 1272 through 1275, and the OID Regulations. Although it is possible that computations with respect to Stripped Securities could be made in one of the ways described below under "--Possible Alternative Characterizations," the OID Regulations state, in general, that two or more debt instruments issued by a single issuer to a single investor in a single transaction should be treated as a single debt instrument. Accordingly, for original issue discount purposes, all payments on any Stripped Securities should be aggregated and treated as though they were made on a single debt instrument. The Pooling and Servicing Agreement will require that the Securities Administrator make and report all computations described below using this aggregate approach, unless substantial legal authority requires otherwise. Furthermore, Treasury regulations provide for treatment of a Stripped Security as a single debt instrument issued on the date it is purchased for purposes of calculating any original issue discount. In addition, under such regulations, a Stripped Security that represents a right to payments of both interest and principal may be viewed either as issued with original issue discount or market discount (as described below), at a de minimis original issue discount, or, presumably, at a premium. This treatment indicates that the interest component of such a Stripped Security would be treated as qualified stated interest under the OID Regulations, assuming it is not an interest-only or super-premium Stripped Security. Further, these regulations provide that the purchaser of such a Stripped Security will be required to account for any discount as market discount rather than original issue discount if either (i) the initial discount with respect to the Stripped Security was treated as zero under the de minimis rule, or (ii) no more than 100 basis points in excess of reasonable servicing is stripped off the related Mortgage Loans. Any such market discount would be reportable as described above under "--REMICs--Taxation of Owners of Regular Securities--Market Discount," without regard to the de minimis rule therein, assuming that a prepayment assumption is employed in such computation. In light of the application of Code Section 1286, a Beneficial Owner of a Stripped Security generally will be required to compute accruals of original issue discount based on its yield, possibly taking into account its own prepayment assumption. The information necessary to perform the related calculations for information reporting purposes, however, generally will not be available to the Securities Administrator. Accordingly, any information reporting provided by the Securities Administrator with respect to these Stripped Securities, which information will be based on pricing information as of the Closing Date, will largely fail to reflect the accurate accruals of original issue discount for these securities. Prospective investors therefore should be aware that the timing of accruals of original issue discount applicable to a Stripped Security generally will be different than that reported to Securityholders and the Internal Revenue Service. You should consult your own tax advisor regarding your obligation to compute and include in income the correct amount of original issue discount accruals and any possible tax consequences to you if you should fail to do so. The holder of a Stripped Security will be treated as owning an interest in each of the Mortgage Loans held by the Grantor Trust Fund and will recognize an appropriate share of the income and expenses associated with the 125 Mortgage Loans. Accordingly, an individual, trust or estate that holds a Stripped Security directly or through a pass-through entity will be subject to the limitations on deductions imposed by Code Sections 67 and 68. A holder of a Stripped Security, particularly any Class of a Series which is a Subordinated Security, may deduct losses incurred with respect to the Stripped Security as described above under "--Standard Securities--General." Status of Stripped Securities No specific legal authority exists as to whether the character of the Stripped Securities, for federal income tax purposes, will be the same as that of the Mortgage Loans. Although the issue is not free from doubt, counsel has advised the Depositor that, except with respect to a Trust Fund consisting of Unsecured Home Improvement Loans, Stripped Securities owned by applicable holders should be considered to represent "real estate assets" within the meaning of Code Section 856(c)(4)(A), "obligation[s] . . . principally secured by an interest in real property which is . . . residential real estate" within the meaning of Code Section 860G(a)(3)(A), and "loans . . . secured by an interest in real property" within the meaning of Code Section 7701(a)(19)(C)(v), and interest (including original issue discount) income attributable to Stripped Securities should be considered to represent "interest on obligations secured by mortgages on real property" within the meaning of Code Section 856(c)(3)(B), provided that in each case the Mortgage Loans and interest on such Mortgage Loans qualify for such treatment. The application of such Code provisions to Buydown Mortgage Loans is uncertain. See "--Standard Securities--Tax Status" above. Taxation of Stripped Securities Original Issue Discount Except as described above under "--General," each Stripped Security will be considered to have been issued at an original issue discount for federal income tax purposes. Original issue discount with respect to a Stripped Security must be included in ordinary income as it accrues, in accordance with a constant yield method that takes into account the compounding of interest, which may be prior to the receipt of the cash attributable to such income. Based in part on the issue discount required to be included in the income of a holder of a Stripped Security (referred to in this discussion as a "Stripped Securityholder") in any taxable year likely will be computed generally as described above under "--REMICs--Taxation of Owner of Regular Securities--Original Issue Discount" and "--Variable Rate Regular Securities." However, with the apparent exception of a Stripped Security qualifying as a market discount obligation as described above under "--General," the issue price of a Stripped Security will be the purchase price paid by each holder thereof, and the stated redemption price at maturity will include the aggregate amount of the payments, other than qualified stated interest, to be made on the Stripped Security to such Securityholder, presumably under the Prepayment Assumption. If the Mortgage Loans prepay at a rate either faster or slower than that under the Prepayment Assumption, a Securityholder's recognition of original issue discount will be either accelerated or decelerated and the amount of such original issue discount will be either increased or decreased depending on the relative interests in principal and interest on each Mortgage Loan represented by such Securityholder's Stripped Security. While the matter is not free from doubt, the holder of a Stripped Security should be entitled in the year that it becomes certain (assuming no further prepayments) that the holder will not recover a portion of its adjusted basis in such Stripped Security to recognize a loss (which may be a capital loss) equal to such portion of unrecoverable basis. As an alternative to the method described above, the fact that some or all of the interest payments with respect to the Stripped Securities will not be made if the Mortgage Loans are prepaid could lead to the interpretation that such interest payments are "contingent" within the meaning of the OID Regulations. The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to prepayable securities such as the Stripped Securities. However, if final regulations dealing with contingent interest with respect to the Stripped Securities apply the same principles as the OID Regulations, such regulations may lead to different timing of income inclusion that would be the case under the OID Regulations. Furthermore, application of such principles could lead to the characterization of gain on the sale of contingent interest Stripped Securities as ordinary income. Investors should consult their tax advisors regarding the appropriate tax treatment of Stripped Securities. Sale or Exchange of Stripped Securities 126 Sale or exchange of a Stripped Security prior to its maturity will result in gain or loss equal to the difference, if any, between the amount received and the Securityholder's adjusted basis in such Stripped Security, as described above under "--REMICs--Taxation of Owners of Regular Securities--Sale or Exchange of Regular Securities." Gain or loss from the sale or exchange of a Stripped Security generally will be capital gain or loss to the Securityholder if the Stripped Security is held as a "capital asset" within the meaning of Code Section 1221, and will be long-term or short-term depending on whether the Stripped Security has been held for the long-term capital gain holding period (currently, more than one year). To the extent that a subsequent purchaser's purchase price is exceeded by the remaining payments on the Stripped Securities, such subsequent purchaser will be required for federal income tax purposes to accrue and report such excess as if it were original issue discount in the manner described above. It is not clear for this purpose whether the assumed prepayment rate that is to be used in the case of a Securityholder other than an original Securityholder should be the Prepayment Assumption or a new rate based on the circumstances at the date of subsequent purchase. Purchase of More Than One Class of Stripped Securities When an investor purchases more than one Class of Stripped Securities, it is currently unclear whether for federal income tax purposes such Classes of Stripped Securities should be treated separately or aggregated for purposes of the rules described above. Possible Alternative Characterization The characterizations of the Stripped Securities discussed above are not the only possible interpretations of the applicable Code provisions. For example, the Securityholder may be treated as the owner of (i) one installment obligation consisting of such Stripped Security's pro rata share of the payments attributable to principal on each Mortgage Loan and a second installment obligation consisting of such Stripped Security's pro rata share of the payments attributable to interest on each Mortgage Loan, (ii) as many stripped bonds or stripped coupons as there are scheduled payments of principal and/or interest on each Mortgage Loan, or (iii) a separate installment obligation for each Mortgage Loan, representing the Stripped Security's pro rata share of payments of principal and/or interest to be made with respect thereto. Alternatively, the holder of one or more Classes of Stripped Securities may be treated as the owner of a pro rata fractional undivided interest in each Mortgage Loan to the extent that such Stripped Security, or Classes of Stripped Securities in the aggregate, represent the same pro rata portion of principal and interest on each such Mortgage Loan, and a stripped bond or stripped coupon (as the case may be), treated as an installment obligation or contingent payment obligation, as to the remainder. Treasury regulations regarding original issue discount on stripped obligations make the foregoing interpretations less likely to be applicable. The preamble to such regulations states that they are premised on the assumption that an aggregation approach is appropriate for determining whether original issue discount on a stripped bond or stripped coupon is de minimis, and solicits comments on appropriate rules for aggregating stripped bonds and stripped coupons under Code Section 1286. Because of these possible varying characterizations of Stripped Securities and the resultant differing treatment of income recognition, Securityholders are urged to consult their own tax advisors regarding the proper treatment of Stripped Securities for federal income tax purposes. Reporting Requirements and Backup Withholding The Securities Administrator will furnish, within a reasonable time after the end of each calendar year, to each Securityholder at any time during such year, such information (prepared on the basis described above) as is necessary to enable such Securityholder to prepare its federal income tax returns. Such information will include the amount of original issue discount accrued on Securities held by persons other than Securityholders exempted from the reporting requirements. However, the amount required to be reported by the Securities Administrator may not be equal to the proper amount of original issue discount required to be reported as taxable income by a Securityholder, other than an original Securityholder that purchased at the issue price. In particular, in the case of Stripped Securities, such reporting will be based upon a representative initial offering price of each Class of Stripped Securities. The Securities Administrator will also file such original issue discount information with the IRS. If a Securityholder fails to supply an accurate taxpayer identification number or if the Secretary of the Treasury determines that a Securityholder has not reported all interest and dividend income required to be shown on his 127 federal income tax return, backup withholding may be required in respect of any reportable payments, as described above under "--REMICs--Taxation of Certain Foreign Investors--Backup Withholding." On January 24, 2006, the IRS published final regulations which establish a reporting framework for interests in "widely held fixed investment trusts" and place the responsibility of reporting on the person in the ownership chain who holds an interest for a Beneficial Owner. A widely-held fixed investment trust is defined as an arrangement classified as a "trust" under Treasury Regulation Section 301.7701-4(c), in which any interest is held by a middleman, which includes, but is not limited to (i) a custodian of a person's account, (ii) a nominee and (iii) a broker holding an interest for a customer in street name. The Securities Administrator, or its designated agent, will be required to calculate and provide information to requesting persons with respect to the Trust Fund in accordance with these new regulations beginning with respect to the 2007 calendar year. The Securities Administrator (or its designated agent), or the applicable middleman (in the case of interests held through a middleman), will be required to file information returns with the IRS and provide tax information statements to Securityholders in accordance with these new regulations after December 31, 2007. Taxation of Certain Foreign Investors To the extent that a Security evidences ownership in Mortgage Loans that are issued on or before July 18, 1984, interest or original issue discount paid by the person required to withhold tax under Code Section 1441 or 1442 to nonresident aliens, foreign corporations, or other Non-U.S. Persons generally will be subject to 30% United States withholding tax, or such lower rate as may be provided for interest by an applicable tax treaty. Accrued original issue discount recognized by the Securityholder on the sale or exchange of such a Security also will be subject to federal income tax at the same rate. Treasury regulations provide that interest or original issue discount paid by the Trustee or other withholding agent to a Non-U.S. Holder evidencing ownership interest in Mortgage Loans issued after July 18, 1984 will be "portfolio interest" and will be treated in the manner, and such persons will be subject to the same certification requirements, described above under "--REMICs--Taxation of Certain Foreign Investors--Regular Securities." Partnership Trust Funds Classification of Partnership Trust Funds With respect to each Series of Partnership Securities or Debt Securities, Cadwalader, Wickersham & Taft LLP will deliver its opinion that the Trust Fund will not be a taxable mortgage pool or an association (or publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumption that the terms of the applicable Agreement and related documents will be complied with, and on counsel's conclusion that the nature of the income of the Trust Fund will exempt it from the rule that certain publicly traded partnerships are taxable as corporations. Characterization of Investments in Partnership Securities and Debt Securities For federal income tax purposes, (i) Partnership Securities and Debt Securities held by a thrift institution taxed as a domestic building and loan association will not constitute "loans . . . secured by an interest in real property which is . . . residential real property" within the meaning of Code Section 7701(a)(19)(C)(v) and (ii) interest on Debt Securities held by a real estate investment trust will not be treated as "interest on obligations secured by mortgages on real property or on interests in real property" within the meaning of Code Section 856(c)(3)(B), and Debt Securities held by a real estate investment trust will not constitute "real estate assets" within the meaning of Code Section 856(c)(4)(A), but Partnership Securities held by a real estate investment trust will qualify under those sections based on the real estate investments trust's proportionate interest in the assets of the Partnership Trust Fund qualifying for such treatments based on capital accounts. 128 Taxation of Debt Securityholders Treatment of the Debt Securities as Indebtedness The Depositor will agree, and the Securityholders will agree by their purchase of Debt Securities, to treat the Debt Securities as debt for federal income tax purposes. No regulations, published rulings, or judicial decisions exist that discuss the characterization for federal income tax purposes of securities with terms substantially the same as the Debt Securities. However, with respect to each Series of Debt Securities, Cadwalader, Wickersham & Taft LLP will deliver its opinion that the Debt Securities will be classified as indebtedness for federal income tax purposes. The discussion below assumes this characterization of the Debt Securities is correct. If, contrary to the opinion of counsel, the IRS successfully asserted that the Debt Securities were not debt for federal income tax purposes, the Debt Securities might be treated as equity interests in the Partnership Trust, and the timing and amount of income allocable to holders of such Debt Securities may be different than as described in the following paragraph. Debt Securities generally will be subject to the same rules of taxation as Regular Securities issued by a REMIC, as described above, except that (i) income reportable on Debt Securities is not required to be reported under the accrual method unless the holder otherwise uses the accrual method and (ii) the special rule treating a portion of the gain on sale or exchange of a Regular Security as ordinary income is inapplicable to Debt Securities. See "--REMICs --Taxation of Owners of Regular Securities" and "--Sale or Exchange of Regular Securities." Taxation of Owners of Partnership Securities Treatment of the Partnership Trust Fund as a Partnership If so specified in the applicable prospectus supplement, the Depositor will agree, and the Securityholders will agree by their purchase of Securities, to treat the Partnership Trust Fund as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Partnership Trust Fund, the partners of the partnership being the Securityholders (including the Depositor), and the Debt Securities (if any) being debt of the partnership. However, the proper characterization of the arrangement involving the Partnership Trust Fund, the Partnership Securities, the Debt Securities, and the Depositor is not clear, because there is no authority on transactions closely comparable to that contemplated herein. A variety of alternative characterizations are possible. For example, because one or more of the Classes of Partnership Securities have certain features characteristic of debt, the Partnership Securities might be considered debt of the Depositor or the Partnership Trust Fund. Any such characterization would not result in materially adverse tax consequences to Securityholders as compared to the consequences from treatment of the Partnership Securities as equity in a partnership, described below. The following discussion assumes that the Partnership Securities represent equity interests in a partnership. Partnership Taxation As a partnership, the Partnership Trust Fund will not be subject to federal income tax. Rather, each Securityholder will be required to separately take into account such holder's allocated share of income, gains, losses, deductions and credits of the Partnership Trust Fund. It is anticipated that the Partnership Trust Fund's income will consist primarily of interest earned on the Mortgage Loans (including appropriate adjustments for market discount, original issue discount and bond premium) as described above under "--Grantor Trust Funds-- Standard Securities--General" and "--Premium and Discount") and any gain upon collection or disposition of Mortgage Loans. The Partnership Trust Fund's deductions will consist primarily of interest accruing with respect to the Debt Securities, servicing and other fees, and losses or deductions upon collection or disposition of Debt Securities. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (here, the Agreements and related documents). The applicable Agreement will provide, in general, that the Securityholders will be allocated taxable income of the Partnership Trust Fund for each Collection Period equal to the sum of (i) the interest that accrues on the Partnership Securities in accordance with 129 their terms for such Collection Period, including interest accruing at the applicable pass-through rate for such Collection Period and interest on amounts previously due on the Partnership Securities but not yet distributed; (ii) any Partnership Trust Fund income attributable to discount on the Mortgage Loans that corresponds to any excess of the principal amount of the Partnership Securities over their initial issue price; and (iii) any other amounts of income payable to the Securityholders for such Collection Period. Such allocation will be reduced by any amortization by the Partnership Trust Fund of premium on Mortgage Loans that corresponds to any excess of the issue price of Partnership Securities over their principal amount. All remaining taxable income of the Partnership Trust Fund will be allocated to the Depositor. Based on the economic arrangement of the parties, this approach for allocating Partnership Trust Fund income should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Securityholders. Moreover, even under the foregoing method of allocation, Securityholders may be allocated income equal to the entire pass-through rate plus the other items described above even though the Trust Fund might not have sufficient cash to make current cash distributions of such amount. Thus, cash basis holders will in effect be required to report income from the Partnership Securities on the accrual basis and Securityholders may become liable for taxes on Partnership Trust Fund income even if they have not received cash from the Partnership Trust Fund to pay such taxes. Part or all of the taxable income allocated to a Securityholder that is a pension, profit sharing or employee benefit plan or other tax-exempt entity (including an individual retirement account) may constitute "unrelated business taxable income" generally taxable to such a holder under the Code. A share of expenses of the Partnership Trust Fund (including fees of the Servicer but not interest expense) allocable to an individual, estate or trust Securityholder would be miscellaneous itemized deductions subject to the limitations described above under "--Grantor Trust Funds--Standard Securities--General". Accordingly, such deductions might be disallowed to the individual in whole or in part and might result in such holder being taxed on an amount of income that exceeds the amount of cash actually distributed to such holder over the life of the Partnership Trust Fund. Discount income or premium amortization with respect to each Mortgage Loan would be calculated in a manner similar to the description above under "--Grantor Trust Funds--Standard Securities--General" and "--Premium and Discount." Notwithstanding such description, it is intended that the Partnership Trust Fund will make all tax calculations relating to income and allocations to Securityholders on an aggregate basis with respect to all Mortgage Loans held by the Partnership Trust Fund rather than on a Mortgage Loan-by-Mortgage Loan basis. If the IRS were to require that such calculations be made separately for each Mortgage Loan, the Partnership Trust Fund might be required to incur additional expense, but it is believed that there would not be a material adverse effect on Securityholders. Discount and Premium It is not anticipated that the Mortgage Loans will have been issued with original issue discount and, therefore, the Partnership Trust Fund should not have original issue discount income. However, the purchase price paid by the Partnership Trust Fund for the Mortgage Loans may be greater or less than the remaining principal balance of the Mortgage Loans at the time of purchase. If so, the Mortgage Loans will have been acquired at a premium or discount, as the case may be. See "Grantor Trust Funds--Standard Securities--Premium and Discount." (As indicated above, the Partnership Trust Fund will make this calculation on an aggregate basis, but might be required to recompute it on a Mortgage Loan-by-Mortgage Loan basis.) If the Partnership Trust Fund acquires the Mortgage Loans at a market discount or premium, the Partnership Trust Fund will elect to include any such discount in income currently as it accrues over the life of the Mortgage Loans or to offset any such premium against interest income on the Mortgage Loans. As indicated above, a portion of such market discount income or premium deduction may be allocated to Securityholders. Section 708 Termination Under Section 708 of the Code, the Partnership Trust Fund will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Partnership Trust Fund are sold or exchanged within a 12-month period. If such a termination occurs, it would cause a deemed contribution of the assets of a 130 Partnership Trust Fund (the "old partnership") to a new Partnership Trust Fund (the "new partnership") in exchange for interests in the new partnership. Such interests would be deemed distributed to the partners of the old partnership in liquidation thereof, which would not constitute a sale or exchange. The Partnership Trust Fund will not comply with certain technical requirements that might apply when such a constructive termination occurs. As a result, the Partnership Trust Fund may be subject to certain tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Partnership Trust Fund might not be able to comply due to lack of data. Disposition of Securities Generally, capital gain or loss will be recognized on a sale of Partnership Securities in an amount equal to the difference between the amount realized and the seller's tax basis in the Partnership Securities sold. A Securityholder's tax basis in an Partnership Security will generally equal the holder's cost increased by the holder's share of Partnership Trust Fund income (includable in income) and decreased by any distributions received with respect to such Partnership Security. In addition, both the tax basis in the Partnership Securities and the amount realized on a sale of an Partnership Security would include the holder's share of the Debt Securities and other liabilities of the Partnership Trust Fund. A holder acquiring Partnership Securities at different prices may be required to maintain a single aggregate adjusted tax basis in such Partnership Securities, and, upon sale or other disposition of some of the Partnership Securities, allocate a portion of such aggregate tax basis to the Partnership Securities sold (rather than maintaining a separate tax basis in each Partnership Security for purposes of computing gain or loss on a sale of that Partnership Security). Any gain on the sale of a Partnership Security attributable to the holder's share of unrecognized accrued market discount on the Mortgage Loans would generally be treated as ordinary income to the holder and would give rise to special tax reporting requirements. The Partnership Trust Fund does not expect to have any other assets that would give rise to such special reporting considerations. Thus, to avoid those special reporting requirements, the Partnership Trust Fund will elect to include market discount in income as it accrues. If a Securityholder is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the Partnership Securities that exceeds the aggregate cash distributions with respect thereto, such excess will generally give rise to a capital loss upon the retirement of the Partnership Securities. Allocations Between Transferors and Transferees In general, the Partnership Trust Fund's taxable income and losses will be determined each Collection Period and the tax items for a particular Collection Period will be apportioned among the Securityholders in proportion to the principal amount of Partnership Securities owned by them as of the close of the last day of such Collection Period. As a result, a holder purchasing Partnership Securities may be allocated tax items (which will affect its tax liability and tax basis) attributable to periods before the actual transaction. The use of such a Collection Period convention may not be permitted by existing regulations. If a Collection Period convention is not allowed (or only applies to transfers of less than all of the partner's interest), taxable income or losses of the Partnership Trust Fund might be reallocated among the Securityholders. The Depositor will be authorized to revise the Partnership Trust Fund's method of allocation between transferors and transferees to conform to a method permitted by future regulations. Section 731 Distributions In the case of any distribution to a Securityholder, no gain will be recognized to that Securityholder to the extent that the amount of any money distributed with respect to such Security does not exceed the adjusted basis of such Securityholder's interest in the Security. To the extent that the amount of money distributed exceeds such Securityholder's adjusted basis, gain will be currently recognized. In the case of any distribution to a Securityholder, no loss will be recognized except upon a distribution in liquidation of a Securityholder's interest. Any gain or loss recognized by a Securityholder will be capital gain or loss. 131 Section 754 Election In the event that a Securityholder sells its Partnership Securities at a profit (loss), the purchasing Securityholder will have a higher (lower) basis in the Partnership Securities than the selling Securityholder had. The tax basis of the Partnership Trust Fund's assets would not be adjusted to reflect that higher (or lower) basis unless the Partnership Trust Fund were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Partnership Trust Fund will not make such an election. As a result, a Securityholder might be allocated a greater or lesser amount of Partnership Trust Fund income than would be appropriate based on its own purchase price for Partnership Securities. Administrative Matters The Securities Administrator is required to keep or have kept complete and accurate books of the Partnership Trust Fund. Such books will be maintained for financial reporting and tax purposes on an accrual basis and the fiscal year of the Partnership Trust Fund will be the calendar year. The Securities Administrator will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Partnership Trust Fund and will report each Securityholder's allocable share of items of Partnership Trust Fund income and expense to holders and the IRS on Schedule K-1. The Securities Administrator will provide the Schedule K-1 information to nominees that fail to provide the Partnership Trust Fund with the information statement described below and such nominees will be required to forward such information to the Beneficial Owners of the Partnership Securities. Generally, holders must file tax returns that are consistent with the information return filed by the Partnership Trust Fund or be subject to penalties unless the holder notifies the IRS of all such inconsistencies. Under Section 6031 of the Code, any person that holds Partnership Securities as a nominee at any time during a calendar year is required to furnish the Partnership Trust Fund with a statement containing certain information on the nominee, the Beneficial Owners and the Partnership Securities so held. Such information includes (i) the name, address and taxpayer identification number of the nominee and (ii) as to each Beneficial Owner (x) the name, address and identification number of such person, (y) whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly-owned agency or instrumentality of either of the foregoing, and (z) certain information on Partnership Securities that were held, bought or sold on behalf of such person throughout the year. In addition, brokers and financial institutions that hold Partnership Securities through a nominee are required to furnish directly to the Securities Administrator information as to themselves and their ownership of Partnership Securities. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any such information statement to the Partnership Trust Fund. The information referred to above for any calendar year must be furnished to the Partnership Trust Fund on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Partnership Trust Fund with the information described above may be subject to penalties. The Depositor will be designated as the tax matters partner in the Pooling and Servicing Agreement and, as such, will be responsible for representing the Securityholders in any dispute with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire until three years after the date on which the partnership information return is filed. Any adverse determination following an audit of the return of the Partnership Trust Fund by the appropriate taxing authorities could result in an adjustment of the returns of the Securityholders, and, under certain circumstances, a Securityholder may be precluded from separately litigating a proposed adjustment to the items of the Partnership Trust Fund. An adjustment could also result in an audit of a Securityholder's returns and adjustments of items not related to the income and losses of the Partnership Trust Fund. Tax Consequences to Foreign Securityholders It is not clear whether the Partnership Trust Fund would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Non-U.S. Holders, because there is no clear authority dealing with that issue under facts substantially similar to those described herein. Although it is not expected that the Partnership Trust Fund would be engaged in a trade or business in the United States for such purposes, if so specified in the applicable prospectus supplement, the Partnership Trust Fund may withhold as if it were so engaged in order to protect the Partnership Trust Fund from possible adverse consequences of a failure to 132 withhold. The Partnership Trust Fund may withhold on the portion of its taxable income that is allocable to Securityholders who are Non-U.S. Holder pursuant to Section 1446 of the Code, as if such income were effectively connected to a U.S. trade or business, at the maximum tax rate for corporations or individuals, as applicable. Amounts withheld will be deemed distributed to the Securityholders who are Non-U.S. Holders. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Partnership Trust Fund to change its withholding procedures. In determining a holder's withholding status, the Partnership Trust Fund may rely on IRS Form W-8BEN, IRS Form W-9 or the holder's certification of nonforeign status signed under penalties of perjury. To the extent specified in the applicable prospectus supplement, (i) each Non-U.S. Holder might be required to file a U.S. individual or corporate income tax return (including, in the case of a corporation, the branch profits tax) on its share of the Partnership Trust Fund's income; (ii) each Non-U.S. Holder must obtain a taxpayer identification number from the IRS and submit that number to the Partnership Trust Fund on Form W-8BEN in order to assure appropriate crediting of the taxes withheld; and (iii) a Non-U.S. Holder generally would be entitled to file with the IRS a claim for refund with respect to taxes withheld by the Partnership Trust Fund, taking the position that no taxes were due because the Partnership Trust Fund was not engaged in a U.S. trade or business. Notwithstanding the foregoing, interest payments made (or accrued) to a Securityholder who is a Non-U.S. Holder may be considered guaranteed payments to the extent such payments are determined without regard to the income of the Partnership Trust Fund. If these interest payments are properly characterized as guaranteed payments, then the interest may not be considered "portfolio interest." As a result, Securityholders who are Non-U.S. Holder may be subject to United States federal income tax and withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant to an applicable treaty. In such case, a Non-U.S. Holder would only be entitled to claim a refund for that portion of the taxes in excess of the taxes that should be withheld with respect to the guaranteed payments. Backup Withholding Distributions made on the Partnership Securities and proceeds from the sale of the Partnership Securities will be subject to a "backup" withholding tax of 28% (increasing to 31% after 2010) if, in general, the Securityholder fails to comply with certain identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING ANY POSSIBLE TAX RETURN DISCLOSURE OBLIGATION WITH RESPECT TO THE SECURITIES DISCUSSED HEREIN. THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A SECURITYHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF REMIC SECURITIES, GRANTOR TRUST SECURITIES, PARTNERSHIP SECURITIES AND DEBT SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. STATE AND OTHER TAX CONSEQUENCES In addition to the federal income tax consequences described in "Federal Income Tax Consequences," potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the Securities offered hereunder. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their own tax advisors with respect to the various tax consequences of investments in the Securities offered hereunder. 133 ERISA CONSIDERATIONS General The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on those employee benefit plans to which it applies ("Plans") and on those persons who are fiduciaries with respect to such Plans. The following is a general discussion of such requirements, and certain applicable exceptions to and administrative exemptions from such requirements. For purposes of this discussion, a person investing on behalf of an individual retirement account established under Code Section 408 (an "IRA") is regarded as a fiduciary and the IRA as a Plan. Before purchasing any Securities, a Plan fiduciary should consult with its counsel and determine whether there exists any prohibition to such purchase under the requirements of ERISA, whether any prohibited transaction exemption such as PTE 83-1 or any individual administrative exemption (as described below) applies, including whether the appropriate conditions set forth therein would be met, or whether any statutory prohibited transaction exemption is applicable, and further should consult the applicable prospectus supplement relating to such Series of Securities. Certain Requirements Under ERISA General In accordance with ERISA's general fiduciary standards, before investing in a Security a Plan fiduciary should determine whether to do so is permitted under the governing Plan instruments and is appropriate for the Plan in view of its overall investment policy and the composition and diversification of its portfolio. A Plan fiduciary should especially consider the ERISA requirement of investment prudence and the sensitivity of the return on the Securities to the rate of principal repayments (including prepayments) on the Mortgage Loans, as discussed in "Prepayment and Yield Considerations" herein. Parties in Interest/Disqualified Persons Other provisions of ERISA (and corresponding provisions of the Code) prohibit certain transactions involving the assets of a Plan and persons who have certain specified relationships to the Plan (so-called "parties in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Code). The Depositor, the Securities Administrator, the Servicer, any Master Servicer or the Trustee or certain affiliates thereof might be considered or might become "parties in interest" or "disqualified persons" with respect to a Plan. If so, the acquisition or holding of Securities by or on behalf of such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless an administrative exemption described below or some other exemption is available. Special caution should be exercised before the assets of a Plan (including assets that may be held in an insurance company's separate or general accounts where assets in such accounts may be deemed Plan assets for purposes of ERISA) are used to purchase a Security if, with respect to such assets, the Depositor, the Securities Administrator, the Servicer, any Master Servicer or the Trustee or an affiliate thereof either: (a) has investment discretion with respect to the investment of such assets of such Plan; or (b) has authority or responsibility to give, or regularly gives, investment advice with respect to such assets for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such assets and that such advice will be based on the particular investment needs of the Plan. Delegation of Fiduciary Duty Further, if the assets included in a Trust Fund were deemed to constitute Plan assets, it is possible that a Plan's investment in the Securities might be deemed to constitute a delegation, under ERISA, of the duty to manage Plan assets by the fiduciary deciding to invest in the Securities, and certain transactions involved in the operation of the 134 Trust Fund might be deemed to constitute prohibited transactions under ERISA and the Code. Neither ERISA nor the Code defines the term "plan assets." The U.S. Department of Labor (the "Department") has issued regulations (the "Regulations") concerning whether or not a Plan's assets would be deemed to include an interest in the underlying assets of an entity (such as a Trust Fund) for purposes of the reporting and disclosure and general fiduciary responsibility provisions of ERISA, as well as for the prohibited transaction provisions of ERISA and the Code, if the Plan acquires an "equity interest" (such as a Security) in such an entity. Certain exceptions are provided in the Regulations whereby an investing Plan's assets would be deemed merely to include its interest in the Securities instead of being deemed to include an interest in the assets of a Trust Fund. However, it cannot be predicted in advance nor can there be any continuing assurance whether such exceptions may be met, because of the factual nature of certain of the rules set forth in the Regulations. For example, one of the exceptions in the Regulations states that the underlying assets of an entity will not be considered "plan assets" if less than 25% of the value of any class of equity interests is held by "benefit plan investors," which are defined as Plans, IRAs, and employee benefit plans not subject to ERISA (for example, governmental plans), and any entity whose assets include "plan assets" by reason of benefit plan investment in such entity; this exception is tested immediately after each acquisition of an equity interest in the entity, whether upon initial issuance or in the secondary market. Administrative Exemptions Individual Administrative Exemptions Several underwriters of mortgage-backed securities have applied for and obtained ERISA prohibited transaction exemptions (each, an "Underwriter Exemption") which are in some respects broader than Prohibited Transaction Class Exemption 83-1 (described below). Such exemptions can only apply to mortgage-backed securities which, among other conditions, are sold in an offering with respect to which such underwriter serves as the sole or a managing underwriter, or as a selling or placement agent. If such an Underwriter Exemption might be applicable to a Series of Securities, the applicable prospectus supplement will refer to such possibility. Among the conditions that must be satisfied for an Underwriter Exemption to apply are the following: (i) The acquisition of Securities by a Plan is on terms (including the price for the Securities) that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated party; (ii) The Securities acquired by the Plan have received a rating at the time of such acquisition that is one of the four highest generic rating categories from either Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings ("Fitch"); (iii) The Trustee must not be an affiliate of any other member of the Restricted Group (as defined below) other than an underwriter; (iv) The sum of all payments made to and retained by the underwriter in connection with the distribution of Securities represents not more than reasonable compensation for underwriting the Securities. The sum of all payments made to and retained by the Depositor pursuant to the assignment of the Mortgage Loans to the Trust Fund represents not more than the fair market value of such Mortgage Loans. The sum of all payments made to and retained by the Servicer (and any other servicer) represents not more than reasonable compensation for such person's services under the applicable Agreement and reimbursement of such person's reasonable expenses in connection therewith; and (v) The Plan investing in the Securities is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended (the "Securities Act"). The Trust Fund must also meet the following requirements: (i) the assets of the Trust Fund must consist solely of assets of the type that have been included in other investment pools in the marketplace; 135 (ii) securities in such other investment pools must have been rated in one of the four highest rating categories of S&P, Moody's or Fitch for at least one year prior to the Plan's acquisition of the Securities; and (iii) securities evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan's acquisition of the Securities. It should be noted that in promulgating the Underwriter Exemptions, the Department may not have had under its consideration interests in mortgage pools of the exact nature of some of the Securities in the applicable Series. In addition, any Securities representing a beneficial ownership interest in Revolving Credit Line Loans will not satisfy the general conditions of an Underwriter Exemption. If the conditions to an Underwriter Exemption are met, whether or not a Plan's assets would be deemed to include an ownership interest in the Mortgage Loans in a mortgage pool, the acquisition, holding and resale of the Securities by Plans would be exempt from the prohibited transaction provisions of ERISA and the Code. Moreover, an Underwriter Exemption can provide relief from certain self-dealing/conflict of interest prohibited transactions that may occur if a Plan fiduciary causes a Plan to acquire Securities in a Trust Fund containing Mortgage Loans on which the fiduciary (or its affiliate) is an obligor provided that, among other requirements: (i) in the case of an acquisition in connection with the initial issuance of Securities, at least fifty percent of each Class of Securities in which Plans have invested is acquired by persons independent of the Restricted Group and at least fifty percent of the aggregate interest in the Trust Fund is acquired by persons independent of the Restricted Group (as defined below); (ii) such fiduciary (or its affiliate) is an obligor with respect to five percent or less of the fair market value of the Mortgage Loans contained in the Trust Fund; (iii) the Plan's investment in Securities of any Class does not exceed twenty-five percent of all of the Securities of that Class outstanding at the time of the acquisition and (iv) immediately after the acquisition no more than twenty-five percent of the assets of any Plan with respect to which such person is a fiduciary are invested in Securities representing an interest in one or more trusts containing assets sold or served by the same entity. An Underwriter Exemption does not apply to Plans sponsored by the Depositor, the underwriter specified in the applicable prospectus supplement, the Servicer, the Securities Administrator, any Master Servicer, the Trustee, any insurer, any obligor with respect to Mortgage Loans included in the Trust Fund constituting more than five percent of the aggregate unamortized principal balance of the assets in the Trust Fund, or any affiliate of such parties (the "Restricted Group"). The Underwriter Exemptions were amended to, among other changes, permit the inclusion of a pre-funding account in a trust fund, provided that the following conditions are met: (a) the pre-funding account may not exceed 25% of the total amount of securities being offered; (b) additional obligations purchased generally must meet the same terms and conditions as those of the original obligations used to create the trust fund; (c) the transfer of additional obligations to the trust during the pre-funding period must not result in the securities receiving a lower rating at the termination of the pre-funding period than the rating that was obtained at the time of the initial issuance of the securities; (d) the weighted average interest rate for all of the obligations in the trust at the end of the pre-funding period must not be more than 100 basis points less than the weighted average interest rate for the obligations which were transferred to the trust on the closing date; (e) the characteristics of the additional obligations must be monitored to confirm that they are substantially similar to those which were acquired as of the closing date either by a credit support provider or insurance provider independent of the sponsor or by an independent accountant retained by the sponsor that confirms such conformance in writing; (f) the pre-funding period must be described in the prospectus or private placement memorandum provided to investing plans; and (g) the trustee of the trust must be a substantial financial institution or trust company experienced in trust activities and familiar with its duties, responsibilities and liabilities as a fiduciary under ERISA. Further, the pre-funding period must be a period beginning on the closing date and ending no later than the earliest to occur of (x) the date the amount on deposit in the pre-funding account is less than the minimum dollar amount specified in the applicable agreement; (y) the date on which an event of default occurs under the applicable agreement; or (z) the date which is the later of three months or 90 days after the closing date. It is expected that the Pre-Funding Account will meet all of these requirements. 136 To the extent the Securities are not treated as equity interests for purposes of DOL regulations section 2510.3-101, a Plan's investment in such Securities ("Non-Equity Securities") would not cause the assets included in a related Trust Fund to be deemed Plan assets. However, the Depositor, the Servicer, the Securities Administrator, any Master Servicer, the Trustee, or underwriter may be the sponsor of or investment advisor with respect to one or more Plans. Because such parties may receive certain benefits in connection with the sale of Non-Equity Securities, the purchase of Non-Equity Securities using Plan assets over which any such parties has investment authority might be deemed to be a violation of the prohibited transaction rules of ERISA and the Code for which no exemption may be available. Accordingly, Non-Equity Securities may not be purchased using the assets of any Plan if any of the Depositor, the Servicer, the Securities Administrator, any Master Servicer, the Trustee or underwriter has investment authority with respect to such assets. In addition, certain affiliates of the Depositor might be considered or might become Parties in Interest with respect to a Plan. Also, any holder of Securities, because of its activities or the activities of its respective affiliates, may be deemed to be a Party in Interest with respect to certain Plans, including but not limited to Plans sponsored by such holder. In either case, the acquisition or holding of Non-Equity Securities by or on behalf of such a Plan could be considered to give rise to an indirect prohibited transaction within the meaning of ERISA and the Code, unless it is subject to one or more statutory or administrative exemptions such as Prohibited Transaction Class Exemption ("PTCE") 84-14, which exempts certain transactions effected on behalf of a Plan by a "qualified professional asset manager", PTCE 90-1, which exempts certain transactions involving insurance company pooled separate accounts, PTCE 91-38, which exempts certain transactions involving bank collective investment funds, PTCE 95-60, which exempts certain transactions involving insurance company general accounts, or PTCE 96-23, which exempts certain transactions effected on behalf of a Plan by certain "in-house" asset managers. It should be noted, however, that even if the conditions specified in one or more of these exemptions are met, the scope of relief provided by these exemptions may not necessarily cover all acts that might be construed as prohibited transactions. Any Plan fiduciary which proposes to cause a Plan to purchase Securities should consult with its counsel with respect to the potential applicability of ERISA and the Code to such investment, the availability of the exemptive relief provided in the Underwriter Exemption and the potential applicability of any other prohibited transaction exemption in connection therewith. In particular, a Plan fiduciary which proposes to cause a Plan to purchase Securities representing a beneficial ownership interest in a pool of single-family residential first mortgage loans, a Plan fiduciary should consider the applicability of PTCE 83-1, which provides exemptive relief for certain transactions involving mortgage pool investment trusts. The prospectus supplement with respect to a Series of Securities may contain additional information regarding the application of the Underwriter Exemption, PTCE 83-1 or any other exemption, with respect to the Securities offered thereby. In addition, any Plan fiduciary that proposes to cause a Plan to purchase Strip Securities should consider the federal income tax consequences of such investment. Fiduciaries of plans not subject to ERISA or the Code, such as governmental plans, should consider the application of any applicable federal, state or local law materially similar to the provisions of ERISA or the Code, as well as the need for and the availability of exemptive relief under such applicable law. PTE 83-1 Prohibited Transaction Class Exemption 83-1 for Certain Transactions Involving Mortgage Pool Investment Trusts ("PTE 83-1") permits certain transactions involving the creation, maintenance and termination of certain residential mortgage pools and the acquisition and holding of certain residential mortgage pool pass-through certificates by Plans, whether or not the Plan's assets would be deemed to include an ownership interest in the mortgages in such mortgage pools, and whether or not such transactions would otherwise be prohibited under ERISA. The term "mortgage pool pass-through certificate" is defined in PTE 83-1 as "a certificate representing a beneficial undivided fractional interest in a mortgage pool and entitling the holder of such a certificate to pass-through payment of principal and interest from the pooled mortgage loans, less any fees retained by the pool sponsor." It appears that, for purposes of PTE 83-1, the term "mortgage pool pass-through certificate" would include Securities issued in a single Class or in multiple Classes that evidence the beneficial ownership of both a specified percentage of future interest payments (after permitted deductions) and a specified percentage of future principal payments on a Trust Fund. 137 However, it appears that PTE 83-1 does or might not apply to the purchase and holding of (a) Securities that evidence the beneficial ownership only of a specified percentage of future interest payments (after permitted deductions) on a Trust Fund or only of a specified percentage of future principal payments on a Trust Fund, (b) Residual Securities, (c) Securities evidencing ownership interests in a Trust Fund which includes Mortgage Loans secured by multifamily residential properties or shares issued by cooperative housing corporations, or (d) Securities which are subordinated to other Classes of Securities of such Series. Accordingly, unless exemptive relief other than PTE 83-1 applies, Plans should not purchase any such Securities. PTE 83-1 sets forth "general conditions" and "specific conditions" to its applicability. Section II of PTE 83-1 sets forth the following general conditions to the application of the exemption: (i) the maintenance of a system of insurance or other protection for the pooled mortgage loans or the property securing such loans, and for indemnifying certificateholders against reductions in pass-through payments due to property damage or defaults in loan payments; (ii) the existence of a pool trustee who is not an affiliate of the pool sponsor; and (iii) a requirement that the sum of all payments made to and retained by the pool sponsor, and all funds inuring to the benefit of the pool sponsor as a result of the administration of the mortgage pool, must represent not more than adequate consideration for selling the mortgage loans plus reasonable compensation for services provided by the pool sponsor to the pool. The system of insurance or protection referred to in clause (i) above must provide such protection and indemnification up to an amount not less than the greater of one percent of the aggregate unpaid principal balance of the pooled mortgages or the unpaid principal balance of the largest mortgage in the pool. It should be noted that in promulgating PTE 83-1 (and a predecessor exemption), the Department may not have had under its consideration interests in mortgage pools of the exact nature of some of the Securities in the applicable Series. Exempt Plans Employee benefit plans which are governmental plans (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements. However, such plans may be subject to the provisions of other applicable federal and state law materially similar to the provisions of ERISA or the Code discussed above. Unrelated Business Taxable Income--Residual Securities The purchase of a Residual Security by any employee benefit plan qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a), including most varieties of ERISA Plans, may give rise to "unrelated business taxable income" as described in Code Sections 511-515 and 860E. Further, prior to the purchase of Residual Securities, a prospective transferee may be required to provide an affidavit to a transferor that it is not, nor is it purchasing a Residual Security on behalf of, a "Disqualified Organization," which term as defined above includes certain tax-exempt entities not subject to Code Section 511, such as certain governmental plans, as discussed above under the caption "Federal Income Tax Consequences--REMICS--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities--Disqualified Organizations." Due to the complexity of these rules and the penalties imposed upon persons involved in prohibited transactions, it is particularly important that potential investors who are Plan fiduciaries consult with their counsel regarding the consequences under ERISA of their acquisition and ownership of Securities. The sale of Securities to a Plan is in no respect a representation by the Depositor or the applicable underwriter that this investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that this investment is appropriate for Plans generally or any particular Plan. 138 LEGAL INVESTMENT If so specified in the applicable prospectus supplement, certain Classes of the Securities will constitute "mortgage related securities " for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). Generally, the only Classes of Securities which will qualify as "mortgage related securities" will be those that (i) are rated in one of the two highest rating categories by at least one Rating Agency and (ii) are part of a Series evidencing interests in a Trust Fund consisting of Mortgage Loans originated by certain types of originators specified in SMMEA and secured by first liens on real estate. The appropriate characterization of those Securities not qualifying as "mortgage related securities" for purposes of SMMEA ("Non-SMMEA Securities") under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase such Securities, may be subject to significant interpretive uncertainties. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the Non-SMMEA Securities constitute legal investments for them. Those Classes of Securities qualifying as "mortgage related securities" which qualify as "mortgage related securities" will constitute legal investments for persons, trusts, corporations, partnerships, associations, business trusts and business entities (including depository institutions, insurance companies and pension funds) created pursuant to or existing under the laws of the United States or of any state (including the District of Columbia and Puerto Rico) whose authorized investments are subject to state regulation, to the same extent that, under applicable law, obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof constitute legal investments for such entities. Under SMMEA, a number of states enacted legislation, on or before the October 3, 1991 cut-off for such enactments, limiting to varying extents the ability of certain entities (in particular, insurance companies) to invest in "mortgage related securities" secured by loans on residential, or mixed residential and commercial properties, in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. Pursuant to Section 347 of the Riegle Community Development and Regulatory Improvement Act of 1994, which amended the definition of "mortgage related security" to include, in relevant part, Securities satisfying the rating and qualified originator requirements for "mortgage related securities," but evidencing interests in a Trust Fund consisting, in whole or in part, of first liens on one or more parcels of real estate upon which are located one or more commercial structures, states were authorized to enact legislation, on or before September 23, 2001, specifically referring to Section 347 and prohibiting or restricting the purchase, holding or investment by state-regulated entities in those types of Securities. Accordingly, the investors affected by such legislation will be authorized to invest in the Offered Securities only to the extent provided in such legislation. SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal in mortgage related securities without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in such securities, and national banks may purchase those securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U. S. C. ss.24 (Seventh), subject in each case to such regulations as the applicable federal regulatory authority may prescribe. In this connection, the OCC has amended 12 C. F. R. Part 1 to authorize national banks to purchase and sell for their own account, without limitation as to a percentage of the bank's capital and surplus (but subject to compliance with certain general standards in 12 C. F. R. ss.1.5 concerning "safety and soundness" and retention of credit information), certain "Type IV securities," defined in 12 C. F. R. ss.1.2(m) to include certain "residential mortgage-related securities." As so defined, "residential mortgage-related security" means, in relevant part, "mortgage related security" within the meaning of SMMEA. The National Credit Union Administration ("NCUA" ) has adopted rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in "mortgage related securities," other than stripped mortgage related securities (unless the credit union complies with the requirements of 12 C.F.R. ss.703.16(e) for investing in those securities) and residual interests in mortgage related securities, subject to compliance with general rules governing investment policies and practices; however, credit unions approved for the NCUA's "investment pilot program" under 12 C.F.R. ss. 703.19 may be able to invest in those prohibited forms of securities. The OTS has issued Thrift Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment Securities, and 139 Derivative Activities" and Thrift Bulletin 73a (December 18, 2001), "Investing in Complex Securities," which thrift institutions subject to the jurisdiction of the OTS should consider before investing in any of the Offered Securities. All depository institutions considering an investment in the Offered Securities should review the "Supervisory Policy Statement on Investment Securities and End-User Derivatives Activities" (the "1998 Policy Statement" ) of the Federal Financial Institutions Examination Council ("FFIEC" ), which has been adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and the OTS, effective May 26, 1998, and by the NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general guidelines which depository institutions must follow in managing risks (including market, credit, liquidity, operational (transaction), and legal risks) applicable to all securities (including mortgage pass-through securities and mortgage-derivative products) used for investment purposes. Investors whose investment activities are subject to regulation by federal or state authorities should review rules, policies, and guidelines adopted from time to time by those authorities before purchasing any Class of the Offered Securities, as certain Classes may be deemed unsuitable investments, or may otherwise be restricted, under those rules, policies, or guidelines (in certain instances irrespective of SMMEA). The foregoing does not take into consideration the applicability of statutes, rules, regulations, orders, guidelines, or agreements generally governing investments made by a particular investor, including, but not limited to, "prudent investor" provisions, percentage-of-assets limits, provisions which may restrict or prohibit investment in securities which are not "interest-bearing" or "income-paying," and, with regard to any Class of Offered Securities issued in book-entry form, provisions which may restrict or prohibit investments in securities which are issued in book-entry form. Except as to the status of certain Classes of Offered Securities as "mortgage related securities," no representations are made as to the proper characterization of the Offered Securities for legal investment purposes, financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase any Offered Securities under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Securities) may adversely affect the liquidity of the Offered Securities. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their legal advisors in determining whether and to what extent the Offered Securities constitute legal investments or are subject to investment, capital or other restrictions and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to that investor. PLAN OF DISTRIBUTION The Securities are being offered hereby in Series through one or more of the methods described below. The applicable prospectus supplement for each Series will describe the method of offering being utilized for that Series and will state the public offering or purchase price of the Securities of such Series, or the method by which such price is to be determined, and the net proceeds to the Depositor from such sale. The Securities will be offered through the following methods from time to time and offerings may be made concurrently through more than one of these methods or an offering of a particular Series of Securities may be made through a combination of two or more of these methods: o By negotiated firm commitment underwriting and public re-offering by underwriters specified in the applicable prospectus supplement; o By placements by the Depositor or its affiliates with investors through dealers; o By direct placements by the Depositor or its affiliates with investors, in which event the Depositor will be an underwriter with respect to the Certificates; and 140 o By inclusion as underlying securities backing another series of mortgage pass-through certificates, in which case if the Depositor is the depositor, it will be an underwriter of the underlying securities. If underwriters are used in a sale of any Securities, such Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale or at the time of commitment therefore. Firm commitment underwriting and public reoffering by underwriters may be done through underwriting syndicates or through one or more firms acting alone. The specific managing underwriter or underwriters, if any, with respect to the offer and sale of a particular Series of Securities will be set forth on the cover of the prospectus supplement applicable to such Series and the members of the underwriting syndicate, if any, will be named in such prospectus supplement. The prospectus supplement will describe any discounts and commissions to be allowed or paid by the Depositor to the underwriters, any other items constituting underwriting compensation and any discounts and commissions to be allowed or paid to the dealers. The obligations of the underwriters will be subject to certain conditions precedent. The underwriters with respect to a sale of any Class of Securities will be obligated to purchase all such Securities if any are purchased. The Depositor, and, if specified in the applicable prospectus supplement, the Sponsor, will indemnify the applicable underwriters against certain civil liabilities, including liabilities under the Securities Act. The prospectus supplement with respect to any Series of Securities offered other than through underwriters will contain information regarding the nature of such offering and any agreements to be entered into between the Depositor or its affiliates and dealers and/or the Depositor or its affiliates and purchasers of Securities of such Series. Purchasers of Securities, including dealers, may, depending on the facts and circumstances of such purchases, be deemed to be "underwriters" within the meaning of the Securities Act in connection with reoffers and sales by them of Securities. Securityholders should consult with their legal advisors in this regard prior to any such reoffer or sale. If specified in the prospectus supplement relating to a Series of Securities, the Depositor or any affiliate thereof may purchase some or all of one or more Classes of Securities of such Series from the Depositor (in the case of affiliates) or underwriter or underwriters at a price specified or described in such prospectus supplement. Such purchaser may thereafter from time to time offer and sell, pursuant to this prospectus, some or all of such Securities so purchased directly, through one or more underwriters to be designated at the time of the offering of such Securities or through dealers acting as agent and/or principal. Such offering may be restricted in the manner specified in such prospectus supplement. Such transactions may be effected at market prices prevailing at the time of sale, at negotiated prices or at fixed prices. The underwriters and dealers participating in such purchaser's offering of such Securities may receive compensation in the form of underwriting discounts or commissions from such purchaser and such dealers may receive commissions from the investors purchasing such Securities for whom they may act as agent (which discounts or commissions will not exceed those customary in those types of transactions involved). Any dealer that participates in the distribution of such Securities will be an "underwriter" within the meaning of the Securities Act, and any commissions and discounts received by such dealer and any profit on the resale of such Securities by such dealer will be underwriting discounts and commissions under the Securities Act. USE OF PROCEEDS The net proceeds from the sale of each Series of Securities will be used by the Depositor for the purchase of the Mortgage Loans represented by the Securities of such Series from the Sponsor. It is expected that the Sponsor will use the proceeds from the sale of the Mortgage Loans to the Depositor for its general business purposes, including, without limitation, the origination or acquisition of new mortgage loans and the repayment of borrowings incurred to finance the origination or acquisition of mortgage loans, including the Mortgage Loans underlying the Securities of such Series. 141 LEGAL MATTERS The legality and certain federal income tax consequences to Securityholders of an investment in the Securities of a Series will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP, New York, New York. RATING It is a condition to the issuance of the Securities of any Series offered pursuant to this prospectus and a prospectus supplement that they be rated in one of the four highest categories by at least one nationally recognized statistical rating organization (a "Rating Agency"). A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. Each securities rating should be evaluated independently of any other rating. REPORTS TO SECURITYHOLDERS The Securities Administrator will prepare and make available to the Securityholders of each Series statements containing information with respect to principal and interest payments and the related Issuing Entity, in accordance with Item 1121 of Regulation AB (17 C.F.R. 229.1121) as described under "Description of the Securities--Reports to Securityholders" (the "Monthly Reports"). No information contained in the Monthly Reports will have been examined or reported upon by an independent public accountant. Copies of these Monthly Reports will be filed with the SEC through its EDGAR system located at "http://www.sec.gov" under the name of the related Issuing Entity as an exhibit to the Issuing Entity's monthly distribution reports on Form 10-D for each Series of Securities for so long as the Issuing Entity is subject to the reporting requirement of the Securities Exchange Act of 1934, as amended. In addition, each party to the servicing function for a Series of Securities (generally the Servicer, the Master Servicer (if any), the Securities Administrator and the Custodian) will furnish to the Depositor or Securities Administrator, as applicable, the compliance statements, Assessments of Compliance and Attestation Reports in accordance with Items 1122 and 1123 of Regulation AB (17 C.F.R. 229.1122 and 229.1123) detailed under "Description of the Agreements-Material Terms of the Pooling and Servicing Agreements and the Underlying Servicing Agreements--Evidence as to Compliance." Copies of these statements and reports will be filed with the SEC through its EDGAR system under the name of the related Issuing Entity as an exhibit to the Issuing Entity's annual statement on Form 10-K for each Series of Securities for so long as the Issuing Entity is subject to the reporting requirement of the Securities Exchange Act of 1934, as amended. Copies of the statements provided by any Servicer, the Master Servicer (if any), Securities Administrator and Custodian will be furnished to Securityholders of each Series upon request addressed to the Securities Administrator c/o Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention: Securities Administration Services Manager, telephone number (410) 884-2000. The Securities Administrator intends to make the information contained in the Monthly Reports available via the internet, facsimile and CD-ROM through SecuritiesLink(R) Investor Information Services ("SecuritiesLink(R)"). On occasion, information in the Monthly Reports may be available to any interested investor through SecuritiesLink(R) up to two business days prior to the related Distribution Date, and in that event prior to the Monthly Reports being delivered or made available by the Securities Administrator to Securityholders. The Securities Administrator may make available to any interested investor through SecuritiesLink(R) certain additional information not contained in the Monthly Reports. For further information, please contact SecuritiesLink(R) at 7430 New Technology Way, Frederick, Maryland 21703, telephone number (301) 846-8130. The Securities Administrator will make the Monthly Reports and Periodic Reports relating to the related Issuing Entity available each month to Securityholders for a Series via the Securities Administrator's internet website. The Securities Administrator's internet website will initially be located at "www.ctslink.com" Assistance in using the website can be obtained by calling the Securities Administrator's customer service desk at (301) 815-6600. Parties that are unable to use the website are entitled to have a paper copy mailed to them at no charge via first class mail by calling the customer service desk. 142 WHERE YOU CAN FIND MORE INFORMATION The Depositor filed a registration statement relating to the Securities with the Securities and Exchange Commission ("SEC" or the "Commission"). This prospectus is part of the registration statement, but the registration statement includes additional information. Copies of the registration statement and any other materials filed with the SEC, including distribution reports on Form 10-D, annual reports on Form 10-K, current reports on Form 8-K and amendment to these reports (collectively, the "Periodic Reports") may be read and copied at the Commission's Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Information concerning the operation of the Commission's Public Reference Room may be obtained by calling the Commission at (800) SEC-0330. The Commission also maintains a site on the World Wide Web at "http://www.sec.gov" at which you can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The Depositor has filed the registration statement, including all exhibits, and will file Periodic Reports through the EDGAR system and therefore such materials should be available by logging onto the Commission's Web site. The Commission maintains computer terminals providing access to the EDGAR system at each of the offices referred to above. Copies of any documents incorporated to this prospectus by reference will be provided to each person to whom a prospectus is delivered upon written or oral request directed to Wells Fargo Asset Securities Corporation, 7430 New Technology Way, Frederick, Maryland 21703, telephone number (301) 846-8881. Copies of filed Periodic Reports relating to an Issuing Entity will also be available on the applicable Paying Agent's website on the same day they are filed through the EDGAR system as described under "Reports to Securityholders." INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The SEC allows the Depositor to "incorporate by reference" information it files with the SEC, which means that the Depositor can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information that the Depositor files later with the SEC will automatically update the information in this prospectus. In all cases, you should rely on the later information rather than on any different information included in this prospectus or the accompanying prospectus supplement. The Depositor incorporates by reference any future annual, monthly and current SEC reports filed by or on behalf of the Trust until the termination of the offering of the related Series of Securities offered hereby. As a recipient of this prospectus, you may request a copy of any document the Depositor incorporates by reference, except exhibits to the documents (unless the exhibits are specifically incorporated by reference), at no cost, by written or oral request to the Securities Administrator at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention: Securities Administration Services Manager, telephone number (410) 884-2000. 