-----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, PJqQyBd7PyblZ2RAx1xVeqPkzd2BnK8qeMLK5KYxlmK1ScrdM664K+2XGZG/24jf FYSpeCYz9ivUtsZI4iN2uA== 0000914121-06-003121.txt : 20061005 0000914121-06-003121.hdr.sgml : 20061005 20061005165536 ACCESSION NUMBER: 0000914121-06-003121 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20061005 DATE AS OF CHANGE: 20061005 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: 333-133209 FILM NUMBER: 061131628 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 we3768865-s3a1.txt AMENDMENT NO. 1 TO REGISTRATION STATEMENT As Filed with the Securities and Exchange Commission on October 5, 2006 Registration No. 333-133209 ================================================================================ 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 Proposed Maximum Maximum Title Of Each Amount Offering Aggregate Amount Of Class Of Securities Being Price Per Offering Registration To Be Registered Registered Unit(1) Price(1) Fee - --------------------- ---------- --------- ---------- ------------ Mortgage Asset Backed $1,000,000 100% $1,000,000 $107.00(2) Securities, issued in Series ================================================================================ (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. 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. SUBJECT TO COMPLETION DATED OCTOBER 5, 2006 PROSPECTUS SUPPLEMENT (To Prospectus Dated , 20 ) [WELLS FARGO LOGO] Wells Fargo Asset Securities Corporation Depositor Wells Fargo Bank, N.A. Sponsor and Master Servicer Wells Fargo Alternative Loan 20 - Trust Issuing Entity $[ ] (Approximate) Mortgage Asset-Backed Pass-Through Certificates, Series 20 - Principal and interest payable monthly, commencing in [_____] 20 - -------------------------------------------------------------------------------- You should carefully consider the risk factors beginning on page S-16 of this prospectus supplement. 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 will 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 Seventeen classes of senior certificates. o Six classes subordinated certificates, all of which are subordinated to, and provide credit enhancement for, the senior certificates. Each class of subordinated certificates is also subordinated to each class of subordinated certificates, if any, with a lower number. 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-4. The Assets of the Issuing Entity Will Include-- o A pool of fully amortizing, one- to four-family, fixed interest rate, residential first mortgage loans (excluding the fixed retained yield described in this prospectus supplement), substantially all of which have original terms to stated maturity of approximately 30 years. Credit Enhancement Will Consist of-- o Subordination of the subordinated certificates to the senior certificates for the distributions of principal and interest and the allocation of losses. o Shifting interest in prepayments through the allocation, subject to certain exceptions, of most principal collections to the senior certificates for the first five years and a lesser, but still disproportionately large, allocation of these collections to the senior certificates during the following four years. 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 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 [_____], 20 . Classes in book entry form will be made available through The Depository Trust Company, Clearstream International or the Euroclear System. Total proceeds to the depositor for the offered certificates will be approximately $[_____] before deducting expenses estimated at $[_____] plus accrued interest from [_____], 20 to [_____], 20 . [Underwriter] The date of this prospectus supplement is [_____], 20 TABLE OF CONTENTS PROSPECTUS SUPPLEMENT IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS........................S-4 SUMMARY INFORMATION..........................................................S-8 RISK FACTORS................................................................S-17 Prepayments May Adversely Affect Yield...................................S-17 Geographic Concentration May Increase Risk of Loss Because of Adverse Economic Conditions or Natural Disasters.......................................................S-18 Residential Real Estate Values May Fluctuate and Adversely Affect Your Investment....................................S-18 Delinquencies and Losses on the Mortgage Loans Will Adversely Affect Your Yield........................................S-19 [Interest Only Mortgage Loans May Have Higher Risk of Default or Rates of Prepayment..................................S-19 The Rate of Default on Mortgage Loans that are Secured by Investor Properties May be Higher than on Other Mortgage Loans............................................S-19 FICO Scores May Not Accurately Predict the Likelihood of Default...................................................S-19 Decrement and Sensitivity Tables are Based Upon Assumptions and Models..................................................S-20 Residual Certificates May Have Adverse Tax Consequences............................................................S-20 United States Military Operations May Increase Risk of Relief Act Shortfalls...........................................S-20 FORWARD LOOKING STATEMENTS..................................................S-22 THE SPONSOR.................................................................S-22 STATIC POOL INFORMATION.....................................................S-22 THE DEPOSITOR...............................................................S-23 THE ISSUING ENTITY..........................................................S-23 THE TRUSTEE.................................................................S-24 THE MASTER SERVICER.........................................................S-24 THE PAYING AGENT............................................................S-25 THE SERVICER................................................................S-25 THE CUSTODIAN...............................................................S-25 ROLES OF WELLS FARGO BANK...................................................S-26 DESCRIPTION OF THE CERTIFICATES.............................................S-26 General..................................................................S-26 Book-Entry Certificates..................................................S-26 Distributions............................................................S-26 Interest.................................................................S-28 Principal (Including Prepayments)........................................S-31 Additional Rights of the Residual Certificateholders......................................................S-38 Restrictions on Transfer of the Residual Certificates............................................................S-39 Periodic Advances........................................................S-39 Subordination of Class B Certificates....................................S-39 Allocation of Losses.....................................................S-40 DESCRIPTION OF THE MORTGAGE LOANS().........................................S-42 General..................................................................S-42 Mortgage Loan Data Appearing in Appendix A...............................S-42 Mortgage Loan Underwriting...............................................S-44 Mandatory Repurchase or Substitution of Mortgage Loans..........................................................S-44 Optional Purchase of Mortgage Loans......................................S-45 PREPAYMENT AND YIELD CONSIDERATIONS.........................................S-45 General..................................................................S-45 Sensitivities of Certain Classes of Certificates.........................S-50 Yield Considerations with Respect to the Class B-2 and Class B-3 Certificates..........................................S-51 POOLING AND SERVICING AGREEMENT.............................................S-52 General..................................................................S-52 Compensation and Payment of Expenses of the Master Servicer, Servicer and Trustee...................................S-52 Optional Termination of the Trust........................................S-53 Voting...................................................................S-53 Fixed Retained Yield.....................................................S-54 FEDERAL INCOME TAX CONSIDERATIONS...........................................S-54 General..................................................................S-54 Regular Certificates.....................................................S-54 Residual Certificates....................................................S-55 ERISA CONSIDERATIONS........................................................S-56 LEGAL INVESTMENT............................................................S-56 SECONDARY MARKET............................................................S-57 UNDERWRITING................................................................S-57 LEGAL MATTERS...............................................................S-57 USE OF PROCEEDS.............................................................S-57 RATINGS.....................................................................S-57 APPENDIX A: MORTGAGE LOAN DATA...............................................A-1 APPENDIX B: DECREMENT TABLES.................................................B-1 APPENDIX C: SENIOR SENSITIVITY TABLES........................................C-1 APPENDIX D: SUBORDINATE SENSITIVITY TABLES...................................D-1 APPENDIX E: PLANNED PRINCIPAL BALANCES.......................................E-1 S-2 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" on page S-58 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. European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date"), it has not made and will not make an offer of offered certificates to the public in that Relevant Member State prior to the publication of a prospectus in relation to the offered 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 offered 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 provision, the expression an "offer of offered certificates to the public" in relation to any offered 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 offered certificates to be offered so as to enable an investor to decide to purchase or subscribe the offered certificates, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. United Kingdom Each underwriter has represented and agreed that: S-4 (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA") received by it in connection with the issue or sale of the offered certificates in circumstances in which Section 21(1) of the FSMA does not apply to the trust; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offered certificates in, from or otherwise involving the United Kingdom. Notice to United Kingdom Investors The distribution of this prospectus supplement and the accompanying prospectus, if made by a person who is not an authorized person under the FSMA, is being made only to, or directed only at persons who (1) are outside the United Kingdom, or (2) have professional experience in matters relating to investments, or (3) are persons falling within Articles 49(2)(a) through (d) ("high net worth companies, unincorporated associations, etc.") or 19 (Investment Professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons together being referred to as the "Relevant Persons"). This prospectus supplement and the accompanying prospectus must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this prospectus supplement and the accompanying prospectus relates, including the offered certificates, is available only to Relevant Persons and will be engaged in only with Relevant Persons. Potential investors in the United Kingdom are advised that all, or most, of the protections afforded by the United Kingdom regulatory system will not apply to an investment in the offered certificates and that compensation will not be available under the United Kingdom Financial Services Compensation Scheme. S-5 - -------------------------------------------------------------------------------- THE SERIES 20 - CERTIFICATES
Initial Rating Initial Pass- of Offered Principal Through Interest Certificates(3) Original Class Balance(1) Rate Principal Types(2) Types(2) [_]------[_] Form(4) - ------------------------ ---------- ------- ------------------------------- -------------- --------------- -------- Offered Certificates Class A-1 (7) Senior, Sequential Pay Inverse BE Floating Rate Class A-2 (7) Senior, Sequential Pay Floating Rate BE Class A-3 [__]% Super Senior, Lockout Fixed Rate BE Class A-4 [__]% Senior, Sequential Pay Fixed Rate BE Class A-5 (7) Senior, Accretion Directed, Floating Rate BE Planned Amortization II Class A-6 (7) Senior, Accretion Directed, Inverse BE Planned Amortization II Floating Rate Class A-7 [__]% Senior, Planned Amortization II Accrual, BE Fixed Rate Class A-8 [__]% Senior, Accretion Directed, Fixed Rate BE Companion Class A-9 [__]% Senior, Companion Accrual, BE Fixed Rate Class A-10 [__]% Senior, Planned Amortization I Fixed Rate BE Class A-11 [__]% Senior, Planned Amortization I Fixed Rate BE Class A-12 [__]% Super Senior, Planned Fixed Rate BE Amortization I Class A-13 [__]% Senior, Planned Amortization I Fixed Rate BE Class A-14 [__]% Super Senior Support, Planned Fixed Rate BE Amortization I Class A-15 [__]% Super Senior Support, Lockout Fixed Rate BE Class A-PO 0.000% Senior, Ratio Strip Principal Only BE Class A-R [__]% Senior, Sequential Pay Fixed Rate D Class B-1 [__]% Subordinated Fixed Rate BE Class B-2 [__]% Subordinated Fixed Rate BE Class B-3 [__]% Subordinated Fixed Rate BE Non-Offered Certificates Class B-4 [__]% Subordinated Fixed Rate N/A Class B-5 [__]% Subordinated Fixed Rate N/A Class B-6 [__]% Subordinated Fixed Rate N/A Final Scheduled Minimum Incremental Distribution Class Denomination Denomination(5) Date(6) - ------------------------ ------------ --------------- --------------- Offered Certificates Class A-1 $ $ [_____], 20 Class A-2 $ $ [_____], 20 Class A-3 $ $ [_____], 20 Class A-4 $ $ [_____], 20 Class A-5 $ $ [_____], 20 Class A-6 $ $ [_____], 20 Class A-7 $ $ [_____], 20 Class A-8 $ $ [_____], 20 Companion Class A-9 $ $ [_____], 20 Class A-10 $ $ [_____], 20 Class A-11 $ $ [_____], 20 Class A-12 $ $ [_____], 20 Class A-13 $ $ [_____], 20 Class A-14 $ $ [_____], 20 Class A-15 $ $ [_____], 20 Class A-PO $ $ [_____], 20 Class A-R $ $ [_____], 20 Class B-1 $ $ [_____], 20 Class B-2 $ $ [_____], 20 Class B-3 $ $ [_____], 20 Non-Offered Certificates Class B-4 N/A N/A [_____], 20 Class B-5 N/A N/A [_____], 20 Class B-6 N/A N/A [_____], 20
- ------------------------------- (1) Approximate. The initial principal balances are subject to adjustment as described under "Summary Information-Principal Balance of the Certificates" in this prospectus supplement. (2) See "Description of the Certificates -- Categories of Classes of Certificates" in the prospectus for a description of the principal and interest categories listed. (3) A description of the ratings of the offered certificates is set forth under the heading "Rating of Certificates" in the Summary Information and under "Ratings" in the main text of this prospectus supplement. (4) See "Description of the Certificates -- Definitive Form" and "-- Book-Entry Form" in the prospectus for a description of the forms of certificates. Book-entry form is designated as "BE" and definitive form is designated as "D" in the table above. S-6 (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 represents the distribution date in the month following the latest maturity date of any mortgage loan in the mortgage pool. The actual final payment on your certificates could occur earlier or later than the final scheduled distribution date. (7) The following table describes the methodology for determining the pass-through rates for each class of floating rate certificates. See "Description of the Certificates-Interest" in this prospectus supplement. Initial Pass- Pass-Through Minimum Maximum Pass- Class Through Rate Rate Formula Pass-Through Rate Through Rate - --------- ------------ --------------------- ----------------- ------------- Class A-1 [__]% [__]% - (LIBOR x [__]) [__]% [__]% Class A-2 [__]% LIBOR + [__]% [__]% [__]% Class A-5 [__]% LIBOR + [__]% [__]% [__]% Class A-6 [__]% [__]% - (LIBOR x [__]) [__]% [__]%
- -------------------------------------------------------------------------------- S-7 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. Master Servicer Wells Fargo Bank, N.A. Servicers Initially, Wells Fargo Bank, N.A. Any other servicer will be approved by the master servicer. Issuing Entity The Wells Fargo Alternative Loan 20 - Trust, a New York common law trust. Trustee HSBC Bank USA, National Association. Custodian Wells Fargo Bank, N.A. Paying Agent Wells Fargo Bank, N.A. AFFILIATIONS Wells Fargo Bank, which is the sponsor, custodian, master servicer, 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 master servicer and the trustee. The master servicer will master service the mortgage loans and 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 servicer will service the mortgage loans in accordance with the underlying servicing agreement entered into between the servicer and the master servicer. S-8 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 Offered v | Certificates -------------- ---------------------> ------------- Depositor <--------------------- Underwriter -------------- ------------- | ^ | ^ Mortgage Loans | | All Offered | | | | Certicates Certificates | | Cash v | v | -------------- ------------- Issuing Investors Entity ------------- -------------- RATING 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-4. 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. See "-- Effects of Prepayments on Your Investment Expectations" below and "Ratings" in this prospectus supplement. 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-4. The certificates consist of: o the seventeen classes of senior Class A Certificates designated as "Senior," "Super S-9 Senior" and "Super Senior Support" certificates in the table beginning on page S-4; and o the six classes of junior Class B Certificates designated as "Subordinated" certificates in the table beginning on page S-4. Only the Class A, Class B-1, Class B-2 and Class B-3 Certificates are being offered by this prospectus supplement and the accompanying prospectus. The Class B-4, Class B-5 and Class B-6 Certificates are not being offered pursuant to this prospectus supplement and the accompanying prospectus, and the depositor may retain or sell such classes. Information provided with respect to the Class B-4, Class B-5 and Class B-6 Certificates is included solely to aid your understanding of the offered certificates. See the table beginning on page S-4 for more information with respect to each class of certificates. Principal Balance of the Certificates The 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. Interests in Mortgage Loans The Class A-PO Certificates represent a portion of the principal balance of the discount mortgage loans. The mortgage loans which have a mortgage interest rate of less than 5.500% after deducting the master servicing fee rate and the applicable servicing fee rate are discount mortgage loans. Because the Class A-PO Certificates represent an interest solely in the discount mortgage loans, only principal payments, including prepayments of principal, and realized losses on the discount mortgage loans will affect the Class A-PO Certificates. The portion of the total principal balance of the mortgage loans not represented by the Class A-PO Certificates is the non-PO portion and is represented by the other Class A Certificates, referred to as the Class A Non-PO Certificates, and the Class B Certificates. The relative interests in the initial non-PO portion of the principal balance of the mortgage loans represented by the Class A Non-PO Certificates and the Class B Certificates are subject to change over time because: o certain unscheduled principal payments on the mortgage loans will be disproportionately allocated to the Class A Non-PO Certificates for a specified period; and o certain losses and certain shortfalls on the mortgage loans will be allocated first to the classes of Class B Certificates in reverse numerical order prior to the allocation of such losses and shortfalls to the Class A Certificates, as discussed in "Description of the Certificates -- Distributions" and "-- Subordination of Class B Certificates" in this prospectus supplement. Forms of Certificates; Denominations Your certificates will be issued either in book-entry form or in fully registered, certificated form and in the minimum denomination and the incremental denomination set forth in the table beginning on page S-4. The offered certificates are not intended to be directly or indirectly held or beneficially owned by anyone in amounts lower than such minimum denominations. MORTGAGE POOL The assets of the trust are expected to consist of approximately [_____] mortgage loans 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 fixed interest rate, monthly pay, fully amortizing, one- to four-family, residential first mortgage loans substantially all of which have original terms to maturity of approximately 30 years. See "Description of the Mortgage Loans" and "Appendix A" in this prospectus supplement. Changes to Mortgage Pool The depositor may remove mortgage loans from the pool, 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 S-10 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, 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 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 Certificateholders" in the prospectus. Optional Termination of the Trust On any distribution date on which the aggregate scheduled principal balance of the mortgage loans is less than 10% of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date, 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 "The Pooling and Servicing Agreement--Termination; Optional Purchase of Mortgage Loans" in the prospectus. DISTRIBUTIONS OF PRINCIPAL AND INTEREST TO CERTIFICATEHOLDERS On each distribution date the amount available for distribution on the certificates, which consists of those payments, recoveries, advances and other receipts in respect of the mortgage loans which are available for distribution on such date, will be distributed generally in the following order of priority: first, pro rata, to the Class A Certificates, in respect of interest which they are entitled to receive on such distribution date; second, to the Class A Certificates in respect of principal which they are entitled to receive on such distribution date; third, to the Class B Certificates in numerical order beginning with the Class B-1 Certificates in respect of interest and principal which they are entitled to receive on such distribution date; and fourth, to the Class A-R Certificates, any remaining amounts. However, if you are purchasing a class of accrual certificates, you will not receive interest distributions with respect to your certificates until either the principal balances of certain classes of accretion directed certificates have been reduced to zero as discussed under "Description of the Certificates--Interest" in this prospectus supplement or the principal balances of the Class B Certificates have been reduced to zero. Until then, interest which would otherwise be distributed on your class of accrual certificates will be added to the principal balance of such class of accrual certificates and will be distributed instead as principal to certain classes of accretion directed certificates and such class of accrual certificates as specified under "Description of the Certificates -- Principal (Including Prepayments)" in this prospectus supplement. In addition, certain payments of principal to which the Class A-PO Certificates are entitled on a distribution date will only be paid out of amounts otherwise distributable as principal to the Class B Certificates on such distribution date. See "Description of the Certificates -- Principal (Including Prepayments)" in this prospectus supplement. The amount available for distribution to certificateholders will not include amounts used to pay the servicing fee and the master servicing fee. Such fees will be paid on each 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. The master 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 An interest-bearing class will accrue interest for each interest accrual period in an amount equal to: o 1/12th of the pass-through rate for the class multiplied by the outstanding principal balance of such class on the related distribution date minus S-11 o the amount of certain interest shortfalls arising from the timing of prepayments on the mortgage loans and the application of the Servicemembers Civil Relief Act and comparable state legislation and interest losses allocated to the class as described under "Description of the Certificates -- Interest" in this prospectus supplement. The allocation of interest distributions among the Class A Non-PO Certificates will be made as described under "Description of the Certificates -- Distributions" and "-- Interest" in this prospectus supplement. Principal Distributions The calculation of the amount of principal which each class of offered certificates is entitled to receive on each distribution date and the priority of principal distributions among the Class A Certificates are described under "Description of the Certificates--Distributions" and "-- Principal (Including Prepayments)" in this prospectus supplement. Credit Enhancement The rights of the holders of each class of Class B Certificates to receive distributions will be subordinated to the rights of the holders of the Class A Certificates to receive distributions and the holders of the classes of Class B Certificates, if any, with lower numerical designations to receive distributions. In general, the protection afforded the holders of more senior classes of certificates by means of this subordination will be effected in two ways: o by the preferential right of the holders of such classes to receive, prior to any distribution being made on any distribution date to the holders of the more junior classes of certificates, the amounts of interest and principal due on the more senior classes of certificates, other than amounts payable to the Class A-PO Certificates, as a reimbursement for realized losses, and, if necessary, by the right of holders of such more senior classes of certificates to receive future distributions on the mortgage loans that would otherwise have been allocated to the holders of the more junior classes of certificates; and o by the allocation of losses resulting from the liquidation of defaulted mortgage loans or the bankruptcy of mortgagors to the more junior classes of certificates in inverse order of seniority, until their respective principal balances have been reduced to zero, prior to the allocation of such losses to the more senior classes of certificates. Credit support for the Class A Certificates is provided by subordination of the Class B Certificates as follows: Subordination of Subordinated Certificates - ------------------------------------------- Senior Priority (Credit Support ^ of Payment [___]%) | - ------------------------------ | | Class B-1 | | (Credit Support | | [___]%) | ------------------ | | Class B-2 | | (Credit Support | | [___]%) | ------------------ | | Class B-3 | | (Credit Support | | [___]%) | ------------------ | | Class B-4 | | (Credit Support | | [___]%) | ------------------ | | Class B-5 | (Credit Support v [___]%) ------------------ Class B-6 Order of (Credit Support Loss 0.00%) Allocation - --------------------------------------------- The approximate initial credit support percentages set forth in the preceding chart show the initial principal balance of the class or classes of certificates subordinate to a class or classes as a percentage of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date. In addition, in order to increase the period during which the principal balances of the Class B Certificates remain available as credit enhancement to the Class A Certificates, a disproportionate amount of prepayments and unscheduled principal receipts with respect to the mortgage loans will be allocated to the Class A Non-PO Certificates in the aggregate. This allocation will accelerate the amortization of the Class A Non-PO Certificates while, in the absence of losses due to the liquidation of defaulted mortgage loans or losses resulting from the bankruptcy of mortgagors, increasing the percentage interest in the principal balance of the mortgage loans evidenced by the Class B Certificates. This disproportionate allocation of prepayments and unscheduled principal receipts will "step down" over time unless specified delinquency and loss tests are not met. See "Description of the Certificates-Principal (Including S-12 Prepayments)--Calculation of Amount to be Distributed on the Certificates" and "Prepayment and Yield Considerations" in this prospectus supplement. After the principal balances of the Class B Certificates have been reduced to zero, the principal portion of all losses, other than the portion attributable to the discount mortgage loans, will be allocated to the Class A Non-PO Certificates. To the extent such losses arise with respect to discount mortgage loans, principal losses will be shared between the Class A Non-PO Certificates and the Class A-PO Certificates according to their respective interests in such mortgage loans. The principal portion of any losses borne by the Class A Non-PO Certificates will be shared pro rata by such classes of Class A Non-PO Certificates based on their then-outstanding principal balances (or, in the case of a class of accrual certificates, such class' initial principal balance, if lower) and the interest portion of such losses will be shared pro rata by the Class A Non-PO Certificates based on interest accrued. However, the share of principal losses allocated to a class of super senior certificates will be borne by the related class of super senior support certificates, together with such class of super senior support certificates' own share of losses. To this extent, a class of super senior support certificates is subordinate to its related class of super senior certificates. See "Description of the Certificates--Interest" and "--Allocation of Losses" in this prospectus supplement. See "Description of the Certificates--Distributions" and "--Subordination of Class B Certificates" in this prospectus supplement. 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 Class A and Class B Certificates were structured assuming, among other things, that prepayments on the mortgage loans occur at a constant rate of [_____]% of the standard prepayment assumption as 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 (Including Prepayments)" and "Prepayment and Yield Considerations." The actual yield on your certificates may not be equal to the yield you anticipated at the time of purchase. In addition, even if the actual yield is equal to the yield you anticipated at the time of purchase, the total return on investment you expected or the expected weighted average life of your certificates may not be realized. These effects are summarized below. Yield The actual yield on your certificates depends on the: o pass-through rate, if any; o price paid; o absence or occurrence of interest shortfalls or losses; o absence or occurrence of principal losses; and o rate and timing of principal prepayments. 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 applicable mortgage loans. o If you purchase your certificate at an amount equal to its unpaid principal balance -- that is, at "par"-- your effective yield will approximate the pass-through rate on that certificate. o If you pay less or more than the unpaid 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. S-13 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. If you purchase principal only certificates, your yield, absent losses, will primarily be a function of the price you paid for your certificates and the rate and timing of principal payments on the discount mortgage loans. In addition, the inverse floating rate certificates are highly sensitive to LIBOR and increases in LIBOR will have a negative effect on the yield to maturity of your certificates. The particular sensitivities of the principal only and inverse floating rate certificates to prepayments and, in the case of the inverse floating rate certificates, to LIBOR are separately displayed in the tables appearing in Appendix C. 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 a class of super senior support certificates, which is subordinate to the related class of super senior certificates after the Class B Certificates are no longer outstanding, you should consider the effect of this increased sensitivity to losses on your yield to maturity. The sensitivities of the yields to maturity of the Class B-2 and Class B-3 Certificates to losses are illustrated in the tables appearing in Appendix D. These illustrations are based on default, loss and other assumptions which are unlikely to match actual experience on the mortgage loans; therefore, your results will vary. If you are purchasing offered certificates at a discount, particularly the principal only certificates, you should consider the risk that a slower than anticipated rate of principal payments on the applicable mortgage loans will 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 mortgage loans will have a negative effect on the yield to maturity of your certificates and that a rapid rate of principal payments on the mortgage loans could result in the loss of all or part of your initial investment. Reinvestment Risk As stated above, if you purchase an offered certificate at par, fluctuations in the rate of distributions of principal will generally not affect your yield to maturity. However, the total return on your investment, even if you purchase your certificates at par, will be reduced if principal distributions received on your certificates cannot be reinvested at a rate as high as the stated pass-through rate or, in the case of principal only certificates, the expected yield. 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. Conversely, slow rates of prepayments on the mortgage loans may coincide with periods of high prevailing market interest rates. During such periods, it is less likely that mortgagors will elect to prepay or refinance mortgage loans and, therefore, the amount of principal distributions available to you for reinvestment at such high prevailing interest rates may be relatively small. Weighted Average Life Volatility One indication of the impact of varying prepayment speeds on a security is the change in its weighted average life. 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 on the applicable mortgage loans may result in the extension of the weighted average life of a certificate. High rates of prepayment S-14 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 even though the yield to maturity on your certificates is unaffected. Because on any distribution date companion certificates will not receive principal distributions until the PAC Certificates have been paid to their planned balances, and will receive all principal distributions in excess of those required to pay the PAC Certificates to their planned balances, the weighted average life of a companion certificate is particularly sensitive to principal prepayments on the mortgage loans. See "Prepayment and Yield Considerations" in this prospectus supplement. The sensitivities of the weighted average lives of the offered certificates to prepayments are 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," "Prepayment and Yield Considerations" and "Description of the Certificates -- Principal (Including Prepayments) -- Principal Payment Characteristics of the PAC Certificates and the Companion Certificates" in this prospectus supplement. FEDERAL INCOME TAX STATUS For federal income tax purposes, the trust estate will be treated as a REMIC. o The offered certificates (other than the Class A-R Certificates) and the Class B-4, Class B-5 and Class B-6 Certificates will constitute "regular interests" in the REMIC and will be treated as newly-originated debt instruments for most federal income tax purposes. o The Class A-R Certificates are residual certificates. The Class A-R Certificates will be the sole "residual interest" in the REMIC. You must report income received on your certificates as it accrues from distribution date to distribution date, even if it is before such income is distributed in cash to you. Certain classes of certificates may be issued with "original issue discount." If your class of certificates is issued with original issue discount, you must report original issue discount income over the life of your certificate, often well before such income is distributed in cash to you. See "Federal Income Tax Considerations" in this prospectus supplement. The residual certificates will not be treated as debt instruments for federal income tax purposes. Instead, if you are a holder of a residual certificate, you must include the taxable income or loss of the REMIC in determining your federal taxable income. You may have to use funds other than distributions on your certificate to meet the tax liabilities resulting from the ownership of a residual certificate. In addition, certain transfers of the residual certificates may be disregarded for federal tax purposes, with the transferor continuing to have tax liabilities for the transferred certificates. See "Description of the Certificates -- Restrictions on Transfer of the Residual Certificates" and "Federal Income Tax Considerations" in this prospectus supplement and "Material Federal Income Tax Consequences -- Federal Income Tax Consequences for REMIC Certificates" 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. The residual certificates may not be purchased by or transferred to a plan or a person acting on behalf of or investing the assets of a plan. See "Description of the Certificates -- Restrictions on Transfer of the Residual Certificates" and "ERISA Considerations" in this prospectus supplement. LEGAL INVESTMENT o The Class A and Class B-1 Certificates will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market S-15 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. o The Class B-2 and Class B-3 Certificates will not constitute "mortgage related securities" under this act. Prospective purchasers, particularly those 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, financial 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. PERIODIC REPORTS The master servicer will file periodic reports with the SEC on behalf of the issuing entity under the name ["Wells Fargo Asset Securities Corporation, Series 20 - " [(File No. 333- )]]. See "Where You Can Find More Information" in the prospectus. - -------------------------------------------------------------------------------- S-16 RISK FACTORS You should consider carefully in connection with the purchase of the offered certificates, the following factors, as well as those described 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 applicable mortgage loans 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 without penalty. 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 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 depositor of all of the mortgage loans in connection with the termination of the trust estate; and o general and targeted solicitations for refinancing by mortgage originators (including the sponsor). 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. If you are purchasing offered certificates at a discount, particularly the Class A-PO Certificates, you should consider the risk that if principal payments on the mortgage loans, or, in the case of the Class A-PO Certificates, on the discount mortgage loans, occur at a rate slower than you expected, there will 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 occur at a rate faster than you expected, there will be a negative effect on the yield to maturity of your certificates. The particular sensitivity of the principal only certificates is separately displayed in the table appearing in Appendix C. S-17 You must make your own decisions as to the appropriate prepayment assumptions to be used in deciding whether to purchase offered certificates. As described in this prospectus supplement under "Description of the Certificates--Principal," the Class A Prepayment Percentage of all principal prepayments (excluding for this purpose, partial liquidations due to default, casualty, condemnation and similar events) initially will be distributed to the classes of Class A Certificates that are entitled to receive principal prepayment distributions at that time. This may result in all (or a disproportionate percentage) of those principal prepayments being distributed to the Class A Certificates and none (or less than their pro rata share) of those principal prepayments being distributed to holders of the subordinated certificates during the periods of time described in the definition of "Class A Prepayment Percentage." 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. Geographic Concentration May Increase Risk of Loss Because of Adverse Economic Conditions or Natural Disasters The yield to maturity on your 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 and housing markets 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 mortgage-backed securities without such concentration. In addition, certain regions have experienced or may experience natural disasters, including earthquakes, fires, floods, hurricanes and tornadoes, which may adversely affect property values. Although mortgaged properties located in certain identified flood zones will be required to be covered by flood insurance, for the maximum amount available, 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 required to be insured against earthquake damage or any other loss not covered by standard hazard insurance policies. The following states have concentrations of mortgaged properties in excess of 10% (by aggregate unpaid principal balance as of the cut-off date) of the mortgage pool: [State] and [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 losses on the mortgage loans. Such losses, if they occur, may have an adverse effect on the yield to maturity of your certificates, especially if they are subordinated and particularly if they are Class B-3 Certificates. The concentrations of mortgaged properties by state and geographic areas are identified 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 appearing 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 S-18 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 on the offered certificates 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 certificate 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 subordinate certificates (in reverse numerical order), and then by the senior certificates. Net interest shortfalls 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 Mortgage Loans May Have Higher Risk of Default or Rates of Prepayment Approximately [___]% (by aggregate unpaid principal balance as of the cut-off date) of the mortgage loans are interest only mortgage loans, which require only the payment of interest with respect to, at the borrower's election at the time of origination of the mortgage loan, the first three to fifteen years of payments with respect to the mortgage loan. At that time, 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. The increase in the mortgagor's monthly payment attributable to principal will occur when the mortgagor's monthly payment may also be increasing as a result of an increase in the mortgage interest rate on the related adjustment date. This increase in monthly payment 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.] The Rate of Default on Mortgage Loans that are Secured by Investor Properties May be Higher than on Other Mortgage Loans Approximately [___]% (by aggregate unpaid principal balance as of the cut-off date) of the mortgage loans in the mortgage pool 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 S-19 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 and the sensitivity tables set forth in Appendix D have been prepared on the basis of the modeling assumptions described under "Prepayment and Yield Considerations--Assumptions Relating to Tables." 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 and the sensitivity 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) and the yields to maturity set forth in the yield tables. 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 and the sensitivity tables, the principal balance of a class of offered certificates could be reduced to zero earlier or later than indicated by the decrement tables and the yield to maturity may be higher or lower than indicated in the sensitivity tables. The models used in this prospectus supplement for prepayments and defaults also do not purport to be a historical description of prepayment or default experience or a prediction of the anticipated rate of prepayment or default of any pool of mortgage loans, including the mortgage loans contained in the trust. It is highly unlikely that the mortgage loans will prepay or liquidate at any of the rates specified or that losses will be incurred according to one particular pattern. The assumed percentages of SDA and SPA and the loss severity percentages shown in the Appendices are for illustrative purposes only. For a description of SDA and SPA, see "Prepayment and Yield Considerations" in this prospectus supplement. The actual rates of prepayment and liquidation and loss severity experience 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. Further, because the timing of cash flows is critical to determining yield, the pre-tax yields to maturity of the Class B-2 and Class B-3 Certificates are likely to differ from the pre-tax yields to maturity shown in the tables in Appendix D. Residual Certificates May Have Adverse Tax Consequences The residual certificates will be the sole "residual interest" in the REMIC for federal income tax purposes. Holders of the residual certificates must report as ordinary income or loss the net income or the net loss of the REMIC whether or not any cash distributions are made to them. This allocation of income or loss may result in a zero or negative after-tax return. No cash distributions are expected to be made with respect to the residual certificates other than the distribution of their principal balance and interest on that balance. Due to their tax consequences, the residual certificates will be subject to restrictions on transfer that may affect their liquidity. In addition, the residual certificates may not be acquired by ERISA plans or similar governmental plans. United States Military Operations May Increase Risk of Relief Act Shortfalls 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, as it may be amended from time to time, or any comparable state legislation will apply. This may result in interest shortfalls on the mortgage loans, which will be borne by all interest-bearing classes of certificates, as described herein under "Description of the Certificates -- Interest." The depositor has not taken S-20 any action to determine whether any of the mortgage loans would be affected by such interest rate limitation. See "Description of the Certificates -- Interest" herein and "Certain Legal Aspects of the Mortgage Loans -- Servicemembers Civil Relief Act and Similar Laws" in the prospectus. S-21 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," "Servicing of the Mortgage Loans" and "The Pooling and Servicing Agreement" 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 residential mortgage loan securitizations involving Alt-A Fixed-Rate Loans is available on the internet at http://www.securitieslink.com/staticpools. Without charge or registration, by clicking on the link in the row titled "WFALT 200 - ," investors can view on this website the following information: o summary information regarding original characteristics of the Sponsor's prior securitized pools of Alt-A Fixed-Rate Loans; and o delinquency, cumulative loss, and prepayment information for the five years preceding the date of first use of this prospectus supplement regarding the Sponsor's prior securitized pools of Alt-A Fixed-Rate 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 of the Sponsor's prior securitized pools issued prior to January 1, 2006 is not deemed to be part of this prospectus supplement, the accompanying prospectus or the Depositor's registration statement. 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 S-22 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" in the prospectus. 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 or substituting Mortgage Loans due to breaches of representations and warranties or as a result of defective documentation, repurchasing at its option certain Mortgage Loans that have become delinquent, repurchasing Mortgage Loans that are required to be transferred to the Sponsor in order to permit the Sponsor to exercise rights that it may have against the originator of the Mortgage Loans or, in the circumstances described in the prospectus under "The Pooling and Servicing Agreement--Termination; Optional Purchase of Mortgage Loans," 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 Master Servicer pursuant to the terms of the Pooling and Servicing Agreement. S-23 THE TRUSTEE HSBC Bank USA, National Association ("HSBC Bank") will act as trustee (the "Trustee") under the Pooling and Servicing Agreement. HSBC is a national banking association. The Depositor and the Master Servicer may maintain other banking relationships in the ordinary course of business with the Trustee. The Trustee's corporate trust office is located at 452 Fifth Avenue, New York, New York 10018, Attention: Corporate Trust or at such other address as the Trustee may designate from time to time. As of [_____], HSBC Bank is acting as Trustee for approximately [___] asset-backed securities transactions involving similar pool assets to those found in this transaction. 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 Certificate Account or compliance with covenants in the Pooling and Servicing Agreement. 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 Certificates -- Periodic Advances" 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 its 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 "The Pooling and Servicing Agreement--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 MASTER SERVICER The Corporate Trust Services division of Wells Fargo Bank will act as master servicer (the "Master Servicer") of the Mortgage Loans and, in that capacity, will supervise the servicing of the Mortgage Loans, cause the Mortgage Loans to be serviced in the event a Servicer (other than Wells Fargo Bank) is terminated and a successor servicer is not appointed, provide certain reports to the Certificateholders regarding the Mortgage Loans and the Certificates and make Periodic Advances to the limited extent described herein. See "Description of the Certificates--Periodic Advances" herein. As of the date of this prospectus supplement, the Master Servicer has not failed to make any required Periodic Advance with respect to any issuance of residential mortgage backed securities. In addition, the Master Servicer will be responsible for securities administration of the Trust. In such capacity, the Master Servicer 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 and the preparation of monthly reports on Form 10-D (based on information included in the monthly distribution date statements), annual reports on Form 10-K and certain reports on Form 8-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 Master Servicer 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 Master Servicer concludes are ambiguous or unclear will be binding on Certificateholders. See "The Sponsor" in the prospectus for more information about Wells Fargo Bank and "The Master Servicer" in the prospectus for more information about Wells Fargo Bank in its capacity as Master Servicer. S-24 THE 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. The Paying Agent will establish and maintain a payment account which will be a trust account and which may be the Certificate Account for so long as the Master Servicer is also acting as the Paying Agent (the "Payment Account"). On each Distribution Date or, if Wells Fargo is no longer acting as Paying Agent, on the business day prior to each Distribution Date, the Master Servicer will deposit funds from the Certificate Account into the Payment Account. The Paying Agent will make payments to Certificateholders with the funds in the Payment Account on the related Distribution Date. See "The Sponsor" in the prospectus for more information about Wells Fargo Bank. THE SERVICER As of the Closing Date, the Sponsor, as "Servicer," will service all of the Mortgage Loans in accordance with the terms of the servicing agreement, dated the Closing Date (the "Wells Fargo Underlying Servicing Agreement" or the "Underlying Servicing Agreement") between the Master Servicer and the Servicer. As of the Closing Date, there are no other Servicers servicing the Mortgage Loans. The rights to enforce the Servicer's obligations under the Wells Fargo Underlying Servicing Agreement with respect to the related Mortgage Loans will be assigned to the Trustee for the benefit of Certificateholders. 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 Wells Fargo Underlying 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 Wells Fargo Underlying Servicing Agreement as if the Servicer alone were servicing the Mortgage Loans. See "The Sponsor," "Servicing of the Mortgage Loans--The Servicers," "--Servicing Experience and Procedures of Wells Fargo Bank" and "The Pooling and Servicing Agreement" in the prospectus for more information about the Servicer, the Servicer's experience, its 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 Certificates--Distributions to Certificateholders--Unscheduled Principal Receipts" and "Servicing of the Mortgage Loans--Changes in Servicing" in the prospectus. See "Servicing of the Mortgage Loans" 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 Master 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. As of [____], Wells Fargo Bank maintains mortgage custody vaults in each of those locations with an aggregate capacity of over [_______] files. 