143 INDEX OF PROSPECTUS DEFINITIONS Terms Page - ----- ---- 1998 Policy Statement........................................................140 Accretion Directed Securities.................................................43 Accrual Securities............................................................45 Accrued Security Interest.....................................................42 Additional Collateral.........................................................27 Additional Collateral Pledged Asset Mortgage Loans............................27 Adjustable Rate First Lien Subprime Loans.....................................32 Adjustable-Rate Interest Only Mortgage Loans..................................25 Advance.......................................................................47 Agreement.....................................................................64 Assessment of Compliance......................................................77 Asset Conservation Act........................................................97 Attestation Report............................................................77 Available Funds...............................................................40 Balloon Loans.................................................................27 Balloon Period................................................................27 Bankruptcy Code...............................................................93 BBA...........................................................................46 Beneficial Owner..............................................................51 Book-Entry Securities.........................................................40 Buy-Down Fund.................................................................27 Buy-Down Loans................................................................27 Capitalized Interest Account..................................................30 Cash Flow Agreement...........................................................31 Cede..........................................................................51 CERCLA........................................................................96 Certificates..................................................................39 Class.........................................................................39 Cleanup Costs.................................................................96 Clearstream...................................................................52 Clearstream Participants......................................................52 Code.........................................................................101 Collection Account............................................................67 Collection Period.............................................................40 Commission...............................................................29, 143 Companion Securities..........................................................43 Compensating Interest.........................................................42 Component.....................................................................43 Component Securities..........................................................43 condotels.....................................................................24 cooperatives..................................................................24 Correspondents................................................................34 Credit Support................................................................30 Debt Securities..............................................................101 Debt Service Reduction........................................................47 Defective Mortgage Loans......................................................67 Deferred Interest.............................................................25 Deficient Valuation...........................................................47 Definitive Securities.........................................................40 Delinquent....................................................................24 Department...................................................................135 Deposit Trust Agreement.......................................................64 Depositor.....................................................................39 Determination Date............................................................40 Disqualified Organization....................................................114 Distribution Account..........................................................68 Distribution Date.............................................................40 DTC...........................................................................51 DTC Participants..............................................................51 Due Date......................................................................24 EDGAR........................................................................143 electing large partnership...................................................115 Eligible Account..............................................................68 Eligible Investments..........................................................68 ERISA........................................................................134 Euroclear.....................................................................53 Euroclear Operator............................................................53 Euroclear Participants........................................................53 European Depositaries.........................................................51 Events of Default.............................................................83 Excess Servicing.............................................................123 FFIEC........................................................................140 FHLBB.........................................................................98 Financial Intermediary........................................................51 First Lien Home Mortgage Loans................................................34 First Lien Subprime Loans.....................................................32 Fitch........................................................................135 Fixed Interest Only Mortgage Loans............................................25 Fixed Rate First Lien Subprime Loans..........................................32 Fixed Rate Securities.........................................................45 Fixed Retained Yield..........................................................76 Floating Rate Securities......................................................45 Garn Act......................................................................98 Graduated Pay Mortgage Loans..................................................26 Grantor Trust Fund...........................................................101 Grantor Trust Securities.....................................................101 Growing Equity Mortgage Loans.................................................26 holder........................................................................51 HOPA..........................................................................95 Indenture.....................................................................64 Indenture Servicing Agreement.................................................64 Indenture Trustee.............................................................64 Indirect Participants.........................................................51 Insurance Proceeds............................................................41 Interest Accrual Period.......................................................42 Interest Only Mortgage Loans..................................................25 Interest Only Securities......................................................45 Interest Settlement Rate......................................................46 Inverse Floating Rate Securities..............................................45 IRA..........................................................................134 IRS...........................................................................73 144 Issuing Entity.................................................................7 Joint Ventures................................................................34 LIBOR.........................................................................45 LIBOR Business Day............................................................45 Limited Purpose Surety Bond...................................................27 Liquidated Mortgage Loan......................................................47 Liquidation Proceeds..........................................................41 Liquidation Profits...........................................................74 Loan Group....................................................................24 LOC...........................................................................27 LOC Pledged Asset Mortgage Loans..............................................27 Lock-out Date.................................................................29 Lock-out Period...............................................................29 Lockout Securities............................................................43 Mark to Market Regulations...................................................117 Master Servicer...............................................................81 Master Servicer Custodial Account.............................................68 Maximum Amount................................................................27 MERS..........................................................................65 Mid-Month Receipt Period......................................................41 Monthly Payment...............................................................24 Monthly Reports..............................................................142 Moody's......................................................................135 Mortgage Interest Rate........................................................29 Mortgage Loan Group...........................................................39 Mortgage Loan Schedule........................................................65 Mortgage Loans................................................................24 Mortgage Notes................................................................24 Mortgage Pool.................................................................24 Mortgaged Properties..........................................................24 Mortgages.....................................................................24 Multifamily Property..........................................................24 NCUA.........................................................................139 new partnership..............................................................130 Non-Equity Securities........................................................137 Non-Pro Rata Security........................................................104 Non-SMMEA Securities.........................................................139 Non-U.S. Holder..............................................................116 Notes.........................................................................39 Notional Amount Securities....................................................44 Offered Securities............................................................40 OID Regulations..............................................................101 old partnership..............................................................130 Optional Termination Date.....................................................49 OTS...........................................................................98 PAC I.........................................................................44 PAC II........................................................................44 PAC Securities................................................................44 Parity Act....................................................................99 Participants..................................................................51 Partnership Securities.......................................................101 Partnership Trust Fund.......................................................101 Pass-Through Entity..........................................................115 Pass-Through Rate.............................................................42 Pass-Through Securities.......................................................44 Paying Agent..................................................................70 Payment Account...............................................................70 PCBs..........................................................................96 Periodic Reports.............................................................143 Planned Amortization Securities...............................................44 Plans........................................................................134 Pledged Asset Mortgage Loans..................................................27 Pledged Value.................................................................28 PMI...........................................................................95 PMI Advance...................................................................47 Pooling and Servicing Agreement...............................................64 Pre-Funded Amount.............................................................30 Pre-Funding Account...........................................................30 Pre-Funding Period............................................................30 Prepayment Assumption........................................................105 Prepayment Interest Shortfalls................................................42 Prepayment Penalty............................................................29 Prepayment Period.............................................................41 Principal Balance.............................................................43 Principal Only Securities.....................................................45 Prior Month Receipt Period....................................................41 PTCE.........................................................................137 PTE 83-1.....................................................................137 Purchase Price................................................................66 Rate Determination Date.......................................................45 Rating Agency................................................................142 Ratio Strip Securities........................................................44 RCRA..........................................................................96 Realized Loss.................................................................46 Regular Securities...........................................................102 Regular Securityholder.......................................................104 Regulations..................................................................135 Reimbursement Amount..........................................................67 Related Documents.............................................................65 Relevant Depositary...........................................................51 Relief Act....................................................................95 RELS..........................................................................38 REMIC........................................................................101 REMIC Pool...................................................................101 REMIC Provisions.............................................................101 REMIC Regulations............................................................101 REMIC Securities.............................................................101 Remittance Date...............................................................68 Reserve Interest Rate.........................................................46 Residual Holders.............................................................111 Residual Securities..........................................................102 Restricted Group.............................................................136 Revolving Credit Line Loans...................................................28 Rules.........................................................................51 S&P..........................................................................135 Scheduled Amortization Securities.............................................44 Scheduled Securities..........................................................44 SEC..........................................................................143 Second Lien Subprime Loans....................................................33 secured-creditor exemption....................................................96 Securities....................................................................39 Securities Act...............................................................135 145 Securities Administrator..................................................64, 86 SecuritiesLink(R)............................................................142 Security......................................................................64 Securityholder................................................................61 Senior Securities.............................................................44 Sequential Pay Securities.....................................................44 Series........................................................................39 Servicer...................................................................7, 77 Servicing Account.............................................................71 Servicing Advance.............................................................74 Servicing Fee.................................................................76 Servicing Fee Rate............................................................76 SMMEA........................................................................139 Special Servicer..............................................................83 Sponsor.......................................................................32 Standard Securities..........................................................121 Startup Day..................................................................102 Step Coupon Securities........................................................45 Strip Securities..............................................................39 Stripped Securities..........................................................124 Stripped Securityholder......................................................126 Subordinated Securities.......................................................44 Subordinated Senior Securities................................................44 Subsequent Mortgage Loans.....................................................30 Subsidy Account...............................................................26 Subsidy Loans.................................................................26 Subsidy Payments..............................................................26 Substitution Adjustment.......................................................66 Super Senior Securities.......................................................44 Super Senior Support Securities...............................................44 Superliens....................................................................96 super-premium................................................................105 Support Securities............................................................43 Surety Bond Provider..........................................................27 TAC Securities................................................................45 Targeted Amortization Securities..............................................45 Taxable Mortgage Pools.......................................................101 Telerate page 3750............................................................46 Termination Price.............................................................50 Terms and Conditions..........................................................53 Texas Home Equity Laws........................................................95 Tiered Payment Mortgage Loans.................................................26 Tiered REMICs................................................................104 Title V.......................................................................99 Title VIII....................................................................99 Treasury Regulations..........................................................66 Trust.........................................................................39 Trust Fund....................................................................39 Trustee.......................................................................64 Type 1 Loans..................................................................41 Type 2 Loans..................................................................41 U.S. Person..................................................................116 UCC...........................................................................91 Underlying Servicing Agreement............................................64, 77 Underwriter Exemption........................................................135 UST...........................................................................96 Variable Rate Securities......................................................45 Voting Interests..............................................................84 VRU...........................................................................80 Wells Fargo Affiliates........................................................32 Wells Fargo Bank..............................................................32 WFHET.........................................................................32 Window Period.................................................................98 Window Period Loans...........................................................98 Window Period States..........................................................98 Withholding Regulations......................................................119 146 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The expenses expected to be incurred in connection with the issuance and distribution of the certificates being registered, other than underwriting compensation, are as set forth below. All such expenses, except for the registration fees, are estimated. SEC Registration Fee $* Legal Fees and Expenses $* Accounting Fees and Expenses $* Trustee Fees and Expenses (including counsel fees) $* Printing and Engraving Fees $* Rating Agency Fees $* Miscellaneous $* ---------- Total $* ========== ---------------------------------------- * To be provided by amendment. Item 15. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons, including officers and directors, who are made, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred. The By-laws of Wells Fargo Asset Securities Corporation provide for indemnification of officers and directors to the full extent permitted by the Delaware General Corporation Law. The Pooling and Servicing Agreement for each Series of Certificates will provide either that the Registrant and the directors, officers, employees and agents of the Registrant, or that the Master Servicer and the directors, officers, employees and agents of the Master Servicer, will be entitled to indemnification by the Trust Estate and will be held harmless against any loss, liability or expense II-1 incurred in connection with any legal action relating to the Pooling and Servicing Agreement or the Certificates, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties thereunder or by reason of reckless disregard of his or its obligations and duties thereunder. The directors and officers of the Registrant are covered by a directors' and officers' liability insurance policy maintained by Wells Fargo & Company for the benefit of all of its subsidiaries. Any underwriters who execute an underwriting agreement in the form incorporated by reference as Exhibit 1.1 hereto will agree to indemnify the Registrant's directors and its officers who signed this Registration Statement against certain liabilities which might arise under the Securities Act of 1933 from certain information furnished to the Registrant by or on behalf of such indemnifying party. Item 16. Exhibits. 1.1 Form of Underwriting Agreement. 3.1 Certificate of Incorporation of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-3 (File No. 333-02209). 3.1(a) Amendment to Certificate of Incorporation of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.1(a) to the Registration Statement on Form S-3 (File No. 333-45578). 3.2 By-laws of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-3 (File No. 333-02209). 4.1 Form of Pooling and Servicing Agreement. 5.1 Opinion of Cadwalader, Wickersham & Taft LLP. 8.1 Opinion of Cadwalader, Wickersham & Taft LLP with respect to certain tax matters. 10.1 Form of Mortgage Loan Purchase Agreement. 23.1 Consent of Cadwalader, Wickersham & Taft LLP (included as part of exhibits 5.1 and 8.1). 24.1 Powers of Attorney.* ------------------- * Previously Filed. II-2 Item 17. Undertakings. (a) Rule 415 Offering. The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) except as otherwise provided by Item 512(a) of Regulation S-K, to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) except as otherwise provided by Item 512(a) of Regulation S-K, to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change of such information in the Registration Statement; provided, however, that paragraphs (i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the Registration Statement; provided further, however, that paragraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (17 CFR 229.1100(c)); (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) that, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: (i) each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the date the filed prospectus was deemed part of and included in the Registration Statement; and II-3 (ii) each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a Registration Statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the Registration Statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the Registration Statement relating to the securities in the Registration Statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a Registration Statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such effective date; and (5) that, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to the Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (iv) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. (b) Filings Incorporating Subsequent Exchange Act Documents by Reference. The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities II-4 offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Filings Regarding Asset-Backed Securities Incorporating by Reference Subsequent Exchange Act Documents by Third Parties. The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the Registration Statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) Filings Regarding Asset-Backed Securities That Provide Certain Information Through an Internet Web Site. The Registrant hereby undertakes that, except as otherwise provided by Item 1105 of Regulation AB (17 CFR 229.1105), information provided in response to that item pursuant to Rule 312 of Regulation S-T (17 CFR 232.312) through the specified internet address in the prospectus is deemed to be a part of the prospectus included in the Registration Statement. In addition, the Registrant hereby undertakes to provide to any person without charge, upon request, a copy of the information provided in response to Item 1105 of Regulation AB pursuant to Rule 312 of Regulation S-T through the specified internet address as of the date of the prospectus included in the Registration Statement if a subsequent update or change is made to the information. (e) Undertaking in respect of indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the forgoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issues. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 (including the requirement that the securities be rated investment grade at the time of sale) and has duly caused this Pre-Effective Amendment No. 1 to Form S-3 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri on March 17, 2006. WELLS FARGO ASSET SECURITIES CORPORATION By: /s/ Thomas Neary ------------------------------------- Name: Thomas Neary Title: Executive Vice President II-6 Pursuant to the requirements of the Securities Act of 1933, as amended, this Pre-Effective Amendment No. 1 to Form S-3 Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Capacity Date President, Chief Executive Officer, * Secretary and Director March 17, 2006 - ------------------------------------------- David Moskowitz Executive Vice President, Chief * Financial Officer and Chief Accounting March 17, 2006 - ------------------------------------------- Officer Franklin Codel /s/ Thomas Neary Executive Vice President and Director March 17, 2006 - ------------------------------------------- Thomas Neary * Director March 17, 2006 - ------------------------------------------- Douglas K. Johnson
* By: /s/ Thomas Neary - ------------------------------------------- Thomas Neary Attorney-In-Fact(1) (1) Thomas Neary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to a power of attorney executed by such persons and filed with the Securities and Exchange Commission. II-7 EXHIBIT INDEX Exhibit Number - ------ 1.1 Form of underwriting agreement. 3.1 Certificate of Incorporation of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-3 (File No. 333-02209). 3.1(a) Amendment to Certificate of Incorporation of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.1(a) to the Registration Statement on Form S-3 (File No. 333-45578). 3.2 By-laws of Wells Fargo Asset Securities Corporation incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-3 (File No. 333-02209). 4.1 Form of Pooling and Servicing Agreement. 5.1 Opinion of Cadwalader, Wickersham & Taft LLP. 8.1 Opinion of Cadwalader, Wickersham & Taft LLP with respect to certain tax matters. 10.1 Form of Mortgage Loan Purchase Agreement. 23.1 Consent of Cadwalader, Wickersham & Taft LLP (included as part of exhibits 5.1 and 8.1). 24.1 Powers of Attorney.* ------------------- * Previously Filed. EX-1.1 2 we890449-ex1_1.txt FORM OF UNDERWRITING AGREEMENT Exhibit 1.1 WELLS FARGO ASSET SECURITIES CORPORATION Asset-Backed Certificates (Issuable in Series) UNDERWRITING AGREEMENT Dated as of [_____], 200[_] [Underwriter] [Address] Ladies and Gentlemen: Wells Fargo Asset Securities Corporation, a Delaware corporation ("WFASC" or the "Seller") proposes to issue and sell from time to time its Asset-Backed Certificates in various series, each series of which may be divided into classes, in one or more offerings on terms determined at the time of sale. One or more series of Asset-Backed Certificates may be offered through you, as underwriter (the "Underwriter"). Whenever WFASC determines to make an offering of a series of its Asset-Backed Certificates through the Underwriter, WFASC and Wells Fargo Bank, N.A., a national banking association (in such capacity, "Wells Fargo Bank"), will enter into an agreement (the "Terms Agreement") with the Underwriter, in substantially the form attached hereto as Exhibit A, providing for the sale of such series of Asset-Backed Certificates to the Underwriter. WFASC is a wholly-owned subsidiary of Wells Fargo Bank. The Asset-Backed Certificates of the series and classes to be sold in each offering to the Underwriter under this Underwriting Agreement, as supplemented by the applicable Terms Agreement, are hereinafter referred to as the "Certificates." The Asset-Backed Certificates of the same series that are not being sold in each offering to the Underwriter under this Underwriting Agreement are hereinafter referred to as the "Other Certificates." The Certificates will have the characteristics set forth in the applicable Terms Agreement and will evidence the ownership interests in a trust consisting of a pool of mortgage loans acquired by WFASC (the "Mortgage Loans") and related property (collectively, the "Trust Fund"). The Mortgage Loans will be of the type described in, and will have the characteristics and aggregate principal balance set forth in, the Issuer Free Writing Prospectus and the Prospectus Supplement (in each case as hereinafter defined). The Certificates will be issued pursuant to a pooling and servicing agreement (the "Pooling and Servicing Agreement"), dated as of the close of business on the date specified in the applicable Terms Agreement, by and among WFASC, as depositor, Wells Fargo Bank, as servicer (in such capacity, the "Servicer"), the trustee identified in the applicable Terms Agreement, as trustee (the "Trustee") and, if applicable, the securities administrator identified in the applicable Terms Agreement, as securities administrator (the "Securities Administrator") and, if applicable, the credit risk manager (the "Credit Risk Manager") identified in the Terms Agreement. The Certificates will be issued in denominations of $25,000, or such lesser or greater amounts as may be specified in the applicable Terms Agreement, and will have the terms set forth in the Issuer Free Writing Prospectus and the Prospectus Supplement. The Terms Agreement may take the form of an exchange of any standard form of written communication among the Underwriter, WFASC and Wells Fargo Bank in substantially the form of Exhibit A hereto. Each offering of Asset-Backed Certificates under this Underwriting Agreement will be governed by this Underwriting Agreement, as supplemented by the applicable Terms Agreement. This Underwriting Agreement, as supplemented by the applicable Terms Agreement, is referred to herein as this "Agreement". 1. Representations and Warranties. (a) WFASC represents and warrants to, and agrees with, the Underwriter as of the date of the applicable Terms Agreement that: (i) A registration statement (with the file number set forth in the related Terms Agreement), including a prospectus (the "Base Prospectus"), has been filed with the Securities and Exchange Commission (the "Commission") and has become effective under the Securities Act of 1933, as amended (the "Act"), and no stop order suspending the effectiveness of such registration statement has been issued and no proceedings for that purpose have been initiated or, to WFASC's knowledge, threatened by the Commission; and the Base Prospectus in the form in which it will be used in connection with the offering of the Certificates is proposed to be supplemented by a prospectus supplement relating to the Certificates and, as so supplemented, to be filed with the Commission pursuant to Rule 424 under the Act. (Such registration statement, as amended to the date of the applicable Terms Agreement, is hereinafter referred to as the "Registration Statement"; such prospectus supplement, as first filed with the Commission, is hereinafter referred to as the "Prospectus Supplement"; and such Base Prospectus, in the form in which it will first be filed with the Commission in connection with the offering of the Certificates, as supplemented by the Prospectus Supplement, is hereinafter referred to as the "Prospectus"). (ii) The Registration Statement and the Prospectus, as of the date of the Prospectus Supplement, will conform, and the Registration Statement and the Prospectus, as revised, amended or supplemented and filed with the Commission prior to the termination of the offering of the Certificates, as of their respective effective or issue dates, will conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder applicable to such documents as of such respective dates, and the Registration Statement and the Prospectus, as revised, amended or supplemented and filed with the Commission as of the "Closing Date" (as hereinafter defined), will conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder applicable to such documents; and the Registration Statement and the Prospectus, as of the date of the Prospectus Supplement, will not include any untrue statement of a material fact and will not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and, in the case of the Prospectus, as revised, amended or supplemented and filed prior to the Closing Date, as of the Closing Date, will not include any untrue statement of a material fact and will not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that WFASC makes no representations, warranties or agreements as to the information contained in or omitted from the Prospectus or any revision or amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to WFASC by or on behalf of the Underwriter specifically for use in connection with the preparation of the Registration Statement , the Prospectus or the Time of Sale Information or any revision or amendment thereof or supplement thereto. The Time of Sale Information (as defined in Section 7(f) below), as amended or supplemented, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in either case at the Time of Sale to the applicable investor; provided, however, that WFASC makes no representations, warranties or agreements as to the information contained in or omitted from the Time of Sale Information or any revision or amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to WFASC by or on behalf of the Underwriter specifically for use in connection with the preparation of the Registration Statement, the Prospectus or the Time of Sale Information or any revision or amendment thereof or supplement thereto. (iii) Assuming that it is rated at the time of issuance in one of the two highest rating categories by a nationally recognized statistical rating organization, each Certificate designated as a "mortgage related security" in the Prospectus Supplement will, at the time of issuance, be a "mortgage related security," as such term is defined in Section 3(a)(41) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (iv) Each of the Certificates will conform in all material respects to the description thereof contained in the Issuer Free Writing Prospectus and the Prospectus, and each of the Certificates, when validly authenticated, issued and delivered in accordance with the Pooling and Servicing Agreement, will be duly and validly issued and outstanding and entitled to the benefits of the Pooling and Servicing Agreement, and immediately prior to the delivery of the Certificates to the Underwriter, WFASC will own the Certificates, and upon such delivery the Underwriter will acquire title thereto, free and clear of any lien, pledge, encumbrance or other security interest other than one created or granted by the Underwriter or permitted by the Pooling and Servicing Agreement. (v) This Agreement has been duly authorized, executed and delivered by WFASC and, as of the Closing Date, the Pooling and Servicing Agreement will have been duly authorized, executed and delivered by WFASC and will conform in all material respects to the description thereof contained in the Issuer Free Writing Prospectus and the Prospectus and, assuming the valid execution thereof by the parties to the Pooling and Servicing Agreement (other than WFASC), will constitute a valid and binding agreement of WFASC enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors' rights and by general equity principles. (vi) WFASC has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with corporate power and authority to own its properties and conduct its business as described in the Issuer Free Writing Prospectus and the Prospectus and to enter into and perform its obligations under the Pooling and Servicing Agreement and this Agreement. (vii) Neither the issuance or delivery of the Certificates, nor the consummation of any other of the transactions contemplated herein, nor compliance with the provisions of the Pooling and Servicing Agreement or this Agreement, will conflict with or result in the breach of any material term or provision of the certificate of incorporation or bylaws of WFASC, and WFASC is not in breach or violation of or in default (nor has an event occurred which with notice or lapse of time or both would constitute a default) under the terms of (i) any indenture, contract, lease, mortgage, deed of trust, note agreement or other evidence of indebtedness or other agreement, obligation or instrument to which WFASC is a party or by which it or its properties are bound, or (ii) any law, decree, order, rule or regulation applicable to WFASC of any court or supervisory, regulatory, administrative or governmental agency, body or authority, or arbitrator having jurisdiction over WFASC, or its properties, the default in or the breach or violation of which would have a material adverse effect on WFASC or the ability of WFASC to perform its obligations under the Pooling and Servicing Agreement; and neither the delivery of the Certificates, nor the consummation of any other of the transactions contemplated herein, nor the compliance with the provisions of the Pooling and Servicing Agreement or this Agreement will result in such a breach, violation or default which would have such a material adverse effect. (viii) No filing or registration with, notice to, or consent, approval, authorization or order or other action of, any court or governmental authority or agency is required for the consummation by WFASC of the transactions contemplated by this Agreement or the Pooling and Servicing Agreement (other than as required under state securities laws or Blue Sky laws, as to which no representations and warranties are made by WFASC), except such as have been, or will have been prior to the Closing Date, obtained under the Act, and such recordations of the assignment of the Mortgage Loans to the Trustee or, if applicable, to the Securities Administrator on behalf of the Trustee, pursuant to the Pooling and Servicing Agreement that have not yet been completed. (ix) There is no action, suit or proceeding before or by any court, administrative or governmental agency, or other tribunal, domestic or foreign, now pending to which WFASC is a party, or, to the best of WFASC's knowledge, threatened against WFASC, which could reasonably result individually or in the aggregate in any material adverse change in the condition (financial or otherwise), earnings, affairs, regulatory situation or business prospects of WFASC or could reasonably interfere with or materially and adversely affect the consummation of the transactions contemplated herein. (x) On the Closing Date the representations and warranties made by WFASC in the Pooling and Servicing Agreement will be true and correct in all material respects as of the date made. (xi) At the time of execution and delivery of the Pooling and Servicing Agreement, WFASC will own the mortgage notes (the "Mortgage Notes") being transferred to the Trust Fund pursuant thereto, free and clear of any lien, mortgage, pledge, charge, encumbrance, adverse claim or other security interest (collectively, "Liens"), except to the extent permitted in the Pooling and Servicing Agreement, and will not have assigned to any person other than the Trust Fund any of its right, title or interest in the Mortgage Notes. WFASC will have the power and authority to transfer the Mortgage Notes to the Trust Fund and to transfer the Certificates to the Underwriter, and, upon execution and delivery to the Trustee of the Pooling and Servicing Agreement, payment by the Underwriter for the Certificates, and delivery to the Underwriter of the Certificates, the Trust Fund will own the Mortgage Notes and the Underwriter will acquire title to the Certificates, in each case free of Liens except to the extent permitted by the Pooling and Servicing Agreement. (xii) Any taxes, fees and other governmental charges in connection with the execution, delivery and issuance of this Agreement, the Pooling and Servicing Agreement and the Certificates have been or will be paid by WFASC on or prior to the Closing Date, except for fees for recording assignments of mortgage loans to the Trustee or, if applicable, to the Securities Administrator on behalf of the Trustee, pursuant to the Pooling and Servicing Agreement that have not yet been completed, which fees will be paid by WFASC in accordance with the Pooling and Servicing Agreement. (xiii) The transfer of the Mortgage Loans and the related assets to the Trust Fund on the Closing Date will be treated by WFASC for financial accounting and reporting purposes as a sale of assets and not as a pledge of assets to secure debt. (xiv) WFASC acknowledges and agrees that (i) the purchase and sale of the Certificates pursuant to this Agreement is an arm's-length commercial transaction between WFASC and Wells Fargo Bank on the one hand, and the Underwriter, on the other, (ii) in connection therewith and with the process leading to such transaction, the Underwriter is acting solely as a principal and not the agent or fiduciary of WFASC, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of WFASC with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriter has advised or is currently advising WFASC on other matters) or any other obligation to WFASC except the obligations expressly set forth in this Agreement and (iv) WFASC has consulted its own legal advisors to the extent it deemed appropriate. (xv) WFASC is not, and on the date on which the first bona fide offer of the Certificates is made will not be, an "ineligible issuer," as defined in Rule 405 under the Act. (b) Wells Fargo Bank represents and warrants to, and agrees with, the Underwriter as of the date of the applicable Terms Agreement that: (i) Wells Fargo Bank is a national banking association duly chartered and validly existing in good standing under the laws of the United States with corporate power and authority to own its properties and conduct its business as described in the Prospectus and the Issuer Free Writing Prospectus and to enter into and perform its obligations under this Agreement. (ii) The execution and delivery by Wells Fargo Bank of this Agreement are within the corporate power of Wells Fargo Bank and have been duly authorized by all necessary corporate action on the part of Wells Fargo Bank. (iii) Neither the execution and delivery of this Agreement, nor the consummation by Wells Fargo Bank of any other of the transactions contemplated herein, nor compliance with the provisions of this Agreement, will conflict with or result in the breach of any material term or provision of the corporate charter or bylaws of Wells Fargo Bank. (iv) This Agreement has been duly authorized, executed and delivered by Wells Fargo Bank. (v) Wells Fargo Bank acknowledges and agrees that (i) the purchase and sale of the Certificates pursuant to this Agreement is an arm's-length commercial transaction between WFASC and Wells Fargo Bank, on the one hand, and the Underwriter, on the other, (ii) in connection therewith and with the process leading to such transaction, the Underwriter is acting solely as a principal and not the agent or fiduciary of Wells Fargo Bank, (iii) Underwriter has not assumed an advisory or fiduciary responsibility in favor of Wells Fargo Bank with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriter has advised or is currently advising Wells Fargo Bank on other matters) or any other obligation to Wells Fargo Bank except the obligations expressly set forth in this Agreement and (iv) Wells Fargo Bank has consulted its own legal advisors to the extent it deemed appropriate. 2. Purchase Price. The purchase price at which the Underwriter will purchase the Certificates shall be the aggregate purchase price set forth in the applicable Terms Agreement. 3. Delivery and Payment. The Certificates shall be delivered at the office, on the date and at the time specified in the applicable Terms Agreement, which place, date and time may be changed by agreement between the Underwriter and WFASC (such date and time of delivery of and payment for the Certificates being hereinafter referred to as the "Closing Date"). Delivery of the Certificates shall be made to the Underwriter against payment by the Underwriter of the purchase price therefor to or upon the order of WFASC in same-day funds. The Certificates shall be registered in such names and in such denominations as the Underwriter may have requested not less than two business days prior to the Closing Date. WFASC agrees to have the Certificates available for inspection, checking and packaging in New York, New York, on the business day prior to the Closing Date. 4. Offering by Underwriter. (a) It is understood that the Underwriter proposes to offer the Certificates for sale as set forth in the Time of Sale Information and the Prospectus and that the Underwriter will not offer, sell or otherwise distribute the Certificates (except for the sale thereof in exempt transactions) in any state in which the Certificates are not exempt from registration under state securities laws or Blue Sky laws (except where the Certificates will have been qualified for offering and sale at the direction of the Underwriter under such state securities laws or Blue Sky laws). In connection with such offering(s), the Underwriter agrees to provide WFASC with information related to the offer and sale of the Certificates that is reasonably requested by WFASC, from time to time (but not in excess of three years from the Closing Date), and necessary for complying with its tax reporting obligations, including, without limitation, the issue price of the Certificates. (b) The Underwriter agrees that it will not sell or transfer any Certificate or interest therein in the initial sale or transfer of such Certificate by the Underwriter in an amount less than the minimum denomination for such Certificate to be set forth in the Issuer Free Writing Prospectus and the Prospectus Supplement. (c) The Underwriter further agrees that (i) if it delivers to an investor the Prospectus in portable document format ("PDF"), upon the Underwriter's receipt of a request from the investor within the period for which delivery of the Prospectus is required, the Underwriter will promptly deliver or cause to be delivered to the investor, without charge, a paper copy of the Prospectus and (ii) it will provide to WFASC any Underwriter Free Writing Prospectuses (as defined in Section 9(a)), or portions thereof, which WFASC is required to file with the Commission in electronic format and will use reasonable efforts to provide to WFASC such Underwriter Free Writing Prospectuses, or portions thereof, in either Microsoft Word(R) or Microsoft Excel(R) format and not in a PDF, except to the extent that WFASC, in its sole discretion, waives such requirements. (d) The Underwriter represents and warrants to, and agrees with, WFASC, as of the date of the applicable Terms Agreement and as of the Closing Date, that: (i) In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), it has not made and will not make an offer of Certificates to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Certificates which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the relevant implementation date, make an offer of Certificates to the public in that Relevant Member State at any time: (A) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; (B) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than (euro)43,000,000 and (3) an annual net turnover of more than (euro)50,000,000, as shown in its last annual or consolidated accounts; or (C) in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this representation, the expression an "offer of Certificates to the public" in relation to any Certificates in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Certificates to be offered so as to enable an investor to decide to purchase or subscribe the Certificates, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means the European Commission Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. (ii) It has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the United Kingdom Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the Certificates in circumstances in which Section 21(1) of the FSMA does not apply to the issuer. (iii) It has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Certificates in, from or otherwise involving the United Kingdom. 5. Agreements. WFASC agrees with the Underwriter that: (a) WFASC will cause the Prospectus to be filed with the Commission pursuant to Rule 424 under the Act and, if necessary, within 15 days of the Closing Date, will file a report on Form 8-K setting forth specific information concerning the Certificates, and will promptly advise the Underwriter when the Prospectus has been so filed, and, prior to the termination of the offering of the Certificates, will also promptly advise the Underwriter (i) when any amendment to the Registration Statement has become effective or any revision of or supplement to the Prospectus has been so filed (unless such amendment, revision or supplement does not relate to the Certificates), (ii) of any request by the Commission for any amendment of the Registration Statement or the Prospectus or for any additional information (unless such request does not relate to the Certificates), and (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement with respect to the Certificates or the institution or, to the knowledge of WFASC, the threatening of any proceeding for that purpose. WFASC will use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. Except as otherwise provided in Section 5(b) hereof, WFASC will not file prior to the termination of such offering any amendment to the Registration Statement or any revision of or supplement to the Prospectus (other than any such amendment, revision or supplement which does not relate to the Certificates) which shall be disapproved by the Underwriter after reasonable notice and review of such filing. (b) If, at any time when a prospectus relating to the Certificates is required to be delivered under the Act (without regard to reliance on Rule 174 under the Act) (i) any event occurs as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (ii) it shall be necessary to revise, amend or supplement the Prospectus to comply with the Act or the rules and regulations of the Commission thereunder, WFASC promptly will notify the Underwriter and will, upon request of the Underwriter, or may, after consultation with the Underwriter, prepare and file with the Commission a revision, amendment or supplement which will correct such statement or omission or effect such compliance, and furnish without charge to the Underwriter as many copies as the Underwriter may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance. (c) WFASC will (i) furnish to the Underwriter and counsel for the Underwriter, without charge, conformed copies of the Registration Statement (including exhibits thereto) and, so long as delivery of a prospectus relating to the Certificates is required under the Act, as many copies of the Prospectus and any revisions or amendments thereof or supplements thereto as may be reasonably requested, and (ii) file promptly all reports and any definitive proxy or information statements required to be filed by WFASC with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (as such requirements may be modified pursuant to Section 12(h) of the Exchange Act) subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required under applicable law in connection with the offering or sale of the Certificates. (d) WFASC will, as between itself and the Underwriter, pay all expenses incidental to the performance of its obligations under this Agreement including, without limitation, (i) expenses of preparing, printing, reproducing and filing the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus, the Pooling and Servicing Agreement and the Certificates, (ii) the cost of delivering the Certificates to the Underwriter, insured to the satisfaction of the Underwriter, (iii) the fees charged by (a) securities rating services for rating the Certificates and (b) WFASC's independent accountants in connection with the letters to be delivered pursuant to Section 6(g) hereof, (iv) the fees and expenses of the Trustee, the Securities Administrator, if applicable, and any agent of the Trustee or the Securities Administrator, if applicable, and the fees and disbursements of counsel for the Trustee and the Securities Administrator, if applicable, in connection with the Pooling and Servicing Agreement and the Certificates, and (v) all other costs and expenses incidental to the performance by WFASC of WFASC's obligations hereunder which are not otherwise specifically provided for in this subsection. It is understood that, except as provided in this paragraph (d) and in Sections 7 and 12 hereof, the Underwriter will pay all of its own expenses, including (i) the fees of any counsel to the Underwriter, (ii) any transfer taxes on resale of any of the Certificates by it, (iii) any advertising expenses connected with any offers that the Underwriter may make, (iv) any expenses for the qualification of the Certificates under state securities laws or Blue Sky laws, including filing fees and the fees and disbursements of counsel for the Underwriter in connection therewith and in connection with the preparation of any Blue Sky survey, and (v) any expenses incurred in connection with the preparation and delivery of any Underwriter Free Writing Prospectus and the filing of such Free Writing Prospectus, if required to be filed by Underwriter with the Commission. (e) So long as any Certificates are outstanding, upon the request of the Underwriter, WFASC will, or will cause the Servicer to, furnish to the Underwriter, as soon as available, a copy of (i) the annual statement of compliance delivered by the Servicer to the Trustee or the Securities Administrator under the Pooling and Servicing Agreement, (ii) the annual independent public accountants' servicing report furnished to the Trustee or the Securities Administrator pursuant to the Pooling and Servicing Agreement, (iii) each report of WFASC regarding the Certificates filed with the Commission under the Exchange Act or mailed to the holders of the Certificates, and (iv) from time to time, such other information concerning the Certificates which may be furnished by WFASC or the Servicer without undue expense and without violation of applicable law. (f) The effective date of the Registration Statement was within three years of the Closing Date of the Certificates. If the third anniversary of the effective date occurs within six months after the Closing Date, the Company will, at the request of the Underwriter, use reasonable efforts to take such action as may be necessary or appropriate to permit the public offering and sale of the Certificates as contemplated herein. 6. Conditions to the Obligation of the Underwriter. The obligation of the Underwriter to purchase the Certificates shall be subject to the accuracy in all material respects of the representations and warranties on the part of WFASC and Wells Fargo Bank contained herein as of the date of the applicable Terms Agreement and as of the Closing Date, to the accuracy of the statements of WFASC and Wells Fargo Bank made in any officer's certificate pursuant to the provisions hereof, to the performance in all material respects by WFASC of its obligations hereunder and to the following additional conditions: (a) No stop order suspending the effectiveness of the Registration Statement with respect to the Certificates shall have been issued and no proceedings for that purpose shall have been instituted and be pending or shall have been threatened, and the Prospectus shall have been filed or mailed for filing with the Commission not later than required pursuant to the rules and regulations of the Commission. (b) WFASC shall have furnished to the Underwriter a certificate, dated the Closing Date, of WFASC, signed by a vice president or an assistant vice president of WFASC, to the effect that the signer of such certificate has carefully examined the Registration Statement, the Prospectus and this Agreement and that: (i) The representations and warranties of WFASC herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and WFASC has complied with all agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the Closing Date; (ii) No stop order suspending the effectiveness of the Registration Statement with respect to the Certificates has been issued, and no proceedings for that purpose have been instituted and are pending or, to his or her knowledge, have been threatened as of the Closing Date; and (iii) Nothing has come to the attention of such person that would lead him or her to believe that the Prospectus contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) WFASC shall have caused Wells Fargo Bank to furnish to the Underwriter a certificate, dated the Closing Date, of Wells Fargo Bank, signed by a vice president or an assistant vice president of Wells Fargo Bank, to the effect that the representations and warranties of Wells Fargo Bank herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and Wells Fargo Bank has in all material respects complied with all agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date. (d) WFASC shall have furnished to the Underwriter an opinion, dated the Closing Date, of Cadwalader, Wickersham & Taft LLP, counsel to WFASC, to the effect that: (i) WFASC is a corporation validly existing and in good standing under the laws of the State of Delaware, with corporate power to enter into and perform its obligations under this Agreement, the applicable Terms Agreement and the Pooling and Servicing Agreement; (ii) The execution and delivery of this Agreement and the applicable Terms Agreement have been duly authorized by WFASC and this Agreement and the applicable Terms Agreement have been duly executed and delivered by WFASC; (iii) The execution and delivery of the Pooling and Servicing Agreement has been duly authorized by WFASC, and the Pooling and Servicing Agreement has been duly executed and delivered by WFASC and constitutes a legal, valid and binding agreement of WFASC, enforceable against WFASC in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors' rights generally or the rights of creditors of banks, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and except that the enforcement of rights with respect to indemnification and contribution obligations and provisions (a) purporting to waive or limit rights to trial by jury, oral amendments to written agreements or rights of set off or (b) relating to submission to jurisdiction, venue or service of process, may be limited by applicable law or considerations of public policy; (iv) The Certificates have been duly authorized and executed by WFASC and, when the Certificates have been duly executed, authenticated and delivered in the manner contemplated in the Pooling and Servicing Agreement and paid for by the Underwriter pursuant to this Agreement and the applicable Terms Agreement, the Certificates will be validly issued and outstanding and entitled to the benefits provided by the Pooling and Servicing Agreement; (v) The issuance and sale by WFASC of the Certificates to the Underwriter pursuant to this Agreement and the applicable Terms Agreement, the compliance by WFASC with the provisions of this Agreement, the applicable Terms Agreement and the Pooling and Servicing Agreement, and the consummation by WFASC of the transactions therein contemplated (a) do not require the consent, approval, authorization, order, or qualification of or registration with any New York State or federal governmental authority or, to the knowledge of such counsel, any New York State or federal court, except such as may be required under state securities or blue sky laws, recordations of the assignment of the Mortgage Loans to the Trustee pursuant to the Pooling and Servicing Agreement that have not yet been completed, and such other approvals as have been obtained or effected, (b) do not conflict with or result in a violation of any provision of the certificate of incorporation and bylaws of WFASC or any New York State or federal law, and (c) to the knowledge of such counsel, do not conflict with or result in a breach or violation of any material indenture, agreement or instrument to which WFASC is a party or by which it or any of its property is bound, or any judgment, decree or order applicable to WFASC, of any New York State or federal court, regulatory body, administrative agency or other governmental authority; (vi) To the knowledge of such counsel, there is no legal or governmental action, investigation or proceeding pending or threatened against WFASC (a) asserting the invalidity of this Agreement, the applicable Terms Agreement, the Pooling and Servicing Agreement or the Certificates, (b) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement and the applicable Terms Agreement, (c) which would materially and adversely affect the performance by WFASC of its obligations under, or the validity or enforceability (with respect to WFASC) of, this Agreement, the applicable Terms Agreement, the Pooling and Servicing Agreement or the Certificates or (d) seeking to affect adversely the federal income tax attributes of the Certificates as described in the Prospectus and the Prospectus Supplement under the headings "Certain Federal Income Tax Consequences" and "Federal Income Tax Considerations," respectively. For purposes of the opinion set forth in this paragraph, such counsel has not regarded any legal or governmental actions, investigations or proceedings to be "threatened" unless the potential litigant or governmental authority has manifested to WFASC a present intention to initiate such proceedings; (vii) The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended; (viii) The Trust Fund (as defined in the Pooling and Servicing Agreement) is not required to be registered under the Investment Company Act of 1940, as amended; (ix) The Registration Statement has been declared effective under the Act, and, to the knowledge of such counsel, no stop order with respect thereto has been issued by the Commission; (x) The Registration Statement, as of its effective date, and the Prospectus and the Prospectus Supplement, as of the dates thereof (in each case, with the exception of any information incorporated by reference therein, and any numerical, financial, statistical and quantitative data included therein, as to which such counsel expresses no view), appeared on their respective faces to be appropriately responsive in all material respects to the requirements of the Act and the rules and regulations thereunder applicable to such documents as of the relevant date; (xi) The statements in the Prospectus Supplement under the headings "Federal Income Tax Considerations" and "ERISA Considerations" insofar as such statements purport to summarize matters of federal law or legal conclusions with respect thereto have been reviewed by such counsel and are correct in all material respects; (xii) Assuming that it is rated at the time of issuance in one of the two highest rating categories by a nationally recognized statistical rating organization, each Certificate designated as a "mortgage related security" in the Prospectus Supplement will, at the time of issuance, be a "mortgage related security" as such term is defined in Section 3(a)(41) of the Exchange Act; and Such opinion may express its reliance as to factual matters on the representations and warranties made by, and on certificates or other documents furnished by officers of, the parties to this Agreement and the Pooling and Servicing Agreement. Such opinion may assume the due authorization, execution and delivery of the instruments and documents referred to therein by the parties thereto other than WFASC. Such opinion may be qualified as an opinion only on the laws of the State of New York, the laws of each state in which the writer of the opinion is admitted to practice law and the federal law of the United States. To the extent that such firm relies upon the opinion of other counsel in rendering any portion of its opinion, the opinion of such other counsel shall be attached to and delivered with the opinion of such firm that is delivered to the Underwriter. (e) The Servicer shall have furnished to the Underwriter an opinion, dated the Closing Date, of counsel to the Servicer (who may be an employee of the Servicer), to the effect that: (i) The Servicer has been duly incorporated and is validly existing as a national banking association and has the power and authority to enter into, and to take all action required of it under, the Pooling and Servicing Agreement and the Servicing Agreement (as defined in the Pooling and Servicing Agreement); (ii) The Pooling and Servicing Agreement and the Servicing Agreement have been duly authorized, executed and delivered by the Servicer and, assuming valid execution and delivery thereof by the other parties thereto, the Pooling and Servicing Agreement and the Servicing Agreement constitute a valid and legally binding agreements of the Servicer, enforceable against the Servicer in accordance with their terms, subject to bankruptcy, insolvency, reorganization or other laws of general applicability relating to or affecting creditors' rights generally and to general equity principles regardless of whether such enforcement is considered in a proceeding at law or in equity; (iii) No consent, approval, authorization or order of any federal court or governmental agency or body is required for the consummation by the Servicer of the transactions contemplated by the terms of the Pooling and Servicing Agreement and the Servicing Agreement except any such as may be required under the blue sky laws of any jurisdiction in connection with the offering, sale or acquisition of the Certificates, any recordations of the assignments of the mortgage loans evidenced by the Certificates pursuant to the Pooling and Servicing Agreement that have not yet been completed and any approvals as have been obtained; (iv) The consummation by the Servicer of the transactions contemplated by the terms of the Pooling and Servicing Agreement and the Servicing Agreement do not, to the knowledge of such counsel, conflict with or result in a breach or violation of any material term or provision of, or constitute a default under, the charter or bylaws of the Servicer, any indenture or other agreement or instrument to which the Servicer is a party or by which it is bound, any federal statute or regulation applicable to the Servicer or, to the knowledge of such counsel, any order of any federal court, regulatory body, administrative agency or governmental body having jurisdiction over the Servicer; and (v) To the best knowledge of such counsel after due inquiry, there are no legal or governmental actions, investigations or proceedings pending to which the Servicer is a party, or threatened against the Servicer, (A) asserting the invalidity of the Pooling and Servicing Agreement or the Servicing Agreement or (B) which might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, the Pooling and Servicing Agreement or the Servicing Agreement. For purposes of the foregoing, such counsel may state that it has not regarded any legal or governmental actions, investigations or proceedings to be "threatened" unless the potential litigant or governmental authority has manifested to a member of the law division of Wells Fargo & Company having responsibility for litigation matters involving the servicing activities of the Servicer a present intention to initiate such proceedings. Such opinion may express its reliance as to factual matters on the representations and warranties made by, and on certificates or other documents furnished by officers of, the parties to the Pooling and Servicing Agreement or Servicing Agreement. Such opinion may assume the due authorization, execution and delivery of the instruments and documents referred to therein by the parties thereto other than the Servicer. Such opinion may be qualified as an opinion only on the federal law of the United States and, with respect to the opinions set forth in paragraph (e)(ii) above, the laws of the State of New York. To the extent that such counsel relies upon the opinion of other counsel in rendering any portion of its opinion, the opinion of such other counsel shall be attached to and delivered with the opinion of such counsel that is delivered to the Underwriter. (f) The Underwriter shall have received from counsel for the Underwriter such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Certificates, the Registration Statement, the Issuer Free Writing Prospectus and the Prospectus, and such other related matters as the Underwriter may reasonably require. (g) WFASC shall have delivered to the Underwriter (i) a letter from WFASC's independent accountants, as identified in the applicable Terms Agreement (the "Independent Accountants"), dated as of or prior to the date of first use of the Prospectus Supplement in the form and reflecting the performance of the procedures previously agreed to by WFASC and the Underwriter with respect to numerical and statistical information included in the Prospectus Supplement (other than static pool information, if any, provided pursuant to Item 1105 of Regulation AB under the Act), (ii) a letter from WFASC's Independent Accountants dated as of or prior to the date of first use of the Issuer Free Writing Prospectus in the form and reflecting the performance of the procedures previously agreed to by WFASC and the Underwriter with respect to numerical and statistical information included in the Issuer Free Writing Prospectus (other than static pool information, if any, provided pursuant to Item 1105 of Regulation AB under the Act), (iii) a copy of a letter from WFASC's Independent Accountants, addressed to WFASC, dated as of a date not more than 135 days prior to the date of first use of the Prospectus Supplement, reflecting the performance of the procedures previously agreed to by WFASC and the Independent Accountants with respect to any static pool information contained on WFASC's static pool website for securitized mortgage pools issued on or after January 1, 2006 and/or vintage origination years commencing on or after January 1, 2006 which is incorporated into the Prospectus Supplement and (iv) a bring down letter, dated the date of the Prospectus Supplement, from the Independent Accountants with respect to the letter described in clause (iii), which shall be addressed to the Underwriter provided that the Underwriter shall have complied with any reasonable requests of the Independent Accountants as a condition thereto. (h) Subsequent to the date on which WFASC notifies the Underwriter that WFASC has selected it to underwrite the offering of the Certificates, there shall not have occurred any change, or any development involving a prospective change, in or affecting the business or properties of WFASC which the Underwriter concludes, in the reasonable judgment of the Underwriter, materially impairs the investment quality of the Certificates so as to make it impractical or inadvisable to proceed with the public offering or the delivery of the Certificates as contemplated by the Issuer Free Writing Prospectus and the Prospectus. (i) The Certificates shall be rated not lower than the required ratings set forth in the applicable Terms Agreement, such ratings shall not have been rescinded and no public announcement shall have been made that any rating of the Certificates has been placed under review (otherwise than for possible upgrading). (j) The Underwriter shall have received copies of any opinions of counsel to WFASC supplied to the rating organizations relating to certain matters with respect to the Certificates. Any such opinions shall be dated the Closing Date and addressed to the Underwriter or accompanied by reliance letters to the Underwriter or shall state that the Underwriter may rely upon them. (k) WFASC shall have furnished to the Underwriter such further information, certificates and documents as the Underwriter may reasonably have requested, and all proceedings in connection with the transactions contemplated by this Agreement and all documents incident hereto shall be in all material respects reasonably satisfactory in form and substance to the Underwriter and its counsel. (l) The Underwriter shall have received a letter from counsel to WFASC, dated the Closing Date, to the effect that in the course of such counsel's review of the Prospectus and discussion of the same with certain officers of WFASC, its accountants and the Underwriter, no facts came to the attention of such counsel that caused such counsel to believe that the Prospectus, as of the date of the Prospectus Supplement, or any revision or amendment thereof or supplement thereto, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of circumstances under which they were made, not misleading; it being understood that such counsel need express no view as to any financial, numerical, statistical, or quantitative data contained in the Prospectus, or any material incorporated by reference in the Prospectus. (m) The Underwriter shall have received a letter from counsel to WFASC, dated the date of the Closing Date, to the effect that in the course of such counsel's review of the Issuer Free Writing Prospectus, no facts came to the attention of such counsel that caused such counsel to believe that as of the Time of Sale, the Issuer Free Writing Prospectus included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no view as to any blanks or bracketed items in the Issuer Free Writing Prospectus, or any financial, numerical, statistical or quantitative data contained in or omitted from the Issuer Free Writing Prospectus or any material incorporated by reference in the Issuer Free Writing Prospectus. (n) The issuance on the Closing Date of the Other Certificates. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, this Agreement and all obligations of the Underwriter hereunder may be canceled at, or at any time prior to, the Closing Date by the Underwriter. Notice of such cancellation shall be given to WFASC in writing, or by telephone or telegraph confirmed in writing. 7. Indemnification and Contribution. (a) WFASC agrees to indemnify and hold harmless the Underwriter and each person who controls the Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act, the Exchange Act, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or in the Prospectus or the Issuer Free Writing Prospectus, or in any revision or amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus or any Issuer Information contained in any Free Writing Prospectus (other than any Issuer Free Writing Prospectus); provided that such misstatement or omission was not corrected by information subsequently supplied by WFASC to the Underwriter sufficiently prior to the Time of Sale to such investor to reasonably permit the delivery thereof by the Underwriter to such investor, and WFASC agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by it or him in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that WFASC will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to WFASC by or on behalf of the Underwriter specifically for use in connection with the preparation thereof. This indemnity agreement will be in addition to any liability which WFASC may otherwise have. (b) The Underwriter agrees to indemnify and hold harmless WFASC, its officers who signed the Registration Statement or any amendment thereof, its directors, and each person who controls WFASC within the meaning of either the Act or the Exchange Act, and Wells Fargo Bank, and each person who controls Wells Fargo Bank within the meaning of either the Act or the Exchange Act, (i) to the same extent as the foregoing indemnities from WFASC to the Underwriter, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to WFASC by or on behalf of the Underwriter specifically for use in connection with the preparation of the Prospectus, the Issuer Free Writing Prospectus or any revision or amendment thereof or supplement thereto or (ii) insofar as such losses, claims, damages or liabilities (or actions in respect thereof) are based on, result from or arise out of (A) any untrue statement or alleged untrue statement of a material fact contained in any Underwriter Free Writing Prospectus, or any omission or alleged omission to state in such Underwriter Free Writing Prospectus a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading at the Time of Sale to the applicable investor, when considered in conjunction with the Time of Sale Information; except to the extent that such untrue statements or alleged untrue statements or omissions or alleged omissions are the result of untrue statements in or omissions from the Issuer Free Writing Prospectus supplied by WFASC to the Underwriter which, in any case, were not corrected by information subsequently supplied by WFASC to the Underwriter sufficiently prior to the Time of Sale to the applicable investor to reasonably permit the delivery thereof by the Underwriter to such investor or (B) any failure by the Underwriter to deliver the Issuer Free Writing Prospectus to the applicable investor prior to the Time of Sale. This indemnity agreement will be in addition to any liability which the Underwriter may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 7. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation by the indemnified party undertaken with notice to and approval by the indemnifying party. (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to (A) in subsection (a)(i) or (b)(i) above in such proportion as is appropriate to reflect both (i) the relative benefits received by WFASC on the one hand and the Underwriter on the other from the offering of the Certificates and (ii) the relative fault of WFASC on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations and (B) in subsection (a)(ii) or (b)(ii) above, in such proportion as is appropriate to reflect the relative fault of the Underwriter on the one hand and WFASC on the other in connection with the actions, statements or omissions that resulted in such losses, claims, damages or liabilities. The relative benefits received by WFASC on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by WFASC bear to the difference between (i) the total price at which the Certificates underwritten by the Underwriter and distributed to the public were offered to the public, and (ii) the portion of the total net proceeds from the offering (before deducting expenses) received by WFASC attributable to the Certificates. The relative fault for the purposes of clauses (A) and (B) above shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact related to information supplied by WFASC or the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. WFASC, Wells Fargo Bank and the Underwriter agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), and with respect to losses, claims, damages or liabilities referred to in subsection (a) or (b) above, the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Certificates underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of WFASC under this Section 7 shall be in addition to any liability which WFASC may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Underwriter within the meaning of the Act; and the obligations of the Underwriter under this Section 7 shall be in addition to any liability which the Underwriter may otherwise have and shall extend, upon the same terms and conditions, to (i) the officers of WFASC who signed the Registration Statement or any amendment thereof, to its directors, and to each person who controls WFASC within the meaning of either the Act or the Exchange Act and (ii) each person who controls Wells Fargo Bank within the meaning of either the Act or the Exchange Act. (f) As used in this Agreement, "Time of Sale" means, as to any investor in the Certificates, the time at which such investor enters into a Contract of Sale (as defined in Section 9(b)) for the Certificates, or if such Contract of Sale is subsequently terminated and a new Contract of Sale is entered into by mutual agreement between such investor and the applicable Underwriter in a manner sufficient to constitute a reformation of the contract within the contemplation of Section IV.2.c of Securities Act Release 33-8591, such time at which the new Contract of Sale is entered into, and "Time of Sale Information" means all information identified in the applicable Terms Agreement as "Time of Sale Information." 8. Obligations of Wells Fargo Bank. Wells Fargo Bank agrees with the Underwriter, for the sole and exclusive benefit of the Underwriter and each person who controls the Underwriter within the meaning of either the Act or the Exchange Act and not for the benefit of any assignee thereof or any other person or persons dealing with the Underwriter, in consideration of and as an inducement to its agreement to purchase the Certificates from WFASC, to indemnify and hold harmless the Underwriter against any failure by WFASC to perform its obligations to the Underwriter (including its contribution obligation) pursuant to Section 7 hereof; provided, however, that the aggregate liability of Wells Fargo Bank for the foregoing indemnity shall not exceed an amount equal to the aggregate principal amount of the Certificates. 9. Offering Communications; Free Writing Prospectuses. (a) Unless preceded or accompanied by a prospectus satisfying the requirements of Section 10(a) of the Act, the Underwriter shall not convey or deliver any written communication, as defined in Rule 405 under the Act (a "Written Communication"), to any person in connection with the initial offering of the Certificates, unless such Written Communication (i) is made in reliance on and in conformity with Rule 134 under the Act, (ii) constitutes a prospectus satisfying the requirements of Rule 430B under the Act or (iii) constitutes a "free writing prospectus," as defined in Rule 405 under the Act (a "Free Writing Prospectus"). Notwithstanding anything to the contrary contained in this Agreement, without the prior written consent of WFASC, which may be withheld in its sole discretion, the Underwriter shall not convey or deliver in connection with the initial offering of the Certificates, any Free Writing Prospectus unless such Free Writing Prospectus contains only ABS Informational and Computational Material, as defined in Item 1101(a) of Regulation AB under the Act ("ABS Informational and Computational Material"). The Underwriter shall not convey or deliver any ABS Informational and Computational Material in reliance on Rules 167 and 426 under the Act. Any Free Writing Prospectus prepared by or on behalf of the Underwriter is referred to as an "Underwriter Free Writing Prospectus." (b) WFASC shall prepare a Free Writing Prospectus (the "Issuer Free Writing Prospectus") and shall deliver such Issuer Free Writing Prospectus to the Underwriter after it files such Issuer Free Writing Prospectus with the Commission and the Underwriter shall not convey or deliver such Issuer Free Writing Prospectus to any person or entity until WFASC has notified the Underwriter that it has completed such filing. Thereafter, the Issuer Free Writing Prospectus may be used by the Underwriter solely in connection with the marketing of the Certificates to institutional investors; provided however, the Underwriter shall not enter into any "contract of sale" with any investor, within the meaning of Rule 159 under the Act (a "Contract of Sale"), with respect to any Certificates, unless prior to the Time of Sale to each investor in the Certificates, the Underwriter shall have delivered to such investor the Issuer Free Writing Prospectus and any additional Time of Sale Information, together with any amendment or supplement thereto supplied by WFASC to the Underwriter sufficiently prior to the Time of Sale to such investor to reasonably permit delivery thereof by the Underwriter to such investor. (c) (i) The Underwriter shall deliver to WFASC each Underwriter Free Writing Prospectus that contains any "issuer information," as defined in Rule 433(h) under the Act and footnote 271 of Securities Act Release No. 33-8591 ("Issuer Information") if such Underwriter Free Writing Prospectus or the portion thereof consisting of Issuer Information is required to be filed by WFASC with the Commission pursuant to Rule 433 under the Act ("Rule 433"). (ii) Any Underwriter Free Writing Prospectus that is required to be delivered pursuant to Section 9(c)(i) shall be delivered by the Underwriter to WFASC no later than two business days prior to the due date for filing of the Prospectus pursuant to Rule 424(b) under the Act; provided however, that if such Underwriter Free Writing Prospectus contains any information other than ABS Informational and Computational Material, it shall instead be delivered by the Underwriter to WFASC not later than two business days prior to the date of first use of such Free Writing Prospectus. (iii) Not later than one business day after the Underwriter has determined the final structure of all classes of Certificates, and in no event later than the fourth business day preceding the due date for filing the final Prospectus pursuant to Rule 424(b) under the Act, the Underwriter shall prepare and deliver to WFASC an Underwriter Free Writing Prospectus (which may consist of a term sheet) containing a description of the final structure of the Certificates, irrespective of whether such Underwriter Free Writing Prospectus has been or will be conveyed or delivered by the Underwriter to any investor in the Certificates. (iv) To facilitate the filing thereof by WFASC, the Underwriter shall provide the Issuer Information contained in any Underwriter Free Writing Prospectus that is required to be delivered to WFASC pursuant to this Section 9(c) in a separate document from the portion of such Free Writing Prospectus which contains information other than Issuer Information. (d) The Underwriter represents and warrants to WFASC that the Underwriter Free Writing Prospectuses required to be furnished to WFASC by the Underwriter pursuant to Section 9(c) will constitute all Underwriter Free Writing Prospectuses of the type described therein that were furnished to prospective investors by the Underwriter in connection with its offer and sale of the Certificates. (e) The Underwriter represents and warrants to WFASC that each Underwriter Free Writing Prospectus provided by it to an investor in the Certificates did not, as of the Time of Sale to any prospective investor to which such Underwriter Free Writing Prospectus was conveyed, include any untrue statement of a material fact or omit any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading when considered in conjunction with the Time of Sale Information; provided however, that the Underwriter makes no representation to the extent such misstatements or omissions were the result of any misstatements that are a substantial restatement in all material respects of a misstatement made in the Issuer Free Writing Prospectus which misstatements were not corrected by information subsequently supplied by WFASC sufficiently prior to the Time of Sale to the applicable investor to reasonably permit delivery thereof by the Underwriter to such investor. (f) Unless WFASC determines that such filing is not required under Rule 433, WFASC agrees to file with the Commission, within the applicable time periods specified in Rule 433, the following: (i) Any Issuer Free Writing Prospectus; and (ii) Any Underwriter Free Writing Prospectus delivered by the Underwriter to WFASC pursuant to Section 9(c) or, at the election of WFASC, the portion of such Underwriter Free Writing Prospectus which consists of Issuer Information. (g) The Underwriter shall file with the Commission, within the applicable time period specified in Rule 433, any Free Writing Prospectus that is distributed by or on behalf of the Underwriter in a manner reasonably designed to lead to its broad, unrestricted dissemination. (h) WFASC and the Underwriter each agrees that any Free Writing Prospectuses prepared by it shall contain substantially the following legend: The depositor has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the depositor and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free 1-8[xx-xxx-xxxx] The asset-backed securities referred to in these materials, and the asset pools backing them, are subject to modification or revision (including the possibility that one or more classes of securities may be split, combined or eliminated at any time prior to issuance or availability of a final prospectus) and are offered on a "when, as and if issued" basis. You understand that, when you are considering the purchase of these securities, a contract of sale will come into being no sooner than the date on which the relevant class has been priced and the underwriter has confirmed the allocation of securities to be made to you; any "indications of interest" expressed by you, and any "soft circles" generated by the underwriter, will not create binding contractual obligations for you, the underwriter or us. (i) The Underwriter agrees to comply with the requirements of Rule 433 under the Act applicable to the Underwriter including, without limitation, the record retention requirements therein. (j) (i) The Underwriter agrees to keep and maintain, for a period of not less than three years following the date of initial issuance of the Certificates, written records documenting, as to each investor in Certificates, the Time of Sale and the date on which each Issuer Free Writing Prospectus and each Underwriter Free Writing Prospectus was conveyed to such investor. (ii) In the event of any litigation or written notice of potential litigation against WFASC or any of its affiliates with respect to the Certificates, the Underwriter shall, upon the request of WFASC, make available to WFASC copies of all records required to be maintained by it pursuant to Section 9(j)(i) and any Free Writing Prospectus required to be retained by it pursuant to Section 9(i). (k) [Reserved] (l) (i) In the event that WFASC becomes aware that the Issuer Free Writing Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading (such Free Writing Prospectus, a "Defective Issuer Free Writing Prospectus"), WFASC shall notify the Underwriter thereof within one business day after discovery and WFASC shall prepare and deliver to the Underwriter a Free Writing Prospectus which corrects the material misstatement or omission in the Defective Issuer Free Writing Prospectus (such corrected Issuer Free Writing Prospectus, a "Corrected Issuer Free Writing Prospectus"). (ii) In the event that the Underwriter becomes aware that, as of the applicable Time of Sale to an investor in the Certificates, any Underwriter Free Writing Prospectus prepared by or on behalf of the Underwriter and delivered to such investor contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, when considered in conjunction with the Time of Sale Information (such Free Writing Prospectus, a "Defective Underwriter Free Writing Prospectus and, together with a Defective Issuer Free Writing Prospectus, a "Defective Free Writing Prospectus"), the Underwriter shall notify WFASC thereof within one business day after discovery. (iii) The Underwriter shall, if requested by WFASC: (A) prepare a Free Writing Prospectus which corrects the material misstatement in or omission from the Defective Underwriter Free Writing Prospectus (such corrected Underwriter Free Writing Prospectus, a "Corrected Underwriter Free Writing Prospectus" and, together with a Corrected Issuer Free Writing Prospectus, a "Corrected Free Writing Prospectus"); (B) deliver the Corrected Free Writing Prospectus to each investor which received the Defective Free Writing Prospectus prior to entering into a Contract of Sale; (C) provide such investor with the following: (1) adequate disclosure of the contractual arrangement; (2) adequate disclosure of the investor's rights under the existing Contract of Sale at the time termination is sought; (3) adequate disclosure of the new information that is necessary to correct the misstatements or omissions in the information given at the time of the original Contract of Sale; and (4) a meaningful ability to elect to terminate or not terminate the prior Contract of Sale and to elect to enter into or not enter into a new Contract of Sale; and (D) comply with any other requirements for reformation of the original Contract of Sale described in Section IV.2.c of Securities Act Release Act 33-8591. (m) The Underwriter covenants with WFASC that it will make available to WFASC, upon reasonable prior notice and at reasonable times during normal business hours, such personnel as are familiar with the Underwriter's compliance procedures for the purpose of answering questions concerning the Underwriter's practices and procedures for the preparation and dissemination of Written Communications concerning the Certificates to prospective investors prior to the delivery of the final Prospectus to such investors. (n) The Underwriter covenants with WFASC that after the final Prospectus is available, the Underwriter shall not distribute any Written Communication concerning the Certificates to a prospective investor unless such communication is preceded or accompanied by the final Prospectus. (o) The Underwriter agrees, upon request of WFASC, to provide to WFASC any information within the control of the Underwriter which WFASC may reasonably request to enable WFASC to timely and accurately meet its disclosure and reporting obligations under the Act and the Exchange Act. (p) The Underwriter agrees to cause any credit enhancement provider, derivative counterparty, special servicer or credit risk manager arranged by the Underwriter in connection with the Certificates to provide to WFASC such narrative disclosure, financial information, including required accountants' consents, and other information as WFASC may reasonably request to enable WFASC to timely and accurately meet its disclosure and reporting obligations under the Act and the Exchange Act. In addition, upon request by WFASC, the Underwriter agrees to cause the party providing the information required by the immediately preceding sentence to provide indemnity satisfactory to WFASC relating to such disclosure and financial information. (q) Notwithstanding any other provision herein, the Underwriter and WFASC each agree to pay all costs and expenses of the other party including, without limitation, legal fees and expenses, incurred in connection with any successful action by the Underwriter or WFASC against the other party to enforce any of its rights set forth in this Section 9. 10. Termination. Subsequent to the execution of the applicable Terms Agreement, this Agreement shall be subject to termination in the absolute discretion of the Underwriter, by notice given to WFASC prior to delivery of and payment for the Certificates, if prior to such time (i) trading in securities generally on the New York Stock Exchange shall have been suspended or materially limited or any setting of minimum prices for trading on such exchange shall have been instituted, (ii) a general moratorium on commercial banking activities in the State of New York shall have been declared by either federal or New York State authorities or there shall have occurred a material disruption in securities settlement or clearance services in the United States, or (iii) there shall have occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the reasonable judgment of the Underwriter, impracticable or inadvisable to market the Certificates on the terms and in the manner contemplated by the Prospectus as amended or supplemented. In addition, following receipt of notice from WFASC that the Mortgage Loans will not conform to the specifications set forth in the applicable Terms Agreement, if, in the reasonable judgment of the Underwriter, such disparity would have a material adverse effect on the marketing and sale of the Certificates, the Underwriter may terminate this Agreement not later than the close of business on the first business day after receipt of such notice or, if earlier, the Closing Date. 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of WFASC, Wells Fargo Bank and their respective officers and of the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Underwriter, WFASC, Wells Fargo Bank or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Certificates. The provisions of Section 5(d), Section 7, Section 8 and Section 12 hereof shall survive the termination or cancellation of this Agreement. 12. Reimbursement of Expenses. If for any reason, other than default by the Underwriter in its obligation to purchase the Certificates, the material breach by the Underwriter of any of its covenants in Section 9 hereof (without the fault of WFASC) or termination by the Underwriter pursuant to Section 10 hereof, the Certificates are not delivered by or on behalf of WFASC as provided herein, WFASC will reimburse the Underwriter for all out-of-pocket expenses of the Underwriter, including reasonable fees and disbursements of its counsel, reasonably incurred by the Underwriter in making preparations for the purchase, sale and delivery of the Certificates, but WFASC and Wells Fargo Bank shall then be under no further liability to the Underwriter with respect to the Certificates except as provided in Section 5(d), Section 7 and Section 8 hereof. If the Certificates are not delivered by or on behalf of WFASC as provided herein because of the default by the Underwriter in its obligation to purchase the Certificates or the material breach by the Underwriter of any of its covenants in Section 9 hereof (without the fault of WFASC), the Underwriter will reimburse WFASC for all out-of-pocket expenses of WFASC, including reasonable fees and disbursements of its counsel, reasonably incurred by WFASC in making preparations for the issuance and delivery of the Certificates, but the Underwriter shall then be under no further liability to WFASC with respect to the Certificates except as provided in Sections 5(d) and 7 hereof. 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 7 hereof and their respective successors and assigns, and no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York. 15. Final Structure Due Date. The Underwriter agrees to submit to WFASC not later than 9:00 a.m. New York City Time on the Final Structure Due Date specified in the applicable Terms Agreement its determination of the final structure relating to, among other items, the class designations, approximate principal amounts and payment priorities of the Certificates. Changes to such final structure may be made by the Underwriter after the Final Structure Due Date if the changes are of a non-material nature. The determination as to whether such changes are non-material shall be in the sole discretion of WFASC. In addition, on or before the Final Structure Due Date the Underwriter may elect an extension thereof for an additional one or two business days beyond the original Final Structure Due Date if the Underwriter notifies WFASC of its election not later than 9:00 a.m. New York City Time on such original Final Structure Due Date and the Underwriter pays to WFASC, on or prior to the Closing Date, an extension fee of $10,000 for each day the Final Structure Due Date is extended as reimbursement for WFASC's costs and expenses arising from such extension. 16. Miscellaneous. Time shall be of the essence of this Agreement. This Agreement supersedes all prior or contemporaneous agreements and understandings relating to the subject matter hereof. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument. 17. Notices. All communications hereunder will be in writing and effective only on receipt and, if sent to the Underwriter, will be delivered to [____________________] or if sent to WFASC, will be delivered to WFASC at 7430 New Technology Way, Frederick, Maryland 21703; or if sent to Wells Fargo Bank, will be delivered to Wells Fargo Bank at 1 Home Campus, Des Moines, Iowa 50328-0001, Attn: Office of General Counsel, Wells Fargo Home Mortgage division. * * * If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this letter and your acceptance shall represent a binding agreement by and among WFASC, Wells Fargo Bank and the Underwriter, effective as of the date first above written and executed as of the date or dates indicated below. Very truly yours, WELLS FARGO ASSET SECURITIES CORPORATION By: __________________________ Name: Title: WELLS FARGO BANK, N.A. By: __________________________ Name: Title: The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. [UNDERWRITER] By: __________________________ Name: Title: Exhibit A WELLS FARGO ASSET SECURITIES CORPORATION Asset-Backed Certificates FORM OF TERMS AGREEMENT [Underwriter] ____________, 20__ Underwriting Agreement dated [____], 2006. Title of Certificates: Asset-Backed Certificates, Series 200_-, (Classes) (the "Offered Certificates"). Underwriter: [____________] Classes of Certificates: Each of the Class A and Class M Certificates will consist of one or more classes with the prior consent of Wells Fargo Asset Securities Corporation (the "Seller"), which consent shall not be unreasonably withheld. Aggregate Principal Amount of the $_________(Approximate) Offered Certificates: Certificates Not Offered Hereby: The Class [___] Certificates (the "Other Certificates"). Subordination: [_________]. Time of Sale Information: [_________]. Minimum Denominations of Offered Certificates:
Class Minimum Denomination Incremental Denomination - ----- -------------------- ------------------------ Classes A $ 25,000 $1,000 Classes M $ [ ] $1,000 Description of the Mortgage Loans: Fixed and adjustable interest rate, monthly pay, one- to four-family, subprime residential first mortgage loans having original stated terms to maturity of approximately [ ] years. REMIC Election: Yes. Cut-Off Date: ________________1 ,20__ Final Structure Due Date: ________________ __ ,20__ Distributions: Distributions will be made monthly on the 25th day of each month or the next succeeding Business Day (the "Distribution Date"). Servicing Fee (Monthly fee payable to the [___] % per annum (or as described in the prospectus Servicer): supplement). Fixed Retained Yield: [Yes][No]. Trustee: [Securities Administrator:] [_________________] Independent Accounts: Book-Entry Registration: Settlement in "same-day" funds, to the extent practicable. REMIC residual certificates will not be issued in book-entry form, unless authorized by the Seller. Optional Termination: [_____] Required Ratings: [Ratings] Mortgage related securities: [_____] Registration File Number: [333-_____] Closing Date, Location and Time: ____________, __, 20__; offices of Cadwalader, Wickersham & Taft LLP, New York, New York; 10:00 a.m. New York City time.
Purchase Price for Offered Certificates: In each case, as offered and sold pursuant to this Terms Agreement. Notwithstanding any other provision of the above-referenced Underwriting Agreement, all references to the Registration Statement in the Underwriting Agreement shall be with reference to File No. [____] Subject to the terms and conditions and in reliance upon the representations and warranties set forth in the above-referenced Underwriting Agreement (which is incorporated herein in its entirety and made a part hereof) as supplemented by this Terms Agreement, the Seller agrees to sell to the Underwriter, and the Underwriter agrees to purchase from the Seller, the Offered Certificates. * * * If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this letter and your acceptance shall represent a binding agreement by and among the Seller, Wells Fargo Bank, N.A. and the Underwriter. Very truly yours, WELLS FARGO ASSET SECURITIES CORPORATION By: ------------------------------------ Name: Title: WELLS FARGO BANK, N.A. By: ------------------------------------ Name: Title: The foregoing Terms Agreement is hereby confirmed and accepted as of the date first above written. [UNDERWRITER] By: ------------------------------------ Name: Title: EX-4.1 3 we890449-ex4_1.txt POOLING AND SERVICING AGREEMENT ============================================================================== WELLS FARGO ASSET SECURITIES CORPORATION, Depositor WELLS FARGO BANK, N.A., Servicer WELLS FARGO BANK, N.A., Securities Administrator and HSBC Bank USA, National Association, Trustee POOLING AND SERVICING AGREEMENT Dated as of [ ], 200 Home Equity Asset-Backed Certificates, Series 200 - ============================================================================== TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.01 Defined Terms..................................................5 Section 1.02 Accounting................................................... ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES Section 2.01 Conveyance of Mortgage Loans................................. Section 2.02 Acceptance by Custodian...................................... Section 2.03 Repurchase or Substitution of Mortgage Loans by the Depositor................................................... Section 2.04 Representations and Warranties of the Depositor with respect to the Mortgage Loans............................... Section 2.05 Representations, Warranties and Covenants of the Servicer.... Section 2.06 Representations and Warranties of the Depositor.............. Section 2.07 Issuance of Certificates and the Uncertificated Regular Interests................................................... ARTICLE III ADMINISTRATION AND SERVICING OF THE TRUST FUND Section 3.01 Servicer to Act as Servicer.................................. Section 3.02 Collection of Mortgage Loan Payments......................... Section 3.03 Realization Upon Defaulted Mortgage Loans.................... Section 3.04 Collection Account, Distribution Account and Reserve Account..................................................... Section 3.05 Permitted Withdrawals From the Collection Account............ Section 3.06 Establishment of Escrow Accounts; Deposits in Escrow Accounts.................................................... Section 3.07 Permitted Withdrawals From Escrow Account.................... Section 3.08 Payment of Taxes, Insurance and Other Charges; Collections Thereunder; Primary Mortgage Insurance.......... Section 3.09 Transfer of Accounts......................................... Section 3.10 Maintenance of Hazard Insurance.............................. Section 3.11 Maintenance of Mortgage Impairment Insurance Policy.......... Section 3.12 Fidelity Bond, Errors and Omissions Insurance................ Section 3.13 Title, Management and Disposition of REO Property............ Section 3.14 Due-on-Sale Clauses; Assumption and Substitution Agreements.................................................. Section 3.15 Duties of the Credit Risk Manager............................ Section 3.16 Optional Purchases of 60+ Day Delinquent Loans............... Section 3.17 Trustee to Cooperate; Release of Files....................... Section 3.18 Servicing Compensation....................................... Section 3.19 Annual Statement as to Compliance............................ Section 3.20 Assessment of Servicing Compliance; Registered Public Accounting Firm Attestation Reports......................... Section 3.21 Access to Certain Documentation and Information Regarding the Mortgage Loans.......................................... Section 3.22 Obligations of the Servicer in Respect of Compensating Interest.................................................... Section 3.23 Investment of Funds in the Collection Account and the Distribution Account........................................ Section 3.24 Liability of Servicer; Indemnification....................... Section 3.25 Reports of Foreclosure and Abandonment of Mortgaged Properties.................................................. Section 3.26 Limitation of Liability of the Credit Risk Manager........... Section 3.27 No Personal Solicitation..................................... Section 3.28 Exchange Act Reports......................................... ARTICLE IV FLOW OF FUNDS Section 4.01 Interest Distributions........................................ Section 4.02 Distributions of Principal and Monthly Excess Cashflow Amounts..................................................... Section 4.03 Allocation of Losses......................................... Section 4.04 Method of Distribution....................................... Section 4.05 Distributions on Book-Entry Certificates..................... Section 4.06 Statements................................................... Section 4.07 Remittance Reports; Advances................................. Section 4.08 REMIC Distributions.......................................... ARTICLE V THE CERTIFICATES Section 5.01 The Certificates............................................. Section 5.02 Registration of Transfer and Exchange of Certificates........ Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates............ Section 5.04 Persons Deemed Owners........................................ Section 5.05 Appointment of Paying Agent.................................. ARTICLE VI THE SERVICER AND THE DEPOSITOR Section 6.01 Liability of the Servicer and the Depositor.................. Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor............... Section 6.03 Limitation on Liability of the Servicer and Others........... Section 6.04 Servicer Not to Resign....................................... Section 6.05 Delegation of Duties......................................... ARTICLE VII DEFAULT Section 7.01 Servicer Events of Termination............................... Section 7.02 Trustee to Act; Appointment of Successor..................... Section 7.03 Waiver of Defaults........................................... Section 7.04 Notification to Certificateholders........................... Section 7.05 Survival of Servicer Liabilities............................. ARTICLE VIII THE TRUSTEE AND THE SECURITIES ADMINISTRATOR Section 8.01 Duties of Trustee and Securities Administrator............... Section 8.02 Certain Matters Affecting the Trustee and the Securities Administrator............................................... Section 8.03 Trustee and Securities Administrator Not Liable for Certificates or Mortgage Loans.............................. Section 8.04 Trustee and Securities Administrator May Own Certificates.... Section 8.05 Trustee and Securities Administrator Fees and Expenses....... Section 8.06 Eligibility Requirements for Trustee and Securities Administrator............................................... Section 8.07 Resignation or Removal of Trustee and Securities Administrator............................................... Section 8.08 Successor Trustee and Successor Securities Administrator..... Section 8.09 Merger or Consolidation of Trustee or Securities Administrator............................................... Section 8.10 Appointment of Co-Trustee or Separate Trustee................ Section 8.11 Limitation of Liability...................................... Section 8.12 Trustee or Securities Administrator May Enforce Claims Without Possession of Certificates.......................... Section 8.13 Suits for Enforcement........................................ Section 8.14 Waiver of Bond Requirement................................... Section 8.15 Waiver of Inventory, Accounting and Appraisal Requirement.... Section 8.16 Appointment of Custodian..................................... ARTICLE IX REMIC AND GRANTOR TRUST ADMINISTRATION Section 9.01 REMIC Administration......................................... Section 9.02 Prohibited Transactions and Activities....................... Section 9.03 Indemnification with Respect to Certain Taxes and Loss of REMIC Status................................................ Section 9.04 REO Property................................................. Section 9.05 Grantor Trust Administration................................. ARTICLE X TERMINATION Section 10.01 Termination.................................................. Section 10.02 Additional Termination Requirements.......................... ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.01 Amendment.................................................... Section 11.02 Recordation of Agreement; Counterparts....................... Section 11.03 Limitation on Rights of Certificateholders................... Section 11.04 Governing Law; Jurisdiction.................................. Section 11.05 Notices...................................................... Section 11.06 Severability of Provisions................................... Section 11.07 Article and Section References............................... Section 11.08 Notice to the Rating Agencies................................ Section 11.09 Further Assurances........................................... Section 11.10 Benefits of Agreement........................................ Section 11.11 Acts of Certificateholders................................... Section 11.12 Regulation AB Compliance; Intent of Parties; Reasonableness.............................................. EXHIBITS: Exhibit A-1 Form of Class AI-1A Certificates Exhibit A-2 Form of Class AI-1B Certificates Exhibit A-4 Form of Class AII-1 Certificates Exhibit A-5 Form of Class AII-2 Certificates Exhibit A-6 Form of Class AII-3 Certificates Exhibit B-1 Form of Class M-1 Certificates Exhibit B-2 Form of Class M-2 Certificates Exhibit B-3 Form of Class M-3 Certificates Exhibit B-4 Form of Class M-4 Certificates Exhibit B-5 Form of Class M-5 Certificates Exhibit B-6 Form of Class M-6 Certificates Exhibit B-7 Form of Class M-7 Certificates Exhibit B-8 Form of Class M-8 Certificates Exhibit B-9 Form of Class M-9 Certificates Exhibit B-10 Form of Class M-10 Certificates Exhibit B-11 Form of Class M-11 Certificates Exhibit B-12 Form of Class M-12 Certificates Exhibit B-13 Form of Class M-13 Certificates Exhibit C-1 Form of Class CE Certificates Exhibit C-2 Form of Class P Certificates Exhibit C-3 Form of Class R Certificates Exhibit C-4 Form of Class R-X Certificates Exhibit D-1 Addresses for Requesting Mortgage Loan Schedule Exhibit E Form of Request for Release Exhibit F-1 Form of Custodian's Initial Certification Exhibit F-2 Form of Custodian's Final Certification Exhibit G Form of Mortgage Loan Purchase Agreement Exhibit H Form of Lost Note Affidavit Exhibit I Form of ERISA Representation Letter Exhibit J Form of Rule 144A Investment Letter Exhibit K Form of Class [R] [R-X] Certificate Transfer Affidavit Exhibit L Form of Transferor Certificate for the Class M-12, Class M-13, Class CE, Class P, Class R and Class R-X Certificates Exhibit M Monthly Information Provided by Servicer Exhibit N Form of Yield Maintenance Agreement Exhibit O Form of Sarbanes-Oxley Certification Exhibit P Form of Certification of the Securities Administrator to be Provided to Servicer Exhibit Q List of Recordation States Exhibit R Form of Custodial Agreement Exhibit S Servicing Criteria to be Addressed in Assessment of Compliance Exhibit T Additional Form 10-D Disclosure Exhibit U Additional Form 10-K Disclosure Exhibit V Form 8-K Disclosure Information Exhibit W Additional Disclosure Notification This Pooling and Servicing Agreement is dated as of [ ], 200 (the "Agreement"), among WELLS FARGO ASSET SECURITIES CORPORATION, as depositor (the "Depositor"), WELLS FARGO BANK, N.A., as servicer (the "Servicer"), WELLS FARGO BANK, N.A., as securities administrator (the "Securities Administrator") and HSBC BANK USA, NATIONAL ASSOCIATION, as trustee (the "Trustee"). PRELIMINARY STATEMENT The Depositor intends to sell pass-through certificates (collectively, the "Certificates"), to be issued hereunder in multiple Classes, which in the aggregate will evidence the entire beneficial ownership interest in the Trust Fund created hereunder. The Certificates will consist of twenty-two Classes of Certificates, designated as (i) the Class AI-1A, Class AI-1B, Class AII-1, Class AII-2 and Class AII-3 Certificates, (ii) 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 and Class M-13 Certificates, (iii) the Class CE Certificates, (iv) the Class P Certificates and (v) the Class R and Class R-X Certificates. REMIC 1 As provided herein, the Trustee will make an election to treat the segregated pool of assets consisting of the Mortgage Loans and certain other related assets subject to this Agreement (but exclusive of the Yield Maintenance Agreement, the Reserve Account, the Cap Carryover Amounts, the Prepayment Penalties, the Servicer Prepayment Penalty Payment Amounts and the Originator Prepayment Penalty Payment Amounts) as a real estate investment conduit (a "REMIC") for federal income tax purposes, and such segregated pool of assets will be designated as "REMIC 1." The Class R-1 Interest will represent the sole class of "residual interests" in REMIC 1 for purposes of the REMIC Provisions under federal income tax law. The following table irrevocably sets forth the designation, the Uncertificated REMIC 1 Pass-Through Rate, the initial Uncertificated Principal Balance, and solely for purposes of satisfying Treasury Regulations Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC 1 Regular Interests. None of the REMIC 1 Regular Interests will be certificated. =========================================================================== Uncertificated Initial REMIC 1 Uncertificated Latest Possible Designation Pass-Through Rate Principal Balance Maturity Date(1) - --------------------------------------------------------------------------- LT1AA Variable(2) $ [______], 20 LT1AI1A Variable(2) $ [______], 20 LT1AI1B Variable(2) $ [______], 20 LT1AII1 Variable(2) $ [______], 20 LT1AII2 Variable(2) $ [______], 20 LT1AII3 Variable(2) $ [______], 20 LT1M1 Variable(2) $ [______], 20 LT1M2 Variable(2) $ [______], 20 LT1M3 Variable(2) $ [______], 20 LT1M4 Variable(2) $ [______], 20 LT1M5 Variable(2) $ [______], 20 LT1M6 Variable(2) $ [______], 20 LT1M7 Variable(2) $ [______], 20 LT1M8 Variable(2) $ [______], 20 LT1M9 Variable(2) $ [______], 20 LT1M10 Variable(2) $ [______], 20 LT1M11 Variable(2) $ [______], 20 LT1M12 Variable(2) $ [______], 20 LT1M13 Variable(2) $ [______], 20 LT1ZZ Variable(2) $ [______], 20 LT1SUB Variable(2) $ [______], 20 LT1GRP Variable(2) $ [______], 20 LT2SUB Variable(2) $ [______], 20 LT2GRP Variable(2) $ [______], 20 LT1XX Variable(2) $ [______], 20 ============================================================================= (1) Solely for purposes of Treasury Regulations Section 1.860G-1(a)(4)(iii), the Distribution Date immediately following the maturity date for the Mortgage Loan with the latest maturity date has been designated as the "latest possible maturity date" for each REMIC 1 Regular Interest. (2) Calculated in accordance with the definition of "Uncertificated REMIC 1 Pass-Through Rate" herein. REMIC 2 As provided herein, the Trustee shall make an election to treat the segregated pool of assets consisting of the REMIC 1 Regular Interests as a REMIC for federal income tax purposes, and such segregated pool of assets will be designated as "REMIC 2." The Class R-2 Interest represents the sole class of "residual interests" in REMIC 2 for purposes of the REMIC Provisions. The following table sets forth (or describes) the Class designation, Original Principal Balance, the Pass-Through Rate and Assumed Final Maturity Dates for each Class of Certificates and the Class CE Uncertificated Interest comprising the interests in the Trust Fund created hereunder: ============================================================================= Original Pass-Through Assumed Final Class Principal Balance Rate Maturity Dates* - ----------------------------------------------------------------------------- AI-1A $ (1) [___], 20 AI-1B $ (2) [___], 20 AII-1 $ (3) [___], 20 AII-2 $ (4) [___], 20 AII-3 $ (5) [___], 20 M-1 $ (6) [___], 20 M-2 $ (7) [___], 20 M-3 $ (8) [___], 20 M-4 $ (9) [___], 20 M-5 $ (10) [___], 20 M-6 $ (11) [___], 20 M-7 $ (12) [___], 20 M-8 $ (13) [___], 20 M-9 $ (14) [___], 20 M-10 $ (15) [___], 20 M-11 $ (16) [___], 20 M-12 $ (17) [___], 20 M-13 $ (18) [___], 20 CE (19) (19) N/A P N/A N/A N/A R N/A N/A N/A R-X N/A N/A N/A Total $ N/A ============================================================================= * Solely for purposes of Treasury Regulations Section 1.860G-1(a)(4)(iii), the Distribution Date following the maturity date for the Mortgage Loan with the latest maturity date has been designated as the "latest possible maturity date" for each Class of Certificates and the Class CE Uncertificated Interest that represents one or more of the "regular interests" in REMIC 2. (1) The Pass-Through Rate for the Class AI-1A Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class AI-1A Formula Rate and (ii) the Group I Cap for such Distribution Date. (2) The Pass-Through Rate for the Class AI-1B Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class AI-1B Formula Rate and (ii) the Group I Cap for such Distribution Date. (3) The Pass-Through Rate for the Class AII-1 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class AII-1 Formula Rate and (ii) the Group II Cap for such Distribution Date. (4) The Pass-Through Rate for the Class AII-2 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class AII-2 Formula Rate and (ii) the Group II Cap for such Distribution Date. (5) The Pass-Through Rate for the Class AII-3 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class AII-3 Formula Rate and (ii) the Group II Cap for such Distribution Date. (6) The Pass-Through Rate for the Class M-1 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-1 Formula Rate and (ii) the Pool Cap for such Distribution Date. (7) The Pass-Through Rate for the Class M-2 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-2 Formula Rate and (ii) the Pool Cap for such Distribution Date. (8) The Pass-Through Rate for the Class M-3 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-3 Formula Rate and (ii) the Pool Cap for such Distribution Date. (9) The Pass-Through Rate for the Class M-4 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-4 Formula Rate and (ii) the Pool Cap for such Distribution Date. (10) The Pass-Through Rate for the Class M-5 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-5 Formula Rate and (ii) the Pool Cap for such Distribution Date. (11) The Pass-Through Rate for the Class M-6 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-6 Formula Rate and (ii) the Pool Cap for such Distribution Date. (12) The Pass-Through Rate for the Class M-7 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-7 Formula Rate and (ii) the Pool Cap for such Distribution Date. (13) The Pass-Through Rate for the Class M-8 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-8 Formula Rate and (ii) the Pool Cap for such Distribution Date. (14) The Pass-Through Rate for the Class M-9 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-9 Formula Rate and (ii) the Pool Cap for such Distribution Date. (15) The Pass-Through Rate for the Class M-10 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-10 Formula Rate and (ii) the Pool Cap for such Distribution Date. (16) The Pass-Through Rate for the Class M-11 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-11 Formula Rate and (ii) the Pool Cap for such Distribution Date. (17) The Pass-Through Rate for the Class M-12 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-12 Formula Rate and (ii) the Pool Cap for such Distribution Date. (18) The Pass-Through Rate for the Class M-13 Certificates during each Interest Accrual Period is equal to the lesser of: (i) the Class M-13 Formula Rate and (ii) the Pool Cap for such Distribution Date. (19) REMIC 2 will issue an Uncertificated Regular Interest economically equivalent to the Class CE Uncertificated Interest. That Regular Interest will be an asset of REMIC A which will issue the Class CE Certificates as described under "REMIC A" in this Preliminary Statement. Solely for REMIC purposes, the Class CE Certificates will (i) have an Original Principal Balance equal to the Initial Overcollateralization Amount (but will not bear interest on such amount) and (ii) will bear interest on its Notional Amount. REMIC A As provided herein, the Trustee shall make an election to treat the segregated pool of assets consisting of the Class CE Uncertificated Interest as a REMIC for federal income tax purposes, and such segregated pool of assets will be designated as "REMIC A." The Class CE Certificates (other than the obligation of the Class CE Certificates to make payments with respect to Cap Carryover Amounts) represent the sole class of regular interests and the Class R-X Certificate represents the sole class of "residual interests" in REMIC A for purposes of the REMIC Provisions. Solely for REMIC purposes, the Class CE Certificates shall have a principal balance equal to the Class CE Uncertificated Interest and shall bear interest at the same rate as the Class CE Uncertificated Interest, in each case as described in footnote (19) relating to REMIC 2. Solely for purposes of Treasury Regulations Section 1.860G-1(a)(4)(iii), the Distribution Date following the maturity date for the Mortgage Loan with the latest maturity date has been designated as the "latest possible maturity date" for the Class CE Certificates. ARTICLE I DEFINITIONS Section 1.01 Defined Terms. Whenever used in this Agreement or in the Preliminary Statement, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Article. Interest on all Regular Certificates will be calculated on the basis of the actual number of days in the related Interest Accrual Period and a 360-day year. "1933 Act" The Securities Act of 1933, as amended. "60+ Day Delinquent Loan" 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. "Account" Any of the Collection Account, the Distribution Account, the Reserve Account or the Escrow Account. "Accrued Certificate Interest" With respect to each Distribution Date and Class of Certificates (other than the Class CE, Class P and Residual Certificates), an amount equal to the interest accrued at the Pass-Through Rate set forth or described for such Class in the table in the Preliminary Statement during the related Interest Accrual Period on the Principal Balance of such Class of Certificates, reduced by such Class' Interest Percentage of any Current Interest Shortfall for such Distribution Date. "Additional Form 10-D Disclosure" As defined in Section 3.28(a). "Additional Form 10-K Disclosure" As defined in Section 3.28(b). "Additional Servicer" As defined in Section 6.05. "Adjustable Rate Mortgage Loan" A Mortgage Loan which has a rate at which interest accrues that adjusts based on the Index plus a related Gross Margin, as set forth and subject to the limitations in the related Mortgage Note. "Adjustment Date" With respect to each Adjustable Rate Mortgage Loan, each adjustment date on which the Mortgage Interest Rate changes pursuant to the related Mortgage Note. The first Adjustment Date following the applicable Cut-off Date as to each Adjustable Rate Mortgage Loan is set forth in the Mortgage Loan Schedules. "Advance" As to any Mortgage Loan, any advance made by the Servicer in respect of any Distribution Date pursuant to Section 4.07 or if the Servicer fails to make any advance, by the Trustee pursuant to Section 7.01. "Adverse REMIC Event" As defined in Section 9.01(f) hereof. "Affiliate" With respect to any Person, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, "control" means the power to direct the management and policies of a Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise and "controlling" and "controlled" shall have meanings correlative to the foregoing. "Agreement" This Pooling and Servicing Agreement and all amendments and supplements hereto. "Applicable Regulations" As to any Mortgage Loan, all federal, state and local laws, statutes, rules and regulations applicable thereto. "Applied Realized Loss Amount" With respect to each Distribution Date, the excess, if any, of (a) the aggregate of the Principal Balances of the Certificates (other than the Class CE, Class P and Residual Certificates and after giving effect to all distributions on such Distribution Date and the increase of any Principal Balances as a result of Subsequent Recoveries) over (b) the Pool Balance as of the end of the related Collection Period. "Assignment" An assignment of Mortgage, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect or record the sale of the Mortgage. "Assumed Final Maturity Date" As to each Class of Certificates, the date set forth as such in the Preliminary Statement. "Available Funds" As to any Distribution Date, an amount equal to the excess of (i) the sum of: (a) the aggregate of the Monthly Payments due during the related Collection Period and received on or prior to the related Determination Date by the Servicer, (b) Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds, Principal Prepayments, Substitution Adjustment Amounts, the Purchase Price for any repurchased Mortgage Loan, the Termination Price with respect to the termination of the Trust pursuant to Section 10.01 hereof and other unscheduled recoveries of principal and interest (excluding Prepayment Penalties, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts) in respect of the Mortgage Loans during the related Prepayment Period, (c) the aggregate of any amounts received in respect of an REO Property deposited in the Collection Account for such Distribution Date, (d) any Compensating Interest for such Distribution Date, (e) the aggregate of any Advances made by the Servicer or the Trustee for such Distribution Date and (f) any Reimbursement Amount or Subsequent Recovery deposited into the Collection Account during the related Prepayment Period over (ii) the sum of (a) amounts reimbursable or payable to the Servicer pursuant to Sections 3.05 or 6.03, (b) amounts reimbursable or payable to the Trustee pursuant to Section 7.01 or Section 8.05 and amounts reimbursable or payable to the Securities Administrator pursuant to Section 8.05 or Section 9.01(c), (c) Stayed Funds, (d) the Servicing Fee and (e) amounts deposited in the Collection Account or the Distribution Account, as the case may be, in error. "Balloon Loan" A Mortgage Loan that provides for the payment of the unamortized principal balance of such Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is substantially greater than the preceding monthly payment. "Balloon Payment" A payment of the unamortized principal balance of a Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is substantially greater than the preceding Monthly Payment. "Bankruptcy Code" Title 11 of the United States Code, as amended. "Book-Entry Certificates" Any of the Certificates that shall be registered in the name of the Depository or its nominee, the ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with the Depository directly, as a Depository Participant, or indirectly, as an indirect participant in accordance with the rules of the Depository and as described in Section 5.02 hereof. On the Closing Date, the Class AI-1A, Class AI-1B, Class AII-1, Class AII-2, Class AII-3, 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 and Class M-13 Certificates shall be Book-Entry Certificates. "Business Day" Any day other than (i) a Saturday or a Sunday or (ii) a legal holiday in the State of Delaware, the State of New York, the State of Maryland, the State of Minnesota, the State of Iowa or in the city in which the Corporate Trust Office of the Trustee or the Securities Administrator is located are authorized or obligated by law or executive order to be closed. "Cap" Any of the Group I Cap, the Group II Cap or the Pool Cap. "Cap Amount" With respect to any Distribution Date and any Class of Class M Certificates an amount equal to (i) the 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. "Cap Carryover Amount" If on any Distribution Date, the Accrued Certificate Interest for any Certificate is based upon a Cap, the excess of (i) the amount of interest such Certificate would have been entitled to receive on such Distribution Date based on the related Formula Rate, over (ii) the amount of interest such Certificate received on such Distribution Date based on the related 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). "Certificate" Any Regular Certificate or Residual Certificate. "Certificate Custodian" Initially, Wells Fargo Bank; thereafter any other Certificate Custodian acceptable to the Depository and selected by the Securities Administrator. "Certificate Owner" With respect to each Book-Entry Certificate, any beneficial owner thereof. "Certificate Register" and "Certificate Registrar" The register maintained and registrar appointed pursuant to Section 5.02 hereof. "Certificateholder" or "Holder" The Person in whose name a Certificate is registered in the Certificate Register, except that a Disqualified Organization or non-U.S. Person shall not be a Holder of a Residual Certificate for any purpose hereof. "Class" Collectively, Certificates or REMIC Regular Interests which have the same priority of payment and bear the same class designation and the form of which is identical except for variation in the Percentage Interest evidenced thereby. "Class A Certificate" Any one of the Class AI or Class AII Certificates. "Class A Certificateholders" Collectively, the Holders of the Class A Certificates. "Class AI Certificate" Any one of the Certificates with an "AI" designated on the face thereof substantially in the form annexed hereto as Exhibits A-1 and A-2, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, representing the right to distributions as set forth herein and therein. "Class AI-1A Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class AI-1A Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class AI-1A Certificate Margin and (b) the Group I Maximum Rate Cap. "Class AI-1B Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class AI-1B Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class AI-1B Certificate Margin and (b) the Group I Maximum Rate Cap. "Class AII Certificate" Any one of the Certificates with an "AII" designated on the face thereof substantially in the form annexed hereto as Exhibits A-4, A-5 and A-6, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, representing the right to distributions as set forth herein and therein. "Class AII-1 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class AII-1 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class AII-1 Certificate Margin and (b) the Group II Maximum Rate Cap. "Class AII-2 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class AII-2 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class AII-2 Certificate Margin and (b) the Group II Maximum Rate Cap. "Class AII-3 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class AII-3 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class AII-3 Certificate Margin and (b) the Group II Maximum Rate Cap. "Class CE Certificates" Any one of the Class CE Certificates as designated on the face thereof substantially in the form annexed hereto as Exhibit C-1, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, representing the right to distributions as set forth herein and therein. "Class CE Distributable Amount" With respect to any Distribution Date, the sum of (i) the interest accrued on such Class CE Certificate at its Pass-Through Rate calculated on its Notional Amount less the amount (without duplication) of Cap Carryover Amounts paid pursuant to Section 4.02(b)(xlii), (ii) any remaining Overcollateralization Release Amounts and (iii) the amount remaining in the Reserve Account after the distributions in Section 3.04(g)(i) and (ii). "Class CE Uncertificated Interest" The uncertificated Regular Interest issued by REMIC 2 and held as an asset of REMIC A, as described in the Preliminary Statement hereto. "Class M Certificate" Any one of the Certificates with an "M" designated on the face thereof substantially in the form annexed hereto as Exhibit B-1, Exhibit B-2, Exhibit B-3, Exhibit B-4, Exhibit B-5, Exhibit B-6, Exhibit B-7, Exhibit B-8, Exhibit B-9, Exhibit B-10, Exhibit B-11, Exhibit B-12 and Exhibit B-13, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, representing the right to distributions as set forth herein and therein. "Class M Certificateholders" Collectively, the Holders of the Class M Certificates. "Class M-1 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-1 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-1 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-1 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-1 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (iv) hereof, in each case for such Distribution Date. "Class M-2 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-2 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-2 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-2 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-2 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (vii) hereof, in each case for such Distribution Date. "Class M-3 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-3 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-3 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-3 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-3 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (x) hereof, in each case for such Distribution Date. "Class M-4 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-4 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-4 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-4 Principal Distribution Amount" 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 Senior 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) 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-4 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xiii) hereof, in each case for such Distribution Date. "Class M-5 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-5 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-5 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-5 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-5 Realized Loss Amortization Amount" 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 Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum of the amounts described in Section 4.02(b)(i) through (xvi) hereof, in each case for such Distribution Date. "Class M-6 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-6 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-6 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-6 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-6 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xix) hereof, in each case for such Distribution Date. "Class M-7 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-7 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-7 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-7 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-7 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xxii) hereof, in each case for such Distribution Date. "Class M-8 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-8 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-8 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-8 Principal Distribution Amount" 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 Senior 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), (vii) 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) and (viii) 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-8 Realized Loss Amortization Amount" As to the Class M-8 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount 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 Section 4.02(b)(i) through (xxv) hereof, in each case for such Distribution Date. "Class M-9 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-9 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-9 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-9 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-9 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xxviii) hereof, in each case for such Distribution Date. "Class M-10 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-10 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-10 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-10 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-10 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xxxi) hereof, in each case for such Distribution Date. "Class M-11 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-11 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-11 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-11 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-11 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xxxiv) hereof, in each case for such Distribution Date. "Class M-12 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-12 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-12 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-12 Principal Distribution Amount" 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 Senior 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-12 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xxxvii) hereof, in each case for such Distribution Date. "Class M-13 Certificate Margin" For each Distribution Date (i) on or prior to the Optional Termination Date, [ ]% per annum, and (ii) following the Optional Termination Date, [ ]% per annum. "Class M-13 Formula Rate" For each Distribution Date, a rate per annum equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination Date, plus the Class M-13 Certificate Margin and (b) the Pool Maximum Rate Cap. "Class M-13 Principal Distribution Amount" 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 Senior 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) 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) [ ]% and (ii) the Pool Balance as of the last day of the related Collection Period and (B) the Overcollateralization Floor. "Class M-13 Realized Loss Amortization Amount" 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 Section 4.02(b)(i) through (xl) hereof, in each case for such Distribution Date. "Class P Certificate" Any one of the Certificates with a "P" designated on the face thereof substantially in the form annexed hereto as Exhibit C-2, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, representing the right to distributions as set forth herein and therein. "Class P Certificateholders" The holders of the Class P Certificates. "Class R Certificate" The Class R Certificate executed by the Securities Administrator on behalf of the Trust, and authenticated and delivered by the Certificate Registrar, substantially in the form annexed hereto as Exhibit C-3 and evidencing the ownership of the Residual Interest in each of REMIC 1 and REMIC 2. The Class R Certificate represents the ownership of the Class R-1 Interest and the Class R-2 Interest. "Class R-1 Interest": The uncertificated residual interest in REMIC 1. "Class R-2 Interest": The uncertificated residual interest in REMIC 2. "Class R-X Certificate" The Class R-X Certificate executed by the Securities Administrator on behalf of the Trust, and authenticated and delivered by the Certificate Registrar, substantially in the form annexed hereto as Exhibit C-4 and evidencing the ownership of the Residual Interest in REMIC A. "Closing Date" [ ], 200 . "Code" The Internal Revenue Code of 1986, as it may be amended from time to time. "Collection Account" The account or accounts created and maintained by the Servicer pursuant to Section 3.04(a), which shall be entitled "Collection Account, Wells Fargo Bank, N.A., as Servicer for HSBC Bank USA, National Association, as Trustee, in trust for registered Holders of Wells Fargo Home Equity Asset-Backed Securities 200 - Trust, Home Equity Asset-Backed Certificates, Series 200 - ," and which must be an Eligible Account. "Collection Period" With respect to any Distribution Date, 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. "Commission" The United States Securities and Exchange Commission. "Compensating Interest" As defined in Section 3.22 hereof. "Condemnation Proceeds" All awards or settlements in respect of a taking of a Mortgaged Property by exercise of the power of eminent domain or condemnation. "Corporate Trust Office" With respect to the Trustee, the principal corporate trust office of the Trustee at which at any particular time its corporate trust business in connection with this Agreement shall be administered, which office at the date of the execution of this instrument is located at 452 Fifth Avenue, New York, New York 10018, Attention: WFHET 200 - or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor, the Securities Administrator and the Servicer. With respect to the Securities Administrator, the corporate trust office of the Securities Administrator at which at any particular time its corporate trust business in connection with this Agreement shall be administered, which office at the date of the execution of this instrument is located at (i) for certificate transfer purposes, Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota, 55479-0113, Attention: Client Manager-WFHET, Series 200 - and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: Client Manager-WFHET, Series 200 - or at such other address as the Securities Administrator may designate from time to time by notice to the Certificateholders, the Depositor, the Trustee and the Servicer. "Corresponding Classes" With respect to REMIC 1 and REMIC 2, the following Classes shall be Corresponding Classes: - --------------------------------------------------------------------------- Corresponding REMIC 1 Classes Corresponding REMIC 2 Classes - --------------------------------------------------------------------------- LT1AI1A Class AI-1A Certificates LT1AI1B Class AI-1B Certificates LT1AII1 Class AII-1 Certificates LT1AII2 Class AII-2 Certificates LT1AII3 Class AII-3 Certificates LT1M1 Class M-1 Certificates LT1M2 Class M-2 Certificates LT1M3 Class M-3 Certificates LT1M4 Class M-4 Certificates LT1M5 Class M-5 Certificates LT1M6 Class M-6 Certificates LT1M7 Class M-7 Certificates LT1M8 Class M-8 Certificates LT1M9 Class M-9 Certificates LT1M10 Class M-10 Certificates LT1M11 Class M-11 Certificates LT1M12 Class M-12 Certificates LT1M13 Class M-13 Certificates "Credit Risk Management Agreement" The Credit Risk Management Agreement between the Servicer and the Credit Risk Manager dated [ ], 200 . "Credit Risk Manager" [ ]. "Credit Risk Manager Fee" The fee payable to the Credit Risk Manager on each Distribution Date for its services as Credit Risk Manager, in an amount equal to the product of (i) one-twelfth of the Credit Risk Manager Fee Rate and (ii) the Pool Balance as of the opening of business on the first day of the related Collection Period. "Credit Risk Manager Fee Rate" With respect to any Distribution Date, [ ]% per annum. "Current Interest Shortfall" With respect to any Distribution Date, the sum of (i) the aggregate amount of Relief Act Interest Shortfalls, (ii) the aggregate amount of Prepayment Interest Shortfalls attributable to partial Principal Prepayments and (iii) the amount, if any, by which (x) the aggregate amount of Prepayment Interest Shortfalls attributable to Principal Prepayments in full exceeds (y) the Compensating Interest for such Distribution Date. "Custodial Agreement" That certain Custodial Agreement, dated as of [ ], 200 , among the Custodian, the Depositor, the Servicer and the Trustee, in the form of Exhibit R attached hereto. "Custodian" Wells Fargo Bank, as custodian pursuant to the Custodial Agreement, and any successor custodian, if any, hereafter appointed by the Trustee pursuant to Section 8.16. The Custodian may (but need not) be the Trustee, the Securities Administrator or the Servicer or any Person directly or indirectly controlling or controlled by or under common control of any of them. "Cut-off Date" With respect to each Mortgage Loan, the Due Date occurring in [ ] 20 . "Cut-off Date Principal Balance" With respect to any Mortgage Loan, the unpaid principal balance thereof as of the applicable Cut-off Date after giving effect to any Monthly Payment due on such date and to the application of funds received or advanced on or before such date (or as of the applicable date of substitution with respect to an Eligible Substitute Mortgage Loan). "Debt Service Reduction" With respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction resulting from a Deficient Valuation. "Defective Mortgage Loan" A Mortgage Loan replaced or to be replaced by one or more Eligible Substitute Mortgage Loans. "Deficient Valuation" With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding principal balance of the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any scheduled Monthly Payment that results in a permanent forgiveness of principal, which valuation results from a proceeding initiated under the Bankruptcy Code. "Definitive Certificates" As defined in Section 5.02(c) hereof. "Delinquent" Any Mortgage Loan with respect to which the Monthly Payment due on a Due Date is not made by the close of business on the next scheduled Due Date for such Mortgage Loan. "Depositor" Wells Fargo Asset Securities Corporation, a Delaware corporation, or any successor in interest. "Depository" The initial depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. The Depository shall initially be the registered Holder of the Book-Entry Certificates. The Depository shall at all times be a "clearing corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York. "Depository Participant" A broker, dealer, bank or other financial institution or other person for whom from time to time a Depository effects book-entry transfers and pledges of securities deposited with the Depository. "Determination Date" With respect to any Distribution Date, the 17th day of the calendar month in which such Distribution Date occurs or, if such 17th day is not a Business Day, the Business Day immediately preceding such 17th day. "Disqualified Organization" A "disqualified organization" under Section 860E of the Code, which as of the Closing Date is any of: (i) the United States, any state or political subdivision thereof, any possession of the United States, any foreign government, any international organization, or any agency or instrumentality of any of the foregoing, (ii) any organization (other than a cooperative described in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code unless such organization is subject to the tax imposed by Section 511 of the Code, (iii) any organization described in Section 1381(a)(2)(C) of the Code, or (iv) any other Person so designated by the Securities Administrator based upon an Opinion of Counsel provided by nationally recognized counsel to the Securities Administrator that the holding of an ownership interest in a Class R or Class R-X Certificate by such Person may cause the Trust Fund or any Person having an ownership interest in any Class of Certificates (other than such Person) to incur liability for any federal tax imposed under the Code that would not otherwise be imposed but for the transfer of an ownership interest in a Class R or Class R-X Certificate to such Person. A corporation will not be treated as an instrumentality of the United States or of any state or political subdivision thereof if all of its activities are subject to tax and a majority of its board of directors is not selected by a governmental unit. The term "United States," "state" and "international organization" shall have the meanings set forth in Section 7701 of the Code. "Distribution Account" The trust account or accounts created and maintained by the Securities Administrator pursuant to Section 3.04(b), which shall be entitled "Distribution Account, Wells Fargo Bank, N.A., as Securities Administrator, in trust for the registered Holders of Wells Fargo Home Equity Asset-Backed Securities 200 - Trust, Home Equity Asset-Backed Certificates, Series 200 - ," and which must be an Eligible Account. "Distribution Date" The 25th day of any calendar month, or if such 25th day is not a Business Day, the Business Day immediately following such 25th day, commencing in [ ] 20 . "Distribution Date Statement" As defined in Section 4.06(a) hereof. Document Transfer Date: The 60th day following the occurrence of a Document Transfer Event. Document Transfer Event: The occurrence of either of the following: (i) Wells Fargo Bank is no longer the Servicer of any of the Mortgage Loans or (ii) the senior, unsecured long-term debt rating of Wells Fargo & Company is less than "BBB-" by [ ]. "Due Date" With respect to each Mortgage Loan, the day of the calendar month on which the Monthly Payment for such Mortgage Loan was due in accordance with the terms of the related Mortgage Note, exclusive of any grace period. "Eligible Account" Any of (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the short-term unsecured debt obligations of such holding company) are rated [ ] by [ ] and [ ] by [ ] (or comparable ratings if [ ] and [ ] are not the Rating Agencies) by each of the Rating Agencies at the time any amounts are held on deposit therein, (ii) an account or accounts the deposits in which are fully insured by the FDIC, (iii) a trust account or accounts maintained with the trust department of a federal or state chartered depository institution, national banking association or trust company acting in its fiduciary capacity or (iv) an account otherwise acceptable to each Rating Agency without reduction or withdrawal of their then current ratings of the Certificates as evidenced by a letter from each Rating Agency to the Securities Administrator and the Trustee. Eligible Accounts may bear interest. "Eligible Investments" Any one or more of the following obligations or securities acquired at a purchase price of not greater than par, regardless of whether issued or managed by the Depositor, the Servicer, the Securities Administrator, the Trustee or any of their respective Affiliates or for which an Affiliate of the Trustee or the Securities Administrator serves as an advisor: (i) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States; (ii) (A) demand and time deposits in, certificates of deposit of, bankers' acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee, the Securities Administrator or their respective agents acting in their respective commercial capacities) incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal and/or state authorities, so long as, at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company or its ultimate parent has a short term uninsured debt rating in one of the two highest available rating categories of [ ] and the highest available rating category of [ ] and provided that each such investment has an original maturity of no more than 365 days and (B) any other demand or time deposit or deposit which is fully insured by the FDIC; (iii) repurchase obligations with a term not to exceed 30 days with respect to any security described in clause (i) above and entered into with a depository institution or trust company (acting as principal) rated [ ] or higher by [ ] and [ ], provided, however, that collateral transferred pursuant to such repurchase obligation must be of the type described in clause (i) above and must (A) be valued daily at current market prices plus accrued interest or (B) pursuant to such valuation, be equal, at all times, to 105% of the cash transferred by the Trustee or the Securities Administrator in exchange for such collateral and (C) be delivered to the Trustee, the Securities Administrator or, if the Trustee or the Securities Administrator is supplying the collateral, an agent for the Trustee or the Securities Administrator, as the case may be, in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities; (iv) securities bearing interest or sold at a discount that are issued by any corporation incorporated under the laws of the United States of America or any State thereof and that are rated by each Rating Agency in its highest long-term unsecured rating categories at the time of such investment or contractual commitment providing for such investment; (v) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than 30 days after the date of acquisition thereof) that is rated by each Rating Agency in its highest short-term unsecured debt rating available at the time of such investment; (vi) units of money market funds registered under the Investment Company Act of 1940 (including funds managed or advised by the Trustee or the Securities Administrator or affiliates thereof) that, if rated by each Rating Agency, are rated in its highest rating category (if so rated by such Rating Agency); and (vii) if previously confirmed in writing to the Trustee and the Securities Administrator, any other demand, money market or time deposit, or any other obligation, security or investment, as may be acceptable to the Rating Agencies in writing as an eligible investment of funds backing securities having ratings equivalent to its highest initial rating of the Senior Certificates; provided, that no instrument described hereunder shall evidence either the right to receive (a) only interest with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument and the interest and principal payments with respect to such instrument provide a yield to maturity at par greater than 120% of the yield to maturity at par of the underlying obligations. "Eligible Substitute Mortgage Loan" A mortgage loan substituted for a Defective Mortgage Loan pursuant to the terms of this Agreement which must, on the date of such substitution, (i) have an outstanding principal balance, after application of all scheduled payments of principal and interest due during or prior to the month of substitution, not in excess of, the outstanding principal balance of the Defective Mortgage Loan as of the Due Date in the calendar month during which the substitution occurs, (ii) have a Mortgage Interest Rate, with respect to a Fixed Rate Mortgage Loan, not less than the Mortgage Interest Rate of the Defective Mortgage Loan and not more than 1% in excess of the Mortgage Interest Rate of such Defective Mortgage Loan, (iii) if an Adjustable Rate Mortgage Loan, have a Rate Ceiling not less than the Rate Ceiling for the Defective Mortgage Loan, (iv) if an Adjustable Rate Mortgage Loan, have a Minimum Mortgage Interest Rate not less than the Minimum Mortgage Interest Rate of the Defective Mortgage Loan, (v) if an Adjustable Rate Mortgage Loan, have a Gross Margin equal to or greater than the Gross Margin of the Defective Mortgage Loan, (vi) if an Adjustable Rate Mortgage Loan, have the same Index and frequency of adjustment as the Defective Mortgage Loan (vii) if an Adjustable Rate Mortgage Loan, have a next Adjustment Date not more than three months later than the next Adjustment Date on the Defective Mortgage Loan, (viii) have an original term to maturity not greater than (and not more than one year less than) that of the Defective Mortgage Loan, (ix) be current as of the date of substitution, (x) have a Loan-to-Value Ratio equal to or lower than the Loan-to-Value Ratio of the Defective Mortgage Loan, (xi) have a risk grading at least equal to the risk grading assigned on the Defective Mortgage Loan, (xii) have the same lien priority as the Defective Mortgage Loan; (xiii) have a Prepayment Penalty at least equal in amount and duration of that of the Defective Mortgage Loan and (xiv) conform to each representation and warranty set forth in Section 2.04 hereof applicable to the Defective Mortgage Loan. In the event that one or more mortgage loans are substituted for one or more Defective Mortgage Loans, the amounts described in clause (i) hereof shall be determined on the basis of aggregate principal balance, the Mortgage Interest Rates described in clause (ii) hereof shall be determined on the basis of weighted average Mortgage Interest Rates, the risk gradings described in clause (xi) hereof shall be satisfied as to each such mortgage loan, the terms described in clause (viii) hereof shall be determined on the basis of weighted average remaining term to maturity, the Loan-to-Value Ratios described in clause (x) hereof shall be satisfied as to each such mortgage loan and, except to the extent otherwise provided in this sentence, the representations and warranties described in clause (xiv) hereof must be satisfied as to each Eligible Substitute Mortgage Loan or in the aggregate, as the case may be. Any Defective Mortgage Loan that is a Group I Mortgage Loan or Group II Mortgage Loan must be replaced by an Eligible Substitute Mortgage Loan that will be a Group I Mortgage Loan or Group II Mortgage Loan, as applicable. "ERISA" The Employee Retirement Income Security Act of 1974, as amended. "ERISA Restricted Certificates" Any of the Class M-12, Class M-13, Class CE, Class P, Class R and Class R-X Certificates. "Escrow Account" The account or accounts created and maintained pursuant to Section 3.06. "Escrow Agreement" An agreement between a Mortgagor and the Servicer relating to accounts constituting taxes and/or fire and hazard insurance premiums required to be escrowed. "Escrow Payments" The amounts constituting taxes and/or fire and hazard insurance premiums required to be escrowed to an Escrow Agreement. "Estate in Real Property" A fee simple estate in a parcel of real property. "Exchange Act" The Securities Exchange Act of 1934, as amended. "Expense Fee Rate" The sum of (i) the Servicing Fee Rate and (ii) the Credit Risk Manager Fee Rate. "Extended Period" As defined in Section 9.04(b). "Extra Principal Distribution Amount" 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. "FDIC" Federal Deposit Insurance Corporation or any successor thereto. "Fidelity Bond" Shall have the meaning assigned thereto in Section 3.12. "Fixed Rate Mortgage Loan" A Mortgage Loan which has a constant annual rate at which interest accrues in accordance with the provisions of the related Mortgage Note. "Foreclosure Price" The amount reasonably expected to be received from the sale of the related Mortgaged Property net of any expenses associated with foreclosure proceedings. "Form 8-K" A Current Report on Form 8-K under the Exchange Act. "Form 8-K Disclosure Information" As defined in Section 3.28(c). "Form 10-D" An Asset-Backed Issuer Distribution Report on Form 10-D under the Exchange Act. "Form 10-K" An Annual Report on Form 10-K under the Exchange Act. "Form 10-K Filing Deadline" As defined in Section 3.28(b). "Form 15" A Form 15 Suspension Notification under the Exchange Act. "Formula Rate" Any of the Class AI-1A Formula Rate, the Class AI-1B Formula Rate, the Class AII-1 Formula Rate, the Class AII-2 Formula Rate, the Class AII-3 Formula Rate, the Class M-1 Formula Rate, the Class M-2 Formula Rate, the Class M-3 Formula Rate, the Class M-4 Formula Rate, the Class M-5 Formula Rate, the Class M-6 Formula Rate, the Class M-7 Formula Rate, the Class M-8 Formula Rate, the Class M-9 Formula Rate, the Class M-10 Formula Rate, the Class M-11 Formula Rate, the Class M-12 Formula Rate and the Class M-13 Formula Rate. "Grantor Trust" That portion of the Trust exclusive of REMIC 1, REMIC 2 and REMIC A consisting of (a) the Prepayment Penalties, any Originator Prepayment Penalty Payment Amounts, any Servicer Prepayment Penalty Payment Amounts, proceeds thereof in the Custodial Account or Distribution Account and the right of the Class P Certificateholders to receive such Prepayment Penalties, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts, (b) the right of the Certificates (other than the Class CE, Class P and Residual Certificates) to receive Cap Carryover Amounts, (c) the Yield Maintenance Agreement, the Reserve Account and the beneficial interest of the Class CE Certificates with respect thereto and (d) the obligation of the Class CE Certificates to pay Cap Carryover Amounts. "Gross Margin" With respect to each Adjustable Rate Mortgage Loan, the fixed percentage set forth in the related Mortgage Note that is added to the Index on each Adjustment Date in accordance with the terms of the related Mortgage Note used to determine the Mortgage Interest Rate for such Mortgage Loan. "Group I Cap" As of any Distribution Date and the Class AI Certificates, a per annum rate (adjusted by multiplying such rate by a fraction equal to 30 over the actual number of days in the related Interest Accrual Period) equal to the Weighted Average Net Mortgage Interest Rate for the Group I Mortgage Loans. "Group I Interest Remittance Amount" As of any Distribution Date, the sum, without duplication, of (i) all interest due and collected with respect to the related Collection Period on the Group I Mortgage Loans received by the Servicer on or prior to the Determination Date for such Distribution Date and any interest advanced by the Servicer or the Trustee on the Group I Mortgage Loans with respect to the related Collection Period (less the Servicing Fee, amounts available for reimbursement of Advances and Servicing Advances pursuant to Section 3.05 and expenses reimbursable pursuant to Section 6.03, amounts reimbursable or payable to the Trustee pursuant to this Agreement, including, without limitation, Sections 7.01 and 8.05 and amounts reimbursable or payable to the Securities Administrator pursuant to this Agreement, including, without limitation, Sections 8.05 and 9.01(c)), (ii) all Compensating Interest paid by the Servicer on the related Distribution Date with respect to such Group I Mortgage Loans, (iii) the portion of any payment in connection with any Principal Prepayment, substitution, Purchase Price, Termination Price, Insurance Proceeds or Net Liquidation Proceeds relating to interest with respect to such Group I Mortgage Loans received during the related Prepayment Period and (iv) the portion of any Reimbursement Amount relating to interest on such Group I Mortgage Loans received during the related Prepayment Period. "Group I Maximum Rate Cap" With respect to any Distribution Date and for the Class AI Certificates, a per annum rate (adjusted by multiplying such rate by a fraction equal to 30 over the actual number of days in the related Interest Accrual Period) equal to the average of the Net Rate Ceilings for the Adjustable Rate Mortgage Loans which are Group I Mortgage Loans and the Net Mortgage Interest Rates for the Fixed Rate Mortgage Loans which are Group I Mortgage Loans, weighted on the basis of the unpaid principal balances of the Group I Mortgage Loans as of the first day of the related Collection Period. "Group I Mortgage Loan" Each Mortgage Loan identified as a Group I Mortgage Loan on the Mortgage Loan Schedule. "Group I Overcollateralization Floor" With respect to 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) [ ]% and (ii) the aggregate unpaid principal balance of the Group I Mortgage Loans on the Cut-off Date. "Group I Principal Distribution Amount" With respect to any Distribution Date, the product of the Group I Principal Percentage and the Principal Distribution Amount. "Group I Principal Percentage" With respect to any Distribution Date and any Class AI Certificates, the percentage equivalent to a fraction, the numerator of which is the Principal Remittance Amount attributable to the Group I Mortgage Loans for such Distribution Date and the denominator of which is the Principal Remittance Amount for such Distribution Date. "Group I Senior Principal Distribution Amount" With respect to 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) [ ]% 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 Cap" As of any Distribution Date and the Class AII Certificates, a per annum rate (adjusted by multiplying such rate by a fraction equal to 30 over the actual number of days in the related Interest Accrual Period) equal to the Weighted Average Net Mortgage Interest Rate for the Group II Mortgage Loans. "Group II Interest Remittance Amount" As of any Distribution Date, the sum, without duplication, of (i) all interest due and collected with respect to the related Collection Period on the Group II Mortgage Loans received by the Servicer on or prior to the Determination Date for such Distribution Date and any interest advanced by the Servicer or the Trustee on the Group II Mortgage Loans with respect to the related Collection Period (less the Servicing Fee, amounts available for reimbursement of Advances and Servicing Advances pursuant to Section 3.05 and expenses reimbursable pursuant to Section 6.03, amounts reimbursable or payable to the Trustee pursuant to this Agreement, including, without limitation, Sections 7.01 and 8.05 and amounts reimbursable or payable to the Securities Administrator pursuant to this Agreement, including, without limitation, Sections 8.05 and 9.01(c)), (ii) all Compensating Interest paid by the Servicer on the related Distribution Date with respect to such Group II Mortgage Loans, (iii) the portion of any payment in connection with any Principal Prepayment, substitution, Purchase Price, Termination Price, Insurance Proceeds or Net Liquidation Proceeds relating to interest with respect to such Group II Mortgage Loans received during the related Prepayment Period and (iv) the portion of any Reimbursement Amount relating to interest on such Group II Mortgage Loans received during the related Prepayment Period. "Group II Maximum Rate Cap" With respect to any Distribution Date and for the Class AII Certificates, a per annum rate (adjusted by multiplying such rate by a fraction equal to 30 over the actual number of days in the related Interest Accrual Period) equal to the average of the Net Rate Ceilings for the Adjustable Rate Mortgage Loans which are Group II Mortgage Loans and the Net Mortgage Interest Rates for the Fixed Rate Mortgage Loans which are Group II Mortgage Loans, weighted on the basis of the unpaid principal balances of the Group II Mortgage Loans as of the first day of the related Collection Period. "Group II Mortgage Loan" Each Mortgage Loan identified as a Group II Mortgage Loan on the Mortgage Loan Schedule. "Group II Overcollateralization Floor" With respect to 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) [ ]% and (ii) the aggregate unpaid principal balance of the Group II Mortgage Loans on the Cut-off Date. "Group II Principal Distribution Amount" With respect to any Distribution Date, the product of the Group II Principal Percentage and the Principal Distribution Amount. "Group II Principal Percentage" With respect to any Distribution Date and any Class AII Certificates, the percentage equivalent to a fraction, the numerator of which is the Principal Remittance Amount attributable to the Group II Mortgage Loans for such Distribution Date and the denominator of which is the Principal Remittance Amount for such Distribution Date. "Group II Senior Principal Distribution Amount" With respect to any Distribution Date, the excess of (a) the aggregate Principal Balance of the Class AII Certificates immediately prior to such Distribution Date over (b) the lesser of (x) the product of (1) [ ]% 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. "Group Subordinate Amount" With respect to any Distribution Date and (i) Loan Group I, 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, 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 aggregate Principal Balance of the Class AII Certificates immediately prior to such Distribution Date. "Independent" When used with respect to any specified Person, any such Person who (i) is in fact independent of the Depositor, the Securities Administrator, the Trustee, the Servicer and their respective Affiliates, (ii) does not have any direct financial interest in or any material indirect financial interest in the Depositor, the Securities Administrator, the Trustee or the Servicer, or any Affiliate thereof, and (iii) is not connected with the Depositor, the Securities Administrator, the Trustee or the Servicer, or any Affiliate thereof, as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, however, that a Person shall not fail to be Independent of the Depositor, the Securities Administrator, the Trustee or the Servicer, or any Affiliate thereof, merely because such Person is the beneficial owner of 1% or less of any class of securities issued by the Depositor, the Securities Administrator, the Trustee or the Servicer, or any Affiliate thereof, as the case may be. "Index" With respect to each Adjustable Rate Mortgage Loan and with respect to each related Adjustment Date, the index as specified in the related Mortgage Note. "Initial Overcollateralization Amount" $[ ]. "Initial Principal Balance" With respect to any Certificate of a Class other than a Class CE, Class P or Residual Certificate, the amount designated "Initial Principal Balance" on the face thereof. "Insurance Proceeds" Proceeds of any title policy, hazard policy or other insurance policy covering a Mortgage Loan, to the extent such proceeds are not to be applied to the restoration of the related Mortgaged Property or released to the Mortgagor in accordance with the procedures that the Servicer would follow in servicing mortgage loans held for its own account, subject to the terms and conditions of the related Mortgage Note and Mortgage. "Interest Accrual Period" With respect to any Distribution Date, the period from and including the preceding Distribution Date to the day prior to the current Distribution Date (or, in the case of the first Distribution Date, the period from [ ], 200 through [ ], 20 ). "Interest Carry Forward Amount" For any Class of Certificates (other than the Class CE, Class P and Residual 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. "Interest Percentage" With respect to any Class of Certificates and any Distribution Date, the ratio (expressed as a decimal carried to at least six places) of the Accrued Certificate Interest for such Class to the sum of the Accrued Certificate Interest for all Classes, in each case with respect to such Distribution Date, without regard to Current Interest Shortfalls. "Interest Remittance Amount" As of any Determination Date, the sum of the Group I Interest Remittance Amount and the Group II Interest Remittance Amount. "Late Collections" With respect to any Mortgage Loan, all amounts received subsequent to the Determination Date immediately following any related Collection Period, whether as late payments of Monthly Payments or as Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds or otherwise, which represent late payments or collections of principal and/or interest due (without regard to any acceleration of payments under the related Mortgage and Mortgage Note) but delinquent on a contractual basis for such Collection Period and not previously recovered. "LIBOR Business Day" Any day on which banks in London, England and the City of New York are open and conducting transactions in foreign currency and exchange. "LIBOR Determination Date" With respect to any Floating Rate Class, (i) for the first Distribution Date, the second LIBOR Business Day preceding the Closing Date and (ii) for each subsequent Distribution Date, the second LIBOR Business Day prior to the immediately preceding Distribution Date. "Liquidated Mortgage Loan" As to any Distribution Date, any Mortgage Loan in respect of which the Servicer has determined, in accordance with the servicing procedures specified herein, as of the end of the related Prepayment Period, that all Liquidation Proceeds, Condemnation Proceeds and Insurance Proceeds which it expects to recover with respect to the liquidation of the Mortgage Loan or disposition of the related REO Property have been recovered. "Liquidation Proceeds" The amount (other than amounts received in respect of the rental of any REO Property prior to REO Disposition) received by the Servicer in connection with (i) the taking of all or a part of a Mortgaged Property by exercise of the power of eminent domain or condemnation or (ii) the liquidation of a defaulted Mortgage Loan by means of a trustee's sale, foreclosure sale or otherwise. "Liquidation Report" The report with respect to a Liquidated Mortgage Loan in such form as is agreed to by the Servicer, the Trustee and the Securities Administrator listing (i) the sale price of the related Mortgaged Property or amount of the REO Disposition, (ii) the amount of any Realized Loss (or gain) with respect to such Liquidated Mortgage Loan, (iii) the expenses relating to the liquidation of such Liquidated Mortgage Loan and (iv) such other information as is agreed to by the Servicer, the Trustee and the Securities Administrator. "Loan Group" Either of Loan Group I or Loan Group II. "Loan Group I" The Group I Mortgage Loans. "Loan Group II" The Group II Mortgage Loans. "Loan-to-Value Ratio" For any Mortgage Loan, the ratio, expressed as a percentage, the numerator of which is the original loan amount (unless otherwise indicated) of a particular Mortgage Loan at origination and the denominator of which is the lesser of (x) the appraised value of the related Mortgaged Property determined in the appraisal used by the originator at the time of origination of such Mortgage Loan, and (y) if the Mortgage is originated in connection with a sale of the Mortgaged Property, the sale price for such Mortgaged Property. "Losses" As defined in Section 9.03. "Lost Note Affidavit" With respect to any Mortgage Loan as to which the original Mortgage Note has been permanently lost or destroyed and has not been replaced, an affidavit from the Seller certifying that the original Mortgage Note has been lost, misplaced or destroyed (together with a copy of the related Mortgage Note and indemnifying the Trust against any loss, cost or liability resulting from the failure to deliver the original Mortgage Note) in the form of Exhibit H hereto. "Majority Certificateholders" The Holders of Certificates evidencing at least 51% of the Voting Interests. "Majority Class CE Certificateholder" The Holder of Class CE Certificates evidencing at least a 51% Percentage Interest in the Class CE Certificates. "Marker Rate" With respect to the Class CE Certificates and any Distribution Date, a per annum rate equal to two (2) times the weighted average of the Uncertificated REMIC Pass-Through Rates for REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ, (i) with the rate on each such REMIC Regular Interest (other than REMIC 1 Regular Interest LT1ZZ) subject to a cap equal to the Pass-Through Rate of its Corresponding Class (taking into account in determining any such Pass-Through Rate the imposition of the Group I Cap and the Group II Cap or the Pool Cap, as applicable, as described in footnotes (1) through (18) to the table in the Preliminary Statement relating to the Certificates) for the purposes of this calculation and (ii) with the rate on REMIC 1 Regular Interest LT1ZZ subject to a cap of zero for the purpose of this calculation; provided, however, that for this purpose, calculations of the Uncertificated REMIC 1 Pass-Through Rate and the related caps with respect to each REMIC I Regular Interest shall be multiplied by a fraction, the numerator of which is the actual number of days in the Interest Accrual Period and the denominator of which is 30. "Maximum LT1ZZ Uncertificated Accrued Interest Deferral Amount" With respect to any Distribution Date, the excess of (a) accrued interest at the Uncertificated REMIC 1 Pass-Through Rate applicable to REMIC 1 Regular Interest LT1ZZ for such Distribution Date on a balance equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1ZZ minus the REMIC 1 Overcollateralized Amount, in each case for such Distribution Date, over (b) Uncertificated Accrued Interest on REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13, each subject to a cap equal to the Pass-Through Rate of the related Corresponding Class for the purpose of this calculation; provided, however, that for this purpose, calculations of the Uncertificated REMIC 1 Pass-Through Rate and the related caps with respect to Uncertificated Accrued Interest on each REMIC 1 Regular Interest shall be multiplied by a fraction, the numerator of which is the actual number of days in the Interest Accrual Period and the denominator of which is 30. "MERS" The Mortgage Electronic Registration Systems, Inc. "MERS Mortgage Loan" Any MOM Mortgage Loan or any other Mortgage Loan as to which MERS is (or is intended to be) the mortgagee of record and as to which a MIN has been assigned. "MIN" A MERS Mortgage Identification Number assigned to a Mortgage Loan in accordance with the MERS Procedure Manual. "Minimum Mortgage Interest Rate" With respect to each Adjustable Rate Mortgage Loan, the percentage set forth in the related Mortgage Note as the minimum Mortgage Interest Rate thereunder. "MOM" A Mortgage Loan where the related Mortgage names MERS as the original mortgagee thereof, as to which a MIN has been assigned, and which Mortgage has not been assigned to any other person. "Monthly Excess Cashflow Amount" The sum of (a) the Monthly Excess Interest Amount remaining after reduction (but not below zero) by any Current Interest Shortfall and any amounts used to fund any 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 (other than the Class CE, Class P and Residual Certificates). "Monthly Excess Interest Amount" With respect to each Distribution Date, the amount, if any, by which the Interest Remittance Amount for such Distribution Date exceeds the aggregate amount distributed on such Distribution Date pursuant to paragraphs (i) through (xviii) of Section 4.01. "Monthly Payment" With respect to any Mortgage Loan, the scheduled monthly payment of principal and interest on such Mortgage Loan which is payable by the related Mortgagor from time to time under the related Mortgage Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction in the amount of interest collectible from the related Mortgagor pursuant to the Relief Act or similar state laws; (b) without giving effect to any extension granted or agreed to by the Servicer pursuant to Section 3.01; and (c) on the assumption that all other amounts, if any, due under such Mortgage Loan are paid when due. "Mortgage" The mortgage, deed of trust or other instrument creating a first or second lien on, or first or second priority security interest in, a Mortgaged Property securing a Mortgage Note. "Mortgage File" Either of the Owner Mortgage File or Retained Mortgage File. "Mortgage Interest Rate" With respect to each Mortgage Loan, the annual rate at which interest accrues on such Mortgage Loan from time to time in accordance with the provisions of the related Mortgage Note, which rate (i) in the case of each Fixed Rate Mortgage Loan shall remain constant at the rate set forth in the applicable Mortgage Loan Schedule as the Mortgage Interest Rate in effect immediately following the applicable Cut-off Date and (ii) in the case of each Adjustable Rate Mortgage Loan (A) as of any date of determination until the first Adjustment Date following the applicable Cut-off Date shall be the rate set forth in the applicable Mortgage Loan Schedule as the Mortgage Interest Rate in effect immediately following the applicable Cut-off Date and (B) as of any date of determination thereafter shall be the rate as adjusted on the most recent Adjustment Date, to equal the sum, rounded as provided in the Mortgage Note, of the Index, determined as set forth in the related Mortgage Note, plus the related Gross Margin subject to the limitations set forth in the related Mortgage Note. With respect to each Mortgage Loan that becomes an REO Property, as of any date of determination, the annual rate determined in accordance with the immediately preceding sentence as of the date such Mortgage Loan became an REO Property. "Mortgage Loan" Each mortgage loan transferred and assigned to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time held as a part of the Trust Fund, the Mortgage Loans so held being identified in the Mortgage Loan Schedules. "Mortgage Loan Purchase Agreement" The agreement between the Seller and the Depositor, dated as of [ ], 200 , regarding the transfer of the Mortgage Loans by the Seller to or at the direction of the Depositor, in the form of Exhibit G attached hereto. "Mortgage Loan Schedule" As of any date with respect to the Mortgage Loans, the lists of such Mortgage Loans included in the Trust Fund on such date, separately identifying the Fixed Rate Mortgage Loans and the Adjustable Rate Mortgage Loans delivered by the Depositor to the Trustee, the Servicer, the Securities Administrator and the Custodian. The Mortgage Loan Schedules shall set forth the following information with respect to each Mortgage Loan: (1) the Mortgage Loan identifying number; (2) the city, state and zip code of the Mortgaged Property; (3) the type of property; (4) the Mortgage Interest Rate; (5) the Net Mortgage Interest Rate; (6) the Monthly Payment; (7) the original number of months to maturity; (8) the scheduled maturity date; (9) the Cut-off Date Principal Balance; (10) the Loan-to-Value Ratio at origination; (11) whether such Mortgage Loan is covered by primary mortgage insurance; (12) the applicable Servicing Fee Rate; (13) the Index; (14) the Gross Margin; (15) the Periodic Cap; (16) the first Adjustment Date; (17) the Rate Ceiling; and (18) a code indicating whether the Mortgage Loan has a Prepayment Penalty and the Prepayment Penalty term. The Mortgage Loan Schedules shall set forth the following information, as of the applicable Cut-off Date, with respect to the Mortgage Loans in the aggregate, for Loan Group I and Loan Group II: (1) the number of Mortgage Loans; (2) the current unpaid principal balance of the Mortgage Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage Loan Schedules shall be amended from time to time in accordance with the provisions of this Agreement. With respect to any Eligible Substitute Mortgage Loan, Cut-off Date shall refer to the applicable date of substitution. "Mortgage Note" The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan. "Mortgage Pool" The pool of Mortgage Loans, identified on the Mortgage Loan Schedule from time to time, and any REO Properties acquired in respect thereof. "Mortgaged Property" The underlying property securing a Mortgage Loan, including any REO Property, consisting of an Estate in Real Property improved by a Residential Dwelling. "Mortgagor" The obligor on a Mortgage Note. "Net Liquidation Proceeds" With respect to any Liquidated Mortgage Loan or any other disposition of related Mortgaged Property (including REO Property) the related Liquidation Proceeds net of unreimbursed Advances, unreimbursed Servicing Advances, unpaid Servicing Fees and any other accrued and unpaid servicing fees received and retained in connection with the liquidation of such Mortgage Loan or Mortgaged Property. "Net Mortgage Interest Rate" With respect to any Mortgage Loan, the Mortgage Interest Rate borne by such Mortgage Loan minus the Expense Fee Rate. "Net Rate Ceiling" With respect to any Adjustable Rate Mortgage Loan, the applicable Rate Ceiling minus the Expense Fee Rate. "Nonrecoverable Advance" Any Advance or Servicing Advance previously made or proposed to be made in respect of a Mortgage Loan that, in the good faith business judgment of the Servicer (or the Trustee, in the case of any Advance made by the Trustee pursuant to Section 7.01), will not or, in the case of a proposed Advance or Servicing Advance, would not be ultimately recoverable from Late Collections on such Mortgage Loan as provided herein. "Notional Amount" With respect to the Class CE Uncertificated Interest and the Class CE Certificates, an amount equal to the aggregate principal balance of the REMIC 1 Regular Interests. "NYCEMA" A New York Consolidation, Extension and Modification Agreement. "Officers' Certificate" A certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a vice president (however denominated), and by the Treasurer, the Secretary, or one of the assistant treasurers or assistant secretaries of the Servicer, the Securities Administrator, the Trustee or the Depositor, as applicable. "One-Month LIBOR" With respect to each Interest Accrual Period, the rate determined by the Securities Administrator on the related LIBOR Determination Date on the basis of the British Bankers' Association ("BBA") "Interest Settlement Rate" for one-month deposits in U.S. Dollars as found on Telerate Page 3750 as of 11:00 A.M. London time on such LIBOR Determination Date. If no such quotations are available on a LIBOR Determination Date, One-Month LIBOR for the related Interest Accrual Period will be established by the Securities Administrator as the higher of: (i) One-Month LIBOR as determined on the previous LIBOR Determination Date; and (ii) the rate per annum which the Securities Administrator determines to be either (A) the arithmetic mean (rounding such arithmetic mean upwards if necessary to the nearest whole multiple of 1/16%) of the one-month U.S. Dollar lending rates that New York City banks selected by the Securities Administrator are quoting, on the relevant LIBOR Determination Date, to the principal London offices of at least two leading banks in the London interbank market or (B) in the event that the Securities Administrator can determine no such arithmetic mean, the lowest one-month U.S. Dollar lending rate that the New York City banks selected by the Securities Administrator