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 S-25 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 "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to the Trustee" 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 Custodian, the Master Servicer, the Paying Agent 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 Master Servicer, the 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. DESCRIPTION OF THE CERTIFICATES General The Issuing Entity will issue Mortgage Asset-Backed Pass-Through Certificates, Series 20 - (the "Certificates") on the Closing Date. The Certificates will consist of seventeen classes of senior certificates (the "Class A Certificates") and six classes of junior certificates (the "Class B Certificates" or "Subordinated Certificates"). The Class A Certificates (other than the Class A-PO Certificates) are referred to herein as the "Class A Non-PO Certificates." Only the Class A Certificates and the Class B-1, Class B-2 and Class B-3 Certificates are being offered by this prospectus supplement and the accompanying prospectus (the "Offered Certificates"). The Offered Certificates will be issued in the forms and denominations set forth in the table beginning on page S-4. Book-Entry Certificates Persons acquiring beneficial ownership interests in the Book-Entry Certificates will hold such Certificates through The Depository Trust Company (in the United States), or Clearstream or Euroclear (in Europe) under certain circumstances as more fully described in the prospectus under "Description of the Certificates--Book-Entry Form." Distributions On each Distribution Date, the Paying Agent will make monthly distributions of interest and in reduction of Principal Balance to holders of each Class of Certificates, to the extent of each Class's entitlement thereto. Distributions will be made on each Distribution Date to holders of record (which, in the case of the Book-Entry Certificates, will be Cede, as nominee for DTC) at the close of business on (i) in the case of the Floating Rate and Inverse Floating Rate Certificates, the business day preceding such Distribution Date and (ii) for all other Certificates, the last business day of the preceding month (each, a "Record Date"). Distributions on the Offered Certificates will be made by either wire transfer or by check mailed to the person entitled thereto as it appears on the certificate register, as described in the prospectus under "Description of the Certificates-General." Any holder of an Offered Certificate (other than any Residual Certificate) evidencing at least a $[______] initial Principal Balance is eligible for wire transfer. See "Description of Certificates-General" in the prospectus. The aggregate amount available for distribution to the Certificateholders on each Distribution Date will be the Pool Distribution Amount. The "Pool Distribution Amount" for a Distribution Date will be the sum of: (i) all previously undistributed payments or other receipts on account of principal (including principal prepayments and Liquidation Proceeds in respect of principal, if any), and interest on or in respect of the S-26 Mortgage Loans received by the Master Servicer, including without limitation any related insurance proceeds, any proceeds received as a result of a substitution of a Mortgage Loan and the proceeds of any purchase of a related Mortgage Loan for breach of a representation or warranty or the sale of a Mortgaged Property by a Servicer in connection with the liquidation of the related Mortgage Loan on or prior to the Remittance Date in the month in which such Distribution Date occurs; (ii) all Periodic Advances made; and (iii) all other amounts (including any insurance proceeds and Compensating Interest) placed in the Certificate Account by any Servicer on or before the Remittance Date or by the Master Servicer on or before the Distribution Date pursuant to the Pooling and Servicing Agreement, but excluding the following: (a) amounts received as late payments of principal or interest as to which one or more unreimbursed Periodic Advances has been made; (b) those portions of each payment of interest on a particular Mortgage Loan which represent (i) the applicable Servicing Fee, (ii) the Master Servicing Fee and (iii) the Fixed Retained Yield, if any; (c) all amounts representing scheduled payments of principal and interest due after the Due Date occurring in the month in which such Distribution Date occurs; (d) all Unscheduled Principal Receipts that were received by the Servicers after the Unscheduled Principal Receipt Period relating to the Distribution Date for the applicable type of Unscheduled Principal Receipt, and all related payments of interest on such amounts; (e) all repurchase proceeds with respect to the Mortgage Loans repurchased by the Depositor on or following the Determination Date in the month in which such Distribution Date occurs and the excess of the unpaid principal balance of any Mortgage Loan for which a Mortgage Loan was substituted over the unpaid principal balance of such substitute Mortgage Loan on or following the Determination Date in the month in which such Distribution Date occurs; (f) to the extent permitted by the Pooling and Servicing Agreement, that portion of Liquidation Proceeds or insurance proceeds with respect to a Mortgage Loan or proceeds of any Mortgaged Property that becomes owned by the Trust Estate which represents (i) any unpaid Servicing Fee or Master Servicing Fee to which such Servicer or the Master Servicer, respectively, is entitled, (ii) any unpaid Fixed Retained Yield or (iii) any unreimbursed Periodic Advances; (g) all amounts representing certain expenses reimbursable to the Master Servicer, any Servicer or the Trustee and other amounts permitted to be retained by the Master Servicer or any Servicer or withdrawn by the Master Servicer from the Certificate Account pursuant to the Pooling and Servicing Agreement; (h) reinvestment earnings on payments received in respect of the Mortgage Loans or on other amounts on deposit in the Certificate Account; (i) Liquidation Profits; (j) Month End Interest; and (k) amounts reimbursable to a Servicer for PMI Advances. See "Description of the Certificates -- Distributions to Certificateholders" in the prospectus. Each Servicer is required to deposit in the Certificate Account by the Remittance Date certain amounts in respect of the Mortgage Loans as set forth in the prospectus under "Servicing of the Mortgage Loans -- Payments on Mortgage Loans." The Master Servicer is required to cause to be remitted to the Payment Account on the business day prior to the Distribution Date any payments constituting part of the Pool Distribution Amount that are received by the Master Servicer or are required to be made with the Master Servicer's own funds. Except as S-27 described below under "-- Periodic Advances," neither the Master Servicer nor the Paying Agent is obligated to remit any amounts which a Servicer was required but failed to deposit in the Certificate Account. On each Distribution Date, the Pool Distribution Amount will be allocated among the Classes of Certificates and distributed to the holders thereof of record as of the related Record Date as follows (the "Pool Distribution Amount Allocation"): first, to the Classes of Class A Certificates, pro rata, based on their respective Interest Accrual Amounts, in an aggregate amount up to the sum of their Interest Accrual Amounts with respect to such Distribution Date; provided that prior to the applicable Accretion Termination Date, an amount equal to the amount that would otherwise be distributable in respect of interest to a Class of Accrual Certificates pursuant to this provision will be distributed in reduction of the Principal Balances of certain Classes of Class A Certificates as set forth below under "--Principal (Including Prepayments)--Allocation of Amount to be Distributed on the Class A Certificates"; second, to the Classes of Class A Certificates, pro rata, based on their respective unpaid Interest Shortfall Amounts, in an aggregate amount up to the sum of their unpaid Interest Shortfall Amounts; provided that prior to the applicable Accretion Termination Date, an amount equal to the amount that would otherwise be distributable in respect of interest shortfalls to a Class of Accrual Certificates pursuant to this provision will be distributed in reduction of the Principal Balances of certain Classes of Class A Certificates as set forth below under "--Principal (Including Prepayments)--Allocation of Amount to be Distributed on the Class A Certificates"; third, concurrently, pro rata, to (A) the Class A Non-PO Certificates, based on and up to the Class A Non-PO Optimal Principal Amount, and (B) the Class A-PO Certificates, based on and up to the Class A-PO Optimal Principal Amount; fourth, to the Class A-PO Certificates in an amount up to the Class A-PO Deferred Amount, but only from amounts otherwise distributable (without regard to this priority) to the Classes of Class B Certificates in reverse order of priority from their respective Class B Principal Distribution Amounts; and fifth, sequentially to the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates so that each such Class shall receive (A) first, an amount up to its Interest Accrual Amount with respect to such Distribution Date, (B) then, an amount up to its previously unpaid Interest Shortfall Amounts and (C) finally, an amount up to its Class B Optimal Principal Amount before any Classes of Class B Certificates with higher numerical designations receive any payments in respect of interest or principal; provided, however, that the amount distributable pursuant to this priority fifth clause (C) to any Classes of Class B Certificates will be reduced by the amount, if any, otherwise distributable as principal hereunder used to pay the Class A-PO Deferred Amount in accordance with priority fourth above. The undivided percentage interest (the "Percentage Interest") represented by any Offered Certificate of a Class will be equal to the percentage obtained by dividing the initial principal balance of such Certificate by the initial Principal Balance of such Class. Interest Interest will accrue on each interest-bearing Class of Certificates (other than the Floating Rate and Inverse Floating Rate Certificates) during each one-month period ending on the last day of the month preceding the month in which each Distribution Date occurs (each, a "Regular Interest Accrual Period"). The initial Regular Interest Accrual Period will be deemed to have commenced on the Cut-Off Date. Interest which accrues on such Classes of Certificates will be calculated on the assumption that distributions in reduction of the Principal Balances thereof on a Distribution Date are made on the first day of the month of each Distribution Date. Interest will accrue on the Floating Rate and Inverse Floating Rate Certificates during each one-month period commencing on the 25th day of the month preceding the month in which such Distribution Date occurs and ending on the 24th day of the month in which such Distribution Date occurs (each, a "LIBOR Based Interest Accrual Period" and, together with each Regular Interest Accrual Period, an "Interest Accrual Period"). The initial LIBOR Based Interest Accrual Period will be deemed to have commenced on [_____], 20 . S-28 The amount of interest that will accrue on each interest-bearing Class of Certificates during each Interest Accrual Period, after taking into account any Non-Supported Interest Shortfalls, Relief Act Shortfalls and the interest portion of certain losses allocated to such Class, is referred to herein as the "Interest Accrual Amount" for such Class. The Interest Accrual Amount for each interest-bearing Class of Certificates equals (a) the product of (i) (1)/12th of the Pass-Through Rate for such Class and (ii) the outstanding Principal Balance of such Class minus (b) the sum of (i) any Non-Supported Interest Shortfall allocable to such Class, (ii) any Relief Act Shortfall allocable to such Class and (iii) in the case of the Class A Certificates, the interest portion of any Realized Losses allocable to such Class on or after the Subordination Depletion Date. The pass-through rate (the "Pass-Through Rate") for each Class of Certificates is the percentage set forth or described in the table beginning on page S-4 of this prospectus supplement. Interest on each Class of Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The Pass-Through Rates on the Floating Rate and Inverse Floating Rate Certificates will be determined as described in the prospectus under "Description of the Certificates -- Pass-Through Rates Based on LIBOR" and may be obtained by telephoning the Paying Agent at 301-815-6000 during normal working hours on any business day. No interest will accrue on the Principal Only Certificates. Subject to the adjustment described below, the "Principal Balance" of a Class of Certificates as of any date will be the principal balance of such Class on the date of initial issuance of the Certificates, plus, in the case of a Class of Accrual Certificates, any applicable Accrual Distribution Amounts, less all amounts previously distributed on such Class in reduction of the principal balance of such Class on prior Distribution Dates including, in the case of the Class A-PO Certificates, distributions in respect of the Class A-PO Deferred Amount. After distributions of principal have been made on a Distribution Date, the Principal Balances of the Certificates will be adjusted so that they equal the Adjusted Pool Amount for such Distribution Date. Such adjustment could result in an increase or decrease in the Principal Balance of a Class. Prior to the Subordination Depletion Date, the most subordinate Class of Class B Certificates then outstanding will be subject to the adjustment. After the Subordination Depletion Date, the Principal Balance of the Class A-PO Certificates will be adjusted to equal the Adjusted Pool Amount (PO Portion) and the Principal Balances of the Class A Non-PO Certificates will be adjusted to equal the Adjusted Pool Amount (Non-PO Portion). Any adjustment to the Class A Non-PO Certificates will be allocated among the Class A Non-PO Certificates, pro rata, based on their Principal Balances or, in the case of a Class of Accrual Certificates, the initial Principal Balance, if lower. Notwithstanding the foregoing, the Principal Balance of a Class may not be increased such that it exceeds the initial Principal Balance of such Class (plus any applicable Accrual Distribution Amounts previously added to the Principal Balance of a Class of Accrual Certificates) less all amounts previously distributed on such Class in reduction of the Principal Balance thereof. A Recovery with respect to a loss on a Mortgage Loan will be treated as a principal prepayment and will result in a payment of principal to one or more corresponding then-outstanding Classes of Certificates. A Class will cease to be entitled to any distribution after its Principal Balance is reduced to zero for any reason. It is possible that such payment will not be made to the Class that originally bore the loss. Further, even though a Class may have previously had its Principal Balance reduced as a result of a loss for which there is later a Recovery, that Class will not be entitled to any interest on the amount of such reduction. Because a Recovery results in a payment of principal to certain Classes without a corresponding decrease in the related Adjusted Pool Amount, the Principal Balance of the most subordinate Class then outstanding (which may not be the Class that originally bore the loss if such Class is no longer outstanding) may be increased or such Principal Balance may be decreased by a lesser amount than would otherwise be the case based on any Realized Losses allocable to such Class. The "Class A Principal Balance" as of any date will be equal to the sum of the Principal Balances of the Classes of Class A Certificates as of such date. The "Class A Non-PO Principal Balance" as of any date will be equal to the sum of the Principal Balances of the Classes of Class A Non-PO Certificates as of such date. S-29 The "Class B Principal Balance" as of any date will be equal to the sum of the Principal Balances of the Classes of Class B Certificates as of such date. The "Aggregate Principal Balance" as of any date will be equal to the sum of the Class A Principal Balance and the Class B Principal Balance as of such date. The "Aggregate Non-PO Principal Balance" as of any date will be equal to the sum of the Class A Non-PO Principal Balance and the Class B Principal Balance as of such date. With respect to any Distribution Date, the "Adjusted Pool Amount" will equal the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-Off Date minus the sum of (i) all amounts in respect of principal received in respect of such Mortgage Loans (including amounts received as Periodic Advances, principal prepayments and Liquidation Proceeds in respect of principal) and distributed to holders of the Certificates on such Distribution Date and all prior Distribution Dates, (ii) the principal portion of all Liquidated Loan Losses incurred on such Mortgage Loans for which the Liquidation Proceeds were received from the Cut-Off Date through the end of the applicable Unscheduled Principal Receipt Period for such Distribution Date and (iii) the principal portion of all Bankruptcy Losses (other than Debt Service Reductions) incurred on such Mortgage Loans from the Cut-Off Date through the end of the period which corresponds to the applicable Unscheduled Principal Receipt Period for principal prepayments in full for such Distribution Date. With respect to any Distribution Date, the "Adjusted Pool Amount (PO Portion)" will equal the sum as to each Mortgage Loan outstanding as of the Cut-Off Date of the product of (A) the PO Fraction for such Mortgage Loan and (B) the principal balance of such Mortgage Loan as of the Cut-Off Date less the sum of (i) all amounts in respect of principal received in respect of such Mortgage Loan (including amounts received as Periodic Advances, principal prepayments and Liquidation Proceeds in respect of principal) and distributed to holders of the Certificates on such Distribution Date and all prior Distribution Dates, (ii) the principal portion of any Liquidated Loan Losses incurred on such Mortgage Loan for which the Liquidation Proceeds were received from the Cut-Off Date through the end of the applicable Unscheduled Principal Receipt Period for such Distribution Date and (iii) the principal portion of all Bankruptcy Losses (other than Debt Service Reductions) incurred on such Mortgage Loan from the Cut-Off Date through the end of the period which corresponds to the applicable Unscheduled Principal Receipt Period for principal prepayments in full for such Distribution Date. With respect to any Distribution Date, the "Adjusted Pool Amount (Non-PO Portion)" will equal the Adjusted Pool Amount less the Adjusted Pool Amount (PO Portion). The "Net Mortgage Interest Rate" on each Mortgage Loan will be equal to the Mortgage Interest Rate on such Mortgage Loan as stated in the related mortgage note minus the sum of (i) the applicable Servicing Fee Rate, (ii) the Master Servicing Fee Rate and (iii) the Fixed Retained Yield rate, if any, for such Mortgage Loan. See "Pooling and Servicing Agreement--Fixed Retained Yield" herein. As to any Distribution Date, Prepayment Interest Shortfalls, to the extent that they exceed Compensating Interest, and Curtailment Interest Shortfalls are referred to herein as "Non-Supported Interest Shortfalls" and will be allocated to (i) the Class A Certificates according to the percentage obtained by dividing the sum of the Class A Non-PO Principal Balances by the Aggregate Non-PO Principal Balance and (ii) the Class B Certificates according to the percentage obtained by dividing the Class B Principal Balance by the Aggregate Non-PO Principal Balance. Such allocation of Non-Supported Interest Shortfalls will reduce the amount of interest due to be distributed to holders of Certificates then entitled to distributions in respect of interest. Any such reduction in respect of interest allocated to the Class A Certificates will be allocated among the Classes of Class A Certificates, pro rata, on the basis of their respective Interest Accrual Amounts, without regard to any reduction pursuant to this paragraph, for such Distribution Date. Any such reduction in respect of interest allocated to the Class B Certificates will be allocated among such Classes of Class B Certificates, pro rata, on the basis of their respective Interest Accrual Amounts, without regard to any reduction pursuant to this paragraph, for such Distribution Date. Any interest shortfalls arising from Unscheduled Principal Receipts in full that are not Prepayments in Full and any other interest shortfalls arising from Unscheduled Principal Receipts, other than Curtailments, will be borne first by the Classes of Class B Certificates in reverse numerical order and then pro rata by the Class A Certificates, based on interest accrued. See "-- Subordination of Class B Certificates" herein. After the Subordination Depletion Date, S-30 all interest shortfalls arising from Unscheduled Principal Receipts, other than Prepayment Interest Shortfalls covered by Compensating Interest, will be treated as Non-Supported Interest Shortfalls and allocated in reduction of interest accrued on the Class A Certificates. See "Description of the Certificates -- Distributions to Certificateholders - -- Distributions of Interest" in the prospectus for a discussion of Prepayment Interest Shortfalls, Curtailment Interest Shortfalls and Compensating Interest. 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 Servicemembers Civil Relief Act or comparable state legislation ("Relief Act Shortfalls") will be allocated among the Class A Certificates and Class B Certificates in the same manner as Non-Supported Interest Shortfalls. Allocations of the interest portion of Realized Losses first to the Classes of Class B Certificates in reverse numerical order will result from the priority of distributions first to the holders of the Class A Certificates and then to the holders of the Classes of Class B Certificates in numerical order of the Pool Distribution Amount as described above under "-- Distributions." On each Distribution Date on which the amount available to be distributed in respect of interest on a Class of Certificates pursuant to the Pool Distribution Amount Allocation is less than such Class's Interest Accrual Amount, the amount of any such deficiency (as to each Class, an "Interest Shortfall Amount") will be added to the amount of interest distributable to such Class on subsequent Distribution Dates, but only for so long as such Class's Principal Balance is greater than zero. No interest will accrue on any Interest Shortfall Amounts. Prior to the applicable Accretion Termination Date, interest in an amount equal to the Interest Accrual Amount for a Class of Accrual Certificates will accrue on such Class, but such amount will not be distributed as interest to such Class until such Accretion Termination Date. Prior to such time, an amount equal to the accrued and unpaid interest on such Class will be added to the Principal Balance thereof and distributed as described under "-- Principal (Including Prepayments) -- Allocation of Amount to be Distributed on the Class A Certificates" below. The "Accretion Termination Date" will be (a) for the Class A-7 Certificates, the earlier to occur of (i) the Distribution Date following the Distribution Date on which the Principal Balances of the Class A-5 and Class A-6 Certificates have been reduced to zero or (ii) the Subordination Depletion Date and (b) for the Class A-9 Certificates, the earlier to occur of (i) the Distribution Date following the Distribution Date on which the Principal Balance of the Class A-8 Certificates has been reduced to zero or (ii) the Subordination Depletion Date. See "Prepayment and Yield Considerations" herein. Principal (Including Prepayments) The principal balance of a Certificate at any time is equal to the product of the related Class's Principal Balance and such Certificate's Percentage Interest, and represents the maximum specified dollar amount (exclusive of (i) any interest that may accrue on such Certificate (other than interest added to the Principal Balance of a Class of Accrual Certificates) and (ii) in the case of the Residual Certificates, any additional amounts to which the holders of such Certificates may be entitled as described below under "--Additional Rights of the Residual Certificateholders") to which the holders thereof are entitled from the cash flow on the Mortgage Loans at such time and will decline to the extent of distributions in reduction of the principal balance of, and allocations of losses to, such Certificate. The approximate initial Principal Balance of each Class of Certificates is set forth in the table beginning on page S-4 of this prospectus supplement. Calculation of Amount to be Distributed on the Certificates Distributions in reduction of the Principal Balance of the Class A Non-PO Certificates will be made on each Distribution Date pursuant to the Pool Distribution Amount Allocation, in an aggregate amount equal to the Class A Non-PO Principal Distribution Amount with respect to such Distribution Date and any Accrual Distribution Amounts for the Classes of Accrual Certificates with respect to such Distribution Date. The "Accrual Distribution Amount" with respect to any Distribution Date and any Class of Accrual Certificates will be equal to the sum of (i) the current interest allocated but not distributed to such Class of Accrual S-31 Certificates on such Distribution Date in accordance with priority first of the Pool Distribution Amount Allocation and (ii) the unpaid Interest Shortfall Amount allocated but not distributed to such Class of Accrual Certificates on such Distribution Date in accordance with priority second of the Pool Distribution Amount Allocation. The "Class A Non-PO Principal Distribution Amount" with respect to any Distribution Date will be equal to the amount distributed pursuant to priority third clause (A) of the Pool Distribution Amount Allocation, in an aggregate amount up to the Class A Non-PO Optimal Principal Amount. Distributions in reduction of the Principal Balance of the Class A-PO Certificates will be made on each Distribution Date in an aggregate amount equal to the Class A-PO Distribution Amount. The "Class A-PO Distribution Amount" with respect to any Distribution Date will be equal to the sum of (i) the amount distributed pursuant to priority third clause (B) of the Pool Distribution Amount Allocation, in an aggregate amount up to the Class A-PO Optimal Principal Amount and (ii) the amount distributed pursuant to priority fourth of the Pool Distribution Amount Allocation, in an aggregate amount up to the Class A-PO Deferred Amount. Distributions in reduction of the Principal Balances of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will be made on each Distribution Date first to the Class B-1 Certificates, second to the Class B-2 Certificates, third to the Class B-3 Certificates, fourth to the Class B-4 Certificates, fifth to the Class B-5 Certificates and then to the Class B-6 Certificates, pursuant to priority fifth clause (C) of the Pool Distribution Amount Allocation, in an aggregate amount with respect to each such Class (each, a "Class B Principal Distribution Amount") up to the Class B Optimal Principal Amount for such Class. The "Class A Non-PO Optimal Principal Amount", the "Class B Optimal Principal Amount" for each Class of Class B Certificates and the "Class A-PO Optimal Principal Amount" with respect to each Distribution Date will be an amount equal to the sum of: (I) for each outstanding Mortgage Loan (including each defaulted Mortgage Loan with respect to which the related Mortgaged Property has been acquired by the Trust Estate) of the product of: (A) (i) in the case of the Class A Non-PO Optimal Principal Amount and each Class B Optimal Principal Amount, the Non-PO Fraction for such Mortgage Loan and (ii) in the case of the Class A-PO Optimal Principal Amount, the PO Fraction for such Mortgage Loan; and (B) the sum of: (i) the applicable Class Percentage of the scheduled payment of principal due on such Mortgage Loan on the first day of the month in which the Distribution Date occurs; (ii) the applicable Class Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the applicable Class Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor, as described under the heading "Description of the Mortgage Loans -- Mandatory Repurchase or Substitution of Mortgage Loans" herein; and (iv) the applicable Class Percentage of the excess of the unpaid principal balance of any Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date over the unpaid principal balance of such substituted Mortgage Loan, less the amount allocable to the principal portion of any unreimbursed advances in respect of such Mortgage Loan. See "The Pooling and Servicing Agreement -- Assignment of Mortgage Loans to the Trustee" in the prospectus; and (II) in the case of the Class A-PO Certificates, the PO Fraction of each Recovery in an aggregate amount not exceeding the Class A-PO Deferred Amount and in the case of the Class A Non-PO Certificates and each Class of S-32 Class B Certificates, the applicable Class Prepayment Percentage of the Recoveries not allocated to the Class A-PO Certificates. The "Class Percentage" will equal (i) the Class A Percentage, in the case of the calculation of the Class A Non-PO Optimal Principal Amount; (ii) the applicable Class B Percentage, in the case of the calculation of the Class B Optimal Principal Amount for a Class of Class B Certificates; and (iii) 100% in the case of the calculation of the Class A-PO Optimal Principal Amount. The "Class Prepayment Percentage" will equal (i) the Class A Prepayment Percentage, in the case of the calculation of the Class A Non-PO Optimal Principal Amount; (ii) the applicable Class B Prepayment Percentage, in the case of the calculation of the Class B Optimal Principal Amount for a Class of Class B Certificates; and (iii) 100% in the case of the calculation of the Class A-PO Optimal Principal Amount. The "Class A-PO Deferred Amount" for any Distribution Date prior to the Subordination Depletion Date will equal the difference between: (A) the sum of: (i) the amount by which the Class A-PO Optimal Principal Amount for all prior Distribution Dates exceeds the amounts distributed to the Class A-PO Certificates on such prior Distribution Dates pursuant to priority third clause (B) of the Pool Distribution Amount Allocation; and (ii) the sum of the product for each Discount Mortgage Loan which became a Liquidated Loan at any time on or prior to the last day of the applicable Unscheduled Principal Receipt Period for the current Distribution Date of: (a)the PO Fraction for such Discount Mortgage Loan; and (b)an amount equal to the principal portion of Realized Losses (other than Bankruptcy Losses due to Debt Service Reductions) incurred with respect to such Discount Mortgage Loan; and (B) the sum of: (i) the sum of the Class A-PO Certificates' portion of Recoveries for such Distribution Date and prior Distribution Dates; and (ii) amounts distributed on the Class A-PO Certificates on prior Distribution Dates pursuant to priority fourth of the Pool Distribution Amount Allocation. On or after the Subordination Depletion Date, the Class A-PO Deferred Amount will be zero. No interest will accrue on any Class A-PO Deferred Amount. The principal distribution to the holders of a Class of Class B Certificates will be reduced on any Distribution Date on which (i) the Principal Balance of such Class of Class B Certificates would be reduced to zero as a result of principal distributions or allocation of losses and (ii) the Principal Balance of any Class A Certificates or any Class of Class B Certificates with a lower numerical designation, would be subject to reduction as a result of allocation of Realized Losses. The amount of any such reduction in the principal distributed to the holders of such Class of Class B Certificates will instead be distributed pro rata to the holders of any Class (but not the Class A-PO Certificates) senior in priority to receive distributions in accordance with the Pool Distribution Amount Allocation. The "Non-PO Fraction" with respect to any Mortgage Loan will equal the Net Mortgage Interest Rate for such Mortgage Loan divided by 1.0%, but will not be greater than 1.0. The "Pool Balance (Non-PO Portion)" for any Distribution Date is the sum for each outstanding Mortgage Loan of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such Mortgage Loan as of such Distribution Date. S-33 The "PO Fraction" with respect to any Mortgage Loan with a Net Mortgage Interest Rate less than [_____]% (a "Discount Mortgage Loan"), will equal the difference between [_____] and the Non-PO Fraction for such Mortgage Loan. The PO Fraction with respect to each Mortgage Loan that is not a Discount Mortgage Loan (a "Premium Mortgage Loan") will be zero. The "Pool Balance (PO Portion)" for any Distribution Date is the sum for each outstanding Mortgage Loan of the product of (i) the PO Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such Mortgage Loan as of such Distribution Date. The "Class A Percentage" for any Distribution Date occurring on or prior to the Subordination Depletion Date is the percentage, which in no event will exceed 100%, obtained by dividing the Class A Non-PO Principal Balance as of such date (before taking into account distributions in reduction of Principal Balance on such date) by the Pool Balance (Non-PO Portion). The Class A Percentage for the first Distribution Date will be approximately [_____]%. The Class A Percentage for any Distribution Date occurring after the Subordination Depletion Date will be [_____]%. The "Class A Prepayment Percentage" for any Distribution Date prior to the Distribution Date in [_____] 20 will be [_____]% and thereafter will be the Class A Percentage for such Distribution Date plus the percentage of the Subordinated Percentage indicated in the table below; provided, however, that if on any Distribution Date the Class A Percentage exceeds the initial Class A Percentage, the Class A Prepayment Percentage for such Distribution Date will equal [_____]%. See "Prepayment and Yield Considerations" herein and in the prospectus. Notwithstanding the foregoing, no reduction of the level of the Class A Prepayment Percentage will occur on any Distribution Date if the Delinquency and Loss Tests are not met. The "Delinquency and Loss Tests" with respect to any Distribution Date are met if (i) as of such Distribution Date as to which any reduction in the Class A Prepayment Percentage applies, the average outstanding principal balance on such Distribution Date and for the preceding five Distribution Dates of the Mortgage Loans that were delinquent 60 days or more (including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust Estate) is less than [_____]% of the Class B Principal Balance and (ii) for any Distribution Date, cumulative Realized Losses with respect to the Mortgage Loans are less than or equal to the percentages of the principal balance of the Class B Certificates as of the Cut-Off Date (the "Original Class B Principal Balance") indicated in the table below. Percentage of Percentage of Original Class Subordinated B Principal Distribution Date Occurring In Percentage Balance - --------------------------------------- ---------------------- -------------- % % % % % % % % % % If on any Distribution Date the allocation to the Class A Non-PO Certificates of full and partial principal prepayments and other amounts in the percentage required as described above would reduce the outstanding Class A Non-PO Principal Balance below zero, the Class A Prepayment Percentage for such Distribution Date will be limited to the percentage necessary to reduce the Class A Non-PO Principal Balance to zero. This disproportionate allocation of certain unscheduled payments in respect of principal will have the effect of accelerating the amortization of the Class A Non-PO Certificates while, in the absence of Realized Losses, increasing the interest in the principal balance of the Mortgage Loans evidenced by the Class B Certificates. Increasing the respective interest of the Class B Certificates relative to that of the Class A Non-PO Certificates is intended to preserve the availability of the subordination provided by the Class B Certificates. See "--Subordination of Class B Certificates" below. The "Subordinated Percentage" for any Distribution Date will be calculated as the difference between 100% and the Class A Percentage for such date. The "Subordinated Prepayment Percentage" for any Distribution Date will be calculated as the difference between 100% and the Class A Prepayment Percentage for such date. S-34 The "Class B Percentage" and "Class B Prepayment Percentage" for a Class of Class B Certificates and any Distribution Date will equal the portion of the Subordinated Percentage and Subordinated Prepayment Percentage, as the case may be, represented by the fraction the numerator of which is the Principal Balance for such Class of Class B Certificates and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates entitled to principal distributions for such Distribution Date as described below. In the event that a Class of Class B Certificates is not entitled to principal distributions for such Distribution Date, the Class B Percentage and Class B Prepayment Percentage for such Class will both be [_____]% with respect to such Distribution Date. In the event that on any Distribution Date the Current Fractional Interest of any Class of Class B Certificates is less than the Original Fractional Interest of such Class, then the Classes of Certificates that are subordinate to such Class will not be entitled to distributions in respect of principal and the Principal Balances of such subordinated Classes will not be used to determine the Class B Percentages and Class B Prepayment Percentages of the Classes of Class B Certificates that are senior to such subordinated Classes for such Distribution Date. The Class B-6 Certificates will not have original or current fractional interests which are required to be maintained as described above. The "Original Fractional Interest" of a Class of Class B Certificates is the percentage obtained by dividing the sum of the initial Principal Balances of the Classes of Certificates that are subordinate to such Class by the initial Aggregate Non-PO Principal Balance. The "Current Fractional Interest" of a Class of Class B Certificates for any Distribution Date is the percentage obtained by dividing the sum of the Principal Balances of the Classes of Certificates that are subordinate to such Class by the Aggregate Non-PO Principal Balance. The following table sets forth the expected approximate Original Fractional Interest for each Class of Class B Certificates on the date of issuance of the Certificates. Approximate Original Class Fractional Interest ---------- ------------------- B-1 % B-2 % B-3 % B-4 % B-5 % B-6 N/A Allocation of Amount to be Distributed on the Class A Certificates I. On each Distribution Date occurring prior to the Accretion Termination Date for the Class A-7 Certificates, the applicable Accrual Distribution Amount will be distributed, sequentially, as follows: first, concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and second, to the Class A-7 Certificates. II. On each Distribution Date occurring prior to the Accretion Termination Date for the Class A-9 Certificates, the applicable Accrual Distribution Amount will be distributed, sequentially, to the Class A-8 and Class A-9 Certificates; III. On each Distribution Date occurring prior to the Subordination Depletion Date, the Class A Non-PO Distribution Amount will be allocated among and distributed in reduction of the Principal Balances of the Class A Non-PO Certificates, sequentially, as follows: first, to the Class A-R Certificates; and second, concurrently, as follows: (A) approximately [_____]%, sequentially, as follows: (i) sequentially, up to the PAC I Group Principal Amount as follows: (a) sequentially, to the Class A-10 and Class A-11 Certificates; S-35 (b) concurrently, to the Class A-12 and Class A-14 Certificates, pro rata; and (c) to the Class A-13 Certificates; (ii) sequentially, up to the PAC II Group Principal Amount, as follows: (a) concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and (b) to the Class A-7 Certificates; (iii) sequentially, to the Class A-8 and Class A-9 Certificates; (iv) sequentially, as follows: (a) concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and (b) to the Class A-7 Certificates; and (v) sequentially, as follows: (a) sequentially, to the Class A-10 and Class A-11 Certificates; (b) concurrently, to the Class A-12 and Class A-14 Certificates, pro rata; and (c) to the Class A-13 Certificates; and (B) approximately [_____]%, sequentially, as follows: (i) to the Class A-3 and Class A-15 Certificates, pro rata, up to the Priority Amount for such Distribution Date; (ii) concurrently, to the Class A-1 and Class A-2 Certificates, pro rata; (iii) to the Class A-4 Certificates; and (iv) concurrently, to the Class A-3 and Class A-15 Certificates, pro rata. The "PAC I Group Principal Amount" for any Distribution Date means the amount, if any, that would reduce the sum of the Principal Balances of the Class A-10, Class A-11, Class A-12, Class A-13 and Class A-14 Certificates (the "PAC I Group" or "PAC I Certificates") to the percentage of the sum of the initial Principal Balances of the PAC I Group shown in the related table appearing in Appendix E with respect to such Distribution Date. The "PAC II Group Principal Amount" for any Distribution Date means the amount, if any, that would reduce the sum of the Principal Balances of the Class A-5, Class A-6 and Class A-7 Certificates (the "PAC II Group" or "PAC II Certificates" and, together with the PAC I Group or PAC I Certificates, the "PAC Groups" or "PAC Certificates") to the percentage of the sum of the initial Principal Balances of the PAC II Group shown in the related table appearing in Appendix E with respect to such Distribution Date. The PAC I Group Principal Amount and PAC II Group Principal Amount are each also referred to as a "PAC Principal Amount". The "Priority Amount" for any Distribution Date means the lesser of (i) the sum of the Principal Balances of the Class A-3 and Class A-15 Certificates and (ii) the sum of (A) the product of (1) the Priority Percentage, (2) the Shift Percentage and (3) approximately [_____]% of the Scheduled Principal Amount and (B) the product of (1) the Priority Percentage, (2) the Prepayment Shift Percentage and (3) approximately [_____]% of the Unscheduled Principal Amount. The "Priority Percentage" means the sum of the Principal Balances of the Class A-3 and Class A-15 Certificates divided by the sum of the Principal Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-15 Certificates. The "Scheduled Principal Amount" means the sum for each outstanding Mortgage Loan (including each defaulted Mortgage Loan with respect to which the related Mortgaged Property has been acquired by the Trust Estate) of the product of (A) the Non-PO Fraction for such Mortgage Loan and (B) the sum of the amounts for such S-36 Mortgage Loan described in clauses B(i) and B(iv) of the definition of "Class A Non-PO Optimal Principal Amount" beginning on page S-28. The "Unscheduled Principal Amount" means the sum for each outstanding Mortgage Loan (including each defaulted Mortgage Loan with respect to which the related Mortgage Property has been acquired by the Trust Estate) of the product of (A) the Non-PO Fraction for such Mortgage Loan and (B) the sum of the amounts for such Mortgage Loan described in clauses B(ii) and B(iii) of the definition of "Class A Non-PO Optimal Principal Amount" beginning on page S-28. The "Shift Percentage" for any Distribution Date will be the percentage indicated below: Shift Distribution Date Occurring In Percentage - ---------------------------------------------------------------- -------------- % % The "Prepayment Shift Percentage" for any Distribution Date will be the percentage indicated below: Prepayment Shift Distribution Date Occurring In Percentage - ---------------------------------------------------------------- -------------- % % % % % % Notwithstanding the foregoing, on each Distribution Date occurring on or after the Subordination Depletion Date, the Class A Non-PO Principal Distribution Amount will be distributed among the Classes of Class A Non-PO Certificates pro rata in accordance with their respective outstanding Principal Balances without regard to either the proportions or the priorities set forth above. Any amounts distributed on a Distribution Date to the holders of any Class in reduction of Principal Balance will be allocated among the holders of such Class pro rata in accordance with their respective Percentage Interests. Principal Payment Characteristics of the PAC Certificates and the Companion Certificates The percentages of the initial aggregate Principal Balances of the PAC Groups set forth in the tables appearing in Appendix E were calculated using, among other things, the Structuring Assumptions. Based on such assumptions, the aggregate Principal Balances of the PAC I Group and PAC II Group would be reduced to the percentages of their initial aggregate Principal Balances indicated in such tables for each Distribution Date if prepayments on the Mortgage Loans occur at a constant rate between approximately [_____]% SPA (as defined herein under "Prepayment and Yield Considerations") and approximately [_____]% SPA for the PAC I Group and between approximately [_____]% SPA (as defined herein under "Prepayment and Yield Considerations") and approximately [_____]% SPA for the PAC II Group. However, it is highly unlikely that principal prepayments on the Mortgage Loans will occur at any constant rate or that the Mortgage Loans will prepay at the same rate. In addition, even if principal prepayments were to occur at a constant rate, there will be differences between the characteristics of the mortgage loans ultimately included in the Trust Estate and the characteristics which are assumed for the Structuring Assumptions. Therefore, there can be no assurance that the aggregate Principal Balances of the PAC Groups, after the application of the distributions to be made on any Distribution Date, will be equal to the percentages of the initial aggregate Principal Balances for such Distribution Dates specified in such tables. The Weighted Average Lives of the Classes of PAC Certificates will vary under different prepayment scenarios. To the extent that principal prepayments occur at a constant rate that is slower than approximately[_____]% SPA for the PAC I Group and approximately [_____]% SPA for the PAC II Group, the available portion of Class A Non-PO Principal Distribution Amount on each Distribution Date may be insufficient to make distributions in reduction of the aggregate Principal Balances of one or both the PAC Groups in an amount that would reduce their aggregate Principal Balances to their planned Principal Balances for such Distribution Date. The Weighted Average Lives of the Classes of PAC Certificates may therefore be extended as illustrated for the PAC Certificates by the related S-37 tables appearing in Appendix B. To the extent that such principal prepayments occur at a constant rate that is faster than approximately [_____]% SPA for the PAC I Group and approximately [_____]% SPA for the PAC II Group, the Weighted Average Lives of the Classes of PAC Certificates may be shortened as illustrated for the PAC Certificates by the related tables appearing in Appendix B. Because any Excess Principal Payments (as defined below) for any Distribution Date will be distributed to Certificateholders on such Distribution Date, the ability to distribute the PAC Principal Amounts on any Distribution Date will not be enhanced by the averaging of high and low principal prepayment rates on the Mortgage Loans over several Distribution Dates, as might be the case if any such Excess Principal Payments were held for future applications and not distributed monthly. There is no assurance that, with respect to distributions of the Class A Non-PO Principal Distribution Amount, the aggregate Principal Balances of the PAC Groups will not be reduced to zero significantly earlier or significantly later than the last Distribution Date shown in the tables appearing in Appendix E. The extent to which the planned Principal Balance of a PAC Group will be achieved and the sensitivity of a PAC Group to principal prepayments on the Mortgage Loans will depend, in part, upon the period of time during which the Certificates supporting such PAC Group remain outstanding. The Companion Certificates and the PAC II Group support the PAC I Group and the Companion Certificates support the PAC II Group. On each Distribution Date, the excess of the portion of the Class A Non-PO Principal Distribution Amount available to make distributions of principal to a PAC Group over the PAC Principal Amount for such PAC Group (the "Excess Principal Payments") for such Distribution Date will be distributed to the Certificates supporting such PAC Group before being distributed to such PAC Group. This is intended to decrease the likelihood that the aggregate Principal Balance of a PAC Group will be reduced below its planned Principal Balance on a given Distribution Date. However, under certain relatively fast prepayment scenarios, one or more Classes of PAC Certificates of a PAC Group may continue to be outstanding when the Certificates supporting such PAC Group are no longer outstanding. Under such circumstances, principal payments will be applied to such PAC Group without regard to its PAC Principal Amount for a given Distribution Date. Thus, when the aggregate Principal Balance of the Certificates supporting a PAC Group has been reduced to zero, such PAC Group, if outstanding, will, in accordance with the priorities set forth above, become more sensitive to the rate of prepayment on the Mortgage Loans. Under such circumstances, such PAC Group will receive principal payments that otherwise would have been distributable to the Certificates supporting such PAC Group. Conversely, under certain relatively slow prepayment scenarios, the portion of the Class A Non-PO Principal Distribution Amount available to make distributions of principal to a PAC Group may not be sufficient to pay the PAC Principal Amount for such PAC Group on a given Distribution Date. In such cases, the portion of the Class A Non-PO Principal Distribution Amount available to make distributions of principal to such PAC Group for each subsequent Distribution Date will be applied in accordance with the priorities described herein such that the Certificates supporting such PAC Group will not receive distributions in reduction of their Principal Balances until the outstanding aggregate Principal Balance of such PAC Group has reached its planned Principal Balance for such Distribution Date. As a result, the Weighted Average Lives of the Classes of PAC Certificates may be extended if their PAC Group did not receive its PAC Principal Amount on a Distribution Date. Classes of PAC Certificates are designed to provide some protection against volatility in their Weighted Average Lives. However, investors in the PAC Certificates should be aware that under certain prepayment scenarios, a "whipsaw" effect in the Weighted Average Lives of such Certificates could occur such that the Weighted Average Lives of such Certificates could extend, rather than shorten as prepayment rates increase (or shorten, rather than extend as prepayment rates decrease) and that any such phenomena will not necessarily be illustrated by the tables appearing in Appendix B. The Weighted Average Lives of the Companion Certificates will be particularly sensitive to the rate of prepayments on the Mortgage Loans. See "Prepayment and Yield Considerations" herein. Additional Rights of the Residual Certificateholders The Residual Certificates will remain outstanding for as long as the Trust Estate shall exist, whether or not such Class is receiving current distributions of principal or interest. The holders of the Residual Certificates will be entitled to receive the proceeds of the remaining assets of the REMIC, if any, on the final Distribution Date for the S-38 Certificates, after distributions in respect of any accrued but unpaid interest on the Certificates and after distributions in reduction of Principal Balance have reduced the Principal Balances of the Certificates to zero. It is not anticipated that there will be any material assets remaining in the Trust Estate on the final Distribution Date following the distributions of interest and in reduction of Principal Balance made on the Certificates on such date. In addition, the Class A-R Certificateholders will be entitled on each Distribution Date to receive any Pool Distribution Amount remaining after all distributions pursuant to the Pool Distribution Amount Allocation have been made. It is not anticipated that there will be any material undistributed portion of the Pool Distribution Amount. Restrictions on Transfer of the Residual Certificates The Residual Certificates will be subject to restrictions on transfer and the Residual Certificates will contain a legend describing such restrictions. Tax-related restrictions on transfer are discussed under "Material Federal Income Tax Consequences -- Federal Income Tax Consequences for REMIC Certificates -- Taxation of Residual Certificates -- Tax-Related Restrictions on Transfer of Residual Certificates" in the prospectus. In addition, the Residual Certificates may not be purchased by or transferred to any person which is an employee benefit plan or other retirement plan or arrangement subject to Title I 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") (any such plan or arrangement, an "ERISA Plan") or which is a governmental plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law ("Similar Law") which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, with an ERISA Plan, a "Plan"), or any person acting on behalf of or investing the assets of such Plan. See "ERISA Considerations" herein and in the prospectus. Periodic Advances Generally, each Servicer is required to advance delinquent payments of principal and interest on any Mortgage Loan in the Trust Estate to the extent that such Servicer believes that such amounts will be recoverable by it from liquidation proceeds or other recoveries in respect of the related Mortgage Loan (each, a "Periodic Advance"). Upon a Servicer's failure to make a Periodic Advance required by the applicable Underlying Servicing Agreement, the Trustee, if such Servicer is Wells Fargo Bank, or the Master Servicer, if such Servicer is not Wells Fargo Bank, will be required to make such Periodic Advance. Amounts advanced are reimbursable to the Servicer, the Master Servicer or the Trustee, as applicable, from amounts received on the related Mortgage Loan or from other funds in the Trust Estate if it is determined that the amounts advanced will not be recoverable from amounts received on such Mortgage Loan. See "Servicing of the Mortgage Loans -- Periodic Advances and Limitations Thereon" in the prospectus. Subordination of Class B Certificates The rights of the holders of the Class B Certificates to receive distributions with respect to the Mortgage Loans in the Trust Estate will be subordinated to such rights of the holders of the Class A Certificates and the rights of the holders of the Classes of Class B Certificates with higher numerical designations to receive distributions with respect to the Mortgage Loans in the Trust Estate will be subordinated to such rights of the holders of Classes of Class B Certificates with lower numerical designations, all to the extent described below. This subordination is intended to enhance the likelihood of timely receipt by the holders of the more senior Certificates of the full amount of their scheduled monthly payments of interest and principal and to afford the holders of the more senior Certificates protection against Realized Losses, as more fully described below. If Realized Losses exceed the credit support provided through subordination to a given Class of Certificates, all or a portion of such losses will be borne by such Class of Certificates. The protection afforded to the holders of more senior Classes of Certificates by means of the subordination feature will be accomplished by the preferential right of such holders to receive, prior to any distribution being made S-39 on a Distribution Date in respect of the more junior Classes of Certificates, the amounts of principal and interest due such holders on each Distribution Date out of the Pool Distribution Amount with respect to such date and, if necessary, by the right of such holders to receive future distributions on the Mortgage Loans that would otherwise have been payable to the holders of the more junior Classes of Certificates. Because of the priorities in distributing principal to the Class A Non-PO Certificates, some Classes of Class A Non-PO Certificates may be outstanding longer than other Classes of Class A Non-PO Certificates. The aggregate Principal Balance of the Class B Certificates will be reduced on each Distribution Date either through principal distributions or the allocation of Realized Losses. The longer a Class of Class A Non-PO Certificates is outstanding, the smaller the Principal Balances will be of the Class B Certificates providing subordination for such Class A Certificates. Amounts distributed to holders of Subordinated Certificates will not be available to cover delinquencies or Realized Losses in respect of subsequent Distribution Dates. Allocation of Losses Realized Losses on the Mortgage Loans will not be allocated to the holders of the Class A Certificates until the date on which the aggregate Principal Balance of the Subordinated Certificates has been reduced to zero (the "Subordination Depletion Date"). Prior to such time, such Realized Losses will be allocated to the Classes of Class B Certificates sequentially in reverse numerical order, until the Principal Balance of each such Class has been reduced to zero. The allocation of the principal portion of a Realized Loss (other than a Debt Service Reduction) of a Mortgage Loan will be effected through the adjustment of the Principal Balance of the most subordinate Class then outstanding in such amount as is necessary to cause the Aggregate Principal Balance to equal the Adjusted Pool Amount. Allocations to the Classes of Class B Certificates of (i) the principal portion of Debt Service Reductions, (ii) the interest portion of Realized Losses, (iii) any shortfalls resulting from delinquencies for which the Servicer, the Master Servicer or the Trustee does not advance and (iv) any interest shortfalls resulting from the timing of the receipt of Unscheduled Principal Receipts (other than Prepayments in Full and Curtailments) with respect to Mortgage Loans will result from the priority of distributions of the Pool Distribution Amount first to the Class A Certificates and then to the Classes of Class B Certificates in numerical order as described above under "--Distributions." After distributions of principal have been made on a Distribution Date, the allocation of the principal portion of Realized Losses in respect of the Mortgage Loans allocated on or after the Subordination Depletion Date will be effected through the adjustment of the Class A Non-PO Principal Balance and the Principal Balance of the Class A-PO Certificates such that (i) the Class A Non-PO Principal Balance equals the Adjusted Pool Amount (Non-PO Portion) and (ii) the Principal Balance of the Class A-PO Certificates equals the Adjusted Pool Amount (PO Portion). The principal portion of such Realized Losses allocated to the Class A Non-PO Certificates will be allocated to such outstanding Classes of Class A Non-PO Certificates, pro rata, in accordance with their Principal Balances or, in the case of a Class of Accrual Certificates, its initial Principal Balance, if lower. The interest portion of any Realized Loss allocated on or after the Subordination Depletion Date will be allocated among the outstanding Classes of Class A Non-PO Certificates, pro rata, in accordance with their respective Interest Accrual Amounts, without regard to any reduction pursuant to this sentence. Any such losses will be allocated among the outstanding Class A Non-PO Certificates of each such Class pro rata in accordance with their respective Percentage Interests. On or after the Subordination Depletion Date, the Principal Balance of a Class of Super Senior Support Certificates will be reduced not only by the principal portion of Realized Losses allocated to such Class as provided in the preceding paragraph but also by the portion allocated to the related Class of Super Senior Certificates indicated in the following table. The related Classes of Super Senior and Super Senior Support Certificates are as follows: Super Senior Classes Super Senior Support Classes -------------------- ---------------------------- Class A-3 Class A-15 Class A-12 Class A-14 S-40 If due to losses on the Mortgage Loans, the Pool Distribution Amount is not sufficient to cover the Class A Non-PO Optimal Principal Amount on a particular Distribution Date, then the Class A Percentage on and after the next Distribution Date will be proportionately increased, thereby reducing, as a relative matter, the respective interest of the Class B Certificates in future payments of principal on the Mortgage Loans. Notwithstanding the foregoing, the provisions relating to subordination will not be applicable in connection with a Bankruptcy Loss so long as the applicable Servicer has notified the Trustee and the Master Servicer in writing that such Servicer is diligently pursuing any remedies that may exist in connection with the representations and warranties made regarding the related Mortgage Loan and when (A) the related Mortgage Loan is not in default with regard to the payments due thereunder or (B) delinquent payments of principal and interest under the related Mortgage Loan and any premiums on any applicable Standard Hazard Insurance Policy and any related escrow payments in respect of such Mortgage Loan are being advanced on a current basis by such Servicer, in either case without giving effect to any Debt Service Reduction. S-41 DESCRIPTION OF THE MORTGAGE LOANS(1) General The mortgage loans to be included in the Trust Estate will be fixed interest rate, monthly pay, fully amortizing, one- to four-family residential first mortgage loans (the "Mortgage Loans"). Substantially all of the Mortgage Loans will have original terms to stated maturity of approximately 30 years. The Mortgage Loans are will be secured by first liens (the "Mortgages") on one- to four-family residential properties (the "Mortgaged Properties") and to have the additional characteristics described herein and in the prospectus. 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 "Servicing of the Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans" in the prospectus. The Mortgage Loans were selected by the Sponsor from the Sponsor's first lien, fixed-rate mortgage loans, and were chosen to conform to the characteristics of mortgage loans eligible to be securitized in the Depositor's WFALT securitization program. See "The Sponsor" in the prospectus. Mortgage Loan Data Appearing in Appendix A 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.] In originating Mortgage Loans, the documentation levels vary depending upon several factors, including loan amount, Loan-to-Value Ratio and the type and purpose of the Mortgage Loan. Documentation levels include "full documentation," "no documentation" and "no ratio." Asset, income and mortgage verifications were obtained for Mortgage Loans processed with "full documentation." In the case of "no documentation" loans, borrowers did not provide any information regarding their income, their source of income or their asset levels. In the case of "no ratio" loans, income was not disclosed by the borrower, however the source of income and assets are stated. In such cases, assets are also verified if that option is chosen by the borrower. In some instances, a verification of the borrower's employment may have been obtained. However, for all of the Mortgage Loans, a credit report on the borrower and a property appraisal were obtained. For a description of the 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 purposes, substantially all of the proceeds are used to pay in full the principal balance of a - ------------------------------ (1) The descriptions in this prospectus supplement of the Trust Estate and the properties securing the Mortgage Loans to be included in the Trust Estate 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 Estate (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 Estate. 