are quoting on such LIBOR Determination Date to leading European banks. "Opinion of Counsel" A written opinion of counsel, who may, without limitation, be a salaried counsel for the Depositor, the Securities Administrator, the Trustee or the Servicer except that any opinion of counsel relating to (a) the qualification of any REMIC as a REMIC or (b) compliance with the REMIC Provisions must be an opinion of Independent counsel. "Optional Termination Date" The first Distribution Date on which the Majority Class CE Certificateholder or, if there is no Majority Class CE Certificateholder, the Depositor, may opt to terminate the Mortgage Pool pursuant to Section 10.01. "Original Principal Balance" With respect to each Class of Certificates, the Principal Balance thereof on the Closing Date, as set forth opposite such Class in the Preliminary Statement, except with respect to (i) the Class P and Residual Certificates, which have an Original Principal Balance of zero and (ii) the Class CE Certificates, which, solely for REMIC purposes, have an Original Principal Balance equal to the Initial Overcollateralization Amount. "Originator" Wells Fargo Bank and its successors. "Originator Prepayment Penalty Payment Amount" The amount payable by the Originator pursuant to Section 5(b) of the Mortgage Loan Purchase Agreement. "Overcollateralization Amount" 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 (other than the Class CE, Class P and Residual 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" 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 (other than the Class CE, Class P and Residual 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 Amount on such Distribution Date. "Overcollateralization Floor" 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) [ ]% and (ii) the Pool Balance as of the Cut-off Date. "Overcollateralization Release Amount" 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 (other than the Class CE, Class P and Residual 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. "Owner Mortgage File" A file maintained by the Custodian for each Mortgage Loan that contains the documents specified in Section 2.01(a) and any additional documents required to be added to the Owner Mortgage File pursuant to this Agreement. "Ownership Interest" As to any Certificate, any ownership or security interest in such Certificate, including any interest in such Certificate as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. "Pass-Through Rate" With respect to any REMIC Regular Interest (other than the Class CE Uncertificated Interest and the Class CE Certificates), the Pass-Through Rate described for such Class in the table in the Preliminary Statement. With respect to the Class CE Certificates and any Distribution Date, a per annum rate equal to the percentage equivalent of a fraction, the numerator of which is the sum of the amounts calculated pursuant to clauses (A) through (T) below, and the denominator of which is the aggregate of the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ. For purposes of calculating the Pass-Through Rate for the Class CE Uncertificated Interest and the Class CE Certificates, the numerator is equal to the sum of the following components: (A) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AA minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AA; (B) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AI1A minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AI1A; (C) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AI1B minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AI1B; (D) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AII1 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AII1; (E) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AII2 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AII2; (F) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AII3 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1AII3; (G) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M1 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M1; (H) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M2 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M2; (I) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M3 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M3; (J) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M4 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M4; (K) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M5 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M5; (L) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M6 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M6; (M) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M7 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M7; (N) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M8 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M8; (O) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M9 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M9; (P) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M9 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M10; (Q) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M9 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M11; (R) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M9 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M12; (S) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1M13 minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M13; and (T) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1ZZ minus the Marker Rate, applied to an amount equal to the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1ZZ. "Paying Agent" Any paying agent appointed pursuant to Section 5.05. "Paying Agent Agreement" As defined in Section 5.05. "Percentage Interest" With respect to any Certificate (other than a Class CE, Class P and Residual Certificate), a fraction, expressed as a percentage, the numerator of which is the initial Principal Balance, as the case may be, represented by such Certificate and the denominator of which is the Original Principal Balance of the related Class. With respect to a Class CE or Class P Certificate, the portion of the Class evidenced thereby, expressed as a percentage, as stated on the face of such Certificate; provided, however, that the sum of all such percentages for each such Class totals 100%. With respect to each of the Class R and Class R-X Certificates, 100%. "Periodic Cap" With respect to each Adjustable Rate Mortgage Loan, the applicable limit on adjustment of the Mortgage Interest Rate for each Adjustment Date specified in the applicable Mortgage Note and designated as such in the Mortgage Loan Schedules. "Permitted Transferee" Any transferee of a Residual Certificate other than a Disqualified Organization, a non-U.S. Person or a U.S. Person with respect to whom income on the Residual Certificate is attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such Person or any other U.S. Person. "Person" Any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof. "Pool Balance" As of any date of determination, the aggregate unpaid principal balance of the Mortgage Loans. "Pool Cap" As of any Distribution Date and for the Class M Certificates, a per annum rate, 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. For federal income tax purposes, the economic equivalent of such rate shall be expressed as the weighted average of the REMIC 1 Remittance Rate on (a) REMIC 1 Regular Interest LT1SUB, subject to a cap and floor equal to the Weighted Average Net Mortgage Interest Rates of the Group I Mortgage Loans and (b) REMIC 1 Regular Interest LT2SUB, subject to a cap and floor equal to the Weighted Average Net Mortgage Interest Rates of the Group II Mortgage Loans, weighted on the basis of the Uncertificated Balance of such REMIC 1 Regular Interests. "Pool Maximum Rate Cap" With respect to any Distribution Date and for the Class M Certificates, a per annum rate, equal to the weighted average of (i) Group I Maximum Rate Cap and (ii) the Group II Maximum Rate Cap, weighted on the basis of the related Group Subordinate Amount. "Prepayment Interest Shortfall" With respect to any Distribution Date, for each Mortgage Loan that was the subject of a Principal Prepayment during the related Prepayment Period that was applied by the Servicer to reduce the outstanding Principal Balance of such Mortgage Loan on a date preceding the related Due Date, an amount equal to interest at the applicable Mortgage Interest Rate (net of the Servicing Fee Rate) on the amount of such Principal Prepayment for the number of days commencing on the date on which the Principal Prepayment is applied and ending on the last day of the calendar month in which applied. "Prepayment Penalty" With respect to any Prepayment Period, any Prepayment Penalty, penalty or charge collected by the Servicer from a Mortgagor in connection with any voluntary Principal Prepayment in full pursuant to the terms of the related Mortgage Note as from time to time held as a part of the Trust Fund, the Prepayment Penalties so held being determined in accordance with the guidelines for Prepayment Penalty provisions set forth in the Seller underwriting standards. The defined term "Prepayment Penalty" shall not include any Servicer Prepayment Penalty Payment Amount or Originator Prepayment Penalty Payment Amount. "Prepayment Period" With respect to any Distribution Date, the one month period ending on the last day of the calendar month preceding the month in which such Distribution Date occurs. "Principal Balance" With respect to any Class of Certificates (other than the Class CE, Class P and Residual Certificates) and any Distribution Date, the Original Principal Balance (a) reduced by the sum of (i) all amounts actually distributed in respect of principal of such Class on all prior Distribution Dates and (ii) Applied Realized Loss Amounts allocated thereto for previous Distribution Dates and (b) increased by any Subsequent Recoveries allocated to such Class for previous Distribution Dates. The Class CE, Class P and Residual Certificates do not have a Principal Balance. With respect to any Certificate (other than a Class CE, Class P or Residual Certificate) of a Class and any Distribution Date, the portion of the Principal Balance of such Class represented by such Certificate equal to the product of the Percentage Interest evidenced by such Certificate and the Principal Balance of such Class. "Principal Distribution Amount" With respect to 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. "Principal Prepayment" Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of scheduled interest due on any Due Date in any month or months subsequent to the month of prepayment. "Principal Remittance Amount" With respect to any Distribution Date, to the extent of funds available therefor, the sum (less amounts available for reimbursement of Advances and Servicing Advances pursuant to Section 3.05 and expenses reimbursable pursuant to Section 6.03 and amounts reimbursable or payable to the Securities Administrator or Trustee pursuant to this Agreement, including, without limitation, Sections 8.05 and Section 9.01(c)) of: (i) each payment of principal on a Mortgage Loan due during the related Collection Period and received by the Servicer on or prior to the related Determination Date, and any Advances with respect thereto (other than any payment received on an Eligible Substitute Mortgage Loan substituted during the related Collection Period), (ii) all full and partial Principal Prepayments received by the Servicer during the related Prepayment Period, (iii) Subsequent Recoveries, Insurance Proceeds and Net Liquidation Proceeds allocable to principal actually collected by the Servicer during the related Prepayment Period, (iv) with respect to Defective Mortgage Loans repurchased with respect to such Prepayment Period, the portion of the Purchase Price allocable to principal, (v) any Substitution Adjustment Amounts received during the related Prepayment Period and (vi) on the Distribution Date on which the Trust is to be terminated in accordance with Section 10.01 hereof, that portion of the Termination Price in respect of principal. "Private Certificates" Any of the Class M-12, Class M-13, Class CE, Class P, Class R and Class R-X Certificates. "Private Placement Memorandum" That certain private placement memorandum dated [ ], 20 relating to the private placement of the Class M-12, Class M-13, Class CE and Class P Certificates. "Prospectus" That certain Prospectus, dated [____], 20[_], as supplemented by the Prospectus Supplement dated [____], 20[_] relating to the public offering of the Senior Certificates and the Class M Certificates (other than the Class M-12 and Class M-13 Certificates). "Purchase Price" With respect to any Mortgage Loan or REO Property to be purchased pursuant to or as contemplated by Section 2.01, 2.03, 3.16 or 10.01, an amount equal to the sum of (i) 100% of the unpaid principal balance thereof as of the date of purchase (or such other price as provided in Section 10.01), (ii) in the case of a Mortgage Loan, accrued interest on such unpaid principal balance at the applicable Mortgage Interest Rate in effect from time to time from the Due Date as to which interest was last covered by a payment by the Mortgagor or an Advance by the Servicer, which payment or Advance had as of the date of purchase been distributed pursuant to Section 4.01, through the end of the calendar month in which the purchase is to be effected, (iii) any unreimbursed Servicing Advances and Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts previously withdrawn from the Collection Account in respect of such Mortgage Loan or REO Property pursuant to Section 3.13 and (v) in the case of a Mortgage Loan required to be purchased pursuant to Section 2.03, expenses reasonably incurred or to be incurred by the Servicer, the Securities Administrator or the Trustee in respect of the breach or defect giving rise to the purchase obligation. "Rate Ceiling" With respect to each Adjustable Rate Mortgage Loan, the maximum per annum Mortgage Interest Rate permitted under the related Mortgage Note. "Rating Agency or Rating Agencies" [ ] and [ ], or their respective successors. If such agencies or their successors are no longer in existence, "Rating Agencies" shall be such nationally recognized statistical rating organizations as set forth on the most current list of such organizations released by the Commission and designated by the Depositor, notice of which designation shall be given to the Trustee, the Securities Administrator and the Servicer. "Realized Loss" With respect to a Liquidated Mortgage Loan, the amount by which the remaining unpaid principal balance of the Mortgage Loan exceeds the amount of Net Liquidation Proceeds applied to the principal balance of the related Mortgage Loan. With respect to any Mortgage Loan, a Deficient Valuation or a reduction in the Principal Balance thereof resulting from a Servicer Modification. "Realized Loss Amortization Amount" Any 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 and the Class M-13 Realized Loss Amortization Amount. "Record Date" With respect to any Distribution Date and (i) the Class CE, Class P and Residual Certificates, the last Business Day of the preceding month and (ii) any Class of Book-Entry Certificates, the Business Day immediately preceding such Distribution Date; provided, however, that if any Book-Entry Certificate becomes a Definitive Certificate, the Record Date for such Class shall be the last Business Day of the immediately preceding month. "Reference Banks" Initially, the Reference Banks shall be Deutsche Bank International, Bank of America, N.A., Citibank, N.A., and The Fuji Bank, Limited. If any of these banks are not available, the Securities Administrator shall select from one of the following banks a substitute Reference Bank: Credit Suisse First Boston Corporation, Westdeutsche Landesbank Girozentrale, The J.P. Morgan Chase Bank or National Westminster Bank Plc. If any of these banks are not available, the Securities Administrator shall in its discretion select another Reference Bank. "Regular Certificate" Any of the Class A, Class M and Class CE Certificates. "Regulation AB" Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R. ss.ss.229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been publicly provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time. "Reimbursement Amount" With respect to any Mortgage Loan, any costs or damages incurred by the Trust in connection with a breach of the Depositor's representations set forth in Section 2.04(i) hereof. "Related Documents" With respect to any Mortgage Loan, the related Mortgage Notes, Mortgages and other related documents. "Relevant Servicing Criteria" The Servicing Criteria applicable to the Securities Administrator, the Trustee, the Custodian or the Servicer, as set forth on Exhibit S attached hereto. For clarification purposes, multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Securities Administrator, the Trustee, the Custodian or the Servicer, the term "Relevant Servicing Criteria" refers to the portion of the Relevant Servicing Criteria applicable to the party engaging such Servicing Function Participant insofar as the functions required to be performed by such party are to be performed by the Servicing Function Participant. "Relief Act" The Servicemembers Civil Relief Act, as it may be amended from time to time. "Relief Act Interest Shortfall" With respect to any Distribution Date, for any Mortgage Loan with respect to which there has been a reduction in the amount of interest collectible thereon for the most recently ended Collection Period as a result of the application of the Relief Act or similar state laws, the amount by which (i) interest collectible on such Mortgage Loan during such Collection Period is less than (ii) one month's interest on the principal balance of such Mortgage Loan at the Mortgage Interest Rate for such Mortgage Loan before giving effect to the application of the Relief Act or similar state laws. "REMIC" A "real estate mortgage investment conduit" within the meaning of Section 860D of the Code. "REMIC 1 Interest Loss Allocation Amount" With respect to any Distribution Date, an amount equal to (a) the product of (i) 50% of the sum of the aggregate principal balance of the Mortgage Loans and related REO Properties then outstanding and (ii) the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1 Regular Interest LT1AA minus the Marker Rate, divided by (b) 12. "REMIC 1 Marker Allocation Percentage" 50% of any amount payable from or loss attributable to the Mortgage Loans, which shall be allocated to REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ. "REMIC 1 Overcollateralization Target Amount" 0.50% of the Targeted Overcollateralization Amount. "REMIC 1 Overcollateralized Amount" With respect to any date of determination, (i) 0.50% of the aggregate Uncertificated Principal Balances of the REMIC 1 Regular Interests minus (ii) the aggregate of the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13, in each case as of such date of determination. "REMIC 1 Principal Loss Allocation Amount" With respect to any Distribution Date, an amount equal to (a) the product of (i) 50% of the aggregate Principal Balance of the Mortgage Loans and related REO Properties then outstanding and (ii) 1 minus a fraction, the numerator of which is two times the aggregate of the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13, the denominator of which is aggregate of the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ. "REMIC 1 Regular Interest LT1AA" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AA shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1AI1A" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AI1A shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1AI1B" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AI1B shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1AII1" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AII1 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1AII2" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AII2 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1AII3" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AII3 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M1" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M1 shall accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M2" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M2 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M3" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M3 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M4" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M4 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M5" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M5 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M6" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M6 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M7" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M7 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M8" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M8 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M9" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M9 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M10" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M10 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M11" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M11 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M12" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M12 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1M13" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M13 shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1SUB" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1SUB shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1XX" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1XX shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT1ZZ" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1ZZ shall accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT2GRP" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT2GRP shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interest LT2SUB" One of the separate non-certificated beneficial ownership interests in REMIC 1 issued hereunder and designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT2SUB shall accrue interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto. "REMIC 1 Regular Interests" REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13, REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1 Regular Interest LT2GRP, REMIC 1 Regular Interest LT1XX and REMIC 1 Regular Interest LT1ZZ. "REMIC 1 Sub WAC Allocation Percentage" 50% of any amount payable or loss attributable from the Mortgage Loans, which shall be allocated to REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1 Regular Interest LT2GRP and REMIC 1 Regular Interest LT1XX. "REMIC 1 Subordinated Balance Ratio" As of any Distribution Date, the ratio among the Uncertificated Principal Balances of each REMIC 1 Regular Interest ending with the designation "SUB," equal to the ratio among, with respect to each such REMIC 1 Regular Interest, the excess of (x) the aggregate unpaid principal balance of the Mortgage Loans in the related Loan Group over (y) the Principal Balance of the Senior Certificates relating to such Loan Group. "REMIC Provisions" Provisions of the federal income tax law relating to real estate mortgage investment conduits which appear at Section 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations and rulings promulgated thereunder, as the foregoing may be in effect from time to time. "REMIC Regular Interest" Any REMIC 1 Regular Interest, the Class CE Uncertificated Interest or any of the Certificates (other than the Class P and Residual Certificates). "Remittance Report" A report prepared by the Servicer and delivered to the Securities Administrator pursuant to Section 4.07, containing the information attached hereto as Exhibit M. "Rents from Real Property" With respect to any REO Property, gross income of the character described in Section 856(d) of the Code. "REO Disposition" The sale or other disposition of an REO Property on behalf of the Trust. "REO Disposition Fee" The REO Disposition Fee shall be the greater of one percent (1%) of the gross sales price of the REO Property or $1,500.00 up to a maximum fee of $10,000 per REO Property. "REO Imputed Interest" As to any REO Property, for any Collection Period, an amount equivalent to interest (at the Net Mortgage Interest Rate that would have been applicable to the related Mortgage Loan had it been outstanding) for such Collection Period on the unpaid principal balance of the Mortgage Loan as of the date of acquisition. "REO Mortgage Loan" Any Mortgage Loan which is not a Liquidated Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage Note is discharged and the related Mortgaged Property is held as part of the Trust Fund. "REO Principal Amortization" With respect to any REO Property, for any calendar month, the aggregate of all amounts received in respect of such REO Property during such calendar month, whether in the form of rental income, sale proceeds (including, without limitation, that portion of the Termination Price paid in connection with a purchase of all of the Mortgage Loans and REO Properties pursuant to Section 10.01 that is allocable to such REO Property) or otherwise, net of any portion of such amounts (i) payable pursuant to Section 3.13 in respect of the proper operation, management and maintenance of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to Section 3.13 for unpaid Servicing Fees in respect of the related Mortgage Loan and payable and reimbursable to the Servicer or the Trustee for unreimbursed Servicing Advances and Advances in respect of such REO Property or the related Mortgage Loan. "REO Property" A Mortgaged Property acquired by the Servicer on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure, as described in Section 3.13. "Reportable Event" As defined in Section 3.28(c). "Request for Release" A release signed by a Servicing Officer, in the form of Exhibit E attached hereto. "Reserve Account" The trust account created and maintained by the Securities Administrator pursuant to Section 3.04(g) which shall be entitled "Reserve Account, Wells Fargo Bank, N.A., as Securities Administrator for HSBC Bank USA, National Association, as Trustee, in trust for registered Holders of the Class M Certificates of Wells Fargo Home Equity Asset-Backed Securities 200 - - Trust, Home Equity Asset-Backed Certificates, Series 200 - ," and which must be an Eligible Account. Amounts on deposit in the Reserve Account shall not be invested. The Reserve Account shall not be an asset of any REMIC formed under this Agreement. "Residential Dwelling" Any one of the following: (i) a detached one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a one-family dwelling unit in a condominium project, (iv) a manufactured home, or (v) a detached one-family dwelling in a planned unit development, none of which is a co-operative or mobile home. "Residual Certificate" Either of the Class R or Class R-X Certificate. "Residual Interest" The sole Class of "residual interests" in each REMIC within the meaning of Section 860G(a)(2) of the Code. "Responsible Officer" When used with respect to the Trustee, the Securities Administrator or the Custodian, any officer assigned to its Corporate Trust Office (or any successor thereto), including any Vice President, Assistant Vice President, Trust Officer, any Assistant Secretary, any trust officer or any other officer of the Trustee or the Securities Administrator customarily performing functions similar to those performed by any of the above designated officers and in each case having direct responsibility for the administration of this Agreement. When used with respect to the Servicer, a Servicing Officer. "Retained Mortgage File" A file maintained by Wells Fargo Bank prior to any Document Transfer Date for each Mortgage Loan that contains the documents specified in Section 2.01(b) and any additional documents required to be added to the Retained Mortgage File pursuant to this Agreement. "Sarbanes Oxley Certification" As defined in Section 3.28(b) hereof. "Securities Administrator" Wells Fargo Bank, or any successor Securities Administrator appointed as herein provided. "Seller" Wells Fargo Bank, or its successor in interest, in its capacity as seller under the Mortgage Loan Purchase Agreement. "Senior Certificates" The Class A Certificates. "Senior Enhancement Percentage" For any Distribution Date, 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" For 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" On any date of determination thereof, [ ]%. "Sequential Trigger Event" With respect to any Distribution Date if (i) the aggregate Principal Balance of the Class M Certificates is reduced to zero, (ii) with respect to any Distribution Date on or prior to the Distribution Date in [ ] 20 , 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 [ ]% or (iii) with respect to any Distribution Date on or after the Distribution Date in [ ] 20 , a Trigger Event is in effect. "Servicer" Wells Fargo Bank, or any successor servicer appointed as herein provided, in its capacity as Servicer hereunder. Initially the servicing functions performed by Wells Fargo Bank shall be performed by the Wells Fargo Home Mortgage division of Wells Fargo Bank. "Servicer Event of Termination" One or more of the events described in Section 7.01. "Servicer Modification" A modification to the terms of a Mortgage Loan, in accordance with the terms of Section 3.01, as to which the Mortgagor is in default or as to which, in the judgment of the Servicer, default is reasonably foreseeable. "Servicer Prepayment Penalty Payment Amount" The amount payable by the Servicer in respect of any waived Prepayment Penalties pursuant to Section 3.01, which amount shall be equal to the difference between the amount of Prepayment Penalty due by a Mortgagor before any waiver and the actual amount of the Prepayment Penalty that was paid by the Mortgagor. "Servicer Remittance Date" With respect to any Distribution Date, the 22nd day of the month of such Distribution Date, or if any such day is not a Business Day, the preceding Business Day. "Servicing Advances" All customary, reasonable and necessary "out of pocket" costs and expenses incurred by the Servicer (including reasonable attorneys' fees and disbursements) in the performance of its servicing obligations, including, but not limited to, the cost of (i) the preservation, restoration, inspection and protection of the Mortgaged Property, (ii) any enforcement or judicial proceedings, including foreclosures, (iii) the management and liquidation of the REO Property and (iv) compliance with the obligations under Section 3.08. "Servicing Criteria" The "servicing criteria" set forth in Item 1122(d) of Regulation AB, as such may be amended from time to time. "Servicing Fee" With respect to each Mortgage Loan (including each REO Property) and for any calendar month, an amount equal to one month's interest (or in the event of any payment of interest which accompanies a Principal Prepayment in full made by the Mortgagor during such calendar month, interest for the number of days covered by such payment of interest) at the Servicing Fee Rate on the same principal amount on which interest on such Mortgage Loan accrues for such calendar month. "Servicing Fee Rate" With respect to each Mortgage Loan, [ ]% per annum. "Servicing Function Participant" Any Subservicer, Subcontractor or any other Person, other than the Securities Administrator, the Trustee, the Custodian and the Servicer, that is performing activities addressed by the Servicing Criteria. "Servicing Officer" Any officer of the Servicer involved in, or responsible for, the administration and servicing of Mortgage Loans, whose name and specimen signature appear on a list of servicing officers furnished by the Servicer to the Trustee, the Securities Administrator and the Depositor, as such list may from time to time be amended. "Servicing Standard" The standards set forth in Section 3.01. "Startup Day" As defined in Section 9.01(b) hereof. "Stayed Funds" Any payment required to be made under the terms of the Certificates and this Agreement but which is not remitted by the Servicer because the Servicer is the subject of a proceeding under the Bankruptcy Code and the making of such remittance is prohibited by Section 362 of the Bankruptcy Code. "Stepdown Date" The earlier to occur of (i) the Distribution Date following the Distribution Date on which the aggregate Principal Balance of the Senior Certificates is reduced to zero and (ii) the later to occur of (x) the Distribution Date in [ ] 20 and (y) the Distribution Date on which the Senior Enhancement Percentage is greater than or equal to the Senior Specified Enhancement Percentage. "Subcontractor" Any vendor, subcontractor or other Person that is not responsible for the overall servicing of Mortgage Loans but performs one or more discrete functions identified in Item 1122(d) of Regulation AB with respect to Mortgage Loans under the direction or authority of the Servicer (or a Subservicer of the Servicer), the Securities Administrator, the Trustee or the Custodian. "Subordination Depletion Date" The Distribution Date on which the aggregate Principal Balance of the Class M Certificates is reduced to zero. "Subsequent Recovery" 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. "Subservicer" Any Person that (i) services Mortgage Loans on behalf of the Servicer, and (ii) is responsible for the performance (whether directly or through Subservicers or Subcontractors) of a substantial portion of the material servicing functions required to be performed under this Agreement or any sub-servicing agreement that are identified in Item 1122(d) of Regulation AB. "Substitution Adjustment Amount" As defined in Section 2.03(d) hereof. "Targeted Overcollateralization Amount" As of any Distribution Date, (x) prior to the Stepdown Date, [ ]% of the Pool Balance as of 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) [ ]% of the Pool Balance as of the last day of the related Collection Period and (B) [ ]% of the Pool Balance as of 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. "Tax Matters Person" The tax matters person appointed pursuant to Section 9.01(e) hereof. "Tax Returns" The federal income tax returns on Internal Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed on behalf of the Trust for each of the three REMICs created pursuant to this Agreement under the REMIC Provisions, together with any and all other information reports or returns that may be required to be furnished to the Certificateholders or filed with the Internal Revenue Service or any other governmental taxing authority under any applicable provisions of federal, state or local tax laws. "Telerate Page 3750" The display page currently so designated on the Moneyline Telerate Service (or such other page as may replace the Telerate Page 3750 page on the Moneyline Telerate Service for the purpose of displaying London interbank offered rates of major banks). "Termination Price" As defined in Section 10.01(a) hereof. "Trigger Event" With respect to any Distribution Date, if (i) the three-month rolling average of 60+ Day Delinquent Loans equals or exceeds [ ]% of the Senior Enhancement Percentage or (ii) the aggregate amount of Realized Losses incurred since the applicable Cut-off Date through the last day of the related Collection Period (reduced by the aggregate amount of Subsequent Recoveries received since the applicable Cut-off Date through the end of the last day of the related Collection Period) divided by the Pool Balance on the Cut-off Date exceeds the applicable percentages set forth below with respect to such Distribution Date: Distribution Date Occurring In Percentage - ------------------------------------- ------------------------------------- [ ] through [ ].......... [ ]% [ ] through [ ].......... [ ]% [ ] through [ ].......... [ ]% [ ] and thereafter .......... [ ]% "Trust" Wells Fargo Home Equity Asset-Backed Securities 200 - Trust, the New York common law trust created hereunder. "Trust Fund" The segregated pool of assets subject hereto, constituting the primary trust created hereby and to be administered hereunder, with respect to a portion of which three REMIC elections are to be made, such entire Trust Fund consisting of: (i) such Mortgage Loans as from time to time are subject to this Agreement, together with the Mortgage Files relating thereto, and together with all collections thereon and proceeds thereof, (ii) any REO Property, together with all collections thereon and proceeds thereof, (iii) the Trustee's rights with respect to the Mortgage Loans under all insurance policies required to be maintained pursuant to this Agreement and any proceeds thereof, (iv) the Depositor's rights under the Mortgage Loan Purchase Agreement (including any security interest created thereby), (v) the Securities Administrator's rights under the Yield Maintenance Agreement and (vi) the Collection Account, the Distribution Account and the Reserve Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. "Trustee" HSBC Bank USA, National Association, a national banking association, in its capacity as trustee hereunder, or any successor Trustee appointed as herein provided. "Uncertificated Accrued Interest" With respect to each REMIC 1 Regular Interest on each Distribution Date, an amount equal to one month's interest at the related Uncertificated Pass-Through Rate on the Uncertificated Principal Balance of such REMIC Regular Interest. In each case, Uncertificated Accrued Interest will be reduced by any Prepayment Interest Shortfalls and Relief Act Interest Shortfalls (allocated to such REMIC Regular Interests based on their respective entitlements to interest irrespective of any Prepayment Interest Shortfalls and Relief Act Interest Shortfalls for such Distribution Date). "Uncertificated Principal Balance" The amount of any REMIC 1 Regular Interest outstanding as of any date of determination. As of the Closing Date, the Uncertificated Balance of each REMIC 1 Regular Interest shall equal the amount set forth in the Preliminary Statement hereto as its initial uncertificated balance. On each Distribution Date, the Uncertificated Principal Balance of each REMIC 1 Regular Interest shall be reduced by all distributions of principal made on such REMIC 1 Regular Interest on such Distribution Date pursuant to Section 4.08 and, if and to the extent necessary and appropriate, shall be further reduced on such Distribution Date by Realized Losses as provided in Section 4.08(b). The Uncertificated Balance of REMIC 1 Regular Interest LT1ZZ shall be increased by interest deferrals as provided in Section 4.08(a)(i). The Uncertificated Balance of each REMIC 1 Regular Interest shall never be less than zero. "Uncertificated REMIC 1 Pass-Through Rate" With respect to REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13, REMIC 1 Regular Interest LT1ZZ, REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular Interest LT2SUB and REMIC 1 Regular Interest LT1XX, the Weighted Average Net Mortgage Interest Rate of the Mortgage Loans. With respect to REMIC 1 Regular Interest LT1GRP, the Weighted Average Net Mortgage Interest Rate of the Group I Mortgage Loans. With respect REMIC 1 Regular Interest LT2GRP, the Weighted Average Net Mortgage Interest Rate of the Group II Mortgage Loans. "United States Person" or "U.S. Person" (i) A citizen or resident of the United States, (ii) a corporation, partnership or other entity treated as a corporation or partnership for United States federal income tax purposes organized in or under the laws of the United States or any state thereof or the District of Columbia (unless, in the case of a partnership, Treasury Regulations provide otherwise), (iii) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury Regulations, certain Trusts in existence on August 20, 1996, and treated as United States persons prior to such date, that elect to continue to be treated as United States persons will also be a U.S. Person; provided, that for purposes of the definition of a "Permitted Transferee," a U.S. Person shall not include any person whose income is attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such Person or any other Person. "Unpaid Realized Loss Amount" For any Class of Class M Certificates and as to any Distribution Date, the excess of (x) the aggregate Applied Realized Loss Amounts applied with respect to such Class for all prior Distribution Dates over (y) the sum of (a) the aggregate amount of any Subsequent Recoveries allocated to such Class and (b) the aggregate Realized Loss Amortization Amounts with respect to such Class for all prior Distribution Dates. "Value" With respect to any Mortgaged Property, the value thereof as determined by an independent appraisal made at the time of the origination of the related Mortgage Loan or the sale price, if the appraisal is not available. "Voting Interests" The portion of the voting rights of all of the Certificates which is allocated to any Certificate. The Voting Interests allocated among Holders of the Certificates (other than the Class CE, Class P and Residual Certificates) shall be 98%, and shall be allocated among each such Class according to the fraction, expressed as a percentage, the numerator of which is the aggregate Principal Balance of all the Certificates of such Class then outstanding and the denominator of which is the aggregate Principal Balance of all the Certificates (other than the Class CE, Class P and Residual Certificates) then outstanding. The Voting Interests allocated to each such Class of Certificates shall be allocated among all holders of each such Class in proportion to the outstanding Principal Balance of such Certificates; provided, however, that any Certificate registered in the name of the Servicer, the Depositor, the Securities Administrator or the Trustee or any of their respective affiliates shall not be included in the calculation of Voting Interests; provided that only such Certificates as are known by a Responsible Officer of the Securities Administrator to be so registered will be so excluded. One percent of all the Voting Interests will be allocated to the Holders of each of the Class CE and Class P Certificates. The Class R and Class R-X Certificates shall have no Voting Interests. "Weighted Average Net Mortgage Interest Rate" The weighted average (based on the unpaid principal balance of the related Mortgage Loans as of the first day of the related Collection Period or, in the case of the first Distribution Date, the applicable Cut-off Date) of the Net Mortgage Interest Rates of the Mortgage Loans, the Group I Mortgage Loans or the Group II Mortgage Loans, as applicable, expressed for each such Mortgage Loan as an annual rate and calculated on the basis of twelve months consisting of 30 days each and a 360 day year. "Wells Fargo Bank" Wells Fargo Bank, N.A., a national banking association, or its successor in interest. "Wells Fargo Bank Correspondents" The entities identified on a list provided by Wells Fargo Bank to the Servicer, from which Wells Fargo Bank purchased the Mortgage Loans. "Written Order to Authenticate" A written order by which the Depositor directing the Securities Administrator to execute, authenticate and deliver the Certificates. "Yield Maintenance Agreement" The yield maintenance agreement between the Securities Administrator, on behalf of the Trust, and the Yield Maintenance Agreement Provider substantially in the form attached hereto as Exhibit N. The Yield Maintenance Agreement shall not be an asset of any REMIC formed under this Agreement. "Yield Maintenance Agreement Payment" On each Distribution Date through the Distribution Date in [ ] 20 , the 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 on the schedule attached to the Yield Maintenance Agreement for such Distribution Date, (b) the notional amount as set forth on the schedule attached to the Yield Maintenance Agreement 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 the Closing Date, in the case of the first Distribution Date) to but excluding the current Distribution Date and the denominator of which is 360. "Yield Maintenance Agreement Provider" [ ], and any successor thereto. Section 1.02 Accounting. Unless otherwise specified herein, for the purpose of any definition or calculation, whenever amounts are required to be netted, subtracted or added or any distributions are taken into account such definition or calculation and any related definitions or calculations shall be determined without duplication of such functions. ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES Section 2.01 Conveyance of Mortgage Loans. (a) The Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust, without recourse for the benefit of the Certificateholders all the right, title and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in and to (i) each Mortgage Loan identified on the Mortgage Loan Schedules, including the related Cut-off Date Principal Balance, all interest accruing thereon after the applicable Cut-off Date and all collections in respect of interest and principal due after the applicable Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Mortgage Loans; (iv) all other assets included or to be included in the Trust Fund; (v) all proceeds of any of the foregoing; and (vi) the rights of the Depositor under the Mortgage Loan Purchase Agreement. Such assignment includes all interest and principal due to the Depositor or the Servicer after the applicable Cut-off Date with respect to the Mortgage Loans. It is agreed and understood by the Depositor and the Trustee that it is not intended that any mortgage loan be included in the Trust Fund that is a "High-Cost Home Loan" as defined in (i) the New Jersey Home Ownership Act effective November 27, 2003, (ii) the New Mexico Home Loan Protection Act effective January 1, 2004, (iii) the Massachusetts Predatory Home Loan Practices Act, effective November 7, 2004 or (iv) the Indiana Home Loan Practices Act, effective January 1, 2005. In connection with such assignment, the Depositor shall, with respect to each Mortgage Loan, deliver, or cause to be delivered, to the Custodian, on or before the Closing Date the following documents or instruments with respect to each Mortgage Loan: (i) The original Mortgage Note either (A) endorsed in blank or (B) endorsed as provided in Section 2.01(d), with all prior and intervening endorsements as may be necessary to show a complete chain of endorsements or with respect to any Mortgage Loan as to which the original Mortgage Note has been permanently lost or destroyed and has not been replaced, a lost note affidavit with a copy of the Mortgage Note and, in the case of any Mortgage Loan originated in the State of New York documented by a NYCEMA, the NYCEMA, the new Mortgage Note, if applicable, the consolidated Mortgage Note and the consolidated Mortgage; (ii) A recorded original assignment of the related Mortgage from Wells Fargo Bank assigning the related Mortgage to the Trustee, certified by the recording office, or, if such assignment is in the process of being recorded, a copy of the related Mortgage transmitted for recordation certified by an officer of Wells Fargo Bank or applicable Wells Fargo Bank Correspondent to be a true and correct copy of such assignment submitted for recordation; provided, however, if recordation is not required as described below, an assignment in recordable form (which may be assigned in blank) with respect to the related Mortgage; (iii) The original of each assumption agreement, modification, written assurance or substitution agreement pertaining to such Mortgage Note, if any; and (iv) For each Mortgage Loan secured by Co-op Shares, the originals of the following documents or instruments: (A) The loan security agreement; (B) The stock certificate; (C) The stock power, executed in blank; (D) The executed proprietary lease; (E) The executed recognition agreement; (F) The executed UCC-1 financing statement with evidence of recording thereon; and (G) The executed UCC-3 financing statements or other appropriate UCC financing statements required by state law, evidencing a complete and unbroken chain from the mortgagee to the Trustee with evidence of recording thereon (or in a form suitable for recordation). (b) The Securities Administrator shall promptly notify the Depositor, the Trustee and the Custodian of the occurrence of any Document Transfer Event of which the Servicer had knowledge. Following the receipt of such notice, the Depositor shall, with respect to each Mortgage Loan, deliver, or cause to be delivered, to the Custodian, no later than the Document Transfer Date, copies (which may be in electronic form mutually agreed upon by the Depositor and the Custodian) of the following additional documents or instruments with respect to each Mortgage Loan; provided, however, that originals of such documents or instruments shall be delivered to the Custodian if originals are required under the law in which the related Mortgaged Property is located in order to exercise all remedies available to the Trust under applicable law following default by the related Mortgagor: (i) The original recorded Mortgage with evidence of recordation noted thereon or attached thereto, together with any addenda or riders thereto, or a copy of such recorded Mortgage with such evidence of recordation certified to be true and correct by the appropriate governmental recording office; or a copy of such recorded Mortgage with such evidence of recordation, or if the original Mortgage has been submitted for recordation but has not been returned from the applicable public recording office, a copy of the Mortgage certified by an officer of Wells Fargo Bank or the applicable Wells Fargo Bank Correspondent to be a true and correct copy of the original Mortgage submitted for recordation; (ii) The original of each assumption agreement, modification, written assurance or substitution agreement pertaining to such Mortgage, if any, or, if such document is in the process of being recorded, a copy of such document, certified by an officer of Wells Fargo Bank or the applicable Wells Fargo Bank Correspondent of such Mortgage Loan or by the applicable title insurance company, closing agent, settlement agent, escrow agent or closing attorney to be a true and correct copy of such document transmitted for recordation, if any; (iii) For each MERS Mortgage Loan that is not a MOM Mortgage Loan, the original assignment showing MERS as the assignee of the Mortgage, with evidence of recording thereon or copies thereof certified by an officer of Wells Fargo Bank or the applicable Wells Fargo Bank Correspondent to have been submitted for recordation; (iv) Each original recorded intervening assignment of the Mortgage as may be necessary to show a complete chain of title from the Mortgage Loan originator to Wells Fargo Bank or Wells Fargo Home Mortgage, Inc., with evidence of recordation noted thereon or attached thereto, or a copy of such assignment with such evidence of recordation to be true and correct by the appropriate governmental recording office, or, if any such assignment has been submitted for recordation but has not been returned from the applicable public recording office or is not otherwise available, a copy of such assignment certified by an officer of Wells Fargo Bank or the applicable Wells Fargo Bank Correspondent to be a true and correct copy of the recorded assignment submitted for recordation; and (v) The original policy of the title insurance or certificate of title insurance or a written commitment to issue such a title insurance policy or certificate of title insurance, or a copy of such title insurance certified as true and correct by the applicable insurer or any attorney's certificate of title with an Officer's Certificate of Wells Fargo Bank or the applicable Wells Fargo Bank Correspondent that such attorney's certificate of title is customarily used in lieu of a title insurance policy in the jurisdiction in which the related mortgage property is located. (c) If any assignment of a Mortgage to the Trustee is in the process of being recorded on the Closing Date, the Depositor shall use its best efforts to cause each such original recorded document or certified copy thereof to be delivered to the Custodian promptly following its recordation, but in no event later than one (1) year following the Closing Date. If any Mortgage has been recorded in the name of MERS or its designee, no assignment of Mortgage in favor of the Trustee will be required to be prepared or delivered and instead, the Master Servicer shall take all actions as are necessary to cause the Trust Fund to be shown as the owner of the related Mortgage Loan on the records of MERS for the purpose of the system of recording transfers of beneficial ownership of mortgages maintained by MERS. The Depositor shall also cause to be delivered to the Custodian any other original mortgage loan document included in the Owner Mortgage File (and, if applicable, the Retained Mortgage File) if a copy thereof has been delivered. The Depositor shall pay from its own funds, without any right of reimbursement therefor, the amount of any costs, liabilities and expenses incurred by the Trust by reason of the failure of the Depositor to cause to be delivered to the Custodian within one (1) year following the Closing Date any assignment of a Mortgage (except with respect to any Mortgage recorded in the name of MERS) not delivered to the Custodian on the Closing Date. In lieu of recording an assignment of any Mortgage the Depositor may, deliver or cause to be delivered to the Custodian the assignment of the Mortgage Loan to the Trustee in a form suitable for recordation, if (i) with respect to a particular state the Trustee and the Custodian have received an Opinion of Counsel acceptable to it that such recording is not required to make the assignment effective against the parties to the Mortgage or subsequent purchasers or encumbrancers of the Mortgaged Property or (ii) the Depositor has been advised by each Rating Agency that non recordation in a state will not result in a reduction of the rating assigned by that Rating Agency at the time of initial issuance of the Certificates. Set forth on Exhibit Q attached hereto is a list of all states where recordation is required by either Rating Agency to obtain the initial ratings of the Certificates. The Custodian may rely and shall be protected in relying upon the information contained in such Exhibit Q. In the event that the Custodian receives notice that recording is required to protect the right, title and interest of the Trustee in and to any such Mortgage Loan for which recordation of an assignment has not previously been required, the Custodian shall promptly notify the Trustee and the Custodian shall within five Business Days (or such other reasonable period of time mutually agreed upon by the Custodian and the Trustee) of its receipt of such notice deliver each previously unrecorded assignment to the related Servicer for recordation. (d) Except for Mortgage Notes endorsed in blank, endorsements shall comply with the following format: WITHOUT RECOURSE PAY TO THE ORDER OF: HSBC BANK USA, NATIONAL ASSOCIATION, AS TRUSTEE under the pooling and servicing agreement dated as of [[ ], 200 ]. and its successors and assigns, [Wells Fargo Bank, N.A.][Wells Fargo Home Mortgage, Inc.] [Signature of Officer] [Officer's Name and Title] Except where assignments in blank are authorized or in the case of any Mortgage registered in the name of MERS, assignments of any Mortgage shall comply with the following: HSBC BANK USA, NATIONAL ASSOCIATION, AS TRUSTEE and its successors and assigns (e) Concurrently with the execution and delivery of this Agreement, the Depositor shall deliver the Mortgage Loan Schedule to the Trustee, the Securities Administrator, the Servicer and the Custodian. The Depositor and the Securities Administrator shall provide a copy of the Mortgage Loan Schedule to any Certificateholders upon written request made to it at the addresses set forth on Exhibit D, as the same may be amended from time to time by written notice from such party to the other parties hereto. (f) The Securities Administrator shall monitor the rating of Wells Fargo & Company and upon the occurrence of a Document Transfer Event relating to such rating, shall promptly notify the Servicer, Depositor, Trustee and Custodian of the occurrence of such Document Transfer Event. Section 2.02 Acceptance by Custodian. The Custodian, on behalf of the Trustee, acknowledges the receipt of, subject to the provisions of Section 2.01 and subject to the review described below and any exceptions noted on the exception report described in the next paragraph below, the documents referred to in Section 2.01 above and all other assets included in the definition of "Trust Fund" and declares that it holds and will hold such documents and the other documents delivered to it constituting the Owner Mortgage File (and in the case of a Document Transfer Event, the Retained Mortgage File), and that it holds or will hold all such assets and such other assets included in the definition of "Trust Fund" in trust for the exclusive use and benefit of all present and future Certificateholders. The Custodian, for the benefit of the Certificateholders, shall execute and deliver to the Servicer, the Securities Administrator, the Trustee and the Depositor on or prior to the Closing Date an initial certification in the form attached hereto as Exhibit F-1 hereto, to the effect that, except as may be specified in a list of exceptions attached thereto, it has received the original Mortgage Notes (described in Section 2.01(a)(i)) relating to each Mortgage Loan listed in the Mortgage Loan Schedules (other than any Mortgage Loan that has been paid in full, liquidated or otherwise released as of the date of such certification, and subject to any exceptions specifically identified in the exception report annexed to such certification). The Custodian will review each Owner Mortgage File within 45 days after execution of this Agreement. The Custodian will deliver no later than 30 days after completion of such review to the Servicer, the Securities Administrator, the Trustee and the Depositor a final certification in the form of Exhibit F-2 hereto to the effect that, except as may be specified in a list of exceptions attached thereto, all required documents set forth in Section 2.01(a) have been executed and received and appear regular on their face, and that such documents relate to the Mortgage Loans identified in the Mortgage Loan Schedule based on a comparison of the Mortgage Loan identifying number, Mortgagor name and street address, and in so doing the Custodian may rely on the purported due execution and genuineness of any such document and on the purported genuineness of any signature thereon. If in the process of reviewing the Mortgage Files and making or preparing, as the case may be, the certifications referred to above, the Custodian finds any document or documents constituting a part of a Mortgage File to be missing or defective in any material respect, at the conclusion of its review the Custodian shall so notify the Depositor, the Trustee, the Securities Administrator and the Servicer. The Depositor and the Trustee intend that the assignment and transfer herein contemplated constitute a sale of the Mortgage Loans and the Related Documents, conveying good title thereto free and clear of any liens and encumbrances, from the Depositor to the Trustee and that such property not be part of the Depositor's estate or property of the Depositor in the event of any insolvency by the Depositor. In the event that such conveyance is deemed to be, or to be made as security for, a loan, the parties intend that the Depositor shall be deemed to have granted and does hereby grant to the Trustee, on behalf of the Trust, a first priority perfected security interest in all of the Depositor's right, title and interest in and to the Mortgage Loans and the Related Documents, and that this Agreement shall constitute a security agreement under applicable law. The Securities Administrator is hereby directed to execute and deliver, on behalf of the Trust, the Yield Maintenance Agreement. Section 2.03 Repurchase or Substitution of Mortgage Loans by the Depositor. (a) Upon discovery or receipt of written notice of any materially defective document in, or that a document is missing from, an Owner Mortgage File (or, if applicable, a Retained Mortgage File) or of a breach of a representation of warranty of the Depositor in Section 2.04 hereof, in respect of any Mortgage Loan and, except for a breach of the representations and warranties set forth in clause (ee) of Section 2.04, such breach materially adversely affects the value of such Mortgage Loan, Prepayment Penalty or the interest therein of the Certificateholders, the Trustee (or the Custodian) shall promptly notify the Depositor and the Servicer of such defect, missing document or breach and request that the Depositor cure such defect or breach or deliver such missing document within 60 days from the date the Depositor was notified of such missing document, breach or defect. If the Depositor does not deliver such missing document or cure such defect or cure such breach in all material respects during such period, the Depositor shall repurchase such Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the Determination Date following the expiration of such period (subject to Section 2.03(d) and the last paragraph of this Section 2.03(a)). The Purchase Price for the repurchased Mortgage Loan shall be deposited in the Collection Account, and the Custodian, upon receipt of written notice from the Servicer of such deposit, shall release to the Depositor the related Owner Mortgage File (and, if applicable, Retained Mortgage File). The Trustee shall execute and deliver such instruments of transfer or assignment (or, in the case of a Mortgage Loan registered in the name of MERS or its designee, the Servicer shall reflect such assignment on the records of MERS), in each case without recourse, as the Depositor shall furnish to it and as shall be necessary to vest in the Depositor any Mortgage Loan released pursuant hereto and the Custodian and the Trustee shall have no further responsibility with regard to such Owner Mortgage File (and, if applicable, Retained Mortgage File). In lieu of repurchasing any such Mortgage Loan as provided above, the Depositor may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a Defective Mortgage Loan) and substitute one or more Eligible Substitute Mortgage Loans in the manner and subject to the limitations set forth in Section 2.03(d). It is understood and agreed that the representations and warranties set forth in Section 2.04 hereof shall survive delivery of the Owner Mortgage Files (and, if applicable, Retained Mortgage Files) to the Custodian and shall inure to the benefit of the Certificateholders notwithstanding any restrictive or qualified endorsement or assignment. It is understood and agreed that the obligations of the Depositor set forth in this Section 2.03(a) to cure, substitute for or repurchase a Mortgage Loan and to pay the Reimbursement Amount constitute the sole remedies available to the Certificateholders and to the Trustee on their behalf respecting a breach of the representations and warranties in Section 2.04 hereof. (b) In addition to the foregoing, in the case of a breach of the Depositor's representation set forth in Section 2.04(i) hereof, the Depositor shall pay to the Trust the Reimbursement Amount. The Reimbursement Amount shall be delivered to the Servicer for deposit into the Collection Account within 10 days from the date the Depositor was notified by the Trustee of the amount of such costs and damages. (c) Within 90 days of the earlier of discovery by the Servicer or receipt of notice by the Servicer of the breach of any representation, warranty or covenant of the Servicer set forth in Section 2.05 which materially and adversely affects the interests of the Certificateholders in any Mortgage Loan, the Servicer shall cure such breach in all material respects. (d) Any substitution of Eligible Substitute Mortgage Loans for Defective Mortgage Loans made pursuant to Section 2.03(a) must be effected prior to the last Business Day that is within two years after the Closing Date. As to any Defective Mortgage Loan for which the Depositor substitutes an Eligible Substitute Mortgage Loan or Loans, such substitution shall be effected by the Depositor delivering to the Custodian, on the Trustee's behalf for such Eligible Substitute Mortgage Loan or Loans, the documents required by Section 2.01, together with an Officers' Certificate providing that each such Eligible Substitute Mortgage Loan satisfies the definition thereof and specifying the Substitution Adjustment Amount (as described below), if any, in connection with such substitution. The Custodian shall acknowledge receipt for such Eligible Substitute Mortgage Loan or Loans and, within ten Business Days thereafter, the Custodian shall review such documents as specified in Section 2.02 and deliver to the Servicer and the Trustee, with respect to such Eligible Substitute Mortgage Loan or Loans, a certification substantially in the form attached hereto as Exhibit F-1, with any applicable exceptions noted thereon. Within one year of the date of substitution, the Custodian shall deliver to the Servicer and the Trustee a certification substantially in the form of Exhibit F-2 hereto with respect to such Eligible Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon. Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the month of substitution are not part of the Trust Fund and will be retained by the Depositor. For the month of substitution, distributions to Certificateholders will reflect the collections and recoveries in respect of such Defective Mortgage Loan in the Collection Period or Prepayment Period, as applicable, preceding the date of substitution and the Depositor shall thereafter be entitled to retain all amounts subsequently received in respect of such Defective Mortgage Loan. The Depositor shall give or cause to be given written notice to the Certificateholders that such substitution has taken place, shall amend the applicable Mortgage Loan Schedule to reflect the removal of such Defective Mortgage Loan from the terms of this Agreement and the substitution of the Eligible Substitute Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the Trustee, the Servicer, the Securities Administrator and the Custodian. Upon such substitution, such Eligible Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be subject in all respects to the terms of this Agreement, including all applicable representations and warranties as of the date of substitution. For any month in which the Depositor substitutes one or more Eligible Substitute Mortgage Loans for one or more Defective Mortgage Loans, the Servicer will determine the amount (the "Substitution Adjustment Amount"), if any, by which the aggregate Purchase Price of all such Defective Mortgage Loans exceeds the aggregate, as to each such Eligible Substitute Mortgage Loan, of the principal balance thereof as of the date of substitution, together with one month's interest on such principal balance at the applicable Net Mortgage Interest Rate. On the date of such substitution, the Depositor will deliver or cause to be delivered to the Servicer for deposit in the Collection Account an amount equal to the Substitution Adjustment Amount, if any, and the Trustee, upon receipt of the related Eligible Substitute Mortgage Loan or Loans and notice by the Servicer of such deposit, shall release to the Depositor the related Owner Mortgage File (and, if applicable, Retained Mortgage File) and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the Depositor shall deliver to it and as shall be necessary to vest therein any Defective Mortgage Loan released pursuant hereto. In addition, the Depositor shall obtain at its own expense and deliver to the Trustee an Opinion of Counsel to the effect that such substitution will not cause (a) any federal tax to be imposed on the Trust Fund, including without limitation, any federal tax imposed on "prohibited transactions" under Section 860F(a)(l) of the Code or on "contributions after the startup date" under Section 860G(d)(l) of the Code, or (b) any REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding. If such Opinion of Counsel can not be delivered, then such substitution may only be effected at such time as the required Opinion of Counsel can be given. (e) Upon discovery by the Depositor, the Seller, the Servicer, the Securities Administrator, the Custodian or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall within two Business Days give written notice thereof to the other parties. In connection therewith, the Depositor shall repurchase or, subject to the limitations set forth in Section 2.03(d), substitute one or more Eligible Substitute Mortgage Loans for the affected Mortgage Loan within 60 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan. In addition, upon discovery that a Mortgage Loan is defective in a manner that would cause it to be a "defective obligation" within the meaning of Treasury Regulations relating to REMICs, the Depositor shall cure the defect or make the required purchase or substitution no later than 60 days after the discovery of the defect. Any such repurchase or substitution shall be made in the same manner as set forth in Section 2.03(a). The Trustee shall reconvey to the Depositor the Mortgage Loan to be released pursuant hereto in the same manner, and on the same terms and conditions, as it would a Mortgage Loan repurchased for breach of a representation or warranty. (f) The Trustee shall be responsible for enforcing the Depositor's obligations under this Section 2.03. If the Trustee receives written notice from the Custodian or the Securities Administrator that the defect is not cured by the Depositor within 60 days after the Trustee's notice, the Trustee shall enforce the Depositor's obligation to repurchase such Mortgage Loan or substitute for such Mortgage Loan in accordance with the provisions of this Section 2.03. In connection with any substitution permitted by this Section 2.03, the Trustee shall verify that the unpaid principal balance and the Loan-to-Value Ratio of the Eligible Substitute Mortgage Loan satisfy the requirements of this Section 2.03. Section 2.04 Representations and Warranties of the Depositor with respect to the Mortgage Loans. The Depositor hereby represents and warrants to the Trustee for the benefit of the Certificateholders that as of the Closing Date or as of such other date specifically provided herein: (a) The information set forth in the Mortgage Loan Schedules was true and correct in all material respects, including, without limitation, the information regarding any Prepayment Penalty, at the date or dates respecting which such information was furnished as specified in the Mortgage Loan Schedules; (b) Immediately prior to the transfer and assignment contemplated herein, the Depositor was the sole owner and holder of the Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature and has full right and authority to sell and assign the same; (c) All payments required to be made up to the Due Date for such Mortgage Loan immediately preceding the Closing Date under the terms of the related Mortgage Note have been made and no Mortgage Loan had more than one delinquency in the 12 months preceding the applicable Cut-off Date; (d) The Mortgage Note, the related Mortgage and other agreements executed in connection therewith are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and, to the best of the Depositor's knowledge, all parties to the Mortgage Note and the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has been duly and properly executed by the Mortgagor; (e) All taxes, governmental assessments, insurance premiums, and water, sewer and municipal charges, which previously became due and owing have been paid, or an escrow of funds has been established, to the extent permitted by law, in an amount sufficient to pay for every such item which remains unpaid; and neither the Servicer nor the Depositor has advanced funds, or received any advance of funds by a party other than the Mortgagor, directly or indirectly for the payment of any amount required by the Mortgage, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is later, to the day which precedes by thirty days the first Due Date under the related Mortgage Note; (f) Neither the Depositor nor any prior holder of the Mortgage or the related Mortgage Note has modified the Mortgage or the related Mortgage Note in any material respect, satisfied, canceled or subordinated the Mortgage in whole or in part, released the Mortgaged Property in whole or in part from the lien of the Mortgage, or executed any instrument of release, cancellation, modification or satisfaction, except in each case as is reflected in an agreement delivered to the Trustee or the Custodian pursuant to Section 2.01; (g) No Mortgage Note or Mortgage is subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of the Mortgage Note or Mortgage, or the exercise of any right thereunder, render the Mortgage Note or Mortgage unenforceable, in whole or in part, or subject it to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto; (h) The Mortgage is a valid, subsisting and enforceable first lien on the property therein described, and the Mortgaged Property is free and clear of all encumbrances and liens having priority over the first lien of the Mortgage except for liens for real estate taxes and special assessments not yet due and payable and liens or interests arising under or as a result of any federal, state or local law, regulation or ordinance relating to hazardous wastes or hazardous substances, and, if the related Mortgaged Property is a condominium unit, any lien for common charges permitted by statute or homeowners association fees; and any security agreement, chattel mortgage or equivalent document related to, and delivered to the Trustee or to the Custodian with, any Mortgage establishes in the Depositor a valid and subsisting first lien on the property described therein and the Depositor has full right to sell and assign the same to the Trustee; (i) Each Mortgage Loan at the time it was originated complied in all material respects with applicable federal, state and local laws including, without limitation, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, predatory and abusive lending laws and disclosure laws; (j) Each Mortgaged Property is located in the United States and consists of a one- to four-unit residential property, which may include a detached home, townhouse, condominium unit, a unit in a planned unit development or a manufacturing housing unit which constitutes real property for purposes of the applicable state law; (k) Except for Mortgage Loans secured by residential long-term leases, the Mortgaged Property consists of a fee simple estate in real property; all of the improvements which are included for the purpose of determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property and no improvements on adjoining properties encroach upon the Mortgaged Property (unless insured against under the related title insurance policy); and to the best of the Depositor's knowledge, the Mortgaged Property and all improvements thereon comply with all requirements of any applicable zoning and subdivision laws and ordinances; (l) With respect to each Mortgage where a lost note affidavit has been delivered to the Custodian on the Trustee's behalf in place of the related Mortgage Note, the related Mortgage Note is no longer in existence; (m) The proceeds of the Mortgage Loans have been fully disbursed, there is no requirement for future advances thereunder and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been complied with (except for escrow funds for exterior items which could not be completed due to weather and escrow funds for the completion of swimming pools); and all costs, fees and expenses incurred in making, closing or recording the Mortgage Loan have been paid, except recording fees with respect to Mortgages not recorded as of the Closing Date; (n) The Mortgage Loan (except any Mortgage Loan secured by a Mortgaged Property located in any jurisdiction, as to which an opinion of counsel of the type customarily rendered in such jurisdiction in lieu of title insurance is instead received) is covered by an American Land Title Association mortgagee title insurance policy or other generally acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac, issued by a title insurer acceptable to Fannie Mae or Freddie Mac insuring the originator, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan and subject only to (A) the lien of current real property taxes and assessments not yet due and payable, (B) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage acceptable to mortgage lending institutions in the area in which the Mortgaged Property is located or specifically referred to in the appraisal performed in connection with the origination of the related Mortgage Loan, (C) liens created pursuant to any federal, state or local law, regulation or ordinance affording liens for the costs of clean-up of hazardous substances or hazardous wastes or for other environmental protection purposes and (D) such other matters to which like properties are commonly subject which do not individually, or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgage; the Depositor is the sole insured of such mortgagee title insurance policy, the assignment to the Trustee of the Depositor's interest in such mortgagee title insurance policy does not require any consent of or notification to the insurer which has not been obtained or made, such mortgagee title insurance policy is in full force and effect and will be in full force and effect and inure to the benefit of the Trustee, no claims have been made under such mortgagee title insurance policy, and no prior holder of the related Mortgage, including the Depositor, has done, by act or omission, anything which would impair the coverage of such mortgagee title insurance policy; (o) To the best of the Depositor's knowledge, there is no default, breach, violation or event of acceleration existing under the Mortgage or the related Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; the Depositor has not waived any default, breach, violation or event of acceleration; and no foreclosure action is currently threatened or has been commenced with respect to the Mortgage Loan; (p) The Mortgaged Property is free and clear of all mechanics' and materialmen's liens or liens in the nature thereof; provided, however, that this warranty shall be deemed not to have been made at the time of the initial issuance of the Certificates if a title policy affording, in substance, the same protection afforded by this warranty is furnished to the Trustee by the Depositor; (q) The Mortgage Loan meets, or is exempt from, applicable state or federal laws, regulations and other requirements, pertaining to usury, and the Mortgage Loan is not usurious; (r) To the best of the Depositor's knowledge, all inspections, licenses and certificates required to be made or issued with respect to all portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including, but not limited to, certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities; (s) Each Mortgage Note (other than with respect to any Balloon Loans) is payable in monthly payments, resulting in complete amortization of the Mortgage Loan over a term of not more than 360 months; (t) Each Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including realization by judicial foreclosure (subject to any limitation arising from any bankruptcy, insolvency or other law for the relief of debtors), and there is no homestead or other exemption available to the Mortgagor which would interfere with such right of foreclosure; (u) The Mortgaged Property is undamaged by water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Depositor makes no representations), in a matter which would adversely affect the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended and to the best of the Depositor's knowledge, there is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property; (v) The Mortgaged Property securing each Mortgage Loan is insured by an insurer acceptable to Fannie Mae or Freddie Mac against loss by fire and such hazards as are covered under a standard extended coverage endorsement, in an amount which is not less than the lesser of 100% of the insurable value of the Mortgaged Property and the outstanding principal balance of the Mortgage Loan, but in no event less than the minimum amount necessary to fully compensate for any damage or loss on a replacement cost basis; if the Mortgaged Property is a condominium unit, it is included under the coverage afforded by a blanket policy for the project; if upon origination of the Mortgage Loan, the improvements on the Mortgaged Property were in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (A) the outstanding principal balance of the Mortgage Loan, (B) the full insurable value of the Mortgaged Property and (C) the maximum amount of insurance which was available under the National Flood Insurance Act of 1968, as amended; and each Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor's cost and expense; (w) To the best of the Depositor's knowledge, no Mortgagor is a debtor in any state or federal bankruptcy or insolvency proceeding; (x) If the Mortgage Loan is secured by a long-term residential lease, (1) the lessor under the lease holds a fee simple interest in the land; (2) the terms of such lease expressly permit the mortgaging of the leasehold estate, the assignment of the lease without the lessor's consent and the acquisition by the holder of the Mortgage of the rights of the lessee upon foreclosure or assignment in lieu of foreclosure or provide the holder of the Mortgage with substantially similar protections; (3) the terms of such lease do not (a) allow the termination thereof upon the lessee's default without the holder of the Mortgage being entitled to receive written notice of, and opportunity to cure, such default, (b) allow the termination of the lease in the event of damage or destruction as long as the Mortgage is in existence, (c) prohibit the holder of the Mortgage from being insured (or receiving proceeds of insurance) under the hazard insurance policy or policies relating to the Mortgaged Property or (d) permit any increase in rent other than pre-established increases set forth in the lease; (4) the original term of such lease is not less than 15 years; (5) the term of such lease does not terminate earlier than five years after the maturity date of the Mortgage Note; and (6) the Mortgaged Property is located in a jurisdiction in which the use of leasehold estates in transferring ownership in residential properties is a widely accepted practice; (y) None of the Mortgage Loans are classified as "high cost" Mortgage Loans under Section 32 of the Home Ownership and Equity Protection Act of 1994 as amended or any comparable state law; (z) With respect to each Mortgage Loan that has a Prepayment Penalty, each such Prepayment Penalty shall be enforceable, and each Prepayment Penalty shall be permitted pursuant to federal, state and local law. Each such Prepayment Penalty is in an amount less than or equal to the maximum amount permitted under applicable law. Each such Prepayment Penalty actually charged to the related borrower is in accordance with the Prepayment Penalty matrices set forth in Exhibit R; (aa) Each Mortgage Loan is a "qualified mortgage" within the meaning of Section 860G of the Code and Treas. Reg. ss.1.860G-2; (bb) No Mortgage Loan is a "high cost" loan as defined under any federal, state or local law applicable to such Mortgage Loan at the time of its origination; (cc) No Mortgage Loan is serviced by the Trustee or an affiliate of the Trustee; and (dd) In addition to the foregoing representations and warranties made in subparagraphs (a) through (cc) above, the Depositor further represents and warrants upon delivery of the Group I Mortgage Loans, as to each, that: (i) No mortgage loan is covered by the Home Ownership and Equity Protection Act of 1994; (ii) With respect to each Group I Mortgage Loan, none of the proceeds of such Mortgage Loan were used to finance single-premium credit life insurance policies; (iii) With respect to each Group I Mortgage Loan, the Servicer has furnished accurate and complete information on the related borrower credit files to Equifax, Experian and Trans Union Credit Information Company, in accordance with the Fair Credit Reporting Act and its implementing regulations; (iv) The unpaid principal balance of each Group I Mortgage Loan does not exceed the applicable maximum original loan amount limitations with respect to first lien one- to four-family residential mortgage loans as set forth in the Freddie Mac Selling Guide; (v) With respect to each Group I Mortgage Loan that has a Prepayment Penalty, no such Prepayment Penalty may be imposed for a term in excess of five (5) years with respect to Mortgage Loans originated prior to October 1, 2002 and three (3) years with respect to Mortgage Loans originated on or after October 1, 2002; (vi) No Group I Mortgage Loan is a "high-cost," "high-cost home," "covered" (excluding home loans defined as "covered home loans" pursuant to clause (1) of the definition of that term in the New Jersey Home Ownership Security Act of 2002), "high-risk home" or "predatory" loan under any applicable federal, state or local predatory or abusive lending law; and (vii) With respect to any Group I Mortgage Loan originated on or after August 1, 2004, neither the related Mortgage nor the related Mortgage Note requires the borrower to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction. Notwithstanding the foregoing, no representations or warranties are made by the Depositor as to the environmental condition of any Mortgaged Property; the absence, presence or effect of hazardous wastes or hazardous substances on any Mortgaged Property; any casualty resulting from the presence or effect of hazardous wastes or hazardous substances on, near or emanating from any Mortgaged Property; the impact on Certificateholders of any environmental condition or presence of any hazardous substance on or near any Mortgaged Property; or the compliance of any Mortgaged Property with any environmental laws, nor is any agent, person or entity otherwise affiliated with the Depositor authorized or able to make any such representation, warranty or assumption of liability relative to any Mortgaged Property. In addition, no representations or warranties are made by the Depositor with respect to the absence or effect of fraud in the origination of any Mortgage Loan. It is understood and agreed that the representations and warranties set forth in this Section 2.04 shall survive delivery of the respective Owner Mortgage Files (and, if applicable, Retained Mortgage Files) to the Custodian and shall inure to the benefit of the Trustee notwithstanding any restrictive or qualified endorsement or assignment. Section 2.05 Representations, Warranties and Covenants of the Servicer. The Servicer hereby represents, warrants and covenants to the Trustee, for the benefit of each of the Trustee and the Certificateholders and to the Depositor and the Securities Administrator that as of the Closing Date or as of such date specifically provided herein: (i) The Servicer is a national banking association duly chartered and validly existing in good standing under the laws of the United States and has all licenses necessary to carry on its business as now being conducted, except for such licenses, certificates and permits the absence of which, individually or in the aggregate, would not have a material adverse effect on the ability of the Servicer to conduct its business as it is presently conducted, and is licensed, qualified and in good standing in the states where the Mortgaged Property is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Servicer or to ensure the enforceability or validity of each Mortgage Loan; the Servicer has the power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by the Servicer and the consummation of the transactions contemplated hereby have been duly and validly authorized; and all requisite corporate action has been taken by the Servicer to make this Agreement valid and binding upon the Servicer in accordance with its terms; (ii) The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Servicer and will not result in the breach of any term or provision of the articles of incorporation or by-laws of the Servicer or result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any agreement, indenture or loan or credit agreement or other instrument to which the Servicer or its property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which the Servicer or its property is subject; (iii) The Servicer is an approved seller/servicer of conventional residential mortgage loans for Fannie Mae or Freddie Mac, with the facilities, procedures, and experienced personnel necessary for the sound servicing of mortgage loans of the same type as the Mortgage Loans. The Servicer is a HUD approved mortgagee pursuant to Section 203 of the National Housing Act and is in good standing to sell mortgage loans to and service mortgage loans for Fannie Mae or Freddie Mac, and no event has occurred, including but not limited to a change in insurance coverage, which would make the Servicer unable to comply with Fannie Mae or Freddie Mac eligibility requirements or which would require notification to either Fannie Mae or Freddie Mac; (iv) This Agreement, and all documents and instruments contemplated hereby which are executed and delivered by the Servicer, constitute and will constitute valid, legal and binding obligations of the Servicer, enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally (whether considered in a proceeding at law or in equity); (v) The Servicer does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement; (vi) There is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against the Servicer that, either individually or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of the Servicer, or in any material impairment of the right or ability of the Servicer to carry on its business substantially as now conducted, or in any material liability on the part of the Servicer, or that would draw into question the validity or enforceability of this Agreement or of any action taken or to be taken in connection with the obligations of the Servicer contemplated herein, or that would be likely to impair materially the ability of the Servicer to perform under the terms of this Agreement; (vii) No consent, approval or order of any court or governmental agency or body is required for the execution, delivery and performance by the Servicer of or compliance by the Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement, except for such consents, approvals, authorizations