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 Estate as it will be constituted at the time the Certificates are issued, although the aggregate principal balance of the Mortgage Loans included in the Trust Estate 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 Estate may vary. In the event that any of the material characteristics as of the Cut-Off Date of the Mortgage Loans that constitute the Trust Estate on the date of initial issuance of the Certificates vary by 5% or more (other than as a result of scheduled payment or prepayment of the Mortgage Loans) the Depositor will file a Current Report on Form 8-K containing updated information with the Securities and Exchange Commission. S-42 previous mortgage loan of the mortgagor with respect to a Mortgaged Property and to pay origination and closing costs associated with such refinancing. However, in the case of a Mortgage Loan made for "equity take out" refinance purpose, all or a portion of the proceeds are generally required by the mortgagor for uses unrelated to the Mortgaged Property. The amount of such proceeds retained by the mortgagor may be substantial. The first table appearing in Appendix A sets forth certain characteristics of the Mortgage Loans, the Premium Mortgage Loans and the Discount Mortgage Loans. 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. Although for purposes of applying the Underwriting Standards, the Loan-to-Value Ratio of an LOC Pledged Asset Mortgage Loan, if any, is calculated taking into account the value of the LOC, for purposes of this prospectus supplement, such Loan-to-Value Ratio is calculated without regard to the value of such LOC. See "The Trust Estates -- Mortgage Loans -- Pledged Asset Mortgage Loans" in the prospectus. 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 "The Trust Estates -- 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. The Depositor has taken no action to establish the current value of any Mortgaged Property. See "Risk Factors -- 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 table appearing in Appendix A. Mortgage Loans with Loan-to-Value Ratios at origination greater than 80% may or may not be covered by a primary mortgage insurance policy. Certain Mortgage Loans may be covered by lender-paid primary mortgage insurance policies (each, an "LPMI Policy") or borrower-paid primary mortgage insurance policies (each, a "BPMI Policy"). The LPMI Policies and BPMI Policies will be assigned to the Trust on the Closing Date. The Sponsor will be responsible for paying the premiums under the LPMI Policies and may assign such obligation only with the consent of each Rating Agency and the respective primary mortgage insurance policy provider. Information with respect to the Mortgage Loans covered by LPMI Policies and BPMI Policies is set forth in Appendix A. Appendix A also contains a table of the FICO Scores for the Mortgage Loans. "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 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 S-43 be a measurement of the relative degree of risk a borrower represents to a lender, i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. In addition, it should be noted that FICO Scores were developed to indicate a level of default probability over a two-year period which does not correspond to the life of a mortgage loan. Furthermore, FICO Scores were not developed specifically for use in connection with mortgage loans, but for consumer loans in general. Therefore, a FICO Score does not take into consideration the effect of mortgage loan characteristics on the probability of repayment by the borrower. The FICO Scores set forth in the table appearing in Appendix A were obtained at either the time of origination of the Mortgage Loan or more recently. 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. For purposes of Appendix A, "Original Total 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, but not limited to, property taxes and insurance) over (ii) the mortgagor's gross monthly income, as of the origination of the Mortgage Loan. For purposes of the table in Appendix A setting forth historical delinquency data with respect to the Mortgage Loans in the mortgage pool, the table shows the extent to which any Mortgage Loans, since their origination (or a period of three years, if shorter), have ever been delinquent and whether foreclosure proceedings with respect to the Mortgage Loans or bankruptcy proceedings with respect to the mortgagors of the Mortgage Loans have ever been instituted. Mortgage Loans are categorized in the most severe category they fall into for any time period, with "Ever 30-59 Days" being the least severe category and "Ever Bankruptcy" being the most severe category. Mortgage Loans are only reported in one category for any time period. The indicated categories of delinquency are based on the number of days delinquent. A mortgage was considered delinquent if a payment was not received by the end of the month in which such payment was due. The data appearing in Appendix A may not be exact due to rounding. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting" in the prospectus. Mortgage Loan Underwriting 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 -- Mortgage Loan Underwriting -- Modified Standards" (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 -- Mortgage Loan Underwriting" and "--Acquisition of Mortgage Loans from Correspondents" in the prospectus. Mandatory Repurchase or Substitution of Mortgage Loans The Depositor is required, with respect to Mortgage Loans that are found by the Trustee or 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, at the Depositor's option, 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 "The Pooling and Servicing Agreement -- Assignment of Mortgage Loans to the Trustee" in the prospectus. S-44 Optional Purchase of Mortgage Loans Under certain circumstances as described in the prospectus under "The Pooling and Servicing Agreement -- Optional Purchases" the Depositor may, at its sole discretion purchase certain Mortgage Loans from the Trust Estate. See "Prepayment and Yield Considerations" herein. PREPAYMENT AND YIELD CONSIDERATIONS General 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 applicable Mortgage Loans and the amount and timing of mortgagor defaults resulting in Realized Losses on such Mortgage Loans. 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 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. 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 and optional purchases by the Depositor of all of the Mortgage Loans in connection with the termination of the Trust Estate. See "Description of the Mortgage Loans--Mandatory Repurchase or Substitution of Mortgage Loans" herein and "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to the Trustee," "--Optional Purchases" and "--Termination; Optional Purchase of Mortgage Loans" in the prospectus. Mortgagors are permitted to prepay the Mortgage Loans, in whole or in part, at any time without penalty. If prevailing rates for similar mortgage loans fall below the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to increase. Conversely, if interest rates on similar mortgage loans rise above the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to decrease. The rate of prepayment on the Mortgage Loans may also be influenced by programs offered by mortgage loan originators (including Wells Fargo Bank), servicers (including Wells Fargo Bank) and mortgage loan brokers to encourage refinancing through such originators, servicers and brokers, including, but not limited to, general or targeted solicitations (which may be based on characteristics including, but not limited to, the mortgage loan interest rate or payment history and the geographic location of the Mortgaged Property), reduced origination fees or closing costs, pre-approved applications, waiver of pre-closing interest accrued with respect to a refinanced loan prior to the pay-off of such loan, or other financial incentives. In particular, the application of Wells Fargo Bank's "retention program," which enables qualifying mortgagors to refinance at greatly reduced cost, to its servicing portfolio may substantially affect the rate of prepayment on the Mortgage Loans. See "Prepayment and Yield Considerations--Refinancings" in the prospectus. 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. For further information regarding historical delinquency, cumulative loss and prepayment experience of the Sponsor's prior residential mortgage loan securitizations, see "Static Pool Information" in this prospectus supplement. As a result of Mortgage Loans being originated using underwriting standards that, in certain respects, may be less stringent that the general standards applied by the Sponsor, the Mortgage Loans may experience rates of delinquency and cumulative loss that are higher than those experienced by mortgage loans that satisfy the general standards applied by the Sponsor. S-45 Other factors affecting prepayment of mortgage loans include changes in mortgagors' housing needs, job transfers, unemployment or substantial fluctuations in income, significant fluctuations in real estate values and adverse economic conditions either generally or in particular geographic areas, mortgagors' equity in the 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 may be more likely to affect prepayments. These characteristics include, but are not limited to, principal balance, loan-to-value ratio, borrower credit quality and current 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 Estate having any particular characteristic. In addition, all of the Mortgage Loans contain due-on-sale clauses which will be exercised upon the sale of the related Mortgaged Properties and enforced to the extent described in the prospectus under "Servicing of the Mortgage Loans -- Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans." 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, among other things, 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) a 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 such Mortgage Loan. See "Servicing of the Mortgage Loans -- Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans" in the prospectus. As described under "Description of the Certificates--Principal (Including Prepayments)" herein, all or a disproportionate percentage of principal prepayments on the Mortgage Loans (including liquidations and repurchases of Mortgage Loans) will be distributed, to the extent of the applicable Non-PO Fraction, to the holders of the Class A Non-PO Certificates then entitled to distributions in respect of principal during the nine years beginning on the first Distribution Date, and, to the extent that such principal prepayments are made in respect of a Discount Mortgage Loan, to the Class A-PO Certificates in proportion to the interest of the Class A-PO Certificates in such Discount Mortgage Loan represented by the related PO Fraction. As described herein under "Description of the Certificates--Principal (Including Prepayments)--Allocation of Amount to be Distributed on the Class A Certificates" unless the Principal Balances of the Class A-1, Class A-2 and Class A-4 Certificates have been reduced to zero, the Class A-3 and Class A-15 Certificates will not be entitled to any distributions of principal payments for [____] years and thereafter the percentage of principal payments (including prepayments) allocated to the Class A-3 and Class A-15 Certificates will increase. The yield to maturity of the Offered Certificates will be sensitive in varying degrees to the rate and timing of principal payments (including prepayments, which may be made at any time without penalty) 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, particularly the Principal Only Certificates, the risk that a slower than anticipated rate of payments in respect of principal (including prepayments) on the Mortgage Loans, or, in the case of the Principal Only Certificates, on the Discount Mortgage Loans, will 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 Mortgage Loans will 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 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 principal payment rates under a variety of scenarios. S-46 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 applicable 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 B Certificates with higher numerical designations will generally be more sensitive to losses than the Classes with lower numerical designations because the entire amount of such losses will be allocable to the Classes of Class B Certificates in reverse numerical order, except as provided herein. To the extent not covered by Periodic Advances, delinquencies on Mortgage Loans will also have a relatively greater effect on the yield to maturity on the Classes of Class B Certificates with higher numerical designations because amounts otherwise distributable on the Class B Certificates will be made available to protect the Class A 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 on the Class B Certificates. On and after the Subordination Depletion Date, the yield to maturity on a Class of Super Senior Support Certificates will be more sensitive to losses than the other Class A Non-PO Certificates because while they are outstanding each such Class of Super Senior Support Certificates will bear not only its share of losses but also the share allocated to the related Class of Super Senior Certificates. The actual yield to maturity experienced by an investor may also be affected by the occurrence of interest shortfalls resulting from Unscheduled Principal Receipts to the extent, if any, to which such interest shortfalls are not covered by Compensating Interest or subordination. See "Description of the Certificates -- Interest" herein and "Servicing of the Mortgage Loans -- Changes in Servicing" in the prospectus. The yield to maturity on the Offered Certificates and more particularly on the Class B-1, Class B-2 and Class B-3 Certificates, may be affected by the geographic concentration of the Mortgaged Properties securing the applicable 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, hurricanes and tornadoes, which may adversely affect property values. See "Description of the Mortgage Loans" herein. Any deterioration in housing prices in the regions in which there is a significant concentration of Mortgaged Properties, as well as other regions in which the Mortgaged Properties are located, and any deterioration of economic conditions in such regions which adversely affects the ability of borrowers to make payments on the Mortgage Loans, may increase the likelihood of losses on the Mortgage Loans. Such losses, if they occur, may have an adverse effect on the yield to maturity of the Offered Certificates and more particularly on the Class B-1, Class B-2 and Class B-3 Certificates. As to Mortgaged Properties in regions that have recently experienced natural disasters, neither the Depositor nor the Sponsor 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 flood, water, fire, earthquake or earth movement, wind-storm, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Depositor makes no representation) in a manner which would adversely affect the value of such Mortgaged Property as security for such Mortgage Loan or the use for which such premises was 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 "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to the Trustee" and "--Representations and Warranties" 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. S-47 An investor should consider the risk that rapid rates of prepayments on the applicable 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. Investors in the Floating Rate Certificates should understand that if LIBOR is greater than or equal to [_____]% and [_____]% per annum, the Pass-Through Rates of the Class A-2 and Class A-5 Certificates, respectively, will remain at their maximum rates. Investors in the Floating Rate Certificates should also consider the risk that if LIBOR is lower than anticipated, the actual yields to such investors could be lower than anticipated yields. Conversely, investors in the Inverse Floating Rate Certificates should consider the risk that if LIBOR is higher than anticipated, the actual yields to such investors could be significantly lower than the anticipated yields. Investors in the Inverse Floating Rate Certificates should also understand that if LIBOR is greater than or equal to [_____]% and [_____]% per annum, the Class A-1 and Class A-6 Certificates, respectively, will accrue interest at their minimum rate. In addition, there can be no assurance that LIBOR will correlate with the levels of prevailing mortgage interest rates, therefore it is possible that lower prevailing mortgage rates, which might be expected to result in faster prepayments, could occur concurrently with an increase in LIBOR. However, if, as generally expected, higher mortgage rates and, accordingly, lower prepayment rates, were to occur concurrently with an increase in LIBOR, the Pass-Through Rate of a Class of Inverse Floating Rate Certificates would be reduced at the same time that the rate of reduction of the Principal Balance of such Class may be reduced. In such circumstances, investors in the Inverse Floating Rate Certificates could have a significantly lower yielding instrument with a longer Weighted Average Life than anticipated. See "--Sensitivities of Certain Classes of Certificates" below. Investors in the Floating Rate and Inverse Floating Rate Certificates should understand that the timing of changes in LIBOR may affect the actual yields to such investors even if the average rate of LIBOR is consistent with such investors' expectations. Each investor must make an independent decision as to the appropriate LIBOR assumptions to be used in deciding whether to purchase a Floating Rate or Inverse Floating Rate Certificate. The Weighted Average Lives of the Companion Certificates will be particularly sensitive to the rate of prepayments on the Mortgage Loans. Specifically, on each Distribution Date up to and including the Distribution Date on which the Principal Balances of the Companion Certificates, which support the PAC Groups are reduced to zero and after the PAC Principal Amounts have been distributed for such Distribution Date, principal payments from the Class A Non-PO Principal Distribution Amount for such Distribution Date will be applied to the Companion Certificates before being distributed to such PAC Groups. Further, the Companion Certificates will not receive distributions in reduction of principal on such Distribution Date from the Class A Non-PO Principal Distribution Amount if the Class A Non-PO Principal Distribution Amount is not sufficient to pay the PAC Principal Amounts of the PAC Groups on such Distribution Date. See "Description of the Certificates--Principal (Including Prepayments)--Principal Payment Characteristics of the PAC Certificates and the Companion Certificates" herein. Classes of PAC Certificates are designed to provide some protection against volatility in their Weighted Average Lives. However, investors in the PAC Certificates should be aware that under certain prepayment scenarios, a "whipsaw" effect in the Weighted Average Lives of such Certificates could occur such that the Weighted Average Lives of such Certificates could extend, rather than shorten as prepayment rates increase (or shorten, rather than extend as prepayment rates decrease) and that any such phenomena will not necessarily be illustrated by the tables appearing in Appendix B. Due to the special tax treatment of residual interests, the after-tax return of the Residual Certificates may be significantly lower than would be the case if the Residual Certificates were taxed as debt instruments, or may be negative. See "Federal Income Tax Considerations" herein. S-48 As referred to herein, the "Weighted Average Life" of a Class of Offered Certificates refers to the average amount of time that will elapse from the date of issuance of such Class until each dollar in reduction of the Principal Balance of such Class is distributed to the investor. Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model. The model used in this prospectus supplement, the Standard Prepayment Assumption ("SPA"), represents an assumed rate of prepayment each month relative to the then-outstanding principal balance of a pool of new mortgage loans. A prepayment assumption of 100% SPA assumes constant prepayment rates of 0.2% per annum of the then-outstanding principal balance of such mortgage loans in the first month of the life of the mortgage loans and an additional 0.2% per annum in each month thereafter until the thirtieth month. Beginning in the thirtieth month and in each month thereafter during the life of the mortgage loans, 100% SPA assumes a constant prepayment rate of 6% per annum each month. As used in the tables appearing in the appendices, "0% SPA" assumes prepayment rates equal to 0% of SPA, i.e., no prepayments. Correspondingly, "[___]% SPA" assumes prepayment rates equal to [_____]% of SPA, and so forth. SPA does not purport to be an historical description of prepayment experience or 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 Estate consists of one "Assumed Discount Mortgage Loan" and one "Assumed Premium Mortgage Loan" (collectively, the "Assumed Mortgage Loans") with the characteristics set forth below; (ii) the scheduled payment in each month for each Assumed Mortgage Loan has been based on its outstanding balance as of the first day of the month preceding the month of such payment, its Mortgage Interest Rate and its remaining term to stated maturity, so that such scheduled payments would amortize the remaining balance over its remaining term to maturity; (iii) scheduled monthly payments of principal and interest on the Assumed Mortgage Loans will be timely received on the first day of each month (with no defaults), commencing in [_____] 20 ; (iv) the Depositor does not repurchase either of the Assumed Mortgage Loans and the Depositor does not exercise its option to purchase the Assumed Mortgage Loans and thereby cause a termination of the Trust Estate; (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 [_____] 20 at the respective constant percentages of SPA set forth in the tables and there are no Curtailments, Prepayment Interest Shortfalls or Relief Act Shortfalls; (vi) the Certificates will be issued on the Closing Date; (vii) distributions to Certificateholders will be made on the 25th day of each month, commencing in [_____] 20 ; (viii) the Master Servicing Fee Rate will be [_____]% per annum for each Assumed Mortgage Loan; and (ix) the initial Principal Balance of each Class of Certificates will be as set forth in the table beginning on page S-4 of this prospectus supplement.
Assumed Mortgage Loan Characteristics Principal Remaining Original Balance as Mortgage Term to Term to of the Interest Servicing Maturity Maturity Cut-Off Date Rate Fee Rate (in Months) (in Months) ------------ -------- --------- ----------- ----------- Assumed Discount Mortgage Loan Assumed Premium Mortgage Loan
S-49 It is highly unlikely that the Mortgage Loans will prepay at any constant rate, that all of the Mortgage Loans will prepay at the same rate or that the Mortgage Loans will not experience any losses. In addition, there will be differences between the characteristics of the Mortgage Loans ultimately included in the Trust Estate 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, 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 constant percentages of SPA presented. 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 under "Description of the Certificates -- Interest" herein. The yield on the Offered Certificates (other than the Floating Rate and Inverse Floating Rate Certificates) will be less than the yield otherwise produced by their respective Pass-Through Rates, if any, and the prices at which such Certificates are purchased because the interest which accrues on the Mortgage Loans during each month will not be passed through to Certificateholders until the 25th day of the month following the end of such month (or if such 25th day is not a business day, the following business day). Sensitivities of Certain Classes of Certificates Certain Classes of Offered Certificates will be highly sensitive to the rate and timing of principal payments (including prepayments) on the applicable Mortgage Loans, which rate may fluctuate significantly from time to time. The Inverse Floating Rate Certificates are also highly sensitive to the rate of LIBOR. See "--General" above. The Class A-PO Certificates will be highly sensitive to the rate and timing of principal payments (including prepayments) on the Discount Mortgage Loans. The tables appearing in Appendix C indicate the sensitivities to various rates of prepayment on the Mortgage Loans, and changes in LIBOR in the case of the Inverse Floating Rate Certificates, of the pre-tax yields to maturity on a semi-annual corporate bond equivalent ("CBE") basis of the designated Classes. The tables have been prepared on the basis of the Structuring Assumptions, and the additional assumptions that (1) the Class A-1, Class A-6 and Class A-PO Certificates will be purchased on the Closing Date at purchase prices equal to [_____]%, [_____]% and [_____]%, respectively, of their initial Principal Balance plus accrued interest, where applicable, from the first day of the Interest Accrual Period to (but not including) the Closing Date and (2) in the case of the Class A-1 and Class A-6 Certificates, beginning with the Distribution Date in [_____] 20 and for each Distribution Date thereafter, LIBOR is at the level specified. The pre-tax yields to maturity set forth in the tables appearing in Appendix C were calculated by (i) determining the monthly discount rates which, when applied to the assumed streams of cash flows to be paid on the designated Class of Certificates, would cause the discounted present value of such assumed streams of cash flows to equal the assumed purchase price for such Class set forth above and (ii) converting such monthly rates to CBE rates. Such calculations do not take into account the interest rates at which investors may be able to reinvest funds received by them as distributions on the Certificates and consequently do not purport to reflect the return on any investment in the Certificates when such reinvestment rates are considered. Notwithstanding the assumed prepayment rates reflected in the tables appearing in Appendix C, it is highly unlikely that the applicable Mortgage Loans will prepay at a constant rate until maturity, that all of the applicable Mortgage Loans will prepay at the same rate or that the applicable Mortgage Loans will not experience any losses. It is also highly unlikely in the case of the Inverse Floating Rate Certificates that LIBOR will remain constant. In addition, there will be differences between the characteristics of the applicable Mortgage Loans ultimately included in the Trust Estate and the Assumed Mortgage Loans. As a result of these factors, the pre-tax yields to maturity on any designated Class of Certificates are likely to differ from those shown in the related table, even if all of the applicable Mortgage Loans prepay at the indicated percentages of SPA. S-50 The tables relating to the Inverse Floating Rate Certificates do not constitute a representation as to the correlation of any level of LIBOR with any rate of prepayments on the Mortgage Loans. Each investor must make an independent decision as to the appropriate combination of prepayment and LIBOR assumptions to be used in deciding whether or not to purchase an Inverse Floating Rate Certificate. Yield Considerations with Respect to the Class B-2 and Class B-3 Certificates Defaults on mortgage loans may be measured relative to a default standard or model. The model used in this prospectus supplement, the standard default assumption ("SDA"), represents an assumed rate of default each month relative to the then-outstanding performing principal balance of a pool of new mortgage loans. A default assumption of 100% SDA assumes constant default rates of 0.02% per annum of the then-outstanding principal balance of such mortgage loans in the first month of the life of the mortgage loans and an additional 0.02% per annum in each month thereafter until the 30th month. Beginning in the 30th month and in each month thereafter through the 60th month of the life of the mortgage loans, 100% SDA assumes a constant default rate of 0.60% per annum each month. Beginning in the 61st month and in each month thereafter through the 120th month of the life of the mortgage loans, 100% SDA assumes that the constant default rate declines each month by 0.0095% per annum, and that the constant default rate remains at 0.03% per annum in each month after the 120th month. As used in the tables appearing in Appendix D, "0% SDA" assumes default rates equal to 0% of SDA (no defaults). SDA does not purport to be a historical description of default experience or a prediction of the anticipated rate of default of any pool of mortgage loans, including the Mortgage Loans. The tables appearing in Appendix D indicate the sensitivities of the pre-tax yields to maturity on a CBE basis of the Class B-2 and Class B-3 Certificates to various rates of prepayment and varying levels of aggregate Realized Losses. The tables appearing in Appendix D are based upon, among other things, the Structuring Assumptions (other than the assumption that no defaults shall have occurred with respect to the Assumed Mortgage Loans) and the additional assumptions that (i) liquidations (other than those scenarios indicated as 0% of SDA (no defaults) occur monthly on the last day of the preceding month at the percentages of SDA set forth in the tables and (ii) all delinquency tests are met. In addition, it was assumed that (i) Realized Losses on liquidations of [__]% or [__]% of the outstanding principal balance of such liquidated Mortgage Loans, as indicated in the tables (referred to as a "Loss Severity Percentage") will occur at the time of liquidation, (ii) there is no delay between the default and the liquidation of the mortgage loans and (iii) the Class B-2 and Class B-3 Certificates are purchased on the Closing Date at purchase prices equal to [_____]% and [_____]%, respectively, of the initial Principal Balances thereof plus accrued interest from the first day of the initial Interest Accrual Period to (but not including) the Closing Date. The actual Mortgage Loans ultimately included in the Trust Estate will have characteristics differing from those assumed in preparing the tables and it is unlikely that they will prepay or liquidate at any of the rates specified. In addition, it is unlikely that Realized Losses will be incurred according to any one particular pattern. The assumed percentages of SPA and SDA and the loss severities shown in the tables are for illustrative purposes only and the Depositor makes no representations with respect to the reasonableness of such assumptions or that the actual rates of prepayment and liquidation and loss severity experience of the Mortgage Loans will in any way correspond to any of the assumptions made herein. For these reasons, and because the timing of cash flows is critical to determining yield, the actual pre-tax yields to maturity of the Class B-2 and Class B-3 Certificates are likely to differ from the pre-tax yields to maturity shown in the tables. The pre-tax yields to maturity in the tables appearing in Appendix D were calculated by (i) determining the monthly discount rates which, when applied to the assumed streams of cash flows to be paid on the Class B-2 and Class B-3 Certificates, would cause the discounted present value of such assumed streams of cash flows to equal the assumed purchase prices of the Class B-2 and Class B-3 Certificates set forth above and (ii) converting such monthly rates to CBE rates. Such calculations do not take into account the interest rates at which investors may be able to reinvest funds received by them as distributions on the Class B-2 and Class B-3 Certificates and consequently do not purport to reflect the return on any investment in the Class B-2 and Class B-3 Certificates when such reinvestment rates are considered. Investors are urged to make their investment decisions based on their determinations as to anticipated rates of prepayment and Realized Losses under a variety of scenarios. Investors in Class B-2 and Class B-3 Certificates S-51 should fully consider the risk that Realized Losses on the Mortgage Loans could result in the failure of such investors to fully recover their initial investments. POOLING AND SERVICING AGREEMENT General The Certificates will be issued pursuant to a Pooling and Servicing Agreement to be dated as of the Closing Date (the "Pooling and Servicing Agreement") among the Depositor, the Master Servicer and the Trustee. 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 certain provisions specific to this transaction. See "Description of the Certificates," "Servicing of the Mortgage Loans" and "The Pooling and Servicing Agreement" in the prospectus. The Trust Estate created pursuant to 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 the Certificateholders, (iii) any Mortgaged Properties acquired on behalf of the Certificateholders by foreclosure or by deed in lieu of foreclosure after the Closing Date and (iv) the rights of the Trustee to receive the proceeds of all insurance policies and performance bonds, if any, required to be maintained pursuant to the Pooling and Servicing Agreement. Compensation and Payment of Expenses of the Master Servicer, Servicer and Trustee The primary compensation payable to the Master Servicer will be the "Master Servicing Fee" payable monthly equal to (1)/12th of the master servicing fee rate set forth in the table below (the "Master Servicing Fee Rate"). The Master Servicing Fee will accrue on the aggregate Scheduled Principal Balance of the Mortgage Loans as of the first day of each month. 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 set forth in the table below (the "Servicing Fee Rate"). 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 Master Servicing Fee Rate, the Servicing Fee Rate and the Trustee Fee Rate will be the per annum rate set forth in the table below: Fees Payable From the Trust Estate(1) Master Servicing Fee Rate Servicing Fee Rate Trustee Fee Rate ------------------------- ------------------ ---------------- [____]%(2) [____]%(2) (3) - --------------------------------- (1) Certain expenses incurred by the Master Servicer and the Trustee are reimbursable from the Trust Estate as described under "Servicing of the Mortgage Loans-The Master Servicer-General" and "The Pooling and Servicing Agreement-The Trustee" in the prospectus. (2) The Master Servicing Fee Rate and Servicing Fee Rate may not be changed without the consent of Certificateholders if such change adversely affects the interests of Certificateholders. (3) The fees of the Trustee incurred in connection with its responsibilities under the Pooling and Servicing Agreement will be payable by the Master Servicer without reimbursement from the Trust Estate. The Master Servicing Fee and Servicing Fee for the Mortgage Loans are payable out of the interest payments on the mortgage loans, prior to any payments to Certificateholders. The Master Servicer is also entitled to additional compensation, as described under "Servicing of the Mortgage Loans--The Master Servicer" in the prospectus. The Servicer is entitled to additional servicing compensation, as described under "Servicing of the Mortgage Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses" in the prospectus. S-52 In the event that the Trustee succeeds to the role of the Master Servicer, it will be entitled to compensation for such duties not to exceed the compensation received by the predecessor master servicer. In addition, if the Trustee appoints a successor master servicer under the Pooling and Servicing Agreement, the Trustee may make arrangements for the compensation of such successor master servicer, such compensation not to exceed the compensation received by the predecessor master servicer. All costs of a transfer of master servicing will be reimbursed to the party who incurred such costs as described under "Servicing of the Mortgage Loans--The Master Servicer" in the prospectus. In the event that the Master Servicer or the Trustee succeeds, or another party is appointed to succeed, to the role of Servicer, such entity will be entitled to compensation for such duties, 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 "Servicing of the Mortgage Loans--The Servicers" in the prospectus. The Master Servicer 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 Master Servicer are subject to rights of reimbursement as described under "Servicing of the Mortgage Loans--The Master Servicer" in the prospectus. The fees of any co-trustee whose appointment is necessary or advisable for (i) conforming to any legal requirement, restriction or condition in any state in which any Mortgaged Property or any portion of the Trust Estate is located, will be paid by the Master Servicer, without reimbursement from the Trust Estate and (ii) any reason other than contemplated by clause (i), will be paid by the Trustee, without reimbursement from the Trust Estate. Expenses incurred by a co-trustee are reimbursable from the Trust Estate to the same extent as expenses of the Trustee are reimbursable from the Trust Estate. See "The Pooling and Servicing Agreement--The Trustee" in the prospectus. The Depositor, the Master Servicer and the Trustee are also entitled to indemnification from the Trust Estate under certain circumstances described under "The Depositor," "Servicing of the Mortgage Loans--The Master Servicer--General" and "The Pooling and Servicing Agreement--The Trustee" in the prospectus. For so long as the Master Servicer and the Paying Agent are the same entity, the Paying Agent will not be entitled to a separate fee for its services. If the Master Servicer and the Paying Agent are no longer the same entity, the Master Servicer will pay the fees of the Paying Agent without reimbursement from the Trust. The servicing fees and other expenses of the REMIC will be allocated to the holders of the Class A-R Certificates. See "Federal Income Tax Considerations" herein and "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates -- Limitations on Deduction of Certain Expenses" in the prospectus. Optional Termination of the Trust On any Distribution Date on which the aggregate Scheduled Principal Balance of the Mortgage Loans is less than 10% of the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-Off Date, the Depositor may, subject to certain conditions, purchase all outstanding Mortgage Loans in the pool and thereby effect early retirement of the Certificates. See "The Pooling and Servicing Agreement--Optional Termination; Optional Purchase of Mortgage Loans" in the prospectus. The exercise of this option will be in the Depositor's sole discretion. Without limitation, 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. Voting 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 Estate, each Class of Certificates will be entitled to a pro rata portion of the Voting Interest based on the outstanding Principal Balance of such Class. 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 S-53 Certificates are issued as described under "Description of the Certificates -- Book-Entry Form" in the prospectus, Beneficial Owners of Book-Entry Certificates may exercise their voting rights only through DTC Participants. Fixed Retained Yield A fixed percentage of the interest on each Mortgage Loan (the "Fixed Retained Yield") will be determined on a loan-by-loan basis and will not be included in the Trust Estate. The Fixed Retained Yield on each Mortgage Loan will equal the greater of (i) zero and (ii) the Mortgage Interest Rate less the sum of (a) [_____]%, (b) the applicable Servicing Fee Rate and (c) the Master Servicing Fee Rate. The amount of any Fixed Retained Yield will be retained by the Sponsor. See "Servicing of the Mortgage Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses" in the prospectus for further information regarding Fixed Retained Yield. FEDERAL INCOME TAX CONSIDERATIONS General In the opinion of Cadwalader, Wickersham & Taft LLP, the following discussion, together with the discussion under "Material Federal Income Tax Consequences" in the prospectus, summarizes the material federal income tax consequences of the purchase ownership and disposition of the Offered Certificates. The Trust will qualify as a REMIC for federal income tax purposes. The assets of the REMIC will include the Mortgage Loans (exclusive of Fixed Retained Yield), together with the amounts held by the Master Servicer in a separate account in which collections on the Mortgage Loans will be deposited (the "Certificate Account"), the hazard insurance policies and primary mortgage insurance policies, if any, relating to the Mortgage Loans and any property that secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of foreclosure. Each Class of Offered Certificates (other than the Class A-R Certificates), together with each Class of Certificates not offered hereby (collectively, the "Regular Certificates") will be designated as regular interests in the REMIC, and the Class A-R Certificates will be designated as the residual interest in the REMIC. The Class A-R Certificates are "Residual Certificates" for purposes of the prospectus. The Offered Certificates will be treated as "loans . . . secured by an interest in real property which is . . . residential real property" for a domestic building and loan association, "real estate assets" for a real estate investment trust and, other than the Residual Certificates, "qualified mortgages" for a REMIC to the extent described in the prospectus. Regular Certificates The Regular Certificates generally will be treated as newly originated debt instruments for federal income tax purposes. Beneficial Owners (or in the case of Definitive Certificates, holders) of the Regular Certificates will be required to report income on such Certificates in accordance with the accrual method of accounting. It is anticipated that: o The Class [_____] Certificates will be issued with original issue discount equal to the excess of their initial principal balance over their issue price; o The Class [_____] Certificates will be issued with original issue discount equal to the excess of the sum of all distributions of principal and interest (whether current or accrued) expected to be received on those Certificates over their respective issue prices (including accrued interest from the first day of the initial Interest Accrual Period); o The Class [_____] Certificates will be issued with original issue discount equal to the excess of their initial Principal Balance (plus [_____] days of accrued interest) over their issue price (including accrued interest from the first day of the initial Interest Accrual Period); S-54 o The Class [_____] Certificates will be issued at a premium; and o The Class [_____] Certificates will be issued with de minimis original issue discount. It is also anticipated that the Class B-4, Class B-5 and Class B-6 Certificates, which are not offered hereby, will be issued with original issue discount. See "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates" in the prospectus. The Prepayment Assumption (as defined in the prospectus) that the Master Servicer intends to use in determining the rate of accrual of original issue discount and whether the original issue discount is considered de minimis, and that may be used by Beneficial Owners (or holders) to amortize premium, will be calculated using [____]% SPA. No representation is made as to the actual rate at which the Mortgage Loans will prepay. If the method for computing original issue discount results in a negative amount for any period with respect to any holder of Offered Certificates, the amount of original issue discount allocable to that period would be zero. The holder would be permitted to offset the negative amount only against future original issue discount, if any, attributable to his or her Certificates. Any loss might be treated as a capital loss. Residual Certificates The holders of the Class A-R Certificates must include the taxable income or loss of the REMIC in determining their federal taxable income. The Residual Certificates will remain outstanding for federal income tax purposes until there are no Certificates of any other Class outstanding. Prospective investors are cautioned that the Residual Certificateholders' REMIC taxable income and the tax liability thereon may exceed, and may substantially exceed, cash distributions to such holders during certain periods, in which event, the holders thereof must have sufficient alternative sources of funds to pay such tax liability. Furthermore, it is anticipated that all or a substantial portion of the taxable income of the REMIC includible by the holders of the Class A-R Certificates will be treated as "excess inclusion" income, resulting in (i) the inability of such holders to use net operating losses to offset such income from the REMIC, (ii) the treatment of such income as "unrelated business taxable income" to certain holders who are otherwise tax-exempt and (iii) the treatment of such income as subject to 30% withholding tax to certain non-U.S. investors, with no exemption or treaty reduction. The Residual Certificates will be considered "noneconomic residual interests," with the result that transfers thereof would be disregarded for federal income tax purposes if any significant purpose of the transferor was to impede the assessment or collection of tax. Accordingly, the Residual Certificates are subject to certain restrictions on transfer and any prospective transferee thereof will be required to furnish to the Trustee an affidavit as described under "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--Noneconomic Residual Interests" in the prospectus. See also "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--Limitations on Offset or Exemption of REMIC Income" in the prospectus. An individual, trust or estate that holds a Residual Certificate (whether such Certificate is held directly or indirectly through certain pass-through entities) also may have additional gross income with respect to, but may be subject to limitations on the deductibility of, Servicing Fees on the Mortgage Loans and other administrative expenses of the REMIC in computing such holder's regular tax liability, and may not be able to deduct such fees or expenses to any extent in computing such holder's alternative minimum tax liability. In addition, some portion of a purchaser's basis, if any, in a Residual Certificate may not be recovered until termination of the REMIC. Due to the special tax treatment of residual interests, the effective after-tax return of the Residual Certificates may be significantly lower than would be the case if the Residual Certificates were taxed as debt instruments, or may be negative. See "Material Federal Income Tax Consequences" in the prospectus. S-55 ERISA CONSIDERATIONS The Residual Certificates may not be purchased by or transferred to a Plan or a person acting on behalf of or investing the assets of a Plan. See "Description of the Certificates--Restrictions on Transfer of the Residual Certificates" herein. Accordingly, the following discussion applies to the Offered Certificates (other than the Residual Certificates) and does not purport to discuss the considerations under ERISA, Code Section 4975 or Similar Law with respect to the purchase, acquisition or resale of a Residual Certificate. As described in the prospectus under "ERISA Considerations," ERISA and the Code impose certain duties and restrictions on ERISA Plans and certain persons who perform services for ERISA Plans. Comparable duties and restrictions may exist under Similar Law on governmental plans and certain persons who perform services for governmental plans. For example, unless exempted, investment by a Plan in the Offered 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 Offered Certificates, including the individual administrative exemptions described below. For a further discussion of the individual administrative exemption, including the necessary conditions to its applicability, and other important factors to be considered by an ERISA Plan contemplating investing in the Offered Certificates, see "ERISA Considerations" in the prospectus. The DOL issued an Underwriter Exemption to [_____]. This Underwriter Exemption might apply to the acquisition, holding and resale of the Offered 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 Offered 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 Offered Certificate, 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 Offered 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 Offered Certificate should also carefully review with its own legal advisors the applicability of the fiduciary duty and prohibited transaction provisions of ERISA and the Code to such investment. See "ERISA Considerations" in the prospectus. LEGAL INVESTMENT The Class A and Class B-1 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 statistical rating organization. The Class B-2 and Class B-3 Certificates will not constitute "mortgage related securities" under SMMEA. Prospective purchasers, particularly those 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, financial 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. S-56 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 [_____], as underwriter, (the "Underwriter"), the Offered Certificates are being purchased from the Depositor by the Underwriter upon issuance thereof. The Underwriter, which is not an affiliate of the Depositor, is committed to purchase all of the Offered Certificates if any such Certificates are purchased. 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 accrued interest thereon from the Cut-Off Date to (but not including) the Closing Date 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 the Sponsor 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 with respect thereto 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 Stroock & Stroock & Lavan 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 the Sponsor of the Mortgage Loans underlying the Certificates. RATINGS It is a condition to the issuance of the Offered Certificates that each such class will have received at least the rating set forth in the table beginning on page S-4 from [_____] ("[_____]") and [_____] ("[_____]," and together with [_____], 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 mortgage pass-through certificates address the likelihood of the receipt by certificateholders of all distributions to which such certificateholders are entitled. [_____] rating opinions address the structural and legal aspects associated with the certificates, including the nature of the underlying mortgage loans. [_____] ratings on mortgage pass-through certificates do not represent any assessment of the likelihood or rate of S-57 principal prepayments and consequently any adverse effect the timing of such prepayments could have on an investor's anticipated yield. The ratings of [_____] on mortgage pass-through 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 and the credit quality of the credit support provider, if any. [_____] ratings on mortgage pass-through certificates do not represent any assessment of the likelihood 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 [_____] and [_____] on a Class of Principal Only Certificates only address the return of the Principal Balance of such Class. The Depositor has not requested a rating on the Offered Certificates of any Class by any rating agency other than [_____] and [_____], although data with respect to the Mortgage Loans may have been provided to other rating agencies solely for their informational purposes. There can be no assurance that any rating assigned by any other rating agency to the Offered Certificates will be as high as those assigned by [_____] and [_____]. In addition, the Rating Agencies will monitor the initial ratings of the Offered Certificates for so long as they remain outstanding. S-58 INDEX OF PROSPECTUS SUPPLEMENT DEFINITIONS Accretion Termination Date..............S-31 Accrual Distribution Amount.............S-31 Adjusted Pool Amount....................S-30 Adjusted Pool Amount (Non-PO Portion)...S-30 Adjusted Pool Amount (PO Portion).......S-30 Aggregate Non-PO Principal Balance......S-30 Aggregate Principal Balance.............S-30 Assumed Discount Mortgage Loan..........S-49 Assumed Mortgage Loans..................S-49 Assumed Premium Mortgage Loan...........S-49 BPMI Policy.............................S-43 CBE.....................................S-50 Certificate Account.....................S-54 Certificates............................S-26 Class A Certificates....................S-26 Class A Non-PO Optimal Principal Amount.S-32 Class A Non-PO Principal Balance........S-29 Class A Non-PO Principal Distribution Amount..................................S-32 Class A Percentage......................S-34 Class A Prepayment Percentage...........S-34 Class A Principal Balance...............S-29 Class A-PO Deferred Amount..............S-33 Class A-PO Distribution Amount..........S-32 Class A-PO Optimal Principal Amount.....S-32 Class B Certificates....................S-26 Class B Optimal Principal Amount........S-32 Class B Percentage......................S-35 Class B Prepayment Percentage...........S-35 Class B Principal Balance...............S-30 Class B Principal Distribution Amount...S-32 Class Percentage........................S-33 Class Prepayment Percentage.............S-33 CLTV....................................S-43 Code....................................S-39 Combined Loan-to-Value Ratio............S-43 Current Fractional Interest.............S-35 Custodial Agreement.....................S-25 Custodian...............................S-25 Delinquency and Loss Tests..............S-34 Depositor...............................S-23 Discount Mortgage Loan..................S-34 DOL.....................................S-56 ERISA...................................S-39 ERISA Plan..............................S-39 FICO Scores.............................S-43 Fixed Retained Yield....................S-54 FSMA.....................................S-5 HSBC Bank...............................S-24 Interest Accrual Period.................S-28 Interest Shortfall Amount...............S-31 LIBOR Based Interest Accrual Period.....S-28 Loss Severity Percentage................S-51 LPMI Policy.............................S-43 Master Servicer.........................S-24 Master Servicing Fee....................S-52 Master Servicing Fee Rate...............S-52 Mortgage Loans..........................S-42 Mortgaged Properties....................S-42 Mortgages...............................S-42 Net Mortgage Interest Rate..............S-30 Non-PO Fraction.........................S-33 Non-Supported Interest Shortfalls.......S-30 Offered Certificates....................S-26 Original Class B Principal Balance......S-34 Original Fractional Interest............S-35 Original Total Debt-to-Income Ratio.....S-44 PAC Certificates........................S-36 PAC Groups..............................S-36 PAC I Certificates......................S-36 PAC I Group.............................S-36 PAC I Group Principal Amount............S-36 PAC II Certificates.....................S-36 PAC II Group............................S-36 PAC II Group Principal Amount...........S-36 PAC Principal Amount....................S-36 Pass-Through Rate.......................S-29 Paying Agent............................S-25 Payment Account.........................S-25 Percentage Interest.....................S-28 Periodic Advance........................S-39 Plan....................................S-39 PO Fraction.............................S-34 Pool Balance (Non-PO Portion)...........S-33 Pool Balance (PO Portion)...............S-34 Pool Distribution Amount................S-26 Pool Distribution Amount Allocation.....S-28 Pooling and Servicing Agreement.........S-52 Premium Mortgage Loan...................S-34 Prepayment Shift Percentage.............S-37 Principal Payments......................S-38 Priority Amount.........................S-36 Priority Percentage.....................S-36 PUDs....................................S-43 Rating Agencies.........................S-57 Record Date.............................S-26 Regular Certificates....................S-54 Regular Interest Accrual Period.........S-28 Relevant Implementation Date.............S-4 Relevant Member State....................S-4 Relevant Persons.........................S-5 Relief Act Shortfalls...................S-31 Scheduled Principal Amount..............S-36 SDA.....................................S-51 Securities Act..........................S-56 Servicer................................S-25 Servicing Fee...........................S-52 Servicing Fee Rate......................S-52 S-59 Shift Percentage........................S-37 Similar Law.............................S-39 SMMEA...................................S-56 SPA.....................................S-49 Structuring Assumptions.................S-49 Subordinated Certificates...............S-26 Subordinated Percentage.................S-34 Subordinated Prepayment Percentage......S-34 Subordination Depletion Date............S-40 Trust...................................S-23 Trustee.................................S-24 Underlying Servicing Agreement..........S-25 Underwriter.............................S-57 Underwriting Agreement..................S-57 Underwriting Standards..................S-44 Unscheduled Principal Amount............S-37 Weighted Average Life...................S-49 Wells Fargo Bank........................S-22 Wells Fargo Underlying Servicing Agreement...............................S-25 S-60 APPENDIX A SELECTED MORTGAGE LOAN DATA (as of the Cut-Off Date)
All Premium Discount 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............................ 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...................................................... 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 Home Asset ManagementSM Account Loans (5)...................... Home Asset ManagementSM Account Loans (5) as a Percentage of Aggregate Unpaid Principal Balance.................................. Number of LOC Pledged Asset Mortgage Loans (6)........................... LOC Pledged Asset Mortgage Loans (6) as a Percentage of Aggregate Unpaid Principal Balance..................................... Weighted Average Original FICO Score(7)..................................
- ------------------------ (1) For a description of Interest Only Loans, see "The Trust Estates-Mortgage Loans" in the prospectus. A-1 (2) For a description of Buydown Loans, see "The Trust Estates-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 "The Trust Estates-Mortgage Loans" in the prospectus. (5) For a description of Home Asset ManagementSM Account Loans, see "The Sponsor's Mortgage Loan Programs-Mortgage Loan Underwriting" in the prospectus. (6) For a description of LOC Pledged Asset Mortgage Loans, see "The Trust Estates-Mortgage Loans" in the prospectus. (7) Does not include the Mortgage Loans for which FICO Scores are not available. A-2 APPENDIX A (Continued) MORTGAGE LOAN DATA CURRENT MORTGAGE INTEREST RATES Percentage of Total Aggregate Aggregate Range of Current Unpaid Unpaid Mortgage Principal Principal Interest Rates Number Balance Balance --------------- ------ --------- ----------- ------ --------- ----------- Total............ ====== ========= =========== DOCUMENTATION LEVELS Percentage of Total Aggregate Aggregate Unpaid Unpaid Documentation Principal Principal Level Number Balance Balance - ------------------- ------ -------- ---------- Full Documentation.... No Documentation... No Ratio........... ------ -------- ---------- Total............ ====== ======== ========== REMAINING TERMS TO STATED MATURITY Percentage of Total Aggregate Aggregate Unpaid Unpaid Remaining Stated Principal Principal Term (Months) Number Balance Balance - ------------------- ------ -------- ---------- ------ -------- ---------- Total............ ====== ======== ========== YEARS OF ORIGINATION Percentage of Total Aggregate Aggregate Unpaid Unpaid Year of Principal Principal Origination Number Balance Balance - ------------------- ------ ------- ---------- ------ -------- ---------- Total............ ====== ======== ========== PROPERTY TYPES Percentage of Total Aggregate Aggregate Unpaid Unpaid Principal Principal Property Type Number Balance 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 Percentage of Total Aggregate Aggregate Unpaid Unpaid Principal Principal Geographic Area Number Balance 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-3 APPENDIX A (Continued) MORTGAGE LOAN DATA ORIGINAL LOAN-TO-VALUE RATIOS Percentage of Total Aggregate Aggregate Range of Original Unpaid Unpaid Loan-to-Value Principal Principal Ratios Number Balance Balance - ------------------- ------ -------- ---------- ------ -------- ---------- Total............ ====== ======== ========== ORIGINAL FICO SCORES Percentage of Total Weighted Aggregate Aggregate Average Range of Unpaid Unpaid Original Original Principal Principal Loan-to-Value FICO Scores Number Balance Balance Ratio - ------------- ------ -------- ---------- ------------- ------ -------- ---------- ------------- Total/ Weighted.... ====== ======== ========== ============= ORIGINAL PRINCIPAL BALANCES Percentage of Total Aggregate Aggregate Unpaid Unpaid Range of Principal Principal Principal Balance Number Balance Balance - ------------------- ------ -------- ---------- ------ -------- ---------- Total............ ====== ======== ========== ORIGINATORS Percentage of Total Aggregate Aggregate Unpaid Unpaid Principal Principal Originator Number Balance Balance - ------------------- ------ -------- ---------- Wells Fargo Bank or Affiliate. [10% Originator] [10% Originator] Other Originators ------ -------- ---------- Total............ ====== ======== ========== PURPOSES Percentage of Total Aggregate Aggregate Unpaid Unpaid Principal Principal Purpose Number Balance Balance - ------------------- ------ -------- ---------- Purchase....... Equity Take Out Refinance.... Rate/Term Refinance.... ------ -------- ---------- Total............ ====== ======== ========== A-4 APPENDIX A (Continued) MORTGAGE LOAN DATA OCCUPANCY TYPES Percentage of Total Aggregate Aggregate Unpaid Unpaid Principal Principal Occupancy Type Number Balance Balance - ------------------- ------ -------- ---------- Investment Property..... Primary Residence Second Home.... ------ -------- ---------- Total............ ====== ======== ========== REMAINING INTEREST ONLY TERMS Percentage of Total Remaining Aggregate Aggregate Interest Unpaid Unpaid Only Term Principal Principal (Months) Number Balance Balance - ------------------- ------ -------- ---------- ------ -------- ---------- Total............ ====== ======== ========== ORIGINAL DEBT TO INCOME RATIOS Percentage of Total Aggregate Aggregate Unpaid Unpaid Range of Debt to Principal Principal Income Ratios Number Balance Balance - ---------------- ------ -------- ---------- ------ -------- ---------- Total......... ====== ======== ========== ORIGINAL COMBINED LOAN-TO-VALUE RATIOS Percentage of Total Range of Aggregate Aggregate Original Unpaid Unpaid Combined Loan Principal Principal to-Value Ratios Number Balance Balance - ------------------- ------ -------- ---------- ------ -------- ---------- Total............ ====== ======== ========== A-5 APPENDIX A (Continued) MORTGAGE LOAN DATA ORIGINAL LOAN-TO-VALUE RATIOS Percentage of Total Weighted Aggregate Aggregate Average Range of Unpaid Unpaid Original Original Principal Principal Loan-to-Value FICO Scores Number Balance Balance Ratio - ------------- ------ -------- ---------- ------------- ------ -------- ---------- ------------- Total/ Weighted.... ====== ======== ========== ============= HISTORICAL LOAN DELINQUENCY DATA Past Past Past 0-12 13-24 25-36 Delinquency Months Monthus Months - ------------------------ ------ ------- ------ Ever 30-59 Days Ever 60-89 Days Ever 90-119 Days Ever 120-149 Days Ever 150-179 Days Ever 180-359 Days Ever 2 Years Ever 3 Years Ever 3+ Years Ever Foreclosure Ever Bankruptcy ------ ------- ------ Total................. ====== ======= ====== A-6 APPENDIX B - Decrement Tables The following tables have been prepared based on the assumptions described in this prospectus supplement under "Prepayment and Yield Considerations" and should be read in conjunction with that section. Percentage of Initial Principal Balance Outstanding For:
Class A-PO Class A-1 and Class A-2 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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-1 APPENDIX B (Continued)
Percentage of Initial Principal Balance Outstanding For: Class A-3 and Class A-15 Class A-4 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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 A-5 and Class A-6 Class A-7 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ----------------------------------------- ----------------------------------------- Distribution Date 0% 7% 9% 10% 11% 20% 50% 75% 0% 7% 9% 10% 11% 20% 50% 75% - ----------------- -- -- -- --- --- --- --- --- -- -- -- --- --- --- --- ---
Weighted Average Life (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 A-8 Class A-9 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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 B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class A-10 Class A-11 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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-5 APPENDIX B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class A-12 and Class A-14 Class A-13 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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-6 APPENDIX B (Continued) Percentage of Initial Principal Balance Outstanding For:
Class A-R Class B-1, Class B-2 and Class B-3 Certificates at the Certificates at the Following Percentages of Following Percentages of SPA SPA ---------------------------------------------- ---------------------------------------------- Distribution Date 0% 100% 250% 300% 400% 500% 750% 1000% 0% 100% 250% 300% 400% 500% 750% 1000% - ----------------- -- ---- ---- ---- ---- ---- ---- ----- -- ---- ---- ---- ---- ---- ---- -----
Weighted Average Life (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-7 APPENDIX C -Senior Sensitivity Tables Sensitivity of the Pre-Tax Yield to Maturity of the Class A-PO Certificates to Prepayments at an Assumed Purchase Price of [_____]% of the Initial Principal Balance (plus Accrued Interest)
Percentages of SPA ----------------------------------------------------------- 0% 100% 250% 300% 400% 500% 750% 1000% -- ---- ---- ---- ---- ---- ---- ----- Pre-Tax Yield To Maturity (CBE)
Sensitivity of the Pre-Tax Yield to Maturity of the Class A-1 Certificates to Prepayments at an Assumed Purchase Price of [_____]% of the Initial Principal Balance (plus Accrued Interest)
Percentages of SPA ----------------------------------------------------------- Level of LIBOR 0% 100% 250% 300% 400% 500% 750% 1000% - -------------- -- ---- ---- ---- ---- ---- ---- -----
Sensitivity of the Pre-Tax Yield to Maturity of the Class A-6 Certificates to Prepayments at an Assumed Purchase Price of [_____]% of the Initial Principal Balance (plus Accrued Interest)
Percentages of SPA ----------------------------------------------------- Level of LIBOR 0% 9% 10% 11% 20% 50% 75% 1000% - -------------- -- -- --- --- --- --- --- -----
Sensitivity of the Pre-Tax Yield to Maturity of the Class A-7 Certificates to Prepayments at an Assumed Purchase Price of [_____]% of the Initial Principal Balance (plus Accrued Interest)
Percentages of SPA ---------------------------------------------------------- Level of LIBOR 7% 9% 10% 11% 20% 50% 75% 1000% - -------------- -- ---- --- --- --- --- --- -----
C-1 APPENDIX D - Subordinate Sensitivity Tables Sensitivity of Pre-Tax Yields to Maturity of the Class B-2 Certificates to Prepayments and Realized Losses at an Assumed Purchase Price of [_____]% of the Initial Principal Balance (plus Accrued Interest)
Loss Severity Percentage of SDA Percentage Percentages of SPA - ----------------- ---------- -------------------------------------------------- 0% 100% 250% 300% 400% 500% 750% 1000% -- ---- ---- ---- ---- ---- ---- -----
** The pre-tax yield to maturity will be less than (99.99)% Sensitivity of Pre-Tax Yields to Maturity of the Class B-3 Certificates to Prepayments and Realized Losses at an Assumed Purchase Price of [_____]% of the Initial Principal Balance ( plus Accrued Interest)
Loss Severity Percentage of SDA Percentage Percentages of SPA - ----------------- ---------- -------------------------------------------------- 0% 100% 250% 300% 400% 500% 750% 1000% -- ---- ---- ---- ---- ---- ---- -----
** The pre-tax yield to maturity will be less than (99.99)% The following table sets forth the amount of Realized Losses that would be incurred with respect to the Mortgage Loans under the assumptions used to generate the pre-tax yields to maturity in the preceding tables, expressed as a percentage of the aggregate outstanding principal balance of the Mortgage Loans as of the Cut-Off Date.
Loss Severity Percentage of SDA Percentage Percentages of SPA - ----------------- ---------- -------------------------------------------------- 0% 100% 250% 300% 400% 500% 750% 1000% -- ---- ---- ---- ---- ---- ---- -----
D-1 APPENDIX E - Planned Principal Balances The following table sets forth for each Distribution Date the planned Principal Balances for the PAC I Group, expressed as a percentage of the initial aggregate Principal Balance of the PAC I Group. Planned Principal Balances as Percentages of Initial Aggregate Principal Balance PAC I Group Percentages of Initial Aggregate Principal Distribution Date Balance - ----------------- ------------------- E-1 APPENDIX E (Continued) The following table sets forth for each Distribution Date the planned Principal Balances for the PAC II Group, expressed as a percentage of the initial aggregate Principal Balance of the PAC II Group. Planned Principal Balances as Percentages of Initial Aggregate Principal Balance PAC II Group Percentages of Initial Aggregate Principal Distribution Date Balance - ----------------- ------------------- E-2 [WELLS FARGO LOGO] Wells Fargo Asset Securities Corporation Depositor Wells Fargo Bank, N.A. Sponsor and Master Servicer Wells Fargo Alternative Loan 20 - Trust Issuing Entity $[ ] (Approximate) Mortgage Asset-Backed Pass-Through Certificates, Series 20 - ------------------------------------- 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 deliver a prospectus supplement and prospectus until ninety days following the date of this prospectus supplement. [ ], 20 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. SUBJECT TO COMPLETION DATED OCTOBER 5, 2006 PROSPECTUS Wells Fargo Asset Securities Corporation Depositor Wells Fargo Bank, N.A. Sponsor Mortgage Asset-Backed Pass-Through Certificates (Issuable in Series) ------------------------------ - -------------------------------------------------------------------------------- You should carefully consider the risk factors beginning on page 11 of this prospectus. Except as otherwise described in the applicable prospectus supplement, neither the certificates of any series nor the related underlying mortgage loans will be insured or guaranteed by any governmental agency or instrumentality or any other entity. The certificates of each series will represent interests in the related issuing entity only and will not represent interests in or obligations of the depositor, the sponsor or any other entity. This prospectus may be used to offer and sell any series of certificates only if accompanied by the prospectus supplement for that series. - -------------------------------------------------------------------------------- Each Issuing Entity-- o will issue a series of mortgage asset-backed pass-through certificates, which will consist of one or more classes of certificates; and o will own a pool or pools of fixed or adjustable interest rate, mortgage loans which are secured by a first lien on a one- to four-family residential property. Each Pool of Mortgage Loans-- o will be sold to the related issuing entity by the depositor, who will have in turn purchased the mortgage loans from the sponsor; 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 Certificates-- o will represent interests in the related issuing entity; o may provide credit support for certain classes by "subordinating" certain classes to other classes of certificates; any subordinate classes will be entitled to payment subject to the payment of more senior classes and may bear losses before more senior classes; o may be entitled to the benefit of one or more of the other types of credit support or derivative instruments described in this prospectus and in more detail in the accompanying prospectus supplement; 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 certificates or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. ------------------ The date of this prospectus is [ ], 2006 TABLE OF CONTENTS PROSPECTUS Page ---- Important Notice About Information Presented in This Prospectus and the Accompanying Prospectus Supplement.....................................5 Summary of Prospectus..........................................................6 Risk Factors..................................................................11 Limited Liquidity for Certificates........................................11 Limited Assets for Payment of Certificates................................11 Certificates May Not Be Appropriate For Certain Individual Investors.............................................................11 Credit Enhancement is Limited in Amount and Coverage......................12 The Ratings of Your Certificates May Be Lowered or Withdrawn Which May Adversely Affect the Liquidity or Market Value of Your Certificates..................................................12 Real Estate Market Conditions Affect Mortgage Loan Performance...........................................................13 Geographic Concentration May Increase Rates of Loss and Delinquency...........................................................13 Less Stringent Underwriting Standards May Increase Risk of Loss..................................................................14 Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on Certificates..............................14 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 Certificates of a Series..............................................15 Subordination of Super Senior Support Certificates and Subordinated Certificates Increases Risk of Loss......................15 There Are Risks Relating to Second Lien Mortgage Loans....................16 The Inclusion of "Negative Amortization" Mortgage Loans in a Series May Adversely Affect Yield of Related Certificates.............16 The Inclusion of Subsidy Mortgage Loans in a Series May Adversely Affect Yield of the Related Certificates....................17 The Inclusion of Buy-Down Mortgage Loans in a Series May Adversely Affect Yield of the Related Certificates....................17 Collateral Securing Cooperative Loans May Diminish in Value...............18 Leaseholds May Be Subject to Default Risk on the Underlying Lease.................................................................18 Exercise of Rights Under Special Servicing Agreements May Be Adverse to Other Certificateholders...................................18 Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates..........................................................18 The Weighted Average Life of a Companion Certificate is Particularly Sensitive to Prepayments.................................20 Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans.....................................................20 Book-Entry Certificates May Experience Decreased Liquidity and Payment Delay.....................................................20 Cash Flow Agreements and External Credit Enhancements are Subject to Third Party Risk...........................................20 Servicing Transfer Following Event of Default May Result in Payment Delays or Losses..............................................21 Consumer Protection Laws May Limit Remedies...............................21 The Recording of the Mortgages of a Series in the Name of MERS May Affect the Yield on the Certificates.........................22 The Trust Estates.............................................................23 General...................................................................23 Mortgage Loans............................................................23 Cash Flow Agreements......................................................28 General...............................................................28 Guaranteed Investment Contract........................................29 Yield Maintenance Agreements..........................................29 Swap Agreements.......................................................29 The Sponsor...................................................................29 The Sponsor's Mortgage Loan Programs..........................................32 Mortgage Loan Production Sources..........................................32 Acquisition of Mortgage Loans from Correspondents.........................32 Mortgage Loan Underwriting................................................33 General Standards.....................................................33 2 Retention Program Standards...........................................37 Modified Standards....................................................37 Underwriter Discretion................................................43 Static Pool Information.......................................................45 The Depositor.................................................................45 Description of the Certificates...............................................47 General...................................................................47 Definitive Form...........................................................47 Book-Entry Form...........................................................48 General...............................................................48 Secondary Market Trading..............................................51 Certain U.S. Federal Income Tax Documentation Requirements of Book-Entry Certificates............................53 Distributions to Certificateholders.......................................53 General...............................................................53 Unscheduled Principal Receipts........................................55 Distributions of Interest.............................................55 Distributions of Principal............................................57 Subordination.............................................................57 Categories of Classes of Certificates.....................................59 Principal Types.......................................................59 Interest Types........................................................61 Pass-Through Rates Based on LIBOR.........................................61 General...............................................................61 Determination of LIBOR................................................62 Other Credit Enhancement..................................................62 General...............................................................62 Limited Guarantee.....................................................62 Financial Guaranty Insurance Policy or Surety Bond....................63 Letter of Credit......................................................63 Pool Insurance Policy.................................................63 Special Hazard Insurance Policy.......................................64 Mortgagor Bankruptcy Bond.............................................65 Reserve Fund..........................................................65 Cross Collateralization...............................................65 Overcollateralization.................................................66 Excess Interest.......................................................66 Exchangeable Certificates.................................................66 General...............................................................66 Exchanges.............................................................67 Procedures............................................................68 Prepayment and Yield Considerations...........................................69 Pass-Through Rates........................................................69 Effects of Defaults.......................................................69 Scheduled Delays in Distributions.........................................69 Effect of Principal Prepayments...........................................69 Weighted Average Life of Certificates.....................................70 Refinancings..............................................................71 Servicing of the Mortgage Loans...............................................72 The Master Servicer.......................................................72 General...............................................................72 Master Servicing Experience and Procedures of Wells Fargo Bank.........................................................74 The Servicers.............................................................75 Servicing Experience and Procedures of Wells Fargo Bank...................76 Servicing Experience..................................................76 Servicing Procedures..................................................77 Payments on Mortgage Loans................................................78 Periodic Advances and Limitations Thereon.................................81 PMI Advances..............................................................82 Collection and Other Servicing Obligations................................82 Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans..............................................82 Insurance Policies........................................................84 Standard Hazard Insurance Policies....................................84 Primary Mortgage Insurance Policies...................................86 Fixed Retained Yield, Servicing Compensation and Payment of Expenses..............................................................86 Evidence as to Compliance.................................................87 Changes in Servicing......................................................87 Changes in Timing of Remittances of Unscheduled Principal Receipts in Full and Elimination of Month End Interest.......................................................87 Changes in Unscheduled Principal Receipt Period.......................88 Servicer Defaults.........................................................88 The Pooling and Servicing Agreement...........................................88 Assignment of Mortgage Loans to the Trustee...............................88 Representations and Warranties............................................90 Optional Purchases........................................................91 Reports to Certificateholders.............................................91 List of Certificateholders................................................93 Events of Default.........................................................93 Rights Upon Event of Default..............................................94 Amendment.................................................................95 Termination; Optional Purchase of Mortgage Loans..........................95 The Trustee...............................................................96 Special Servicing Agreements..............................................97 Certain Legal Aspects of the Mortgage Loans...................................97 General...................................................................98 Condominiums..............................................................98 Cooperatives..............................................................98 Foreclosure...............................................................99 Foreclosure on Shares of Cooperatives.....................................99 3 Leaseholds...............................................................100 Rights of Redemption.....................................................101 Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations on Lenders...............................................101 Forfeiture for Drug, RICO and Money Laundering Violations................103 Homeowners Protection Act of 1998........................................103 Texas Home Equity Loans..................................................103 Servicemembers Civil Relief Act and Similar Laws.........................104 Environmental Considerations.............................................104 "Due-on-Sale" Clauses....................................................106 Applicability of Usury Laws..............................................107 Enforceability of Certain Provisions.....................................107 Material Federal Income Tax Consequences.....................................108 Federal Income Tax Consequences for REMIC Certificates...................108 General..............................................................108 Status of REMIC Certificates.........................................108 Qualification as a REMIC.............................................109 Taxation of Regular Certificates.....................................110 Taxation of Residual Certificates....................................117 Taxes That May Be Imposed on the REMIC Pool..........................123 Liquidation of the REMIC Pool........................................124 Administrative Matters...............................................124 Limitations on Deduction of Certain Expenses.........................124 Taxation of Certain Foreign Investors................................125 Backup Withholding...................................................126 Reporting Requirements...............................................126 Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made............................................127 General..............................................................127 Tax Status...........................................................127 Premium and Discount.....................................................128 Premium..............................................................128 Original Issue Discount..............................................128 Market Discount......................................................128 Recharacterization of Servicing Fees.....................................129 Sale or Exchange of Certificates.........................................129 Stripped Certificates....................................................130 General..............................................................130 Status of Stripped Certificates......................................131 Taxation of Stripped Certificates....................................131 Reporting Requirements and Backup Withholding............................132 Reportable Transactions..................................................133 Taxation of Certain Foreign Investors....................................133 Federal Income Tax Consequences for Exchangeable Certificates............133 Tax Status...........................................................133 Exchangeable Certificates Representing Proportionate Interests in Two or More Exchangeable REMIC Certificates......................................................133 Exchangeable Certificates Representing Disproportionate Interests in Exchangeable REMIC Certificates......................133 Sales, Exchanges and Other Dispositions of Exchangeable Certificates......................................................134 ERISA Considerations.........................................................134 General..................................................................134 Certain Requirements Under ERISA.........................................135 General..............................................................135 Parties in Interest/Disqualified Persons.............................135 Delegation of Fiduciary Duty.........................................135 Administrative Exemptions................................................136 Individual Administrative Exemptions.................................136 PTE 83-1.............................................................137 Exempt Plans.............................................................138 Unrelated Business Taxable Income--Residual Certificates.................138 Legal Investment.............................................................138 Accounting Considerations....................................................140 Plan of Distribution.........................................................140 Use of Proceeds..............................................................141 Legal Matters................................................................141 Rating.......................................................................141 Reports to Certificateholders................................................141 Where You Can Find More Information..........................................142 Incorporation of Certain Information by Reference............................143 Index of Prospectus Definitions..............................................144 4 IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT Information is provided to you about the certificates 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 certificates, including your series, and (b) the accompanying prospectus supplement, which will describe the specific terms of your series of certificates, 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 certificates. 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 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 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. ---------------------- 5 - -------------------------------------------------------------------------------- SUMMARY OF PROSPECTUS o 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. To understand all of the terms of a series of certificates, please read this entire document and the accompanying prospectus supplement carefully. o This summary provides an overview of certain calculations, cash flows and other information to aid your understanding of the terms of the certificates and is qualified by the full description of these calculations, cash flows and other information in this prospectus and the accompanying prospectus supplement. RELEVANT PARTIES FOR EACH SERIES OF CERTIFICATES Issuing Entity Each series of certificates will be issued by a separate common law trust. Each trust will be formed, and each series of certificates will be issued, under a separate pooling and servicing agreement among the depositor, the master servicer and the trustee specified in the applicable prospectus supplement. Sponsor Wells Fargo Bank, N.A. will be the sponsor of each series of certificates. 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 certificates. 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 an indirect, wholly-owned subsidiary of Wells Fargo & Company. It is not expected that the depositor will have any business operations other than offering certificates and related activities. Master Servicer The sponsor will act as master servicer of each trust and will supervise the servicers and perform certain other administrative and reporting duties with respect to each series of certificates. In addition, the master servicer will generally be required to make advances with respect to the mortgage loans in each trust to the extent that a servicer (other than Wells Fargo Bank, N.A.) fails to make a required advance. Servicers The sponsor and, if specified in the applicable prospectus supplement, one or more other entities will service the mortgage loans in each trust. Each servicer will perform certain servicing functions with respect to the mortgage loans serviced by it pursuant to a related servicing agreement. Trustee A trustee for each trust will be named in the applicable prospectus supplement. The trustee generally will be responsible under each pooling and servicing agreement 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 servicing agreement for making distributions to certificateholders 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 certificates. Generally, the custodian will be responsible for holding and safeguarding the mortgage notes and other contents of the mortgage file on behalf of the certificateholders of a series. 6 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 estate: o will be fixed or adjustable interest rate, mortgage loans secured by first liens on one- to four-family residential properties; 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 general or modified standards or to other standards specified in the applicable prospectus supplement. See "The Trust Estates" and "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting." You should refer to the applicable prospectus supplement for the precise characteristics or expected characteristics of the mortgage loans included in a particular trust estate. DISTRIBUTIONS ON THE CERTIFICATES Each series of certificates will include one or more classes. A class of certificates 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. Interest Distributions With respect to each series of certificates, interest on the related mortgage loans at the weighted average of their mortgage interest rates after deducting servicing fees and certain other amounts as described in this prospectus or in the applicable prospectus supplement, will be passed through to holders of the related classes of certificates in accordance with the particular terms of each class of certificates. The terms of each class of certificates will be described in the applicable prospectus supplement. See "Description of the Certificates--Distributions to Certificateholders--Distributions of Interest." Except as otherwise specified in the applicable prospectus supplement, interest on each class of certificates of each series will accrue at the pass-through rate for each class indicated in the applicable prospectus supplement on their outstanding principal balance or notional amount. Principal Distributions With respect to a series of certificates, principal payments (including prepayments) on the related mortgage loans will be passed through to holders of the related certificates or otherwise applied in accordance with the related pooling and servicing agreement on each distribution date. Distributions in reduction of principal balance will be allocated among the classes of certificates of a series in the manner specified in the applicable prospectus supplement. See "Description of the Certificates--Distributions to Certificateholders--Distributions of Principal." Distribution Dates Distributions on the certificates 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 certificates 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 certificateholders of record at the close of business on the last business day of the month preceding the month in which such distribution date occurs (unless a different date is specified in the applicable prospectus supplement). CREDIT ENHANCEMENT Subordination A series of certificates may include one or more classes of senior certificates and one or more classes of subordinated certificates. The rights of the holders 7 of subordinated certificates of a series to receive distributions will be subordinated to such rights of the holders of the senior certificates of the same series to the extent and in the manner specified in the applicable prospectus supplement. Subordination is intended to enhance the likelihood of the timely receipt by the senior certificateholders of their proportionate share of scheduled monthly principal and interest payments on the related mortgage loans and to protect them from losses. This protection will be effected by: o the preferential right of the senior certificateholders to receive, prior to any distribution being made in respect of the related subordinated certificates on each distribution date, current distributions on the related mortgage loans of principal and interest due them on each distribution date out of the funds available for distributions on such date; o the right of such holders to receive future distributions on the mortgage loans that would otherwise have been payable to the holders of subordinated certificates; and/or o the prior allocation to the subordinated certificates of all or a portion of losses realized on the underlying mortgage loans. Other Types of Credit Enhancement If so specified in the applicable prospectus supplement, the certificates of any series, or any one or more classes of a series, may, in addition to or in lieu of subordination, be entitled to the benefits of one or more of the following types of credit enhancement: o limited guarantee o letter of credit o financial guaranty o reserve fund o insurance policy o cross-collateralization o surety bond o overcollateralization o mortgage pool o excess interest insurance policy See "Description of the Certificates--Other Credit Enhancement." In addition, if specified in the applicable prospectus supplement, amounts received under any cash flow agreement described under "The Trust Estate--Cash Flow Agreements" may also be used to provide credit enhancement for one or more classes of certificates. PERIODIC 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 related 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 periodic advances will be reimbursed for these as described in this prospectus and in the applicable prospectus supplement. If the servicer fails to make a required principal or interest advance, the master servicer or trustee 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 "Servicing of the Mortgage Loans--Periodic Advances and Limitations Thereon." FORMS OF CERTIFICATES The certificates 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 certificates, you will not receive a physical certificate representing your ownership interest in such book-entry certificates, except under extraordinary circumstances which are discussed in "Description of the Certificates--Book-Entry 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 certificates may generally only be exercised through DTC and its participating organizations. See "Description of the Certificates--Book-Entry Form." 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, purchase from the related trust: 8 o any defaulted mortgage loan during the periods specified under "The Pooling and Servicing Agreement--Optional Purchases"; and 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 "Pooling and Servicing Agreement--Optional Purchases." OPTIONAL PURCHASE OF ALL MORTGAGE LOANS AND TERMINATION OF THE TRUST If so specified in the prospectus supplement with respect to a series, all of the mortgage loans in the related trust (or one or more groups of mortgage loans, if specified in the applicable prospectus supplement) and any property acquired with respect to such mortgage loans may be purchased by the depositor, the sponsor or such other party as is specified in the applicable prospectus supplement. Any such purchase must be made in the manner and at the price specified in such prospectus supplement. In the event that an election is made to treat the related trust estate or one or more segregated pools of assets in the trust estate 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. Exercise of the right of purchase will effect the early retirement of the certificates of that series. See "Prepayment and Yield Considerations." ERISA LIMITATIONS If you are a fiduciary of any employee benefit plan subject to the fiduciary responsibility or prohibited transaction provisions of ERISA, you should carefully review with your own legal advisors whether the purchase or holding of certificates could give rise to a transaction prohibited or otherwise impermissible under ERISA or other similar rules or regulations. See "ERISA Considerations." TAX STATUS The treatment of the certificates for federal income tax purposes will depend on: o whether a REMIC election is made with respect to a series of certificates; and o if a REMIC election is made, whether the certificates are regular interests or residual interests. If one or more REMIC elections are made, certificates that are regular interests will be treated as newly issued debt instruments of the REMIC and must be accounted for under an accrual method of accounting. Certificates that are residual interests are not treated as debt instruments, but rather must be treated according to the rules prescribed in the Internal Revenue Code for REMIC residual interests, including restrictions on transfer and the reporting of net income or loss of the REMIC, including the possibility of a holder of such certificate having taxable income without a corresponding distribution of cash to pay taxes currently due. If the certificates represent interests in a grantor trust, beneficial owners of certificates generally are treated as owning an undivided beneficial interest in the mortgage loans that are assets of the trust. See "Material Federal Income Tax Consequences." LEGAL INVESTMENT The applicable prospectus supplement will specify whether the class or classes of certificates offered will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If your investment authority is subject to legal restrictions you should consult your own legal advisors to determine whether and to what extent such certificates constitute legal investments for you. See "Legal Investment" in this prospectus and in the applicable prospectus supplement. RATING Certificates of any series will not be offered pursuant to this prospectus and a prospectus supplement unless each offered class is rated in one of the four highest rating categories by at least one nationally recognized statistical rating organization. o A security rating is not a recommendation to buy, sell or hold the certificates of any series and is subject to revision or withdrawal at any time by the assigning rating agency. 9 o Ratings do not address the effect of prepayments on the yield you may anticipate when you purchase your certificates. - -------------------------------------------------------------------------------- 10 RISK FACTORS You should consider, among other things, the following factors in connection with the purchase of certificates. Limited Liquidity for Certificates The liquidity of your certificates may be limited. You should consider that: o a secondary market for the certificates 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 certificates of any series; o the prospectus supplement for any series of certificates may indicate that an underwriter intends to establish a secondary market in such certificates, but no underwriter will be obligated to do so; and o unless specified in the applicable prospectus supplement, the certificates will not be listed on any securities exchange. In addition to these considerations, the secondary market for mortgage asset-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 certificates. Although any class of certificates may experience illiquidity, it is more likely that classes of certificates that are more sensitive to prepayment, credit or interest rate risk will experience illiquidity. You should consider that illiquidity may also result from legal or regulatory changes, or from the adoption or change of accounting rules, which affect the certificates generally or particular types of certificateholders. Limited Assets for Payment of Certificates Except for any related insurance policies and any reserve fund or credit enhancement described in the applicable prospectus supplement: o mortgage loans included in the related trust estate will be the sole source of payments on the certificates of a series; o the certificates of any series will not represent an interest in or obligation of the depositor, the sponsor, the master servicer, the paying agent, any servicer, the trustee 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 master servicer with respect to its master servicing obligations; and o neither the certificates of any series nor the related mortgage loans will be guaranteed or insured by any governmental agency or instrumentality, the depositor, the sponsor, the master servicer, the paying agent, any servicer, the trustee, any of their affiliates or any other person. Consequently, in the event that payments on the mortgage loans underlying your series of certificates are insufficient or otherwise unavailable to make all payments required on your certificates, there will be no recourse to the depositor, the sponsor, the master servicer, any servicer, the trustee, the paying agent or, except as specified in the applicable prospectus supplement, any other entity. Certificates May Not Be Appropriate For Certain Individual Investors If you are an individual investor who does not have sufficient resources or expertise to evaluate the particular characteristics of a series of certificates, the series of certificates may not be an appropriate investment for you. This may be the case because, among other things: o if you purchase your certificates at a price other than par, your yield to maturity will be sensitive to the uncertain rate and timing of principal prepayments on the applicable mortgage loans; -11- o the rate of principal distributions on, and the weighted average life of, the certificates will be sensitive to the uncertain rate and timing of principal prepayments on the applicable mortgage loans and the priority of principal distributions among the classes of certificates of such series, and, as such, the certificates may be inappropriate investments for you if you require a distribution of a particular amount of principal on a specific date or an otherwise predictable stream of distributions; o you may not be able to reinvest amounts distributed in respect of principal on your certificates (which distributions in general, are expected to be greater during periods of relatively low interest rates) at a rate at least as high as the applicable pass-through rate or your expected yield; o a secondary market for the certificates may not develop or provide you with liquidity of investment; and o you must report interest as well as original issue discount, if any, on the accrual method of accounting, even if you are otherwise using the cash method of accounting. If you are an individual investor considering the purchase of a certificate of a series, you should carefully consider other risk factors discussed in this prospectus and the applicable prospectus supplement. Credit Enhancement is Limited in Amount and Coverage With respect to each series of certificates, credit enhancement may be provided in limited amounts to cover certain types of losses on the underlying mortgage loans. Credit enhancement will be provided in one or more of the forms referred to in this prospectus, including: subordination of other classes of certificates of the same series; a limited guarantee; a financial guaranty insurance policy; a surety bond; a letter of credit; a pool insurance policy; a special hazard insurance policy; a mortgagor bankruptcy bond; a reserve fund; cross-collateralization; overcollateralization; excess interest; and any combination of the preceding types of credit enhancement. See "Description of the Certificates--Other Credit Enhancement." 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; o may provide only very limited coverage as to certain types of losses, and may provide no coverage as to certain other types of losses; and o all or a portion of the credit enhancement for any series of certificates will generally be permitted to be reduced, terminated or substituted for, in the sole discretion of the master servicer or the depositor, if each applicable rating agency indicates that the then-current ratings will not be adversely affected. 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 certificates (or certain classes). None of the depositor, the sponsor, the master servicer, any 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 certificates. See "Description of the Certificates--Other Credit Enhancement." The Ratings of Your Certificates May Be Lowered or Withdrawn Which May Adversely Affect the Liquidity or Market Value of Your Certificates It is a condition to the issuance of the certificates of a series offered by a prospectus supplement that the certificates be rated in one of the four highest rating categories by a nationally recognized statistical rating agency. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. No person is obligated to maintain the rating on any certificate, and accordingly, there can -12- be no assurance to you that the ratings assigned to any certificate on the date on which the certificate is originally issued will not be lowered or withdrawn by a rating agency at any time thereafter. The rating(s) of any series of certificates by any applicable rating agency may be lowered following the initial issuance of the certificates as a result of the downgrading of the obligations of any applicable credit support provider, or as a result of losses on the related mortgage loans in excess of the levels contemplated by the rating agency at the time of its initial rating analysis. Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to replace or supplement any credit support, or to take any other action to maintain any rating(s) of any series of certificates. If any rating is revised or withdrawn, the liquidity or the market value of your certificate may be adversely affected. Real Estate Market Conditions Affect Mortgage Loan Performance An investment in securities such as the certificates, which generally represent interests in pools of residential mortgage loans, may be affected by a decline in real estate values and changes in the mortgagor's financial condition. There is no assurance that the values of the mortgaged properties securing the mortgage loans underlying any series of certificates have remained or will remain at their levels 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 estate 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 and those experienced in Wells Fargo Bank, N.A.'s or other servicers' servicing portfolios. To the extent that losses on mortgage loans underlying a series are not covered by credit enhancement, certificateholders of the series will bear all risk of loss resulting from default by mortgagors and will have to look primarily to the value of the mortgaged properties for recovery of the outstanding principal and unpaid interest on the defaulted mortgage loans. See "The Trusts Estates--Mortgage Loans" and "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting." 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 "Servicing of the Mortgage Loans--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 required to be insured against earthquake damage or any other loss not covered by standard hazard insurance policies, as described under "Servicing of the Mortgage Loans--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 estate. The mortgage loans underlying certain series of certificates may be concentrated in certain regions. Such concentration may present risk considerations in addition to those generally present for similar mortgage asset-backed securities without such concentration. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting." -13- Less Stringent Underwriting Standards May Increase Risk of Loss The mortgage loans, including certain loans made to foreign nationals, may have been originated using underwriting standards that are different from and, in certain respects, less stringent than the general underwriting policies of the sponsor. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting--Modified Standards." For example, certain of the mortgage loans may have been originated with reduced or no documentation, higher maximum loan-to-value ratios, lower FICO scores, less restrictive requirements for investment properties or "equity take out" financings, and may have been secured by shares in cooperative housing corporations, condotels or unique parcels of land or may have been made to foreign nationals. In addition, a portion of the mortgage loans may have been originated with no documentation or may be no ratio loans, stated loans or stated reduced loans, each as described under "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting--Modified Standards" herein, for which ratios of the related prospective borrowers' debt service on the mortgage loan and total debt obligations to income were not required to be taken into account in making the loan or for which no information regarding income or assets was required. Such mortgage loans may experience rates of delinquencies and cumulative loss that are higher than those experienced by mortgage loans underwritten to the sponsor's general underwriting standards. Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on Certificates The yield of the certificates 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 certificate 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 classes of certificates entitling their holders primarily or exclusively to payments of interest, such as interest only certificates, or primarily or exclusively to payments of principal, such as principal only certificates, will be extremely sensitive to the rate of prepayments on the related mortgage loans; and o the yield on certain classes of certificates may be relatively more sensitive to the rate of prepayment of specified mortgage loans than other classes of certificates. The rate of prepayments on mortgage loans is influenced by a number of factors, including: o prevailing mortgage market interest rates; o local and national economic conditions; 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 aggregate servicing fees or other mechanisms specified in the applicable prospectus supplement. Your yield will be also adversely affected to the extent that losses on the mortgage loans in the related trust estate are allocated to your certificates and may be adversely affected to the extent of unadvanced delinquencies on the mortgage loans in the related trust. Classes of certificates identified in the applicable prospectus supplement as subordinated certificates are more likely to be affected by delinquencies and losses than other classes of certificates. 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, including a table demonstrating the particular sensitivity of any class of principal only certificates to the rate of prepayments. -14- 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, including, in the case of interest only certificates that are extremely sensitive to principal prepayments, a table demonstrating the particular sensitivity of those interest only certificates to the rate of prepayments. 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 pays interest on the amount prepaid only to the date of prepayment. 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 certificateholders. To partially mitigate this reduction in yield, the master servicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments in full on the mortgage loans, but only up to the amount of compensating interest for such distribution date as described under "Description of the Certificates--Distributions to Certificateholders--Distributions of Interest" in this prospectus. To the extent these shortfalls from the mortgage loans are not covered by the amount of compensating interest or other mechanisms specified in the applicable prospectus supplement, they will be allocated among the classes of interest bearing certificates as described in the applicable prospectus supplement under "Description of the Certificates--Interest." No comparable interest shortfall coverage will be provided by the master servicer for partial prepayments or with respect to liquidations of any mortgage loans. Any interest shortfall arising from partial prepayments or liquidations will be covered by means of the subordination of the rights of subordinate certificateholders or any other credit support arrangements described in this prospectus. Increase in Index May Adversely Affect Yield on Certain Certificates of a Series Certain series of certificates may contain inverse floating rate certificates. If you are purchasing inverse floating rate certificates 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. The particular sensitivities of the inverse floating rate certificates are separately displayed in tables in an Appendix to the applicable prospectus supplement. See "Prepayment and Yield Considerations" in the applicable prospectus supplement. Subordination of Super Senior Support Certificates and Subordinated Certificates Increases Risk of Loss Certain series of certificates may contain super senior support certificates. If you purchase a class of super senior support certificates of a series, you should consider the risk that after the aggregate principal balance of the subordinated certificates of the series has been reduced to zero, the principal portion of realized losses allocated to the related class of super senior certificates of a series will be borne by your class of super senior support certificates (in addition to the principal portion of realized losses allocated to such class of super senior support certificates) and not by the related class of super senior certificates so long as the principal balance of such class of super senior support certificates remains outstanding. See "Description of the Certificates" in the applicable prospectus supplement. The rights of the holders of each class of subordinated certificates of a series to receive distributions will be subordinated to such rights of the holders of the senior certificates of the series and the holders of the lower-numbered classes of subordinated certificates of the series, if any. In addition, realized losses will be allocated to the subordinated certificates of a series in the reverse order in which they are entitled to distributions of principal before -15- being allocated to the senior certificates of a series. Accordingly, if you are purchasing subordinated certificates, you will be more likely to experience losses as a result of the occurrence of losses or interest shortfalls on the mortgage loans of the related series. See "Description of the Certificates" in the applicable prospectus supplement. There Are Risks Relating to Second Lien Mortgage Loans With respect to certain of the mortgage loans of a series, at the time of origination of the first lien mortgage loan, the originator or another lender may have originated a second lien mortgage loan. With respect to mortgage loans that have second lien mortgage loans encumbering the same mortgaged property, foreclosure frequency may be increased relative to mortgage loans that do not have second lien mortgage loans behind them because mortgagors have less equity in the mortgaged property. Investors should also note that any mortgagor may obtain second lien mortgage loans at any time subsequent to the date of origination of their first lien mortgage loan from the originator or from any other lender. See table with the heading "Original Combined Loan-To-Value Ratios" in Appendix A of the prospectus supplement. Information relating to any second lien mortgage loans relating to the mortgage loans for a series will be specified in an appendix to the applicable prospectus supplement containing mortgage loan information for the related series. The Inclusion of "Negative Amortization" Mortgage Loans in a Series May Adversely Affect Yield of Related Certificates If so specified in the applicable prospectus supplement, a trust estate may contain "negative amortization" mortgage loans. The mortgage interest rates on mortgage loans that allow for "negative amortization" will adjust monthly but their monthly payments and amortization schedules adjust annually and are subject to payment caps. During a period of rising interest rates, as well as prior to the annual adjustment to the monthly payment made by the mortgagor, the amount of interest accruing on the principal balance of such mortgage loans may exceed the amount of the scheduled monthly payment. As a result, a portion of the accrued interest on such a mortgage loan may become "deferred interest" which will be added to the principal balance of such mortgage loan and will also bear interest at the applicable mortgage interest rate. The excess, if any, of the aggregate amount of any deferred interest on such mortgage loans over the aggregate amount of partial and full prepayments received from mortgagors on the mortgage loans in the related trust estate in any month will reduce the amount of interest distributable on the classes of certificates of such series identified in the applicable prospectus supplement. Because partial and full prepayments received from mortgagors on the mortgage loans in the related trust estate will be used to pay deferred interest to certain classes of certificates of a series, principal distributions on the certificates of such series may occur at a slower rate than if all deferred interest on the mortgage loans was allocated in reduction of current interest distributions on such certificates. In addition, due to the priority of distributions, a class of subordinate certificates may fail to receive all or part of the deferred interest allocable to it if full and partial prepayments on such mortgage loans otherwise available for such purpose are required to pay interest (other than as a result of negative amortization of such mortgage loans) or principal on more senior classes of certificates of such series due, for example, to unadvanced delinquencies or losses on the related mortgage loans. If the mortgage interest rates on "negative amortization" mortgage loans decrease prior to their annual adjustment in monthly payment, a larger portion of the monthly payment will be applied to the unpaid principal balance of such mortgage loans, which may cause the related classes of certificates to amortize more quickly. Conversely, if the mortgage interest rates on "negative amortization" mortgage loans increase prior to their annual adjustment in monthly payment, a smaller portion of the monthly payment will be applied to the unpaid principal balance of such mortgage loans, which may cause the related classes of certificates to amortize more slowly. If the unpaid principal balance of a "negative amortization" mortgage loan exceeds the original balance of the mortgage loan by the maximum amount specified in the related mortgage note, the monthly payment due on that mortgage loan will be recast without regard to the related payment cap in order to provide for the outstanding balance of the mortgage loan to be paid in full at its maturity. In addition, on the fifth adjustment date of a "negative amortization" mortgage loan, and every fifth adjustment date thereafter and the last adjustment date prior to such mortgage loan's maturity, the monthly payment due on that mortgage loan will be recast without regard to the related payment cap in order to provide for the outstanding balance of the mortgage loan to be paid in full at its maturity by the payment of equal monthly installments. These features may affect the rate at which principal on these mortgage loans is paid and may create a greater risk of default if the borrowers are unable to pay the monthly payments on the related increased principal balances. -16- On each distribution date, the deferred interest on any "negative amortization" mortgage loans will be allocated to the related classes of certificates as described in the applicable prospectus supplement. Any such allocation of deferred interest could, as a result, affect the maturity of the affected classes of certificates of such series. The amount of deferred interest, if any, with respect to such mortgage loans for a given month will reduce the amount of interest collected on these mortgage loans and available to be distributed to the related classes of certificates of such series. The resulting reduction in interest collections on such mortgage loans will be offset, in part or in whole, by applying principal prepayments received on such mortgage loans to interest distributions on the related classes of certificates. For any distribution date, the deferred interest on such mortgage loans, net of the amount of any offsetting prepayments, will be deducted from the interest payable to the related certificates as described in the applicable prospectus supplement. The amount of the reduction of accrued interest distributable to each related class of certificates attributable to net deferred interest will be added to the principal balance of that class of certificates. Only the amount by which the principal prepayments received on such mortgage loans exceed the amount of deferred interest on the such mortgage loans will be distributed as principal to the related classes of certificates of such series in accordance with the priorities described in the applicable prospectus supplement. For a description of "negative amortization" mortgage loans and deferred interest, see "The Trust Estates-Mortgage Loans." The effects on the yield of any class of certificates of a series due to the inclusion of any "negative amortization" mortgage loans in the related trust estate will be further described in the related prospectus supplement. The Inclusion of Subsidy Mortgage Loans in a Series May Adversely Affect Yield of the Related Certificates If so specified in the applicable prospectus supplement, a trust estate 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 estate and the resulting prepayment in full of the subsidy loan may adversely affect the yield on one or more classes of certificates of the related series, particularly interest only certificates or certificates 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 certificates may be adversely affected. For a description of subsidy loans, see "The Trust Estates-Mortgage Loans" herein. The Inclusion of Buy-Down Mortgage Loans in a Series May Adversely Affect Yield of the Related Certificates If so specified in the applicable prospectus supplement, a trust estate 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 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 -17- 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 certificates 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 certificates will contain provisions protective of the mortgagee as described under "The Trust Estates -- 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. Exercise of Rights Under Special Servicing Agreements May Be Adverse to Other Certificateholders The pooling and servicing agreement for a series will permit the master servicer at the direction of the depositor to enter into a special servicing agreement with an unaffiliated holder of a class of Class B Certificates or a class of securities representing interests in one or more classes of Class B Certificates and/or other subordinated mortgage pass-through certificates, pursuant to which the holder may instruct the master servicer to instruct the servicer, to the extent provided in the related underlying servicing 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 certificates 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 certificates 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 certificates, while delaying foreclosure will adversely affect the yield to maturity of principal only certificates. Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates 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 -18- 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 master servicing obligations under the related pooling and servicing agreement and the sponsor's ongoing servicing obligations under the applicable underlying servicing 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 certificates 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. 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 certificates 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 a master servicer or servicer of the mortgage loans of a series, even if a contractual basis for termination exists. This inability to terminate the sponsor as a master servicer or servicer could result in a delay or possibly a reduction in distributions on the certificates of a series to the extent the sponsor, as master servicer or servicer, received, but did not remit to the trustee or the securities administrator, mortgage loan collections before the date of insolvency or if the sponsor failed to make any required advances. -19- The Weighted Average Life of a Companion Certificate is Particularly Sensitive to Prepayments Because on any distribution date companion certificates will not receive principal distributions until the planned amortization certificates, targeted amortization certificates or scheduled certificates they support have been paid to their planned, targeted or scheduled balances, and will receive all principal distributions in excess of those required to pay the planned amortization certificates, targeted amortization certificates or scheduled certificates to their planned, targeted or scheduled balances, the weighted average life of a companion certificate of a series is particularly sensitive to principal prepayments on the mortgage loans of such series. 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 of 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 certificates. In addition, a bankruptcy proceeding could result in the temporary disruption of distributions on the certificates of a series. Book-Entry Certificates May Experience Decreased Liquidity and Payment Delay Since transactions in the classes of book-entry certificates of any series generally can be effected only through DTC, DTC participants and indirect DTC participants: o your ability to pledge book-entry certificates to someone who does not participate in the DTC system, or to otherwise act with respect to such book-entry certificates, may be limited due to the lack of a physical certificate; o you may experience delays in your receipt of payments on book-entry certificates because distributions will be made by the master servicer, or a paying agent on behalf of the master servicer, to Cede, as nominee for DTC; o you may experience delays in your receipt of payments on book-entry certificates in the event of misapplication of payments by DTC, DTC participants or indirect DTC participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities; and o the liquidity of book-entry certificates in any secondary trading market that may develop may be limited because investors may be unwilling to purchase securities for which they cannot obtain delivery of physical certificates. See "Description of the Certificates--Book-Entry Form." Cash Flow Agreements and External Credit Enhancements are Subject to Third Party Risk The assets of a trust estate may, if specified in the applicable prospectus supplement, include agreements, such as interest rate swap, cap, floor or similar agreements, which will require the provider of such instrument or -20- counterparty to make payments to the trust estate under the circumstances described in the prospectus supplement. To the extent that payments on the certificates of the related series depend in part on payments to be received under this type of agreement, the ability of the trust estate to make payments on the certificates will be subject to the credit risk of the counterparty. In addition, the ratings assigned to the certificates 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 certificates of the series. A reduction in the ratings assigned to the certificates of a series is likely to affect adversely the liquidity and market value of the certificates. See "The Trust Estates--Cash Flow Agreements" and "Description of the Certificates--Other Credit Enhancement" herein. Servicing Transfer Following Event of Default May Result in Payment Delays or Losses Following the occurrence of an event of default under a pooling and servicing agreement or underlying servicing agreement, the trustee for the related series may, in its discretion or pursuant to direction from certificateholders, 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 certificates. 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 certificates. Consumer Protection Laws May Limit Remedies There are various federal and state laws, public policies and principles of equity that protect consumers. Among other things, these laws, policies and principles: o regulate interest rates and other charges; o require certain disclosures; o require licensing of mortgage loan originators; o require the lender to provide credit counseling and/or make affirmative determinations regarding the borrower's ability to repay the mortgage loan; o prohibit discriminatory lending practices; o limit or prohibit certain mortgage loan features, such as prepayment penalties or balloon payments; o regulate the use of consumer credit information; and o regulate debt collection practices. Violation of certain provisions of these laws, policies and principles: o may limit a servicer's ability to collect all or part of the principal of or interest on the mortgage loans; o may entitle the borrower to a refund of amounts previously paid; and -21- o could subject a servicer to damages and administrative sanctions. The depositor will generally be required to repurchase any mortgage loan which, at the time of origination, did not comply with such federal and state laws or regulations, however that remedy may not be adequate to fully compensate the related trust estate. In addition, the sponsor will be required to pay to the depositor, and the depositor will be required to pay to the applicable trust, any costs or damages incurred by the related trust as a result of a violation of these laws or regulations. See "The Pooling and Servicing Agreement--Representations and Warranties." See "Certain Legal Aspects of the Mortgage Loans." 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- THE TRUST ESTATES General The assets underlying each Series of Certificates (each, a "Trust Estate") will consist primarily of fixed or adjustable interest rate, first mortgage loans ("Mortgage Loans") evidenced by promissory notes (the "Mortgage Notes") secured by mortgages, deeds of trust or other instruments creating first liens (the "Mortgages") on some or all of the following five types of property (as so secured, the "Mortgaged Properties"), to the extent set forth in the applicable prospectus supplement: (i) one- to four-family detached 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 and (vi) manufactured homes. In addition, a Trust Estate will also include (i) amounts held from time to time in the related Certificate Account, (ii) 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 Trust Estate will not include the portion of interest on the Mortgage Loans which constitutes the Fixed Retained Yield, if any. See "Servicing of the Mortgage Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses." Mortgage Loans 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 or modified standards as set forth herein, or to such other standards set forth in the applicable prospectus supplement. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Production Sources" and "--Mortgage Loan Underwriting." 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 Estate, 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. Each of the Mortgage Loans will be secured by a Mortgage on a Mortgaged Property located in any of the 50 states, the District of Columbia or the territories of the United States. Generally, the land underlying a Mortgaged Property will consist of five acres or less but may consist of greater acreage in the Sponsor's discretion. The borrowers for each of the Mortgage Loans will be natural persons or, under certain conditions, borrowers may be inter vivos revocable trusts established by natural persons. If specified in the applicable prospectus supplement, the Mortgage Loans may be secured by leases on real property under circumstances that the Sponsor determines in its discretion are commonly acceptable to institutional mortgage investors. A Mortgage Loan secured by a lease on real property is secured not by a fee simple interest in the Mortgaged Property but rather by a lease under which the mortgagor has the right, for a specified term, to use the related real estate and the residential dwelling located on the property. Generally, a Mortgage Loan will be secured by a lease only if (i) the use of leasehold estates as security for mortgage loans is customary in the area, (ii) the lease is not subject to any prior lien that could result in termination of the lease and (iii) the term of the lease ends at least five years beyond the maturity date of the related Mortgage Loan. The provisions of each lease securing a Mortgage -23- Loan will expressly permit (i) mortgaging of the leasehold estate, (ii) assignment of the lease without the lessor's consent and (iii) acquisition by the holder of the Mortgage, in its own or its nominee's name, of the rights of the lessee upon foreclosure or assignment in lieu of foreclosure, unless alternative arrangements provide the holder of the Mortgage with substantially similar protections. No lease will contain provisions which (i) provide for termination upon the lessee's default without the holder of the Mortgage being entitled to receive written notice of, and opportunity to cure, such default, (ii) provide for termination in the event of damage or destruction as long as the Mortgage is in existence or (iii) prohibit the holder of the Mortgage from being insured under the hazard insurance policy or policies related to the premises. The prospectus supplement will set forth certain information, 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 Estate 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 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 FICO Scores 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 Estate contains Interest Only Mortgage Loans, the number and aggregate unpaid principal balances of the Interest Only Mortgage Loans and the remaining interest only term and weighted average remaining interest only term for the Interest Only Mortgage Loans in the Trust Estate. 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. The Mortgage Loans in a Trust 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. Each Mortgage Loan will be of one of the following types of mortgage loans: a. Fixed Rate Loans. If so specified in the applicable prospectus supplement, a Trust Estate may include fixed-rate, fully-amortizing Mortgage Loans providing for level monthly payments of principal and interest and terms at origination or modification of not more than 40 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 Pooling and Servicing Agreement will require the Depositor or another party identified in the applicable prospectus supplement to repurchase each such converted Mortgage Loan at the price set forth in the applicable prospectus supplement. A Trust Estate 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 Estate and which are subject to no further conversions. -24- b. Adjustable Rate Loans. If so specified in the applicable prospectus supplement, a Trust Estate may include adjustable-rate, fully-amortizing Mortgage Loans having an original or modified term to maturity of not more than 40 years with a related Mortgage Interest Rate which generally adjusts initially either six months, one, 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 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. 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 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 price set forth in the applicable prospectus supplement. A Trust Estate 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 Estate. If so specified in the applicable prospectus supplement, a Trust Estate may contain adjustable-rate Mortgage Loans with original terms to maturity of not more than 40 years and flexible payment options ("Option ARM Mortgage Loans"). The initial required monthly payment is fully amortizing based on the initial mortgage interest rate (which may be a rate that is less than the sum of the applicable index at origination and the gross margin specified in the related Mortgage). After an introductory period of a few months, the borrower may select from up to three payment options each month: (i) a monthly payment of principal and interest sufficient to fully amortize the mortgage loan based on the remaining scheduled term of the loan, (ii) an interest only payment that would cover solely the amount of interest that accrued during the previous month (this option is only available if it would exceed the minimum payment option for the month), or (iii) a minimum payment equal to either (a) the initial monthly payment, (b) the monthly payment as of the most recent annual adjustment date, or (c) the monthly payment as of the most recent automatic adjustment, whichever is most recent. The minimum payment adjusts annually after the first payment date but is subject to a payment cap which limits any increase or decrease to no more than a specified percentage (the "Payment Cap") of the previous year's minimum payment amount. In addition, the minimum payment is subject to an automatic adjustment every five years or if the outstanding principal balance of the mortgage loan exceeds a specified percentage of the original principal balance, in each case without regard to the Payment Cap limitation. On each annual adjustment date and in the event of an automatic adjustment, the minimum monthly payment is adjusted to an amount sufficient to fully amortize the mortgage loan based on the then-current mortgage interest rate and remaining scheduled term of the loan, unless, in the case of an annual adjustment, the monthly payment is restricted by the Payment Cap limitation, in which case the monthly payment is adjusted by the Payment Cap. A minimum payment may not cover the amount of interest accrued during a month and may not pay down any principal. Any interest not covered by a monthly payment ("Deferred Interest") will be added to the principal balance of the Mortgage Loan. This is called "negative amortization" and results in an increase in the amount of principal the borrower owes. Interest will then accrue on this new larger principal balance. The index for an Option ARM Mortgage Loan will be determined monthly or at other less frequent intervals specified in the applicable prospectus supplement. c. Interest Only Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Estate may contain (i) Mortgage Loans having an original term to maturity of not more than 40 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 -25- 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 40 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"). d. Graduated Payment Loans. If so specified in the applicable prospectus supplement, a Trust Estate may contain fixed-rate, graduated payment Mortgage Loans having original or modified terms to maturity of not more than 40 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 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 Estate 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 related 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 -26- 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 Estate. See "Prepayment and Yield Considerations." 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 is used by Wells Fargo Bank in determining certain expense-to-income ratios utilized in underwriting a Subsidy Loan. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting." f. Buy-Down Loans. If so specified in the applicable prospectus supplement, a Trust Estate 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 seller 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 related 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 Servicer Custodial Account or the Certificate 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 Estate may contain Mortgage Loans which are amortized over a fixed period not exceeding 40 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 Estate. See "Prepayment and Yield Considerations." h. Pledged Asset Mortgage Loans. If so specified in the applicable prospectus supplement, a Trust Estate may contain fixed-rate mortgage loans having original terms to stated maturity of not more than 40 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 Estate 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 Estate 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 -27- on an Additional Collateral Pledged Asset Mortgage Loan upon liquidation. The Limited Purpose Surety Bond will not cover any payments on the Certificates of the related 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 Estate 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. 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 of pledged securities which can be drawn under each LOC (the "Pledged Value") is generally equal to at least 20% of the purchase price or appraised value of the Mortgaged Property (whichever is less). The Pledged Value may be reduced by the amount of the borrower's equity in the property or any down payment made by such borrower. 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 Underlying Servicing 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 Underlying Servicing 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. Cash Flow Agreements General If specified in the applicable prospectus supplement, the Trust Estate 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 Certificates (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 Certificates 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 C.F.R. 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 C.F.R. 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 C.F.R. 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 Certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K. -28- 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 Certificateholders. 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 Certificates as specified in the applicable prospectus supplement. Yield Maintenance Agreements If specified in the applicable prospectus supplement, the Trustee (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 Certificates. The counterparty 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 Trustee (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 Certificates 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 Certificates and will be paid to the Class or Classes of Certificates as specified in the applicable prospectus supplement. Swap Agreements If specified in the applicable prospectus supplement, the Trustee (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 Certificates. 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 prior to distributions to Certificateholders. 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 Trustee (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 Certificates in the event those Certificates 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 Certificates 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 Certificates 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 Certificates. Wells Fargo Bank will also be the Master Servicer, the Paying Agent and a Servicer for each Series of Certificates. 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. -29- 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 Alternative Mortgage Backed Securities ("WFALT") program is used to securitize the following types of residential mortgage loans that were originated or acquired by the Sponsor: a. Fixed-rate mortgage loans having original terms to maturity of approximately fifteen years to approximately forty years, and which mortgage loans were originated pursuant to Wells Fargo Bank's underwriting guidelines for "Alt-A" mortgage loans ("Alt-A Fixed-Rate Loans"); b. Adjustable-rate mortgage loans having original terms to maturity of approximately fifteen years to approximately forty years, and which mortgage loans were originated pursuant to Wells Fargo Bank's underwriting guidelines for "Alt-A" mortgage loans ("Alt-A Adjustable-Rate Loans"); c. Fixed-rate mortgage loans having original terms to maturity of approximately fifteen years to approximately forty years, and which mortgage loans were originated pursuant to Wells Fargo Bank's underwriting guidelines for "Alt-B" mortgage loans ("Alt-B Fixed-Rate Loans"); and d. Adjustable-rate mortgage loans having original terms to maturity of approximately fifteen years to approximately forty years, and which mortgage loans were originated pursuant to Wells Fargo Bank's underwriting guidelines for "Alt-B" mortgage loans ("Alt-B Adjustable-Rate 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 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: -30-
2003 2004 2005 ------------------------- ------------------------- ------------------------- Aggregate Aggregate Aggregate Original Original Original No. of Principal No. of Principal No. of Principal Asset Type Loans Balance of Loans Loans Balance of Loans Loans Balance of Loans - --------------------------- Alt-A Fixed-Rate Loans 7,821 $1,218,547,744 1,971 $ 363,156,775 1,712 $ 386,302,325 Alt-A Adjustable Rate Loans 2,138 $ 353,752,693 500 $ 100,031,808 3,208 $ 966,796,725 Alt-B Fixed-Rate Loans 4,257 $ 671,401,750 10,504 $1,710,604,264 16,298 $3,032,243,542 Alt-B Adjustable Rate Loans 1,644 $ 347,514,301 12,874 $2,857,345,640 6,841 $1,476,803,195
Only Certificates backed by Alt-A Fixed-Rate Loans, Alt-A Adjustable Rate, Alt-B Fixed-Rate Loans and Alt-B Adjustable Rate Loans are securitized under the Depositor's WFALT 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 WFALT securitization programs and those of its predecessors from and including 1996 through 2005 and backed by the foregoing asset types is $2.546 billion. The following table shows the aggregate initial principal balances of residential mortgage-backed securities which have been offered under the Depositor's WFALT securitization program during each of the years indicated and the total number of issuances of residential mortgage asset-backed securities which have been offered under the Depositor's WFALT securitization program for each of the years indicated:
2003 2004 2005 ----------------- ----------------- ----------------- Aggregate Initial Aggregate Initial Aggregate Initial Principal Principal Principal Asset Type Balance Balance Balance - -------------------------- ----------------- ----------------- ----------------- Alt-A Fixed-Rate Loans and Alt-B Fixed Rate Loans $235,020,224 $0 $217,289,883 Alt-A Adjustable Rate Loans and Alt-B Adjustable Rate Loans $ 0 $0 $344,994,234 2003 2004 2005 ----------------- ----------------- ----------------- Total Number of Issuances 1 0 2
Under the Depositor's residential mortgage asset-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 general or modified underwriting standards or other underwriting standards which will be described in the prospectus supplement. See "The Trust Estates-Mortgage Loans" 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 and also acts as master servicer for each such trust, supervising the servicers and performing certain other administrative and reporting duties with respect to each series of certificates. See "The Sponsor's Mortgage Loan Programs," "Servicing of the Mortgage Loans" and "The Pooling and Servicing Agreement" 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. -31- THE SPONSOR'S MORTGAGE LOAN PROGRAMS Mortgage Loan Production Sources Wells Fargo Bank originates and acquires 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 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 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 or originations by Wells Fargo Bank's Private Mortgage Banking division (including referrals from the private banking group of Wells Fargo Bank and other affiliated banks), which specializes in providing services to individuals meeting certain earnings, liquidity or net worth parameters, (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 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 the Wells Fargo Affiliates. Wells Fargo Bank may directly contact prospective borrowers (including borrowers with mortgage loans currently serviced by Wells Fargo Bank) through general and targeted solicitations. Such solicitations are made through direct mailings, mortgage loan statement inserts and television, radio and print advertisements and by telephone. Wells Fargo Bank's targeted solicitations may be based on characteristics such as the borrower's mortgage loan interest rate or payment history and the geographic location of the mortgaged property. See "Prepayment and Yield Considerations." A majority of Wells Fargo Bank's corporate clients are companies that sponsor relocation programs for their employees and in connection with which Wells Fargo Bank provides mortgage financing. Eligibility for a relocation loan is based, in general, on an employer's providing financial assistance to the relocating employee in connection with a job-required move. Although Subsidy Loans are typically generated through such corporate-sponsored programs, the assistance extended by the employer need not necessarily take the form of a loan subsidy. Not all relocation loans are generated by Wells Fargo Bank through referrals from its corporate clients; some relocation loans are generated as a result of referrals from mortgage brokers and similar entities and others are generated through Wells Fargo Bank's acquisition of mortgage loans from other originators. Also among Wells Fargo Bank's corporate clients are various professional associations. These associations, as well as the other corporate clients, promote the availability of a broad range of Wells Fargo Bank mortgage products to their members or employees, including refinance loans, second-home loans and investment-property loans. 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 -32- 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. The contractual arrangements with Correspondents may also involve the delegation of all underwriting functions to such Correspondents ("Delegated Underwriting"), which will result in Wells Fargo Bank not performing any underwriting functions prior to acquisition of the loan but instead relying on such Correspondents' representations and, in the case of bulk purchase acquisitions from such Correspondents, Wells Fargo Bank's post-purchase reviews of samplings of mortgage loans acquired from such Correspondents regarding the Correspondents' compliance with Wells Fargo Bank's underwriting standards. In all instances, however, acceptance by Wells Fargo Bank is contingent upon the loans being found to satisfy Wells Fargo Bank's program standards or the standards of a pool insurer. 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 general or modified underwriting standards. To the extent that 20% or more of the aggregate principal balance of the Mortgage Loans in a Trust Estate are underwritten by a Correspondent whose underwriting standards vary materially from Wells Fargo Bank's general or modified underwriting standards, the applicable prospectus supplement will describe such underwriting standards for such Mortgage Loans. Mortgage Loan Underwriting The Trust for each Series of Certificates will include Mortgage Loans which have been underwritten in accordance with one or more of the following: (i) Wells Fargo Bank's "general" underwriting standards, (ii) Wells Fargo Bank's "retention program," (iii) Wells Fargo Bank's modified underwriting standards that have been applied in the underwriting of mortgage loans under Wells Fargo Bank's "alternative" mortgage loan underwriting program, (iv) the underwriting standards of a pool insurer and (v) the underwriting standards of participants in Wells Fargo Bank's non-agency conduit program. General Standards Wells Fargo Bank's underwriting standards are applied by or on behalf of Wells Fargo Bank to evaluate the applicant's credit standing and ability to repay the loan, as well as the value and adequacy of the mortgaged property as collateral. The underwriting standards that guide the determination represent a balancing of several factors that may affect the ultimate recovery of the loan amount, including, among others, the amount of the loan, the ratio of the loan amount to the property value (i.e., the lower of the appraised value of the mortgaged property and the purchase price), the borrower's means of support and the borrower's credit history. Wells Fargo Bank's guidelines for underwriting may vary according to the nature of the borrower or the type of loan, since differing characteristics may be perceived as presenting different levels of risk. With respect to certain Mortgage Loans, the originators of such loans may have contracted with unaffiliated third parties to perform the underwriting process. Except as described below, the Mortgage Loans will be underwritten by or on behalf of Wells Fargo Bank generally in accordance with the standards and procedures described herein. Wells Fargo Bank supplements the mortgage loan underwriting process with either its own proprietary scoring system or scoring systems developed by third parties such as Freddie Mac's Loan Prospector, Fannie Mae's Desktop Underwriter or scoring systems developed by private mortgage insurance companies. These scoring systems assist Wells Fargo Bank in the mortgage loan approval process by providing consistent, objective measures of borrower credit and certain loan attributes. Such objective measures are then used to evaluate loan applications and assign each application a "Mortgage Score." -33- The portion of the Mortgage Score related to borrower credit history is generally based on computer models developed by a third party. These models evaluate information available from three major credit reporting bureaus regarding historical patterns of consumer credit behavior in relation to default experience for similar types of borrower profiles. A particular borrower's credit patterns are then considered in order to derive a "FICO Score" which indicates a level of default probability over a two-year period. The Mortgage Score is used to determine the type of underwriting process and which level of underwriter will review the loan file. For transactions which are determined to be low-risk transactions, based upon the Mortgage Score and other parameters (including the mortgage loan production source), the lowest underwriting authority is generally required. For moderate and higher risk transactions, higher level underwriters and a full review of the mortgage file are generally required. Borrowers who have a satisfactory Mortgage Score (based upon the mortgage loan production source) are generally subject to streamlined credit review (which relies on the scoring process for various elements of the underwriting assessments). Such borrowers may also be eligible for a reduced documentation program and are generally permitted a greater latitude in the application of borrower debt-to-income ratios. With respect to all mortgage loans underwritten by Wells Fargo Bank, Wells Fargo Bank's underwriting of a mortgage loan may be based on data obtained by parties other than Wells Fargo Bank that are involved at various stages in the mortgage origination or acquisition process. This typically occurs under circumstances in which loans are subject to an alternative approval process, as when Correspondents, certain mortgage brokers or similar entities that have been approved by Wells Fargo Bank to process loans on its behalf, or independent contractors hired by Wells Fargo Bank to perform underwriting services on its behalf ("contract underwriters") make initial determinations as to the consistency of loans with Wells Fargo Bank underwriting guidelines. Wells Fargo Bank may also permit these third parties to utilize scoring systems in connection with their underwriting process. The underwriting of mortgage loans acquired by Wells Fargo Bank pursuant to a Delegated Underwriting arrangement with a Correspondent is not reviewed prior to acquisition of the mortgage loan by Wells Fargo Bank although the mortgage loan file is reviewed by Wells Fargo Bank to confirm that certain documents are included in the file. In addition, in order to be eligible to sell mortgage loans to Wells Fargo Bank pursuant to a Delegated Underwriting arrangement, the originator must meet certain requirements including, among other things, certain quality, operational and financial guidelines. See "--Acquisition of Mortgage Loans from Correspondents" above. A prospective borrower applying for a mortgage loan is required to complete a detailed application. The loan application elicits pertinent information about the applicant, with particular emphasis on the applicant's financial health (assets, liabilities, income and expenses), the property being financed and the type of loan desired. A self-employed applicant may be required to submit his or her most recent signed federal income tax returns. With respect to every applicant, credit reports are obtained from commercial reporting services, summarizing the applicant's credit history with merchants and lenders. Generally, significant unfavorable credit information reported by the applicant or a credit reporting agency must be explained by the applicant. The credit review process generally is streamlined for borrowers with a qualifying Mortgage Score. Verifications of employment, income, assets or mortgages may be used to supplement the loan application and the credit report in reaching a determination as to the applicant's ability to meet his or her monthly obligations on the proposed mortgage loan, as well as his or her other mortgage payments (if any), living expenses and financial obligations. A mortgage verification involves obtaining information regarding the borrower's payment history with respect to any existing mortgage the applicant may have. This verification is accomplished by either having the present lender complete a verification of mortgage form, evaluating the information on the credit report concerning the applicant's payment history for the existing mortgage, communicating, either verbally or in writing, with the applicant's present lender or analyzing cancelled checks provided by the applicant. Verifications of income, assets or mortgages may be waived under certain programs offered by Wells Fargo Bank, but Wells Fargo Bank's underwriting guidelines require, in most instances, a verbal or written verification of employment to be obtained. In some cases, employment histories may be obtained through one of various employment verification sources, including the borrower's employer, employer sponsored web sites, or third party services specializing in employment verifications. In addition, the loan applicant may be eligible for a loan approval process permitting reduced documentation. The above referenced reduced documentation options and waivers limit the amount of documentation required for an underwriting decision and have the effect of increasing the relative importance of the credit report and the appraisal. Documentation requirements vary based upon a number of factors, including the -34- purpose of the loan, the amount of the loan, the ratio of the loan amount to the property value and the mortgage loan production source. Wells Fargo Bank accepts alternative methods of verification, in those instances where verifications are part of the underwriting decision; for example, salaried income may be substantiated either by means of a form independently prepared and signed by the applicant's employer or by means of the applicant's most recent paystub and/or W-2. Loans underwritten using alternative verification methods are considered by Wells Fargo Bank to have been underwritten with "full documentation." In cases where two or more persons have jointly applied for a mortgage loan, the gross incomes and expenses of all of the applicants, including nonoccupant co-mortgagors, are combined and considered as a unit. In general, borrowers applying for loans must demonstrate that the ratio of their total monthly debt to their monthly gross income does not exceed a certain maximum level. Such maximum level varies depending on a number of factors including Loan-to-Value Ratio, a borrower's credit history, a borrower's liquid net worth, the potential of a borrower for continued employment advancement or income growth, the ability of the borrower to accumulate assets or to devote a greater portion of income to basic needs such as housing expense, a borrower's Mortgage Score and the type of loan for which the borrower is applying. These calculations are based on the amortization schedule and the interest rate of the related loan, with the ratio being computed on the basis of the proposed monthly mortgage payment. In the case of adjustable-rate mortgage loans, the interest rate used to determine a mortgagor's total debt for purposes of such ratio may, in certain cases, be the initial mortgage interest rate or another interest rate, which, in either case, is lower than the sum of the index rate that would have been applicable at origination plus the applicable margin. In evaluating applications for Subsidy Loans and Buy-Down Loans, the ratio is determined by including in the applicant's total monthly debt the proposed monthly mortgage payment reduced by the amount expected to be applied on a monthly basis under the related subsidy agreement or buy-down agreement or, in certain cases, the mortgage payment that would result from an interest rate lower than the Mortgage Interest Rate but higher than the effective rate to the mortgagor as a result of the subsidy agreement or the buy-down agreement. See "The Trust Estates--Mortgage Loans." In the case of the mortgage loans of certain applicants referred by Wells Fargo Bank's Private Mortgage Banking division, qualifying income may be based on an "asset dissipation" approach under which future income is projected from the assumed liquidation of a portion of the applicant's specified assets. In evaluating an application with respect to a "non-owner-occupied" property, which Wells Fargo Bank defines as a property leased to a third party by its owner (as distinct from a "second home," which Wells Fargo Bank defines as an owner-occupied, non-rental property that is not the owner's principal residence), Wells Fargo Bank will include projected rental income net of certain mortgagor obligations and other assumed expenses or loss from such property to be included in the applicant's monthly gross income or total monthly debt in calculating the foregoing ratio. A mortgage loan secured by a two- to four-family Mortgaged Property is considered to be an owner-occupied property if the borrower occupies one of the units; rental income on the other units is generally taken into account in evaluating the borrower's ability to repay the mortgage loan. 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. Secondary financing may be provided by Wells Fargo Bank, any of its affiliates or other lenders simultaneously with the origination of the first lien mortgage loan. Wells Fargo Bank or one of its affiliates may provide such secondary financing in the form of a flexible home equity line of credit, the available balance under which may increase on a quarterly basis by one dollar for each dollar applied in payment of the principal balance of the first lien mortgage loan during the preceding quarter (any such loan, a "Home Asset ManagementSM Account Loan"). In addition, the available balance of such line of credit may be eligible for increase on an annual basis by one dollar for each dollar, if any, by which the value of the related Mortgaged Property has increased over the prior year, as determined pursuant to a statistically derived home price index. The payment obligations under both primary and secondary financing are included in the computation of the debt-to-income ratio, and the combined amount of primary and secondary loans will be used to calculate the combined loan-to-value ratio. Wells Fargo Bank does not restrict a borrower from obtaining secondary financing after origination of the first lien mortgage loan. Mortgage Loans will not generally have had at origination a Loan-to-Value Ratio in excess of 95%. However, if so specified in the applicable prospectus supplement, Mortgage Loans that had Loan-to-Value Ratios at origination in excess of 95% may be included in the related Trust Estate. The "Loan-to-Value Ratio" is the ratio, expressed as -35- 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 four months prior to origination (or, with respect to newly constructed properties, no more than twelve months prior to origination), or (ii) the sale price for such property. In some instances, the Loan-to-Value Ratio may be based on an appraisal that was obtained by the originator more than four months 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. 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 obtained in connection with the origination of the replacement loan. In connection with certain of its mortgage originations, Wells Fargo Bank currently obtains appraisals through 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. No assurance can be given that values of the Mortgaged Properties have remained or will remain at the levels which existed on the dates of appraisal (or, where applicable, on the dates of appraisal updates) of the related Mortgage Loans. The appraisal of any Mortgaged Property reflects the individual appraiser's judgment as to value, based on the market values of comparable homes sold within the recent past in comparable nearby locations and on the estimated replacement cost. The appraisal relates both to the land and to the structure; in fact, a significant portion of the appraised value of a Mortgaged Property may be attributable to the value of the land rather than to the residence. Because of the unique locations and special features of certain Mortgaged Properties, identifying comparable properties in nearby locations may be difficult. The appraised values of such Mortgaged Properties will be based to a greater extent on adjustments made by the appraisers to the appraised values of reasonably similar properties rather than on objectively verifiable sales data. If residential real estate values generally or in particular geographic areas decline such that the outstanding balances of the Mortgage Loans and any secondary financing on the Mortgaged Properties in a particular Trust Estate become equal to or greater than the values of the related Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry and those now experienced in Wells Fargo Bank's servicing portfolios. In addition, 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) and other factors which may or may not affect real property values, including the purposes for which the Mortgage Loans were made and the uses of the Mortgaged Properties, may affect the timely payment by mortgagors 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 Trust Estate. See "Prepayment and Yield Considerations--Weighted Average Life of Certificates." To the extent that such losses are not covered by the methods of credit support or the insurance policies described herein, they will be borne by holders of the Certificates of the Series evidencing interests in such Trust Estate. Wells Fargo Bank originates mortgage loans with Loan-to-Value Ratios in excess of 80% either with or without the requirement to obtain primary mortgage insurance. In cases for which such primary mortgage insurance is obtained, the excess over 75% (or such other lower percentage as Wells Fargo Bank may require at origination) 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%. In cases for which such primary mortgage insurance is not obtained, loans having Loan-to-Value Ratios exceeding 80% are required to be secured by primary residences or second homes (excluding Cooperatives). Generally, each loan originated without primary mortgage insurance will have been made at an interest rate that was higher than the rate would have been had the Loan-to-Value Ratios been 80% or less or had primary mortgage insurance been obtained. The prospectus supplement will specify the number and percentage of Mortgage Loans contained in the Trust Estate for a particular Series of Certificates with Loan-to-Value Ratios at origination in excess of 80% which are not covered by primary mortgage insurance. Except as described below, Mortgage Loans will generally be covered by an appropriate standard form American Land Title Association ("ALTA") title insurance policy, or a substantially similar policy or form of insurance acceptable to Fannie Mae or Freddie Mac. The Depositor will represent and warrant to the Trustee of any Trust Estate that the Mortgaged Property related to each Mortgage Loan is free and clear of all encumbrances and -36- liens having priority over the first lien of the related Mortgage, subject to certain limited exceptions as set forth below under "The Pooling and Servicing Agreement--Representations and Warranties." Retention Program Standards A borrower with at least one mortgage loan serviced by Wells Fargo Bank may be eligible for Wells Fargo Bank's retention program. Provided such a borrower is current in his or her mortgage payment obligations, Wells Fargo Bank may permit a refinancing of one or more of the borrower's mortgage loans that are serviced by Wells Fargo Bank or another servicer to a current market interest rate without applying any significant borrower credit or property underwriting standards. As a result, borrowers who qualify under the retention program may not need to demonstrate that their current total monthly debt obligation in relation to their monthly income level does not exceed a certain ratio; Wells Fargo Bank may not obtain a current credit report for the borrower or apply a new FICO Score to the refinanced loan; and the borrower may not be required to provide any verifications of current employment, income level or extent of assets. In addition, no current appraisal or indication of market value may be required with respect to the properties securing the mortgage loans which are refinanced under the retention program. A borrower may participate in this retention program through a refinancing of one or more of his or her existing mortgage loans by either replacing any such loan with a new mortgage loan at a current market interest rate or, in the case of a mortgage loan that had been originated or purchased by Wells Fargo Bank, by executing a modification agreement under which the interest rate on the existing mortgage loan is reduced to a current market rate. Mortgage Loans initially included in the Trust Estate for a particular Series of Certificates may have been the subject of a refinancing under the retention program and, to the extent that borrowers become eligible for the retention program after their Mortgage Loans have been included in a particular Trust Estate, such Mortgage Loans may be refinanced under such program. See "Prepayment and Yield Considerations" in this prospectus and in the prospectus supplement for a description of the potential effects on Certificateholders resulting from such refinancings. Wells Fargo Bank may also apply the retention program to its existing borrowers who obtain new purchase money mortgage loans secured by primary residences where the initial principal balance of the new loan would not exceed 150% of the original principal balance of the previous loan (up to a maximum new loan amount of $400,000). Borrowers may be pre-approved under this program if they have a satisfactory payment history with Wells Fargo Bank as well as a satisfactory FICO Score. Wells Fargo Bank may waive verifications of borrower income and assets under this program and may not impose any limitation on the ratio of a borrower's current total debt obligation in relation to current monthly income. A new appraisal will be obtained with respect to the residence securing the new purchase money mortgage loan. Modified Standards In comparison to Wells Fargo Bank's "general" underwriting standards described above, the underwriting standards applicable to mortgage loans under Wells Fargo Bank's "alternative" mortgage loan underwriting program permit different underwriting criteria, additional types of mortgaged properties or categories of borrowers such as "foreign nationals" without a FICO Score who hold certain types of visas and have acceptable credit references (such Mortgage Loans, "Foreign National Loans"), and include certain other less restrictive parameters. Generally, relative to the "general" underwriting standards, these standards include higher loan amounts, higher maximum Loan-to-Value Ratios, higher maximum "combined" Loan-to-Value Ratios (in each case, relative to Mortgage Loans with otherwise similar characteristics) in cases of simultaneous primary and secondary financings, less restrictive requirements for "equity take out" refinancings, the removal of limitations on the number of permissible mortgage loans that may be extended to one borrower financing a primary residence and the ability to originate mortgage loans with Loan-to-Value Ratios in excess of 80% without the requirement to obtain primary mortgage insurance if such loans are secured by cooperatives or investment properties. On July 10, 2006, Wells Fargo Bank implemented new expanded financing solutions for underwriting their "alternative" mortgage loans (the "EFA Program"). Under the EFA Program, mortgage loans are divided into two general categories, "Alt-A Prime" and "Alt-A Minus". Borrower and mortgage loan characteristics will determine whether a mortgage loan falls within the Alt-A Prime or Alt-A Minus category. The differences between these categories are discussed herein. All "alternative" mortgage loan originated by Wells Fargo Bank on and after July 10, 2006 were originated under the EFA Program guidelines. Unless otherwise specified, the descriptions contained herein are applicable to loans originated before and after the implementation of the EFA Program. -37- For mortgage loans originated under the EFA Program, if the property is a second home or investment property, the borrower is not permitted to finance more than six one-to-four family residences (including the borrowers primary residence) with Wells Fargo Bank. If the property is a primary residence, there is no limitation on the number of one-to-four family residences that a borrower may finance with Wells Fargo Bank. Generally, Wells Fargo Bank requires primary mortgage insurance for all Alt-A Prime mortgage loans. For Alt-A Prime mortgage loans the primary insurance is paid by the borrower and for Alt-A Minus mortgage loans the primary mortgage insurance is paid by Wells Fargo Bank. In cases where primary mortgage insurance is obtained, the percentage of the unpaid principal balances of the mortgage loans as set forth in the following table (the "Coverage Percentage") 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, typically 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 Coverage Percentages generally required by Wells Fargo Bank at various levels of Loan-to-Value Ratios and documentation types are as follows: -38- Coverage Percentages
Loan-to-Value Documentation Category I Mortgage Category II Mortgage Ratios Types Loans Loans 97.01% to 100.00% Full documentation 35% 30% 95.01% to 97.00% Full documentation 30% 25% 90.01% to 95.00% Alldocumentation 30% 25% levels 85.01% to 90.00% Alldocumentation 25% 12% levels 80.01% to 85.00% All documentation 12% 6% levels
"Category I Mortgage Loans" includes Mortgage Loans with terms to maturity in excess of 20 years. "Category II Mortgage Loans" includes Mortgage Loans with terms to maturity less than or equal to 20 years. Under a program available to eligible borrowers who meet certain underwriting criteria and for which program a minimum downpayment of only 3% is required, mortgage loans may be originated with Loan-to-Value Ratios between 95.01% and 97% with the application of less restrictive maximum qualifying ratios of borrower monthly housing debt or total monthly debt obligations to borrower monthly income and reduced minimum requirements for primary mortgage insurance coverage ("3% Solution Loans"). With respect to mortgaged property types, mortgage loans may be secured by shares in cooperative housing corporations, manufactured homes, investment properties permitted under less stringent guidelines, condotels (features of which may include maid service, a front desk or resident manager, rental pools and up to 20% of commercial space), and the mortgaged properties may represent an unusually high percentage of land vs. structure or have other unique characteristics. In connection with its "Mortgage Express alternative-A" program ("Alt-B"), which was in effect prior to July 10, 2006, Wells Fargo Bank established classifications with respect to the credit profile of the applicant, and each loan was placed into one of thirteen credit levels denoted as "F9 through F1," with certain levels subdivided by Stated Reduced, as described in the table below. Terms of mortgage loans originated by Wells Fargo Bank under the Alt-B program, 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 were 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. Except for loans originated under the "No Ratio" program, the maximum total debt to gross income ratio for each credit level is generally 50%. 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 were as follows: -39-
Maximum Combine Credit Existing Mortgage Documentation Credit Bureau Loan Level History Type Score* to Value Ratio** - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F9 2 x 30; Mortgage or rent payments no more than No documentation 700 or higher 95% CLTV @ 30 days late at application time and a maximum LTV < 95% of two 30-day late payments in the last 12 months - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F8 2 x 30; Mortgage or rent payments no more than No documentation 660-699 95% CLTV @ 30 days late at application time and a maximum LTV <95% of two 30-day late payments in the last 12 months - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F7 0 x 30; Mortgage or rent payments no more than No documentation 620-659 95% CLTV @ 30 days late at application time and no 30-day LTV <95% late payments in the last 12 months - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F6 2 x 30; Mortgage or rent payments no more than Stated with option of 700 or higher 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <95% of two 30-day late payments in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F6 Stated Reduced 1 x 30; Mortgage or rent payments no more than Stated with option of 700 or higher 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <80% of one 30-day late payment in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F5 2 x 30; Mortgage or rent payments no more than Stated with option of 660-699 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <95% of two 30-day late payments in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F5 Stated Reduced 1 x 30; Mortgage or rent payments no more than Stated with option of 660-699 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <80% of one 30-day late payment in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F4 0 x 30; Mortgage or rent payments no more than Stated with option of 640-659 95% CLTV @ 30 days late at application time and no 30-day verification of assets; LTV <95% late payments in the last 12 months maximum debt-to-income ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F4 Stated Reduced 1 x 30; Mortgage or rent payments no more than Stated with option of 640-659 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <80% of one 30-day late payment in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F3 0 x 30; Mortgage or rent payments no more than Stated with option of 620-639 95% CLTV @ 30 days late at application time and no 30-day verification of assets; LTV <95% late payments in the last 12 months maximum debt-to-income ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F3 Stated Reduced 1 x 30; Mortgage or rent payments no more than Stated with option of 620-639 95% CLTV @ 30 days late at application time and a maximum verification of assets; LTV <80% of one 30-day late payment in the last 12 maximum debt-to-income months ratio of 50% - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F2 2 x 30; Mortgage or rent payments no more than No Ratio with option of 600 or higher 95% CLTV @ 30 days late at application time and a maximum verification of assets LTV <95% of two 30-day late payments in the last 12 months - ------------------- ----------------------------------------------- ----------------------- -------------- ---------------- F1 0 x 30; Mortgage or rent payments no more than No Ratio with option of 620-659 95% CLTV @ 30 days late at application time and no 30-day verification of assets LTV <95% late payments in the last 12 months
- -------------- * Lower of two, middle of three credit bureau scores used. If only one credit bureau score is obtained, then that score is used. ** 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 mortgage loan. Wells Fargo Bank does not restrict a borrower from obtaining secondary financing after the origination of a mortgage loan. 100% CLTV allowed when verification of assets option chosen, with loan amounts less than or equal to $500,000 and LTV less than or equal to 80%. -40- For the purpose of assigning (a) the credit levels designated as Stated Reduced in the table above, consecutive monthly payments having the same delinquency characterization (e.g., 30-day late or 60-day late) were counted as a single late payment of such delinquency characterization and (b) the credit levels, other than those designated as Stated Reduced in the table above, consecutive monthly payments having the same delinquency characterization (e.g., 30-day late or 60-day late) were each counted as an additional occurrence of such delinquency characterization. Wells Fargo Bank used the foregoing categories and characteristics as guidelines only. On a case-by case basis, Wells Fargo Bank may have made 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. The Mortgage Loans originated or acquired by Wells Fargo Bank under the Alt-B program had loan terms of 15, 20 or 30 years and fully amortize over such terms. The principal amounts of the Mortgage Loans originated or acquired by Wells Fargo Bank under the Alt-B program generally range from a minimum of $10,000 to a maximum of $1,000,000. Wells Fargo Bank generally did not originate or acquire any Mortgage Loans under the Alt-B program 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. The Mortgage Loans originated or acquired by Wells Fargo Bank under the Alt-B program are generally secured by single-family detached residences, 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 Mortgage Loans originated under the Alt-B program. Wells Fargo Bank, may have, 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. The Alt-B program includes No Ratio Loans, No Documentation Loans, Stated Loans and Stated Reduced Loans. Under the EFA Program, Wells Fargo Bank revised its underwriting program to include expanded credit score requirements and loan-to-value ratios and combined loan-to-value ratios, higher loan amounts and more documentation types and property types. The Mortgage Loans originated or acquired by Wells Fargo Bank under the EFA Program include the following: Fixed Rate Loans with terms of 15, 20 or 30 years which fully amortize over such terms; 30 and 40-year Balloon Loans; and various types of Adjustable Rate Loans. The principal amounts of the Mortgage Loans originated or acquired by Wells Fargo Bank under the EFA Program generally range from a minimum of $300,000 to a maximum of $6,000,000 for Alt-A Prime and from a minimum of $400,000 to a maximum of $4,000,000 for Alt-A Minus. To be eligible for Alt-A Prime, a borrower must have (i) a minimum FICO Score of 680 and (ii) a mortgage or rent history with (a) no mortgage or rent payments 30 days late at application time, (b) no mortgage or rent payments 60 days late in the last twelve months, (c) no more than two 30-day late mortgage or rent payments in the last twelve months and (d) no rolling late payments. To be eligible for Alt-A Minus, a borrower must have (i) a minimum FICO Score of 620 and (ii) a mortgage or rent history with (a) no mortgage or rent payments 30 days late at application time, (b) no mortgage or rent payments 60-days late in the last twelve months, (c) no more than two 30-day late mortgage or rent payments in the last twelve months and (d) no more than six rolling late payments for delinquencies no longer than 30 days. Wells Fargo Bank generally does not originate or acquire any Mortgage Loans under the EFA Program 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. The Mortgage Loans originated or acquired by Wells Fargo Bank under the EFA Program are generally secured by single-family detached residences, planned unit developments, condotels, condominium units, unwarrantable 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 Mortgage Loans originated under the EFA Program. 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. The EFA program includes No Ratio Loans with a borrowers option to have assets verified, Stated Loans with a borrowers option to have assets verified, Full Documentation Loans and No Documentation Loans. -41- The following table sets forth the different documentation types, occupancy types, maximum loan amounts and maximum loan-to-value ratios and combined loan-to-value ratios for the Alt-A Prime and Alt-A Minus mortgage loans originated under the EFA Program:
Occupancy Maximum Loan Maximum Loan to Maximum Combined Credit Level Documentation Type Type Amount Value Ratio** Loan to Value Ratio** - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Full Documentation Owner $6,000,000 100% 100% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Full Documentation Second home $6,000,000* 95% 100% - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Full Documentation Non-owner $4,000,000 90% 100% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Stated with option of Owner $6,000,000 95% 100% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Stated with option of Second home $6,000,000* 90% 90% verification of assets - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime Stated with option of Non-owner $4,000,000 90% 90% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime No Ratio with option of Owner $4,000,000 95% 100% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- ---------------------- Alt-A Prime No Ratio with option of Second home $4,000,000* 90% 90% verification of assets - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime No Ratio with option of Non-owner $3,000,000 90% 90% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime No Documentation Owner $3,000,000 95% 95% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime No Documentation Second home $3,000,000 80% 80% - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Prime No Documentation Non-owner $1,000,000 75% 75% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Full Documentation Owner $4,000,000 100% 100% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Full Documentation Second home $4,000,000 95% 100% - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Full Documentation Non-owner $3,000,000 90% 100% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Stated with option of Owner $4,000,000 95% 100% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Stated with option of Second home $2,000,000 90% 90% verification of assets - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus Stated with option of Non-owner $2,000,000 90% 90% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No ratio with option of Owner $4,000,000 95% 100% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No ratio with option of Second home $2,000,000* 90% 90% verification of assets - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No ratio with option of Non-owner $1,000,000 90% 90% verification of assets occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No Documentation Owner $2,000,000 95% 95% occupied - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No Documentation Second home $2,000,000* 75% 75% - ------------------ ----------------------- ----------- ------------ --------------- --------------------- Alt-A Minus No Documentation Non-owner $750,000 75% 75% occupied