and orders, if any, that have been obtained; (viii) No information in this Agreement provided by the Servicer nor any information, certificate of an officer, statement furnished in writing or report delivered to the Trustee or the Securities Administrator by the Servicer in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; (ix) The Servicer has fully furnished, and shall continue to fully furnish for so long as it is servicing the Mortgage Loans hereunder, in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information on the Mortgagor credit files to Equifax, Experian and Trans Union Credit Information Company on a monthly basis; (x) Except as otherwise disclosed in the Prospectus, no legal or governmental proceedings are pending (or known to be contemplated) against the Servicer that would be material to Certificateholders; (xi) Except as otherwise disclosed in the Prospectus, the Servicer is not aware and has not received notice that any default, early amortization or other performance triggering event has occurred as to any other securitization due to any act or failure to act of the Servicer under such securitization; (xii) Except as otherwise disclosed in the Prospectus, the Servicer has not been terminated as servicer in a residential mortgage loan securitization, either due to a servicing default or to application of a servicing performance test or trigger; (xiii) Except as otherwise disclosed in the Prospectus, no material noncompliance with the applicable servicing criteria with respect to other securitizations of residential mortgage loans involving the Servicer as a servicer has been disclosed or reported by the Servicer within the past three (3) years; (xiv) Except as otherwise disclosed in the Prospectus, no material changes to the Servicer's policies or procedures with respect to the servicing function it will perform under this Agreement for mortgage loans of a type similar to the Mortgage Loans have occurred during the three-year period immediately preceding the date of this Agreement; (xv) Except as otherwise disclosed in the Prospectus, there is no material risk that the Servicer's financial condition could affect one or more aspects of the performance by the Servicer of its servicing obligations under this Agreement in a manner that could have a material impact on the performance of the Mortgage Loans or the Certificates; and (xvi) Except as disclosed in the Prospectus, there are no affiliations, relationships or transactions relating to the Servicer and any party identified in Item 1119 of Regulation AB of the type described therein. It is understood and agreed that the representations, warranties and covenants set forth in this Section 2.05 shall survive delivery of the Mortgage Files to the Custodian and shall inure to the benefit of the Trustee, the Depositor, the Securities Administrator and the Certificateholders. Upon discovery by any of the Depositor, the Servicer, the Securities Administrator or the Trustee of a breach of any of the foregoing representations, warranties and covenants which materially and adversely affects the value of any Mortgage Loan, Prepayment Penalty or the interests therein of the Certificateholders, the party discovering such breach shall give prompt written notice (but in no event later than two Business Days following such discovery) to the other parties hereto. Upon discovery by any of the Depositor, the Servicer, the Securities Administrator or the Trustee of a breach of any of the representations and warranties set forth in this Section 2.05, the party discovering such breach shall give prompt written notice, which shall not exceed two days, to the other parties. The Securities Administrator shall consult with the Depositor to determine if any such breach is material and any breach determined by the Depositor to be material shall be included by the Securities Administrator on the next Distribution Date Statement prepared pursuant to Section 4.06. Section 2.06 Representations and Warranties of the Depositor. The Depositor represents and warrants to the Trust and the Trustee on behalf of the Certificateholders and to the Servicer and Securities Administrator as follows: (i) This agreement constitutes a legal, valid and binding obligation of the Depositor, enforceable against the Depositor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity); (ii) Immediately prior to the sale and assignment by the Depositor to the Trustee on behalf of the Trust of each Mortgage Loan, the Depositor had good and marketable title to each Mortgage Loan (insofar as such title was conveyed to it by the Seller) subject to no prior lien, claim, participation interest, mortgage, security interest, pledge, charge or other encumbrance or other interest of any nature; (iii) As of the Closing Date, the Depositor has transferred all right, title interest in the Mortgage Loans to the Trustee on behalf of the Trust; (iv) The Depositor has not transferred the Mortgage Loans to the Trustee on behalf of the Trust with any intent to hinder, delay or defraud any of its creditors; (v) The Depositor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own its assets and conduct its business as presently being conducted; (vi) The Depositor is not in violation of its certificate of incorporation or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Depositor is a party or by which it or its properties may be bound, which default might result in any material adverse changes in the financial condition, earnings, affairs or business of the Depositor or which might materially and adversely affect the properties or assets, taken as a whole, of the Depositor; (vii) The execution, delivery and performance of this Agreement by the Depositor, and the consummation of the transactions contemplated thereby, do not and will not result in a material breach or violation of any of the terms or provisions of, or, to the knowledge of the Depositor, constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Depositor is a party or by which the Depositor is bound or to which any of the property or assets of the Depositor is subject, nor will such actions result in any violation of the provisions of the certificate of incorporation or by-laws of the Depositor or, to the best of the Depositor's knowledge without independent investigation, any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Depositor or any of its properties or assets (except for such conflicts, breaches, violations and defaults as would not have a material adverse effect on the ability of the Depositor to perform its obligations under this Agreement); (viii) To the best of the Depositor's knowledge without any independent investigation, no consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body of the United States or any other jurisdiction is required for the issuance of the Certificates, or the consummation by the Depositor of the other transactions contemplated by this Agreement, except such consents, approvals, authorizations, registrations or qualifications as (a) may be required under State securities or blue sky laws, (b) have been previously obtained or (c) the failure of which to obtain would not have a material adverse effect on the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement; and (ix) There are no actions, proceedings or investigations pending before or, to the Depositor's knowledge, threatened by any court, administrative agency or other tribunal to which the Depositor is a party or of which any of its properties is the subject: (a) which if determined adversely to the Depositor would have a material adverse effect on the business, results of operations or financial condition of the Depositor; (b) asserting the invalidity of this Agreement or the Certificates; (c) seeking to prevent the issuance of the Certificates or the consummation by the Depositor of any of the transactions contemplated by this Agreement, as the case may be; or (d) which might materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement. Section 2.07 Issuance of Certificates and the Uncertificated Regular Interests. The Trustee acknowledges the assignment to it of the Mortgage Loans and the delivery to the Custodian on its behalf of the Mortgage Files, subject to the provisions of Sections 2.01 and 2.02, and the Trustee acknowledges the assignment to it of all other assets included in the Trust Fund, receipt of which is hereby acknowledged. Concurrently with such assignment and delivery and in exchange therefor, the Securities Administrator, pursuant to the Written Order to Authenticate executed by an officer of the Depositor, has executed, and the Certificate Registrar has authenticated and delivered to or upon the order of the Depositor, the Class A Certificates and Class M Certificates (other than the Class M-12 and Class M-13 Certificates) in minimum dollar denominations of $[ ] and integral dollar multiples of $[ ] in excess thereof and the Class M-12 and Class M-13 Certificates in minimum denominations of $[ ] and integral multiples of $[ ] in excess thereof. The Class CE and Class P Certificates are issuable only in minimum Percentage Interests of 10%. Each Residual Certificate is issuable only as a single certificate. The Trustee acknowledges the issuance of the uncertificated REMIC 1 Regular Interests and declares that it hold such regular interests as assets of REMIC 2. The Trustee acknowledges the issuance of the Class CE Uncertificated Interest and declares that it holds such regular interest as the asset of REMIC A. The Trustee acknowledges that the obligation of the Class CE Certificates to pay Cap Carryover Amounts, and declares that it hold the same as assets of the Grantor Trust on behalf of the Holders of the Class AI-1A, Class AI-1B, Class AII-1, Class AII-2, Class AII-3, 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 and Class M-13 Certificates, respectively. In addition to the assets described in the preceding sentence, the assets of the Grantor Trust shall also include (i) Prepayment Penalties, any Servicer Prepayment Penalty Payment Amounts, any Originator Prepayment Penalty Payment Amounts and the beneficial interest of the Class P Certificates with respect thereto and (ii) the Yield Maintenance Agreement, the Reserve Account and the beneficial interest of the Class CE Certificates with respect thereto, subject to the obligation to pay Cap Carryover Amounts. The interests evidenced by the Certificates constitute the entire beneficial ownership interest in the Trust Fund. ARTICLE III ADMINISTRATION AND SERVICING OF THE TRUST FUND Section 3.01 Servicer to Act as Servicer. The Servicer, as independent contract servicer, shall service and administer the Mortgage Loans in accordance with this Agreement and the normal and usual standards of practice of sub-prime mortgage servicers servicing similar mortgage loans in the same respective jurisdictions as the Mortgaged Properties, and shall have full power and authority, acting alone, to do or cause to be done any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement (the "Servicing Standards"). Consistent with the terms of this Agreement, the Servicer may waive, modify or vary any term of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in any manner grant indulgence to any Mortgagor if in the Servicer's reasonable determination such waiver, modification, postponement or indulgence is not materially adverse to the Certificateholders; provided, however, that the Servicer shall not make future advances and (unless the Mortgagor is in default with respect to the Mortgage Loan or such default is, in the judgment of the Servicer, reasonably foreseeable) the Servicer shall not permit any modification with respect to any Mortgage Loan that would (i) change the Mortgage Interest Rate, defer or forgive the payment thereof of any principal or interest payments, reduce the outstanding principal amount (except for actual payments of principal) or extend the final maturity date with respect to such Mortgage Loan, (ii) affect adversely the status of any REMIC created hereunder as a REMIC or (iii) cause any REMIC created hereunder to be subject to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC Provisions. Notwithstanding the foregoing, the Servicer shall not permit any modification with respect to any Mortgage Loan that would both (x) effect an exchange or reissuance of such Mortgage Loan under Section 1.860G-2(b) of the Treasury Regulations and (y) cause any REMIC constituting part of the Trust Fund to fail to qualify as a REMIC under the Code or the imposition of any tax on "prohibited transactions" or "contributions" after the Startup Day under the REMIC Provisions. Without limiting the generality of the foregoing, the Servicer shall continue, and is hereby authorized and empowered to execute and deliver on behalf of itself and the Trustee, all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loans and with respect to the Mortgaged Properties. The Servicer shall make all required Servicing Advances and shall service and administer the Mortgage Loans in accordance with Applicable Regulations, and shall provide to the Mortgagor any reports required to be provided to them thereby. By the execution of this Agreement, the Trustee hereby grants to the Servicer, a power of attorney to enable the Servicer to carry out its servicing and administrative duties hereunder; provided, however, that the Trustee shall not be held liable for any misuse of any such power of attorney by the Servicer. Notwithstanding anything contained herein to the contrary, the Servicer shall not, without the Trustee's written consent: (i) initiate any action, suit or proceeding solely under the Trustee's name without indicating the Servicer's representative capacity; or (ii) take any action with the intent to cause, and that actually causes, the Trustee to be registered to do business in any state. In servicing and administering the Mortgage Loans, the Servicer shall employ procedures including collection procedures and exercise the same care that it customarily employs and exercises in servicing and administering mortgage loans for its own account giving due consideration to accepted mortgage servicing practices of prudent lending institutions and the Certificateholders' reliance on the Servicer. Notwithstanding anything in this Agreement to the contrary, in the event of a voluntary Principal Prepayment in full of a Mortgage Loan, the Servicer may not waive any Prepayment Penalty or portion thereof required by the terms of the related Mortgage Note unless (i)(a) the Servicer determines that such waiver is standard and customary in servicing similar mortgage loans, (b) such waiver relates to a default or a reasonably foreseeable default and (c) would, in the reasonable judgment of the Servicer, maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into account the value of such Prepayment Penalty, or (ii) the enforceability thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or other similar law relating to creditors' rights generally or (2) due to acceleration in connection with a foreclosure or other involuntary payment. If the Servicer has waived or does not collect all or a portion of a Prepayment Penalty relating to a voluntary Principal Prepayment in full due to any action or omission of the Servicer, other than as provided above, the Servicer shall, on the date on which the Principal Prepayment in full is remitted to the Securities Administrator, deliver to the Securities Administrator the Servicer Prepayment Penalty Amount with respect to such Mortgage Loan for distribution in accordance with the terms of this Agreement. In the event that a Prepayment Penalty due with respect to any Mortgage Loan is not timely received by the Servicer, the Servicer shall use commercially reasonable efforts to determine whether the Originator is obligated to pay a related Originator Prepayment Penalty Payment Amount, and if the Servicer determines that a Originator Prepayment Penalty Payment Amount is due, the Servicer shall promptly notify the Originator, and the Servicer shall enforce the Originator's obligations as set forth in the Mortgage Loan Purchase Agreement to pay any such Originator Prepayment Penalty Payment Amounts and, to the extent that such amounts are received by the Servicer, shall cause such amounts to be deposited into the Collection Account within one Business Day of receipt. Section 3.02 Collection of Mortgage Loan Payments. Continuously from the date hereof until the principal and interest on all Mortgage Loans are paid in full or as long as the Mortgage Loan remains subject to this Agreement, the Servicer will diligently collect all payments due under each Mortgage Loan when the same shall become due and payable and shall, to the extent such procedures shall be consistent with the Servicing Standards and Applicable Regulations, follow such collection procedures as it follows with respect to mortgage loans comparable to the Mortgage Loans and held for its own account. Further, where applicable, the Servicer will take special care in ascertaining and estimating annual Escrow Payments that, as provided in the Escrow Agreement, will become due and payable to that end that the installments payable by the Mortgagors will be sufficient to pay such charges as and when they become due and payable. Section 3.03 Realization Upon Defaulted Mortgage Loans. In the event that any payment due under any Mortgage Loan is not paid when the same becomes due and payable, or in the event the Mortgagor fails to perform any other covenant or obligation under the Mortgage Loan and such failure continues beyond any applicable grace period, the Servicer shall take such action as it shall deem to be in the best interest of the Certificateholders. In connection with a foreclosure or other conversion, the Servicer shall exercise such rights and powers vested in it hereunder and use the same degree of care and skill in its exercise as it would exercise or use under the circumstances in the conduct of its own affairs and consistent with Applicable Regulations and the Servicing Standards, including, without limitation, advancing funds for the payment of taxes and insurance premiums with respect to first lien Mortgage Loans. Notwithstanding the foregoing provisions of this Section 3.03, with respect to any Mortgage Loan as to which the Servicer has received actual notice of, or has actual knowledge of, the presence of any toxic or hazardous substance on the related Mortgaged Property, the Servicer shall not either (i) obtain title to such Mortgaged Property as a result of or in lieu of foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any other action with respect to, such Mortgaged Property if, as a result of any such action, the Trust would be considered to hold title to, to be a mortgagee-in-possession of, or to be an owner or operator of such Mortgaged Property within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, or any comparable law, unless the Servicer has also previously determined, based on its reasonable judgment and a report prepared by a Person who regularly conducts environmental audits using customary industry standards, stating that: A. such Mortgaged Property is in compliance with applicable environmental laws or, if not, that it would be in the best economic interest of the Certificateholders to take such actions as are necessary to bring the Mortgaged Property into compliance therewith; and B. there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any hazardous substances, hazardous materials, hazardous wastes, or petroleum-based materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or regulation, or that if any such materials are present for which such action could be required, that it would be in the best economic interest of the Certificateholders to take such actions with respect to the affected Mortgaged Property. Notwithstanding the foregoing, if such environmental audit reveals, or if the Servicer has actual knowledge or notice, that such Mortgaged Property contains such wastes or substances, the Servicer shall not foreclose or accept a deed in lieu of foreclosure. The cost of the environmental audit report contemplated by this Section 3.03 shall be advanced by the Servicer, subject to the Servicer's right to be reimbursed therefor from the Collection Account as provided in Section 3.05(ii). If the Servicer determines, as described above, that it is in the best economic interest of the Certificateholders to take such actions as are necessary to bring any such Mortgaged Property into compliance with applicable environmental laws, or to take such action with respect to the containment, clean-up or remediation of hazardous substances, hazardous materials, hazardous wastes, or petroleum-based materials affecting any such Mortgaged Property, then the Servicer shall take such action as it deems to be in the best economic interest of the Certificateholders. The cost of any such compliance, containment, cleanup or remediation shall be advanced by the Servicer, subject to the Servicer's right to be reimbursed therefor from the Collection Account as provided in Section 3.05(ii). Section 3.04 Collection Account, Distribution Account and Reserve Account. (a) The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and shall establish and maintain one or more accounts (such account or accounts, the "Collection Account"). Each Collection Account shall be an Eligible Account. The Servicer shall deposit in the Collection Account within three Business Days of receipt, and retain therein, the following payments and collections received or made by it after the applicable Cut-off Date with respect to the Mortgage Loans, without duplication: (i) all payments on account of principal, including Principal Prepayments, on the Mortgage Loans; (ii) all payments on account of interest on the Mortgage Loans adjusted to the Mortgage Interest Rate less the Servicing Fee Rate; (iii) all Net Liquidation Proceeds and Subsequent Recoveries; (iv) all Insurance Proceeds including amounts required to be deposited pursuant to Section 3.10, other than proceeds to be held in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Servicer's normal servicing procedures, the loan documents or applicable law; (v) all Condemnation Proceeds affecting any Mortgaged Property which are not released to the Mortgagor in accordance with the Servicer's normal servicing procedures, the loan documents or applicable law; (vi) any amounts required to be deposited by the Servicer in connection with any REO Property pursuant to Section 3.13; (vii) all Prepayment Penalties collected by the Servicer in connection with the voluntary Principal Prepayment in full of any of the Mortgage Loans, all Originator Prepayment Penalty Payment Amounts paid by the Originator and all Servicer Prepayment Penalty Payment Amounts required to be paid by the Servicer pursuant to Section 3.01 in connection with any such Principal Prepayment; and (viii) all amounts required to be deposited by the Servicer pursuant to Section 2.03. Any interest paid on funds deposited in the Collection Account, subject to Section 3.23, shall accrue to the benefit of the Servicer and the Servicer shall be entitled to retain and withdraw such interest from the Collection Account pursuant to Section 3.05(v). The foregoing requirements for deposit from the Collection Account shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments in the nature of late payment charges, bad check fees, prepayment penalties that are not Prepayment Penalties, Originator Prepayment Penalty Payment Amounts or Servicer Prepayment Penalty Payment Amounts, assumption fees and other similar fees need not be deposited by the Servicer in the Collection Account. Amounts deposited into the Collection Account in error may be withdrawn at any time. (b) On behalf of the Trust Fund, the Securities Administrator shall establish and maintain one or more accounts (such account or accounts, the "Distribution Account"), on behalf of the Trustee, held in trust for the benefit of the Certificateholders. On behalf of the Trust Fund, the Servicer shall deliver (or cause the Originator to deliver in the case of clause (iii) below) to the Securities Administrator in immediately available funds for deposit in the Distribution Account by 1:00 p.m. New York City time on the Servicer Remittance Date, (i) that portion of the Available Funds (calculated without regard to the references in the definition thereof to amounts that may be deposited to the Distribution Account from a different source as provided herein) then on deposit in the Collection Account, (ii) the amount of all Prepayment Penalties collected by the Servicer in connection with the voluntary Principal Prepayment in full of any of the Mortgage Loans then on deposit in the Collection Account (other than any such Prepayment Penalties received after the related Prepayment Period), (iii) any Originator Prepayment Penalty Payment Amount or Servicer Prepayment Penalty Payment Amount that became due during the related Prepayment Period and (iv) amounts reimbursable or payable to the Trustee pursuant to Section 7.01 and Section 8.05 and amounts reimbursable or payable to the Securities Administrator pursuant to Section 8.05 or Section 9.01(c). These amounts may be sent via a single combined wire transfer. Except as otherwise provided in Section 3.04(f), amounts in the Distribution Account shall be deemed to be held on behalf of the related REMICs in accordance with the REMIC distributions set forth in Section 4.08. The Securities Administrator may, from time to time, withdraw from the Distribution Account for the following purposes: (i) to pay to itself and to the Trustee any amounts owed to itself and the Trustee pursuant to Section 8.05, any amounts owed to itself pursuant to Section 9.01(c) and any amounts owed to the Trustee pursuant to Section 7.01; (ii) to pay to itself as compensation any interest earned on funds in the Distribution Account (all such interest to be withdrawn monthly on each Distribution Date); and (iii) to clear and terminate the Distribution Account upon the termination of this Agreement. (c) Funds in the Collection Account and the Distribution Account may be invested in Permitted Investments in accordance with the provisions set forth in Section 3.23. The Servicer shall give notice to the Securities Administrator (and the Securities Administrator shall give such notice to the Trustee) of the location of the Collection Account maintained by it when established upon request and prior to any change thereof. The Securities Administrator shall give notice to the Servicer, the Trustee and the Depositor of the location of the Distribution Account when established and prior to any change thereof. (d) In the event the Servicer shall deliver to the Securities Administrator for deposit in the Distribution Account any amount not required to be deposited therein, it may at any time request that the Securities Administrator withdraw such amount from the Distribution Account and remit to the Servicer any such amount, any provision herein to the contrary notwithstanding. In addition, the Servicer shall deliver to the Securities Administrator from time to time for deposit, and the Securities Administrator shall so deposit, in the Distribution Account in respect of REMIC 1: (i) any Advances, as required pursuant to Section 4.07; (ii) any Stayed Funds, as soon as permitted by the federal bankruptcy court having jurisdiction in such matters; (iii) any Prepayment Penalties or amounts in connection with the waiver of such Prepayment Penalties, in each case required to be deposited pursuant to Section 3.01; (iv) any amounts required to be deposited in the Distribution Account pursuant to Sections 2.03, 3.04, 3.16, 3.23 or 4.07; and (v) any amounts required to be deposited by the Servicer pursuant to Section 3.11 in connection with the deductible clause in any blanket hazard insurance policy, such deposit being made from the Servicer's own funds, without reimbursement therefor. (e) Promptly upon receipt of any Stayed Funds, whether from the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source, the Securities Administrator shall, unless such funds have been received from the Servicer, notify the Servicer of such receipt and deposit such funds in the Distribution Account, subject to withdrawal thereof as permitted hereunder. In addition, the Securities Administrator shall deposit in the Distribution Account any amounts required to be deposited pursuant to Section 3.23(b) in connection with losses realized on Permitted Investments with respect to funds held in the Distribution Account. (f) Any Prepayment Penalties, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts deposited pursuant to Section 3.04(a)(vii) shall not be assets of any REMIC created hereunder, but shall be considered assets of the Grantor Trust held by the Securities Administrator, on behalf of the Trustee, for the benefit of the Class P Certificateholders. In addition, any Cap Carryover Amounts that are paid with respect to the Class A or Class M Certificates will be treated as first having been distributed with respect to the Class CE Certificates and then having been paid outside of the REMICs to the Class A or Class M Certificateholders. (g) The Securities Administrator shall establish and maintain the Reserve Account, held in trust for the benefit of the Holders of the Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-9, Class M-10, Class M-11, Class M-12 and Class M-13 Certificates. The Securities Administrator shall deposit in the Reserve Account on the date received by it, any Yield Maintenance Agreement Payment received from the Yield Maintenance Agreement Provider for the related Distribution Date. On each Distribution Date, the Securities Administrator shall withdraw from the Reserve Account any Yield Maintenance Agreement Payment on deposit and apply it in the following order of priority: (i) to the Class M Certificates, from the 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 and Class M-13 Certificates; (ii) to the Class M Certificates, from the 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 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 and Class M-13 Certificates, pro rata, based on their respective remaining Cap Carryover Amounts; and (iii) to the Class CE Certificates, any remaining amount on deposit in the Reserve Account. (h) The Securities Administrator shall account for the Reserve Account as an asset of a grantor trust under subpart E, part I of subchapter J of the Code and not an asset of any REMIC created pursuant to this Agreement. The beneficial owner of the Reserve Account is the Class CE Certificateholder. For all federal tax purposes, amounts transferred or reimbursed by REMIC A to the Reserve Account shall be treated as distributions by the Securities Administrator to the Class CE Certificateholder. (i) Any Cap Carryover Amounts paid by the Securities Administrator pursuant to Section 3.04(g) to the Regular Certificates (other than the Class CE Certificates) shall be accounted for by the Securities Administrator as amounts paid first to the Class CE Certificates and then to the respective Class or Classes of Regular Certificates (other than the Class CE Certificates). In addition, the Securities Administrator shall account for the Regular Certificates' (other than the Class CE Certificates) rights to receive payments of Cap Carryover Amounts as rights in a limited recourse interest rate cap contract written by the Class CE Certificates in favor of the Regular Certificates (other than the Class CE Certificates). (j) For federal tax return and information reporting, the right of the Holders of the Regular Certificates (other than the Class CE Certificates) to receive payments under the Yield Maintenance Agreement in respect of the Yield Maintenance Agreement Payments shall be assigned a value of zero. Section 3.05 Permitted Withdrawals From the Collection Account. The Servicer may, from time to time, withdraw from the Collection Account for the following purposes: (i) to remit to the Securities Administrator for deposit in the Distribution Account the amounts required to be so remitted pursuant to Section 3.04(b) or permitted to be so remitted pursuant to the first sentence of Section 3.04(d); (ii) first, to the extent the Servicer has not previously reimbursed the Trustee pursuant to Section 4.07(e), to reimburse the Trustee for any unreimbursed Advances made by the Trustee and second, to reimburse itself for any unreimbursed Advances and Servicing Advances; the Servicer's right to reimburse itself and the Trustee pursuant to this subclause (ii) being limited to amounts received on the related Mortgage Loan which represent payments of (a) principal and/or interest respecting which any such Advance was made or (b) Condemnation Proceeds, Insurance Proceeds or Liquidation Proceeds respecting which any such Servicing Advance was made; (iii) first, to the extent the Servicer has not previously reimbursed the Trustee pursuant to Section 4.07(e), to reimburse the Trustee for any unreimbursed Advances made by the Trustee and second to reimburse itself for any unreimbursed Servicing Advances, any unpaid Servicing Fees and for unreimbursed Advances, in each case, to the extent that such amounts are deemed to be Nonrecoverable Advances, and to reimburse itself and the Trustee for such amounts to the extent that such amounts are nonrecoverable from the disposition of REO Property pursuant to Section 3.03 or Section 3.13 hereof; (iv) to reimburse itself for any amounts paid or expenses incurred pursuant to Section 3.03 (and not otherwise previously reimbursed); (v) to pay to itself as servicing compensation (a) any interest earned on funds in the Collection Account (all such interest to be withdrawn monthly not later than each Servicer Remittance Date) and (b) the Servicing Fee from that portion of any payment or recovery as to interest to a particular Mortgage Loan to the extent not retained pursuant to Section 3.04(ii); (vi) to reimburse itself for any amounts paid pursuant to Section 6.03 (and not otherwise previously reimbursed); (vii) to reimburse the Servicer (if the Servicer is not an Affiliate of the repurchasing party), the Securities Administrator or the Trustee, as the case may be, for enforcement expenses reasonably incurred in respect of the breach or defect giving rise to the purchase obligation under Section 2.03 of this Agreement that were included in the Purchase Price of the Mortgage Loan, including any expenses arising out of the enforcement of the purchase obligation; (viii) to reimburse the Depositor or the Servicer for expenses and costs reimbursable to them pursuant to Section 3.24(b); and (ix) to clear and terminate the Collection Account upon the termination of this Agreement. The foregoing requirements for withdrawal from the Collection Account shall be exclusive. In the event the Servicer shall deposit in the Collection Account any amount not required to be deposited therein, it may at any time withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. Section 3.06 Establishment of Escrow Accounts; Deposits in Escrow Accounts. The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more Escrow Accounts, in the form of time deposit or demand accounts. A copy of such letter agreement shall be furnished to the Trustee upon request. The Escrow Account shall be an Eligible Account. The Servicer shall deposit in the Escrow Account or Accounts within three Business Days of receipt, and retain therein, (i) all Escrow Payments collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement, and (ii) all Insurance Proceeds which are to be applied to the restoration or repair of any Mortgaged Property. The Servicer shall make withdrawals therefrom only to effect such payments as are required under this Agreement, and for such other purposes as shall be set forth in, or in accordance with, Section 3.07. The Servicer shall be entitled to retain any interest paid on funds deposited in the Escrow Account by the depository institution other than interest on escrowed funds required by law to be paid to the Mortgagor and, to the extent required by the related Mortgage Loan or Applicable Regulations, the Servicer shall pay interest on escrowed funds to the Mortgagor notwithstanding that the Escrow Account is non-interest bearing or that interest paid thereon is insufficient for such purposes. Section 3.07 Permitted Withdrawals From Escrow Account. Withdrawals from the Escrow Account may be made by the Servicer (i) to effect timely payments of Escrow Payments, (ii) to reimburse the Servicer for any Servicing Advance made by the Servicer with respect to a related Mortgage Loan but only from amounts received on the related Mortgage Loan which represent late payments or Late Collections of Escrow Payments thereunder, (iii) to refund to the Mortgagor any funds as may be determined to be overages, (iv) for transfer to the Collection Account in accordance with the terms of this Agreement, (v) for application to restoration or repair of the Mortgaged Property, (vi) to pay to the Servicer, or to the Mortgagor to the extent required by the related Mortgage Loan or Applicable Regulations, any interest paid on the funds deposited in the Escrow Account, (vii) to clear and terminate the Escrow Account on the termination of this Agreement, or (viii) to transfer to the Collection Account any Insurance Proceeds. As part of its servicing duties, the Servicer shall pay to the Mortgagor interest on funds in the Escrow Account, to the extent required by the related Mortgage Loan or Applicable Regulations, and to the extent that interest earned on funds in the Escrow Account is insufficient, shall pay such interest from its own funds, without any reimbursement therefor. In the event the Servicer shall deposit in the Escrow Account any amount not required to be deposited therein, it may at any time withdraw such amount from the Escrow Account, any provision herein to the contrary notwithstanding. Section 3.08 Payment of Taxes, Insurance and Other Charges; Collections Thereunder; Primary Mortgage Insurance. (a) With respect to each Mortgage Loan subject to an Escrow Agreement, the Servicer shall maintain accurate records reflecting the status of taxes, which are or may become a lien upon the Mortgaged Property and the status of fire, flood (if applicable) and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) and shall effect payment thereof prior to the applicable penalty or termination date and at a time appropriate for securing maximum discounts allowable, employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Escrow Agreement or Applicable Regulations. To the extent that a Mortgage Loan is not subject to an Escrow Agreement, the Servicer shall determine that any such payments are made by the Mortgagor. The Servicer assumes full responsibility for the payment of all such bills and shall effect payments of all such bills irrespective of the Mortgagor's faithful performance in the payment of same or the making of the Escrow Payments and shall make Servicing Advances from its own funds to effect such payments. (b) For any Mortgage Loan with a Loan-to-Value Ratio at origination of greater than 80%, if the Mortgage Loan Schedule indicates that such Mortgage Loan has primary mortgage insurance, the Servicer shall maintain coverage under a primary mortgage insurance policy until the Loan-to-Value Ratio on any such Mortgage Loan is reduced to 78% or lower as a result of principal payments on such Mortgage Loan or based upon an appraisal of the related Mortgaged Property after the Closing Date. Notwithstanding anything to the contrary herein, the Servicer shall be responsible for the payment of all primary mortgage insurance premiums out of the Servicer's own funds, without any right to reimbursement therefor. The Servicer shall not assign its obligation under any primary mortgage insurance policy without the consent of each Rating Agency and the related primary insurance policy provider. In the event that Wells Fargo Bank is no longer Servicer hereunder, Wells Fargo Bank agrees to continue to pay all primary mortgage insurance premiums for the Mortgage Loans. Section 3.09 Transfer of Accounts. The Servicer may transfer the Collection Account or the Escrow Account to a different depository institution from time to time. Upon such transfer, the Servicer shall deliver to the Securities Administrator (and the Securities Administrator shall provide to the Depositor and the Trustee), a certification or letter agreement, as the case may be, as required pursuant to Sections 3.04 and 3.06. Section 3.10 Maintenance of Hazard Insurance. The Servicer shall cause to be maintained for each Mortgage Loan fire and hazard insurance with extended coverage as is customary in the area where the Mortgaged Property is located in an amount which is at least equal to the lesser of (i) the amount necessary to fully compensate for any damage or loss to the improvements which are a part of such property on a replacement cost basis or (ii) the Principal Balance of the Mortgage Loan, in each case in an amount not less than such amount as is necessary to prevent the Mortgagor and/or the Mortgagee from becoming a co-insurer. If the Mortgaged Property is in an area identified in the Federal Register by the Flood Emergency Management Agency as having special flood hazards and flood insurance has been made available, the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the Principal Balance of the Mortgage Loan, (ii) the maximum insurable value of the improvements securing such Mortgage Loan or (iii) the maximum amount of insurance which is available under the National Flood Insurance Act of 1968, as amended. The Servicer shall also maintain on the REO Property for the benefit of the Certificateholders, (x) fire and hazard insurance with extended coverage in an amount which is at least equal to the replacement cost of the improvements which are a part of such property and (y) to the extent required and available under the Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount as provided above. Any amounts collected by the Servicer under any such policies other than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or REO Property, or released to the Mortgagor in accordance with the Servicer's normal servicing procedures, shall be deposited in the Collection Account, subject to withdrawal pursuant to Section 3.05. It is understood and agreed that no earthquake or other additional insurance is required to be maintained by the Servicer or the Mortgagor or maintained on property acquired in respect of the Mortgage Loan, other than pursuant to such Applicable Regulations as shall at any time be in force and as shall require such additional insurance. All such policies shall be endorsed with standard mortgagee clauses with loss payable to the Servicer and shall provide for at least thirty days prior written notice of any cancellation, reduction in the amount of or material change in coverage to the Servicer. The Servicer shall not interfere with the Mortgagor's freedom of choice in selecting either his insurance carrier or agent, provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies currently reflect a general policy rating of B:VI or better in Best's Key Rating Guide and are licensed to do business in the state wherein the property subject to the policy is located. Section 3.11 Maintenance of Mortgage Impairment Insurance Policy. In the event that the Servicer shall obtain and maintain a blanket policy issued by an insurer that has a general policy rating of B:VI or better in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage Loans, then, to the extent such policy provides coverage in an amount equal to the amount required pursuant to Section 3.10 and otherwise complies with all other requirements of Section 3.10, it shall conclusively be deemed to have satisfied its obligations as set forth in Section 3.10, it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property or REO Property a policy complying with Section 3.10, and there shall have been a loss which would have been covered by such policy, deliver to the Securities Administrator for deposit in the Distribution Account the amount not otherwise payable under the blanket policy because of such deductible clause, which amount shall not be reimbursable to the Servicer from the Trust Fund. In connection with its activities as servicer of the Mortgage Loans, the Servicer agrees to prepare and present, on behalf of the Trustee, claims under any such blanket policy in a timely fashion in accordance with the terms of such policy. Upon request of the Securities Administrator, the Servicer shall cause to be delivered to the Custodian and the Securities Administrator a certified true copy of such policy and a statement from the insurer thereunder that such policy shall in no event be terminated or materially modified without thirty days prior written notice to the Trustee. Section 3.12 Fidelity Bond, Errors and Omissions Insurance. The Servicer shall maintain, at its own expense, a blanket fidelity bond (the "Fidelity Bond") and an errors and omissions insurance policy, with broad coverage with financially responsible companies on all officers, employees or other persons acting in any capacity with regard to the Mortgage Loans to handle funds, money, documents and papers relating to the Mortgage Loans. The Fidelity Bond and errors and omissions insurance shall be in the form of the Mortgage Banker's Blanket Bond and shall protect and insure the Servicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such persons. Such Fidelity Bond shall also protect and insure the Servicer against losses in connection with the failure to maintain any insurance policies required pursuant to this Agreement and the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby. No provision of this Section 3.12 requiring the Fidelity Bond and errors and omissions insurance shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement. The minimum coverage under any such bond and insurance policy shall be in an amount acceptable to Fannie Mae or Freddie Mac. Upon request of the Trustee, the Servicer shall cause to be delivered to the Trustee a certified true copy of the Fidelity Bond and errors and omissions insurance policy and a statement from the surety and the insurer that such Fidelity Bond and errors and omissions insurance policy shall in no event be terminated or materially modified without the acquisition of comparable coverage by the Servicer. Section 3.13 Title, Management and Disposition of REO Property. (a) In the event that title to a Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Trustee, on behalf of the Certificateholders, or in the event the Trustee is not authorized or permitted to hold title to real property in the state where the REO Property is located, or would be adversely affected under the "doing business" or tax laws of such state by so holding title, the deed or certificate of sale shall be taken in the name of such Person or Persons as shall be consistent with an Opinion of Counsel obtained by the Servicer from an attorney duly licensed to practice law in the state where the REO Property is located. Any Person or Persons holding such title other than the Trustee shall acknowledge in writing that such title is being held as nominee for the benefit of the Trustee. Pursuant to the power of attorney granted in Section 3.01, the Servicer is hereby authorized to acquire, transfer and dispose of any REO Property taken in the name of the Trustee pursuant to this Section 3.13 without further documentation of its authority as attorney in fact for the Trustee on behalf of the Trust. (b) In the event that the Trust Fund acquires any REO Property as aforesaid or otherwise in connection with a default or imminent default on a Mortgage Loan, the Servicer shall dispose of such REO Property before the end of the third calendar year beginning after the year of its acquisition by the Trust Fund for purposes of Section 860G(a)(8) of the Code or, at the expense of the Trust Fund, request from the Internal Revenue Service, more than 60 days before the day on which the above-mentioned grace period would otherwise expire, an extension of the above-mentioned grace period, unless the Servicer obtains an Opinion of Counsel, addressed and delivered to the Servicer and the Trustee, to the effect that the holding by the Trust Fund of such REO Property subsequent to such period will not: (i) result in the imposition of any tax on "prohibited transactions" as defined in Section 860F of the Code; or (ii) cause any REMIC constituting any part of the Trust Fund to fail to qualify as a REMIC at any time that any Certificates are outstanding, in which case the Trust Fund may continue to hold such REO Property (subject to any conditions contained in such Opinion of Counsel). The Servicer shall be entitled to be reimbursed from the Collection Account for any costs incurred in obtaining such Opinion of Counsel, as provided in Section 3.05. Subject to compliance with applicable laws and regulations as shall at any time be in force, and notwithstanding any other provisions of this Agreement, no REO Property acquired by the Trust Fund shall be rented (or allowed to continue to be rented) or otherwise used by or on behalf of the Trust Fund in such a manner or pursuant to any terms that would: (i) cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code; or (ii) subject any REMIC constituting part of the Trust Fund to the imposition of any federal income taxes on the income earned from such REO Property, including any taxes imposed by reason of Sections 860F or 860G(c) of the Code, unless the Servicer has agreed to indemnify and hold harmless the Trust Fund with respect to the imposition of any such taxes. The Servicer shall manage, conserve, protect and operate each REO Property for the Certificateholders and the Trust Fund solely for the purpose of its prompt disposition and sale in a manner which does not cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code or result in the receipt by the related REMIC of any "income from non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which is subject to taxation under the REMIC Provisions. The Servicer shall cause each REO Property to be inspected promptly upon the acquisition of title thereto and possession thereof and shall cause each REO Property to be inspected at least annually thereafter. The Servicer shall make or cause to be made a written or electronic report of each such inspection. Such reports shall be retained in the Mortgage File and copies thereof shall be forwarded by the Servicer to the Trustee upon request. The Servicer shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Servicer deems to be in the best interest of the Certificateholders and the Trust Fund. With respect to each REO Property, the Servicer shall segregate and hold all funds collected and received in connection with the operation of the REO Property separate and apart from its own funds or general assets and shall deposit or cause to be deposited, on a daily basis, within three Business Days of receipt, into the Collection Account, all revenues received with respect to the related REO Property and shall withdraw therefrom funds necessary for the proper operation, management and maintenance of the REO Property, including the cost of maintaining any hazard insurance pursuant to Section 3.10 hereof and the fees of any managing agent acting on behalf of the Servicer. The Servicer shall furnish to the Securities Administrator and the Trustee, on each Servicer Remittance Date, an operating statement for each REO Property covering the operation of each REO Property for the previous month, if applicable. Such operation statement shall be accompanied by such other information as the Securities Administrator or the Trustee shall reasonably request. The Servicer shall use its best efforts to dispose of the REO Property as promptly as is practically consistent with protecting the Certificateholders' interests. Each REO Disposition shall be carried out by the Servicer at such price and upon such terms and conditions as the Servicer deems to be in the best interest of the Certificateholders. If as of the date title to any REO Property was acquired by the Servicer there were outstanding unreimbursed Servicing Advances with respect to the REO Property, the Servicer, upon an REO Disposition of such REO Property, shall be entitled to reimbursement for any related unreimbursed Servicing Advances from proceeds received in connection with such REO Disposition. The Servicer shall be entitled to an REO Disposition Fee upon each REO Disposition, and may withhold and retain the REO Disposition Fee from Liquidation Proceeds. The proceeds from the REO Disposition, net of any payments to the Servicer as provided above, shall be deposited in the Collection Account and shall be distributed to the Trust in the month following receipt thereof in accordance with Section 4.01. Any REO Disposition shall be for cash only (unless changes in the REMIC Provisions made subsequent to the Startup Day allow a sale for other consideration and an Opinion of Counsel is obtained by the Servicer to the effect that such sale shall not cause any REMIC constituting part of the Trust Fund to fail to qualify as a REMIC). Section 3.14 Due-on-Sale Clauses; Assumption and Substitution Agreements. When a Mortgaged Property has been or is about to be conveyed by the Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance or prospective conveyance, exercise its rights to accelerate the maturity of the related Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage or Mortgage Note; provided, however, that the Servicer shall not exercise any such right if the "due-on-sale" clause, in the reasonable belief of the Servicer, is not enforceable under applicable law. In such event, the Servicer shall make reasonable efforts to enter into an assumption and modification agreement with the Person to whom such property has been or is about to be conveyed, pursuant to which such Person becomes liable under the Mortgage Note and, unless prohibited by applicable law or the Mortgage, the Mortgagor remains liable thereon. If the foregoing is not permitted under applicable law, the Servicer is authorized to enter into a substitution of liability agreement with such Person, pursuant to which the original Mortgagor is released from liability and such Person is substituted as Mortgagor and becomes liable under the Note. The Mortgage Loan, as assumed, shall conform in all respects to the requirements, representations and warranties of this Agreement. The Servicer shall notify the Trustee that any such assumption or substitution agreement has been completed by forwarding to the Trustee (or the Custodian, as the case may be) the original copy of such assumption or substitution agreement (indicating the Mortgage File to which it relates) which copy shall be added by the Trustee (or the Custodian, as the case may be) to the related Mortgage File and which shall, for all purposes, be considered a part of such Mortgage File to the same extent as all other documents and instruments constituting a part thereof. The Servicer shall be responsible for recording any such assumption or substitution agreements. Except as otherwise provided in Section 3.01, in connection with any such assumption or substitution agreement, the Monthly Payment on the related Mortgage Loan shall not be changed but shall remain as in effect immediately prior to the assumption or substitution, the stated maturity or outstanding principal amount of such Mortgage Loan shall not be changed nor shall any required monthly payments of principal or interest be deferred or forgiven. Any fee collected by the Servicer for consenting to any such conveyance or entering into an assumption or substitution agreement shall be retained by or paid to the Servicer as additional servicing compensation. Notwithstanding the foregoing paragraph or any other provision of this Agreement, the Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any assumption of a Mortgage Loan by operation of law or any assumption which the Servicer may be restricted by law from preventing, for any reason whatsoever. Section 3.15 Duties of the Credit Risk Manager. For and on behalf of the Trust, the Credit Risk Manager shall provide reports and recommendations as to loss mitigation activities concerning Mortgage Loans that are past due, are in default, as to which there has been commencement of foreclosure, as to which there has been forbearance in exercise of remedies, as to which any obligor is the subject of bankruptcy, receivership, or an arrangement of creditors, or which have become REO Properties. Such reports and recommendations will be based upon information provided pursuant to the Credit Risk Management Agreement. The Credit Risk Manager shall look solely to the Servicer for all information and data (including loss and delinquency information and data) and loan-level information and data relating to the servicing of the Mortgage Loans. The Credit Risk Manager may be removed at any time by a vote of Certificateholders holding Certificates evidencing at least 66 2/3% of the aggregate Voting Interests of the Certificates. After any such termination, the Credit Risk Manager shall have no further obligations hereunder, and shall no longer be entitled to the Credit Risk Manager Fee. Section 3.16 Optional Purchases of 60+ Day Delinquent Loans. (a) The Depositor may, at its option, purchase any 60+ Day Delinquent Loan or any Mortgage Loan or REO Property for which the Servicer has accepted a deed in lieu of foreclosure during the following time periods: (i) beginning on the first day of the second month following the month in which the Servicer has reported that it has initiated foreclosure proceedings with respect to such 60+ Day Delinquent Loan, with such repurchase option expiring on the last day of such second following month; (ii) beginning on the first day of the second month following the month in which the Servicer has reported that such defaulted Mortgage Loan has become an REO Property, with such repurchase option expiring on the last day of such second following month; and (iii) beginning on the day on which the Servicer accepts a contractual commitment by a third party to purchase the Mortgaged Property related to the 60+ Day Delinquent Loan or REO Property, with such repurchase option expiring on the earlier of the last day of the month in which such contractual commitment was accepted by the Servicer or the day immediately prior to the day on which the closing occurs with respect to such third party purchase of the Mortgaged Property related to the 60+ Day Delinquent Loan or REO Property. Prior to purchase pursuant to this Section 3.16, the Servicer shall be required to continue to make monthly Advances pursuant to Section 4.07. The Depositor shall not use any procedure in selecting Mortgage Loans to be purchased which is materially adverse to the interests of the Certificateholders. The Depositor shall purchase any such 60+ Day Delinquent Loan or REO Property that it elects to purchase at a price equal to the Purchase Price. The Purchase Price for the repurchased Mortgage Loan or REO Property shall be deposited in the Collection Account, and the Trustee, upon receipt of written certification from the Depositor of such deposit, shall release to, or at the direction of, the Depositor, the related Mortgage File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the Depositor shall furnish to it and as shall be necessary to vest in the Depositor any Mortgage Loan or REO Property released pursuant hereto and the Trustee shall have no further responsibility with regard to such Mortgage File. Section 3.17 Trustee to Cooperate; Release of Files. (a) Upon the payment in full of any Mortgage Loan (including any liquidation of any Mortgage Loan through foreclosure or otherwise, or the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes), the Servicer shall confirm to the Trustee and the Securities Administrator that all amounts required to be remitted to the Distribution Account in connection with such Mortgage Loan have been so deposited, and the Servicer shall deliver two copies of such Request for Release to the Custodian. The Custodian shall, within five Business Days of its receipt of such a Request for Release, release the related Owner Mortgage File (and Retained Mortgage File, if applicable) to the Servicer, as requested by the Servicer. No expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the Distribution Account. From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan, including but not limited to, collection under any insurance policies, or to effect a partial release of any Mortgaged Property from the lien of the Mortgage, the Servicer shall deliver to the Custodian two copies of a Request for Release. The Custodian shall, within five Business Days, release the related Owner Mortgage File (and Retained Mortgage File, if applicable) to the Servicer. Any such Request for Release shall obligate the Servicer to return the Owner Mortgage File (and Retained Mortgage File, if applicable) to the Custodian by the twenty-first day following the release thereof, unless (i) the Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been deposited in the Distribution Account or (ii) the Owner Mortgage File (or Retained Mortgage File, if applicable) or any documents contained therein have been delivered to an attorney, or to a public trustee or other public official as required by law, for purposes of initiating or pursuing legal action or other proceedings for the foreclosure of the Mortgaged Property either judicially or non-judicially. Upon receipt of two copies of a Request for Release stating that such Mortgage Loan was liquidated and that all amounts received or to be received in connection with such liquidation which are required to be deposited into the Distribution Account have been so deposited, or that such Mortgage Loan has become an REO Property, the Custodian shall amend its records. Upon the occurrence of the event specified in clause (ii) of the preceding paragraph, the Trustee shall execute and deliver to the Servicer, as directed by the Servicer, court pleadings, requests for trustee's sale or other documents necessary to the foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or rights provided by the Mortgage Note or Mortgage or otherwise available at law or in equity. Each such direction shall include a request that such pleadings or documents be executed by the Trustee and a statement as to the reason such documents or pleadings are required and a certification that the execution and delivery thereof by the Trustee will not invalidate or otherwise affect the lien of the Mortgage, except for the termination of such a lien upon completion of the foreclosure proceeding or trustee's sale. (b) Subject to Section 3.01, the Servicer shall have the right to accept applications of Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations, and (iii) removal, demolition or division of properties subject to Mortgages. No application for approval shall be considered by the Servicer unless: (w) either (A) it has received an Opinion of Counsel, addressed to the Trustee (which opinion shall not be an expense of the Trustee or the Trust Fund) that such sale, disposition, substitution, acquisition or contribution will not affect adversely the status of any REMIC constituting part of the Trust Fund as a REMIC or cause any REMIC constituting part of the Trust Fund to be subject to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC Provisions or (B) other evidence satisfactory to the Servicer; (x) the provisions of the related Mortgage Note and Mortgage have been complied with; (y) the Loan-to-Value Ratio and debt-to-income ratio after any release does not exceed the maximum Loan-to-Value Ratio and debt-to-income ratio established in accordance with the underwriting standards of the Mortgage Loans; and (z) the lien priority of the related Mortgage is not affected. Upon receipt by the Trustee of a Servicing Officer's certificate setting forth the action proposed to be taken in respect of a particular Mortgage Loan and certifying that the criteria set forth in the immediately preceding sentence have been satisfied, the Trustee shall execute and deliver to the Servicer the consent or partial release so requested by, and furnished to it by, the Servicer. A proposed form of consent or partial release, as the case may be, shall accompany any Servicing Officer's certificate delivered by the Servicer pursuant to this paragraph. Section 3.18 Servicing Compensation. As compensation for its activities hereunder, the Servicer shall be entitled to retain the amount of the Servicing Fee with respect to each Mortgage Loan (including REO Properties). The Servicer shall be entitled to retain additional servicing compensation in the form of release fees, bad check charges, assumption fees, modification or extension fees, late payment charges, prepayment penalties that are not Prepayment Penalties, Servicer Prepayment Penalty Payment Amounts, Originator Prepayment Penalty Payment Amounts or REO Disposition Fees, or any other service-related fees, Insurance Proceeds and Liquidation Proceeds not required to be deposited in the Collection Account and similar items, to the extent collected from Mortgagors. In addition, the Servicer shall be entitled to the investment income on funds on deposit in the Collection Account. Section 3.19 Annual Statement as to Compliance. (a) The Securities Administrator shall deliver in electronic format or otherwise make available to the Depositor and the Servicer shall deliver in electronic form, or otherwise make available to the Securities Administrator, and the Servicer shall cause each Additional Servicer engaged by it to deliver, in electronic form, or otherwise make available, to the Securities Administrator, the Trustee and each Rating Agency on or before March 5 of each year or if such day is not a Business Day, the next Business Day (with a 10 calendar day cure period, but in no event later than March 15), commencing in March 200 , a copy of a certificate (followed by a hard copy to the party or parties receiving such certificate within 10 calendar days) in the form required by Item 1123 of Regulation AB, to the effect that (i) an authorized officer of the Securities Administrator, the Servicer or the Additional Servicer, as the case may be, has reviewed (or a review has been made under his or her supervision of) such party's activities under this Agreement or such other applicable agreement in the case of an Additional Servicer, during the prior calendar year or portion thereof and (ii) to the best of such officer's knowledge, based on such review, such party has fulfilled all of its obligations under this Agreement or such other applicable agreement in the case of an Additional Servicer, in all material respects throughout the prior calendar year or portion thereof or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such officer and the nature and status thereof. If any of the certificates delivered pursuant to this Section 3.19 disclose that there has been a failure to fulfill any obligation in any material respect then the Securities Administrator shall promptly notify the Depositor and forward a copy of such certificate to the Depositor, and the Depositor shall review such certificate and, if applicable, consult with the Servicer as to the nature of any failure to fulfill any obligation under this Agreement or such other applicable agreement in the case of an Additional Servicer, in any material respect. (b) Delivery of such reports, information and documents to the Securities Administrator is for informational purposes only and the Trustee's, Securities Administrator's and Depositor's receipt of such shall not constitute constructive notice of any information contained therein or determinable, from information contained therein, including the Servicer's compliance with any of its covenants hereunder (as to which the Trustee, the Securities Administrator and the Depositor are entitled to rely exclusively on Officers' Certificates). Section 3.20 Assessment of Servicing Compliance; Registered Public Accounting Firm Attestation Reports. (a) The Securities Administrator, at its own expense, shall furnish to the Depositor, and the Servicer, the Trustee and the Custodian, at their own expense, shall furnish, or otherwise make available, and shall cause any Servicing Function Participant engaged by any such party to furnish, to the Securities Administrator, not later than March 5 of each year, or if such day is not a Business Day, the next Business Day (with a 10 day cure period, but in no event later than March 15), commencing in March 200 , a copy of a report, followed by a hard copy to the Securities Administrator within 10 calendar days, signed by an authorized officer of the Securities Administrator, the Trustee, the Custodian, the Servicing Function Participant or the Servicer, as applicable, on assessment of compliance with, at a minimum, the Relevant Servicing Criteria that contains: (i) a statement by such party of its responsibility for assessing compliance with the Servicing Criteria applicable to it; (ii) a statement that such party used the Servicing Criteria applicable to it to assess compliance with the Servicing Criteria; (iii) such party's assessment of compliance with the Servicing Criteria applicable to it as of and for the preceding fiscal year, including, if there had been any material instance of noncompliance with the Servicing Criteria applicable to it, identifying each such failure and the nature and status thereof; and (iv) a statement that a registered public accounting firm has issued an attestation report on such party's assessment of compliance with the Servicing Criteria applicable to it as of and for the preceding fiscal year. No later than 30 days following the end of each fiscal year, the Securities Administrator shall forward to the Depositor the name of each Servicing Function Participant engaged by it and what Relevant Servicing Criteria will be addressed in the report on assessment of compliance prepared by such Servicing Function Participant. When the Securities Administrator submits its assessments to the Depositor, it will also at such time include the assessment (and attestation pursuant to Section 3.20(b)) of each Servicing Function Participant engaged by it. No later than 30 days following the end of each fiscal year, each of the Servicer, the Trustee and the Custodian (so long as the Custodian is not the Securities Administrator) shall forward to the Securities Administrator the name of each Servicing Function Participant engaged by it and what Relevant Servicing Criteria will be addressed in the report on assessment of compliance prepared by such Servicing Function Participant. When the Servicer, the Trustee, the Servicer and the Custodian (so long as the Custodian is not the Securities Administrator) submit their assessments to the Securities Administrator, each such party will also at such time include the assessment (and attestation pursuant to Section 3.20(b)) of each Servicing Function Participant engaged by it. The Securities Administrator shall confirm that the assessments address the Relevant Servicing Criteria for each party as set forth on Exhibit S and shall notify the Depositor of any exceptions and deliver the assessment of compliance containing such exceptions. Promptly after receipt of each such report on assessment of compliance, the Depositor shall review each such report and, if applicable, consult with the Securities Administrator, the Trustee, the Custodian, the Servicer and any Servicing Function Participant as to the nature of any material instance of noncompliance with the Relevant Servicing Criteria by the Securities Administrator, the Trustee, the Custodian, the Servicer or any Servicing Function Participant engaged by such parties. (b) The Securities Administrator, at its own expense, shall cause a registered public accounting firm which is a member of the Institute of Certified Public Accountants to furnish to the Depositor, and each of the Trustee, the Servicer and the Custodian at their own expense, shall cause, and shall cause any Servicing Function Participant engaged by any such party, at such party's expense, to cause a registered public accounting firm which is a member of the Institute of Certified Public Accountants to furnish to the Securities Administrator, not later than March 5 of each year, or if such day is not a Business Day, the next Business Day (with a 10 calendar day cure period, but in no event later than March 15), commencing in March 200 , an electronic report (with a hard copy to follow within 10 calendar days) to the effect that (i) it has obtained a representation regarding certain matters from the management of such party, which includes an assertion that such party has complied with the Relevant Servicing Criteria, and (ii) on the basis of an examination conducted by such firm in accordance with standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board, it is expressing an opinion as to whether such party's assessment of compliance with the Relevant Servicing Criteria was fairly stated in all material respects, or it cannot express an overall opinion regarding such party's assessment of compliance with the Relevant Servicing Criteria. In the event that an overall opinion cannot be expressed, such registered public accounting firm shall state in such report why it was unable to express such an opinion. Such report must be available for general use and not contain restricted use language. If requested by the Securities Administrator or the Depositor, such report shall contain or be accompanied by a consent of such accounting firm to inclusion or incorporation of such report in the Depositor's Registration Statement on Form S-3 relating to the Certificates and the Trust's Form 10-K. Promptly after receipt of such report from the Securities Administrator, the Depositor shall review the report and, if applicable, consult with the Securities Administrator if any such report (i) states that the party's assessment of compliance was not fairly stated in a material respect or (ii) is unable to state an overall opinion. Promptly after receipt of such report from the Trustee, the Custodian, the Servicer or any Servicing Function Participant engaged by such parties, the Securities Administrator shall review the report and shall promptly notify the Depositor if any such report (i) states that the party's assessment of compliance was not fairly stated in a material respect or (ii) is unable to state an overall opinion and the Depositor shall promptly review each such report and the Depositor and the Securities Administrator shall consult with the parties to which such report relates. (c) The Securities Administrator shall make available any report from the Securities Administrator, the Trustee, the Custodian, the Servicer, or any Servicing Function Participant furnished pursuant to Section 3.19 and this Section 3.20, as well as any documents incorporated by reference into the Prospectus (to the extent such documents are either in its possession or have been filed with the Commission), to any Certificateholder requesting such information. Section 3.21 Access to Certain Documentation and Information Regarding the Mortgage Loans. The Servicer shall provide to the Trustee, the Securities Administrator, Certificateholders that are federally insured savings and loan associations, the Office of Thrift Supervision, the FDIC and the supervisory agents and examiners of each of the foregoing (which, in the case of supervisory agents and examiners, may be required by applicable state and federal regulations) access to the available documentation regarding the Mortgage Loans, such access being afforded without charge but only upon reasonable advance request and during normal business hours at the offices of the Servicer designated by it. Upon request, the Servicer shall furnish to the Securities Administrator its most recent financial statements and such other information relating to the Servicer's capacity to perform its obligations under this Agreement as it possesses. The Securities Administrator shall deliver such financial statements to the Depositor and the Trustee immediately upon receipt. To the extent such information is not otherwise available to the public, the Depositor, the Securities Administrator and the Trustee shall not disseminate any information obtained pursuant to the preceding sentence without the Servicer's written consent, except as required pursuant to this Agreement or to the extent that it is appropriate to do so (i) in working with legal counsel, auditors, taxing authorities or other governmental agencies or (ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction or decree of any court or governmental authority having jurisdiction over the Depositor and the Trustee or the Trust Fund, and in any case, each of the Depositor, the Securities Administrator or the Trustee, as the case may be, shall use its best efforts to assure the confidentiality of any such disseminated non-public information. Section 3.22 Obligations of the Servicer in Respect of Compensating Interest. With respect to each Distribution Date, not later than the close of business on the related Servicer Remittance Date, the Servicer shall deliver to the Securities Administrator for deposit in the Distribution Account an amount ("Compensating Interest") equal to the lesser of (A) the aggregate of the Prepayment Interest Shortfalls on the Mortgage Loans for such Distribution Date resulting from Principal Prepayments on the Mortgage Loans during the related Prepayment Period and (B) its aggregate Servicing Fee received in the related Collection Period. The Servicer shall apply Compensating Interest to offset any Prepayment Interest Shortfalls attributable to Principal Prepayments in full on the Mortgage Loans. The Servicer shall not have the right to reimbursement for any amounts remitted to the Securities Administrator in respect of Compensating Interest. Such amounts so remitted shall be included in the Available Funds and distributed therewith on the next Distribution Date. Section 3.23 Investment of Funds in the Collection Account and the Distribution Account. (a) The Servicer may direct in writing any depository institution maintaining the Collection Account and the Securities Administrator may direct in writing any depository institution maintaining the Distribution Account (for purposes of this Section 3.23, each an "Investment Account"), to invest the funds in such Investment Account in one or more Permitted Investments bearing interest or sold at a discount, and maturing, unless payable on demand, (i) no later than the Business Day immediately preceding the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, if a Person other than the Securities Administrator is the obligor thereon, and (ii) no later than the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, if the Securities Administrator is the obligor thereon. All such Permitted Investments shall be held to maturity, unless payable on demand. Any investment of funds in an Investment Account shall be made in the name of the Securities Administrator or the Servicer, as applicable (in its capacity as such) or in the name of a nominee of the same. The Servicer or the Securities Administrator, as applicable, shall be entitled to sole possession over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment shall be delivered directly to the Securities Administrator or its agent, together with any document of transfer necessary to transfer title to such investment to the Securities Administrator or its nominee. In the event amounts on deposit in an Investment Account are at any time invested in a Permitted Investment payable on demand, the Servicer or the Securities Administrator: (x) consistent with any notice required to be given thereunder, demand that payment thereon be made on the last day such Permitted Investment may otherwise mature hereunder in an amount equal to the lesser of (1) all amounts then payable thereunder and (2) the amount required to be withdrawn on such date; and (y) demand payment of all amounts due thereunder promptly upon determination by a Responsible Officer of the Securities Administrator that such Permitted Investment would not constitute a Permitted Investment in respect of funds thereafter on deposit in the Investment Account. (b) All income and gain realized from the investment of funds in the Collection Account shall be for the benefit of the Servicer. The Servicer shall deposit in the Collection Account the amount of any loss incurred in respect of any such Permitted Investment made with funds in such account immediately upon realization of such loss. All income and gain realized from the investment of funds in the Distribution Account shall be for the benefit of the Securities Administrator. The Securities Administrator shall deposit in the Distribution Account the amount of any loss incurred on Permitted Investments in the Distribution Account. (c) Except as otherwise expressly provided in this Agreement, if any default occurs in the making of a payment due under any Permitted Investment, or if a default occurs in any other performance required under any Permitted Investment, the Securities Administrator may and, subject to Section 8.01 and Section 8.02(a)(v), upon the request of the Holders of Certificates representing more than 50% of the Voting Rights allocated to any Class of Certificates, shall take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate proceedings. Section 3.24 Liability of Servicer; Indemnification. (a) Subject to clause (b) below and Section 6.03, the Servicer (except the Securities Administrator if it is required to succeed the Servicer hereunder) indemnifies and holds the Trustee, the Securities Administrator and the Depositor (and their respective officers, directors and Affiliates) and each Certificateholder harmless against any and all claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that the Trustee, the Securities Administrator, the Depositor and any Certificateholder may sustain in any way related to the failure of the Servicer to perform its duties hereunder and service the Mortgage Loans in compliance with the Servicing Standards, including, but not limited to the Servicer's obligation to deliver any information, report, certification, accountants' letter or other material required to comply with Regulation AB or (b) any material breach by the Servicer of any of the representations and warranties contained in Section 2.05. The Servicer shall immediately notify the Trustee, the Securities Administrator, the Depositor and each Certificateholder if a claim is made that may result in such claims, losses, penalties, fines, forfeitures, legal fees or related costs, judgments, or any other costs, fees and expenses, and the Servicer shall assume (with the consent of such party or parties who are the subject of any such claim) the defense of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the Servicer, the Trustee, the Securities Administrator, the Depositor and/or Certificateholder in respect of such claim. The provisions of this Section 3.24 shall survive the termination of this Agreement and the payment of the outstanding Certificates. (b) None of the Depositor, the Servicer, or any of the directors, officers, employees or agents of the Depositor or the Servicer shall be under any liability to the Trust Fund or the Certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Depositor or the Servicer or any such Person against any breach of warranties or representations made herein, or against any specific liability imposed on the Servicer for a breach of the Servicing Standard, or against any liability which would otherwise be imposed by reason of its respective willful misfeasance, bad faith, fraud or negligence in the performance of its duties or by reasons of negligent disregard of its respective obligations or duties hereunder. The Depositor, the Servicer and any director, officer, employee or agent of the Depositor or the Servicer, may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any appropriate Person with respect to any matters arising hereunder. The Depositor, the Servicer and any director, officer, employee or agent of the Depositor or the Servicer shall be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense incurred in connection with any legal action incurred by reason of its respective misfeasance, bad faith, fraud or negligence, a breach of a representation or warranty hereunder or (in the case of the Servicer) a breach of the Servicing Standard in the performance of its respective duties or by reason of negligent disregard of its respective obligations or duties hereunder. Neither the Depositor nor the Servicer shall be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its respective duties under this Agreement and in its opinion does not expose it to any expense or liability; provided, however, that each of the Depositor and the Servicer may in its discretion undertake any action related to its obligations hereunder which it may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. The Servicer's right to indemnity or reimbursement pursuant to this Section shall survive any resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with respect to any losses, expenses, costs or liabilities arising prior to such resignation or termination (or arising from events that occurred prior to such resignation or termination). In such event, unless the Depositor or the Servicer acts without the consent of Holders of Certificates entitled to at least 51% of the Voting Rights, the legal expenses and costs of such action and any liability resulting therefrom (except any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the Depositor and the Servicer shall be entitled to be reimbursed therefor from the Collection Account as and to the extent provided in Section 3.05, any such right of reimbursement being prior to the rights of the Certificateholders to receive any amount in the Collection Account. Section 3.25 Reports of Foreclosure and Abandonment of Mortgaged Properties. On or before April 30 of each year beginning in 200 , the Servicer shall file the reports of foreclosure and abandonment of any Mortgaged Property required by Section 6050J of the Code with the Internal Revenue Service and provide an Officer's Certificate certifying its compliance with this Section 3.25 to the Trustee. The reports from the Servicer shall be in form and substance sufficient to meet the reporting requirements imposed by such Section 6050J. Section 3.26 Limitation of Liability of the Credit Risk Manager. Neither the Credit Risk Manager, nor any of the directors, officers, employees or agents of the Credit Risk Manager, shall be under any liability to the Trustee, the Securities Administrator, the Certificateholders or the Depositor for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, in reliance upon information provided by the Servicer under the Credit Risk Management Agreement or for errors in judgment; provided, however, that this provision shall not protect the Credit Risk Manager or any such person against liability that would otherwise be imposed by reason of willful malfeasance, bad faith or gross negligence in its performance of its duties or by reason of reckless disregard for its obligations and duties under this Agreement or the applicable Credit Risk Management Agreement. The Credit Risk Manager and any director, officer, employee or agent of the Credit Risk Manager may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder, and may rely in good faith upon the accuracy of information furnished by the Servicer pursuant to the applicable Credit Risk Management Agreement in the performance of its duties thereunder and hereunder. Section 3.27 No Personal Solicitation. From and after the Closing Date, the Servicer agrees that it will not take any action or permit or cause any action to be taken by any of its agents and Affiliates, or by any independent contractors or independent mortgage brokerage companies on the Servicer's behalf, to personally, by telephone, mail or electronic mail, solicit the Mortgagor under any Mortgage Loan for the purpose of refinancing such Mortgage Loan; provided, that the Servicer may solicit any Mortgagor for whom the Servicer has received a request for verification of mortgage, a request for demand for payoff, a mortgagor initiated written or verbal communication indicating a desire to prepay the related Mortgage Loan, or the mortgagor initiates a title search; provided, further, it is understood and agreed that promotions undertaken by the Servicer or any of its Affiliates which (i) concern optional insurance products or other additional products or (ii) are directed to the general public at large, including, without limitation, mass mailings based on commercially acquired mailing lists, newspaper, radio and television advertisements shall not constitute solicitation under this Section, nor is the Servicer prohibited from responding to unsolicited requests or inquiries made by a Mortgagor or an agent of a Mortgagor. Furthermore, the Servicer shall be permitted to include in its monthly statements to borrowers or otherwise, statements regarding the availability of the Servicer's counseling services with respect to refinancing mortgage loans. Section 3.28 Exchange Act Reports. (a) Within 15 days after each Distribution Date, the Securities Administrator shall prepare, an authorized officer of the Securities Administrator shall sign, and the Securities Administrator shall file with the Commission, on behalf of the Trust, any Form 10-D required by the Exchange Act, in form and substance as required by the Exchange Act. The Securities Administrator shall file each Form 10-D with a copy of the related Distribution Date Statement attached thereto. Any disclosure in addition to the Distribution Date Statement that is required to be included on Form 10-D ("Additional Form 10-D Disclosure") shall be reported by the parties set forth on Exhibit T and directed and approved by the Depositor, and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Additional Form 10-D Disclosure (other than with respect to itself) absent such reporting, direction and approval. If a Form 10-D cannot be filed on time or if a previously filed Form 10-D needs to be amended, the Securities Administrator will follow the procedures set forth in Section 3.28(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will make available on its internet website a final executed copy of each Form 10-D. For so long as the Trust is subject to the Exchange Act reporting requirements, within five (5) calendar days after the related Distribution Date, the parties identified on Exhibit T shall (i) provide to the Securities Administrator and the Depositor, to the extent known by a Responsible Officer, in EDGAR-compatible format, or in such other format as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Additional Form 10-D Disclosure, if applicable and (ii) include with such Additional Form 10-D Disclosure, an Additional Disclosure Notification in the form attached hereto as Exhibit W, and the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-D Disclosure on Form 10-D. The Securities Administrator has no duty under this Agreement to monitor or enforce the performance by the parties listed on Exhibit T of their duties under this paragraph or proactively solicit or procure from such parties any Additional Form 10-D Disclosure. After preparing the Form 10-D, if the Form 10-D contains any Additional Form 10-D Disclosure, the Securities Administrator shall forward electronically a draft copy of the Form 10-D to the Depositor for review. Each party to this Agreement acknowledges that the performance by the Securities Administrator of its duties under this Section 3.28(a) relating to the timely preparation and filing of Form 10-D is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under this Section 3.28(a). The Securities Administrator shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-D, where such failure results from the Securities Administrator's inability or failure to receive, on a timely basis, any information from any other party hereto or the Custodian, needed to prepare, arrange for execution or file such Form 10-D, not resulting from its own negligence, bad faith or willful misconduct. The Depositor will be responsible for any reasonable fees assessed and expenses incurred by the Securities Administrator in connection with including any Additional Form 10-D Disclosure on Form 10-D pursuant to this paragraph. (b) Within 90 days after the end of each fiscal year of the Trust or such earlier date as may be required by the Exchange Act (it being understood that the fiscal year for the Trust ends on December 31st of each year), commencing in March 200 (the "Form 10-K Filing Deadline"), the Securities Administrator shall prepare and the Securities Administrator shall file with the Commission, on behalf of the Trust, a Form 10-K, in form and substance as required by the Exchange Act. Each such Form 10-K shall include the following items, in each case to the extent they have been delivered to the Securities Administrator within the applicable timeframes set forth in this Agreement or the Custodial Agreement: (i) an annual compliance statement for the Securities Administrator, the Servicer and any Additional Servicer, as described under Section 3.19; (ii) (A) the annual reports on assessment of compliance with servicing criteria for the Securities Administrator, the Trustee, the Servicer, the Custodian, and each Servicing Function Participant, as described under Section 3.20(a), and (B) if any party's report on assessment of compliance with Servicing Criteria described under Section 3.20(a) identifies any material instance of noncompliance, disclosure identifying such instance of noncompliance, or if any party's report on assessment of compliance with servicing criteria described under Section 3.20(a) is not included as an exhibit to such Form 10-K, disclosure that such report is not included and an explanation of why such report is not included; (iii) (A) the registered public accounting firm attestation report for each of the Securities Administrator, the Trustee, the Servicer, the Custodian, and each Servicing Function Participant, as described under Section 3.20(b), and (B) if any registered public accounting firm attestation report described under Section 3.20(b) identifies any material instance of noncompliance, disclosure identifying such instance of noncompliance, or if any such registered public accounting firm attestation report is not included as an exhibit to such Form 10-K, disclosure that such report is not included and an explanation of why such report is not included; and (iv) the Sarbanes-Oxley Certification. Any disclosure or information in addition to (i) through (iv) above that is required to be included on Form 10-K ("Additional Form 10-K Disclosure") shall, pursuant to the paragraph immediately below, be reported by the parties set forth on Exhibit U and directed and approved by the Depositor, and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Additional Form 10-K Disclosure (other than with respect to itself) absent such reporting, direction and approval. If a Form 10-K cannot be filed on time or if a previously filed Form 10-K needs to be amended, the Securities Administrator will follow the procedures set forth in Section 3.28(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will make available on its internet website a final executed copy of each Form 10-K. No later than March 5 (with a 10 calendar day cure period, but in no event later than March 15) of each year that the Trust is subject to the Exchange Act reporting requirements, commencing in March 200 , (i) the parties identified on Exhibit U shall provide to the Securities Administrator and the Depositor, to the extent known by a Responsible Officer, in EDGAR-compatible format, or in such other format as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Additional Form 10-K Disclosure, if applicable, and (ii) the parties identified on Exhibit U shall include with such Additional Form 10-K Disclosure, an Additional Disclosure Notification in the form attached hereto as Exhibit W, and the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-K Disclosure on Form 10-K. The Securities Administrator has no duty under this Agreement to monitor or enforce the performance by the parties listed on Exhibit U of their duties under this paragraph or proactively solicit or procure from such parties any Additional Form 10-K Disclosure information. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Securities Administrator in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant to this paragraph. After preparing the Form 10-K, no later than the close of business on the seventh Business Day prior to the Form 10-K Filing Deadline, the Securities Administrator shall forward electronically a draft copy of the Form 10-K to the Depositor and the Servicer for review. No later than the close of business on the third Business Day prior to the Form 10-K Filing Deadline, a senior officer of the Servicer in charge of the servicing function shall sign the Form 10-K and return an electronic or fax copy of such signed Form 10-K, together with a signed copy of the certification in the form attached hereto as Exhibit O or in such other form as may be required by Rules 13a-14 and 15d-14 under the Exchange Act, as applicable, and any directives or interpretations thereof by the Commission (the "Sarbanes-Oxley Certification") and required to be included with each Form 10-K (with an original executed hard copy of each to follow by overnight mail) to the Securities Administrator. Each party to this Agreement acknowledges that the performance by the Securities Administrator of its duties under this Section 3.28(b) relating to the timely preparation and filing of Form 10-K is contingent upon such parties strictly observing all applicable timeframes in the performance of their duties under Sections 3.19, 3.20 or this Section 3.28(b). The Securities Administrator shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-K, where such failure results from the Securities Administrator's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto or the Custodian needed to prepare, arrange for execution or file such Form 10-K, not resulting from its own negligence, bad faith or willful misconduct. (c) Within four (4) Business Days after the occurrence of an event requiring disclosure on Form 8-K (each such event, a "Reportable Event"), and if directed by the Depositor, the Securities Administrator shall prepare, an authorized officer of the Securities Administrator shall sign, and the Securities Administrator shall file with the Commission, on behalf of the Trust, any Form 8-K, as required by the Exchange Act, provided that the Depositor shall prepare and file the initial Form 8-K in connection with the issuance of the Certificates. Any disclosure or information related to a Reportable Event or that is otherwise required to be included on Form 8-K ("Form 8-K Disclosure Information") shall, pursuant to the paragraph immediately below, be reported by the parties set forth on Exhibit V and directed and approved by the Depositor, and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Form 8-K Disclosure Information (other than with respect to itself) absent such reporting, direction and approval. If a Form 8-K cannot be filed on time or if a previously filed Form 8-K needs to be amended, the Securities Administrator will follow the procedures set forth in Section 3.28(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will, make available on its internet website a final executed copy of each Form 8-K. For so long as the Trust is subject to the Exchange Act reporting requirements, no later than the end of business on the second Business Day after the occurrence of a Reportable Event (i) the parties identified on Exhibit V shall provide to the Securities Administrator and the Depositor, to the extent known by a Responsible Officer, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Form 8-K Disclosure Information, if applicable, and (ii) the parties identified on Exhibit V shall include with such Additional Form 8-K Disclosure, an Additional Disclosure Notification in the form attached hereto as Exhibit W and the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Form 8-K Disclosure Information on Form 8-K. The Securities Administrator has no duty under this Agreement to monitor or enforce the performance by the parties listed on Exhibit V of their duties under this paragraph or proactively solicit or procure from such parties any Form 8-K Disclosure Information. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Securities Administrator in connection with including any Form 8-K Disclosure Information on Form 8-K pursuant to this paragraph. After preparing the Form 8-K, the Securities Administrator shall forward electronically a draft copy of the Form 8-K to the Depositor for review. Each party to this Agreement acknowledges that the performance by the Securities Administrator of its duties under this Section 3.28(c) relating to the timely preparation and filing of Form 8-K is contingent upon such party strictly observing all applicable timeframes in the performance of its duties under this Section 3.28(c). The Securities Administrator shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 8-K, where such failure results from the Securities Administrator's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto or the Custodian needed to prepare, arrange for execution or file such Form 8-K, not resulting from its own negligence, bad faith or willful misconduct. (d) In the event that the Securities Administrator is unable to timely file with the Commission all or any required portion of any Form 8-K, 10-D or 10-K required to be filed by this Agreement because required disclosure information was either not delivered to it or delivered to it after the delivery deadlines set forth in this Agreement or for any other reason, the Securities Administrator will promptly notify the Depositor and, in the case of Form 10-D or 10-K, the Depositor, the Servicer and the Securities Administrator will cooperate to prepare and file a Form 12b-25 pursuant to Rule 12b-25 of the Exchange Act. Any Form 12b-25 relating to a Form 10-K shall be signed by a senior officer of the Servicer and any Form 12b-25 relating to a Form 10-D shall be signed by a senior officer of the Securities Administrator. Within five days following the due date of any Form 10-D as to which it has filed a Form 12b-25, the Securities Administrator shall prepare, sign and file the related Form 10-D. Within 15 days following the due date of any Form 10-K as to which it has filed a Form 12b-25, the Securities Administrator shall prepare, cause the Servicer to sign and file the related Form 10-K. In the case of Form 8-K, the Securities Administrator will, upon receipt of all required Form 8-K Disclosure Information and at the direction of the Depositor, include such disclosure information on the next Form 10-D. In the event that any previously filed Form 8-K, 10-D or 10-K needs to be amended, the Securities Administrator will notify the Depositor and each party whose cooperation is required in connection with the preparation of such amendment; provided however that such notice shall not be required in connection with an amendment to Form 10-D due to a revision made to any Distribution Date Statement. Any amendment to Form 10-D or Form 8-K shall be signed by a senior officer of the Securities Administrator and any amendment to the Form 10-K shall be signed by a senior officer of the Servicer. The parties to this Agreement acknowledge that the performance by the Securities Administrator of its duties under this Section 3.28(d) related to the timely preparation and filing of a Form 12b-25 or any amendment to Form 8-K, 10-D or 10-K is contingent upon each such party performing its duties under this Section. The Securities Administrator shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file any such Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, where such failure results from the Securities Administrator's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto or the Custodian needed to prepare, arrange for execution or file such Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, not resulting from its own negligence, bad faith or willful misconduct. (e) Not later than 15 calendar days before the date on which the Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations of the Commission (or, if such day is not a Business Day, the immediately preceding Business Day), the Securities Administrator shall sign and deliver to the Servicer a certification in the form attached hereto as Exhibit P (the "Securities Administrator's Certification") for the benefit of the Servicer and its officers, directors and Affiliates as to items 1 through 3 of the Sarbanes-Oxley Certification; provided, however, that the Securities Administrator shall not undertake an analysis of the accountant's report attached as an exhibit to the Form 10-K. In addition, the Securities Administrator shall indemnify and hold harmless the Servicer and each Person, if any, who "controls" the Servicer within the meaning of the 1933 Act and its officers, directors and Affiliates from and against any losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments and other costs and expenses arising out of or based upon a breach of the Securities Administrator's obligations under this Section 3.28(e) or the Securities Administrator's negligence, bad faith or willful misconduct in connection therewith or any inaccuracy in the Securities Administrator's Certification. If the indemnification provided for in this Section 3.28(e) is unavailable or insufficient to hold harmless such Persons, then the Securities Administrator shall contribute to the amount paid or payable by such Persons as a result of the losses, claims, damages or liabilities of such Persons in such proportion as is appropriate to reflect the relative fault of the Depositor or the Servicer on the one hand and the Securities Administrator on the other. The Securities Administrator acknowledges that the Servicer is relying on the Securities Administrator's performance of its obligations under this Section 3.28(e) in order to perform its obligations under Section 3.28(b) above. (f) On or prior to January 30 of the first year in which the Securities Administrator is able to do so under applicable law, the Securities Administrator shall prepare, an authorized officer of the Securities Administrator shall sign, and the Securities Administrator shall file with the Commission, on behalf of the Trust, a Form 15 relating to the automatic suspension of reporting in respect of the Trust under the Exchange Act. At the beginning of any year after the filing of a Form 15, if the number of Certificateholders of record exceeds the number set forth in Section 15(d) of the Exchange Act or the regulations promulgated pursuant thereto which would cause the Trust to again become subject to the reporting requirements of the Exchange Act, the Securities Administrator shall recommence preparing and filing reports on Form 10-D, 10-K and 8-K as required pursuant to this Section and the parties hereto, the Trustee and the Custodian will again have the obligations set forth in paragraphs (a) through (d) of this Section. (g) To the extent the Securities Administrator is obligated to give any notice to the Depositor pursuant to this Section 3.28, such notice may, notwithstanding the provisions of Section 11.05 in this Agreement, be delivered via facsimile to 301-816-8152 or via electronic mail to Structuredfinance-frederick@wellsfargo.com ARTICLE IV FLOW OF FUNDS Section 4.01 Interest Distributions. On each Distribution Date, the Securities Administrator shall withdraw from the Distribution Account the Interest Remittance Amount and apply it in the following order of priority (based upon the Mortgage Loan information provided to it in the Remittance Report, upon which the Securities Administrator may conclusively rely), and the calculations required to be made by the Securities Administrator, to the extent available: (i) to the Credit Risk Manager, the Credit Risk Manager Fee for such Distribution Date; (ii) concurrently, as follows: (A) concurrently, from the Group I Interest Remittance Amount, 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 (B) concurrently, from the Group II Interest Remittance Amount, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata (based on the Accrued Certificate Interest for each such Class), the applicable Accrued Certificate Interest thereon for such Distribution Date; (iii) concurrently, as follows: (A) concurrently, from the Group I Interest Remittance Amount, 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 (B) concurrently, from the Group II Interest Remittance Amount, to the Class AII-1, Class AII-2 and Class AII-3 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; (iv) concurrently, as follows: (A) from the Group I Interest Remittance Amount, to the Class AII-1, Class AII-2 and Class AII-3 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 clause (ii) above; and (B) concurrently, from the Group II Interest Remittance Amount, 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 clause (ii) above; and (v) concurrently, as follows: (A) from the Group I Interest Remittance Amount, to the Class AII-1, Class AII-2 and Class AII-3 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 clause (iii) above; and (B) concurrently, from the Group II Interest Remittance Amount, 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 clause (iii) above; (vi) to the Class M-1 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (vii) to the Class M-2 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (viii) to the Class M-3 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (ix) to the Class M-4 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (x) to the Class M-5 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xi) to the Class M-6 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xii) to the Class M-7 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xiii) to the Class M-8 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xiv) to the Class M-9 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xv) to the Class M-10 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xvi) to the Class M-11 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; (xvii) to the Class M-12 Certificates, the Accrued Certificate Interest thereon for such Distribution Date; and (xviii) to the Class M-13 Certificates, the Accrued Certificate Interest thereon for such Distribution Date. Section 4.02 Distributions of Principal and Monthly Excess Cashflow Amounts. (a) On each Distribution Date, the Securities Administrator shall make the following distributions in the following order of priority (based upon the Mortgage Loan information provided to it in the Remittance Report and the calculations required to be made by the Securities Administrator), to the extent of the Principal Distribution Amount: (i) before the Stepdown Date or with respect to which a Trigger Event is in effect, sequentially, as follows: 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, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; second, concurrently, as follows: (i) the Group I Principal Distribution Amount remaining after priority first (i) above, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; 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 and Class M-13 Certificates; and fourth, any remaining Principal Distribution Amount will be distributed as part of the Monthly Excess Cashflow Amount as set forth in Section 4.02(b). (ii) on or after the Stepdown Date and as long as a Trigger Event is not in effect: 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 any 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, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, up to an amount equal to the Group II Senior Principal Distribution Amount and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata, 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, up to an amount equal to the Group II Senior Principal Distribution Amount not paid pursuant to priority first (ii) above, (a) with respect to each Distribution Date prior to the Subordination Depletion Date, sequentially, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, and (b) with respect to each Distribution Date on or after the Subordination Depletion Date, concurrently, to the Class AII-1, Class AII-2 and Class AII-3 Certificates, pro rata; 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 any 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; 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; and sixteenth, any remaining Principal Distribution Amount will be distributed as part of the Monthly Excess Cashflow Amount as set forth in Section 4.02(b). (b) On each Distribution Date, any Monthly Excess Cashflow Amount remaining after distributions made pursuant to Section 4.02(f) on such Distribution Date shall be distributed, to the extent available, in the following order of priority 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; (iii) to the Class M-1 Certificates, any remaining unpaid Accrued Certificate Interest for such Distribution Date; (iv) to the Class M-1 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (vii) to the Class M-2 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (x) to the Class M-3 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xiii) to the Class M-4 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xvi) to the Class M-5 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xix) to the Class M-6 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxii) to the Class M-7 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxv) to the Class M-8 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxviii) to the Class M-9 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxxi) to the Class M-10 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxxiv) to the Class M-11 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xxxvii) to the Class M-12 Certificates, any remaining Interest Carry Forward Amount 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 unpaid Accrued Certificate Interest for such Distribution Date; (xl) to the Class M-13 Certificates, any remaining Interest Carry Forward Amount for such Distribution Date; (xli) to the Class M-13 Certificates, any Class M-13 Realized Loss Amortization Amount for such Distribution Date; (xlii) 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; (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 (xlii)(a) above) any remaining unpaid Cap Carryover Amount for such Class, after giving effect to any distributions pursuant to clause (xlii)(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 and Class M-13 Certificates, any Cap Carryover Amount for such Class, after giving effect to any amounts received from the Reserve Account pursuant to Section 3.04(g); and (xliii) to the Class CE Certificates, up to the Class CE Distributable Amount for such Distribution Date. On each Distribution Date, there shall be distributed to the Holder of the Class R Certificate in respect of the Class R-1 Interest, any remaining amount in the Distribution Account on such date after the application pursuant to Sections 4.01, 4.02(a) and 4.02(b)(i)-(xliii). (c) On each Distribution Date, the Securities Administrator shall withdraw any amounts then on deposit in the Distribution Account that represent Prepayment Penalties collected by the Servicer in connection with the Principal Prepayment in full of any of the Mortgage Loans, any Originator Prepayment Penalty Payment Amounts or Servicer Prepayment Penalty Payment Amounts and shall distribute such amounts to the Holders of the Class P Certificates. Such amounts shall be treated as having been distributed to the Holders of the Class P Certificates from the Grantor Trust. (d) Any amounts distributed to the Certificates (other than the Class CE, Class P and Class R Certificates) in respect of interest pursuant to Section 4.02(b)(xlii) that constitute Cap Carryover Amounts shall be deemed distributed (i) in the case of any Class of Class M Certificates, to the extent the source of such funds is a Yield Maintenance Agreement Payment or a distribution from the Reserve Account, from the Grantor Trust and (ii) otherwise, as first, a distribution by REMIC 2 in respect of the Class CE Uncertificated Interest, and then by REMIC A as a distribution to the Class CE Certificates and then, a distribution to the applicable Certificates from the Grantor Trust, in either case, as payments on notional principal contracts in the nature of cap contracts. Any remaining amount with respect to the Class CE Certificates or any remaining Yield Maintenance Agreement Payments shall be treated as having been distributed to the Holders of the Class CE Certificates from the Grantor Trust. (e) On each Distribution Date, Unpaid Realized Loss Amounts on the Class M Certificates will be reduced by the amount of any Subsequent Recoveries received during the related Prepayment Period in the same order as Realized Loss Amortization Amounts are paid to the Class M Certificates pursuant to Section 4.02(b) above. (f) On each Distribution Date, prior to any distributions of the Monthly Excess Cashflow Amount pursuant to Section 4.02(b), any Monthly Excess Interest Amount shall be distributed, to the extent available, in the following order of priority on such Distribution Date: (i) concurrently, based on each Class' Interest Percentage of the Current Interest Shortfall for such Distribution Date, to the Class A Certificates, pro rata, and (ii) sequentially, up to each Class' Interest Percentage of the Current Interest Shortfall for such Distribution Date, 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 and Class M-13 Certificates. Section 4.03 Allocation of Losses. Realized Losses shall be allocated, through the priority of distributions in Section 4.02, first against the Monthly Excess Interest Amount and then against the Overcollateralization Amount until such amount has been reduced to zero. If, after giving effect to the distribution of the Principal Distribution Amount on any Distribution Date the aggregate Principal Balance of the Certificates (other than the Class CE, Class P and Residual Certificates) exceeds the Pool Balance as of the end of the related Collection Period, the resulting Applied Realized Loss Amount will be allocated against the 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 and until the respective Principal Balances thereof are reduced to zero. Section 4.04 Method of Distribution. The Securities Administrator shall make distributions in respect of a Distribution Date to each Certificateholder of record on the related Record Date (other than as provided in Section 10.01 respecting the final distribution), in the case of Certificateholders of the Certificates, by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of such Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Distributions among Certificateholders shall be made in proportion to the Percentage Interests evidenced by the Certificates held by such Certificateholders. Section 4.05 Distributions on Book-Entry Certificates. Each distribution with respect to a Book-Entry Certificate shall be paid to the Depository, which shall credit the amount of such distribution to the accounts of its Depository Participants in accordance with its normal procedures. Each Depository Participant shall be responsible for disbursing such distribution to the Certificate Owners that it represents and to each indirect participating brokerage firm (a "brokerage firm" or "indirect participating firm") for which it acts as agent. Each brokerage firm shall be responsible for disbursing funds to the Certificate Owners that it represents. All such credits and disbursements with respect to a Book Entry Certificate are to be made by the Depository and the Depository Participants in accordance with the provisions of the Certificates. None of Securities Administrator, the Trustee, the Depositor or the Servicer shall have any responsibility therefor except as otherwise provided by applicable law. Section 4.06 Statements. (a) On each Distribution Date, based on the Mortgage Loan information contained in the Remittance Report, the Securities Administrator shall prepare and make available on its website at www.ctslink.com, a statement (the "Distribution Date Statement") as to the distributions made on such Distribution Date: (i) the amount of the distribution made on such Distribution Date to the Holders of each Class of Certificates allocable to principal, separately identified and the amount of the distribution made on such Distribution Date to the Holders of the Class P Certificates from Prepayment Penalties, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts; (ii) the amount of the distribution made on such Distribution Date to the Holders of each Class of Certificates allocable to interest or Class CE Distributable Amount, separately identified; (iii) the Overcollateralization Amount, the Overcollateralization Release Amount, the Overcollateralization Deficiency and the Targeted Overcollateralization Amount as of such Distribution Date and the Monthly Excess Interest Amount and Monthly Excess Cashflow Amount for such Distribution Date; (iv) the aggregate amount of servicing compensation received by the Servicer during the related Collection Period; (v) the aggregate amount of Advances for the related Collection Period, cumulative unreimbursed Advances and Servicing Advances and cumulative Nonrecoverable Advances; (vi) the Pool Balance, at the close of business at the end of the related Collection Period; (vii) the number, weighted average remaining term to maturity and weighted average Mortgage Interest Rate of the Mortgage Loans as of the related Due Date; (viii) the number and aggregate principal balances of the Mortgage Loans (A) delinquent (exclusive of Mortgage Loans in foreclosure or bankruptcy), grouping such delinquent Mortgage Loans in 30 day increments, up to [_] days delinquent (determined in accordance with the Mortgage Bankers' Association delinquency methodology), (B) in foreclosure, as of the close of business on the last day of the calendar month preceding the Distribution Date and (C) in bankruptcy as of the close of business on the last day of the calendar month preceding the Distribution Date; (ix) with respect to any Mortgage Loan that became an REO Property during the preceding calendar month, the loan number of such Mortgage Loan, the unpaid principal balance of the REO Property as of the close of business on the last Business Day of such calendar month and the principal balance of such Mortgage Loan as of the date it became an REO Property; (x) the book value of any REO Property as of the close of business on the last Business Day of the calendar month preceding the Distribution Date, and, cumulatively, the total number and cumulative principal balance of all REO Properties as of the close of business of the last day of the preceding Collection Period; (xi) separately stated for each Loan Group, the aggregate amount of Principal Prepayments made during the related Prepayment Period; (xii) separately stated for each Loan Group, the aggregate amount of Realized Losses incurred during the related Collection Period and the cumulative amount of Realized Losses; (xiii) the Principal Balance of each Class of Certificates, after giving effect to the distributions, and allocations of Realized Losses or Applied Realized Loss Amounts, as applicable, made on such Distribution Date, separately identifying any reduction thereof due to allocations of Realized Losses or Applied Realized Loss Amounts; (xiv) the Accrued Certificate Interest in respect of each Class of Certificates for such Distribution Date and any related Cap Carryover Amounts, and the respective portions thereof, if any, remaining unpaid following the distributions made in respect of such Certificates on such Distribution Date; (xv) the aggregate amount of any Prepayment Interest Shortfalls and of any Compensating Interest for such Distribution Date, to the extent not covered by payments by the Servicer pursuant to Section 3.23; (xvi) the Interest Percentage for each Class of Certificates, the amount of any Current Interest Shortfall and the amount of the distribution made to each Class of Certificates pursuant to Section 4.02(f) for such Distribution Date; (xvii) the Cap Carryover Amounts distributed on such Distribution Date, the amounts remaining after giving effect to distributions thereof on such Distribution Date and the amount of all Cap Carryover Amounts covered by withdrawals from the Reserve Account on such Distribution Date; (xviii) any Overcollateralization Deficiency after giving effect to the distribution of principal on such Distribution Date; (xix) whether a Trigger Event has occurred and is continuing, and the cumulative Realized Losses, as a percentage of the original Pool Balance; (xx) the Available Funds; (xxi) the Pass-Through Rate for each Class of Certificates for such Distribution Date; (xxii) the information contained in the Liquidation Report for such Distribution Date; (xxiii) the aggregate Principal Balance of Mortgage Loans purchased by the Servicer or the Depositor during the related Prepayment Period and indicating the section of this Agreement requiring or allowing the purchase of each such Mortgage Loan; (xxiv) the aggregate Principal Balance of the Mortgage Loans repurchased by the Depositor during the related Prepayment Period in connection with Section 3.16; (xxv) the amount of the Credit Risk Manager Fee paid; (xxvi) the Mortgage Loan identifying number of each Mortgage Loan with a Prepayment Penalty that was the subject of a Principal Prepayment in full during the related Collection Period, the Prepayment Penalty listed on each related Mortgage Note and the Prepayment Penalty collected, and the Servicer Prepayment Penalty Payment Amount and the Originator Prepayment Penalty Payment Amount paid with respect to each such Mortgage Loan; (xxvii) the amount of any Yield Maintenance Agreement Payments for such Distribution Date; (xxviii) the amount of Subsequent Recoveries received during the related Prepayment Period; (xxix) any expenses or indemnification amounts paid by the Trust Fund, the specific purpose of each payment and the parties to whom these payments are made; (xxx) the applicable Determination Date, the Record Date and Interest Accrual Period for calculating the distribution and the actual Distribution Date for the distribution; (xxxi) any material modifications, extensions or waivers to Mortgage Loan terms, fees, penalties or payments since the previous Distribution Date; (xxxii) any material breaches of representations and warranties relating to the Mortgage Loans or material breaches of transaction covenants or representations and warranties; and (xxxiii) any other customary information as is required to enable Certificateholders to prepare their tax returns. Assistance in using the Securities Administrator's website can be obtained by calling the Securities Administrator's customer service desk at (301) 815-6600. The Securities Administrator shall provide such information to parties that are unable to use the above distribution option by mailing to them via first class mail a paper copy of the Distribution Date Statement, upon request of any such party made by calling the customer service desk and indicating such. The Securities Administrator shall have the right to change the way such reports are distributed in order to make such distribution more convenient and/or more accessible to the parties, and the Securities Administrator shall provide timely and adequate notification to all parties regarding any such change. The Securities Administrator may fully rely upon and shall have no liability with respect to information with respect to the Mortgage Loans provided by the Servicer. In the case of information furnished pursuant to subclauses (i), (ii) and (xiii) above, the amounts shall be expressed in a separate section of the report as a dollar amount for each Class for each $1,000 original dollar amount as of the Closing Date. (b) Within a reasonable period of time after the end of each calendar year, the Securities Administrator shall furnish to each Person who at any time during the calendar year was a Certificateholder of a Regular Certificate, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information set forth in subclauses (i), (ii), (xiv) and (xvii) above, aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of the Securities Administrator shall be deemed to have been satisfied to the extent that substantially comparable information shall be prepared and furnished by the Securities Administrator to Certificateholders pursuant to any requirements of the Code as are in force from time to time. (c) On each Distribution Date, the Securities Administrator shall forward to the Residual Certificateholders a copy of the reports forwarded to the holder of any Regular Certificate in respect of such Distribution Date with such other information as the Securities Administrator deems necessary or appropriate. Such obligation of the Securities Administrator shall be deemed to have been satisfied to the extent that substantially comparable information shall be prepared and furnished to Residual Certificateholders by the Securities Administrator pursuant to any requirements of the Code as from time to time in force. Section 4.07 Remittance Reports; Advances. (a) On the 15th calendar day of each month, or the following Business Day if such 15th calendar day is not a Business Day, the Servicer shall deliver to the Securities Administrator by telecopy (or by such other means as the Servicer and the Securities Administrator may agree from time to time) a Remittance Report with respect to the related Distribution Date. On the same date, the Servicer shall electronically forward to the Securities Administrator in such medium as may be agreed between the Servicer and the Securities Administrator the information set forth in such Remittance Report with respect to the related Distribution Date and such information reasonably available to the Servicer necessary in order for the Securities Administrator to perform the calculations necessary to make the distributions and allocations contemplated by Section 4.01, 4.02 and 4.03 and to prepare the Distribution Date Statement. The Securities Administrator shall not be responsible to recompute, recalculate or verify any information provided to it by the Servicer. (b) The amount of Advances to be made by the Servicer for any Distribution Date shall equal, subject to Section 4.07(d), the sum of (i) the aggregate amount of Monthly Payments (net of the related Servicing Fee), due during the related Collection Period in respect of the Mortgage Loans, which Monthly Payments were delinquent on a contractual basis as of the close of business on the related Determination Date and (ii) with respect to each REO Property, which REO Property was acquired during or prior to the related Collection Period and as to which REO Property an REO Disposition did not occur during the related Collection Period, an amount equal to the excess, if any, of the REO Imputed Interest on such REO Property for such Collection Period, over the net income from such REO Property transferred to the Distribution Account pursuant to Section 3.13 for distribution on such Distribution Date. For purposes of the preceding sentence, the Monthly Payment on each Balloon Loan with a delinquent Balloon Payment is equal to the assumed monthly payment that would have been due on the related Due Date based on the original principal amortization schedule for such Balloon Loan. On or before 1:00 p.m. New York City time on the Servicer Remittance Date, the Servicer shall remit in immediately available funds to the Securities Administrator for deposit in the Distribution Account an amount equal to the aggregate amount of Advances, if any, to be made in respect of the Mortgage Loans for the related Distribution Date either (i) from its own funds or (ii) from the Collection Account, to the extent of funds held therein for future distribution (in which case it will cause to be made an appropriate entry in the records of the Collection Account that amounts held for future distribution have been, as permitted by this Section 4.07, used by the Servicer in discharge of any such Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the total amount of Advances to be made by the Servicer with respect to the Mortgage Loans. Any amounts held for future distribution and so used shall be appropriately reflected in the Servicer's records and replaced by the Servicer by deposit in the Collection Account on or before any future Servicer Remittance Date to the extent that the Available Funds for the related Distribution Date (determined without regard to Advances to be made on the Servicer Remittance Date) shall be less than the total amount that would be distributed to the Classes of Certificateholders pursuant to Section 4.01 and 4.02 on such Distribution Date if such amounts held for future distributions had not been so used to make Advances. The Securities Administrator will provide notice to the Servicer by telecopy by 4:00 p.m. New York City time on any Servicer Remittance Date in the event that (i) the Servicer fails to remit the Advances required to be made by the Servicer for the related Distribution Date or (ii) the amount remitted by the Servicer to the Securities Administrator on such date is less than the Advances required to be made by the Servicer for the related Distribution Date, as set forth in the related Remittance Report. (c) The obligation of the Servicer to make such Advances is mandatory, notwithstanding any other provision of this Agreement but subject to (d) below, and, with respect to any Mortgage Loan, shall continue until the earlier of such time as the Mortgage Loan is paid in full by the Mortgagor or until the Mortgage Loan (or the related Mortgage Property) is disposed of by the Trust. (d) Notwithstanding anything herein to the contrary, no Advance or Servicing Advance shall be required to be made hereunder by the Servicer if such Advance would, if made, constitute a Nonrecoverable Advance. The determination by the Servicer that it has made a Nonrecoverable Advance or that any proposed Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officers' Certificate of the Servicer delivered to the Securities Administrator. (e) In the event that the Servicer fails to remit any Advances as required pursuant to this Section 4.07, the Securities Administrator shall notify the Trustee by 4:00 p.m. on the Servicer Remittance Date identifying for each Advance the related Mortgage Loan and the amount of the Advance. On or before 11:00 a.m. New York City time on the Distribution Date immediately following the Servicer Remittance Date, the Trustee shall remit in immediately available funds to the Securities Administrator such Advances that the Servicer was required but failed to make for the related Distribution Date; provided that the Trustee may conclusively rely upon any determination by the Servicer that an Advance if made would be a Nonrecoverable Advance; provided, further, that the Trustee is not obligated to make any Advance that the Trustee, in its good faith business judgment, determines would constitute a Nonrecoverable Advance, such determination to be evidenced by an Officer's Certificate of the Trustee delivered to the Securities Administrator. So long as the Trustee has not terminated all of the rights and obligations of the Servicer pursuant to Section 7.01(b) as a result of a Servicer Event of Termination pursuant to 7.01(a)(i)(A), the Servicer shall pay to the Trustee an amount equal to the Advance made by the Trustee plus interest at an annual rate equal to Prime Rate, adjusted as of the date of each change, plus two percentage points, but in no event greater than the maximum amount permitted by applicable law, on any Advances made by the Trustee. Such interest shall be solely an obligation of the Servicer and shall not be payable or reimbursable from any assets of the Trust Fund. Section 4.08 REMIC Distributions.(a) (a) On each Distribution Date, the Securities Administrator shall cause in the following order of priority, the following amounts to be distributed by REMIC 1 to REMIC 2 on account of the REMIC 1 Regular Interests or withdrawn from the Distribution Account and distributed to the Holders of the Class R Certificates (in respect of the Class R-1 Interest), as the case may be: (i) to Holders of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ, pro rata, in an amount equal to (a) the Uncertificated Accrued Interest for such Distribution Date, plus (b) any amounts in respect thereof remaining unpaid from previous Distribution Dates. Amounts payable as Uncertificated Accrued Interest in respect of REMIC 1 Regular Interest LT1ZZ shall be reduced and deferred when the REMIC 1 Overcollateralized Amount is less than the REMIC 1 Overcollateralization Target Amount, by the lesser of (x) the amount of such difference and (y) the Maximum LT1ZZ Uncertificated Accrued Interest Deferral Amount and such amount will be payable to the Holders of REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13 in the same proportion as the Overcollateralization Deficiency is allocated to the Corresponding Certificates; (ii) to Holders of REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1 Regular Interest LT2GRP and REMIC 1 Regular Interest LT1XX, pro rata, in an amount equal to (A) the Uncertificated Accrued Interest for such Distribution Date, plus (B) any amounts in respect thereof remaining unpaid from previous Distribution Dates; (iii) to the Holders of REMIC 1 Regular Interests, in an amount equal to the remainder of the REMIC 1 Marker Allocation Percentage of Available Funds for such Distribution Date after the distributions made pursuant to clause (i) above, allocated as follows: (1) to REMIC 1 Regular Interest LT1AA, 98.00% of such remainder, until the Uncertificated Principal Balance of such Uncertificated REMIC 1 Regular Interest is reduced to zero; (2) to REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13, 1.00% of such remainder, in the same proportion as principal payments are allocated to the Corresponding Certificates, until the Uncertificated Principal Balances of such REMIC 1 Regular Interests are reduced to zero; then (3) to REMIC 1 Regular Interest LT1ZZ, 1.00% of such remainder, until the Uncertificated Principal Balance of such REMIC 1 Regular Interest is reduced to zero; provided, however, that (i) 98.00% and (ii) 2.00% of any principal payments that are attributable to an Aggregate Overcollateralization Release Amount shall be allocated to (i) REMIC 1 Regular Interest LT1AA and (ii) REMIC 1 Regular Interest LT1ZZ, respectively; and (iv) to the Holders of REMIC 1 Regular Interests, in an amount equal to the REMIC 1 Sub WAC Allocation Percentage of Available Funds for such Distribution Date after the distributions made pursuant to clause (i) above, such that distributions of principal shall be deemed to be made to the REMIC 1 Regular Interests first, so as to keep the Uncertificated Principal Balance of each REMIC 1 Regular Interest ending with the designation "GRP" equal to 0.01% of the aggregate Principal Balance of the Mortgage Loans in the related group of Mortgage Loans; second, to each REMIC 1 Regular Interest ending with the designation "SUB," so that the Uncertificated Principal Balance of each such REMIC 1 Regular Interest is equal to 0.01% of the excess of (x) the aggregate Principal Balance of the Mortgage Loans in the related group of Mortgage Loans over (y) the aggregate current Principal Balance of the Class A Certificates in the related group of Mortgage Loans (except that if any such excess is a larger number than in the preceding distribution period, the least amount of principal shall be distributed to such REMIC 1 Regular Interests such that the REMIC 1 Subordinated Balance Ratio is maintained); and third, any remaining principal to REMIC 1 Regular Interest LT1XX. (b) The Securities Administrator shall cause the following allocation of losses: (i) The REMIC 1 Marker Allocation Percentage of the aggregate amount of any Prepayment Interest Shortfalls and the REMIC 1 Marker Allocation Percentage of the aggregate amount of any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for any Distribution Date shall be allocated first, to Uncertificated Accrued Interest payable to REMIC 1 Regular Interest LT1AA and REMIC 1 Regular Interest LT1ZZ up to an aggregate amount equal to the REMIC 1 Interest Loss Allocation Amount, 98% and 2%, respectively, and thereafter among REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI1A, REMIC 1 Regular Interest LT1AI1B, REMIC 1 Regular Interest LT1AII1, REMIC 1 Regular Interest LT1AII2, REMIC 1 Regular Interest LT1AII3, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular Interest LT1M6, REMIC 1 Regular Interest LT1M7, REMIC 1 Regular Interest LT1M8, REMIC 1 Regular Interest LT1M9, REMIC 1 Regular Interest LT1M10, REMIC 1 Regular Interest LT1M11, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ pro rata based on, and to the extent of, one month's interest at the then applicable respective Uncertificated REMIC 1 Pass-Through Rate on the respective Uncertificated Principal Balance of each such REMIC 1 Regular Interest; (ii) The REMIC 1 Sub WAC Allocation Percentage of the aggregate amount of any Prepayment Interest Shortfalls and the REMIC 1 Sub WAC Allocation Percentage of the aggregate amount of any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for any Distribution Date shall be allocated to Uncertificated Accrued Interest payable to REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1 Regular Interest LT2GRP and REMIC 1 Regular Interest LT1XX, pro rata based on, and to the extent of, one month's interest at the then applicable respective Uncertificated REMIC 1 Pass-Through Rate on the respective Uncertificated Principal Balance of each such REMIC 1 Regular Interest; (iii) The REMIC 1 Marker Allocation Percentage of all Realized Losses on the Mortgage Loans shall be allocated by the Securities Administrator on each Distribution Date to the following REMIC 1 Regular Interests in the specified percentages, as follows: first, to Uncertificated Accrued Interest payable to REMIC 1 Regular Interest LT1AA and REMIC 1 Regular Interest LT1ZZ up to an aggregate amount equal to the REMIC 1 Interest Loss Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA and REMIC 1 Regular Interest LT1ZZ up to an aggregate amount equal to the REMIC 1 Principal Loss Allocation Amount, 98% and 2%, respectively; third, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M13 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M13 has been reduced to zero; fourth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M12 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M12 has been reduced to zero; fifth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M11 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M11 has been reduced to zero; sixth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M10 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M10 has been reduced to zero; seventh, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M9 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M9 has been reduced to zero; eighth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M8 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M8 has been reduced to zero; ninth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M7 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M7 has been reduced to zero; tenth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M6 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M6 has been reduced to zero; eleventh, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M5 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M5 has been reduced to zero; twelfth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M4 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M4 has been reduced to zero; thirteenth to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M3 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M3 has been reduced to zero; fourteenth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M2 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M2 has been reduced to zero; and fifteenth, to the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M1 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M1 has been reduced to zero; and (iv) The REMIC 1 Sub WAC Allocation Percentage of all Realized Losses shall be applied after all distributions have been made on each Distribution Date first, so as to keep the Uncertificated Principal Balance of each REMIC 1 Regular Interest ending with the designation "GRP" equal to 0.01% of the aggregate Stated Principal Balance of the Mortgage Loans in the related Loan Group; second, to each REMIC 1 Regular Interest ending with the designation "SUB," so that the Uncertificated Principal Balance of each such REMIC 1 Regular Interest is equal to 0.01% of the excess of (x) the aggregate Principal Balance of the Mortgage Loans in the related Loan Group over (y) the aggregate current Principal Balances of the Class A Certificates in the related group of Mortgage Loans (except that if any such excess is a larger number than in the preceding distribution period, the least amount of Realized Losses shall be applied to such REMIC 1 Regular Interests such that the REMIC 1 Subordinated Balance Ratio is maintained); and third, any remaining Realized Losses shall be allocated to REMIC 1 Regular Interest LT1XX. (c) With respect to REMIC 1, any increase in principal balance due to a Subsequent Recovery shall be allocated as follows: 50% to REMIC 1 Regular Interest LT1XX; 49% to REMIC 1 Regular Interest LT1AA; 0.5% to REMIC 1 Regular Interest LT1ZZ; and 0.5% to each REMIC 1 Regular Interest that is a Corresponding Class to any REMIC 2 Regular Interest that was increased as a result of such Subsequent Recovery (provided, that if more than one REMIC 2 Regular Interest is so increased, such amount shall be allocated to the REMIC 1 Regular Interests that are Corresponding Classes in the same proportion as the increase is allocated to the applicable REMIC 2 Regular Interests). (d) Notwithstanding anything to the contrary contained herein, the above distributions in this Section 4.08 (other than on the Certificates) are deemed distributions, and distributions of funds from the Distribution Account shall be made only in accordance with Sections 4.01 and 4.02 hereof. ARTICLE V THE CERTIFICATES Section 5.01 The Certificates. Each of the Class AI-1A, Class AI-1B, Class AII-1, Class AII-2, Class AII-3, 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, Class CE, Class P, Class R and Class R-X Certificates shall be substantially in the forms annexed hereto as exhibits, and shall, on original issue, be executed by the Securities Administrator and authenticated and delivered by the Certificate Registrar to or upon the receipt of a Written Order to Authenticate from the Depositor concurrently with the sale and assignment to the Trustee of the Trust Fund. Each Class of the Class A and Class M Certificates (other than the Class M-12 and Class M-13 Certificates) shall be initially evidenced by one or more Certificates representing a Percentage Interest with a minimum dollar denomination of $[ ] and integral multiples of $[ ] in excess thereof. Each of the Class M-12 and Class M-13 Certificates shall be initially evidenced by one or more Certificates representing a Percentage Interest with a minimum dollar denomination of $[ ] and integral multiples of $[ ] in excess thereof. The Class CE and Class P Certificates are issuable only in minimum Percentage Interests of 10%. The Class R and Class R-X Certificates are issuable only as single certificates. The Certificates shall be executed on behalf of the Trust by manual or facsimile signature on behalf of the Securities Administrator by a Responsible Officer. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Securities Administrator shall bind the Trust, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificate. No Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose, unless such Certificate shall have been manually authenticated by the Certificate Registrar substantially in the form provided for herein, and such authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. Subject to Section 5.02(c), the Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) shall be Book-Entry Certificates. The Class CE, Class P, Class R and Class R-X Certificates shall not be Book-Entry Certificates but shall be issued in fully registered certificate form. Section 5.02 Registration of Transfer and Exchange of Certificates. (a) The Certificate Registrar shall cause to be kept at the Corporate Trust Office of the Securities Administrator a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. The Securities Administrator shall initially serve as Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided. The Securities Administrator as Certificate Registrar shall be subject to the same standards of care, limitations on liability and rights to indemnity as the Securities Administrator, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15 and 8.16 shall apply to the Certificate Registrar to the same extent as they apply to the Securities Administrator. Any Certificate Registrar appointed in accordance with this Section 5.02(a) may at any time resign by giving at least 30 days' advance written notice of resignation to the Securities Administrator, the Trustee, the Servicer and the Depositor, such resignation to become effective upon appointment of a successor Certificate Registrar. Upon surrender for registration of transfer of any Certificate at any office or agency of the Certificate Registrar maintained for such purpose pursuant to the foregoing paragraph and, in the case of the Class R and Class R-X Certificates, upon satisfaction of the conditions set forth below, the Securities Administrator on behalf of the Trust shall execute and the Certificate Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same aggregate Percentage Interest. At the option of the Certificateholders, Certificates may be exchanged for other Certificates in authorized denominations and the same aggregate Percentage Interests, upon surrender of the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered for exchange, the Securities Administrator shall execute on behalf of the Trust and the Certificate Registrar shall authenticate and deliver the Certificates which the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Securities Administrator or the Certificate Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer satisfactory to the Securities Administrator and the Certificate Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing. (b) Upon original issuance, the Book-Entry Certificates shall be issued in the form of one or more typewritten certificates, to be delivered to the Depository by, or on behalf of, the Depositor; or to, and deposited with the Certificate Custodian, on behalf of the Depository, if directed to do so pursuant to instructions from the Depository. Except as provided in paragraph (c) below, the Book-Entry Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (i) registration of such Certificates may not be transferred by the Securities Administrator except to another Depository; (ii) the Depository shall maintain book-entry records with respect to the Certificate Owners and with respect to ownership and transfers of such Certificates; (iii) ownership and transfers of registration of such Certificates on the books of the Depository shall be governed by applicable rules established by the Depository; (iv) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (v) the Securities Administrator shall for all purposes deal with the Depository as representative of the Certificate Owners of the Certificates for purposes of exercising the rights of Holders under this Agreement, and requests and directions for and votes of such representative shall not be deemed to be inconsistent if they are made with respect to different Certificate Owners; (vi) the Securities Administrator may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and Persons shown on the books of such indirect participating firms as direct or indirect Certificate Owners; and (vii) the direct participants of the Depository shall have no rights under this Agreement under or with respect to any of the Certificates held on their behalf by the Depository, and the Depository may be treated by the Securities Administrator and its agents, employees, officers and directors as the absolute owner of the Certificates for all purposes whatsoever. All transfers by Certificate Owners of Book-Entry Certificates shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing such Certificate Owners. Each Depository Participant shall only transfer Book Entry Certificates of Certificate Owners that it represents or of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures. The parties hereto are hereby authorized to execute one or more Letter of Representations with the Depository or take such other action as may be necessary or desirable to register a Book-Entry Certificate to the Depository. In the event of any conflict between the terms of any such Letter of Representation and this Agreement, the terms of this Agreement shall control. (c) If the Depository advises the Securities Administrator in writing that the Depository is no longer willing or able to discharge properly its responsibilities as Depository and the Securities Administrator or the Depositor is unable to locate a qualified successor and upon surrender to the Certificate Registrar of the Book-Entry Certificates by the Depository, accompanied by registration instructions from the Depository for registration, the Securities Administrator shall, at the Trust's expense, execute on behalf of the Trust and the Certificate Registrar shall authenticate definitive, fully registered certificates (the "Definitive Certificates"). None of the Depositor or the Securities Administrator shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates, the Securities Administrator, the Certificate Registrar, the Servicer, the Securities Administrator, any Paying Agent and the Depositor shall recognize the Holders of the Definitive Certificates as Certificateholders hereunder. (d) Except with respect to a transfer of the Private Certificates between or among the Depositor, the Seller, their affiliates or both, no transfer, sale, pledge or other disposition of any Private Certificate shall be made unless such disposition is exempt from the registration requirements of the 1933 Act, and any applicable state securities laws or is made in accordance with the 1933 Act and laws. In the event of any such transfer, the Certificate Registrar shall require the transferor to execute a transferor certificate in substantially the form attached hereto as Exhibit L and the transferee to execute an investment letter in substantially in the form attached hereto as Exhibit J acceptable to and in form and substance reasonably satisfactory to the Depositor and the Certificate Registrar certifying to the Depositor and the Certificate Registrar the facts surrounding such transfer, which investment letter shall not be an expense of the Certificate Registrar or the Depositor. The transferor of a Private Certificate desiring to effect such transfer shall, and does hereby agree to, indemnify the Certificate Registrar and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. For purposes of this Section 5.02(d) the representations required in any transferor certificate (in substantially the form attached hereto as Exhibit L) and any investment letter (substantially in the form of Exhibit J hereto) shall be deemed to have been made in connection with the transfer of any Private Certificate that is a Book-Entry Certificate. No transfer of an ERISA Restricted Certificate shall be made unless the Certificate Registrar and the Depositor shall have received a representation from the transferee of such Certificate, acceptable to and in form and substance satisfactory to the Certificate Registrar and the Depositor, (such requirement is satisfied only by the Certificate Registrar's receipt of a representation letter from the transferee substantially in the form of Exhibit I hereto, as appropriate), to the effect that such transferee is not an employee benefit plan or arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of the Code or a plan subject to any federal, state or local law ("Similar Law") materially similar to the foregoing provisions of ERISA or of the Code, nor a person acting on behalf of any such plan or arrangement nor using the assets of any such plan or arrangement to effect such transfer other than (except in the case of the Class CE, Class P, Class R or Class R-X Certificates) an insurance company that represents (or is deemed to represent) that (A) the source of funds used to purchase the Certificates is an "insurance company general account" (as such term is defined in Section V(e) of PTE 95-60, 60 Fed. Reg. 35925 (July 12, 1995)), (B) that there is no Plan with respect to which the amount of such general account's reserves and liabilities for the contract(s) held by or on behalf of such Plan and all other Plans maintained by the same employer (or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee organization exceeds 10% of the total of all reserves and liabilities of such general account (as such amounts are determined under Section I(a) of PTE 95-60) at the date of acquisition and (C) all Plans that have an interest in such general account are Plans to which PTE 95-60 applies, or (ii) (except in the case of the Class CE, Class P, Class R or Class R-X Certificates) in the case of any such ERISA Restricted Certificate presented for registration in the name of an employee benefit plan subject to ERISA or a plan or arrangement subject to Section 4975 of the Code (or comparable provisions of any subsequent enactments), or a trustee of any such plan or any other person acting on behalf of any such plan or arrangement or using such plan's or arrangement's assets, an Opinion of Counsel satisfactory to the Certificate Registrar and the Depositor, to the effect that the purchase or holding of such ERISA Restricted Certificate will not constitute or result in a non-exempt prohibited transaction within the meaning of ERISA Section 4975 of the Code on Similar Law and will not subject the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar to any obligation in addition to those expressly undertaken in this Agreement or to any liability. For purposes of clause (i) of the preceding sentence, such representation shall be deemed to have been made to the Certificate Registrar by the acceptance by a Certificate Owner of the beneficial interest in any such Class of ERISA Restricted Certificates, unless the Certificate Registrar shall have received from the transferee an alternative representation acceptable in form and substance to the Depositor. Notwithstanding anything else to the contrary herein, any purported transfer of an ERISA Restricted Certificate to or on behalf of an employee benefit plan subject to ERISA, Section 4975 of the Code or Similar Law shall be void and of no effect. Each Person who has or who acquires any Ownership Interest in a Residual Certificate shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the following provisions and to have irrevocably appointed the Depositor or its designee as its attorney-in-fact to negotiate the terms of any mandatory sale under clause (v) below and to execute all instruments of transfer and to do all other things necessary in connection with any such sale, and the rights of each Person acquiring any Ownership Interest in a Class R or Class R-X Certificate are expressly subject to the following provisions: (i) Each Person holding or acquiring any Ownership Interest in a Class R or Class R-X Certificate shall be a Permitted Transferee and shall promptly notify the Certificate Registrar of any change or impending change in its status as a Permitted Transferee. (ii) No Person shall acquire an Ownership Interest in a Class R or Class R-X Certificate unless such Ownership Interest is a pro rata undivided interest. (iii) In connection with any proposed transfer of any Ownership Interest in a Class R or Class R-X Certificate, the Certificate Registrar shall as a condition to registration of the transfer, require delivery to it, in form and substance satisfactory to it, of each of the following: A. an affidavit in the form of Exhibit K hereto from the proposed transferee to the effect that, among other things, such transferee is a Permitted Transferee and that it is not acquiring its Ownership Interest in a Class R or Class R-X Certificate that is the subject of the proposed transfer as a nominee, trustee or agent for any Person who is not a Permitted Transferee; and B. a covenant of the proposed transferee to the effect that the proposed transferee agrees to be bound by and to abide by the transfer restrictions applicable to a Class R or Class R-X Certificate. (iv) Any attempted or purported transfer of any Ownership Interest in a Residual Certificate in violation of the provisions of this Section shall be absolutely null and void and shall vest no rights in the purported transferee. If any purported transferee shall, in violation of the provisions of this Section, become the Holder of a Class R or Class R-X Certificate, then the prior Holder of such Class R or Class R-X Certificate that is a Permitted Transferee shall, upon discovery that the registration of transfer of such Class R or Class R-X Certificate was not in fact permitted by this Section, be restored to all rights as Holder thereof retroactive to the date of registration of transfer of such Class R or Class R-X Certificate. The Certificate Registrar shall be under no liability to any Person for any registration of transfer of a Class R or Class R-X Certificate that is in fact not permitted by this Section or for making any distributions due on such Class R or Class R-X Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the Certificate Registrar received the documents specified in clause (iii). The Securities Administrator shall be entitled to recover from any Holder of a Class R or Class R-X Certificate that was in fact not a Permitted Transferee at the time such distributions were made all distributions made on such Class R or Class R-X Certificate. Any such distributions so recovered by the Securities Administrator shall be distributed and delivered by the Securities Administrator to the prior Holder of such Class R or Class R-X Certificate that is a Permitted Transferee. (v) If any Person other than a Disqualified Organization acquires any Ownership Interest in a Class R or Class R-X Certificate in violation of the restrictions in this Section, then the Certificate Registrar shall have the right but not the obligation, without notice to the Holder of a Class R or Class R-X Certificate or any other Person having an Ownership Interest therein, to notify the Depositor to arrange for the sale of a Class R or Class R-X Certificate. The proceeds of such sale, net of commissions (which may include commissions payable to the Depositor or its affiliates in connection with such sale), expenses and taxes due, if any, will be remitted by the Securities Administrator to the previous Holder of a Class R or Class R-X Certificate that is a Permitted Transferee, except that in the event that the Securities Administrator determines that the Holder of a Class R or Class R-X Certificate may be liable for any amount due under this Section or any other provisions of this Agreement, the Securities Administrator may withhold a corresponding amount from such remittance as security for such claim. The terms and conditions of any sale under this clause (v) shall be determined in the sole discretion of the Securities Administrator and it shall not be liable to any Person having an Ownership Interest in a Class R or Class R-X Certificate as a result of its exercise of such discretion. (vi) If any Person other than a Permitted Transferee acquires any Ownership Interest in a Class R or Class R-X Certificate in violation of the restrictions in this Section, then the Securities Administrator will provide to the Internal Revenue Service, and to the persons specified in Sections 860E(e)(3) and (6) of the Code, information needed to compute the tax imposed under Section 860E(e)(5) of the Code on transfers of residual interests to disqualified organizations. The Securities Administrator shall be entitled to reasonable compensation for providing such information from the person to whom it is provided. The foregoing provisions of this Section shall cease to apply to transfers occurring on or after the date on which there shall have been delivered to the Certificate Registrar, in form and substance satisfactory to the Certificate Registrar, (i) written notification from each Rating Agency that the removal of the restrictions on Transfer set forth in this Section will not cause such Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of Counsel to the effect that such removal will not cause any REMIC created hereunder to fail to qualify as a REMIC. (e) No service charge shall be made for any registration of transfer or exchange of Certificates of any Class, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. All Certificates surrendered for registration of transfer or exchange shall be cancelled by the Certificate Registrar and disposed of pursuant to its standard procedures. Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any mutilated Certificate is surrendered to the Certificate Registrar or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (ii) there is delivered to the Securities Administrator, the Trustee, the Depositor and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Securities Administrator or the Certificate Registrar that such Certificate has been acquired by a bona fide purchaser, the Securities Administrator shall execute on behalf of the Trust, and the Certificate Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Percentage Interest. Upon the issuance of any new Certificate under this Section, the Securities Administrator or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Securities Administrator and the Certificate Registrar) in connection therewith. Any duplicate Certificate issued pursuant to this Section, shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 5.04 Persons Deemed Owners. The Servicer, the Depositor, the Trustee, the Securities Administrator, the Certificate Registrar, any Paying Agent and any agent of the Servicer, the Depositor, the Securities Administrator, the Trustee, the Certificate Registrar or any Paying Agent may treat the Person, including a Depository, in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.01 and 4.02 and for all other purposes whatsoever, and none of the Servicer, the Trust, the Trustee, the Securities Administrator nor any agent of any of them shall be affected by notice to the contrary. Section 5.05 Appointment of Paying Agent. The Paying Agent shall make distributions to Certificateholders from the Distribution Account pursuant to Section 4.01 and 4.02 and shall report the amounts of such distributions to the Securities Administrator. The duties of the Paying Agent may include the obligation to distribute statements and provide information to Certificateholders as required hereunder. The Paying Agent hereunder shall at all times be an entity duly incorporated and validly existing under the laws of the United States of America or any state thereof, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authorities. The Paying Agent shall initially be the Securities Administrator. The Securities Administrator may appoint a successor to act as Paying Agent, which appointment shall be reasonably satisfactory to the Depositor and the Rating Agencies. The Securities Administrator as Paying Agent shall be subject to the same standards of care, limitations on liability and rights to indemnity as the Securities Administrator, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15 and 8.16 shall apply to the Paying Agent to the same extent as they apply to the Securities Administrator. Any Paying Agent appointed in accordance with this Section 5.05 may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee, the Securities Administrator, the Servicer and the Depositor, such resignation to become effective upon appointment of a successor Paying Agent. The Trustee shall cause any Paying Agent that is not the Securities Administrator to execute and deliver to the Trustee an instrument (a "Paying Agent Agreement") in which such Paying Agent agrees with the Trustee that such Paying Agent shall (i) hold all amounts remitted to it by the Securities Administrator for distribution to Certificateholders in trust for the benefit of Certificateholders until such amounts are distributed to Certificateholders or otherwise disposed of as herein provided; (ii) give the Depositor notice of any default by the Securities Administrator in remitting any required amount; (iii) at any time during the continuance of any such default, upon the written request of the Depositor, forthwith pay to the Depositor all amounts held in trust by such Paying Agent; and (iv) provide to the Securities Administrator the assessment of compliance and accountants report provided for in Section 3.20 with respect to the Servicing Criteria set forth in Item 1122(d) of Regulation AB applicable to the duties of the Paying Agent. ARTICLE VI THE SERVICER AND THE DEPOSITOR Section 6.01 Liability of the Servicer and the Depositor. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Servicer herein. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor. Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor. Any entity into which the Servicer or the Depositor may be merged or consolidated, or any entity resulting from any merger, conversion or consolidation to which the Servicer or the Depositor shall be a party, or any organization succeeding to the business of the Servicer or the Depositor through the transfer of substantially all of its assets or all assets relating to such business, or otherwise, shall be the successor of the Servicer or the Depositor, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that (a) the successor servicer shall satisfy all the requirements of Section 7.02 with respect to the qualifications of a successor servicer and (b) the Servicer and such successor or surviving Person shall notify the Depositor and the Trustee of any such merger, conversion or consolidation at least two Business Days prior to the effective date thereof (unless giving such prior notice would be prohibited by applicable law or by a confidentiality agreement, in which case notice shall be given by 12 noon eastern time one Business Day after such merger or consolidation). Section 6.03 Limitation on Liability of the Servicer and Others. Neither the Servicer nor any of the directors or officers or employees or agents of the Servicer shall be under any liability to the Trust or the Certificateholders for any action taken or for refraining from the taking of any action by the Servicer in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability which would otherwise be imposed by reason of its willful misfeasance, bad faith or gross negligence in the performance of duties of the Servicer or by reason of its reckless disregard of its obligations and duties of the Servicer hereunder. The Servicer and any director or officer or employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Servicer and any director or officer or employee or agent of the Servicer shall be indemnified by the Trust and held harmless against any loss, liability or expense incurred in connection with the performance of its duties and obligations and any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense related to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of its willful misfeasance, bad faith or gross negligence in the performance of duties hereunder or by reason of its reckless disregard of obligations and duties hereunder. The Servicer may undertake any such action which it may deem necessary or desirable in respect of this Agreement, and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such event, the reasonable legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust and the Servicer shall be entitled to be reimbursed therefor pursuant to Section 3.05. The Servicer's right to indemnity or reimbursement pursuant to this Section shall survive any resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with respect to any losses, expenses, costs or liabilities arising prior to such resignation or termination (or arising from events that occurred prior to such resignation or termination). This paragraph shall apply to the Servicer solely in its capacity as Servicer hereunder and in no other capacities. Section 6.04 Servicer Not to Resign. Subject to the provisions of Section 7.01 and Section 6.02, the Servicer shall not resign from the obligations and duties hereby imposed on it except (i) upon determination that the performance of its obligations or duties hereunder are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it or its subsidiaries or Affiliates, the other activities of the Servicer so causing such a conflict being of a type and nature carried on by the Servicer or its subsidiaries or Affiliates at the date of this Agreement or (ii) upon satisfaction of the following conditions: (a) the Servicer has proposed a successor servicer to the Trustee and the Securities Administrator in writing and such proposed successor servicer is reasonably acceptable to the Trustee and the Securities Administrator and the proposed successor executes and delivers to the Trustee and the Securities Administrator an agreement, in form and substance reasonably satisfactory to the Trustee and the Securities Administrator, which contains an assumption by such successor servicer of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Servicer under this Agreement from and after the date of such agreement; and (b) each Rating Agency shall have delivered a letter to the Trustee and the Securities Administrator prior to the appointment of the successor servicer stating that the proposed appointment of such successor servicer as Servicer hereunder will not result in the reduction or withdrawal of the then current rating of the Regular Certificates or the ratings that are in effect; provided, however, that no such resignation by the Servicer shall become effective until such successor servicer or, in the case of (i) above, the Trustee shall have assumed the Servicer's responsibilities and obligations hereunder or the Trustee shall have designated a successor servicer in accordance with Section 7.02. Any such resignation shall not relieve the Servicer of responsibility for any of the obligations specified in Sections 7.01 and 7.02 as obligations that survive the resignation or termination of the Servicer. Any such determination permitting the resignation of the Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee and the Securities Administrator. Section 6.05 Delegation of Duties.