- --------------------------------- * The maximum loan amounts are subject to downward adjustment based upon certain factors including property type and purpose of the mortgage loan. ** 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 and the type of mortgaged property. 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. -42- Borrowers who satisfy certain guidelines regarding credit history may have been approved under a "No Ratio" program (such Mortgage Loans, "No Ratio Loans") or under a "No Documentation" program (such Mortgage Loans, "No Documentation Loans"). In the case of No Ratio Loans, the borrower's would not have been required to provide any information in their loan application regarding their income nor would there have been the calculation of any ratios, as part of the loan underwriting decision, of the borrower's expected monthly housing debt or total monthly debt obligations to the borrower's monthly income. In connection with such No Ratio program, the borrower has the option to have assets verified and certain minimum "cash reserves" are required. In the case of No Documentation Loans, borrowers may not have been required to provide any information in their loan application regarding their employment and in that instance employment would not have been verified. Also, in the case of No Documentation Loans, borrowers would not have been required to provide any information in their loan application regarding their income or assets. In the case of the "Stated" program (such Mortgage Loans, "Stated Loans"), the borrower's income would not have been verified and the borrower has the option to have assets verified and certain minimum "cash reserves" are required. Under the Stated program the borrower's employment, income sources and assets must be stated on the signed loan application. The borrower's income as stated must be reasonable for the borrower's occupation as determined at the discretion of the loan underwriter. Similarly, the borrower's assets as stated must be reasonable for the borrower's income as determined at the discretion of the loan underwriter. In certain circumstances borrowers who do not qualify for other reduced documentation programs may qualify for the "Stated Reduced" program (such Mortgage Loans, "Stated Reduced Loans"). Maximum Loan-to-Value Ratios are lower under the Stated Reduced program than for other reduced documentation programs. In the case of Stated Reduced Loans, the borrower's income would not have been verified, the borrower's assets may have been verified and certain minimum "cash reserves" required. Under the Stated Reduced program the borrower's employment, income sources and assets must be stated on the signed loan application. The borrower's income as stated must be reasonable for the borrower's occupation as determined in the discretion of the loan underwriter. Similarly, the borrower's assets as stated must be reasonable for the borrower's occupation as determined in the discretion of the loan underwriter. The Stated Reduced program is not available for any mortgage loans originated under the guidelines of the EFA Program. In the case of the "Full Documentation" program (such Mortgage Loans, "Full Documentation Loans"), all sections of the mortgage loan application must be complete with borrower's employment, income and assets. A minimum of two years of continuous employment or source of income must be disclosed for each borrower. Generally, self-employed borrowers should have at least a two year history in the same business in the same market area and must provide previous year's W-2 and current pay stub with year-to-date earnings or, if unavailable, must provide previous year's tax return. For loans originated under the Full Documentation program, a verbal verification of employment is required and assets must be disclosed, documented and verified. In addition, Full Documentation Loans are subject to a maximum debt-to-income ratio of 55%. Wells Fargo Bank's underwriting of every Mortgage Loan submitted (as to which underwriting authority has not been delegated) consists of a credit review. In addition, Wells Fargo Bank's underwriting of every Mortgage Loan submitted consists of a separate appraisal conducted by (i) a third-party appraiser, (ii) an appraiser approved by RELS, 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 amount of the Mortgage Loan 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, each Mortgage Loan is subject to further review in the form of a desk review, field review or additional full appraisal. Underwriter Discretion During the second calendar quarter of 2005, Wells Fargo Bank initiated a program designed to encourage its mortgage loan underwriting staff to prudently, but more aggressively, utilize the underwriting discretion already granted to them under Wells Fargo Bank's underwriting guidelines and policies. This initiative was viewed by management as necessary and desirable to make prudent loans available to customers where such loans may have been denied in the past because of underwriter hesitancy to maximize the use of their ability to consider -43- compensating factors as permitted by the underwriting guidelines. There can be no assurance that the successful implementation of this initiative will not result in an increase in the incidence of delinquencies and foreclosures, or the severity of losses, among mortgage loans underwritten in accordance with the updated philosophy, as compared to mortgage loans underwritten prior to the commencement of the initiative. -44- 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 either (1) prior residential mortgage loan pools securitized by the Sponsor in registered offerings through the Depositor's WFALT program or (2) prior originations of, or purchases by, the Sponsor of 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, the Federal Housing Administration or the 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 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 Estate with respect to any Series. 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 Estate, 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 Estate from the Sponsor. The Depositor will have limited obligations and rights under the Pooling and Servicing Agreement after the Closing Date for any Series, including but not limited to, repurchasing or substituting Mortgage Loans in a Trust Estate 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 "The Pooling and Servicing Agreement--Termination; Optional Purchase of Mortgage Loans," repurchasing all or a portion of the Mortgage Loans of a Series. The Pooling and Servicing Agreement will also provide that neither the Depositor nor any subcontractor, nor any director, officer, employee or agent of the Depositor, will be under any liability to the Trust Estate or the Certificateholders, for the taking of any action or for refraining from the taking of any action in good faith pursuant to the Pooling and Servicing Agreement, or for errors in judgment; provided, however, that neither the Depositor, 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 Pooling and Servicing Agreement will further provide that the Depositor, any subcontractor, and any director, officer, employee or agent of the Depositor shall be entitled to indemnification by the Trust Estate 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 Pooling and Servicing Agreement, the Certificates or the Mortgage Loans of a Series (except for amounts due in -45- connection with a breach of a representation or warranty concerning the applicable Mortgage Loans), other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties under the Pooling and Servicing Agreement or by reason of reckless disregard of its obligations and duties thereunder. In addition, the Pooling and Servicing Agreement will provide that the Depositor 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 Pooling and Servicing Agreement and, in its opinion, does not involve it in any expense or liability. The Depositor may, however, in its discretion, undertake any such action deemed by it necessary or desirable with respect to the Pooling and Servicing Agreement and the rights and duties of the parties thereto and the interests of the Certificateholders thereunder if the Certificateholders offer the Depositor 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 Estate and the Depositor will be entitled to be reimbursed therefor out of the Certificate Account, and any loss to the Trust Estate arising from such right of reimbursement will be allocated first to the Subordinated Certificates of a Series before being allocated to the related Senior Certificates, or if such Series does not contain Subordinated Certificates, pro rata among the various Classes of Certificates or in another manner specified in the applicable Pooling and Servicing Agreement. -46- DESCRIPTION OF THE CERTIFICATES General A separate common law trust (a "Trust") will serve as the "Issuing Entity" and issue each series (each, a "Series") of certificates (the "Certificates"). Each Series of Certificates will include one or more classes (each, a "Class"). In addition, any Class of Certificates may consist of two or more non-severable components, each of which may exhibit any of the principal or interest payment characteristics described herein with respect to a Class of Certificates. A Series may include one or more Classes of Certificates 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 described in this prospectus. Each Series of Certificates will be issued on the date specified in the applicable prospectus supplement (the "Closing Date") pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") among the Depositor, the Master Servicer and the Trustee named in the applicable prospectus supplement. Distributions to Certificateholders of all Series (other than the final distribution in retirement of the Certificates) will, unless another method is specified in the applicable prospectus supplement, be made by wire transfer in immediately available funds, provided that the Certificateholder holds Certificates having a minimum denomination set forth in the applicable prospectus supplement and the Paying Agent is furnished with appropriate wiring instructions not less than seven business days prior to the related Distribution Date. If a Certificateholder holds Certificates having a denomination less than the minimum denomination set forth in the applicable prospectus supplement or if a Certificateholder holds a Residual Certificate or has not notified the Paying Agent with the time period set forth in the immediately preceding sentence, distributions will be made by check mailed to the address of the person entitled thereto (which in the case of Book-Entry Certificates will be Cede as nominee for DTC) as it appears on the certificate register. The final distribution in retirement of Certificates will be made only upon presentation and surrender of the Certificates at the office or agency maintained by the Paying Agent or other entity for such purpose, as specified in the final distribution notice to Certificateholders. Each Series of Certificates will represent ownership interests in the related Trust Estate. An election may be made to treat the Trust Estate (or one or more segregated pools of assets therein) with respect to a Series of Certificates as a REMIC. If such an election is made, such Series will consist of one or more Classes of Certificates that will represent "regular interests" within the meaning of Code Section 860G(a)(1) (such Class or Classes collectively referred to as the "Regular Certificates") and one Class of Certificates with respect to each REMIC that will be designated as the "residual interest" within the meaning of Code Section 860G(a)(2) (the "Residual Certificates") representing the right to receive distributions as specified in the prospectus supplement for such Series. See "Material Federal Income Tax Consequences." Definitive Form Certificates of a Series that are issued in fully registered, certificated form are referred to herein as "Definitive Certificates." Distributions of principal of, and interest on, the Definitive Certificates will be made directly to holders of Definitive Certificates in accordance with the procedures set forth in the Pooling and Servicing Agreement. The Definitive Certificates of a Series offered hereby and by means of the applicable prospectus supplements will be transferable and exchangeable at the office or agency maintained by the Master Servicer, as certificate registrar, 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 Certificates, but the Master Servicer, as certificate registrar, 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 Estate (or one or more segregated pools of assets therein) as a REMIC, the "residual interest" thereof will be issued as a Definitive Certificate. No legal or beneficial interest in all or any portion of any "residual interest" may be transferred without the receipt by the transferor and the Master Servicer or other entity acting as certificate registrar 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 -47- 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 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 Master Servicer or other entity acting as certificate registrar 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 "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of Residual Certificates." Book-Entry Form General Each Class of Certificates of a Series issued in book-entry form ("Book-Entry Certificates") 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 "Certificateholder" of such Certificates, as such terms are used herein. Any person acquiring an interest in a Book-Entry Certificate (a "Beneficial Owner") will hold such Certificates 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, National Association 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 Certificate representing such person's interest in the Book-Entry Certificate, except as set forth below. Unless and until Definitive Certificates are issued under the limited circumstances described herein, all references to actions taken by Certificateholders or holders shall, in the case of the Book-Entry Certificates, refer to actions taken by DTC upon instructions from its DTC Participants, and all references herein to distributions, notices, reports and statements to Certificateholders or holders shall, in the case of the Book-Entry Certificates, refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the Book-Entry Certificates, 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 (the "Exchange Act"). 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 Certificate in its records for such purpose. In turn, the Financial Intermediary's ownership of such Book-Entry Certificate 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 Certificates from the Paying Agent through DTC and DTC Participants. While the Book-Entry Certificates are outstanding, under the -48- 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 Certificates and is required to receive and transmit distributions of principal of, and interest on, the Book-Entry Certificates. Participants and Indirect Participants with whom Beneficial Owners have accounts with respect to Book-Entry Certificates 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 representing their respective interests in the Book-Entry Certificates, the Rules provide a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. Unless and until Definitive Certificates are issued, Beneficial Owners who are not Participants may transfer ownership of Book-Entry Certificates only through Participants and Indirect Participants by instructing such Participants and Indirect Participants to transfer Book-Entry Certificates, by book-entry transfer, through DTC, for the account of the purchasers of such Book-Entry Certificates, 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 Certificates 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, the Master Servicer or any Paying Agent as Certificateholders, as such term is used in the Pooling and Servicing Agreement, and Beneficial Owners will be permitted to exercise the rights of Certificateholders 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 Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Book-Entry Certificates, may be limited due to the lack of a physical certificate for such Book-Entry Certificates. If specified in the applicable prospectus supplement, the Book-Entry Certificates will be offered globally and may be held by investors through any of DTC, Clearstream or Euroclear. These Book-Entry Certificates 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 Certificates 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 Certificates 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 Certificates 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 Certificates will be credited to the securities custody accounts on the settlement date against payment in same-day funds. Clearstream International ("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 Institute Monetaire Luxembourgeois and 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 -49- Euroclear Bank S.A./N.V. as the Euroclear Operator in Brussels to facilitate settlement of trades between systems. Clearstream currently accepts over 200,000 securities issues on it 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 is available to other institutions which clear through or maintain 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 securities, 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 Certificates 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 Certificates 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 Certificates that it represents. Under a book-entry format, Beneficial Owners of the Book-Entry Certificates 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 Certificates 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 "Material Federal Income Tax Consequences -- Taxation of Certain Foreign Investors" and "-- Backup Withholding" herein. DTC has advised the Depositor that, unless and until Definitive Certificates are issued, DTC will take any action the holders of the Book-Entry Certificates 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 Certificates are credited, to the extent that such actions are taken on behalf of Financial Intermediaries whose holdings include such Book-Entry Certificates. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Certificateholder 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 -50- direction of the related DTC Participants, with respect to some Book-Entry Certificates which conflict with actions taken with respect to other Book-Entry Certificates. Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Book-Entry Certificates among Participants, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. Neither the Depositor, the Master Servicer, the Paying Agent nor 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 Certificates 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 Certificates are registered, the ability of the Beneficial Owners of such Book-Entry Certificates 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 Certificates may be impaired. The Book-Entry Certificates will be converted to Definitive Certificates and reissued to Beneficial Owners or their nominees, rather than to DTC or its nominee, only if (i) the Paying Agent 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 Certificates and the Paying Agent 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 Paying Agent will be required to notify all Beneficial Owners through DTC Participants of the availability of Definitive Certificates. Upon surrender by DTC of the physical certificates representing the Book-Entry Certificates and receipt of instructions for re- registration, the Paying Agent will reissue the Book-Entry Certificates as Definitive Certificates to Beneficial Owners. The procedures relating to payment on and transfer of Certificates initially issued as Definitive Certificates will thereafter apply to those Book-Entry Certificates that have been reissued as Definitive Certificates. 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 Certificates 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 Certificates against payment. Payment will include interest accrued on the Book-Entry Certificates 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 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 Certificates. After settlement has been completed, the Book-Entry Certificates 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 Certificates will accrue -51- 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 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 Certificates 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 Certificates 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 Certificates would accrue from the value date. Therefore, in many cases the investment income on the Book-Entry Certificates 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 Certificates 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 Certificates 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 Certificates to the DTC Participant's account against payment. Payment will include interest accrued on the Book-Entry Certificates 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 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 Certificates 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 Certificates in the U.S. from a Participant no later than one day prior to settlement, which would give the Book-Entry Certificates sufficient time to be reflected in their Clearstream or Euroclear account in order to settle the sale side of the trade; or -52- (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. Certain U.S. Federal Income Tax Documentation Requirements of Book-Entry Certificates A Beneficial Owner of Book-Entry Certificates 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 Certificates 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 Certificate 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 "Material Federal Income Tax Consequences -- Taxation of Certain Foreign Investors" and " -- Taxation of Certain Foreign Investors" in this prospectus. Neither this discussion nor the discussion under "Material Federal Income Tax Consequences" referenced above covers all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders in Book-Entry Certificates. Investors are advised to consult their own tax advisors for specific tax advice concerning their purchase, holding and disposing of the Book-Entry Certificates. Distributions to Certificateholders General Distributions on the Certificates will generally be made on a day specified in the applicable prospectus supplement (or, if such day is not a business day, the business day following such day) of each month, commencing with the month specified in the applicable prospectus supplement (each, a "Distribution Date"). The "Determination Date" with respect to each Distribution Date will be the day of the month specified in the applicable prospectus supplement or, if that day is not a business day, the immediately preceding business day. The "Cut-Off Date" for each Series will be the date specified in the applicable prospectus supplement. On each Distribution Date, each holder of a Certificate of a Class will, except as described in the following sentence, be entitled to receive its Certificate's Percentage Interest of the portion of the Pool Distribution Amount (as defined -53- below) allocated to such Class. Generally, the undivided percentage interest (the "Percentage Interest") represented by any Certificate of a Class in distributions to such Class will be equal to the percentage obtained by dividing the initial principal balance (or notional amount) of such Certificate by the aggregate initial principal balance (or notional amount) of all Certificates of such Class. The Percentage Interest for a Certificate of a Class that receives distributions pursuant to request or random lot or that is an Exchangeable REMIC Certificate or an Exchangeable Certificate is equal to the percentage obtained by dividing the current principal balance (or notional amount) of the Certificate by the current principal balance (or notional amount) of the Class of which the Certificate is a part. In general, the funds available for distribution to Certificateholders of a Series of Certificates with respect to each Distribution Date for such Series (the "Pool Distribution Amount") will be the sum of all previously undistributed payments or other receipts on account of principal (including principal prepayments and Liquidation Proceeds, if any) and interest on or in respect of the related Mortgage Loans received by the related Servicer after the Cut-Off Date (except for amounts due on or prior to the Cut-Off Date), or received by the related Servicer on or prior to the Cut-Off Date but due after the Cut-Off Date, in either case received on or prior to the business day preceding the Determination Date in the month in which such Distribution Date occurs, plus all Periodic Advances with respect to payments due to be received on the Mortgage Loans on the Due Date preceding such Distribution Date, but excluding the following: (a) amounts received as late payments of principal or interest respecting which one or more unreimbursed Periodic Advances has been made; (b) those portions of each payment of interest on a particular Mortgage Loan which represent (i) the Fixed Retained Yield, if any, (ii) the applicable Servicing Fee, (iii) the applicable Master Servicing Fee, (iv) the Trustee Fee, if any, and (v) any other amounts described in the applicable prospectus supplement; (c) all amounts representing scheduled payments of principal and interest due after the Due Date occurring in the month in which such Distribution Date occurs; (d) all principal prepayments in full, all partial principal prepayments, the principal portion of all proceeds of any Mortgage Loans or property acquired in respect thereof, or liquidated pursuant to the Pooling and Servicing Agreement, net of related expenses, including Net Partial Liquidation Proceeds and Recoveries, and other unscheduled receipts in respect of principal of the Mortgage Loans other than proceeds of a repurchase of a Mortgage Loan by the Depositor or amounts deposited by the Depositor in the Certificate Account in connection with the substitution of a Mortgage Loan (collectively, "Unscheduled Principal Receipts") that were received by the Servicers after the Unscheduled Principal Receipts Period (as described under "--Unscheduled Principal Receipts" below) relating to the Distribution Date for the applicable type of Unscheduled Principal Receipt, and all related payments of interest on such amounts; (e) all repurchase proceeds with respect to the Mortgage Loans repurchased by the Depositor on or following the Determination Date in the month in which such Distribution Date occurs and the excess of the unpaid principal balance of any Mortgage Loan for which a Mortgage Loan was substituted over the unpaid principal balance of such substitute Mortgage Loan on or following the Determination Date in the month in which such Distribution Date occurs; (f) that portion of Liquidation Proceeds or insurance proceeds which represents any unpaid Servicing Fees, Master Servicing Fee or any Trustee Fee to which the related Servicer, the Trustee or the Master Servicer, respectively, is entitled, any unpaid Fixed Retained Yield and any unreimbursed Periodic Advances; (g) if an election has been made to treat the applicable Trust Estate as a REMIC, any Liquidation Profits with respect to such Distribution Date; (h) all amounts representing certain expenses reimbursable to the Master Servicer, the Trustee, any Servicer and other amounts permitted to be withdrawn by the Master Servicer from the Certificate Account, in each case pursuant to the applicable Pooling and Servicing Agreement; (i) all amounts in the nature of late fees, assumption fees, prepayment fees and similar fees and payments of interest related to principal prepayments received on or after the first day of the month in which a -54- Distribution Date occurs and prior to the Determination Date in the month of such Distribution Date which the related Servicer is entitled to retain pursuant to the applicable Underlying Servicing Agreement; (j) reinvestment earnings on payments received in respect of the Mortgage Loans; and (k) any amounts reimbursable to the related Servicer to cover PMI Advances. The applicable prospectus supplement for a Series will describe any material variation in the calculation of the Pool Distribution Amount for such Series. A "Recovery" is an amount received in respect of principal which has previously been allocated as a Realized Loss to a Class of Certificates. "Liquidation Profits" with respect to a Distribution Date and a liquidated Mortgage Loan will be the amount, if any, by which net Liquidation Proceeds on such liquidated Mortgage Loan exceed the unpaid principal balance thereof plus accrued interest thereon at the Mortgage Interest Rate. "Liquidation Proceeds" are all amounts received by a Servicer in connection with the liquidation of defaulted Mortgage Loans or property acquired in respect thereof, whether through foreclosure sale or otherwise, including payments in connection with defaulted Mortgage Loans received from the mortgagor other than amounts required to be paid to the mortgagor pursuant to the terms of the applicable Mortgage Loan or otherwise pursuant to law. "Partial Liquidation Proceeds" are Liquidation Proceeds received by a Servicer on a Mortgage Loan prior to such Mortgage Loan becoming a Liquidated Loan and "Net Partial Liquidation Proceeds" are Partial Liquidation Proceeds less expenses incurred with respect to such liquidation. Unscheduled Principal Receipts The Pooling and Servicing Agreement for each Series will specify, as to each type of Unscheduled Principal Receipt, a period (as to each type of Unscheduled Principal Receipt, the "Unscheduled Principal Receipt Period") during which all Unscheduled Principal Receipts of such type received by the Servicer will be distributed to Certificateholders on the related Distribution Date. Each Unscheduled Principal Receipt 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 Remittance Date occurs (such period a "Prior Month Receipt Period") or (ii) the one month period ending on the day preceding the Determination Date preceding the applicable Remittance Date (such period a "Mid-Month Receipt Period"). With respect to certain of the Mortgage Loans serviced by the Sponsor ("Type 1 Loans"), the Unscheduled Principal Receipt Period with respect to all types of Unscheduled Principal Receipts is a Mid-Month Receipt Period. With respect to certain other Mortgage Loans serviced by the Sponsor ("Type 2 Loans"), the Unscheduled Principal Receipt Period with respect to all types of Unscheduled Principal Receipts is a Prior Month Receipt Period. With respect to other Servicers, the Unscheduled Principal Receipt Period with respect to partial Unscheduled Principal Receipts is a Prior Month Receipt Period and with respect to Unscheduled Principal Receipts in full is either a Prior Month Receipt Period or a Mid-Month Receipt Period. Distributions of Interest With respect to each Series of Certificates, interest on the related Mortgage Loans at the weighted average of the applicable Net Mortgage Interest Rates thereof, will be passed through monthly to holders of the related Classes of Certificates in the aggregate, in accordance with the particular terms of each such Class of Certificates. The "Net Mortgage Interest Rate" for each Mortgage Loan in a given period will equal the mortgage interest rate for such Mortgage Loan in such period, as specified in the related mortgage note (the "Mortgage Interest Rate"), less the portion thereof, if any, not contained in the Trust Estate (the "Fixed Retained Yield"), and less amounts payable to the applicable Servicer for servicing the Mortgage Loan (the "Servicing Fee"), the fee payable to the Master Servicer (the "Master Servicing Fee"), the fee payable to the Trustee (the "Trustee Fee"), if any, and any related expenses or other amounts specified in the applicable prospectus supplement. See "Servicing of the Mortgage Loans--Fixed Retained Yield; Servicing Compensation and Payment of Expenses" for a description of Fixed Retained Yield. -55- Interest will accrue on the principal balance (or notional amount, as described below) of each Class of Certificates entitled to interest at the pass-through rate (the "Pass-Through Rate") for such Class indicated in the applicable prospectus supplement (which may be a fixed rate or an adjustable rate) from the date and for the accrual periods (each, an "Interest Accrual Period") specified in such prospectus supplement. To the extent the Pool Distribution Amount is available therefore, interest accrued during each such specified period on each Class of Certificates entitled to interest (other than a Class that provides for interest that accrues, but is not currently payable, referred to hereafter as "Accrual Certificates") will be distributable on the Distribution Dates specified in the applicable prospectus supplement until the principal balance (or notional amount) of such Class has been reduced to zero. Distributions allocable to interest on each Certificate that is not entitled to distributions allocable to principal will generally be calculated based on the notional amount of such Certificate. The notional amount of a Certificate will not evidence an interest in or entitlement to distributions allocable to principal but will be solely for convenience in expressing the calculation of interest and for certain other purposes. With respect to any Class of Accrual Certificates, any interest that has accrued but is not paid on a given Distribution Date will be added to the principal balance of such Class of Certificates on that Distribution Date. Distributions of interest on each Class of Accrual Certificates will commence only after the occurrence of the events or the existence of the circumstance specified in such prospectus supplement and, prior to such time, or in the absence of such circumstances, the principal balance of such Class will increase on each Distribution Date by the amount of interest that accrued on such Class during the preceding interest accrual period but that was not required to be distributed to such Class on such Distribution Date. Any such Class of Accrual Certificates will thereafter accrue interest on its outstanding principal balance as so adjusted. When mortgagors prepay principal, or when principal is recovered through foreclosure sales or other liquidations of defaulted Mortgage Loans, or when other Unscheduled Principal Receipts occur, 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 Certificateholders made in the month in which it is received. Interest shortfalls resulting from principal prepayments in full made by mortgagors ("Prepayments in Full") are referred to herein as "Prepayment Interest Shortfalls." The Master Servicer will be obligated, on or before each Distribution Date, to deposit into the Certificate Account, from the Master Servicer's own funds (including amounts otherwise payable to the Master Servicer in respect of such Distribution Date as Master Servicing Fees) an amount (such amount, "Compensating Interest") equal to the lesser of (i) the aggregate Prepayment Interest Shortfall with respect to such Distribution Date and (ii) the lesser of (X) the product of (A) 1/12th of 0.20% and (B) the aggregate Scheduled Principal Balance of the Mortgage Loans for such Distribution Date and (Y) the Available Master Servicing Compensation for such Distribution Date. The "Available Master Servicing Compensation" for any Distribution Date will be equal to the sum of (a) the Master Servicing Fee for such Distribution Date, (b) interest earned through the business day preceding the applicable Distribution Date on any Prepayments in Full remitted to the Master Servicer and deposited in the Certificate Account (which amount of interest with respect to Prepayments in Full on the Mortgage Loans serviced by the Sponsor is expected to be zero unless the Remittance Date for such Mortgage Loans changes as described below under "Servicing of the Mortgage Loans--Changes in Servicing") and (c) the aggregate amount of Month End Interest remitted by the Servicers to the Master Servicer pursuant to the related Underlying Servicing Agreements. The actual amount of the Available Master Servicing Compensation is subject to a number of variables and depends, in part, on the provisions of the Underlying Servicing Agreements of the Servicers of the Mortgage Loans. For example, the Sponsor, as a Servicer, is not currently required to remit funds to the Master Servicer until the business day preceding the applicable Distribution Date. Therefore with respect to any loans serviced by the Sponsor the amount of Available Master Servicing Compensation determined under clause (b) would be zero. The calculation of Month End Interest also varies depending on the provisions of the Underlying Servicing Agreements. With respect to the Mortgage Loans serviced by the Sponsor, "Month End Interest" for each Distribution Date will be equal to the lesser of (i) the aggregate Prepayment Interest Shortfalls with respect to the Mortgage Loans serviced by the Sponsor and (ii) the product of 1/12th of 0.20% and the aggregate scheduled principal balance (as determined in the applicable Underlying Servicing Agreement) of the Mortgage Loans serviced by the Sponsor. With respect to the Mortgage Loans serviced by each Other Servicer, Month End Interest for each Distribution Date depends in part on whether such Other Servicer has agreed to remit Prepayments in Full to the -56- Master Servicer daily on a specified business day following receipt rather than waiting until the Remittance Date. Although an Underlying Servicing agreement may provide an exception, "Month End Interest" for Other Servicers will generally equal the lesser of (a) (i) with respect to Other Servicers remitting Prepayments in Full on a daily basis, the aggregate Curtailment Interest Shortfalls with respect to the Mortgage Loans serviced by such Other Servicer or (ii) with respect to Other Servicers not remitting Prepayments in Full on a daily basis, the sum of the aggregate Prepayment Interest Shortfalls and aggregate Curtailment Interest Shortfalls with respect to the Mortgage Loans serviced by such Other Servicer and (b) the sum of (X) for each Mortgage Loan serviced by such Other Servicer, the product of 1/12th of the applicable Servicing Fee Rate and the scheduled principal balance (as determined in the applicable Underlying Servicing Agreement) of such Mortgage Loan serviced by such Other Servicer and (Y) with certain exceptions, reinvestment earnings on payments received in respect of the Mortgage Loans or on other amounts on deposit in the related Servicer Custodial Account pursuant to the related Underlying Servicing Agreement on such Distribution Date. As described herein under "Servicing of the Mortgage Loans -- Changes in Servicing," a Servicer not currently remitting Prepayments in Full on a daily basis may agree to begin to do so at some time in the future. In conjunction therewith, the amount of Month End Interest such Servicer is required to remit may be decreased or such Servicer may be relieved of its obligation to remit any Month End Interest. If an Other Servicer that is not currently remitting Prepayments in Full on a daily basis begins to do so, any such change may have an impact on the amount of Compensating Interest by increasing the amount described in clause (b) of the definition of Available Master Servicing Compensation and decreasing the amount described in clause (c) of the definition thereof. No assurance can be given as to the timing of any such changes or that any such changes will occur. Any interest shortfalls arising from Unscheduled Principal Receipts in full that are not Prepayments in Full and any interest shortfalls resulting from the timing of the receipt of partial principal prepayments ("Curtailments") by mortgagors ("Curtailment Interest Shortfalls") or of other partial Unscheduled Principal Receipts with respect to the Mortgage Loans will not be offset by Compensating Interest. Distributions of Principal The principal balance of any Class of Certificates entitled to distributions of principal will generally be the original principal balance of such Class specified in such prospectus supplement, reduced by all distributions reported to the holders of such Certificates as allocable to principal and any losses on the related Mortgage Loans allocated to such Class of Certificates and (i) in the case of Accrual Certificates, increased by all interest accrued but not then distributable on such Accrual Certificates and (ii) in the case of a Series of Certificates representing interests in a Trust Estate containing adjustable-rate Mortgage Loans, increased by any Deferred Interest allocable to such Class. The principal balance of a Class of Certificates generally represents the maximum specified dollar amount (exclusive of any interest that may accrue on such Class to which the holder thereof is entitled from the cash flow on the related Mortgage Loans at such time) and will decline to the extent of distributions in reduction of the principal balance of, and allocations of losses to such Class. Certificates with no principal balance will not receive distributions in respect of principal. The applicable prospectus supplement will specify the method by which the amount of principal to be distributed on the Certificates on each Distribution Date will be calculated and the manner in which such amount will be allocated among the Classes of Certificates entitled to distributions of principal. Subordination If so provided in the applicable prospectus supplement, one or more Classes of Senior Certificates will be entitled to receive all or a disproportionate percentage of the payments of principal that are received from borrowers in advance of their scheduled due dates and are not accompanied by amounts representing scheduled interest due after the months of such payments or of other unscheduled principal receipts or recoveries in the percentages and under the circumstances or for the periods specified in such prospectus supplement. Any such allocation of principal prepayments or other unscheduled receipts or recoveries in respect of principal to such Class or Classes of Senior Certificates will have the effect of accelerating the amortization of such Senior Certificates while increasing the interests evidenced by the Subordinated Certificates in the Trust Estate. Increasing the interests of the Subordinated Certificates relative to that of the Senior Certificates is intended to preserve the availability of the subordination provided by the Subordinated Certificates. -57- If specified in the applicable prospectus supplement, the rights of the holders of the Subordinated Certificates of a Series of Certificates for which credit enhancement is provided through subordination to receive distributions with respect to the Mortgage Loans in the related Trust Estate will be subordinated to such rights of the holders of the Senior Certificates of the same Series. This subordination is intended to enhance the likelihood of regular receipt by holders of Senior Certificates of the full amount of scheduled monthly payments of principal and interest due them and to provide limited protection to the holders of the Senior Certificates against losses due to mortgagor defaults. The protection afforded to the holders of Senior Certificates of a Series of Certificates for which credit enhancement is provided through subordination by the subordination feature described above will be effected by (i) the preferential right of such holders to receive, prior to any distribution being made in respect of the related Subordinated Certificates on each Distribution Date, current distributions on the related Mortgage Loans of principal and interest due them on each Distribution Date out of the funds available for distribution on such date in the related Certificate Account, (ii) by the right of such holders to receive future distributions on the Mortgage Loans that would otherwise have been payable to the holders of Subordinated Certificates and/or (iii) by the prior allocation to the Subordinated Certificates of all or a portion of losses realized on the related Mortgage Loans. Realized Losses on Liquidated Loans (other than Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses as described below) will be allocated to the holders of Subordinated Certificates through a reduction of the amount of principal payments on the Mortgage Loans to which such holders are entitled before any corresponding reduction is made in respect of the Senior Certificates. A "Realized Loss" is any Liquidated Loan Loss (including any Special Hazard Loss and any Fraud Loss) or any Bankruptcy Loss. A "Liquidated Loan" is a defaulted Mortgage Loan as to which the Servicer has determined that all recoverable liquidation and insurance proceeds have been received. However, a loan will be considered a Liquidated Loan if a PMI Advance has been made. See "Servicing of the Mortgage Loans--PMI Advances." A "Liquidated Loan Loss" on a Liquidated Loan for any Distribution Date is equal to the excess, if any, of (i) the unpaid principal balance of such Liquidated Loan, plus accrued interest thereon at the Net Mortgage Interest Rate through the last day of the month preceding the month in which such Distribution Date occurs, over (ii) net Liquidation Proceeds. For purposes of calculating the amount of any Liquidated Loan Loss, all net Liquidation Proceeds (after reimbursement of any previously unreimbursed Periodic Advance) will be applied first to accrued interest and then to the unpaid principal balance of the Liquidated Loan. A "Special Hazard Loss" is (A) a Liquidated Loan Loss suffered by a Mortgaged Property on account of direct physical loss exclusive of (i) any loss covered by a standard hazard insurance policy or, if the Mortgaged Property is located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy, of the types described under "Servicing of the Mortgage Loans--Insurance Policies" and (ii) any loss caused by or resulting from (a) normal wear and tear, (b) dishonest acts of the Trustee, the Master Servicer or the Servicer or (c) errors in design, faulty workmanship or faulty materials, unless the collapse of the property or a part thereof ensues or (B) a Liquidated Loan Loss arising from or related to the presence or suspected presence of hazardous wastes or substances on a Mortgaged Property. A "Fraud Loss" is a Liquidated Loan Loss incurred on a Liquidated Loan as to which there was fraud in the origination of such Mortgage Loan. A "Bankruptcy Loss" is a loss attributable to certain actions which may be taken by a bankruptcy court in connection with a Mortgage Loan, including a reduction by a bankruptcy court of the principal balance of or the interest rate on a Mortgage Loan or an extension of its maturity. A "Debt Service Reduction" means a reduction in the amount of monthly payments due to certain bankruptcy proceedings, but does not include any permanent forgiveness of principal. A "Deficient Valuation" with respect to a Mortgage Loan means a valuation by a court of the Mortgaged Property in an amount less than the outstanding indebtedness under the Mortgage Loan or any reduction in the amount of monthly payments that results in a permanent forgiveness of principal, which valuation or reduction results from a bankruptcy proceeding. Special Hazard Losses in excess of the amount, if any, specified in the applicable prospectus supplement (the "Special Hazard Loss Amount") are "Excess Special Hazard Losses." Fraud Losses in excess of the amount, if any, specified in the applicable prospectus supplement (the "Fraud Loss Amount") are "Excess Fraud Losses." Bankruptcy losses in excess of the amount, if any, specified in the applicable prospectus supplement (the "Bankruptcy Loss Amount") are "Excess Bankruptcy Losses." If and to the extent specified in the applicable prospectus supplement, Excess Special Hazard Losses, Excess Fraud Losses or Excess Bankruptcy Losses with respect to a Series will be allocated on a pro rata basis among the related Classes of Senior and Subordinated Certificates. An allocation of a loss on a "pro rata basis" among two or more Classes of Certificates means an allocation on a pro rata basis to each such Class of Certificates on the basis of their then-outstanding -58- principal balances in the case of the principal portion of a loss or based on the accrued interest thereon in the case of an interest portion of a loss. For any Series of Certificates where the amounts of the Special Hazard Loss Amount, Fraud Loss Amount and Bankruptcy Loss Amount for a Series of Certificates are each expected to be less than the amount of principal payments on the Mortgage Loans to which the holders of the Subordinated Certificates of such Series are initially entitled (such amount being subject to reduction, as described above, as a result of allocation of losses on liquidated Mortgage Loans that are not Special Hazard Losses, Fraud Losses or Bankruptcy Losses), the holders of Subordinated Certificates of such Series will bear the risk of Special Hazard Losses, Fraud Losses and Bankruptcy Losses to a lesser extent than they will bear other losses on Liquidated Loans. Although the subordination feature described above is intended to enhance the likelihood of timely payment of principal and interest to the holders of Senior Certificates, shortfalls could result in certain circumstances. For example, a shortfall in the payment of principal otherwise due the holders of Senior Certificates could occur if losses realized on the Mortgage Loans in a Trust Estate were exceptionally high and were concentrated in a particular month. The holders of Subordinated Certificates 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 Certificates of the same Series. Categories of Classes of Certificates The Certificates 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 Certificates 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 Certificates" are Certificates that receives principal payments from amounts that would otherwise be distributed as interest on specified Accrual Certificates. 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 Certificates" (also sometimes referred to as a "Support Certificates") are Certificates that are entitled to receive principal payments on any Distribution Date only if scheduled payments have been made on specified Planned Amortization Certificates, Targeted Amortization Certificates and/or Scheduled Amortization Certificates. "Component Certificates" are Certificates consisting of two or more specified components (each, a "Component") as described in the applicable prospectus supplement. The Components of a Class of Component Certificates 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 Certificates may be identified as falling into one or more of the categories described herein. "Exchangeable Certificates" are Certificates that may be exchanged for proportionate interests in one or more specified Classes of Exchangeable REMIC Certificates in the same Series, as described in the applicable prospectus supplement. Each Class of Exchangeable Certificates may be identified as falling into one or more of the categories described herein. "Exchangeable REMIC Certificates" are Certificates that may be exchanged for proportionate interests in one or more specified Classes of Exchangeable Certificates in the same Series, as described in the applicable prospectus supplement. Each Class of Exchangeable REMIC Certificates may be identified as falling into one or more of the categories described herein. "Lockout Certificates" are Senior Certificates 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 -59- Mortgage Loans that are allocated disproportionately to the Classes of Senior Certificates 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 Certificates as a group. A Class of Lockout Certificates 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 Certificates. Lockout Certificates are designed to minimize weighted average life volatility during the lockout period. "Notional Amount Certificates" are Certificates 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 Certificates" are Senior Certificates that are entitled to receive a specified percentage of the principal payments that are distributable to the Senior Certificates or applicable group of Senior Certificates (other than any Ratio Strip Class) in the aggregate on each Distribution Date until the principal balances of all the Senior Certificates or applicable group of Senior Certificates are reduced to zero and that is not designated as a Class of Sequential Pay Certificates. "Planned Amortization Certificates" (also sometimes referred to as "PAC Certificates") are Certificates 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 Certificates. The Planned Amortization Certificates in any Series may be subdivided into different categories (e.g., Planned Amortization Certificates I ("PAC I") Planned Amortization Certificates II ("PAC II") and so forth) derived using different structuring ranges and/or payment priorities. A Class of PAC Certificates is designed to provide protection against volatility of weighted average life if prepayments occur at a constant rate within the structuring range. "Ratio Strip Certificates" are Certificates that are entitled to receive a constant proportion, or "ratio strip," of the principal payments on the underlying Mortgage Loans. "Scheduled Amortization Certificates" (also sometimes referred to as "Scheduled Certificates") are Certificates that are designed to receive principal payments using a predetermined principal balance schedule but are not designated as Planned Amortization Certificates or Targeted Amortization Certificates. 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 Certificates and such range generally is narrower than that for a Class of Planned Amortization Certificates. Typically, the Support Certificates for the applicable Series of Certificates generally will represent a smaller percentage of the Class of Scheduled Amortization Certificates than Support Certificates generally would represent in relation to a Class of Planned Amortization Certificates or Targeted Amortization Certificates. A Class of Scheduled Amortization Certificates is generally less sensitive to weighted average life volatility as a result of prepayments than a Class of Support Certificates but more sensitive than a Class of Planned Amortization Certificates or Targeted Amortization Certificates. "Senior Certificates" are Certificates that are entitled to receive payments of principal and interest on each Distribution Date prior to the Classes of Subordinated Certificates. "Sequential Pay Certificates" are Certificates 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 Certificates 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 Certificates may be identified as a Class of Sequential Pay Certificates. "Subordinated Certificates" are Certificates that are entitled to receive payments of principal and interest on each Distribution Date only after the Senior Certificates and Classes of Subordinated Certificates with higher priority of distributions, if any, have received their full principal and interest entitlements. -60- "Super Senior Certificates" are Senior Certificates that will not bear their share of certain losses after the Classes of Subordinated Certificates are no longer outstanding for so long as one or more other specified Classes of Senior Certificates are outstanding. "Super Senior Support Certificates" are Senior Certificates that bear certain losses allocated to one or more Classes of Super Senior Certificates after the Classes of Subordinated Certificates are no longer outstanding. "Targeted Amortization Certificates" (also sometimes referred to as "TAC Certificates") are Certificates 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 Certificates 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 Certificates. Interest Types "Accrual Certificates" are Certificates that accrete the amount of accrued interest otherwise distributable on such Certificates, which amount will be added as principal to the principal balance of such Certificates on each applicable Distribution Date. Such accretion may continue until some specified event has occurred or until such Accrual Certificates are retired. "Fixed Rate Certificates" are Certificates with an interest rate that is fixed throughout the life of the Class. "Floating Rate Certificates" are Certificates with an interest rate that resets periodically based upon a designated index and that varies directly with changes in such index. "Interest Only Certificates" are Certificates that are entitled to receive some or all of the interest payments made on the Mortgage Loans and little or no principal. Interest Only Certificates have either a nominal principal balance or a notional amount. A nominal principal balance represents actual principal that will be paid on the Certificates. 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 Certificates that is not entitled to any distributions in respect of principal. "Inverse Floating Rate Certificates" are Certificates 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 Certificates. "Principal Only Certificates" are Certificates that do not bear interest and are entitled to receive only distributions in respect of principal. "Step Coupon Certificates" are Certificates with a fixed interest rate that is reduced or increased 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 Certificates" are Certificates 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 Based on LIBOR General The index used to determine the Pass-Through Rates for Floating Rate and Inverse Floating-Rate Certificates 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 based on LIBOR for an Interest Accrual Period for Floating Rate and Inverse Floating Rate Certificates after the initial Interest Accrual Period will be determined on the second LIBOR Business Day -61- 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, England and the City of New York. Determination of LIBOR On each Rate Determination Date, the Paying Agent will determine LIBOR for the succeeding Interest Accrual Period for the Floating Rate and Inverse Floating Rate Certificates 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. If on any Rate Determination Date the Paying Agent 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 Paying Agent 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 Pooling and Servicing 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 Paying Agent can determine no such arithmetic mean, the lowest one-month U.S. lending rate that the banks set forth in the Pooling and Servicing Agreement are quoting on such Rate Determination Date to leading European banks. If on any Rate Determination Date the Paying Agent 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 Pooling and Servicing Agreement. The establishment of LIBOR by the Paying Agent and the Paying Agent's subsequent calculation of the Pass-Through Rates applicable to the Floating Rate and Inverse Floating Rate Certificates for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding. Other Credit Enhancement General In addition to, or in substitution for, the subordination discussed above under "Description of the Certificates--Subordination", credit enhancement may be provided with respect to any Series of Certificates 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 Certificates, 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 Certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K. Limited Guarantee If specified in the prospectus supplement with respect to a Series of Certificates, credit enhancement may be provided in the form of a limited guarantee issued by a guarantor named in such prospectus supplement. The -62- limited guarantee may cover deficiencies in amounts otherwise payable on some or all of the Certificates of a Series. The limited guarantee may cover timely distributions of interest or full distributions of principal or both on the basis 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 Estate, 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 Certificates 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 Certificates, 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 Certificates 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 Certificateholder 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 Certificates, 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 Certificates. 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 Certificates will expire at the earlier of the date specified in the prospectus supplement or the termination of the Trust. Pool Insurance Policy If specified in the prospectus supplement relating to a Series of Certificates, credit enhancement may be provided by a mortgage pool insurance policy for the Mortgage Loans in the related Trust Estate. 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 "Servicing of the Mortgage Loans--Enforcement of "Due-on-Sale" Clauses; Realization Upon Defaulted Mortgage Loans," the Servicer or the Master Servicer, as the case may be, 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 -63- 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. Certificateholders may experience a shortfall in the amount of interest payable on the related Certificates 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, Certificateholders may also experience losses with respect to the related Certificates 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 Certificateholders. 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 Certificates 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 Certificates 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 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 Certificates, to the extent not covered by other credit enhancements. Special Hazard Insurance Policy If specified in the prospectus supplement relating to a Series of Certificates, 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 Certificateholders from Special Hazard Losses. Aggregate claims under a special hazard insurance policy will be limited to the amount set forth in the related Pooling and Servicing Agreement and will be subject to reduction as described in the related Pooling and Servicing 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. -64- 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 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 Certificateholders, 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 Fund If specified in the applicable prospectus supplement, credit enhancement with respect to a Series of Certificates 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 prospectus supplement and will not be available for further application to the related Certificates. 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. The reserve fund for a Series will not be a part of the Trust Estate. Cross Collateralization If specified in the applicable prospectus supplement, the beneficial ownership of separate groups of Mortgage Loans included in a Trust Estate may be evidenced by separate Classes of Certificates. 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 Certificates evidencing a -65- beneficial ownership interest in other loan groups within the same Trust Estate. As a result, the amount of credit enhancement available to a Class of Certificates 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. 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 Certificates 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 Certificates. 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 Certificates. This acceleration may continue for the life of the related Certificates, 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 Certificates 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 Certificates. Excess Interest If specified in the applicable prospectus supplement, the Mortgage Loans in a Trust may generate more interest than is necessary to pay the interest earned on the Classes of Certificates 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 Certificates and to reimburse certain Classes of Certificates for losses and certain shortfalls that they experienced previously. 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 "The Trust Estates-Cash Flow Agreements" may also be used to provide credit enhancement for one or more Classes of Certificates. Exchangeable Certificates General If specified in a prospectus supplement for a Series, certain Classes of Certificates may be Exchangeable REMIC Certificates or Exchangeable Certificates. In any of these Series, the holders of one or more of the Classes of Exchangeable REMIC Certificates will be entitled, after notice and payment to the Master Servicer of an administrative fee, to exchange all or a portion of those Classes of Exchangeable REMIC Certificates for proportionate interests in one or more specified Classes of Exchangeable Certificates in the same Series and vice versa. If a Series includes Exchangeable REMIC Certificates and Exchangeable Certificates, all of these Classes of Exchangeable REMIC Certificates and Exchangeable Certificates will be listed in the applicable prospectus supplement. The Classes of Certificates that are exchangeable for one another will be referred to in the applicable prospectus supplement as "Related" to each other, and each related grouping of Exchangeable REMIC Certificates and Exchangeable Certificates will be referred to as a "Combination," with the Classes of Exchangeable REMIC Certificates in the Combination referred to as a "REMIC Combination" and the Classes of Exchangeable Certificates in the Combination referred to as an "Exchangeable Combination." At any time after their initial -66- issuance, any Class of Exchangeable REMIC Certificates may be exchanged for the Related Class or Classes of Exchangeable Certificates. In some cases, multiple Classes of Exchangeable REMIC Certificates may be exchanged for one or more Classes of Related Exchangeable Certificates. The descriptions in the related prospectus supplement of the Certificates of a Series that includes Exchangeable REMIC Certificates and Exchangeable Certificates, including descriptions of principal and interest distributions, registration and denominations of Certificates, credit enhancement, prepayment and yield considerations, tax and legal investment considerations and ERISA considerations, also will apply to each Class of Exchangeable REMIC Certificates and Exchangeable Certificates. The related prospectus supplement will separately describe the prepayment and yield considerations applicable to, and the risks of investment in, each Class of Exchangeable REMIC Certificates and Exchangeable Certificates. For example, separate decrement tables and yield tables, if applicable, will be included for each Class of Exchangeable Certificates. Exchanges If a holder of Exchangeable REMIC Certificates elects to exchange its Exchangeable REMIC Certificates for Related Exchangeable Certificates, then: o the aggregate principal balance of the Related Exchangeable Certificates received in the exchange, immediately after the exchange, will equal the aggregate principal balance, immediately prior to the exchange, of the Exchangeable REMIC Certificates so exchanged (for purposes of an exchange, Interest Only Certificates will have a principal balance of zero); o the aggregate amount of principal or interest payable on each Distribution Date with respect to the Related Exchangeable Certificates received in the exchange will equal the aggregate amount of principal or interest payable on each Distribution Date with respect to the Exchangeable REMIC Certificates so exchanged; and o the Class or Classes of Exchangeable REMIC and Exchangeable Certificates will be exchanged in the applicable proportions, if any, described in the applicable prospectus supplement. Different types of combinations may exist. Any individual Series of Certificates may have multiple types of Combinations. Some examples of Combinations of Exchangeable REMIC Certificates and Exchangeable Certificates that differ in their interest characteristics include: o Floating Rate Certificates and Inverse Floating Rate Certificates that are Exchangeable REMIC Certificates may be exchangeable, together, for Related Fixed Rate Certificates. In such a Combination, the Floating Rate Certificates and Inverse Floating Rate Certificates would produce, in the aggregate, an annual interest amount equal to that generated by the Related Fixed Rate Certificates. In addition, the aggregate principal balance of a Class of Floating Rate Certificates and a Class of Inverse Floating Rate Certificates would equal the aggregate principal balance of the Related Fixed Rate Certificates. o Interest Only Certificates and Principal Only Certificates that are Exchangeable REMIC Certificates may be exchangeable, together, for Related Exchangeable Certificates that are entitled to both principal and interest payments. In such a Combination, the principal balance of the Class of Related Exchangeable Certificates would be equal to the principal balance of the Class of Principal Only Certificates, and the interest rate on the Class of Related Exchangeable Certificates, when applied to the principal balance of this Related Class, would generate interest equal to the annual interest amount of the Interest Only Certificates. o Two Classes of Fixed Rate Certificates that are Exchangeable REMIC Certificates with different interest rates may be exchangeable, together, for a single Class of Related Exchangeable Certificates with a fixed interest rate. In such a Combination, the principal balance of the single Class of Related Exchangeable Certificates would be equal to the aggregate principal balance of the two Classes of Exchangeable REMIC Certificates, and the single Class of Related Exchangeable Certificates would have a fixed interest rate that, when applied to the aggregate principal balance of the two Classes of Exchangeable REMIC Certificates, would generate interest equal to the aggregate annual interest amount of the two Classes of Exchangeable REMIC Certificates. -67- In some Series, a Certificateholder may be able to exchange its Exchangeable REMIC Certificates for other Related Exchangeable Certificates that have different principal payment characteristics. Some examples of Combinations that differ in the principal payment characteristics include: o A Class of Exchangeable REMIC Certificates that is a Class of Accrual Certificates, and a second Class of Exchangeable REMIC Certificates that is a Class of Accretion Directed Certificates and receives all of the interest accrued on the Class of Accrual Certificates for so long as the Accrual Certificates are accreting, may be exchangeable, together, for a single Class of Related Exchangeable Certificates that receives payments of interest continuously from the first Distribution Date on which it receives interest until it is retired. o A Class of Exchangeable REMIC Certificates that is a Class of PAC, Scheduled Amortization or TAC Certificates, and a Class of Exchangeable REMIC Certificates that is a Class of Companion Certificates, may be exchangeable, together, for a Class of Related Exchangeable Certificates that receives principal payments without regard to the amortization schedule for the Class of PAC, Scheduled Amortization or TAC Certificates from the first Distribution Date on which it receives principal until it is retired. The holder of the Class or Classes of Exchangeable Certificates in any of the example Combinations described above may also exchange its Exchangeable Certificates for the Related Exchangeable REMIC Certificates and this process may occur repeatedly in each direction. A number of factors may limit the ability of a holder of Exchangeable REMIC Certificates or Exchangeable Certificates to effect an exchange. For example, the Certificateholder must own, at the time of the proposed exchange, the Class or Classes of Exchangeable REMIC Certificates or Exchangeable Certificates necessary to make the exchange in the necessary proportions. If a Certificateholder does not own the necessary Classes of Exchangeable REMIC Certificates or Exchangeable Certificates or does not own the necessary Classes of Exchangeable REMIC Certificates or Exchangeable Certificates in the proper proportions, the Certificateholder may not be able to obtain the desired Classes of Exchangeable REMIC Certificates or Exchangeable Certificates, as the case may be. The Certificateholder desiring to make the exchange may not be able to purchase the necessary Class of Exchangeable REMIC Certificates or Exchangeable Certificates from the then-current owner at a reasonable price, or the necessary proportion of the needed Class of Exchangeable REMIC Certificates or Exchangeable Certificates may no longer be available due to principal payments or prepayments that have been applied to that Class of Exchangeable REMIC Certificates or Exchangeable Certificates. Procedures The applicable prospectus supplement will describe the procedures that must be followed to make an exchange of Exchangeable REMIC Certificates and Exchangeable Certificates. A Certificateholder will be required to provide notice to the Master Servicer prior to the proposed exchange date within the time period specified in the applicable prospectus supplement. The notice must include, among other things, the outstanding principal balance or notional amount of the Exchangeable REMIC Certificates or Exchangeable Certificates to be exchanged and the Related Exchangeable REMIC Certificates or Exchangeable Certificates to be received, and the proposed exchange date. When the Master Servicer receives this notice, it will provide instructions to the Certificateholder regarding delivery of the Exchangeable REMIC Certificates or Exchangeable Certificates and payment of the administrative fee. A Certificateholder's notice to the Master Servicer will become irrevocable on the second day prior to the proposed exchange date specified in the applicable prospectus supplement. Any Exchangeable REMIC Certificates or Exchangeable Certificates that are Book-Entry Certificates will be subject to DTC's Rules. If the applicable prospectus supplement describes exchange proportions for a Combination of Classes of Exchangeable REMIC Certificates or Exchangeable Certificates, these proportions will be based on the original, rather than the outstanding, principal balances or notional amounts of these Classes. Distributions on an Exchangeable REMIC Certificate or Exchangeable Certificate received in an exchange will be made as described in the applicable prospectus supplement. Distributions will be made to the applicable Certificateholder of record as of the applicable Record Date. -68- PREPAYMENT AND YIELD CONSIDERATIONS Pass-Through Rates Any Class of Certificates of a Series may have a fixed Pass-Through Rate, or a Pass-Through 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 Net 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, Net Mortgage Interest Rates for the Mortgage Loans underlying such Series as of the Cut-Off Date. If the Trust Estate includes adjustable-rate Mortgage Loans or includes Mortgage Loans with different Net Mortgage Interest Rates, the weighted average Net Mortgage Interest Rate may vary from time to time as set forth below. See "The Trust Estates." The prospectus supplement for a Series will also specify the initial Pass-Through Rate for each Class of Certificates of such Series and will specify whether each such Pass-Through Rate is fixed or is variable. The Net 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 Net Mortgage Interest Rate with respect to any Series may vary due to changes in the Net 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- or adjustable-rate Mortgage Loans bearing different Mortgage Interest Rates. Effects of Defaults The rate of defaults on the Mortgage Loans will also affect the rate and timing of principal payments on the Mortgage Loans. In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. The rate of default on Mortgage Loans that are secured by non-owner occupied properties, Mortgage Loans with higher Loan-to-Value Ratios and Mortgage Loans made to borrowers with higher debt-to-income ratios or borrowers approved under a No Ratio program, may be higher than for other types of Mortgage Loans. As a result of the Mortgage Loans being originated using "alternative" underwriting standards that, in certain respects, may be less stringent than the "general" standards applied by the Sponsor, the Mortgage Loans may experience rates of delinquency and cumulative loss that are higher than those experienced by mortgage loans that satisfy the standards generally applied by the Sponsor. Scheduled Delays in Distributions At the date of initial issuance of the Certificates of each Series offered hereby, the initial purchasers of a Class of Certificates may be required to pay accrued interest at the applicable Pass-Through Rate for such Class from the Cut-Off Date for such Series to, but not including, the date of issuance. The effective yield to Certificateholders will be below the yield otherwise produced by the applicable Pass-Through 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 (as defined herein) 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 Certificateholders. To partially mitigate this reduction in yield with respect to Prepayments in Full, 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 -69- Master 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 be covered as provided in the applicable prospectus supplement. See "Description of the Certificates -- Distributions to Certificateholders -- Distributions of Interest." A lower rate of principal prepayments than anticipated would negatively affect the total return to investors in any Certificates 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 Certificates of a Series that are offered at a premium to their principal amount. The yield on Certificates 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 Certificates will be included in the applicable prospectus supplement. Weighted Average Life of Certificates The Mortgage Loans may be prepaid in full or in part at any time. Mortgage Loans generally will not provide for a prepayment penalty but may so provide if indicated in the applicable prospectus supplement. 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 Certificates 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 Certificates 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 Certificates, 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 Certificates of a Series may evidence an interest in a Trust Estate with different Mortgage Interest Rates. Accordingly, the prepayment experience of such Certificates 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 Underlying Servicing Agreements will require the related 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 "Servicing of the Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage -70- Loans" and "Certain Legal Aspects of the Mortgage Loans--Due-On-Sale Clauses" for a description of certain provisions of each Pooling and Servicing Agreement 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, the Sponsor 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 Pooling and Servicing 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 Certificate Account and such purchase or repurchase will have the same effect as a prepayment in full of the related Mortgage Loan. See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to the Trustee" and "--Optional Purchases." In addition, if so specified in the applicable prospectus supplement, the Depositor or another person identified therein will have the option to purchase all, but not less than all, of the Mortgage Loans in any Trust Estate under the limited conditions specified in such prospectus supplement. For any Series of Certificates for which an election has been made to treat the Trust Estate (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 "The Pooling and Servicing Agreement--Termination; Optional Purchase of Mortgage Loans." Refinancings At the request of the mortgagor, a Servicer, including the Sponsor, may allow the refinancing of a Mortgage Loan in any Trust Estate 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 Estate. 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. In this regard a Servicer may, from time to time, implement programs designed to encourage refinancing through such Servicer, including but not limited to general or targeted solicitations, or the offering of pre-approved applications, reduced or nominal origination fees or closing costs, or other financial incentives. A Servicer may also modify the payment terms of a defaulted Mortgage Loan or encourage selling a Mortgaged Property securing a defaulted Mortgage Loan for less than the unpaid principal balance of such Mortgage Loan. The Sponsor has a retention program applicable to its servicing portfolio. Provided the borrower is current in his or her mortgage payment obligations, the Sponsor may agree to refinance the mortgage loan in order to reduce the borrower's mortgage interest rate, through the extension of a replacement loan or the execution of a modification agreement, without the application of any significant new borrower credit or property underwriting standards. Any such refinancing will have the same effect as a prepayment in full of the related Mortgage Loan. See "The Sponsor's Mortgage Loan Programs--Mortgage Loan Underwriting--Retention Program Standards." The streamlined procedures, minimal borrower cost and the absence of significant underwriting standards associated with this retention program may result in an increase in the number of Mortgage Loans eligible for refinancing and a narrowing of the interest rate differential that may otherwise need to exist before a refinancing is practical and economic for the borrower. These factors, together with increased borrower sophistication in general regarding the benefits of refinancing may also result in a significant increase in the rate of prepayments on the Mortgage Loans. In addition, the success of the Sponsor over time in attracting borrowers to its retention program who are current in their mortgage payment obligations may result in a higher proportion of Mortgage Loans not eligible for such program remaining in the Trust Estate, thereby increasing the relative percentage of delinquent Mortgage Loans in such Trust Estate. -71- SERVICING OF THE MORTGAGE LOANS The servicing of the Mortgage Loans in the Trust underlying a Series of Certificates will be performed by one or more Servicers, which may include the Sponsor or its affiliates. In addition, the Sponsor will act as master servicer with respect to each Series of Certificates. The applicable prospectus supplement will identify (i) each Servicer affiliated with the Sponsor, (ii) each Servicer that services 10% or more of the Mortgage Loans and (iii) any other material servicer that is responsible for performing an aspect of the servicing on which the performance of the related Mortgage Loans or Certificates are materially dependent. The following is a summary of the material servicing provisions of the Underlying Servicing Agreements and the Pooling and Servicing Agreement that have been filed as exhibits to the registration statement of which this prospectus forms a part. The Underlying Servicing Agreements and the Pooling and Servicing Agreement for each Series will be filed with the SEC following the date of initial issuance of the related Certificates. The Master Servicer General The master servicer (the "Master Servicer") with respect to each Series of Certificates will be the Sponsor. See "The Sponsor." Wells Fargo Bank conducts its master servicing and securities administration 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 generally will (a) be responsible under each Pooling and Servicing Agreement for providing general administrative services for the Trust Estate for any such Series, including, among other things, (i) administering and supervising the performance by the Servicers of their duties and responsibilities under the Underlying Servicing Agreements, (ii) oversight of payments received on Mortgage Loans, (iii) monitoring the amounts on deposit in various trust accounts, (iv) calculation of the amounts payable to Certificateholders on each Distribution Date, (v) preparation of periodic reports to the Certificateholders with respect to the foregoing matters, (vi) preparation of federal and applicable state and local tax and information returns; (vii) preparation of reports, if any, required under the Exchange Act and (viii) performing certain of the servicing obligations of a terminated Servicer as described below under "--The Servicers"; (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 "Servicing of Mortgage Loans--Periodic Advances and Limitations Thereon," 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 Pooling and Servicing Agreement. The Master Servicer will be entitled to receive a portion of the interest payments on the Mortgage Loans included in the Trust Estate for such a Series to cover its fees as Master Servicer. The Master Servicer will be entitled to retain Liquidation Profits as additional master servicing compensation to the extent a Servicer is not entitled to retain such amounts as additional servicing compensation under the applicable Underlying Servicing Agreement. In addition, as additional compensation, the Master Servicer will be entitled to any income from investments of funds in the Certificate Account and Payment Account and any Liquidation Profits to which a Servicer is not entitled under the related Underlying Servicing Agreement. The Master Servicer may subcontract with any entity the obligations of the Master Servicer under any Pooling and Servicing Agreement. The Master Servicer will remain primarily liable for any such contractor's performance in accordance with the applicable Pooling and Servicing Agreement. The Master Servicer may be released from its obligations in certain circumstances. The Master Servicer will be required to pay certain expenses incurred in connection with the administration of the Trust Estate, which will generally include, the fees and disbursements of any custodian, the fees of the Trustee or co-trustee, fees due to the independent accountants and expenses incurred in connection with distributions and reports to Certificateholders. Certain of these expenses will be reimbursable to the Master Servicer pursuant to the terms of the applicable Pooling and Servicing 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 Estate as a result of such reimbursement -72- will be allocated first to the Subordinated Certificates of a Series before being allocated to the related Senior Certificates, or if such Series does not contain Subordinated Certificates, pro rata among the various Classes of Certificates or in another manner specified in the applicable prospectus supplement. The Master Servicer may not resign from its obligations and duties under the Pooling and Servicing Agreement for each Series, except (i) upon the appointment of a successor and the receipt by the Trustee of a letter from each Rating Agency rating the affected Series of Certificates that its resignation and the appointment of a successor will not result in a downgrade of such Certificates, (ii) upon its determination that its duties thereunder are no longer permissible under applicable law or (iii) in the case of an assignment of its rights and delegation or its duties described below. 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 Pooling and Servicing 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 Pooling and Servicing Agreement, it may appoint another institution to so act as described under "The Pooling and Servicing Agreement--Rights Upon Event of Default." The Pooling and Servicing Agreement will also provide that neither the Master Servicer nor any subcontractor, nor any director, officer, employee or agent of any of them, will be under any liability to the Trust Estate or the Certificateholders, for the taking of any action or for refraining from the taking of any action in good faith pursuant to the Pooling and Servicing 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 Pooling and Servicing Agreement will further provide that the Master Servicer, any subcontractor, and any director, officer, employee or agent of either of them shall be entitled to indemnification by the Trust Estate 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 Pooling and Servicing Agreement, the Certificates or the Mortgage Loans of a Series, 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 Pooling and Servicing 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 Pooling and Servicing Agreement and, in its opinion, does not 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 Pooling and Servicing Agreement and the rights and duties of the parties thereto and the interests of the Certificateholders thereunder if the Certificateholders 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 Estate and the Master Servicer will be entitled to be reimbursed therefor out of the Certificate Account, and any loss to the Trust Estate arising from such right of reimbursement will be allocated first to the Subordinated Certificates of a Series before being allocated to the related Senior Certificates, or if such Series does not contain Subordinated Certificates, pro rata among the various Classes of Certificates or in another manner specified in the applicable Pooling and Servicing 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 Pooling and Servicing 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, to assign its rights and delegate its duties and obligations under the Pooling and Servicing Agreement for each Series; provided that, if the Master 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 executes and delivers to the Depositor and the Trustee an agreement, in 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 -73- the Master Servicer under the Pooling and Servicing Agreement from and after the date of such agreement; and (iii) each applicable Rating Agency's rating of any Certificates 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 Certificates 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 Pooling and Servicing 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, 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 Pooling and Servicing 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 of rights and delegation of duties by the Master Servicer, the Master Servicer will report such event on Form 8-K for so long as the related Issuing Entity is subject to the reporting requirements of the Exchange Act. 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 Trustee or successor master servicer, as applicable, the Trustee or successor master servicer 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 Pooling and Servicing 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 - ----------------------------- ----------------------------- ----------------------------- No. of Aggregate Initial No. of Aggregate Initial No. of Aggregate Initial Issuances Principal Balance Issuances Principal Balance Issuances Principal Balance 643 $210,199,085,957 735 $347,601,679,698 1,096 $542,500,639,530
In addition, the Master Servicer will be responsible for securities administration of each Trust. 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 certificates are handled at Wells Fargo Bank's location in Columbia, Maryland. -74- 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 - ----------------------------- ----------------------------- ----------------------------- No. of Aggregate Initial No. of Aggregate Initial No. of Aggregate Initial Issuances Principal Balance Issuances Principal Balance Issuances Principal Balance 1,231 $251,288,485,527 1,510 $495,339,300,548 2,131 $766,507,104,520
The Servicers For each Series, the Sponsor and one or more other servicers (each, a "Servicer") specified in the applicable prospectus supplement, will provide certain customary servicing functions with respect to Mortgage Loans pursuant to separate servicing agreements with the Master Servicer, the Sponsor or an affiliate thereof (each, an "Underlying Servicing Agreement"). The rights of the Master Servicer, the Sponsor or such affiliate under the applicable Underlying Servicing Agreements in respect of the Mortgage Loans included in the Trust Estate 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. Each Servicer generally will be approved by Fannie Mae or Freddie Mac as a servicer of mortgage loans and must be approved by the Master Servicer. In determining whether to approve a Servicer, the Master Servicer will perform a review of the Servicer that includes minimum net worth requirements, servicing experience, errors and omissions and fidelity bond coverage and other standards to be set forth in the applicable Underlying Servicing Agreement. In addition, the Master Servicer's mortgage servicing personnel will review the Servicer's servicing record and evaluate the ability of the Servicer to conform with required servicing procedures. Once a Servicer is approved, the Master Servicer will continue to monitor the compliance of the Servicer according to the Underlying Servicing Agreement on an annual basis. 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 enable the Master Servicer to provide required information to the Trustee or Paying Agent with respect to the Mortgage Loans included in the Trust Estate 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. With the consent of the Master Servicer, any of the servicing obligations of a Servicer may be delegated to another person approved by the Master Servicer. In addition, certain limited duties of a Servicer may be delegated without consent. 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 Certificates, the Master Servicer will report such appointment on Form 8-K for so long as the related Issuing Entity is subject to the reporting requirements of the Exchange Act. The Trustee, or if so provided in the applicable Pooling and Servicing Agreement, the Master Servicer, may terminate a Servicer who has failed to comply with its covenants or breached one of its representations contained in the Underlying Servicing Agreement or in certain other circumstances. Upon termination of a Servicer (other than the Sponsor as a Servicer), the Master Servicer will assume certain servicing obligations of the terminated Servicer, or, at its option, may appoint a substitute Servicer acceptable to the Trustee (which substitute Servicer may be the Sponsor) to assume the servicing obligations of the terminated Servicer. The Master Servicer's obligations to act as a servicer following the termination of an Underlying Servicing Agreement will not, however, require the Master -75- Servicer to purchase a Mortgage Loan from the Trust Estate due to a breach by such Servicer of a representation or warranty in respect of such Mortgage Loan. Upon the termination of the Sponsor as Servicer, the Trustee will appoint a successor. See "--Servicer Defaults" below. The Trustee or a successor servicer is entitled to be reimbursed for its costs in effecting a servicing transfer from the predecessor servicer or from the Master Servicer, who is entitled to reimbursement from the predecessor servicer. In the event that the predecessor servicer fails to reimburse the Master Servicer or the Trustee, the Master Servicer or the Trustee will be entitled to reimbursement from the assets of the related Trust. The applicable Underlying Servicing Agreement provides that neither the Sponsor (as a Servicer), any subservicer appointed by it, nor any of their respective partners, directors, officers, employees or agents, or its delegees will be under any liability to the Master Servicer or the Trustee for any action taken or for refraining from the taking of any action in good faith pursuant to the related Underlying Servicing Agreement, or for errors in judgment; provided, however, that the Sponsor, any subservicer or any of their respective partners, directors, officers, employees or agents, or its delegees are not protected against any liability which 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 under the related Underlying Servicing Agreement. The applicable Underlying Servicing Agreement provides that the Sponsor (as a Servicer) may not sell or transfer the servicing of the applicable Mortgage Loans without the prior written consent of the Master Servicer. Any proposed transferee of servicing must agree to enter into a servicing agreement with the Master Servicer substantially in the form of the original Underlying Servicing Agreement and must be approved by the Master Servicer and the applicable Rating Agencies. The applicable Underlying Servicing Agreement permits the Sponsor to delegate certain of its duties under the applicable Underlying Servicing Agreement, provided that the Sponsor shall remain liable to the Master Servicer for the performance of the Servicer's duties and obligations under the applicable Underlying Servicing Agreement. The information provided in the two preceding paragraphs describes provisions relating to the Underlying Servicing Agreement of the Sponsor. Any provisions of the Underlying Servicing Agreements of the other 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. 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 Alt-A Fixed-Rate Loans, Alt-A Adjustable Rate Loan, Alt-B Fixed-Rate Loans and Alt-B Adjustable Rate 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 $1.005 trillion as of the end of 2005. The table below sets forth for each of the periods indicated the number and aggregate original principal balance of first lien, non-subprime, residential 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): -76- As of As of As of December 31, 2003 December 31, 2004 December 31, 2005 - ------------------------- -------------------------- ---------------------- Aggregate Aggregate Aggregate Unpaid Unpaid Unpaid Principal Principal Principal No. of Balance of No. of Balance of No. of Balance of Loans Loans Loans Loans Loans Loans $ 472,694 141,120,796,584 553,262 $171,086,652,776 635,091 $218,067,611, 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 Pooling and Servicing Agreement and applicable Underlying Servicing 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 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 Pooling and Servicing Agreement and the applicable Underlying Servicing 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 16th 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 -77- 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. 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. 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. Payments on Mortgage Loans The Master Servicer will, as to each Series of Certificates, establish and maintain a separate trust account in the name of the Master Servicer on behalf of the Trustee (the "Certificate Account"). Such account may be established at Wells Fargo Bank or an affiliate thereof. Each such account must be maintained with a depository institution ("Depository") either (i) whose long-term debt obligations (or, in the case of a depository institution which is part of a holding company structure, the long-term debt obligations of such parent holding company) are, at the time of any deposit therein rated in at least one of the two highest rating categories by each nationally recognized statistical rating organization that rated the related Series of Certificates, or (ii) that is otherwise acceptable to the Rating Agency or Rating Agencies rating the Certificates of such Series and, if a REMIC election has been made, that would not cause the related Trust Estate (or one or more segregated pools of assets therein) to fail to qualify as a REMIC. To the extent that the portion of funds deposited in the Certificate Account at any time exceeds the limit of insurance coverage established by the Federal Deposit Insurance Corporation (the "FDIC"), such excess will be subject to loss in the event of the failure of the Depository. Such insurance coverage will be based on the number of holders of Certificates, rather than the number of underlying mortgagors. Holders of the Subordinated Certificates of a Series will bear any such loss up to the amount of principal payments on the related Mortgage Loans to which such holders are entitled. Pursuant to the applicable Underlying Servicing Agreements with respect to a Series, each Servicer may be required to establish and maintain one or more accounts (collectively, the "Servicer Custodial Account") into which the Servicer will be required to deposit on a daily basis amounts received with respect to Mortgage Loans serviced by such Servicer included in the Trust Estate for such Series, as more fully described below. Each required Servicer Custodial Account must generally be a separate custodial account insured to the available limits by the FDIC or otherwise acceptable to the applicable Rating Agencies (such eligible account, an "Eligible Custodial Account") and limited to funds held with respect to a particular Series, unless the Underlying Servicing Agreement specifies that a Servicer may establish an account which is an eligible account to serve as a unitary Servicer Custodial Account both for such Series and for other Series of Certificates for which Wells Fargo Bank is the Master -78- 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 Servicer Custodial Account with its general assets until such time as such funds are required to be remitted to the Certificate Account for so long as (i) a master guarantee of Wells Fargo Bank's remittance obligation has been issued by its parent, Wells Fargo & Company ("Wells Fargo") for the benefit of the Certificateholders and is currently in force and (ii) the short-term debt or long-term debt of Wells Fargo 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 Certificates by the Rating Agencies or result in any rated Class of Certificates being placed on credit review status by the Rating Agencies. 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 24th day of each month, or if any such day is not a business day, the preceding business day. Each Servicer will be required to deposit in the Certificate Account for each Series of Certificates on the first Remittance Date any amounts representing scheduled payments of principal and interest on the Mortgage Loans serviced by such Servicer due after the applicable Cut-Off Date but received on or prior thereto, and will deposit in the Servicer Custodial Account on receipt and on the Remittance Date will remit to the Master Servicer for deposit in the Certificate Account, the following payments and collections received or made by such Servicer with respect to the Mortgage Loans serviced by such Servicer subsequent to the applicable Cut-Off Date (other than (a) payments due on or before the Cut-Off Date, (b) amounts held for future distribution, (c) amounts representing certain expenses reimbursable to the Servicer, (d) amounts representing reimbursements for Periodic Advances made by the Servicer, (e) amounts representing additional servicing compensation and (f) any other amounts permitted to be retained by the Servicer pursuant to the applicable Underlying Servicing Agreement): (i) all payments on account of principal, including prepayments, and interest; (ii) all Liquidation Proceeds less, to the extent permitted under the applicable Underlying Servicing Agreement, the amount of any expenses incurred in connection with the liquidation of such Mortgage Loans; (iii) all proceeds received by the Servicer under any title, hazard or other insurance policy covering any such Mortgage Loan, other than proceeds to be applied to the restoration or repair of the property subject to the related Mortgage or released to the mortgagor in accordance with the Underlying Servicing Agreement; (iv) all Periodic Advances made by the Servicer; (v) all amounts withdrawn from Buy-Down Funds or Subsidy Funds, if any, with respect to such Mortgage Loans, in accordance with the terms of the respective agreements applicable thereto; (vi) all proceeds of any such Mortgage Loans or property acquired in respect thereof purchased or repurchased pursuant to the Pooling and Servicing Agreement or the Underlying Servicing Agreement; and (vii) all other amounts required to be deposited therein pursuant to the applicable Pooling and Servicing Agreement or the Underlying Servicing Agreement. Notwithstanding the foregoing, if at any time the sums in (x) any Servicer Custodial Account, other than any Eligible Custodial Account, exceed $100,000 or (y) any such Servicer Custodial Account, in certain circumstances, exceed such amount less than $100,000 as shall have been specified by the Master Servicer, the Servicer will be required within one business day to withdraw such excess funds from such account and remit such amounts to the Certificate Account. Notwithstanding the foregoing, each Servicer will be entitled, at its election, either (a) to withhold and pay itself the applicable Servicing Fee from any payment or other recovery on account of interest as received and prior to deposit in the Servicer Custodial Account or (b) to withdraw from the Servicer Custodial Account the applicable Servicing Fee after the entire payment or recovery has been deposited in such account. -79- The Master Servicer or Trustee will deposit in the Certificate Account any Periodic Advances made by the Master Servicer or Trustee in the event of a Servicer default or as otherwise required by the Pooling and Servicing Agreement not later than the Distribution Date on which such amounts are required to be distributed. All other amounts will be deposited in the Certificate Account not later than the business day next following the day of receipt and posting by the Master Servicer. On or prior to each Distribution Date, the Master Servicer will cause to be deposited into the Payment Account for distribution by the Paying Agent to Certificateholders all amounts allocable to the Pool Distribution Amount for such Distribution Date. If a Servicer, the Master Servicer or the Trustee deposits in the Certificate Account for a Series any amount not required to be deposited therein, the Master Servicer may at any time withdraw such amount from such account for itself or for remittance to such Servicer or the Trustee, as applicable. Funds on deposit in the Certificate Account may be invested in certain investments acceptable to the Rating Agencies ("Eligible Investments") maturing in general not later than the business day preceding the next Distribution Date. In the event that an election has been made to treat the Trust Estate (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 Master Servicer has received an opinion of counsel or other evidence satisfactory to it that such sale or disposition will not cause the Trust Estate (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 Estate (or segregated pool of assets) to tax, or cause the Trust Estate (or any segregated pool of assets) to fail to qualify as a REMIC while any Certificates of the Series are outstanding. Except as otherwise specified in the applicable prospectus supplement, all income and gain realized from any such investment will be for the account of the Master Servicer as additional compensation and all losses from any such investment will be deposited by the Master Servicer out of its own funds to the Certificate Account immediately as realized. The Master Servicer is permitted, from time to time, to make withdrawals from the Certificate Account for the following purposes, to the extent permitted in the applicable Pooling and Servicing Agreement (and, in the case of Servicer reimbursements by the Master Servicer, only to the extent funds in the respective Servicer Custodial Account are not sufficient therefor): (i) to reimburse the Master Servicer, the Trustee or any Servicer for Advances; (ii) to reimburse any Servicer for liquidation expenses and for amounts expended by itself or any Servicer, as applicable, in connection with the restoration of damaged property; (iii) to pay to itself the applicable Master Servicing Fee and any other amounts constituting additional master servicing compensation, to pay any other fees described in the applicable prospectus supplement; and to pay to the owner thereof any Fixed Retained Yield; (iv) to reimburse itself, any Servicer or the Trustee for certain expenses (including amounts as to which a Servicer is entitled to reimbursement for taxes paid on behalf of the Trust Estate) incurred by and recoverable by or reimbursable to itself, any Servicer or the Trustee, as applicable, or any reimbursement amounts owed to itself, any Servicer or the Trustee, as applicable; (v) to pay to the Depositor, a Servicer or itself with respect to each Mortgage Loan or property acquired in respect thereof that has been repurchased by the Depositor or purchased by a Servicer or the Master Servicer all amounts received thereon and not distributed as of the date as of which the purchase price of such Mortgage Loan was determined; (vi) to pay to itself any interest earned on or investment income earned with respect to funds in the Certificate Account (all such interest or income to be withdrawn not later than the next Distribution Date); (vii) to pay to itself, the Servicer and the Trustee from net Liquidation Proceeds allocable to interest, the amount of any unpaid Master Servicing Fee or Servicing Fees and any unpaid assumption fees, late payment charges or other mortgagor charges on the related Mortgage Loan; (viii) to remit funds to the Paying Agent; -80- (ix) to withdraw from the Certificate Account any amount deposited in such account that was not required to be deposited therein; and (x) to clear and terminate the Certificate Account. A paying agent (the "Paying Agent"), which may be the Master Servicer or the Trustee, will be appointed pursuant to the Pooling and Servicing Agreement to make distributions to Certificateholders of a Series. The Trustee may remove or replace the Paying Agent, other than Wells Fargo Bank, for so long as Wells Fargo Bank is acting as the Master Servicer. The Master Servicer will, on or prior to each Distribution Date, deposit in immediately available funds in an account, which may be the Certificate Account if the Master Servicer is also acting as Paying Agent (the "Payment Account"), designated by the Paying Agent the amount required to be distributed to the Certificateholders on such Distribution Date. Funds on deposit in the Payment Account may be invested in Eligible Investments, as directed by the Master Servicer. All income and gain realized from any such investment will be for the account of the Master Servicer or such other party identified in the applicable prospectus supplement as additional compensation and all losses from any such investment will be deposited by the Master Servicer or such other party out of its own funds to the Payment Account immediately as realized. Any fee payable to the Paying Agent will be paid by the Master Servicer. The Trustee will cause any Paying Agent that is not the Trustee or the Master Servicer to execute and deliver to the Trustee an instrument in which such Paying Agent agrees with the Trustee that such Paying Agent will: (1) hold all amounts deposited with it by the Master Servicer for distribution to Certificateholders in trust for the benefit of Certificateholders until such amounts are distributed to Certificateholders or otherwise disposed of as provided in the applicable Pooling and Servicing Agreement; (2) give the Trustee notice of any default by the Master Servicer in remitting any required amount; (3) 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; and (4) provide to the Depositor and the Master Servicer 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. Periodic Advances and Limitations Thereon Generally each Servicer will be required to make (i) advances to cover delinquent payments of principal and interest (a "Periodic Advance") on such Mortgage Loan and (ii) other advances of cash ("Other Advances" and, collectively with Periodic Advances, "Advances") to cover (x) delinquent payments of taxes, insurance premiums, and other escrowed items and (y) rehabilitation expenses and foreclosure costs, including reasonable attorneys' fees, in either case unless such Servicer has determined that any subsequent payments on that Mortgage Loan or from the borrower will ultimately not be available to reimburse such Servicer for such amounts. The failure of the Servicer to make any required Periodic Advances or Other Advances under an Underlying Servicing Agreement constitutes a default under such agreement for which the Servicer will be terminated. Upon default by a Servicer, other than the Sponsor as a Servicer, the Master Servicer may, and upon default by the Sponsor the Trustee may, be required to make Periodic Advances to the extent necessary to make required distributions on certain Certificates or certain Other Advances, provided that the Master Servicer or Trustee, as applicable, determines that funds will ultimately be available to reimburse it. In the case of Certificates of any Series for which credit enhancement is provided in the form of a mortgage pool insurance policy, the Depositor may obtain an endorsement to the mortgage pool insurance policy which obligates the pool insurer to advance delinquent payments of principal and interest. The pool insurer would only be obligated under such endorsement to the extent the mortgagor fails to make such payment and the Master Servicer or Trustee fails to make a required advance. Any such Periodic Advances by the Servicers or the Master Servicer or Trustee, as the case may be, must be deposited into the applicable Servicer Custodial Account or the Certificate Account and will be due no later than the business day before the Distribution Date to which such delinquent payment relates. Advances by the Servicers or the Master Servicer or Trustee, as the case may be, will be reimbursable out of insurance proceeds or Liquidation -81- Proceeds of, or, except for Other Advances, future payments on, the Mortgage Loans for which such amounts were advanced. If an Advance made by a Servicer, the Master Servicer or the Trustee later proves, or is deemed by the Master Servicer or the Trustee, to be unrecoverable, such Servicer, the Master Servicer or the Trustee, as the case may be, will be entitled to reimbursement from funds in the Certificate Account prior to the distribution of payments to the Certificateholders in accordance with the Pooling and Servicing Agreement. Any Periodic Advances made by a Servicer, the Master Servicer or the Trustee with respect to Mortgage Loans included in the Trust Estate for any Series are intended to enable the Paying Agent to make timely payment of the scheduled distributions of principal and interest on the Certificates of such Series. However, neither the Master Servicer, the Trustee, Paying Agent, any Servicer nor any other person will, except as otherwise specified in the applicable prospectus supplement, insure or guarantee the Certificates of any Series or the Mortgage Loans included in the Trust Estate for any Certificates. PMI Advances If a 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, if the applicable Underlying Servicing Agreement so provides, 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 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 applicable Servicer Custodial Account. Collection and Other Servicing Obligations Each Servicer will be required by the related Underlying Servicing Agreement to make reasonable efforts to collect all payments called for under the Mortgage Loans and, consistent with the applicable Underlying Servicing Agreement and any applicable agreement governing any form of credit enhancement, 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 prepayment charge, assumption fee, late payment charge or any other charge in connection with the prepayment of a Mortgage Loan 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 Underlying Servicing Agreement) provided that such period will not result in a "significant modification" of the Mortgage Loan under the REMIC provisions. Under each Underlying Servicing Agreement, each Servicer, to the extent permitted by law, will establish and maintain one or more escrow accounts (each such account, a "Servicing Account") in which each such 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. Each Servicer will be responsible for the administration of its Servicing Account. A 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, a Servicer may procure a performance bond or other form of insurance coverage, in an amount acceptable to the Master Servicer and each Rating Agency rating the related Series of Certificates, covering loss occasioned by the failure to escrow such amounts. Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans With respect to each Mortgage Loan, the applicable Underlying Servicing 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 -82- 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, in the case of a Servicer other than the Sponsor, would, in the Servicer's judgment, be reasonably likely to result in litigation by the mortgagor and such Servicer has not obtained the Master Servicer's consent to such exercise; 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. Each Underlying Servicing Agreement and Pooling and Servicing Agreement with respect to a Series will require the Servicer or the Master Servicer, as the case may be, to present claims to the insurer under any insurance policy applicable to the Mortgage Loans included in the Trust Estate 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. Each Servicer is obligated under the applicable Underlying Servicing 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 Underlying Servicing 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. Each Servicer may also, with the consent of the Master Servicer, modify the payment terms of Mortgage Loans that are in default, or as to which default is reasonably foreseeable, that remain in the Trust Estate rather than foreclose on such Mortgage Loans; provided that no such modification shall forgive principal owing under such Mortgage Loan or permanently reduce the interest rate on such Mortgage Loan. Any such modification will be made only upon the determination by the Servicer and the Master Servicer that such modification is likely to increase the proceeds of such Mortgage Loan over the amount expected to be collected pursuant to foreclosure. A Servicer may permit the capitalization of the interest portion of unreimbursed Periodic Advances and the amount of any unreimbursed Other 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 Periodic 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 Other 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 "The Pooling and Servicing Agreement--Optional Purchases," below, with respect to the Depositor's right to repurchase Mortgage Loans that are in default. Further, a Servicer may encourage selling a Mortgaged Property securing a defaulted Mortgage Loan for less than the unpaid principal balance of such Mortgage Loan. 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 Underlying Servicing Agreement to take into account the interests of the borrower. The Servicer may also make other modifications with the consent of the Master Servicer if an opinion of counsel is delivered to the Trustee to the effect that such modification will not -83- 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 Curtailment. 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 Certificateholders 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 Servicer has expended its own funds for foreclosure or to restore damaged property, it will be entitled to be reimbursed from the Certificate Account for such Series an amount equal to all costs and expenses incurred by it. The Sponsor as a Servicer will not be obligated to, and any other Servicer will not (except with the express written approval of the Master Servicer), 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 the Mortgage Loans--Environmental Considerations." If a Servicer does not foreclose on a Mortgaged Property, the Certificateholders of the related Series may experience a loss on the related Mortgage Loan. A Servicer will not be liable to the Certificateholders 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, a Servicer will not be liable to the Certificateholders 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. 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 the Mortgage Loans--Anti-Deficiency Legislation 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 under the applicable Underlying Servicing Agreement to seek deficiency judgments. In lieu of foreclosure, each 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 Estate (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 Trustee (or Servicer acting on behalf of the Trustee) or Master Servicer will be required to dispose of such property prior to the close of the third calendar year following the year the Trust Estate acquired such property (or such shorter period if provided in the applicable Underlying Servicing Agreement) unless the Trustee (a) receives an opinion of counsel to the effect that the holding of the Mortgaged Property by the Trust Estate will not cause the Trust Estate to be subject to the tax on "prohibited transactions" imposed by Code Section 860F(a)(1) or cause the Trust Estate (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 is granted 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 Estate 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 "Material Federal Income Tax Consequences." Insurance Policies Standard Hazard Insurance Policies Each Underlying Servicing Agreement will require the related Servicer to cause to be maintained for each Mortgage Loan a standard hazard insurance policy issued by a generally acceptable insurer insuring the -84- improvements on the Mortgaged Property underlying such Mortgage Loan against loss by fire, with extended coverage (a "Standard Hazard Insurance Policy"). The Underlying Servicing Agreements will require that such Standard Hazard Insurance Policy 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. Each Servicer will also maintain on property acquired upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, a Standard 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. Any amounts collected under any such policies (other than amounts to be applied to the restoration or repair of the Mortgaged Property or released to the borrower in accordance with normal servicing procedures) will be deposited in the Servicer Custodial Account for remittance to the Certificate Account by a Servicer. The Standard Hazard Insurance Policies covering the Mortgage Loans generally will cover physical damage to, or destruction of, the improvements on the Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to the conditions and exclusions particularized in each policy. Because the Standard Hazard Insurance 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, 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 Underlying Servicing Agreement will require the related 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 Underlying Servicing 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. Each Servicer may maintain a blanket policy insuring against hazard losses on all of the Mortgaged Properties in lieu of maintaining the required Standard Hazard Insurance Policies and may maintain a blanket policy insuring against special hazards in lieu of maintaining any required flood insurance. Each Servicer will be liable for the amount of any deductible under a blanket policy if such amount would have been covered by a required Standard Hazard Insurance Policy or flood insurance, had it been maintained. 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 Certificateholders. -85- 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 Certificates that is required to be kept in force under the applicable Underlying Servicing 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 Certificates of such Series that have been rated. Fixed Retained Yield, Servicing Compensation and Payment of Expenses Fixed Retained Yield with respect to any Mortgage Loan is that portion, if any, of interest at the Mortgage Interest Rate that is not included in the related Trust Estate. The prospectus supplement for a Series will specify whether there is any Fixed Retained Yield with respect to the Mortgage Loans of such Series. If so, the Fixed Retained Yield will be established on a loan-by-loan basis and will be specified in the schedule of Mortgage Loans delivered to the applicable Trustee. The Sponsor as Servicer may deduct the Fixed Retained Yield from mortgagor payments as received or deposit such payments in the Servicer Custodial Account or Certificate Account for such Series and then either withdraw the Fixed Retained Yield from the Servicer Custodial Account or Certificate Account. In the case of any Fixed Retained Yield with respect to Mortgage Loans serviced by a Servicer other than the Sponsor, the Master Servicer will make withdrawals from the Certificate Account for the purpose of remittances to the Sponsor as owner of the Fixed Retained Yield. Notwithstanding the foregoing, with respect to any payment of interest received by the Sponsor as Servicer relating to a Mortgage Loan (whether paid by the mortgagor or received as Liquidation Proceeds, insurance proceeds or otherwise) which is less than the full amount of interest then due with respect to such Mortgage Loan, the owner of the Fixed Retained Yield with respect to such Mortgage Loan will bear a ratable share of such interest shortfall. For each Series of Certificates, each Servicer will be entitled to be paid the Servicing Fee on the related Mortgage Loans serviced by such Servicer until termination of the applicable Underlying Servicing Agreement. A Servicer, at its election, will pay itself the Servicing Fee for a Series with respect to each Mortgage Loan by (a) withholding the Servicing Fee from any scheduled payment of interest prior to deposit of such payment in the Servicer Custodial Account for such Series or (b) withdrawing the Servicing Fee from the Servicer Custodial Account after the entire interest payment has been deposited in such account. A Servicer may also pay itself out of the Liquidation Proceeds of a Mortgage Loan or other recoveries with respect thereto, or withdraw from the Servicer Custodial Account or request the Master Servicer to withdraw from the Certificate Account for remittance to the Servicer such amounts after the deposit thereof in such accounts, the Servicing Fee in respect of such Mortgage Loan as provided in the applicable Pooling and Servicing Agreement. The Servicing Fee or the range of Servicing Fees with respect to the Mortgage Loans underlying the Certificates of a Series will be specified in the applicable prospectus supplement. Additional servicing compensation in the form of prepayment charges, assumption fees, late payment charges or Liquidation Profits or otherwise will be retained by the Servicers, to the extent specified in the Underlying Servicing Agreement. Generally, each Servicer will pay all expenses incurred in connection with the servicing of the Mortgage Loans serviced by such Servicer underlying a Series, including, without limitation, payment of the hazard insurance policy premiums. The Servicers will be entitled, in certain circumstances, to reimbursement from the Certificate Account of Periodic Advances, of Other Advances made by it to pay taxes, insurance premiums and similar items with respect to any Mortgaged Property, for expenditures incurred by it in connection with the restoration, foreclosure or liquidation of any Mortgaged Property (to the extent of Liquidation Proceeds or insurance policy proceeds in respect of such Mortgaged Property) or for certain property inspection expenses for defaulted Mortgage Loans or Mortgaged Properties owned by the Trust and of certain losses against which it is indemnified by the Trust Estate. As set forth in the preceding paragraph, a Servicer may be entitled to reimbursement for certain expenses incurred by it, and payment of additional fees for certain extraordinary services rendered by it (provided that such fees do not exceed those which would be charged by third parties for similar services) in connection with the liquidation of defaulted Mortgage Loans and related Mortgaged Properties. In the event that claims are either not -86- made or are not fully paid from any applicable form of credit enhancement, the related Trust Estate will suffer a loss to the extent that Liquidation Proceeds, after reimbursement of the Servicing Fee and the expenses of the Servicer, are less than the principal balance of the related Mortgage Loan. Evidence as to Compliance Each Servicer will deliver or make available annually to the Master Servicer, and the Master Servicer will deliver or make available annually to the Depositor, the Trustee and each Rating Agency, on or before the date specified in the applicable Underlying Servicing Agreement or Pooling and Servicing Agreement, as applicable, an officer's certificate stating that (i) a review of the activities of the Master Servicer or such Servicer during the preceding calendar year and of performance under the applicable Pooling and Servicing Agreement or Underlying Servicing 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 Master Servicer or such Servicer has fulfilled all its obligations under the applicable Pooling and Servicing Agreement or Underlying Servicing 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, each Servicer and any other party that participates in the servicing and administration of the Mortgage Loans and other assets comprising a Trust will deliver annually to the Master Servicer and the Master Servicer will deliver annually 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. Changes in Servicing Changes in Timing of Remittances of Unscheduled Principal Receipts in Full and Elimination of Month End Interest The Pooling and Servicing Agreement for each Series will provide that the Master Servicer may (but is not required), from time to time and without the consent of any Certificateholder or the Trustee, enter into an amendment (a) to an Underlying Servicing Agreement of any Servicer other than the Sponsor for the purpose of (i) eliminating or reducing Month End Interest and (ii) providing for the remittance of Unscheduled Principal Receipts in full by the applicable Servicer to the Master Servicer not later than the 24th day of each month (or if such day is not a business day, the previous business day), (b) to the Underlying Servicing Agreement of the Sponsor for the purpose of changing the applicable Remittance Date to the 18th day of each month (or if such day is not a business day, on the previous business day) or (c) to any Underlying Servicing Agreement for the purpose of effecting or facilitating compliance by the Servicer with Regulation AB (17 C.F.R. 229) or to conform the Underlying Servicing Agreement to industry practices relating to Regulation AB (17 C.F.R. 229). The Pooling and Servicing Agreement permits the Master Servicer to direct the Sponsor, as Servicer, to enter into any amendment pursuant to clause (b) or -87- (c) of the immediately preceding sentence. No assurance can be given as to the timing of any such changes or that any such changes will occur. Changes in Unscheduled Principal Receipt Period The Pooling and Servicing Agreement for each Series will provide that the Master Servicer may (but is not required to), from time to time and without the consent of any Certificateholder or the Trustee, (i) direct the Sponsor, as Servicer under the related Underlying Servicing Agreement to change the Unscheduled Principal Receipt Period for the Type 2 Loans (to achieve consistency with the Type 1 Loans) to a Mid-Month Receipt Period and (ii) make any conforming changes incident thereto. Changing the applicable Unscheduled Principal Receipt Period from a Prior Month Receipt Period to a Mid-Month Receipt Period may decrease the amount of interest shortfalls with respect to the applicable type of Unscheduled Principal Receipt. However, no assurance can be given as to the timing of any change to any Unscheduled Principal Receipt Period or that any such changes will occur. Servicer Defaults The Master Servicer, or if Wells Fargo Bank is the Servicer or the Underlying Servicing Agreement so provides, the Trustee will have the right pursuant to the Underlying Servicing Agreements to terminate a Servicer in certain events, including the breach by such Servicer of any of its material obligations under its Underlying Servicing Agreement. In the event of such termination, (i) the Trustee may enter into a substitute Underlying Servicing Agreement with the Master Servicer or another servicing institution acceptable to the Trustee and each Rating Agency; and (ii) in the case of a Servicer other than the Sponsor, the Master Servicer shall assume certain of the Servicer's servicing obligations under such Underlying Servicing Agreement, including the obligation to make Periodic Advances (limited as provided herein under the heading "Servicing of the Mortgage Loans--Periodic Advances and Limitations Thereon"), until such time as a successor servicer is appointed. The Master Servicer will be entitled to reimbursement for the costs and expenses associated with the transfer, including indemnity payments owed to the Trustee in connection with directing the Trustee to terminate an Underlying Servicing Agreement. To the extent the terminated Servicer does not reimburse the Master Servicer, the Master Servicer is entitled to reimbursement out of the Certificate Account which may result in a loss to the Certificates of the related Series. See "Servicing of the Mortgage Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses". THE POOLING AND SERVICING AGREEMENT Assignment of Mortgage Loans to the Trustee The Depositor will have acquired the Mortgage Loans included in each Trust Estate from the Sponsor pursuant to an agreement dated the applicable Closing Date (the "Mortgage Loan Purchase Agreement") between the Sponsor and the Depositor. In connection with the conveyance of the Mortgage Loans to the Depositor, Wells Fargo Bank will (i) agree to deliver to the Depositor all of the documents which the Depositor is required to deliver to the Trustee or the custodian; (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 a Correspondent to the Sponsor; and (iii) agree to repurchase or substitute (or assign rights to a comparable agreement of a Correspondent) 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 Certificateholders 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 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 Pooling and Servicing Agreement due to -88- any costs or damages incurred by the Trust as a result of the violation of such laws. See "The Pooling and Servicing Agreement--Representations and Warranties." At the time of issuance of each Series of Certificates, the Mortgage Loans in the related Trust Estate will, pursuant to the applicable Pooling and Servicing Agreement, be assigned to the Trustee, together with all principal and interest received on or with respect to such Mortgage Loans after the applicable Cut-Off Date other than principal and interest due and payable on or before such Cut-Off Date and interest attributable to the Fixed Retained Yield on such Mortgage Loans, if any. See "Servicing of the Mortgage Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses." The Trustee or its agent will, concurrently with such assignment, authenticate and deliver the Certificates evidencing such Series to the Depositor in exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a schedule delivered to the applicable Trustee or custodian. Each such 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 Estate. In addition, with respect to each Mortgage Loan in a Trust Estate, 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) will be delivered to the Trustee or, if indicated in the applicable prospectus supplement, to a custodian, which may be the Sponsor. 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 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 will be required to be prepared or delivered. Instead, the applicable Servicer will be required to take all actions as are necessary to cause the applicable Trust Estate 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 Mortgage Loan documents delivered to it in trust for the benefit of Certificateholders of the related Series and will review such documents within 45 days of the date of the applicable Pooling and Servicing Agreement. 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 Certificateholders in a Mortgage Loan, and the Depositor cannot deliver such document or cure such defect or breach within 60 days after receipt of final certification from the Trustee or custodian listing such defects or written notice of any such breach, the Depositor will, within 60 days of such certification or notice, either repurchase the related Mortgage Loan from the Trustee at a 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 execution of the applicable Pooling and Servicing Agreement) 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 Pooling and Servicing Agreement (except for representations and warranties as to the correctness of the applicable schedule of mortgage loans) 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 Certificate 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 deposit in the Certificate Account, an amount 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 -89- greater than the Scheduled 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 Net 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 Scheduled 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 Net Mortgage Interest Rate equal to, that of the Mortgage Loan for which it is substituted, and will bear interest based on the same index, 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 Certificateholders 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, as described under "The Pooling and Servicing Agreement--Representations and Warranties." The "Scheduled Principal Balance" of a Mortgage Loan as of any Distribution Date is the unpaid principal balance of such Mortgage Loan as specified in the amortization schedule at the time relating thereto (before any adjustment to such schedule by reason of bankruptcy (other than Deficient Valuations), moratorium or similar waiver or grace period) as of the Due Date occurring in the month preceding the month in which such Distribution Date occurs, after giving effect to any principal prepayments or other unscheduled recoveries of principal previously received, to any partial principal prepayments and Deficient Valuations occurring prior to such Due Date, to the payment of principal due on such Due Date irrespective of any delinquency in payment by the mortgagor and to any Unscheduled Principal Receipts (net of unreimbursed Periodic Advances, if applicable) received or applied during the applicable Unscheduled Principal Receipt Period for the Distribution Date in the month preceding the month in which such Distribution Date occurs or any Deficient Valuations occurring during the period corresponding to the applicable Unscheduled Principal Receipt Period for principal prepayments in full for such preceding Distribution Date. If no custodian is initially named in the Pooling and Servicing Agreement, the Trustee will be authorized to appoint a custodian to maintain possession of the documents relating to the Mortgage Loans and to conduct the review of such documents described above. Any custodian so appointed will keep and review such documents as the Trustee's agent under a custodial agreement. Representations and Warranties In connection with the transfer of the Mortgage Loans related to any Series by the Depositor to the Trust Estate, the Depositor will generally make certain representations and warranties regarding the Mortgage Loans. In certain cases in which the Sponsor 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 or the Wells Fargo Affiliates to be assigned to the Trust Estate. In such cases, the Correspondent's representations and warranties may have been made as of a date prior to the date of execution of the Pooling and Servicing Agreement. 