(a) (a) In the ordinary course of business, the Servicer at any time may delegate any of its duties hereunder to any Person, including any of its Affiliates, who agrees to conduct such duties in accordance with standards comparable to those set forth in Section 3.01. Such delegation shall not relieve the Servicer of its liabilities and responsibilities with respect to such duties and shall not constitute a resignation within the meaning of Section 6.04. The Servicer shall provide the Trustee and the Rating Agencies with 60 days prior written notice prior to the delegation of any of its duties to any Person other than any of the Servicer's Affiliates or their respective successors and assigns. (b) Notwithstanding anything contained herein to the contrary, to the extent the Servicer engages any affiliate or third party vendor, in connection with the performance of any of its duties under this Agreement, the Servicer shall immediately notify the Depositor in writing of such engagement; provided however, that prior to engaging any affiliate or third party vendor in connection with the performance of any of its duties under this Agreement, the Servicer shall determine (i) if such affiliates or third party vendors would be a Servicing Function Participant and (ii) if such affiliate or third party vendor would be a "servicer" within the meaning of Item 1101 of Regulation AB (an "Additional Servicer") and meets the criteria in Item 1108(a)(2)(i), (ii) or (iii) of Regulation AB. If the Servicer has determined that such affiliates or third party vendors are a Servicing Function Participant, the Servicer shall cause such Servicing Function Participant to prepare and deliver to the Securities Administrator a separate assessment and attestation report, as contemplated by Section 3.20 of this Agreement. In addition, if the Servicer has determined that any such affiliate or third party vendor would be an Additional Servicer and meets the criteria in Item 1108(a)(2)(i), (ii) or (iii) of Regulation AB, the Servicer shall cause such Additional Servicer to prepare and deliver to the Securities Administrator a separate compliance statement as contemplated by Section 3.19 of this Agreement. In addition, if the Servicer determines any such affiliate or third party vendor would be a "servicer" within the meaning of Item 1101 of Regulation AB, the Servicer shall not engage such affiliate or third party vendor unless it provides the Securities Administrator and the Depositor the information required by Section 1108(b) and 1108(c) of Regulation AB prior to such engagement. In the event of any assignment of rights or delegation of duties of the Servicer, the Securities Administrator shall report such event on Form 8-K within four Business Days after the effective date thereof. ARTICLE VII DEFAULT Section 7.01 Servicer Events of Termination. (a) If any one of the following events ("Servicer Events of Termination") shall occur and be continuing: (i) (A) The failure by the Servicer to make any Advance, Servicing Advance or to pay Compensating Interest and such failure described in this clause (A) continues unremedied until 1:00 p.m. New York City time on the Business Day immediately following the Distribution Date following such failure; or (B) any other failure by the Servicer to deposit in the Collection Account or Distribution Account any deposit required to be made under the terms of this Agreement, which failure described in this clause (B) continues unremedied for a period of three Business Days after the first date on which written notice of such failure is given to the Servicer; (ii) any failure on the part of the Servicer to observe or perform in any material respect any of its covenants or agreements under Sections 3.19, 3.20 or 3.28 hereof, subject to any cure period set forth in such sections; (iii) The failure by the Servicer duly to observe or perform, in any material respect, any other covenants, obligations or agreements of the Servicer as set forth in this Agreement, which failure continues unremedied for a period of 60 days, after the date (A) on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, the Securities Administrator or by any Holder of a Regular Certificate evidencing at least 25% of the Voting Interests or (B) actual knowledge of such failure by a Servicing Officer of the Servicer; or (iv) The entry against the Servicer of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 days; or (v) The Servicer shall voluntarily go into liquidation, consent to the appointment of a conservator or receiver or liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged, unbonded or unstayed for a period of 60 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or (vi) the Servicer becoming ineligible to service for both Fannie Mae and Freddie Mac (unless remedied within 90 days). (b) Then, and in each and every such case, so long as a Servicer Event of Termination shall not have been remedied within the applicable grace period, (x) with respect solely to clause (i)(A) above, if such Advance is not made by 1:00 p.m. New York City time on the Business Day immediately following the Distribution Date, the Trustee may terminate all of the rights and obligations of the Servicer under this Agreement and the Trustee shall assume upon such termination (or, pursuant to Section 4.07(e), prior to such termination in the case of the obligation to make Advances), pursuant to Section 7.02, the duties of a successor servicer (including, but not limited to, the duty to make Advances required pursuant to this Agreement) and (y) in the case of (i)(B), (ii), (iii), (iv) and (v) above, the Trustee shall, at the direction of the Holders of each Class of Regular Certificates evidencing Voting Interests aggregating not less than 66 2/3%, by notice then given in writing to the Servicer (and to the Trustee if given by Holders of Certificates), terminate all of the rights and obligations of the Servicer as servicer under this Agreement. Any such notice to the Servicer shall also be given to the Securities Administrator, each Rating Agency and the Depositor. On or after the receipt by the Servicer (and by the Trustee if such notice is given by the Holders) of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee pursuant to and under this Section or successor servicer appointed in connection with Section 7.02; and, without limitation, the Trustee or successor servicer is hereby authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of each Mortgage Loan and Related Documents or otherwise. The Servicer agrees to cooperate with the Trustee (or the applicable successor servicer) in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the delivery to the Trustee (or the applicable successor servicer) of all documents and records requested by it to enable it to assume the Servicer's functions under this Agreement within twenty Business Days subsequent to such notice, the transfer within two Business Days subsequent to such notice to the Trustee (or the applicable successor servicer) for the administration by it of all cash amounts that shall at the time be held by the Servicer and to be deposited by it in the Collection Account, the Distribution Account or any Escrow Account or that have been deposited by the Servicer in such accounts or thereafter received by the Servicer with respect to the Mortgage Loans or any REO Property received by the Servicer. All reasonable out-of-pocket costs and expenses (including attorneys' fees) incurred in connection with transferring the servicing to the successor servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section shall be paid by the predecessor servicer (or if the predecessor servicer is the Trustee, the initial servicer) upon presentation of reasonable documentation of such costs and expenses, and if such predecessor Servicer defaults in its obligation to pay such costs, such costs shall be paid by the successor Servicer or the Trustee (in which case the successor Servicer or the Trustee shall be entitled to reimbursement therefor from the assets of the Trust). Notwithstanding any termination of the activities of a Servicer hereunder, the Servicer shall be entitled to receive payment of all accrued and unpaid Servicing Fees and reimbursement for all outstanding Advances and Servicing Advances properly made prior to the date of termination. Section 7.02 Trustee to Act; Appointment of Successor. (a) Within 90 days of the time the Servicer (and the Trustee, if notice is sent by the Holders) receives a notice of termination pursuant to Section 7.01 or 6.04, the Trustee (or such other successor servicer as is approved in accordance with this Agreement) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof arising on and after its succession. As compensation therefor, the Trustee (or such other successor servicer) shall be entitled to such compensation as the Servicer would have been entitled to hereunder if no such notice of termination had been given. Notwithstanding the above, (i) if the Trustee is unwilling to act as successor servicer or (ii) if the Trustee is legally unable so to act, the Trustee shall appoint or petition a court of competent jurisdiction to appoint, any established housing and home finance institution, bank or other mortgage loan or home equity loan servicer having a net worth of not less than $50,000,000 as the successor to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder; provided, that the appointment of any such successor servicer will not result in the qualification, reduction or withdrawal of the ratings assigned to the Certificates or the ratings that are in effect by the Rating Agencies as evidenced by a letter to such effect from the Rating Agencies. Pending appointment of a successor to the Servicer hereunder, unless the Trustee is prohibited by law from so acting, the Trustee shall act in such capacity as hereinabove provided. In connection with such appointment and assumption, the successor shall be entitled to receive compensation out of payments on Mortgage Loans in an amount equal to the compensation which the Servicer would otherwise have received pursuant to Section 3.18 (or such other compensation as the Trustee and such successor shall agree, not to exceed the Servicing Fee). The successor servicer shall be entitled to withdraw from the Collection Account all costs and expenses associated with the transfer of the servicing to the successor servicer, including costs and expenses of the Trustee. The appointment of a successor servicer shall not affect any liability of the predecessor servicer which may have arisen under this Agreement prior to its termination as Servicer to pay any deductible under an insurance policy pursuant to Section 3.11 or to indemnify the parties indicated in Section 3.24 pursuant to the terms thereof, nor shall any successor servicer be liable for any acts or omissions of the predecessor servicer or for any breach by such servicer of any of its representations or warranties contained herein or in any related document or agreement. The Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. The predecessor Servicer and successor Servicer shall notify the Securities Administrator, Depositor and Trustee of any such appointment at least two Business Days prior to the effective date thereof and shall provide the Securities Administrator, the Depositor and the Trustee with all information required by the Depositor to comply with its reporting obligation under Item 6.02 of Form 8-K not later than the effective date of such appointment and the successor Servicer shall report such event on Form 8-K within four business days of the occurrence of such event. (b) Any successor, including the Trustee, to the Servicer as servicer shall during the term of its service as servicer continue to service and administer the Mortgage Loans for the benefit of Certificateholders, and maintain in force a policy or policies of insurance covering errors and omissions in the performance of its obligations as Servicer hereunder and a Fidelity Bond in respect of its officers, employees and agents to the same extent as the Servicer is so required pursuant to Section 3.12. Section 7.03 Waiver of Defaults. The Holders of Certificates entitled to at least 66 2/3% of the Voting Interests allocated to the Classes of Certificates affected by a Servicer Event of Termination may, on behalf of all Certificateholders, waive any events permitting removal of the Servicer as servicer pursuant to this Article VII, provided, however, that such Holders may not waive a default in making a required distribution on a Certificate without the consent of the Holder of such Certificate. Upon any waiver of a past default, such default shall cease to exist and any Servicer Event of Termination arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto except to the extent expressly so waived. Notice of any such waiver shall be given by the Trustee to the Securities Administrator and the Rating Agencies. Section 7.04 Notification to Certificateholders. (a) On any termination or appointment of a successor to the Servicer pursuant to this Article VII or Section 6.04, the Trustee shall give prompt written notice thereof to the Securities Administrator and the Certificateholders at their respective addresses appearing in the Certificate Register and each Rating Agency. (b) No later than 60 days after the occurrence of any event which constitutes or which, with notice or a lapse of time or both, would constitute a Servicer Event of Termination for five Business Days after a Responsible Officer of the Trustee becomes aware of the occurrence of such an event, the Trustee shall transmit by mail to the Securities Administrator and all Certificateholders notice of such occurrence unless such default or Servicer Event of Termination shall have been waived or cured. Such notice shall be given to the Rating Agencies promptly after any such occurrence. Section 7.05 Survival of Servicer Liabilities. Notwithstanding anything herein to the contrary, upon termination of the Servicer hereunder, any liabilities of the Servicer which accrued prior to such termination shall survive such termination. ARTICLE VIII THE TRUSTEE AND THE SECURITIES ADMINISTRATOR Section 8.01 Duties of Trustee and Securities Administrator. The Trustee, prior to the occurrence of a Servicer Event of Termination of which a Responsible Officer of the Trustee shall have actual knowledge and after the curing of all Servicer Events of Termination which may have occurred, and the Securities Administrator, each undertakes to perform such duties and only such duties as are specifically set forth in this Agreement as duties of the Trustee and the Securities Administrator, respectively. If a Servicer Event of Termination has occurred (which has not been cured), of which a Responsible Officer of the Trustee has knowledge, the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee and the Securities Administrator which are specifically required to be furnished pursuant to any provision of this Agreement, the Trustee and the Securities Administrator shall examine them to determine whether they conform to the requirements of this Agreement; provided, however, that neither the Trustee or the Securities Administrator shall be responsible for the accuracy or content of any resolution, certificate, statement, opinion, report, document, order or other instrument furnished by the Servicer, the Seller or the Depositor hereunder. If any such instrument is found not to conform in any material respect to the requirements of this Agreement, the Trustee shall notify the Certificateholders of such instrument in the event that the Trustee, after so requesting, does not receive a satisfactorily corrected instrument. No provision of this Agreement shall be construed to relieve the Trustee and the Securities Administrator from liability for its own negligent action, its own negligent failure to act or its own misconduct; provided, however, that: (i) prior to the occurrence of a Servicer Event of Termination, and after the curing of all such Servicer Events of Termination which may have occurred, the duties and obligations of the Trustee and the Securities Administrator shall be determined solely by the express provisions of this Agreement, neither the Trustee nor the Securities Administrator shall be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and the Securities Administrator and, in the absence of bad faith on the part of the Trustee or the Securities Administrator, the Trustee or the Securities Administrator, as the case may be, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee or the Securities Administrator and conforming to the requirements of this Agreement; (ii) neither the Trustee nor the Securities Administrator shall be personally liable for an error of judgment made in good faith by a Responsible Officer of the Trustee or the Securities Administrator, unless it shall be proved that the Trustee or the Securities Administrator, respectively, was negligent in ascertaining or investigating the facts related thereto; (iii) neither the Trustee nor the Securities Administrator shall be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Majority Certificateholders relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee or the Securities Administrator or exercising or omitting to exercise any trust or power conferred upon the Trustee or the Securities Administrator under this Agreement; and (iv) neither the Trustee nor the Securities Administrator shall be charged with knowledge of any failure by the Servicer to comply with the obligations of the Servicer referred to in clauses (i) and (ii) of Section 7.01(a) or any Servicer Event of Termination unless a Responsible Officer of the Trustee or the Securities Administrator obtains actual knowledge of such failure or the Trustee or the Securities Administrator receives written notice of such failure from the Servicer or the Majority Certificateholders. Neither the Trustee nor the Securities Administrator shall be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee or the Securities Administrator to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer under this Agreement, except during such time, if any, as the Securities Administrator shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of this Agreement. Section 8.02 Certain Matters Affecting the Trustee and the Securities Administrator. (a) Except as otherwise provided in Section 8.01: (i) the Trustee and the Securities Administrator may request and rely upon, and shall be protected in acting or refraining from acting upon, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) the Trustee and the Securities Administrator may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (iii) neither the Trustee nor the Securities Administrator shall be under any obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of the Certificateholders pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee or the Securities Administrator, as the case may be, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; the right of the Trustee or the Securities Administrator, as the case may be, to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and neither the Trustee nor the Securities Administrator shall be answerable for other than its negligence or willful misconduct in the performance of any such act; (iv) neither the Trustee nor the Securities Administrator shall be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (v) prior to the occurrence of a Servicer Event of Termination and after the curing of all Servicer Events of Termination which may have occurred, neither the Trustee nor the Securities Administrator shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or documents, unless requested in writing to do so by the Majority Certificateholders; provided, however, that if the payment within a reasonable time to the Trustee or the Securities Administrator of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee or the Securities Administrator, not reasonably assured to the Trustee or the Securities Administrator by the security afforded to it by the terms of this Agreement, the Trustee and the Securities Administrator may require reasonable indemnity against such cost, expense or liability as a condition to such proceeding. The reasonable expense of every such examination shall be paid by the Servicer or, if paid by the Trustee or the Securities Administrator, shall be reimbursed by the Servicer upon demand. Nothing in this clause (v) shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Mortgagors; (vi) neither the Trustee nor the Securities Administrator shall be accountable, have any liability or make any representation as to any acts or omissions hereunder of the Servicer until such time as the Trustee may be required to act as Servicer pursuant to Section 7.02; (vii) each of the Trustee and the Securities Administrator may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian and neither the Trustee nor the Securities Administrator shall be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed by it with due care; and (viii) the right of the Trustee or the Securities Administrator to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and neither the Trustee nor the Securities Administrator shall be answerable for other than its negligence or willful misconduct in the performance of such act. Section 8.03 Trustee and Securities Administrator Not Liable for Certificates or Mortgage Loans. The recitals contained herein and in the Certificates (other than the authentication of the Trustee on the Certificates) shall be taken as the statements of the Depositor, and neither the Trustee nor the Securities Administrator assumes any responsibility for the correctness of the same. Neither the Trustee nor the Securities Administrator makes any representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the signature and authentication of the Securities Administrator on the Certificates, in the case of the Securities Administrator) or of any Mortgage Loan or Related Document. Neither the Trustee nor the Securities Administrator shall be accountable for the use or application by the Servicer, or for the use or application of any funds paid to the Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the Collection Account by the Servicer. Neither the Trustee nor the Securities Administrator shall at any time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage or any Mortgage Loan, or the perfection and priority of any Mortgage or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust or its ability to generate the payments to be distributed to Certificateholders under this Agreement, including, without limitation: the existence, condition and ownership of any Mortgaged Property; the existence and enforceability of any hazard insurance thereon (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02); the validity of the assignment of any Mortgage Loan to the Trustee or of any intervening assignment; the completeness of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02); the compliance by the Depositor or the Servicer with any warranty or representation made under this Agreement or in any related document or the accuracy of any such warranty or representation (except, in the case of the Trustee, after receipt of notice of any non-compliance therewith or any breach thereof); any investment of monies by or at the direction of the Servicer or any loss resulting therefrom, it being understood that the Trustee shall remain responsible for any Trust property that it may hold in its individual capacity; the acts or omissions of any of the Servicer (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02), or any Mortgagor; any action of the Servicer (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02), taken in the name of the Trust; the failure of the Servicer to act or perform any duties required of it as agent of the Trust hereunder (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02); or any action by the Trustee or the Securities Administrator taken at the instruction of the Servicer (other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02); provided, however, that the foregoing shall not relieve the Trustee and the Securities Administrator of their obligation to perform their respective duties under this Agreement. The Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder. Section 8.04 Trustee and Securities Administrator May Own Certificates. Each of the Trustee and the Securities Administrator in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights as it would have if it were not Trustee or Securities Administrator and may transact any banking and trust business with the Servicer, the Depositor or their Affiliates. Section 8.05 Trustee and Securities Administrator Fees and Expenses. The Securities Administrator shall be entitled to the investment income on funds on deposit in the Distribution Account as set forth in Section 3.23. This shall constitute compensation to the Securities Administrator for its activities hereunder. The fees and expenses of the Trustee shall be paid in accordance with a side letter agreement between the Trustee and the Securities Administrator. The Trust shall reimburse the Trustee and the Securities Administrator for all reasonable expenses, disbursements and advances incurred or made by the Trustee or the Securities Administrator in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its gross negligence or bad faith or which is the responsibility of the Trustee or Securities Administrator hereunder or that does not constitute an "unanticipated expense" of a REMIC within the meaning of Treasury Regulation Section 1.860G(b)(3)(ii). In addition, the Trustee, the Securities Administrator and their respective officers, directors, employees and agents shall be indemnified by the Trust from, and held harmless against, any and all losses, liabilities, damages, claims or expenses incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense (i) that constitutes a specific liability of the Trustee or the Securities Administrator, as applicable, under this Agreement, (ii) incurred by reason of willful misfeasance, bad faith or gross negligence of the Trustee or Securities Administrator, as applicable, in the performance of its respective duties hereunder or by reason of the Trustee's or the Securities Administrator's, as the case may be, reckless disregard of its obligations and duties hereunder or (iii) that does not constitute an "unanticipated expense" of a REMIC within the meaning of Treasury Regulation Section 1.860G(b)(3)(ii). The Trustee and its officers, directors, employees and agents shall be indemnified by the Trust from, and held harmless against, any and all losses, liabilities, damages, claims or expenses, including reasonable attorneys' fees, that may be imposed on, incurred by or asserted against the Custodian in any way related to or arising out of the Custodial Agreement or any action taken or not taken by the Custodian and which the Trustee had paid to the Custodian pursuant to the terms of the Custodial Agreement, other than any loss, liability or expense (i) that constitutes a specific liability of the Custodian under the Custodial Agreement or (ii) or incurred by reason of willful misfeasance, bad faith or negligence of the Custodian in the performance of its duties under the Custodial Agreement or by reason of the Custodian's reckless disregard of its obligations under the Custodial Agreement. Subject to the provisions of this Article VIII, the Trustee and its officers, directors, employees and agents shall be indemnified by the Securities Administrator from, and held harmless against, any and all losses, liabilities, damages, claims or expenses incurred by the Trustee in connection with or arising out of the willful misfeasance, bad faith or negligence of the Securities Administrator in the performance of its duties under this Agreement or by reason of the Securities Administrator's reckless disregard of its obligations and duties under this Agreement. Subject to the provisions of this Article VIII, the Securities Administrator and its officers, directors, employees and agents shall be indemnified by the Trustee from, and held harmless against, any and all losses, liabilities, damages, claims or expenses incurred by the Securities Administrator in connection with or arising out of willful misfeasance, bad faith or negligence of the Trustee in the performance of its duties under this Agreement or by reason of the Trustee's reckless disregard of its obligations and duties under this Agreement. This Section shall survive termination of this Agreement or the resignation or removal of any Trustee or Securities Administrator hereunder. Section 8.06 Eligibility Requirements for Trustee and Securities Administrator. Each of the Trustee and the Securities Administrator shall at all times be (i) an entity duly organized and validly existing under the laws of the United States of America or any state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 or a member of a bank holding system, the aggregate combined capital surplus of which is at least $50,000,000, provided that its separate capital and surplus shall at all times be at least the amount specified in Section 310(a)(2) of the Trust Indenture Act of 1939, (ii) be subject to supervision or examination by federal or state authority and (iii) have a minimum long-term debt rating of [ ] by [ ] and [ ], and subject to supervision or examination by federal or state authority. The Trustee shall not be an affiliate of the Depositor or the Servicer. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 8.06, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The principal office of the Trustee and the Securities Administrator (other than the initial Trustee or Securities Administrator) shall be in a state with respect to which an Opinion of Counsel has been delivered to such Trustee or Securities Administrator at the time such Trustee or Securities Administrator is appointed Trustee or Securities Administrator, at such entity's expense, to the effect that the Trust will not be a taxable entity under the laws of such state. In case at any time the Trustee or Securities Administrator shall cease to be eligible in accordance with the provisions of this Section 8.06, the Trustee or Securities Administrator shall resign immediately in the manner and with the effect specified in Section 8.07. The Securities Administrator (i) may not be the Originator, the Servicer, the Depositor or an affiliate of the Depositor unless the Securities Administrator is in an institutional trust department, (ii) must be authorized to exercise corporate trust powers under the laws of its jurisdiction of organization, and (iii) must be rated at least [ ] by [ ] and [ ] by [ ] (or such other rating acceptable to [ ] and [ ] pursuant to a ratings confirmation). If no successor Securities Administrator shall have been appointed and shall have accepted appointment within 60 days after the Securities Administrator ceases to be the Securities Administrator pursuant to this Section 8.06, then the Trustee shall perform the duties of the Securities Administrator pursuant to this Agreement. The Trustee shall notify the Rating Agencies of any change of Securities Administrator. Section 8.07 Resignation or Removal of Trustee and Securities Administrator. The Trustee or the Securities Administrator may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Depositor, the Servicer and each Rating Agency. Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor Trustee or Securities Administrator, by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee or Securities Administrator, as applicable, and one copy to the successor Trustee or Securities Administrator, as the case may be. If no successor Trustee or Securities Administrator shall have been so appointed and having accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee or Securities Administrator may petition any court of competent jurisdiction for the appointment of a successor Trustee or Securities Administrator. If at any time the Trustee or the Securities Administrator shall cease to be eligible in accordance with the provisions of Section 8.06 and shall fail to resign after written request therefor by the Depositor, or if at any time the Trustee or the Securities Administrator shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or the Securities Administrator or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or the Securities Administrator or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Depositor or Servicer may remove the Trustee or the Securities Administrator, as the case may be. If the Depositor or the Servicer removes the Trustee or the Securities Administrator under the authority of the immediately preceding sentence, the Depositor shall promptly appoint a successor Trustee or Securities Administrator by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee or Securities Administrator so removed and one copy to the successor Trustee or Securities Administrator. In addition, if (a) the Trustee or Securities Administrator fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports required pursuant to Section 3.20 or (b) any Servicing Function Participant engaged by the Trustee or Securities Administrator fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports, the Servicer, may, after consultation with the Depositor, remove the Trustee or Securities Administrator and appoint a successor trustee or securities administrator by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee or Securities Administrator so removed and one copy to the successor trustee or securities administrator. The Majority Certificateholders may at any time remove the Trustee or the Securities Administrator by written instrument or instruments delivered to the Servicer, the Depositor, the Securities Administrator and the Trustee; the Depositor shall thereupon use its best efforts to appoint a successor Trustee or Securities Administrator, as the case may be in accordance with this Section. Any resignation or removal of the Trustee or the Securities Administrator and appointment of a successor Trustee or Securities Administrator pursuant to any of the provisions of this Section 8.07 shall not become effective until acceptance of appointment by the successor Trustee or Securities Administrator as provided in Section 8.08. Section 8.08 Successor Trustee and Successor Securities Administrator. Any successor Trustee or Securities Administrator appointed as provided in Section 8.07 shall execute, acknowledge and deliver to the Depositor, the Rating Agencies, the Servicer and to its predecessor Trustee or Securities Administrator an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee or Securities Administrator shall become effective, and such successor Trustee or Securities Administrator, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee or Securities Administrator. The Depositor, the Servicer and the predecessor Trustee or Securities Administrator shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Trustee or Securities Administrator all such rights, powers, duties and obligations. No successor Trustee or Securities Administrator shall accept appointment as provided in this Section 8.08 unless at the time of such acceptance such successor Trustee or Securities Administrator shall be eligible under the provisions of Section 8.06 and the appointment of such successor Trustee or Securities Administrator shall not result in a downgrading of the Regular Certificates by either Rating Agency, as evidenced by a letter from each Rating Agency. Upon acceptance of appointment by a successor Trustee or Securities Administrator as provided in this Section 8.08, the successor Trustee or Securities Administrator shall mail notice of the appointment of a successor Trustee or Securities Administrator hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register and to each Rating Agency. Section 8.09 Merger or Consolidation of Trustee or Securities Administrator. Any entity into which the Trustee or the Securities Administrator may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Trustee or the Securities Administrator shall be a party, or any entity succeeding to the business of the Trustee or the Securities Administrator, shall be the successor of the Trustee or Securities Administrator hereunder, provided such entity (i) shall be eligible under the provisions of Section 8.06 and 8.08, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding and (ii) shall notify the Depositor of any such merger, conversion or consolidation at least two Business Days prior to the effective date thereof and shall provide the Depositor and the Securities Administrator (if such entity is not replacing the Securities Administrator) with all information required by the Depositor to comply with its reporting obligations under Item 6.02 of Form 8-K not later than the effective date of such merger, conversion or consolidation and the Securities Administrator shall report such event on Form 8-K within four business days of the occurrence of such event. Section 8.10 Appointment of Co-Trustee or Separate Trustee. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust or any Mortgaged Property may at the time be located, the Depositor and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and trusts as the Servicer and the Trustee may consider necessary or desirable. Any such co-trustee or separate trustee shall be subject to the written approval of the Servicer. If the Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in the case a Servicer Event of Termination shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 8.06, and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall be required under Section 8.08. Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be held personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Securities Administrator and the Trustee, acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Depositor, the Securities Administrator, the Rating Agencies and the Servicer. Any separate trustee or co-trustee may, at any time, constitute the Trustee, its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor Trustee. Section 8.11 Limitation of Liability. The Certificates are executed by the Securities Administrator, not in its individual capacity but solely as Securities Administrator of the Trust, in the exercise of the powers and authority conferred and vested in it by this Agreement. Each of the undertakings and agreements made on the part of the Securities Administrator in the Certificates is made and intended not as a personal undertaking or agreement by the Securities Administrator but is made and intended for the purpose of binding only the Trust. Section 8.12 Trustee or Securities Administrator May Enforce Claims Without Possession of Certificates. (a) All rights of action and claims under this Agreement or the Certificates may be prosecuted and enforced by the Trustee or the Securities Administrator without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and such proceeding instituted by the Trustee or the Securities Administrator shall be brought in its own name or in its capacity as Trustee or Securities Administrator for the benefit of all Holders of such Certificates, subject to the provisions of this Agreement. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursement and advances of the Trustee or Securities Administrator, as the case may be, or their agents and counsel, be for the ratable benefit of the Certificateholders in respect of which such judgment has been recovered. (b) The Trustee shall afford the Depositor, the Servicer, the Securities Administrator and each Certificateholder upon reasonable notice during normal business hours, access to all records maintained by the Trustee in respect of its duties hereunder and access to officers of the Trustee responsible for performing such duties. The Trustee shall cooperate fully with the Servicer, the Depositor, the Securities Administrator and such Certificateholder and shall make available to the Servicer, the Depositor, the Securities Administrator and such Certificateholder for review and copying at the expense of the party requesting such copies, such books, documents or records as may be requested with respect to the Trustee's duties hereunder. The Depositor, the Servicer, the Securities Administrator and the Certificateholders shall not have any responsibility or liability for any action or failure to act by the Trustee and are not obligated to supervise the performance of the Trustee under this Agreement or otherwise. (c) The Securities Administrator shall afford the Depositor, the Trustee, the Servicer and each Certificateholder upon reasonable notice during normal business hours, access to all records maintained by the Securities Administrator in respect of its duties hereunder and access to officers of the Securities Administrator responsible for performing such duties. The Securities Administrator shall cooperate fully with the Servicer, the Trustee, the Depositor and such Certificateholder and shall make available to the Servicer, the Trustee, the Depositor and such Certificateholder for review and copying at the expense of the party requesting such copies, such books, documents or records as may be requested with respect to the Securities Administrator's duties hereunder. The Depositor, the Trustee, the Servicer and the Certificateholders shall not have any responsibility or liability for any action or failure to act by the Securities Administrator and are not obligated to supervise the performance of the Securities Administrator under this Agreement or otherwise. Section 8.13 Suits for Enforcement. In case a Servicer Event of Termination or other default by the Servicer hereunder shall occur and be continuing, the Trustee may proceed to protect and enforce its rights and the rights of the Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy, as the Trustee, being advised by counsel, and subject to the foregoing, shall deem most effectual to protect and enforce any of the rights of the Trustee and the Certificateholders. Section 8.14 Waiver of Bond Requirement. The Trustee shall be relieved of, and each Certificateholder hereby waives, any requirement of any jurisdiction in which the Trust, or any part thereof, may be located that the Trustee post a bond or other surety with any court, agency or body whatsoever. Section 8.15 Waiver of Inventory, Accounting and Appraisal Requirement. The Trustee shall be relieved of, and each Certificateholder hereby waives, any requirement of any jurisdiction in which the Trust, or any part thereof, may be located that the Trustee file any inventory, accounting or appraisal of the Trust with any court, agency or body at any time or in any manner whatsoever. Section 8.16 Appointment of Custodian. Wells Fargo Bank has been appointed Custodian by the Trustee pursuant to the Custodial Agreement. If such entity resigns or is terminated as Custodian pursuant to the Custodial Agreement, the Trustee shall serve as Custodian or the Trustee may, with the consent of the Depositor and the Servicer, appoint one or more Custodians to hold all or a portion of the Mortgage Files as agent for the Trustee, by entering into a custodial agreement in the form of the Custodial Agreement or otherwise in a form acceptable to the Depositor and the Servicer. Subject to this Article VIII, the Trustee agrees to comply with the terms of the Custodial Agreement and any such custodial agreement and to enforce the terms and provisions thereof against the Custodian for the benefit of the Certificateholders. Each Custodian will be a depositary institution subject to supervision by federal or state authority, shall have a combined capital and surplus of at least $10,000,000 and shall be qualified to do business in the jurisdiction in which it holds any Mortgage File and afforded the same protections hereunder as the Trustee. ARTICLE IX REMIC AND GRANTOR TRUST ADMINISTRATION Section 9.01 REMIC Administration. (a) The Trustee shall make or cause to be made REMIC elections for each of REMIC 1, REMIC 2 and REMIC A as set forth in the Preliminary Statement on Forms 1066 as prepared by the Securities Administrator or other appropriate federal tax or information return for the taxable year ending on the last day of the calendar year in which the Certificates are issued. The Securities Administrator shall prepare such Forms 1066 and any other appropriate federal tax or information return and deliver them to the Trustee on a timely basis for the Trustee's execution. The Trustee shall execute and the Securities Administrator shall file such forms. The regular interests and residual interest in each REMIC shall be as designated in the Preliminary Statement. (b) The Closing Date is hereby designated as the "Startup Day" of each REMIC within the meaning of section 860G(a)(9) of the Code. (c) The Securities Administrator shall pay any and all tax related expenses (not including taxes) of each REMIC, including but not limited to any professional fees or expenses related to audits or any administrative or judicial proceedings with respect to such REMIC that involve the Internal Revenue Service or state tax authorities, but only to the extent that (i) such expenses are ordinary or routine expenses, including expenses of a routine audit but not expenses of litigation (except as described in (ii)); or (ii) such expenses or liabilities (including taxes and penalties) are attributable to the negligence or willful misconduct of the Securities Administrator in fulfilling its duties hereunder. The Securities Administrator shall be entitled to reimbursement of expenses to the extent provided in clause (i) above from the Trust. (d) The Securities Administrator shall prepare or cause to be prepared, and cause the Trustee to sign and the Securities Administrator shall file or cause to be filed, each REMIC's federal and state tax and information returns as such REMIC's direct representative. The expenses of preparing and filing such returns shall be borne by the Securities Administrator. The Securities Administrator will apply for an Employer Identification Number from the Internal Revenue Service via a form SS-4 or any other acceptable method for all REMICs and other tax entities and will also file a Form 8811 with respect to all such REMICs with the Internal Revenue Service. (e) The Holder of a Residual Certificate shall be the "tax matters person" as defined in the REMIC Provisions (the "Tax Matters Person") with respect to REMIC 1 and REMIC 2, and the Securities Administrator is irrevocably designated as and shall act as attorney-in-fact and agent for such Tax Matters Person for REMIC 1 and REMIC 2. The Holder of the Class R-X Certificate shall be the Tax Matters Person with respect to REMIC A, and the Securities Administrator is irrevocably designated as and shall act as attorney-in-fact and agent for such Tax Matters Person for REMIC A. The Securities Administrator, as agent for the Tax Matters Person, shall perform, on behalf of each REMIC, all reporting and other tax compliance duties that are the responsibility of such REMIC under the Code, the REMIC Provisions, or other compliance guidance issued by the Internal Revenue Service or any state or local taxing authority. Among its other duties, if required by the Code, the REMIC Provisions, or other such guidance, the Securities Administrator, as agent for the Tax Matters Person, shall provide (i) to the Treasury or other governmental authority such information as is necessary for the application of any tax relating to the transfer of a Class R or Class R-X Certificate to any disqualified person or organization and (ii) to the Certificateholders such information or reports as are required by the Code or REMIC Provisions. (f) The Trustee, the Securities Administrator, the Servicer, and the Holders of Certificates shall take any action or cause any REMIC formed under this Agreement to take any action necessary to create or maintain the status of such REMIC as a REMIC under the REMIC Provisions and shall assist each other as necessary to create or maintain such status. None of the Trustee, the Servicer, the Securities Administrator or the Holder of the Class R or Class R-X Certificate shall take any action or cause any REMIC formed under this Agreement to take any action or fail to take (or fail to cause to be taken) any action that, under the REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger the status of such REMIC as a REMIC or (ii) result in the imposition of a tax upon such REMIC (including but not limited to the tax on prohibited transactions as defined in Code Section 860F(a)(2) and the tax on prohibited contributions set forth on Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event") unless the Securities Administrator, the Trustee and the Servicer have received an Opinion of Counsel (at the expense of the party seeking to take such action) to the effect that the contemplated action will not endanger such status or result in the imposition of such a tax. In addition, prior to taking any action with respect to any REMIC formed under this Agreement or the assets therein, or causing such REMIC to take any action, which is not expressly permitted under the terms of this Agreement, any Holder of the Class R or Class R-X Certificate will consult with the Securities Administrator, the Trustee and the Servicer, or their respective designees, in writing, with respect to whether such action could cause an Adverse REMIC Event to occur with respect to REMIC 1 or REMIC 2, as applicable, and no such Person shall take any such action or cause such REMIC to take any such action as to which the Securities Administrator, the Trustee or the Servicer has advised it in writing that an Adverse REMIC Event could occur. (g) The Holder of a Class R Certificate shall pay when due any and all taxes imposed on REMIC 1 or REMIC 2 by federal or state governmental authorities, but only from amounts, if any, distributable thereon. The Holder of the Class R-X Certificate shall pay when due any and all taxes imposed on REMIC A by federal or state governmental authorities, but only from amounts, if any, distributable thereon. To the extent that such REMIC taxes are not paid by the Class R or Class R-X Certificateholder, as applicable, the Securities Administrator shall pay any remaining REMIC taxes out of future amounts otherwise distributable to the Holder of the Class R or Class R-X Certificate, as applicable, or, if no such amounts are available, out of other amounts held in the Distribution Account, and shall reduce amounts otherwise payable to Holders of the REMIC Regular Interests or the Certificates, as the case may be. (h) The Securities Administrator, shall, for federal income tax purposes, maintain or cause to be maintained books and records with respect to each REMIC formed under this Agreement on a calendar year and on an accrual basis. (i) No additional contributions of assets shall be made to any REMIC created hereunder, except as expressly provided in this Agreement with respect to Eligible Substitute Mortgage Loans. (j) None of the Trustee, the Securities Administrator or the Servicer shall enter into any arrangement by which any REMIC created hereunder will receive a fee or other compensation for services. (k) On or before April 15 of each calendar year, beginning in 200 , the Securities Administrator shall deliver to each Rating Agency an Officer's Certificate stating the Securities Administrator's compliance with those provisions of this Section 9.01 applicable to it. (l) The Securities Administrator shall treat (i) the rights of the Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) to receive Cap Carryover Amounts as a right in interest rate cap contracts written by the Class CE Certificateholders in favor of the Holders of the Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) and (ii) the rights of the Class CE Certificates under the Yield Maintenance Agreement in accordance with the terms thereof and shall assign such rights for federal tax return and information reporting a value of zero. The Securities Administrator shall account for such as property held separate and apart from the regular interests it holds in each of the REMICs created hereunder. The provisions of this paragraph are intended to satisfy the requirements of Treasury Regulations Section 1.860G-2(i) for the treatment of property rights coupled with regular interests to be separately respected and shall be interpreted consistent with such regulation. On each Distribution Date, to the extent the Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) receive interest in excess of their Pass-Through Rate, such interest will be treated as distributed to the Class CE Certificates, together with any amount deposited in the Reserve Account in respect of the Yield Maintenance Agreement, and then paid to the respective Classes of Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) pursuant to the related interest rate cap agreement. Section 9.02 Prohibited Transactions and Activities. (a) None of the Depositor, the Servicer, the Securities Administrator or the Trustee shall sell, dispose of, or substitute for any of the Mortgage Loans, except in a disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the Trust Fund, (iii) the termination of any REMIC pursuant to Article X of this Agreement, (iv) a substitution pursuant to Article II of this Agreement, (v) a repurchase of Mortgage Loans pursuant to Article II of this Agreement or (vi) an optional purchase by the Depositor pursuant to Section 3.16 of this Agreement, nor acquire any assets for any REMIC constituting part of the Trust Fund, nor sell or dispose of any investments in the Distribution Account for gain, nor accept any contributions to any REMIC constituting part of the Trust Fund after the Closing Date, unless it has received an Opinion of Counsel (at the expense of the party causing such sale, disposition, or substitution) that such disposition, acquisition, substitution, or acceptance will not (a) affect adversely the status of such REMIC as a REMIC or of the interests therein other than the Class R or Class R-X Certificates, as applicable, and as the regular interests therein, (b) affect the distribution of interest or principal on the Certificates, (c) result in the encumbrance of the assets transferred or assigned to the Trust Fund (except pursuant to the provisions of this Agreement) or (d) cause such REMIC to be subject to a tax on prohibited transactions or prohibited contributions pursuant to the REMIC Provisions. (b) No Eligible Investments will be sold or disposed of at a gain prior to maturity unless the Securities Administrator has received an Opinion of Counsel or other evidence satisfactory to it that such sale or disposition will not cause the Trust Fund to be subject to the tax on "prohibited transactions" imposed by Code Section 860F(a)(1), otherwise subject the Trust Fund to tax, or cause the Trust Fund to fail to qualify as a REMIC while any Certificates are outstanding. Section 9.03 Indemnification with Respect to Certain Taxes and Loss of REMIC Status. In the event that any REMIC formed hereunder fails to qualify as a REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a result of a prohibited transaction or prohibited contribution under the REMIC Provisions due to the negligent performance by the Servicer, the Trustee or the Securities Administrator of its duties and obligations set forth herein, such person shall indemnify the Holder of the Class R or Class R-X Certificate, as applicable, against any and all losses, claims, damages, liabilities or expenses ("Losses") resulting from such negligence; provided, however, that no such person shall be liable for any such Losses attributable to the action or inaction of the Trustee, the Depositor or the Holder of the Class R or Class R-X Certificate, as applicable, nor for any such Losses resulting from misinformation provided by the Holder of the Class R or Class R-X Certificate, as applicable, on which such person has relied. The foregoing shall not be deemed to limit or restrict the rights and remedies of the Holder of the Class R or Class R-X Certificate, as applicable, now or hereafter existing at law or in equity. Notwithstanding the foregoing, however, in no event shall the Servicer have any liability (1) for any action or omission that is taken in accordance with and in compliance with the express terms of, or which is expressly permitted by the terms of, this Agreement, (2) for any Losses other than arising out of a negligent performance by the Servicer, the Trustee or the Securities Administrator of its duties and obligations set forth herein, and (3) for any special or consequential damages to Certificateholders (in addition to payment of principal and interest on the Certificates). Section 9.04 REO Property. (a) Subject to compliance with applicable laws and regulations as shall at any time be in force, and notwithstanding any other provision of this Agreement, the Servicer, acting on behalf of the Trust hereunder, shall not rent, lease, or otherwise earn income on behalf of any REMIC created hereunder with respect to any REO Property which might cause such REO Property to fail to qualify as "foreclosure" property within the meaning of section 860G(a)(8) of the Code or result in the receipt by any REMIC created hereunder of any "income from non-permitted assets" within the meaning of section 860F(a)(2) of the Code or any "net income from foreclosure property" which is subject to tax under the REMIC Provisions unless the Servicer has advised the Trustee in writing to the effect that, under the REMIC Provisions, such action would not adversely affect the status of any REMIC created hereunder as a REMIC and any income generated for such REMIC by the REO Property would not result in the imposition of a tax upon such REMIC. (b) The Servicer shall make reasonable efforts to sell any REO Property for its fair market value. In any event, however, the Servicer shall dispose of any REO Property before the close of the third calendar year beginning after the year of its acquisition by the Trust Fund unless the Servicer has received a grant of extension from the Internal Revenue Service to the effect that, under the REMIC Provisions and any relevant proposed legislation and under applicable state law, any REMIC constituting part of the Trust Fund may hold REO Property for a longer period without adversely affecting its REMIC status or causing the imposition of a Federal or state tax upon any REMIC constituting part of the Trust Fund. If the Servicer has received such an extension, then the Servicer shall continue to attempt to sell the REO Property for its fair market value as determined in good faith by the Servicer for such longer period as such extension permits (the "Extended Period"). If the Servicer has not received such an extension and the Servicer is unable to sell the REO Property by September 30th of the third year after its acquisition by the Trust Fund or if the Servicer has received such an extension, and the Servicer is unable to sell the REO Property within the period ending three months before the close of the Extended Period, the Servicer shall, before the end of the applicable period, (i) purchase such REO Property at a price equal to the REO Property's fair market value as determined in good faith by the Servicer or (ii) auction the REO Property to the highest bidder (which may be the Servicer) in an auction reasonably designed to produce a fair price prior to the expiration of the applicable period. Section 9.05 Grantor Trust Administration. The parties intend that the portions of the Trust Fund consisting of the right of the Class P Certificates to receive Prepayment Penalties, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts, the right of the Certificates (other than the Class CE, Class P, Class R and Class R-X Certificates) to receive Cap Carryover Amounts, the Reserve Account and the right of the Class CE Certificates to receive Yield Maintenance Agreement Payments subject to the obligation of the Class CE Certificates to pay Cap Carryover Amounts, shall be treated as a "grantor trust" under the Code, and the provisions hereof shall be interpreted consistently with this intention. In furtherance of such intention, the Securities Administrator shall furnish or cause to be furnished (i) the Holders of the Class P Certificates, (ii) to the Holders of the Regular Certificates (other than the Class CE Certificates) and (iii) to the Holders of the Class CE Certificates and shall file or cause to be filed with the Internal Revenue Service together with Form 1041 or such other form as may be applicable, their allocable shares of income and expenses with respect to the property held by the Grantor Trust, at the time or times and in the manner required by the Code. ARTICLE X TERMINATION Section 10.01 Termination. (a) The respective obligations and responsibilities of the Servicer, the Depositor, the Trustee, the Securities Administrator and the Certificate Registrar created hereby (other than the obligation of the Securities Administrator to make certain payments to Certificateholders after the final Distribution Date and the obligation of the Securities Administrator to send certain notices as hereinafter set forth) shall terminate upon notice to the Trustee and the Securities Administrator upon the earliest of (i) the Distribution Date on which the Principal Balance of each Class of Certificates has been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, and (iii) the optional purchase by the Majority Class CE Certificateholder, or if there is no Majority Class CE Certificateholder, the Depositor of the Mortgage Loans as described below. Notwithstanding the foregoing, in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date hereof. The Majority Class CE Certificateholder or Depositor may, at its option, terminate the Trust Fund and retire the Certificates on the next succeeding Distribution Date upon which the aggregate current Pool Balance is less than 10% of the Pool Balance as of the Cut-off Date by purchasing all of the outstanding (i) Mortgage Loans in the Trust Fund at a price equal to the sum of the outstanding unpaid principal balance of the Mortgage Loans and except to the extent previously advanced by the Servicer, accrued and unpaid interest thereon at the weighted average of the Mortgage Interest Rates through the end of the Collection Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances and any unpaid Servicing Fees allocable to such Mortgage Loans and (ii) REO Properties in the Trust Fund at a price equal to their fair market value as determined in good faith by the Servicer (the "Termination Price"). If the Majority Class CE Certificateholder (or, if there is no Majority Class CE Certificateholder, the Depositor or an affiliate of the Depositor) is subject to regulation by the OCC, the FDIC, the Federal Reserve or the Office of Thrift Supervision, however, the option may not be exercised unless the aggregate fair market value of the Mortgage Loans and REO Properties is greater than or equal to the Termination Price. Notwithstanding the foregoing, no party may exercise this optional purchase right unless any Reimbursement Amount owed to the Trust pursuant to Section 2.03 hereof has been paid. Any such purchase shall be accomplished by delivery by the party exercising the optional purchase right on the Determination Date before such Distribution Date of the Termination Price to the Securities Administrator for deposit into the Distribution Account as part of Available Funds. (b) Notice of any termination, specifying the Distribution Date (which shall be a date that would otherwise be a Distribution Date) upon which the Certificateholders may surrender their Certificates to the Securities Administrator for payment of the final distribution and cancellation, shall be given promptly by the Securities Administrator upon the Securities Administrator receiving notice of such date from the Depositor by letter to the Certificateholders and the Securities Administrator mailed not earlier than the 15th day of the month preceding the month of such final distribution and not later than the 15th day of the month of such final distribution specifying (1) the Distribution Date upon which final distribution of the Certificates will be made upon presentation and surrender of such Certificates at the office or agency of the Securities Administrator therein designated, (2) the amount of any such final distribution and (3) that the Record Date otherwise applicable to such Distribution Date is not applicable, distributions being made only upon presentation and surrender of the Certificates at the office or agency of the Securities Administrator therein specified. Not less than five (5) Business Days prior to such Determination Date relating to such Distribution Date, the Securities Administrator shall notify the Depositor of the amount of any unpaid Reimbursement Amount owed to the Trust. (c) Upon presentation and surrender of the Certificates, the Securities Administrator shall cause to be distributed to the Holders of the Certificates on the Distribution Date for such final distribution, in proportion to the Percentage Interests of their respective Class and to the extent that funds are available for such purpose, an amount equal to the amount required to be distributed to such Holders in accordance with the provisions of Sections 4.01 and 4.02 for such Distribution Date. (d) In the event that all Certificateholders shall not surrender their Certificates for final payment and cancellation on or before such final Distribution Date, the Securities Administrator shall promptly following such date cause all funds in the Distribution Account not distributed in final distribution to Certificateholders to be withdrawn therefrom and credited to the remaining Certificateholders by depositing such funds in a separate escrow account for the benefit of such Certificateholders, and the Servicer shall give a second written notice to the remaining Certificateholders, to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within nine months after the second notice all the Certificates shall not have been surrendered for cancellation, the Residual Certificateholders shall be entitled to all unclaimed funds and other assets which remain subject hereto (except with respect to the Class CE and Class P Certificates) and the Securities Administrator upon transfer of such funds shall be discharged of any responsibility for such funds, and all other Certificateholders shall look to the Residual Certificateholders for payment. Section 10.02 Additional Termination Requirements. (a) In the event that the Majority Class CE Certificateholder or the Depositor exercises its purchase option as provided in Section 10.01, the Trust shall be terminated in accordance with the following additional requirements, unless the Securities Administrator shall have been furnished with an Opinion of Counsel to the effect that the failure of the Trust to comply with the requirements of this Section will not (i) result in the imposition of taxes on "prohibited transactions" of the Trust as defined in Section 860F of the Code or (ii) cause any REMIC constituting part of the Trust Fund to fail to qualify as a REMIC at any time that any Certificates (other than the Class P Certificates) are outstanding: (i) The Securities Administrator shall designate a date within 90 days prior to the final Distribution Date as the date of adoption of plans of complete liquidation of each of REMIC 1, REMIC 2 and REMIC A and shall specify such date in the final federal income tax return of each REMIC; (ii) After the date of adoption of such plans of complete liquidation and at or prior to the final Distribution Date, the Securities Administrator shall sell all of the assets of the Trust to the Majority Class CE Certificateholder or Depositor, as applicable, for cash; and (iii) At the time of the making of the final payment on the Certificates, the Securities Administrator shall distribute or credit, or cause to be distributed or credited in the order of priority set forth in Section 4.02 and then (A) to the Class R Certificateholder, all cash on hand in respect of REMIC 1 and REMIC 2 and (B) to the Class R-X Certificateholder, all cash on hand in respect of REMIC A after such payment (other than cash retained to meet claims) and the Trust shall terminate at such time. (b) By their acceptance of Certificates, the Holders thereof hereby agree to appoint the Securities Administrator as their attorney in fact to: (i) designate such date of adoption of plans of complete liquidation and (ii) to take such other action in connection therewith as may be reasonably required to carry out such plans of complete liquidation all in accordance with the terms hereof. ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.01 Amendment. This Agreement may be amended from time to time by the Depositor, the Servicer, the Securities Administrator and the Trustee without the consent of the Certificateholders (i) to cure any ambiguity or mistake, (ii) to correct, modify or supplement any provision herein which may be inconsistent with any other provision herein or the Prospectus or the Private Placement Memorandum, (iii) to make any other provisions with respect to matters or questions arising under this Agreement, which are not materially inconsistent with the provisions of this Agreement, (iv) to conform the obligations of the parties under this Agreement, or to add obligations of the parties to this Agreement, if necessary, to comply with the requirements of Regulation AB or (v) to comply with any requirements imposed by the Code; provided, however, that any such action listed in clause (iii) above shall not adversely affect in any material respect the interests of any Certificateholder, as evidenced by (a) delivery to the Depositor, the Servicer, the Securities Administrator and the Trustee of written notification from each Rating Agency that provides, at the request of the Depositor, a rating for each outstanding Class of Certificates (other than the Class CE, Class P and Residual Certificates) to the effect that such amendment will not cause such Rating Agency to lower or withdrawal of the then current rating of such outstanding Classes of Certificates with respect to which it is a Rating Agency, or (b) an Opinion of Counsel delivered to the Servicer, the Securities Administrator and the Trustee. In addition, this Agreement may be amended from time to time by the Depositor, the Servicer, the Securities Administrator and the Trustee, with the consent of the Majority Certificateholders for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates; provided, however, that no such amendment or waiver shall (x) reduce in any manner the amount of, or delay the timing of, payments on the Certificates which are required to be made on any Certificate without the consent of the Holder of such Certificate, (y) adversely affect in any material respect the interests of the Holders of any Class of Certificates in a manner other than as described in clause (x) above, without the consent of the Holders of Certificates of such Class aggregating at least 66 2/3% of the Voting Interests evidenced by such Class, or (z) reduce the percentage of Voting Interests required by clause (y) above without the consent of the Holders of all Certificates of such Class then outstanding. Upon approval of an amendment, a copy of such amendment shall be sent to the Rating Agencies. Prior to the execution of any amendment to this Agreement, the Trustee and the Securities Administrator will not consent to any amendment of the applicable Agreement unless it shall first have received an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. Each of the Securities Administrator and Trustee may, but shall not be obligated to, enter into any such amendment which affects the Trustee's or Securities Administrator's own rights, duties or immunities under this Agreement. Notwithstanding any provision of this Agreement to the contrary, neither the Securities Administrator, nor the Trustee shall consent to any amendment to this Agreement unless it shall have first received an Opinion of Counsel, delivered by (and at the expense of) the Person seeking such Amendment, to the effect that such amendment will not result in the imposition of a tax on any REMIC constituting part of the Trust Fund pursuant to the REMIC Provisions or cause any REMIC constituting part of the Trust Fund to fail to qualify as a REMIC or the Grantor Trust to fail to qualify as a grantor trust at any time that any Certificates are outstanding and that the amendment is being made in accordance with the terms hereof. Promptly after the execution of any such amendment the Securities Administrator shall furnish, at the expense of the Person that requested the amendment if such Person is the Servicer (but in no event at the expense of the Trustee), otherwise at the expense of the Trust, a copy of such amendment and the Opinion of Counsel referred to in the immediately preceding paragraph to the Servicer and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 11.01 to approve the particular form of any proposed amendment; instead it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Securities Administrator may prescribe. Section 11.02 Recordation of Agreement; Counterparts. To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any or all of the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Servicer at the expense of the Trust, but only upon direction of Certificateholders, accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Certificateholders. For the purpose of facilitating the recordation of this Agreement as herein provided and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. Section 11.03 Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not (i) operate to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust, or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Except as expressly provided for herein, no Certificateholder shall have any right to vote or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth or contained in the terms of the Certificates be construed so as to constitute the Certificateholders from time to time as partners or members of an association; nor shall any Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of default and of the continuance thereof, as herein provided, and unless also the Holders of Certificates entitled to at least 25% of the Voting Interests shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding. It is understood and intended, and expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, which priority or preference is not otherwise provided for herein, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section 11.03 each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 11.04 Governing Law; Jurisdiction. This Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. With respect to any claim arising out of this Agreement, each party irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in The City of New York, and each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such courts, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party, provided that service of process has been made by any lawful means. Section 11.05 Notices. All directions, demands and notices hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class mail, postage prepaid, or by express delivery service, or, in the case of the Securities Administrator, sent by facsimile, to (a) in the case of the Trustee, HSBC Bank USA, National Association, 452 Fifth Avenue, New York, New York 10018, Attention: WFHET 200 - , or such other address as may hereafter be furnished to the Depositor, the Securities Administrator and the Servicer in writing by the Trustee, (b) in the case of the Depositor, Wells Fargo Asset Securities Corporation, 7430 New Technology Way, Frederick, Maryland 21703, Attention: Vice President, Structured Finance, or such other address as may be furnished to the Servicer, the Securities Administrator and the Trustee in writing by the Depositor, (c) in the case of the Servicer, Wells Fargo Bank, N.A., 405 Southwest 5th Street, Des Moines, Iowa 50309, Attention: Senior Vice President, Servicing, and Wells Fargo Bank, N.A., 1 Home Campus, Des Moines, Iowa 50328 0001, Attention: John B. Brown, MAC X2401 042, or such other address as may be hereafter furnished to the Depositor, the Trustee and the Securities Administrator by the Servicer in writing and (d) in the case of the Securities Administrator, Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: Client Manager-WFHET, Series 200 - , or such other address as may be hereafter furnished to the Depositor, the Trustee and the Servicer by the Securities Administrator in writing or by facsimile at (410) 715-2380. Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Notice of any Servicer Event of Termination shall be given by telecopy and by certified mail. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have duly been given when mailed, whether or not the Certificateholder receives such notice. A copy of any notice required to be telecopied hereunder shall also be mailed to the appropriate party in the manner set forth above. Section 11.06 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof. Section 11.07 Article and Section References. All article and section references used in this Agreement, unless otherwise provided, are to articles and sections in this Agreement. Section 11.08 Notice to the Rating Agencies. (a) Each of the Trustee and the Securities Administrator shall be obligated to use its reasonable efforts promptly to provide notice to the Rating Agencies with respect to each of the following of which a Responsible Officer of the Trustee or the Securities Administrator, as the case may be, has actual knowledge: (i) any material change or amendment to this Agreement; (ii) the occurrence of any Servicer Event of Termination that has not been cured or waived; (iii) the resignation or termination of the Servicer, the Securities Administrator or the Trustee; (iv) the final payment to Holders of the Certificates of any Class; (v) any change in the location of any Account; and (vi) if the Trustee is acting as successor servicer pursuant to Section 7.02 hereof, any event that would result in the inability of the Trustee to make Advances. In addition, the Securities Administrator shall promptly furnish to each Rating Agency copies of the following: (A) each annual statement as to compliance described in Section 3.19 hereof; (B) each annual independent public accountants' servicing report described in Section 3.20 hereof; and (C) each notice delivered pursuant to Section 7.01(a) hereof which relates to the fact that the Servicer has not made an Advance. Any such notice pursuant to this Section 11.08 shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by first class mail, postage prepaid, or by express delivery service to: [ ] [ ], Attention: [ ]; and [ ], [ ], Attention: [ ]. Section 11.09 Further Assurances. Notwithstanding any other provision of this Agreement, neither the Regular Certificateholders, the Securities Administrator nor the Trustee shall have any obligation to consent to any amendment or modification of this Agreement unless they have been provided reasonable security or indemnity against their out-of-pocket expenses (including reasonable attorneys' fees) to be incurred in connection therewith. Section 11.10 Benefits of Agreement. Nothing in this Agreement or in the Certificates, expressed or implied, shall give to any Person, other than the Certificateholders and the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement, except that the Custodian is an express third party beneficiary of this Agreement for purposes of Section 8.05. Section 11.11 Acts of Certificateholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by the Certificateholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by agent duly appointed in writing; and such action shall become effective when such instrument or instruments are delivered to the Trustee, the Securities Administrator and the Servicer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and conclusive in favor of the Securities Administrator, the Trustee and the Trust, if made in the manner provided in this Section 11.11. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) Any request, demand, authorization, direction, notice, consent, waiver or other action by any Certificateholder shall bind every future Holder of such Certificate and the Holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee, the Securities Administrator or the Trust in reliance thereon, whether or not notation of such action is made upon such Certificate. Section 11.12 Regulation AB Compliance; Intent of Parties; Reasonableness. The parties hereto acknowledge that interpretations of the requirements of Regulation AB may change over time, whether due to interpretive guidance provided by the Commission or its staff, consensus among participants in the asset-backed securities markets, advice of counsel, or otherwise, and agree to comply with requests made by the Depositor or the Securities Administrator in good faith for delivery of information under these provisions on the basis of evolving interpretations of Regulation AB. In connection with the Trust, the parties hereto shall cooperate fully with the Securities Administrator and the Depositor to deliver to the Securities Administrator and/or the Depositor, any and all statements, reports, certifications, records and any other information available to such party and reasonably necessary in the good faith determination of the Depositor or the Securities Administrator to permit the Depositor or the Securities Administrator to comply with the provisions of Regulation AB, together with such disclosures reasonably believed by the Depositor or the Securities Administrator to be necessary in order to effect such compliance. IN WITNESS WHEREOF, the Depositor, the Servicer, the Securities Administrator and the Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. WELLS FARGO ASSET SECURITIES CORPORATION, as Depositor By:____________________________________ Name: Title: WELLS FARGO BANK, N.A., as Servicer By:____________________________________ Name: Title: WELLS FARGO BANK, N.A., as Securities Administrator By:____________________________________ Name: Title: HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee By:____________________________________ Name: Title: STATE OF ) ) ss.: COUNTY OF ) On the ____ day _____ of before me, a notary public in and for said State, personally appeared ____________, known to me to be a ____________of Wells Fargo Asset Securities Corporation, a Delaware corporation, that executed the within instrument, and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public STATE OF ) ) ss.: COUNTY OF ) On the ___ day _____ of before me, a notary public in and for said State, personally appeared ____________, known to me to be a ________________ of Wells Fargo Bank, N.A., a national banking association, that executed the within instrument, and also known to me to be the person who executed it on behalf of said association, and acknowledged to me that such corporation executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public STATE OF ) ) ss.: COUNTY OF ) On the day of before me, a notary public in and for said State, personally appeared _______________, known to me to be a _______ of Wells Fargo Bank, N.A., a national banking association, that executed the within instrument, and also known to me to be the person who executed it on behalf of said association, and acknowledged to me that such association executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public STATE OF ) ) ss.: COUNTY OF ) On the ___ day of before me _____, a notary public in and for said State, personally appeared _______________, known to me to be a ____________ of HSBC Bank USA, National Association, a national banking association, that executed the within instrument, and also known to me to be the person who executed it on behalf of said association, and acknowledged to me that such association executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public EXHIBIT A-1 [FORM OF THE CLASS AI-1A CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS AI-1A evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class AI-1A Original Principal Balance of the Class AI-1A Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class AI-1A Certificates) in that certain beneficial ownership interest evidenced by all the Class AI-1A Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class AI-1A Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class AI-1A Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class AI-1A Certificates for each Distribution Date will be the lesser of (i) the Class AI-1A Formula Rate and (ii) the Group I Cap. Interest will accrue on the Class AI-1A Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class AI-1A Certificates. The Class AI-1A Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Securities Administrator and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Securities Administrator and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT A-2 [FORM OF THE CLASS AI-1B CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS AI-1B evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class AI-1B Original Principal Balance of the Class AI-1B Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class AI-1B Certificates) in that certain beneficial ownership interest evidenced by all the Class AI-1B Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class AI-1B Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class AI-1B Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class AI-1B Certificates for each Distribution Date will be the lesser of (i) the Class AI-1B Formula Rate and (ii) the Group I Cap. Interest will accrue on the Class AI-1B Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class AI-1B Certificates. The Class AI-1B Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Securities Administrator and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Securities Administrator and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT A-3 [FORM OF THE CLASS AII-1 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS AII-1 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class AII-1 Original Principal Balance of the Class AII-1 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class AII-1 Certificates) in that certain beneficial ownership interest evidenced by all the Class AII-1 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class AII-1 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class AII-1 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class AII-1 Certificates for each Distribution Date will be the lesser of (i) the Class AII-1 Formula Rate and (ii) the Group II Cap. Interest will accrue on the Class AII-1 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class AII-1 Certificates. The Class AII-1 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Securities Administrator and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT A-4 [FORM OF THE CLASS AII-2 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS AII-2 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class AII-2 Original Principal Balance of the Class AII-2 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class AII-2 Certificates) in that certain beneficial ownership interest evidenced by all the Class AII-2 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class AII-2 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class AII-2 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class AII-2 Certificates for each Distribution Date will be the lesser of (i) the Class AII-2 Formula Rate and (ii) the Group II Cap. Interest will accrue on the Class AII-2 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class AII-2 Certificates. The Class AII-2 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Securities Administrator and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT A-5 [FORM OF THE CLASS AII-3 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS AII-3 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class AII-3 Original Principal Balance of the Class AII-3 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class AII-3 Certificates) in that certain beneficial ownership interest evidenced by all the Class AII-3 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class AII-3 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class AII-3 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class AII-3 Certificates for each Distribution Date will be the lesser of (i) the Class AII-3 Formula Rate and (ii) the Group II Cap. Interest will accrue on the Class AII-3 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class AII-3 Certificates. The Class AII-3 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Securities Administrator and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-1 [FORM OF CLASS M-1 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-1 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-1 Original Principal Balance of the Class M-1 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-1 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-1 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-1 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-1 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-1 Certificates for each Distribution Date will be the lesser of (i) the Class M-1 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-1 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-1 Certificates. The Class M-1 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Securities Administrator and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-2 [FORM OF CLASS M-2 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR AND CLASS M-1 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-2 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-2 Original Principal Balance of the Class M-2 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-2 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-2 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-2 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-2 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-2 Certificates for each Distribution Date will be the lesser of (i) the Class M-2 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-2 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-2 Certificates. The Class M-2 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior Certificates and Class M-1 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-3 [FORM OF CLASS M-3 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1 AND CLASS M-2 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-3 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-3 Original Principal Balance of the Class M-3 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-3 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-3 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-3 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-3 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-3 Certificates for each Distribution Date will be the lesser of (i) the Class M-3 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-3 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-3 Certificates. The Class M-3 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1 and Class M-2 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. [FORM OF CLASS M-4 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2 AND CLASS M-3 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-4 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-4 Original Principal Balance of the Class M-4 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-4 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-4 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-4 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-4 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-4 Certificates for each Distribution Date will be the lesser of (i) the Class M-4 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-4 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-4 Certificates. The Class M-4 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2 and Class M-3 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-5 [FORM OF CLASS M-5 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3 AND CLASS M-4 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-5 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-5 Original Principal Balance of the Class M-5 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-5 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-5 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-5 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-5 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-5 Certificates for each Distribution Date will be the lesser of (i) the Class M-5 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-5 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-5 Certificates. The Class M-5 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3 and Class M-4 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-6 [FORM OF CLASS M-6 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3, CLASS M-4 AND CLASS M-5 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-6 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-6 Original Principal Balance of the Class M-6 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-6 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-6 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-6 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-6 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-6 Certificates for each Distribution Date will be the lesser of (i) the Class M-6 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-6 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-6 Certificates. The Class M-6 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-7 [FORM OF CLASS M-7 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3, CLASS M-4, CLASS M-5 AND CLASS M-6 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-7 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-7 Original Principal Balance of the Class M-7 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-7 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-7 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-7 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-7 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-7 Certificates for each Distribution Date will be the lesser of (i) the Class M-7 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-7 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-7 Certificates. The Class M-7 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-8 [FORM OF CLASS M-8 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3, CLASS M-4, CLASS M-5, CLASS M-6 AND CLASS M-7 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-8 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-8 Original Principal Balance of the Class M-8 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-8 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-8 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-8 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-8 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-8 Certificates for each Distribution Date will be the lesser of (i) the Class M-8 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-8 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-8 Certificates. The Class M-8 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class M-7 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-9 [FORM OF CLASS M-9 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3, CLASS M-4, CLASS M-5, CLASS M-6, CLASS M-7 AND CLASS M-8 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-9 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-9 Original Principal Balance of the Class M-9 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-9 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-9 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-9 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-9 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-9 Certificates for each Distribution Date will be the lesser of (i) the Class M-9 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-9 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-9 Certificates. The Class M-9 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7 and Class M-8 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-10 [FORM OF CLASS M-10 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, CLASS M-1, CLASS M-2, CLASS M-3, CLASS M-4, CLASS M-5, CLASS M-6, CLASS M-7, CLASS M-8 AND CLASS M-9 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-10 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-10 Original Principal Balance of the Class M-10 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-10 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-10 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-10 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this CertifiScate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-10 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-10 Certificates for each Distribution Date will be the lesser of (i) the Class M-10 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-10 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-10 Certificates. The Class M-10 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class M-9 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-11 [FORM OF CLASS M-11 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, 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 AND CLASS M-10 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-11 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-11 Original Principal Balance of the Class M-11 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-11 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-11 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-11 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-11 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-11 Certificates for each Distribution Date will be the lesser of (i) the Class M-11 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-11 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-11 Certificates. The Class M-11 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, 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 and Class M-10 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-12 [FORM OF CLASS M-12 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, 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 AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. THE INITIAL PURCHASER IN THIS CERTIFICATE, AND EACH SUBSEQUENT PURCHASER OF THIS CERTIFICATE, BY PURCHASING THIS CERTIFICATE OR AN INTEREST HEREIN, IS DEEMED TO HAVE AGREED TO COMPLY WITH CERTAIN TRANSFER REQUIREMENTS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. UNDER CURRENT LAW THE PURCHASE AND HOLDING OF THIS CERTIFICATE BY OR ON BEHALF OF ANY EMPLOYEE BENEFIT PLAN OR ARRANGEMENT, INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT, SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), THE CODE OR ANY FEDERAL, STATE OR LOCAL LAW ("SIMILAR LAW") WHICH IS SIMILAR TO ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), MAY RESULT IN "PROHIBITED TRANSACTIONS" WITHIN THE MEANING OF ERISA, THE CODE OR SIMILAR LAW. TRANSFER OF THIS CERTIFICATE WILL NOT BE MADE UNLESS THE TRANSFEREE DELIVERS TO THE CERTIFICATE REGISTRAR AND DEPOSITOR EITHER (I) A REPRESENTATION LETTER, IN FORM AND SUBSTANCE SATISFACTORY TO THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, STATING THAT (A) IT IS NOT, AND IS NOT ACTING ON BEHALF OF, ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH PURCHASE OR (B) IF IT IS AN INSURANCE COMPANY, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE IS AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995)), THERE IS NO PLAN WITH RESPECT TO WHICH THE AMOUNT OF SUCH GENERAL ACCOUNT'S RESERVES AND LIABILITIES FOR THE CONTRACT(S) HELD BY OR ON BEHALF OF SUCH PLAN AND ALL OTHER PLANS MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATE THEREOF AS DEFINED IN SECTION V(A)(1) OF PTE 95-60) OR BY THE SAME EMPLOYEE ORGANIZATION EXCEEDS 10% OF THE TOTAL OF ALL RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT (AS SUCH AMOUNTS ARE DETERMINED UNDER SECTION I(A) OF PTE 95-60) AT THE DATE OF ACQUISITION AND ALL PLANS THAT HAVE AN INTEREST IN SUCH GENERAL ACCOUNT ARE PLANS TO WHICH PTE 95-60 APPLIES, OR (II) AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE BY OR ON BEHALF OF SUCH PLAN WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF ERISA, SECTION 4975 OF THE CODE OR SIMILAR LAW AND WILL NOT SUBJECT THE DEPOSITOR, THE SERVICER, THE SECURITIES ADMINISTRATOR, THE TRUSTEE OR THE CERTIFICATE REGISTRAR TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND SERVICING AGREEMENT. EACH PERSON WHO ACQUIRES THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO HAVE MADE THE REPRESENTATIONS REQUIRED BY THE REPRESENTATION LETTER REFERRED TO IN THE PRECEDING SENTENCE, UNLESS SUCH PERSON SHALL HAVE PROVIDED SUCH REPRESENTATION LETTER OR THE OPINION OF COUNSEL REFERRED TO IN THE PRECEDING SENTENCE TO THE CERTIFICATE REGISTRAR AND DEPOSITOR. THE POOLING AND SERVICING AGREEMENT PROVIDES THAT ANY ATTEMPTED OR PURPORTED TRANSFER IN VIOLATION OF THESE TRANSFER RESTRICTIONS WILL BE NULL AND VOID AND WILL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-12 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-12 Original Principal Balance of the Class M-12 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-12 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-12 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-12 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-12 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-12 Certificates for each Distribution Date will be the lesser of (i) the Class M-12 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-12 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-12 Certificates. The Class M-12 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, 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 as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement (as to which, so long as this Certificate is a Book-Entry Certificate, the representations and agreements made therein will be deemed to have been made by the prospective transferor and/or the prospective transferee, as applicable). None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT B-13 [FORM OF CLASS M-13 CERTIFICATE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR, 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 AND CLASS M-12 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. THE INITIAL PURCHASER IN THIS CERTIFICATE, AND EACH SUBSEQUENT PURCHASER OF THIS CERTIFICATE, BY PURCHASING THIS CERTIFICATE OR AN INTEREST HEREIN, IS DEEMED TO HAVE AGREED TO COMPLY WITH CERTAIN TRANSFER REQUIREMENTS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. UNDER CURRENT LAW THE PURCHASE AND HOLDING OF THIS CERTIFICATE BY OR ON BEHALF OF ANY EMPLOYEE BENEFIT PLAN OR ARRANGEMENT, INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT, SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), THE CODE OR ANY FEDERAL, STATE OR LOCAL LAW ("SIMILAR LAW") WHICH IS SIMILAR TO ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), MAY RESULT IN "PROHIBITED TRANSACTIONS" WITHIN THE MEANING OF ERISA, THE CODE OR SIMILAR LAW. TRANSFER OF THIS CERTIFICATE WILL NOT BE MADE UNLESS THE TRANSFEREE DELIVERS TO THE CERTIFICATE REGISTRAR AND DEPOSITOR EITHER (I) A REPRESENTATION LETTER, IN FORM AND SUBSTANCE SATISFACTORY TO THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, STATING THAT (A) IT IS NOT, AND IS NOT ACTING ON BEHALF OF, ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH PURCHASE OR (B) IF IT IS AN INSURANCE COMPANY, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE IS AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995)), THERE IS NO PLAN WITH RESPECT TO WHICH THE AMOUNT OF SUCH GENERAL ACCOUNT'S RESERVES AND LIABILITIES FOR THE CONTRACT(S) HELD BY OR ON BEHALF OF SUCH PLAN AND ALL OTHER PLANS MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATE THEREOF AS DEFINED IN SECTION V(A)(1) OF PTE 95-60) OR BY THE SAME EMPLOYEE ORGANIZATION EXCEEDS 10% OF THE TOTAL OF ALL RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT (AS SUCH AMOUNTS ARE DETERMINED UNDER SECTION I(A) OF PTE 95-60) AT THE DATE OF ACQUISITION AND ALL PLANS THAT HAVE AN INTEREST IN SUCH GENERAL ACCOUNT ARE PLANS TO WHICH PTE 95-60 APPLIES, OR (II) AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE BY OR ON BEHALF OF SUCH PLAN WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF ERISA, SECTION 4975 OF THE CODE OR SIMILAR LAW AND WILL NOT SUBJECT THE DEPOSITOR, THE SERVICER, THE SECURITIES ADMINISTRATOR, THE TRUSTEE OR THE CERTIFICATE REGISTRAR TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND SERVICING AGREEMENT. EACH PERSON WHO ACQUIRES THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO HAVE MADE THE REPRESENTATIONS REQUIRED BY THE REPRESENTATION LETTER REFERRED TO IN THE PRECEDING SENTENCE, UNLESS SUCH PERSON SHALL HAVE PROVIDED SUCH REPRESENTATION LETTER OR THE OPINION OF COUNSEL REFERRED TO IN THE PRECEDING SENTENCE TO THE CERTIFICATE REGISTRAR AND DEPOSITOR. THE POOLING AND SERVICING AGREEMENT PROVIDES THAT ANY ATTEMPTED OR PURPORTED TRANSFER IN VIOLATION OF THESE TRANSFER RESTRICTIONS WILL BE NULL AND VOID AND WILL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS M-13 evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class M-13 Original Principal Balance of the Class M-13 Certificates as of the Closing Date: $[ ] Pass-Through Rate: Floating Initial Principal Balance: $ Date of Pooling and Servicing Agreement: [ ] Servicer: Wells Fargo Bank, N.A. First Distribution Date: [ ] Trustee: HSBC Bank USA, National Association No. Closing Date: [ ] CUSIP: [ ] DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _________________ is the registered owner of a Percentage Interest (obtained by dividing the Initial Principal Balance of this Certificate by the Original Principal Balance of the Class M-13 Certificates) in that certain beneficial ownership interest evidenced by all the Class M-13 Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class M-13 Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class M-13 Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. The Pass-Through Rate for the Class M-13 Certificates for each Distribution Date will be the lesser of (i) the Class M-13 Formula Rate and (ii) the Pool Cap. Interest will accrue on the Class M-13 Certificates during each Interest Accrual Period at the Pass-Through Rate. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing a Percentage Interest in the Class M-13 Certificates. The Class M-13 Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. This certificate is subordinated in right of payment to the Senior, 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 and Class M-12 Certificates as described in the Agreement. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement (as to which, so long as this Certificate is a Book-Entry Certificate, the representations and agreements made therein will be deemed to have been made by the prospective transferor and/or the prospective transferee, as applicable). None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT C-1 [FORM OF CLASS CE CERTIFICATES] FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A DIRECT OR INDIRECT BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER PROPERTY. THIS CLASS CE CERTIFICATE IS SUBORDINATE TO THE SENIOR CERTIFICATES AND THE CLASS M CERTIFICATES OF THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT. THIS CLASS CE CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS DESCRIBED IN THE AGREEMENT. THIS CLASS CE CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, SECTION 4975 OF THE CODE OR ANY MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW WILL BE REGISTERED. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS CE evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class CE Servicer: Wells Fargo Bank, N.A. Date of Pooling and Servicing Trustee: HSBC Bank USA, National Agreement: [ ] Association First Distribution Date: Closing Date: [ ] [ ] No. Percentage Interest: 100% THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that __________________________________ is the registered owner of the Percentage Interest set forth above in that certain beneficial ownership interest evidenced by all the Class CE Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class CE Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class CE Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing the Percentage Interest specified on the face hereof. The Class CE Certificates are limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement. None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Securities Administrator and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assume no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT C-2 [FORM OF CLASS P CERTIFICATE] THIS CLASS P CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. THIS CLASS P CERTIFICATE IS ONLY ENTITLED TO PREPAYMENT PENALTIES ON THE MORTGAGE LOANS, ORIGINATOR PREPAYMENT PENALTY PAYMENT AMOUNTS AND SERVICER PREPAYMENT PENALTY PAYMENT AMOUNTS, ALL AS MORE SPECIFICALLY DESCRIBED IN THE AGREEMENT. NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, SECTION 4975 OF THE CODE OR ANY MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW WILL BE REGISTERED. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS P evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class P Servicer: Wells Fargo Bank, N.A. Date of Pooling and Servicing Trustee: HSBC Bank USA, National Agreement: [ ] Association First Distribution Date: Closing Date: [ ] [ ] No. Percentage Interest: 100% THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that __________________________________ is the registered owner of the Percentage Interest set forth above in that certain beneficial ownership interest evidenced by all the Class P Certificates in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from Prepayment Penalties, Servicer Prepayment Penalty Payment Amounts and Originator Prepayment Penalty Payment Amounts in the Distribution Account in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to the Holders of Class P Certificates on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class P Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing the Percentage Interest specified on the face hereof. The Class P Certificates are limited in right of payment to Prepayment Penalties received on the Mortgage Loans, Originator Prepayment Penalty Payment Amounts and Servicer Prepayment Penalty Payment Amounts, all as more specifically set forth in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Trustee, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement. None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar or any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory Date of authentication: ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT C-3 [FORM OF CLASS R CERTIFICATE] THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS THE "RESIDUAL INTEREST" IN TWO SEPARATE "REAL ESTATE MORTGAGE INVESTMENT CONDUITS," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE SENIOR CERTIFICATES AND THE CLASS M CERTIFICATES OF THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT. THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS DESCRIBED IN THE AGREEMENT. THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, SECTION 4975 OF THE CODE OR ANY MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW WILL BE REGISTERED. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE MADE ONLY IF (1) THE PROPOSED TRANSFEREE PROVIDES AN AFFIDAVIT TO THE CERTIFICATE REGISTRAR THAT SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), (D) AN AGENT OF A DISQUALIFIED ORGANIZATION OR (E) ANY PERSON THAT CAUSES INCOME FROM THIS CERTIFICATE TO BE ATTRIBUTABLE TO A FOREIGN PERMANENT ESTABLISHMENT OR FIXED BASE, WITHIN THE MEANING OF AN APPLICABLE INCOME TAX TREATY, OF THAT PERSON OR ANY OTHER U.S. PERSON AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THE CLASS R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CLASS R CERTIFICATE. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS R evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class R Servicer: Wells Fargo Bank, N.A. Date of Pooling and Servicing Trustee: HSBC Bank USA, National Agreement: [ ] Association First Distribution Date: Closing Date: [ ] [ ] No. Percentage Interest: 100% THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________________ is the registered owner of 100% Percentage Interest in that certain beneficial ownership interest evidenced by the Class R Certificate in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in the amount required to be distributed to the Holder of Class R Certificate on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class R Certificate, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing the Percentage Interest specified on the face hereof. The Class R Certificate is limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies appointed by the Trustee as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Securities Administrator, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement. None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. The Holder of this Certificate, by its acceptance hereof, shall be deemed for all purposes to have consented to the provisions of Section 5.02 of the Agreement and to any amendment of the Agreement deemed necessary by counsel of the Depositor to ensure that the transfer of this Certificate to any Person other than a Permitted Transferee or any other Person will not cause the Trust to cease to qualify as three separate REMICs or cause the imposition of a tax upon the Trust. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Date of authentication: Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT C-4 [FORM OF CLASS R-X CERTIFICATE] THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON. FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS THE "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). THIS CLASS R-X CERTIFICATE IS SUBORDINATE TO THE SENIOR CERTIFICATES AND THE CLASS M CERTIFICATES OF THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT. THIS CLASS R-X CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS DESCRIBED IN THE AGREEMENT. THIS CLASS R-X CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, SECTION 4975 OF THE CODE OR ANY MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW WILL BE REGISTERED. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R-X CERTIFICATE MAY BE MADE ONLY IF (1) THE PROPOSED TRANSFEREE PROVIDES AN AFFIDAVIT TO THE CERTIFICATE REGISTRAR THAT SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), (D) AN AGENT OF A DISQUALIFIED ORGANIZATION OR (E) ANY PERSON THAT CAUSES INCOME FROM THIS CERTIFICATE TO BE ATTRIBUTABLE TO A FOREIGN PERMANENT ESTABLISHMENT OR FIXED BASE, WITHIN THE MEANING OF AN APPLICABLE INCOME TAX TREATY, OF THAT PERSON OR ANY OTHER U.S. PERSON AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R-X CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THE CLASS R-X CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CLASS R-X CERTIFICATE. WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET-BACKED CERTIFICATES SERIES 20 - , CLASS R-X evidencing a beneficial ownership interest in a Trust Fund consisting primarily of a pool of conventional fixed-rate and adjustable-rate one- to four-family first lien mortgage loans formed and sold by WELLS FARGO ASSET SECURITIES CORPORATION Series 20 - , Class R-X Servicer: Wells Fargo Bank, N.A. Date of Pooling and Servicing Trustee: HSBC Bank USA, National Agreement: [ ] Association First Distribution Date: Closing Date: [ ] [ ] No. Percentage Interest: 100% THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN WELLS FARGO ASSET SECURITIES CORPORATION, THE SERVICER, THE TRUSTEE, THE SECURITIES ADMINISTRATOR OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER ENTITY. This certifies that _______________________ is the registered owner of 100% Percentage Interest in that certain beneficial ownership interest evidenced by the Class R-X Certificate in the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as specified above (the "Agreement"), among Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement), the Servicer, the Securities Administrator and the Trustee, a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Pursuant to the terms of the Agreement, distributions will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (a "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered on the Record Date, from funds in the Distribution Account in the amount required to be distributed to the Holder of Class R-X Certificate on such Distribution Date pursuant to the Agreement. All distributions to the Holder of this Certificate under the Agreement will be made or caused to be made by or on behalf of the Securities Administrator by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Certificate Registrar in writing at least seven Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of Class R-X Certificate, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Certificate Registrar may deduct a reasonable wire transfer fee from any payment made by wire transfer. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Securities Administrator of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Securities Administrator for that purpose as provided in the Agreement. This Certificate is one of a duly authorized issue of Certificates designated as Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates of the Series specified on the face hereof (herein called the "Certificates") and representing the Percentage Interest specified on the face hereof. The Class R-X Certificate is limited in right of payment to certain collections and recoveries respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. As provided in the Agreement, withdrawals from the Collection Account and the Distribution Account may be made from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement of advances made, or certain expenses incurred, with respect to the Mortgage Loans. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor, the Servicer, the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Servicer, the Securities Administrator and the Trustee with the consent of the Holders of Certificates entitled to the Voting Interests identified in the Agreement. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies appointed by the Trustee as provided in the Agreement, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to the Securities Administrator, the Securities Administrator and the Certificate Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable in fully registered form only without coupons in Percentage Interests representing denominations as specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. No transfer of this Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of this Certificate is to be made without registration under the 1933 Act, then the Certificate Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) certain certificate(s) required pursuant to Section 5.02 of the Agreement. None of the Depositor, the Certificate Registrar or the Trustee is obligated to register or qualify the Class of Certificates specified on the face hereof under the 1933 Act or any other securities law or to take any action not otherwise required under the Agreement to permit the transfer of such Certificates without registration or qualification. Any transferor desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. The Holder of this Certificate, by its acceptance hereof, shall be deemed for all purposes to have consented to the provisions of Section 5.02 of the Agreement and to any amendment of the Agreement deemed necessary by counsel of the Depositor to ensure that the transfer of this Certificate to any Person other than a Permitted Transferee or any other Person will not cause the Trust to cease to qualify as three separate REMICs or cause the imposition of a tax upon the Trust. No service charge will be made for any such registration of transfer or exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor, the Servicer, the Trustee, the Securities Administrator and the Certificate Registrar and any agent of the Depositor, the Servicer, the Trustee, the Securities Administrator or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Depositor, the Servicer, the Trustee, the Securities Administrator, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement and the Trust Fund created thereby shall terminate upon payment to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Fund, and (ii) the purchase by the party designated in the Agreement at a price determined as provided in the Agreement from the Trust Fund of all Mortgage Loans and all property acquired in respect of such Mortgage Loans. The Agreement permits, but does not require, the party designated in the Agreement to purchase from the Trust Fund all Mortgage Loans and all property acquired in respect of any Mortgage Loan at a price determined as provided in the Agreement. The exercise of such right will effect early retirement of the Certificates; however, such right to purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of purchase being less than 10% of the Pool Balance as of the Cut-off Date. The recitals contained herein shall be taken as statements of the Depositor and the Securities Administrator assumes no responsibility for their correctness. Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Securities Administrator has caused this Certificate to be duly executed. Dated: Wells Fargo Bank, N.A., as Securities Administrator By:______________________________________ Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Agreement. Date of authentication: Wells Fargo Bank, N.A., as Certificate Registrar By:______________________________________ Authorized Signatory ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act JT TEN - as joint tenants with right ________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name, address including postal zip code, and Taxpayer Identification Number of assignee) _____________________________________________ a Percentage Interest equal to ____% evidenced by the within asset-backed Certificate and hereby authorize(s) the registration of transfer of such interest to assignee on the Certificate Register of the Trust Fund. I (we) further direct the Certificate Registrar to issue a new Certificate of a like Percentage Interest and Class to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ Dated: ________________________________________ Signature by or on behalf of assignor ________________________________________ Signature Guaranteed DISTRIBUTION INSTRUCTIONS The assignee should include the following for purposes of distribution: Distributions shall be made, by wire transfer or otherwise, in immediately available funds to _________________________________________________ ________________________________________________________________________________ for the account of _______________________________, account number ____________, or, if mailed by check, to ____________________________________________________. Applicable statements should be mailed to ______________________________________ This information is provided by _______________________________________________, the assignee named above, or ________________________________________, as its agent. EXHIBIT D Addresses for Requesting Mortgage Loan Schedule In the case of the Depositor: Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Attention: Vice President - Structured Finance In the case of the Securities Administrator: Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attention: Client Manager - WFHET 200 - EXHIBIT E FORM OF REQUEST FOR RELEASE OF DOCUMENTS To: [Custodian] Re: Pooling and Servicing Agreement dated as of [ ] among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as servicer, Wells Fargo Bank, National Association, as securities administrator and HSBC Bank USA, National Association, as trustee All capitalized terms used herein shall have the means ascribed to them in the Pooling and Servicing Agreement (the "Agreement") referenced above. In connection with the administration of the Mortgage Loans held by you as Custodian pursuant to the Agreement, we request the release, and hereby acknowledge receipt, of the Custodian's Mortgage File for the Mortgage Loan described below, for the reason indicated. Mortgage Loan Number: Mortgagor Name, Address & Zip Code: Reason for Requesting Documents (check one): _____ 1. Mortgage Paid in Full _____ 2. Foreclosure _____ 3. Substitution _____ 4. Other Liquidation (Repurchases, etc.) _____ 5. Nonliquidation Reason:______________________ By:__________________________ (authorized signer) Issuer:______________________ Address:_____________________ _____________________________ Date:________________________ Custodian [________________________________] Please acknowledge the execution of the above request by your signature and date below: _________________________________ ____________________________ Signature Date Documents returned to Custodian: _________________________________ ____________________________ Custodian Date EXHIBIT F-1 FORM OF CUSTODIAN'S INITIAL CERTIFICATION Date Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Wells Fargo Bank, N.A. 7430 New Technology Way Frederick, Maryland 21703 HSBC Bank USA, National Association 452 Fifth Avenue New York, New York 10018 Attention: WFHET 20 - Re: Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of [ ] among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as servicer, Wells Fargo Bank, National Association, as securities administrator and HSBC Bank USA, National Association, as trustee, with respect to Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - Ladies and Gentlemen: In accordance with Section 2.02 of the Pooling and Servicing Agreement, the undersigned, as Custodian, hereby certifies that it has received original Mortgage Note (as described in Section 2.01(a)(i)) relating to each Mortgage Loan listed on Exhibits D-1 and D-2 to the Pooling and Servicing Agreement, subject to any exceptions noted on Schedule I hereto. The Custodian has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the Pooling and Servicing Agreement in connection with this initial certification. The Custodian makes no representations as to: (i) the validity, legality, sufficiency, enforceability, recordability or genuineness of any of the documents contained in each Mortgage File or any of the Mortgage Loans identified in the Mortgage Loan Schedule or (ii) the collectibility, insurability, effectiveness or suitability of any such Mortgage Loan. Capitalized words and phrases used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Pooling and Servicing Agreement. This Certificate is subject in all respects to the terms of Section 2.02 of the Pooling and Servicing Agreement and the Pooling and Servicing Agreement sections cross-referenced therein. WELLS FARGO BANK, N.A. as Custodian By:______________________________________ Name: Title: EXHIBIT F-2 FORM OF CUSTODIAN'S FINAL CERTIFICATION [Date] Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Wells Fargo Bank, N.A. 7430 New Technology Way Frederick, Maryland 21703 HSBC Bank USA, National Association 452 Fifth Avenue New York, New York 10018 Attention: WFHET 20 - Re: Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of [ ] among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as servicer, Wells Fargo Bank, National Association, as securities administrator and HSBC Bank USA, National Association, as trustee, with respect to Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - Ladies and Gentlemen: In accordance with Section 2.02 of the Pooling and Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedules attached as Exhibits D-1 and D-2 to the Pooling and Servicing Agreement (other than any Mortgage Loan paid in full or listed on Schedule I hereto), it has received the applicable documents listed in Section 2.01(a) of the Pooling and Servicing Agreement. The undersigned hereby certifies that as to each Mortgage Loan identified on the Mortgage Loan Schedules, other than any Mortgage Loan listed on Schedule I hereto, it has reviewed the applicable documents listed in Section 2.01 of the Pooling and Servicing Agreement and has determined that each such document appears to have been executed and appear regular on their face, and that such documents relate to the Mortgage Loans identified in the Mortgage Loan Schedule based on a comparison of the Mortgage Loan identifying number, Mortgagor name and street address. The Custodian has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the Pooling and Servicing Agreement in connection with this final certification. The Custodian makes no representations as to: (i) the validity, legality, sufficiency, enforceability, recordability or genuineness of any of the documents contained in each Mortgage File or any of the Mortgage Loans identified in the Mortgage Loan Schedule or (ii) the collectibility, insurability, effectiveness or suitability of any such Mortgage Loan. Capitalized words and phrases used herein shall have the respective meanings assigned to them in the Pooling and Servicing Agreement. This Certificate is qualified in all respects by the terms of said Pooling and Servicing Agreement. WELLS FARGO BANK, N.A., as Custodian By:______________________________________ Name: Title: EXHIBIT G FORM OF MORTGAGE LOAN PURCHASE AGREEMENT EXHIBIT H FORM OF LOST NOTE AFFIDAVIT Personally appeared before me the undersigned authority to administer oaths, ______________________ who first being duly sworn deposes and says: Deponent is ______________________ of ______________________________, successor by merger to _________________________________________ ("Seller") and who has personal knowledge of the facts set out in this affidavit. On ___________________, _________________________ did execute and deliver a promissory note in the principal amount of $__________. That said note has been misplaced or lost through causes unknown and is presently lost and unavailable after diligent search has been made. Seller's records show that an amount of principal and interest on said note is still presently outstanding, due, and unpaid, and Seller is still owner and holder in due course of said lost note. Seller executes this Affidavit for the purpose of inducing [_______________________________], as trustee on behalf of Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - , to accept the transfer of the above described loan from Seller. Seller agrees to indemnify and hold harmless [____________________________] and Wells Fargo Asset Securities Corporation for any losses incurred by such parties resulting from the above described promissory note has been lost or misplaced. By:___________________________________ ______________________________________ STATE OF ) ) SS: COUNTY OF ) On this ____ day of _______ 20__, before me, a Notary Public, in and for said County and State, appeared ________________________, who acknowledged the extension of the foregoing and who, having been duly sworn, states that any representations therein contained are true. Witness my hand and Notarial Seal this ____ day of _______ 20__. __________________________________ __________________________________ My commission expires_____________. EXHIBIT I FORM OF ERISA REPRESENTATION LETTER Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21405 Attention: Client Manager - WFHET, Series 20 - Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Re: Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - Ladies and Gentlemen: 1. [The undersigned is the ______________________ of (the "Transferee") a [corporation duly organized] and existing under the laws of __________, on behalf of which he makes this affidavit.] [The undersigned, ___________________, is the transferee (the "Transferee").] 2. The Transferee hereby acknowledges that under the terms of the Pooling and Servicing Agreement (the "Agreement") among Wells Fargo Asset Securities Corporation, as depositor (the "Depositor"), Wells Fargo Bank, N.A., as servicer, Wells Fargo Bank, National Association, as securities administrator, and HSBC Bank USA, National Association, as trustee (the "Trustee"), no transfer of the ERISA-Restricted Certificates shall be permitted to be made to any person unless the Depositor and the Certificate Registrar (as defined in the Agreement) have received a certificate from such transferee in the form hereof. 3. The Transferee either (x) (i) is not an employee benefit plan subject to Section 406 or Section 407 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") or any materially similar provisions of applicable federal, state or local law ("Similar Law"), the Trustee of any such plan or other than (except in the case of the Class CE, Class P, Class R or Class R-X Certificates) an insurance company that represents (or is deemed to represent) that (i) the source of funds used to purchase the Certificates is an "insurance company general account" (as such term is defined in Section V(e) of PTE 95-60, 60 Fed. Reg. 35925 (July 12, 1995)), (ii) that there is no Plan with respect to which the amount of such general account's reserves and liabilities for the contract(s) held by or on behalf of such Plan and all other Plans maintained by the same employer (or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee organization exceeds 10% of the total of all reserves and liabilities of such general account (as such amounts are determined under Section I(a) of PTE 95-60) at the date of acquisition and (iii) all Plans that have an interest in such general account are Plans to which PTE 95-60 applies, or (y) (except in the case of the Class CE, Class P, Class R or Class R-X Certificates) shall deliver to the Certificate Registrar and the Depositor an opinion of counsel (a "Benefit Plan Opinion") satisfactory to the Certificate Registrar, and upon which the Certificate Registrar and the Depositor shall be entitled to rely, to the effect that the purchase or holding of such Certificate by the Transferee will not constitute or otherwise result in a non-exempt prohibited transaction within the meaning of ERISA or Section 4975 of the Code (or similar provisions of Similar Law) and will not subject the Trustee, the Securities Administrator or the Depositor to any obligation in addition to those undertaken by such entities in the Pooling and Servicing Agreement, which opinion of counsel shall not be an expense of the Trustee, the Securities Administrator, the Depositor or the Certificate Registrar. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement. IN WITNESS WHEREOF, the Transferee has executed this certificate. _________________________________________ [Transferee] By:______________________________________ Name: Title: EXHIBIT J FORM OF RULE 144A INVESTMENT LETTER [DATE] Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21405 Attention: Client Manager - WFHET, Series 20 - Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Re: Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - Ladies and Gentlemen: In connection with our acquisition of the Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - (the "Certificates"), we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we have had the opportunity to ask questions of and receive answers from the Depositor concerning the purchase of the Certificates and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Certificates, (c) we have not, nor has anyone acting on our behalf offered, transferred, pledged, sold or otherwise disposed of the Certificates, any interest in the Certificates or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Certificates, any interest in the Certificates or any other similar security from, or otherwise approached or negotiated with respect to the Certificates, any interest in the Certificates or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Certificates under the Securities Act or that would render the disposition of the Certificates a violation of Section 5 of the Securities Act or require registration pursuant thereto, nor will act, nor has authorized or will authorize any person to act, in such manner with respect to the Certificates, (d) we are a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act and have completed either of the forms of certification to that effect attached hereto as Annex 1 or Annex 2. We are aware that the sale to us is being made in reliance on Rule 144A. We are acquiring the Certificates for our own account or for resale pursuant to Rule 144A and further, understand that such Certificates may be resold, pledged or transferred only (i) to a person reasonably believed to be a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the Securities Act. Very truly yours, [NAME OF TRANSFEREE] By:______________________________________ Authorized Officer ANNEX 1 TO EXHIBIT J QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees Other Than Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: i. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer. ii. In connection with purchases by the Buyer, the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or invested on a discretionary basis $ (1) in securities (except for the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A and (ii) the Buyer satisfies the criteria in the category marked below. ___ Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. ___ Bank. The Buyer (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ___ Savings and Loan. The Buyer (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over any such institutions or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ___ Broker-dealer. The Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. - ------------------------- (1) Buyer must own and/or invest on a discretionary basis at least $__________ in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $__________ in securities. ___ Insurance Company. The Buyer is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a State, territory or the District of Columbia. ___ State or Local Plan. The Buyer is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees. ___ ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974. ___ Investment Advisor. The Buyer is an investment advisor registered under the Investment Advisors Act of 1940. ___ Small Business Investment Company. Buyer is a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958. ___ Business Development Company. Buyer is a business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940. iii. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank deposit notes and certificates of deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities owned but subject to a repurchase agreement and (viii) currency, interest rate and commodity swaps. iv. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include any of the securities referred to in the preceding paragraph, except (i) where the Buyer reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer's direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934, as amended. v. The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer may be in reliance on Rule 144A. vi. Until the date of purchase of the Rule 144A Securities, the Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Buyer is a bank or savings and loan is provided above, the Buyer agrees that it will furnish to such parties updated annual financial statements promptly after they become available. _________________________________________ Print Name of Buyer By:______________________________________ Name: Title: Date:_____________________________________ ANNEX 2 TO EXHIBIT J QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees That are Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 2. In connection with purchases by Buyer, the Buyer is a "qualified institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of 1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer's Family of Investment Companies, the cost of such securities was used, except (i) where the Buyer or the Buyer's Family of Investment Companies reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. ___ The Buyer owned $ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). ___ The Buyer is part of a Family of Investment Companies which owned in the aggregate $ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). 3. The term "Family of Investment Companies" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). 4. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part of the Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 5. The Buyer is familiar with Rule 144A and understands that the parties listed in the Rule 144A Transferee Certificate to which this certification relates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer's own account. 6. Until the date of purchase of the Certificates, the undersigned will notify the parties listed in the Rule 144A Transferee Certificate to which this certification relates of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. _________________________________________ Print Name of Buyer or Adviser By:______________________________________ Name: Title: IF AN ADVISER: ________________________________________ Print Name of Buyer Date:___________________________________ EXHIBIT K FORM OF CLASS [R][R-X] CERTIFICATE TRANSFER AFFIDAVIT WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET BACKED CERTIFICATES, SERIES 20 - STATE OF ) ) ss.: COUNTY OF ) The undersigned, being first duly sworn, deposes and says as follows: 1. The undersigned is [an officer of] , the proposed Transferee of an Ownership Interest in the Class [R][R-X] Certificates (the "Certificate") issued pursuant to the Pooling and Servicing Agreement, (the "Agreement"), relating to the above-referenced Certificates, among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as servicer, Wells Fargo Bank, National Association, as securities administrator, and [_______________________________], as trustee (the "Trustee"). Capitalized terms used, but not defined herein shall have the meanings ascribed to such terms in the Agreement. The Transferee has authorized the undersigned to make this affidavit on behalf of the Transferee. 2. The Transferee is, as of the date hereof, and will be, as of the date of the Transfer, a Permitted Transferee. The Transferee is acquiring its Ownership Interest in the Certificates either (i) for its own account or (ii) as nominee, trustee or agent for another Person and has attached hereto an affidavit from such Person in substantially the same form as this affidavit. The Transferee has no knowledge that any such affidavit is false. 3. The Transferee has been advised of, and understands that (i) a tax will be imposed on Transfers of the Certificate to Persons that are Disqualified Organization; (ii) such tax will be imposed on the transferor, or, if such Transfer is through an agent (which includes a broker, nominee or middleman) for a Person that is a Disqualified Organization, on the agent; and (iii) the Person otherwise liable for the tax shall be relieved of liability for the tax if the subsequent Transferee furnished to such Person an affidavit that such subsequent Transferee is not a Disqualified Organization and, at the time of Transfer, such Person does not have actual knowledge that the affidavit is false. 4. The Transferee has been advised of, and understands that a tax will be imposed on a "pass-through entity" holding the Certificate if at any time during the taxable year of the pass-through entity a Person that is a Disqualified Organization is the record holder of an interest in such entity. The Transferee understands that such tax will not be imposed for any period with respect to which the record holder furnishes to the pass-through entity an affidavit that such record holder is not a Disqualified Organization and the pass-through entity does not have actual knowledge that such affidavit is false. (For this purpose, a "pass-through entity" includes a regulated investment company, a real estate investment trust or common trust fund, a partnership, trust or estate, and certain cooperatives and, except as may be provided in Treasury Regulations, persons holding interests in pass-through entities as a nominee for another Person.) 5. The Transferee has reviewed the provisions of Section 5.02 of the Agreement and understands the legal consequences of the acquisition of an Ownership Interest in the Certificate including, without limitation, the restrictions on subsequent Transfers and the provisions regarding voiding the Transfer and mandatory sales. The Transferee expressly agrees to be bound by and to abide by the provisions of Section 5.02 of the Agreement and the restrictions noted on the face of the Certificate. The Transferee understands and agrees that any breach of any of the representations included herein shall render the Transfer to the Transferee contemplated hereby null and void. 6. The Transferee agrees to require a Transfer Affidavit from any Person to whom the Transferee attempts to Transfer its Ownership Interest in the Certificate, and in connection with any Transfer by a Person for whom the Transferee is acting as nominee, trustee or agent, and the Transferee will not Transfer its Ownership Interest or cause any Ownership Interest to be Transferred to any Person that the Transferee knows is not a Permitted Transferee. In connection with any such Transfer by the Transferee, the Transferee agrees to deliver to the Trustee a certificate substantially in the form set forth in Exhibit L to the Agreement for any transfer of a Class M-12, Class M-13, Class CE, Class P, Class R or Class R-X Certificate (a "Transferor Certificate") to the effect that such Transferee has no actual knowledge that the Person to which the Transfer is to be made is not a Permitted Transferee. 7. The Transferee does not have the intention to impede the assessment or collection of any tax legally required to be paid with respect to the Certificate. 8. The Transferee's taxpayer identification number is _____________. 9. The Transferee is a U.S. Person as defined in Code Section 7701(a)(30). 10. The Transferee is aware that the Certificate may be a "noneconomic residual interest" within the meaning of Treasury regulations promulgated pursuant to the Code and that the transferor of a noneconomic residual interest will remain liable for any taxes due with respect to the income on such residual interest, unless no significant purpose of the transfer was to impede the assessment or collection of tax. 11. That the Transferee will not cause income from the Class [R][R-X] Certificate to be attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of the Transferee or any other U.S. Person. 12. That, if the Transferee is purchasing the Class [R][R-X] Certificate in a transfer intended to meet the safe harbor provisions of Treasury Regulations Sections 1.860E-1(c), the Transferee has executed and attached Attachment A hereto. 13. The Transferee is not an employee benefit plan that is subject to ERISA or a plan that is subject to Section 4975 of the Code or a plan or arrangement subject to any materially similar provisions of applicable federal, state or local law, nor are we acting on behalf of such a plan. IN WITNESS WHEREOF, the Transferee has caused this instrument to be executed on its behalf, pursuant to authority of its Board of Directors, by its duly authorized officer, duly attested, this ___ day of ___________, 20__. [NAME OF TRANSFEREE] By:______________________________________ Name: Title: [Corporate Seal] ATTEST: [Assistant] Secretary Personally appeared before me the above-named_______, known or proved to me to be the same person who executed the foregoing instrument and to be the ___________of the Transferee, and acknowledged that he executed the same as his free act and deed and the free act and deed of the Transferee. Subscribed and sworn before me this ___ day of ________, 20__. ________________________________________ NOTARY PUBLIC My Commission expires the ___ day of ___________, 20__. ATTACHMENT A to AFFIDAVIT PURSUANT TO SECTION 860E(e)(4) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED Check the appropriate box: [ ] The consideration paid to the Transferee to acquire the Class [R][R-X] Certificate equals or exceeds the excess of (a) the present value of the anticipated tax liabilities over (b) the present value of the anticipated savings associated with holding such Certificate, in each case calculated in accordance with U.S. Treasury Regulations Sections 1.860E-1(c)(7) and (8), computing present values using a discount rate equal to the short-term Federal rate prescribed by Section 1274(d) of the Code and the compounding period used by the Transferee. OR [ ] The transfer of the Class [R][R-X] Certificate complies with U.S. Treasury Regulations Sections 1.860E-1(c)(5) and (6) and, accordingly: (i) the Transferee is an "eligible corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i), as to which income from Class [R][R-X] Certificate will only be taxed in the United States; (ii) at the time of the transfer, and at the close of the Transferee's two fiscal years preceding the year of the transfer, the Transferee had gross assets for financial reporting purposes (excluding any obligation of a person related to the Transferee within the meaning of U.S. Treasury Regulations Section 1.860E-1(c)(6)(ii)) in excess of $100 million and net assets in excess of $10 million; (iii) the Transferee will transfer the Class [R][R-X] Certificate only to another "eligible corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i), in a transaction that satisfies the requirements of Sections 1.860E-1(c)(4)(i), (ii) and (iii) and Section 1.860E-1(c)(5) of the U.S. Treasury Regulations; (iv) the Transferee has determined the consideration paid to it to acquire the Class [R][R-X] Certificate based on reasonable market assumptions (including, but not limited to, borrowing and investment rates, prepayment and loss assumptions, expense and reinvestment assumptions, tax rates and other factors specific to the Transferee) that it has determined in good faith; and (v) in the event of any transfer of the Class [R][R-X] Certificate by the Transferee, the Transferee will require its transferee to complete a representation in the form of this Attachment A as a condition of the transferee's purchase of the Class [R][R-X] Certificate. EXHIBIT L FORM OF TRANSFEROR CERTIFICATE FOR THE CLASS M-12, CLASS M-13, CLASS CE, CLASS P, CLASS R AND CLASS R-X CERTIFICATES [DATE] Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21405 Attention: Client Manager - WFHET, Series 20 - Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Re: Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - Ladies and Gentlemen: In connection with our disposition of the Wells Fargo Asset Securities Corporation, Home Equity Asset Backed Certificates, Series 20 - (the "Certificates"), we certify that (a) we understand that the Certificates have not been registered under the Securities Act of 1933, as amended (the "Act"), and are being disposed by us to a "qualified institutional buyer" as defined under the Act, (b) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action which would result in, a violation of Section 5 of the Act, (c) to the extent we are disposing of the Class [R][R-X] Certificate, we have no knowledge the Transferee is not a Permitted Transferee and (d) no purpose of the proposed disposition of the Class [R][R-X] Certificate is to impede the assessment or collection of tax. Very truly yours, [_____________________] By: ______________________________ EXHIBIT M MONTHLY INFORMATION DELIVERED BY SERVICER 1. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the number and Principal Balances of all Mortgage Loans which were the subject of Principal Prepayments during the related Prepayment Period. 2. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the amount of all curtailments which were received during the related Prepayment Period. 3. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the aggregate amount of the principal portion of all Monthly Payments received during the related Collection Period. 4. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the amount of interest received on the Mortgage Loans during the related Collection Period. 5. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the aggregate amount of the Advances made and recovered with respect to such Distribution Date. 6. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the aggregate amount of the Servicing Advances made and recovered with respect to such Distribution Date. 7. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the delinquency and foreclosure information and the amount of Mortgage Loan Losses during the related Collection Period. 8. The information contained in the Liquidation Report for the related Collection Period. 9. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the weighted average maturity, the weighted average Mortgage Interest Rate and the weighted average Net Mortgage Interest Rate as of the last day of the Collection Period preceding of the related Interest Accrual Period. 10. The Servicing Fees paid and Servicing Fees accrued during the related Collection Period. 11. [reserved] 12. [reserved] 13. The amount of all payments or reimbursements to the Servicer paid or to be paid since the prior Distribution Date (or in the case of the first Distribution Date, since the Closing Date). 14. The Pool Balance, the aggregate Principal Balance of the Group I Mortgage Loans and the aggregate Principal Balance of the Group II Mortgage Loans. 15. With respect to the Mortgage Pool, the Group I Mortgage Loans and the Group II Mortgage Loans, the number of Mortgage Loans outstanding at the beginning and at the end of the related Collection Period. 16. The aggregate interest accrued on the Mortgage Loans, the Group I Mortgage Loans and the Group II Mortgage Loans, at their respective Mortgage Interest Rates for the related Collection Period. 17. The amount deposited in the Collection Account which may not be withdrawn therefrom pursuant to an Order of a United States Bankruptcy Court of competent jurisdiction imposing a stay pursuant to Section 362 of U.S. Bankruptcy Code. 18. The aggregate Realized Losses in the Mortgage Pool, in the Group I Mortgage Loans and in the Group II Mortgage Loans since the Cut-off Date as of the end of the related Collection Period. 19. The amount of Prepayment Penalties received and the reason for any Prepayment Penalties waived during the related Collection Period. 20. The amount of Yield Maintenance Agreement Payments received with respect to such Distribution Date. EXHIBIT N Form of Yield Maintenance Agreement EXHIBIT O Form of Sarbanes-Oxley Certification WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET BACKED CERTIFICATES, SERIES 20 - I, [identify the certifying individual] certify that: 1. I have reviewed this report on Form 10-K and all reports on Form 10-D required to be filed in respect of the period covered by this report on Form 10-K of the Wells Fargo Home Equity Asset-Backed Securities 20 - Trust (the "Exchange Act Periodic Reports"); 2. Based on my knowledge, the Exchange Act Periodic Reports, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, all of the distribution, servicing and other information required to be provided under Form 10-D for the period covered by this report is included in the Exchange Act Periodic Reports; 4. I am responsible for reviewing the activities performed by the Servicer and based on my knowledge and the compliance review conducted in preparing the servicer compliance statement required in this report under Item 1123 of Regulation AB, and except as disclosed in the Exchange Act Periodic Reports, the Servicer has fulfilled its obligations under the pooling and servicing agreement, dated [ ], 20 , among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank N.A., as securities administrator, Wells Fargo Bank, N.A., as servicer, and HSBC Bank USA, National Association, as trustee; and 5. All of the reports on assessment of compliance with the servicing criteria for asset-backed securities and their related attestation reports on assessment of compliance with servicing criteria for asset-backed securities required to be included in this report in accordance with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have been included as an exhibit to this report, except as otherwise disclosed in this report. Any material instances of noncompliance described in such reports have been disclosed in this report on Form 10-K. By:______________________________________ Name: Title: EXHIBIT P Form of Certification to be Provided by the Securities Administrator to the Servicer WELLS FARGO ASSET SECURITIES CORPORATION, HOME EQUITY ASSET BACKED CERTIFICATES, SERIES 20 - I, [identify the certifying individual], certify to Wells Fargo Bank, N.A. and its officers, directors and affiliates, and with the knowledge and intent that they will rely upon this certification, that: 1. I have reviewed the annual report on Form 10-K for the fiscal year [___] (the "Annual Report"), and all reports on Form 10-D required to be filed in respect of period covered by the Annual Report (collectively with the Annual Report, the "Reports"), of the Trust; 2. To my knowledge, the Reports, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Annual Report; 3. To my knowledge, the distribution information required to be provided by the Securities Administrator under the pooling and servicing agreement (the "Pooling and Servicing Agreement"), dated [ ], 20 , among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank N.A., as securities administrator, Wells Fargo Bank, N.A., as servicer, and HSBC Bank USA, National Association, as trustee, for inclusion in the Reports is included in the Reports; 4. I am responsible for reviewing the activities performed by the Securities Administrator under the Pooling and Servicing Agreement, and based on my knowledge and the compliance review conducted in preparing the compliance statement of the Securities Administrator required in the Annual Report under Item 1123 of Regulation AB, and except as disclosed in the Reports, the Securities Administrator has fulfilled its obligations under the Pooling and Servicing Agreement in all material respects; and 5. The report on assessment of compliance with servicing criteria for asset-backed securities of the Securities Administrator and its related attestation report on assessment of compliance with servicing criteria required to be included in the Annual Report in accordance with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 has been included as an exhibit to the Annual Report. Any material instances of non-compliance are described in such report and have been disclosed in the Annual Report. By:______________________________________ Name: Title: EXHIBIT Q List of Recordation States Maryland Florida EXHIBIT R Form of Custodial Agreement 0 EXHIBIT S Servicing Criteria to be Addressed in Assessment of Compliance
- ----------------------------------------------------------------------------------------------------------------------------------- SERVICING CRITERIA APPLICABLE SERVICING CRITERIA - ----------------------------------------------------------------------------------------------------------------------------------- Securities Admini- Reference Criteria strator Trustee Servicer Custodian - ----------------------------------------------------------------------------------------------------------------------------------- General Servicing Considerations 1122(d)(1)(i) Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. 1122(d)(1)(ii) If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party's performance and compliance with such servicing activities. 1122(d)(1)(iii) Any requirements in the transaction agreements to maintain a back-up servicer for the mortgage loans are maintained. 1122(d)(1)(iv) A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. Cash Collection and Administration 1122(d)(2)(i) Payments on mortgage loans are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements. 1122(d)(2)(ii) Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. 1122(d)(2)(iii) Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. 1122(d)(2)(iv) The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. 1122(d)(2)(v) Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, "federally insured depository institution" with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act. 1122(d)(2)(vi) Unissued checks are safeguarded so as to prevent unauthorized access. 1122(d)(2)(vii) Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. Investor Remittances and Reporting 1122(d)(3)(i) Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors' or the trustee's records as to the total unpaid principal balance and number of mortgage loans serviced by the Servicer. 1122(d)(3)(ii) Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. 1122(d)(3)(iii) Disbursements made to an investor are posted within two business days to the Servicer's investor records, or such other number of days specified in the transaction agreements. 1122(d)(3)(iv) Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. Pool Asset Administration 1122(d)(4)(i) Collateral or security on mortgage loans is maintained as required by the transaction agreements or related mortgage loan documents. 1122(d)(4)(ii) Mortgage loan and related documents are safeguarded as required by the transaction agreements 1122(d)(4)(iii) Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. 1122(d)(4)(iv) Payments on mortgage loans, including any payoffs, made in accordance with the related mortgage loan documents are posted to the Servicer's obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related mortgage loan documents. 1122(d)(4)(v) The Servicer's records regarding the mortgage loans agree with the Servicer's records with respect to an obligor's unpaid principal balance. 1122(d)(4)(vi) Changes with respect to the terms or status of an obligor's mortgage loans (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. 1122(d)(4)(vii) Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. 1122(d)(4)(viii) Records documenting collection efforts are maintained during the period a mortgage loan is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity's activities in monitoring delinquent mortgage loans including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). 1122(d)(4)(ix) Adjustments to interest rates or rates of return for mortgage loans with variable rates are computed based on the related mortgage loan documents. 1122(d)(4)(x) Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor's mortgage loan documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable mortgage loan documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related mortgage loans, or such other number of days specified in the transaction agreements. 1122(d)(4)(xi) Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. 1122(d)(4)(xii) Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer's funds and not charged to the obligor, unless the late payment was due to the obligor's error or omission. 1122(d)(4)(xiii) Disbursements made on behalf of an obligor are posted within two business days to the obligor's records maintained by the Servicer, or such other number of days specified in the transaction agreements. 1122(d)(4)(xiv) Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. 1122(d)(4)(xv)
[_______________________] Date: _________________________ By:_____________________________ Name: Title: EXHIBIT T Additional Form 10-D Disclosure - ------------------------------------------------------------------------------- Item on Form 10-D Party Responsible - ------------------------------------------------------------------------------- Item 1: Distribution and Pool Securities Administrator Performance Information Any information required by 1121 which is NOT included on the Distribution Date Statement Item 2: Legal Proceedings per Item (i) All parties to the Pooling 1117 of Reg AB and Servicing Agreement and the Custodian, (ii) the Securities Administrator as to the issuing entity, (iii) the Depositor as to the sponsor, any 1110(b) originator, any 1100(d)(1) party Item 3: Sale of Securities and Use of Depositor Proceeds Item 4: Defaults Upon Senior Securities Securities Administrator Item 5: Submission of Matters to a Securities Administrator, Trustee Vote of Security Holders Item 6: Significant Obligors of Pool Depositor, if applicable Assets Item 7: Significant Enhancement Depositor, if applicable Provider Information Item 8: Other Information Any party responsible for disclosure items on Form 8-K Item 9: Exhibits Depositor, Securities Administrator EXHIBIT U Additional Form 10-K Disclosure - ------------------------------------------------------------------------------- Item on Form 10-K Party Responsible - ------------------------------------------------------------------------------- Item 1B: Unresolved Staff Comments Depositor Item 9B: Other Information Any party responsible for disclosure items on Form 8-K Item 15: Exhibits, Financial Statement Securities Administrator Schedules Depositor Additional Item: (i) All parties to the Pooling and Servicing Agreement and the Disclosure per Item 1117 of Reg AB Custodian, (ii) the Securities Administrator as to the issuing entity, (iii) the Depositor as to the sponsor, any 1110(b) originator, any 1100(d)(1) party Additional Item: (i) All parties to the Pooling Disclosure per Item 1119 of Reg AB and Servicing Agreement and the Custodian, (ii) the Securities Administrator as to the issuing entity, (iii) the Depositor as to the sponsor, any 1110(b) originator, any 1100(d)(1) party, any significant obligor, any credit enhancement provider or derivative counterparty Additional Item: Depositor, if applicable Disclosure per Item 1112(b) of Reg AB Additional Item: Depositor, if applicable Disclosure per Items 1114(b) and 1115(b) of Reg AB EXHIBIT V Form 8-K Disclosure Information - ------------------------------------------------------------------------------- Item on Form 8-K Party Responsible - ------------------------------------------------------------------------------- Item 1.01- Entry into a Material All parties to the Pooling and Definitive Agreement Servicing Agreement and the Custodian Item 1.02- Termination of a Material All parties to the Pooling and Definitive Agreement Servicing Agreement and the Custodian Item 1.03- Bankruptcy or Receivership (i) Depositor, as to itself, the sponsor, any 1100(d)(1) party, any significant obligor, any credit enhancement provider or derivative counterparty and any other transaction party, to the extent known to the Depositor, (ii) Trustee, as to itself, (iii) the Servicer as to itself, (iv) Securities Administrator, as to itself and any other transaction party, to the extent known to the Securities Administrator Item 2.04- Triggering Events that Securities Administrator Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement Item 3.03- Material Modification to Securities Administrator Rights of Security Holders Item 5.03- Amendments of Articles of Securities Administrator Incorporation or Bylaws; Change of Fiscal Year Item 6.01- ABS Informational and Depositor Computational Material Item 6.02- Change of Servicer or Servicer, Securities Securities Administrator Administrator Item 6.03- Change in Credit Depositor/ Securities Enhancement or External Administrator Support Item 6.04- Failure to Make a Required Securities Administrator Distribution Item 6.05- Securities Act Updating Depositor Disclosure Item 7.01- Reg FD Disclosure Depositor Item 8.01- Other Events Depositor, Securities Administrator Item 9.01 Depositor, Securities Administrator EXHIBIT W Additional Disclosure Notification **SEND VIA FAX TO 410-715-2380 AND VIA EMAIL TO CTS.SEC.NOTIFICATIONS@WELLSFARGO.COM AND VIA OVERNIGHT MAIL TO THE ADDRESS IMMEDIATELY BELOW** Wells Fargo Bank, N.A., as Securities Administrator Old Annapolis Road Columbia, Maryland 21045 Attn: Client Manager- [DEAL NAME]--SEC REPORT PROCESSING RE:**[Additional Form [10-D][10-K] Disclosure][Form 8-K Disclosure Information]** Required Ladies and Gentlemen: In accordance with Section [ ] of the Pooling and Servicing Agreement, , dated as of [ ][ ], 2006, among [ ], as [ ] [ ], as [ ], [ ], as [ ] and [ ], as [ ]. the undersigned, as [ ], hereby notifies you that certain events have come to our attention that [will] [may] need to be disclosed on Form [10-D][10-K][8-K]. Description of [Additional Form [10-D][10-K] Disclosure][Form 8-K Disclosure Information]: List of any Attachments hereto to be included in the [Additional Form [10-D][10-K] Disclosure][Form 8-K Disclosure Information]: Any inquiries related to this notification should be directed to [ ], phone number: [ ]; email address: [ ]. [NAME OF PARTY], as [role] By: __________________________ Name: Title: EX-5.1 4 we890449-ex5_1.txt OPINION OF CADWALADER, WICKERSHAM & TAFT LLP Exhibit 5.1 March 17, 2006 Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Ladies and Gentlemen: We have acted as your counsel in connection with the registration statement (File No. 333-131594) filed with the Securities and Exchange Commission (the "Commission") on February 6, 2006, as amended (as amended, the "Registration Statement"), pursuant to the Securities Act of 1933, as amended (the "Act"). The Registration Statement covers Asset-Backed Certificates ("Certificates") and Asset-Backed Notes ("Notes") to be sold by Wells Fargo Asset Securities Corporation (the "Company") in one or more series (each, a "Series") of Securities. Each Series of Certificates will be issued under a separate pooling and servicing agreement (each, a "Pooling and Servicing Agreement") among the Company, a trustee to be identified in the Prospectus Supplement for such Series of Certificates (a "Trustee"), a securities administrator to be identified in the Prospectus Supplement for such Series of Certificates, if applicable (a "Securities Administrator") and a servicer (the "Servicer") or a master servicer (the "Master Servicer") to be identified in the Prospectus Supplement for such Series of Certificates. Each Series of Notes will be issued under a separate indenture (each, an "Indenture") between a statutory trust formed to issue the Notes (the "Note Issuer") and an indenture trustee to be identified in the Prospectus Supplement for such Series of Notes (an "Indenture Trustee"). Capitalized terms used and not otherwise defined herein have the respective meanings ascribed to such terms in the Registration Statement. In rendering the opinion set forth below, we have examined and relied upon the following: (i) the Registration Statement, the Prospectus and the form of Prospectus Supplement constituting a part thereof, each substantially in the form filed with the Commission and (ii) such other documents, records and instruments as we have deemed necessary for the purposes of this opinion. Based upon and subject to the foregoing, we are of the opinion that: 1. When a Pooling and Servicing Agreement for a Series of Certificates has been duly and validly authorized, executed and delivered by the Company, a Trustee, a Securities Administrator (if applicable) and the Servicer or Master Servicer, and the Certificates of such Series have been duly executed, authenticated, delivered and sold as contemplated in the Registration Statement, such Certificates will be validly issued, fully paid and non-assessable. 2. When an Indenture for a Series of Notes has been duly and validly authorized, executed and delivered by the Note Issuer and an Indenture Trustee, and the Notes of such Series have been duly executed, authenticated, delivered and sold as contemplated in the Registration Statement, such Notes will be binding obligations of the Note Issuer, enforceable against the Note Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors' rights generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Matters" in the Prospectus and the form of Prospectus Supplement forming a part of the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required to be filed with the Registration Statement under the provisions of the Act. Very truly yours, /s/ Cadwalader, Wickersham & Taft LLP EX-8.1 5 we890449-ex8_1.txt OPINION OF CADWALADER, WICKERSHAM & TAFT LLP Exhibit 8.1 March 17, 2006 Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Ladies and Gentlemen: We have acted as your counsel in connection with the registration statement (File No. 333-131594) filed with the Securities and Exchange Commission (the "Commission") on February 6, 2006, as amended (as amended, the "Registration Statement"), pursuant to the Securities Act of 1933, as amended (the "Act"). The Registration Statement covers Asset-Backed Certificates ("Certificates") and Asset-Backed Notes ("Notes") to be sold by Wells Fargo Asset Securities Corporation (the "Company") in one or more series (each, a "Series") of Securities. Each Series of Certificates will be issued under a separate pooling and servicing agreement among the Company, a trustee to be identified in the Prospectus Supplement for such Series of Certificates, a securities administrator to be identified in the Prospectus Supplement, if applicable, and a servicer or a master servicer to be identified in the Prospectus Supplement for such Series of Certificates. Each Series of Notes will be issued under a separate indenture between a statutory trust formed to issue the Notes and an indenture trustee to be identified in the Prospectus Supplement for such Series of Notes. Capitalized terms used and not otherwise defined herein have the respective meanings ascribed to such terms in the Registration Statement. In rendering the opinion set forth below, we have examined and relied upon the following: (i) the Registration Statement, the Prospectus and the form of Prospectus Supplement constituting a part thereof, each substantially in the form filed with the Commission and (ii) such other documents, records and instruments as we have deemed necessary for the purposes of this opinion. As counsel to the Company, we have advised the Company with respect to certain federal income tax aspects of the proposed issuance of the Certificates and the Notes. The description of federal income tax consequences appearing under the heading "Federal Income Tax Consequences" in the Prospectus accurately describes the material federal income tax consequences to holders of a Series of Certificates or Notes, under existing law and subject to the qualifications and assumptions stated therein. We also hereby confirm and adopt the opinions expressly set forth under such headings, under existing law and subject to the qualifications and assumptions stated therein. This opinion is based on the facts and circumstances set forth in the Prospectus and Prospectus Supplement and in the other documents reviewed by us. Our opinion as to the matters set forth herein could change with respect to a particular Series of Certificates or Notes as a result of changes in facts or circumstances, changes in the terms of the documents reviewed by us, or changes in the law subsequent to the date hereof. Because the Registration Statement contemplates Series of Certificates or Notes with numerous different characteristics, the particular characteristics of each Series of Certificates or Notes must be considered in determining the applicability of this opinion to a particular Series of Certificates or Notes. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the references to this firm under the caption "Federal Income Tax Consequences" in the Prospectus forming a part of the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required to be filed with the Registration Statement under the provisions of the Act. No opinion has been sought and none has been given concerning the tax treatment of the issuance and sale of the Certificates or the Notes under the laws of any state. Very truly yours, /s/ Cadwalader, Wickersham & Taft LLP EX-10.1 6 we890449-ex10_1.txt FORM OF MORTGAGE LOAN PURCHASE AGREEMENT Exhibit 10.1 MORTGAGE LOAN PURCHASE AGREEMENT This Mortgage Loan Purchase Agreement (the "Agreement"), dated as of [ ], is between Wells Fargo Asset Securities Corporation, a Delaware corporation (the "Company"), and Wells Fargo Bank, N.A., a national banking association ("Wells Fargo Bank" or, the "Seller"). The Company and Wells Fargo Bank hereby recite and agree as follows: 1. Defined Terms. Terms used without definition herein shall have the respective meanings assigned to them in the Pooling and Servicing Agreement, dated as of [ ] (the "Pooling and Servicing Agreement"), among the Company, Wells Fargo Bank, as servicer (the "Servicer"), HSBC Bank USA, National Association, as trustee (the "Trustee"), and Wells Fargo Bank, N.A., as securities administrator (the "Securities Administrator"), relating to the issuance of the Company's Home Equity Asset-Backed Certificates, Series 200 - (the "Certificates") or, if not defined therein, in the underwriting agreement, dated [ ] and terms agreement, dated [ ] (together, the "Underwriting Agreement"), among the Company, Wells Fargo Bank and [ ], or in the purchase agreement dated [ ] and the purchaser terms agreement, dated [ ] (together, the "Purchase Agreement"), among the Company, Wells Fargo Bank and [ ]. 2. Assignment of Servicing Agreements. Wells Fargo Bank agrees to sell, and the Company agrees to purchase, the mortgage loans listed in Exhibit I hereto and all of Wells Fargo Bank's interest with respect to the Mortgage Loans as the owner in, to and under each Servicing Agreement (as defined in the Pooling and Servicing Agreement). 3. Purchase Price; Purchase and Sale. The purchase price (the "Purchase Price") for the Mortgage Loans shall consist of $[ ] payable by the Company to Wells Fargo Bank on the Closing Date in immediately available funds. Upon payment of the Purchase Price, Wells Fargo Bank shall be deemed to have transferred, assigned, set over and otherwise conveyed to the Company all the right, title and interest of Wells Fargo Bank in and to the Mortgage Loans including all interest and principal received or receivable by Wells Fargo Bank on or with respect to the Mortgage Loans after the Cut-Off Date (and including scheduled payments of principal and interest due after the Cut-Off Date but received by Wells Fargo Bank on or before the Cut-Off Date and Principal Prepayments received or applied on the Cut-Off Date, but not including payments of principal and interest due on the Mortgage Loans on or before the Cut-Off Date), together with all of Wells Fargo Bank's right, title and interest in and to the proceeds of any related title, hazard, primary mortgage or other insurance policies, all of Wells Fargo Bank's rights described in Section 2 above, and all other property and rights described in the first paragraph of Section 2.01(a) of the Pooling and Servicing Agreement. The Company hereby directs Wells Fargo Bank, and Wells Fargo Bank hereby agrees, to deliver to the Trustee or Custodian on behalf of the Trustee, all documents, instruments and agreements required to be delivered by the Company to the Trustee under the Pooling and Servicing Agreement; including, without limitation, the documents required to be delivered under Section 2.01(a) of the Pooling and Servicing Agreement; and upon the occurrence of a Document Transfer Event, the documents required to be delivered under Section 2.01(b). Wells Fargo Bank further agrees to deliver such other documents, instruments and agreements as the Company or the Trustee shall reasonably request. 4. Representations and Warranties; Covenants. Wells Fargo Bank hereby represents and warrants to the Company that (i) the Company's representations and warranties to the Trustee pursuant to Section 2.04 of the Pooling and Servicing Agreement are true and correct, as of the date thereof, and (ii) Wells Fargo Bank has not dealt with any broker, investment banker, agent or other person (other than the Company and [ ]) who may be entitled to any commission or compensation in connection with the sale of the Mortgage Loans. Wells Fargo Bank hereby agrees to cure any breach of such representations and warranties in accordance with the terms of the Pooling and Servicing Agreement. Wells Fargo Bank hereby agrees to continue to pay on behalf of the Company and its successors and assignees, promptly as they become due, any lender-paid primary mortgage insurance premiums ("LPMI Premiums") with respect to any lender-paid primary mortgage insurance policy (an "LPMI Policy") on each Mortgage Loan so insured as of the Cut-Off Date, until such Mortgage Loan has been paid in full or otherwise liquidated; provided, however, that the foregoing obligation of Wells Fargo Bank shall terminate with respect to all such Mortgage Loans in the event that either (i) another entity acceptable to the insurers of such LPMI Policies (the "LPMI Insurers") and the rating agencies rating the Certificates undertakes to pay such LPMI Premiums, or (ii) Wells Fargo Bank pays one-time premiums to such LPMI Insurers such that all outstanding LPMI Policies will remain in force until the related Mortgage Loans have been paid in full or otherwise liquidated, without the requirement of any further premium payments. 5. Repurchase or Substitution. (a) Wells Fargo Bank hereby agrees to repurchase any Mortgage Loan from the Company (i) for which any document is not delivered, as provided in paragraph 3 above, (ii) which is found by the Trustee to be defective in any material respect, as provided in the Pooling and Servicing Agreement, or (iii) which is discovered at any time not to be in conformance with the representations and warranties referred to in paragraph 4 above and which document relating thereto Wells Fargo Bank does not deliver or which defect or breach Wells Fargo Bank does not cure (as provided in paragraph 4 above) within 60 days after the date of notice thereof from the Trustee or the Company, at a price equal to the Purchase Price. In addition, Wells Fargo Bank hereby agrees to reimburse the Company for any Reimbursement Amount. Alternatively, Wells Fargo Bank hereby agrees, if so requested by the Company to substitute for any such Mortgage Loan, a new mortgage loan having characteristics such that the representations and warranties referred to in paragraph 4 above would not have been incorrect (except for representations and warranties as to the correctness of the Mortgage Loan Schedule) had such substitute mortgage loan originally been a Mortgage Loan. Wells Fargo Bank further agrees that a substituted mortgage loan will meet the requirements of an Eligible Substitute Mortgage Loan. Wells Fargo Bank shall remit to the Company, in cash, the difference between the unpaid principal balance of the Mortgage Loan to be substituted and the unpaid principal balance of the substitute mortgage loan. (b) In addition, Wells Fargo Bank shall pay (i) the amount of any Prepayment Premium (to the extent not collected and remitted to the Trust) to the Trust if Wells Fargo Bank is unable to collect a Prepayment Penalty as a result of its enforceability being found to be limited or prohibited by applicable law and (ii) without duplication of any amount payable under clause (i), the amount due to the Trust by Wells Fargo Bank pursuant to the last paragraph of Section 2.03(a) of the Pooling and Servicing Agreement (any such amounts, the "Originator Prepayment Penalty Payment Amount"). Wells Fargo Bank shall remit to the Securities Administrator for deposit into the Collection Account any Originator Prepayment Penalty Payment Amount by the Servicer Remittance Date following the month in which a Principal Prepayment was made on the related Mortgage Loan. (c) In the event that Wells Fargo Bank has a right against the originator or former owner of a Mortgage Loan (the "Prior Holder") for breach of a representation or warranty regarding the characteristics of such Mortgage Loan made by the Prior Holder, Wells Fargo Bank may request the Company to repurchase the Mortgage Loan from the Trust Estate pursuant to Section 2.03 of the Pooling and Servicing Agreement and Wells Fargo Bank agrees that at the time of the repurchase by the Company, Wells Fargo Bank will repurchase the Mortgage Loan from the Company at a price equal to the then unpaid principal balance thereof, plus accrued and unpaid interest at the applicable Net Mortgage Interest Rate, through the last day of the month in which such repurchase takes place. At the time of any such repurchase by Wells Fargo Bank, Wells Fargo Bank agrees either to promptly (i) liquidate such Mortgage Loan, to the extent that Wells Fargo Bank's rights in respect of the Prior Holder consist of a claim for indemnity or (ii) transfer such Mortgage Loan to the Prior Holder at a price not less than that paid by Wells Fargo Bank to the Company. 6. Underwriting. Wells Fargo Bank hereby agrees to furnish any and all information, documents, certificates, letters or opinions with respect to the Mortgage Loans, reasonably requested by the Company in order to perform any of its obligations or satisfy any of the conditions on its part to be performed or satisfied pursuant to the Underwriting Agreement or the Purchase Agreement at or prior to the Closing Date. 7. Costs. The Company shall pay all expenses incidental to the performance of its obligations under the Underwriting Agreement and the Purchase Agreement, including without limitation (i) any recording fees or fees for title policy endorsements and continuations, (ii) the expenses of preparing, printing and reproducing the Prospectus, the Prospectus Supplement, the Underwriting Agreement, the Private Placement Memorandum, the Purchase Agreement, the Pooling and Servicing Agreement and the Certificates and (iii) the cost of delivering the Certificates to the offices of [ ] insured to the satisfaction of [ ]. 8. Servicing. (a) Wells Fargo Bank hereby represents to the Company that the Mortgage Loans are serviced by the Servicer. (b) With respect to each Mortgage Loan, the Servicing Fee Rate shall be as set forth on Schedule I hereto. (c) On the Closing Date, Wells Fargo Bank shall assign to the Company its interest with respect to the Mortgage Loans in, to and under each Servicing Agreement. 9. Notices. All demands, notices and communications hereunder shall be in writing, shall be effective only upon receipt and shall, if sent to the Company, be addressed to it at Wells Fargo Asset Securities Corporation, 7430 New Technology Way, Frederick, Maryland 21703, Attn: Vice President, Structured Finance, or, if sent to Wells Fargo Bank, be addressed to it at Wells Fargo Bank, N.A., 7430 New Technology Way, Frederick, Maryland, 21703, Attn: Vice President, Structured Finance. 10. Trustee Beneficiary. The representations, warranties and agreements made by Wells Fargo Bank in this Agreement are made for the benefit of, and may be enforced by, the Trustee and the holders of Certificates to the same extent that the Trustee and the holders of Certificates, respectively, have rights against the Company under the Pooling and Servicing Agreement in respect of representations, warranties and agreements made by the Company therein. 11. Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought. This Agreement may not be changed in any manner which would have a material adverse effect on holders of Certificates without the prior written consent of the Trustee. The Trustee shall be protected in consenting to any such change to the same extent provided in Article VIII of the Pooling and Servicing Agreement. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and Wells Fargo Bank and their respective successors and assigns. 12. Recharacterization. The parties hereto intend the conveyance by the Seller to the Company of all of its right, title and interest in and to the Mortgage Loans pursuant to this Agreement to constitute a purchase and sale and not a loan. Notwithstanding the foregoing, to the extent that such conveyance is held not to constitute a sale under applicable law, it is intended that this Agreement shall constitute a security agreement under applicable law and that the Seller shall be deemed to have granted to the Company a first priority security interest in all of the Seller's right, title and interest in and to the Mortgage Loans. IN WITNESS WHEREOF, the Company and Wells Fargo Bank have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. WELLS FARGO ASSET SECURITIES CORPORATION By:_____________________________________ Name: Title: WELLS FARGO BANK, N.A. By:_____________________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----