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 schedule of Mortgage Loans delivered to the applicable Trustee or custodian 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 Pooling and Servicing 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; -90- (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); (v) the Mortgage is a valid, subsisting and enforceable first lien on the related Mortgaged Property and the Mortgaged Property is free and clear of all encumbrances and liens having a priority over the first lien of the Mortgage except for those liens set forth in the Pooling and Servicing 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) all payments required to be made up to the Due Date immediately preceding the Cut-Off Date for such Mortgage Loan 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 Cut-Off Date; (viii) 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; 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" below. 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 Certificateholders. See "--Assignment of Mortgage Loans to the Trustee" above for a description of the limited remedies available in connection with breaches of the foregoing representations and warranties. In addition to those remedies, 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 Depositor (or other party making such representation) will be required to pay any costs or damages incurred by the Trust as a result of the violation of such laws. The Sponsor will be required to pay to the Depositor any amount that the Depositor is required to pay pursuant to the immediately preceding sentence. Optional Purchases Subject to the requirements of the applicable Pooling and Servicing Agreement, the Depositor or the Master Servicer may, at such party's option, repurchase (i) any Mortgage Loan which is in default during one or more thirty-day periods specified in the Pooling and Servicing Agreement and (ii) 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, at a price equal to the unpaid principal balance thereof plus accrued interest thereon. Reports to Certificateholders The Master Servicer will, based on information provided by the Servicer, prepare and make available via the internet to Certificateholders of record of each Series a Monthly Report setting forth the following information, if applicable: -91- (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 Certificateholders 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 Certificates and the principal balance of each Class of Certificates prior to and after giving effect to the distributions of principal on the Distribution Date; (v) the amount of master servicing compensation and servicing compensation with respect to the related Trust Estate and such other customary information as is required to enable Certificateholders to prepare their tax returns; (vi) the amount of the aggregate Servicing Fees paid to each Servicer and Master Servicing Fees paid to the Master Servicer and the amount by which the master servicing compensation for the related Distribution Date has been reduced by interest shortfalls due to prepayments; (vii) the amount of any Periodic Advances by any Servicer, the Master Servicer or the Trustee included in the amounts actually distributed to the Certificateholders; (viii) 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; (ix) 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; (x) the Pass-Through Rate (if any) for each Class of Certificates; (xi) 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; (xii) the aggregate amount of Realized Losses incurred during the preceding calendar month; (xiii) any expenses or indemnification amounts paid by the related Trust Estate, the specific purpose of each payment and the parties to whom these payments are made; (xiv) the number and total principal balance of the Mortgage Loans as of the previous Distribution Date and the related Distribution Date, 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; (xv) the beginning and ending balances of the Certificate Account and any reserve fund for a Series; (xvi) 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; -92- (xvii) any material breaches of representations and warranties relating to the Mortgage Loans or material breaches of transaction covenants; (xviii) 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; (xix) the number and aggregate unpaid principal balances of the Mortgage Loans by range of current Mortgage Interest Rates; (xx) pool factors for the related Distribution Date; (xxi) the amount of excess cash flow, if any, for the related Distribution Date; and (xxii) whether any exchanges of Exchangeable REMIC Certificates and Exchangeable Certificates have taken place since the preceding Distribution Date and, if applicable, the class designations, principal balances or notional amounts, Pass-Through Rates, and any interest and/or principal paid, including any shortfalls allocated, with respect to any Classes of Certificates that were received by Certificateholders as a result of such exchange. In addition, the Master Servicer will include in the statement any information specific to the Classes of Certificates offered by the applicable prospectus supplement and, within a reasonable period of time after the end of each calendar year, the Paying Agent, upon request, will furnish a report to each Certificateholder of record at any time during such calendar year such information as required by the Code and applicable regulations thereunder to enable Certificateholders to prepare their tax returns. In the event that an election has been made to treat the Trust Estate (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 Master Servicer). See "Material Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC Certificates--Administrative Matters." List of Certificateholders The Pooling and Servicing Agreement for each Series will require the Master Servicer or other entity acting as certificate registrar to provide access to the most current list of names and addresses of Certificateholders of such Series to any group of five or more Certificateholders who advise the Master Servicer or other entity acting as certificate registrar in writing that they desire to communicate with other Certificateholders with respect to their rights under the Pooling and Servicing Agreement or under the Certificates. Events of Default Events of Default under the Pooling and Servicing Agreement for each Series include (i) any failure by the Master Servicer to make a required deposit which continues unremedied for three business days after either (a) receipt by the Master Servicer of written notice of such failure by the Trustee for such Series, or to the Master Servicer and the Trustee by the holders of Certificates of such Series having voting rights allocated to such Certificates ("Voting Interests") aggregating not less than 25% of the Voting Interests represented by all Certificates for such Series or (b) solely in the case of the Master Servicer failing to remit any Periodic Advance, the date on which the Master Servicer certifies the amount of Periodic Advances for such Distribution Date to the Trustee; (ii) any failure by the Master Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Pooling and Servicing Agreement , or any material breach by the Master Servicer of its representations and warranties made in the Pooling and Servicing Agreement resulting in a loss to the Depositor or the related Trust Estate, which continues unremedied for 60 days after the giving of written notice of such failure to the Master Servicer by the Trustee or the Depositor, or to the Master Servicer and the Trustee by the holders of Certificates aggregating not less than 25% of the Voting Interests represented by all of the Certificates for such Series, or which continues unremedied for a lesser number of days set forth in the applicable Pooling and Servicing 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 events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings and certain actions by the Master Servicer indicating its insolvency, reorganization -93- or inability to pay its obligations and (iv) the Master Servicer and any subservicer appointed by it becoming ineligible to service for both Fannie Mae and Freddie Mac (unless remedied within 90 days). Upon the occurrence of an Event of Default under the Pooling and Servicing Agreement for a Series, the Trustee will be required pursuant to the applicable Pooling and Servicing Agreement to (a) give prompt notice to each Rating Agency of the Event of Default and (b) within 45 days after the occurrence of any Event of Default known to the Trustee, give written notice thereof to Certificateholders of a Series, unless such Event of Default shall have been cured or waived within said 45 day period. Rights Upon Event of Default So long as an Event of Default remains unremedied under the Pooling and Servicing Agreement for a Series, the Trustee for such Series or holders of Certificates of such Series evidencing not less than 66 (2)/3% of the Voting Interests in the Trust Estate for such Series may terminate all of the rights and obligations of the Master Servicer under the Pooling and Servicing Agreement and in and to the Mortgage Loans (other than the Master Servicer's right to recovery of the aggregate Master Servicing Fees due prior to the date of termination, and other expenses and amounts advanced pursuant to the terms of the Pooling and Servicing Agreement, which rights the Master Servicer will retain under all circumstances), whereupon the Trustee will succeed to all the responsibilities, duties and liabilities of the Master Servicer under the Pooling and Servicing Agreement and will be entitled to monthly compensation not to exceed the aggregate Master Servicing Fees together with the other compensation to which the Master Servicer is entitled under the Pooling and Servicing Agreement. In the event that the Trustee is unwilling or unable so to act, it may select, pursuant to the public bid procedure described in the applicable Pooling and Servicing 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 $10,000,000 to act as successor to the Master Servicer under the provisions of the Pooling and Servicing Agreement; provided however, that until such a successor Master Servicer is appointed and has assumed the responsibilities, duties and liabilities of the Master Servicer under the Pooling and Servicing Agreement, the Trustee shall continue as the successor to the Master Servicer as described above. In the event such public bid procedure is utilized, the successor would be entitled to compensation in an amount equal to the aggregate Master Servicing Fees, together with the other compensation to which the Master Servicer is entitled under the Pooling and Servicing Agreement, and the Master Servicer would be entitled to receive the net profits, if any, realized from the sale of its rights and obligations under the Pooling and Servicing Agreement. The Trustee or the successor Master Servicer or Servicer will be entitled to be reimbursed from the predecessor Master Servicer (or the Trust if the predecessor Master Servicer is unable to fulfill its obligations under the Pooling and Servicing Agreement) for all costs associated with the transfer of servicing. During the continuance of any Event of Default under the Pooling and Servicing 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 Certificateholders of such Series, and holders of Certificates 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 Certificateholders 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 Certificateholders. No Certificateholder of a Series, solely by virtue of such holder's status as a Certificateholder, will have any right under the Pooling and Servicing Agreement for such Series to institute any proceeding with respect to the Pooling and Servicing Agreement, unless such holder previously has given to the Trustee for such Series written notice of default and unless the holders of Certificates 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. -94- Amendment Each Pooling and Servicing Agreement may be amended by the Depositor, the Master Servicer and the Trustee without the consent of the Certificateholders, (i) to cure any ambiguity or mistake, (ii) to correct or supplement any provision therein that may be inconsistent with any other provision therein or in this prospectus or the applicable prospectus supplement, (iii) to modify, eliminate or add to any of its provisions to such extent as shall be necessary to maintain the qualification of the Trust Estate (or one or more segregated pools of assets therein) as a REMIC at all times that any Certificates are outstanding or to avoid or minimize the risk of the imposition of any tax on the Trust Estate pursuant to the Code that would be a claim against the Trust Estate, provided that the Trustee has received an opinion of counsel to the effect that such action is necessary or desirable to maintain such qualification or to avoid or minimize the risk of the imposition of any such tax and such action will not, as evidenced by such opinion of counsel, adversely affect in any material respect the interests of any Certificateholder, (iv) to conform the obligations of the parties under the Pooling and Servicing Agreement, if necessary, to comply with the requirements of Regulation AB (17 C.F.R. 229), (v) to change the timing and/or nature of deposits into the Certificate Account, provided that such change will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any Certificateholder, (vi) to add to, modify or eliminate any provisions therein restricting transfers of the Certificates of a Series provided that the Depositor has determined in its sole discretion that any such modifications to the Pooling and Servicing Agreement will neither adversely affect the ratings on the Certificates nor give rise to a risk that the applicable REMIC or any Certificateholders will be subject to a tax caused by a transfer to a non-permitted transferee, (vii) to make certain provisions with respect to the denominations of, and the manner of payments on, certain Classes of Certificates initially retained by the Depositor or an affiliate, or (viii) to make any other provisions with respect to matters or questions arising under such Pooling and Servicing Agreement that are not inconsistent with the provisions thereof, provided that such action will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the Certificateholders of the related Series. Notwithstanding the foregoing, such action described in clause (v) or (viii) will not be considered to adversely affect in any material respect the interest of Certificateholders and no opinion of counsel to that effect will be required if each Rating Agency rating the Certificates states in writing that such action would not result in the downgrading or withdrawal of the ratings then assigned to the Certificates. The Pooling and Servicing Agreement may also be amended by the Depositor, the Master Servicer and the Trustee with the consent of the holders of Certificates evidencing interests aggregating not less than 66 (2)/3% of the Voting Interests evidenced by the Certificates 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 Pooling and Servicing Agreement or of modifying in any manner the rights of the Certificateholders; 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 Certificates, without the consent of the holder of such Certificate, (ii) adversely affect in any material respect the interests of the holders of a Class of Certificates of a Series in a manner other than that set forth in (i) above without the consent of the holders of Certificates aggregating not less than 66 (2)/3% of the Voting Interests evidenced by such Class, or (iii) reduce the aforesaid percentage of Certificates of any Class, the holders of which are required to consent to such amendment, without the consent of the holders of all Certificates of such Class affected then outstanding. Notwithstanding the foregoing, the Trustee will not consent to any such amendment if such amendment would subject the Trust Estate (or any segregated pool of assets therein) to tax or cause the Trust Estate (or any segregated pool of assets therein) to fail to qualify as a REMIC. Termination; Optional Purchase of Mortgage Loans The obligations created by the Pooling and Servicing Agreement for a Series of Certificates will terminate on the Distribution Date following the final payment or other liquidation of the last Mortgage Loan subject thereto and the disposition of all property acquired upon foreclosure of any such Mortgage Loan. In no event, however, will the trust created by the Pooling and Servicing Agreement continue beyond the expiration of 21 years from the death of the last survivor of certain persons named in such Pooling and Servicing Agreement. For each Series of Certificates, the Paying Agent will give written notice of termination of the Pooling and Servicing Agreement to each Certificateholder, and the final distribution will be made only upon surrender and cancellation of the Certificates at an office or agency appointed by the Depositor and specified in the notice of termination. The Pooling and Servicing Agreement for each Series of Certificates will permit, but not require, the Depositor, the Sponsor or such other party as is specified in the applicable prospectus supplement, to purchase from the Trust -95- Estate for such Series all remaining Mortgage Loans and any REO Property (or one or more groups of Mortgage Loans and any related REO Property, if specified in the applicable prospectus supplement), and thereby effect an early retirement of the applicable Series of Certificates (or in the case of the optional purchase of one or more, but less than all, groups of Mortgage Loans, the Certificates relating to such group or groups), at a price equal to the sum of (a) the unpaid principal balance of each Mortgage Loan in the applicable group or groups plus (b) the fair market value of other property (including any Mortgaged Property title to which has been acquired by the Trust Estate ("REO Property")) in the Trust Estate (or the related group or groups, if specified in the applicable prospectus supplement) plus accrued and unpaid interest. However, for so long as the purchasing party is subject to regulation by the OCC, the FDIC, the Federal Reserve or the OTS, the purchasing party may exercise its purchase option only if the aggregate fair market value of the Mortgage Loans and REO Properties is greater than or equal to the purchase price described in the preceding sentence. This right to purchase all remaining Mortgage Loans of a Series (or one or more groups of Mortgage Loans of such Series, if specified in the applicable prospectus supplement) may be exercised on any Distribution Date when the aggregate Scheduled Principal Balance of the applicable Mortgage Loans is less than 10% of the aggregate unpaid principal balance of the applicable Mortgage Loans as of the Cut-Off Date for such Series or a lower percentage specified in the applicable prospectus supplement. In the event that such party has caused the related Trust Estate (or any segregated pool of assets therein) to be treated as a REMIC, any such purchase will be effected only pursuant to a "qualified liquidation" as defined in Code Section 860F(a)(4)(A) and, if the Trust Estate is liquidated other than in the manner specified in the Pooling and Servicing Agreement, the receipt by the Trustee of an opinion of counsel or other evidence that such other liquidation method will not (i) result in the imposition of a tax on "prohibited transactions" under Code Section 860F(a)(1), (ii) otherwise subject the Trust Estate to tax, or (iii) cause the Trust Estate (or any segregated pool of assets) to fail to qualify as a REMIC. The exercise of such right will effect early retirement of the Certificates of that Series (or in the case of the optional purchase of one or more, but less than all, groups of Mortgage Loans, the Certificates relating to such group or groups), but the right so to purchase may be exercised only after the aggregate principal balance of the applicable Mortgage Loans at the time of purchase is less than a specified percentage of the aggregate principal balance at the Cut-Off Date for the Series, or after the date set forth in the applicable prospectus supplement. The Trustee The trustee under each Pooling and Servicing Agreement (the "Trustee") 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. With respect to certain Series of Certificates, a trust administrator may perform certain duties and functions normally performed by the Trustee. Any trust administrator will be a party to the Pooling and Servicing Agreement and will be named in the applicable prospectus supplement. Any trust administrator will have obligations and rights similar to the Trustee as described herein. The Master Servicer will pay from its own funds (without right of reimbursement from the related Trust Estate) the fees of the Trustee incurred in connection with its responsibilities under the Pooling and Servicing Agreement. The Pooling and Servicing Agreement will provide that the Trustee will be entitled to reimbursement from the Trust Estate for all reasonable expenses, disbursements and advances incurred or made by it in accordance with the provisions of the Pooling and Servicing Agreement to the extent permitted by Treasury regulations Section 1.860G-1(b)(3), which allows reimbursement for "unanticipated expenses," except (i) for any such expense, disbursement or advance arising from the Trustee's gross negligence, bad faith or willful misconduct and (ii) for any routine ongoing expenses incurred by the Trustee in the ordinary course of its duties. Any loss to the Trust Estate as a result of such reimbursement will be allocated first to the Subordinated Certificates of a Series before being allocated to the related Senior Certificates, or if such Series does not contain Subordinated Certificates, pro rata among the various Classes of Certificates or in another manner specified in the applicable prospectus supplement. The Trustee and any director, officer, employee or agent of the Trustee will be entitled to indemnification by the Trust Estate and held harmless against any loss, liability or expense (including reasonable attorney's fees) (a) incurred in connection with any claim or legal action relating to (i) the Pooling and Servicing Agreement, (ii) the Certificates, or (iii) the performance of any of the Trustee's duties under the Pooling and Servicing Agreement, -96- unless the loss, liability or expense was incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of any of the Trustee's duties under the Pooling and Servicing Agreement and (b) resulting from any tax or information return which was prepared by, or should have been prepared by, the applicable Servicer or Master Servicer. The Trustee may resign at any time, in which event the Master Servicer will be obligated to appoint a successor trustee. The Master Servicer may also remove the Trustee if the Trustee ceases to be eligible to act as Trustee under the Pooling and Servicing Agreement, if the Trustee becomes incapable of acting as Trustee, if the Trustee becomes insolvent or in order to change the situs of the Trust Estate for state tax reasons. Upon becoming aware of such circumstances, the Master Servicer will become obligated to appoint a successor trustee. The Trustee may also be removed at any time by the holders of Certificates evidencing not less than 51% of the Voting Interests in the Trust Estate, except that, any Certificate registered in the name of the Depositor, the Master Servicer or any affiliate thereof will not be taken into account in determining whether the requisite Voting Interest in the Trust Estate necessary to effect any such removal has been obtained. Any resignation and removal of the Trustee, and the appointment of a successor trustee, will not become effective until acceptance of such appointment by the successor trustee. The Trustee, and any successor trustee, will be required to (a) be a corporation or association having its principal office in a state and city acceptable to the Depositor, organized and doing business under the laws of such state or the United States of America, authorized under such laws to exercise corporate trust powers having 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, provided that the Trustee's and any such successor trustee'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, (b) be subject to supervision or examination by federal or state authorities and (c) have a credit rating or be otherwise acceptable to the Rating Agencies. In the event the predecessor trustee has resigned or is removed for cause, any costs associated with the appointment of a successor trustee are required to be paid by the predecessor and, if not paid, will be reimbursed to the successor trustee from the assets of the related Trust. Notwithstanding the foregoing, if the predecessor has been removed without cause, any costs associated with the appointment of a successor trustee will be reimbursed to the party incurring such costs from the assets of the related Trust. Special Servicing Agreements The Pooling and Servicing Agreement for a Series may permit the Master Servicer at the direction of the Depositor to enter into a special servicing agreement with an unaffiliated holder of a Class of Class B Certificates or of a class of securities representing interests in one or more Classes of Class B Certificates and/or other subordinated mortgage pass-through certificates. Pursuant to such an agreement, such holder may instruct the Master Servicer to instruct the Servicers, to the extent provided in the applicable Underlying Servicing Agreement to commence or delay foreclosure proceedings with respect to delinquent Mortgage Loans. Such commencement or delay at such holder's direction will be taken by the Master Servicer only after such holder deposits a specified amount of cash with the Master Servicer. Such cash will be available for distribution to Certificateholders if Liquidation Proceeds are less than they otherwise may have been had the Servicers acted pursuant to their normal servicing procedures. Such agreement may also provide for the right of the holder to purchase certain delinquent Mortgage Loans from the applicable Trust Estate at a price not less than the unpaid principal balance of such Mortgage Loans plus accrued interest thereon. CERTAIN LEGAL ASPECTS OF THE 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. -97- General The Mortgage Loans will, in general, be secured by either first mortgages or first 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 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. 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-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. -98- 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 and Other Limitations on Lenders" below. Certain states, such as Mississippi, may limit the right of foreclosure under certain conditions in the event of natural disasters, such as hurricanes. 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 -99- 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 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, 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 -100- 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. 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. 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. A Servicer generally will not be required under the applicable Underlying Servicing Agreement to pursue deficiency judgments on the Mortgage Loans even if permitted by law. 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 -101- 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. 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. -102- 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. 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 (ii) 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 -103- 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 and Similar Laws 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 Estate. 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 Certificates 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 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 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. -104- 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 Estate. 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 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 Estate and occasion a loss to the Trust Estate and to Certificateholders in certain circumstances. The new secured creditor amendments to CERCLA, also, would not necessarily affect the -105- 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, Wells Fargo Bank nor the Wells Fargo Affiliates have made such evaluations prior to the origination of the Mortgage Loans, nor does Wells Fargo Bank or the Wells Fargo Affiliates require that such evaluations be made by originators who have sold the Mortgage Loans to Wells Fargo Bank. 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 Master 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 Certificateholders 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 "The Pooling and Servicing Agreement--Representations and Warranties" and "Servicing of the Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans" above. "Due-on-Sale" Clauses The forms of note, mortgage and deed of trust relating to 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, a Servicer may generally be permitted to accelerate any 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 -106- 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." 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. The Depositor will represent and warrant in the Pooling and Servicing Agreement to the Trustee for the benefit of Certificateholders that all Mortgage Loans are originated in full compliance with applicable state laws, including usury laws. See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to the Trustee." 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. Under the Pooling and Servicing Agreement, late charges and prepayment fees (to the extent permitted by law and not waived by the Servicer) will be retained by the Servicer as additional servicing compensation. 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. -107- MATERIAL FEDERAL INCOME TAX CONSEQUENCES 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 Certificates. The discussion below does not purport to address all federal income tax consequences that may be applicable to particular categories of investors, some of which may be subject to special rules. The authorities on which this discussion is based are subject to change or differing interpretations, and any such change or interpretation could apply retroactively. This discussion reflects the applicable provisions of the Code, as well as regulations (the "REMIC Regulations") promulgated by the U.S. Department of the Treasury. Investors should consult their own tax advisors in determining the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of Certificates. If a Series of Certificates includes Exchangeable Certificates, each Class of Exchangeable Certificates will represent beneficial ownership of one or more interests in one or more REMIC regular interests. The applicable prospectus supplement will specify whether each Class of Exchangeable Certificates represents a proportionate or disproportionate interest in each underlying REMIC regular interest. The Exchangeable Certificates will be created, sold and administered pursuant to an arrangement that will be treated as a grantor trust under subpart E, Part 1 of subchapter J of the Code. The tax treatment of Exchangeable Certificates is discussed under "--Federal Income Tax Consequences for Exchangeable Certificates" below. For purposes of this discussion, where the applicable prospectus supplement provides for a Fixed Retained Yield with respect to the Mortgage Loans of a Series of Certificates, references to the Mortgage Loans will be deemed to refer to that portion of the Mortgage Loans held by the Trust Estate that does not include the Fixed Retained Yield. References to a "holder" or "Certificateholder" in this discussion generally mean the beneficial owner of a Certificate. Federal Income Tax Consequences for REMIC Certificates General With respect to a particular Series of Certificates, an election may be made to treat the Trust Estate or one or more segregated pools of assets therein as one or more real estate mortgage investment conduits (each, a "REMIC") within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the "Code"). A Trust Estate or a portion or portions thereof as to which one or more REMIC elections will be made will be referred to as a "REMIC Pool." For purposes of this discussion, Certificates of a Series as to which one or more REMIC elections are made are referred to as "REMIC Certificates" and will consist of one or more Classes of "Regular Certificates" and one Class of "Residual Certificates" in the case of each REMIC Pool. Qualification as a REMIC requires ongoing compliance with certain conditions. With respect to each Series of REMIC Certificates, Cadwalader, Wickersham & Taft LLP, counsel to the Depositor, has advised the Depositor that in the firm's opinion, assuming (i) the making of an appropriate election, (ii) compliance with the Pooling and Servicing Agreement, and (iii) compliance with any changes in the law, including any amendments to the Code or applicable Treasury regulations thereunder, each REMIC Pool will qualify as a REMIC. In such case, the Regular Certificates will be considered to be "regular interests" in the REMIC Pool and generally will be treated for federal income tax purposes as if they were newly originated debt instruments, and the Residual Certificates will be considered to be "residual interests" in the REMIC Pool. The prospectus supplement for each Series of Certificates will indicate whether one or more REMIC elections with respect to the related Trust Estate will be made, in which event references to "REMIC" or "REMIC Pool" herein shall be deemed to refer to each such REMIC Pool. Status of REMIC Certificates REMIC Certificates held by a domestic building and loan association will constitute "a regular or residual interest in a REMIC" within the meaning of Code Section 7701(a)(19)(C)(xi) in the same proportion that the assets of the REMIC Pool would be treated as "loans...secured by an interest in real property which is...residential real property" within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section 7701(a)(19)(C). REMIC Certificates held by a real estate investment trust will constitute "real estate assets" within the meaning of Code Section 856(c)(4)(A), and interest on the Regular Certificates and income with respect to -108- Residual Certificates will be considered "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) in the same proportion that, for both purposes, the assets of the REMIC Pool would be so treated. If at all times 95% or more of the assets of the REMIC Pool qualify for each of the foregoing treatments, the REMIC Certificates will qualify for the corresponding status in their entirety. For purposes of Code Section 856(c)(4)(A), payments of principal and interest on the Mortgage Loans that are reinvested pending distribution to holders of REMIC Certificates qualify for such treatment. Where two REMIC Pools are a part of a tiered structure they will be treated as one REMIC for purposes of the tests described above respecting asset ownership of more or less than 95%. In addition, if the assets of the REMIC 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 amount of the related Buy-Down Funds. Regular Certificates will represent "qualified mortgages," within the meaning of Code Section 860G(a)(3), for other REMICs. REMIC Certificates held by a regulated investment company will not constitute "Government securities" within the meaning of Code Section 851(b)(3)(A)(i). REMIC Certificates held by certain financial institutions will constitute an "evidence of indebtedness" within the meaning of Code Section 582(c)(1). Qualification as a REMIC 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 Certificates) 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. See "--Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--Disqualified Organizations." A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to the REMIC Pool on the Startup Day or is either purchased by the REMIC Pool within a three-month period thereafter or represents an increase in the loan advanced to the obligor under its original terms, in each case 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 a tiered REMIC. The REMIC Regulations specify that loans secured by timeshare interests and shares held by a tenant stockholder in a cooperative housing corporation 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 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 -109- the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and certain other contingencies. In addition, a reserve fund (limited to not more than 50% of the REMIC's initial assets) may be used to provide a source of funds for the purchase of increases in the balances of qualified mortgages pursuant to their terms. 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" to the extent no longer required. Foreclosure property is real property acquired by the REMIC Pool in connection with the default or imminent default of a qualified mortgage and generally not held beyond the close of the third calendar year following the year in which such property is acquired with an extension that may be granted by the Internal Revenue Service. 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, in the opinion of Cadwalader, Wickersham & Taft LLP, the Regular Certificates of a Series will constitute one or more classes of regular interests, and the Residual Certificates with respect to that Series will constitute a single class of residual interests on which distributions are made pro rata. If an entity, such as the REMIC Pool, fails to comply with one or more of the ongoing requirements of the Code for REMIC status during any taxable year, the Code provides that the entity will not be treated as a REMIC for such year and thereafter. In this event, an entity with multiple classes of ownership interests may be treated as a separate association taxable as a corporation under Treasury regulations, and the Regular Certificates may be treated as equity interests therein. The Code, however, authorizes the Treasury Department to issue regulations that address situations where failure to meet one or more of the requirements for REMIC status occurs inadvertently and in good faith, and disqualification of the REMIC Pool would occur absent regulatory relief. Investors should be aware, however, that the Conference Committee Report to the Tax Reform Act of 1986 (the "1986 Act") indicates that the relief may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the REMIC Pool's income for the period of time in which the requirements for REMIC status are not satisfied. Taxation of Regular Certificates General In general, interest, original issue discount, and market discount on a Regular Certificate will be treated as ordinary income to a holder of the Regular Certificate (the "Regular Certificateholder"), and principal payments on a Regular Certificate will be treated as a return of capital to the extent of the Regular Certificateholder's basis in the Regular Certificate allocable thereto. Regular Certificateholders must use the accrual method of accounting with regard to Regular Certificates, regardless of the method of accounting otherwise used by such Regular Certificateholders. -110- Original Issue Discount Accrual Certificates will be, and other classes of Regular Certificates may be, issued with "original issue discount" within the meaning of Code Section 1273(a). Holders of any Class of Regular Certificates 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 interest method that takes into account the compounding of interest, in advance of receipt of the cash attributable to such income. The following discussion is based in part on temporary and final Treasury regulations (the "OID Regulations") under Code Sections 1271 through 1273 and 1275 and in part on the provisions of the 1986 Act. Regular Certificateholders should be aware, however, that the OID Regulations do not adequately address certain issues relevant to prepayable securities, such as the Regular Certificates. 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 Internal Revenue Service 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 Internal Revenue Service 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 herein and the appropriate method for reporting interest and original issue discount with respect to the Regular Certificates. Each Regular Certificate (except to the extent described below with respect to a Regular Certificate on which principal is distributed in a single installment or by lots of specified principal amounts upon the request of a Certificateholder or by random lot (a "Non-Pro Rata Certificate")) will be treated as a single installment obligation for purposes of determining the original issue discount includible in a Regular Certificateholder's income. The total amount of original issue discount on a Regular Certificate is the excess of the "stated redemption price at maturity" of the Regular Certificate over its "issue price." The issue price of a Class of Regular Certificates 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, the Depositor intends to 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 that Class as of the issue date. The issue price of a Regular Certificate also includes any amount paid by an initial Regular Certificateholder for accrued interest that relates to a period prior to the issue date of the Regular Certificate, unless the Regular Certificateholder 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 Certificate always includes the original principal amount of the Regular Certificate, 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 Certificate. Because there is no penalty or default remedy in the case of nonpayment of interest with respect to a Regular Certificate, it is possible that no interest on any Class of Regular Certificates 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, the Depositor intends to treat interest with respect to the Regular Certificates as qualified stated interest. Distributions of interest on a Compound Interest Certificate, or on other Regular Certificates 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 Certificates includes all distributions of interest as well as principal thereon. Likewise, the Depositor intends to 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 Certificate 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 Certificate 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 Certificate multiplied by the weighted average maturity of the Regular Certificate. For this purpose, the weighted average maturity of the Regular Certificate 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 -111- 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 Certificate and the denominator of which is the stated redemption price at maturity of the Regular Certificate. 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 Certificates. The Prepayment Assumption with respect to a Series of Regular Certificates 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 Certificate is held as a capital asset. Under the OID Regulations, however, Regular Certificateholders 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 Certificateholder 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 Certificate accrued during an accrual period for each day on which it holds the Regular Certificate, including the date of purchase but excluding the date of disposition. The Depositor will treat the monthly period ending on the day before each Distribution Date as the accrual period. With respect to each Regular Certificate, 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 Certificate. 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 Prepayment Assumption. Other than as discussed below with respect to a Non-Pro Rata Certificate, 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 Certificate as of the end of that accrual period, and (b) the distributions made on the Regular Certificate during the accrual period that are included in the Regular Certificate's stated redemption price at maturity, over (ii) the adjusted issue price of the Regular Certificate 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 Certificate 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 Certificate at the beginning of any accrual period equals the issue price of the Regular Certificate, increased by the aggregate amount of original issue discount with respect to the Regular Certificate that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Certificate's stated redemption price at maturity that were made on the Regular Certificate 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 Certificateholder generally will increase to take into account prepayments on the Regular Certificates 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 Certificates can result in both a change in the priority of principal payments with respect to certain Classes of Regular Certificates and either an increase or decrease in the daily portions of original issue discount with respect to such Regular Certificates. In the case of a Non-Pro Rata Certificate, the Depositor intends to determine the yield to maturity of such Certificate 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 Certificate 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 Certificate (or portion of such unpaid principal balance), (a) the remaining unaccrued original issue discount allocable to such Certificate (or to such portion) will accrue at the time of such distribution, and (b) the accrual of original issue discount allocable to each remaining Certificate of such Class (or the remaining unpaid principal balance of a partially redeemed Non-Pro Rata Certificate after a distribution of principal has been received) will be adjusted by reducing the present value of the remaining payments on such Class -112- 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. Acquisition Premium A purchaser of a Regular Certificate 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 Certificate 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 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 Certificates Regular Certificates 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 in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds, where such rate is subject to a fixed multiple that is greater than 0.65 but not more than 1.35. Such rate may also be increased or decreased by a fixed spread or 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 Certificates 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 Certificates. However, if final regulations dealing with contingent interest with respect to Regular Certificates apply the same principles as the OID Regulations, such regulations may lead to different timing of income inclusion than would be the case under the OID Regulations for non-contingent debt instruments. Furthermore, application of such principles could lead to the characterization of gain on the sale of contingent interest Regular Certificates as ordinary income. Investors should consult their tax advisors regarding the appropriate treatment of any Regular Certificate that does not pay interest at a fixed rate or variable rate as described in this paragraph. Under the REMIC Regulations, a Regular Certificate (i) bearing 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, the Depositor intends to treat Regular Certificates that qualify as regular interests under this rule in the same manner as obligations bearing a variable rate for original issue discount reporting purposes. -113- The amount of original issue discount with respect to a Regular Certificate 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 Certificate generally to be determined by assuming that interest will be payable for the life of the Regular Certificate 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, the Depositor intends to 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 includible 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. The Depositor intends to treat Regular Certificates bearing an interest rate that is a weighted average of the net interest 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 Certificates 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 Certificates. Market Discount A purchaser of a Regular Certificate 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 Certificate (i) is exceeded by the then-current principal amount of the Regular Certificate, or (ii) in the case of a Regular Certificate having original issue discount, is exceeded by the adjusted issue price of such Regular Certificate 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 Certificate as distributions includible 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 Certificate 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. A purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Certificate 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. A 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 Certificate over the interest distributable thereon. The deferred portion of the interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Certificate 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 Certificate is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Certificateholder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such Regular Certificateholder 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. By analogy to the OID Regulations, market discount with respect to a Regular Certificate will be considered to be zero if the market discount is less than 0.25% of the remaining stated redemption price at maturity of such Regular Certificate multiplied by the weighted average maturity of the Regular Certificate (determined as described above in the third paragraph under "--Original Issue Discount") remaining after the date of purchase. It appears that -114- de minimis market discount would be reported in a manner similar to de minimis original issue discount. See "--Original Issue Discount" above. Treasury regulations implementing the market discount rules have not yet been issued, and therefore investors should consult their own tax advisors regarding the application of these rules. 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. Premium A Regular Certificate 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 Certificateholder holds such Regular Certificate as a "capital asset" within the meaning of Code Section 1221, the Regular Certificateholder may elect under Code Section 171 to amortize such premium under the constant yield method. Such election will apply to all debt obligations acquired by the Regular Certificateholder at a premium held in that taxable year or thereafter, unless revoked with the permission of the Internal Revenue Service. Final Treasury Regulations issued under Code Section 171 do not by their terms apply to prepayable debt instruments such as the Regular Certificates. 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 Certificates, although it is unclear whether the alternatives to the constant interest method described above under "--Market Discount" are available. Amortizable bond premium will be treated as an offset to interest income on a Regular Certificate, rather than as a separate deduction item. 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. Election to Treat All Interest Under the Constant Yield Method A holder of a debt instrument such as a Regular Certificate 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 this 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 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 Internal Revenue Service. Investors should consult their own tax advisors regarding the advisability of making this election. Treatment of Losses Regular Certificateholders will be required to report income with respect to Regular Certificates 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 uncollectible. Accordingly, the holder of a Regular Certificate, particularly a Subordinated Certificate, 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 uncollectible, the Internal Revenue Service 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 Certificateholders that are corporations or that otherwise hold the Regular Certificates in connection with a trade or business should in general be allowed to deduct as an ordinary loss such loss with respect to principal -115- sustained during the taxable year on account of any such Regular Certificates becoming wholly or partially worthless, and that, in general, Regular Certificateholders that are not corporations and do not hold the Regular Certificates 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 Certificates becoming wholly worthless. Although the matter is not free from doubt, such non-corporate Regular Certificateholders should be allowed a bad debt deduction at the time the principal balance of such Regular Certificates is reduced to reflect losses resulting from any liquidated Mortgage Loans. The Internal Revenue Service, 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 Estate have been liquidated or the applicable Class of Regular Certificates has been otherwise retired. The Internal Revenue Service could also assert that losses on the Regular Certificates are deductible based on some other method that may defer such deductions for all holders, such as reducing future cash flow 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 Certificateholders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained with respect to such Regular Certificates. While losses attributable to interest previously reported as income should be deductible as ordinary losses by both corporate and non-corporate holders, the Internal Revenue Service 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 Certificates 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 Certificates. Sale or Exchange of Regular Certificates If a Regular Certificateholder sells or exchanges a Regular Certificate, the Regular Certificateholder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Certificate. The adjusted basis of a Regular Certificate generally will equal the cost of the Regular Certificate 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 Certificate and reduced by amounts included in the stated redemption price at maturity of the Regular Certificate 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 Certificate realized by an investor who holds the Regular Certificate as a capital asset will be capital gain or loss and will be long-term or short-term depending on whether the Regular Certificate has been held for the related capital gain holding period. Such gain will be treated as ordinary income (i) if a Regular Certificate 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 Certificateholder's net investment in the conversion transaction at 120% of the appropriate applicable federal rate under Code Section 1274(d) 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 includible in the gross income of the holder if its yield on such Regular Certificate were 110% of the applicable federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of such holder with respect to such Regular Certificate. In addition, gain or loss recognized from the sale of a Regular Certificate by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Generally, short-term capital gains of certain non-corporate taxpayers are subject to the same tax rate as the ordinary income of such taxpayers for property held for not more than one year, and long-term capital gains of such taxpayers are subject to a lower maximum tax rate for property held for more than one year. The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains. -116- Taxation of Residual Certificates Taxation of REMIC Income Generally, the "daily portions" of REMIC taxable income or net loss will be includible as ordinary income or loss in determining the federal taxable income of holders of Residual Certificates ("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 Certificates 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 Certificates, plus income on reinvestment of cash flows and reserve assets, plus any cancellation of indebtedness income upon allocation of realized losses to the Regular Certificates. The REMIC Pool's deductions include interest and original issue discount expense on the Regular Certificates, 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 Certificates 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 and 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 Certificates, 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 Residual Holder may recognize taxable income without being entitled to receive a corresponding amount of cash because (i) the prepayment may be used in whole or in part to make distributions in reduction of principal on the Regular Certificates and (ii) the discount on the Mortgage Loans which is includible in income may exceed the deduction allowed upon such distributions on those Regular Certificates on account of any unaccrued original issue discount relating to those Regular Certificates. When there is more than one Class of Regular Certificates that distribute principal sequentially, this mismatching of income and deductions is particularly likely to occur in the early years following issuance of the Regular Certificates when distributions in reduction of principal are being made in respect of earlier Classes of Regular Certificates 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 Certificates 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 Certificates, may increase over time as distributions in reduction of principal are made on the lower yielding Classes of Regular Certificates, 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 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 Certificates, may have a significant adverse effect upon a Residual Holder's after-tax rate of return. In addition, a Residual Holder's taxable income during certain periods may exceed the income reflected by such Residual Holder 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 Certificates. -117- 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 Certificate as of the close of the quarter (or time of disposition of the Residual Certificate if earlier), determined without taking into account the net loss for the quarter. The initial adjusted basis of a purchaser of a Residual Certificate is the amount paid for such Residual Certificate. 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 Certificate as an offset to its share of the taxable income of the related REMIC Pool. However, that taxable income will not include cash received by the REMIC Pool that represents a recovery of the REMIC Pool's basis in its assets. This recovery of basis by the REMIC Pool will have the effect of amortization of the issue price of the Residual Certificates 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 Certificates. A Residual Certificate 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. These regulations require inducement fees to be included in income over a period reasonably related to the period in which a Residual Certificate is expected to generate taxable income or net loss to its Residual 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 Residual 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 the Residual Holder sells or otherwise disposes of the residual interest, any unrecognized portion of the inducement fee generally is required to be taken into account at the time of the sale or disposition. A prospective purchaser of a Residual Certificate should consult with its tax counsel regarding the effect of these regulations. Further, to the extent that the initial adjusted basis of a Residual Holder (other than an original holder) in the Residual Certificate 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 its 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 Exchange of a Residual Certificate" 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 the Depositor intends to 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 the Trustee will use for reporting income with respect to the Mortgage Loans and expenses with respect to the Regular Certificates and different methods could result in different timing of 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 issue premium will be determined in the same manner as original issue discount income on Regular Certificates as described above under "--Taxation of Regular Certificates--Original Issue -118- Discount" and "--Variable Rate Regular Certificates," without regard to the de minimis rule described therein, and "--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 Regular Certificates--Market Discount." Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans exceeds their unpaid principal balances, 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 Regular Certificates--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 Internal Revenue Service 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 includible 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 Certificate 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 Certificate (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 Certificate at the beginning of such quarterly period. For this purpose, the adjusted issue price of a Residual Certificate at the beginning of a quarter is the issue price of the Residual Certificate, 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 Certificate 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 Certificates diminishes. 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 Certificates-- 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 Certificates" below. Finally, if a real estate investment trust or a regulated investment company owns a Residual Certificate, 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. -119- 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 Certificates Disqualified Organizations. If any legal or beneficial interest in a Residual Certificate 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 Certificate 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 Certificate, 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 Certificate would in no event be liable for such tax with respect to a transfer if the transferee furnishes 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 Internal Revenue Service if the Disqualified Organization promptly disposes of the Residual Certificate and the transferor pays income tax at the highest corporate rate on the excess inclusion for the period the Residual Certificate 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 Certificate 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 Certificate, the Pass-Through Entity does not have actual knowledge that such affidavit is false. If an "electing large partnership" holds a Residual Certificate, 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. 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 is not selected by any such governmental entity), any cooperative organization furnishing electric energy or providing telephone service to 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 521) 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 -120- 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 Certificate may be transferred or registered unless (i) the proposed transferee furnishes to the Depositor and the Trustee an affidavit providing its taxpayer identification number and stating that such transferee is the beneficial owner of the Residual Certificate and is not a Disqualified Organization and is not purchasing such Residual Certificate 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 Depositor and 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 Certificate 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 Internal Revenue Service and to the requesting party within 60 days of the request, and the Depositor or the Trustee may charge a fee for computing and providing such information. Noneconomic Residual Interests. The REMIC Regulations disregard certain transfers of Residual Certificates, in which case the transferor would continue to be treated as the owner of the Residual Certificates 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 transferor 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, (x) 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 (y) 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. 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 tax 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, (iii) the transferee represents to the transferor that it will not cause income from the Residual Certificate to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the treaty) of the transferee or of any other person, and (iv) one of the two following tests is satisfied: either (a) the present value of the anticipated tax liabilities associated with holding the noneconomic residual interest will not exceed the sum of: (1) the present value of any consideration given to the transferee to acquire the residual interest; (2) the present value of the expected future distributions on the residual; and (3) the present value of the anticipated tax savings associated with holding the residual interest as the REMIC generates losses; or (b) (1) 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 gross and net asset tests -121- (generally, $100 million of gross assets and $10 million of net assets for the current year and the two preceding fiscal years); (2) 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 requirement for a safe harbor transfer; and (3) 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. For purposes of the computation in clause (a), 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. The Pooling and Servicing Agreement with respect to each Series of Certificates will require the transferee of a Residual Certificate to certify to the matters in requirements (i) through (iii) above as part of the affidavit described above under "--Disqualified Organizations." The Pooling and Servicing Agreement will not require that transfers of the Residual Certificates meet requirement (iv) above. Consequently, such transfers may not meet the safe harbor. Persons considering the purchase of the Residual Certificates of a Series should consult their advisors regarding the advisability of meeting the safe harbor in any transfer of the Residual Certificates. Foreign Investors. The REMIC Regulations provide that the transfer of a Residual Certificate 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" (as defined below), unless such transferee's income is effectively connected with the conduct of a trade or business within the United States. A Residual Certificate 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. Person transfers the Residual Certificate 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. A Residual Certificate may not be purchased by or transferred to any person that is not a "U.S. Person," unless (i) such person holds such Residual Certificate in connection with the conduct of a trade or business within the United States and furnishes the transferor and the Master Servicer with an effective Internal Revenue Service Form W-8ECI (or successor form) or (ii) the transferee delivers to both the transferor and the Trustee an opinion of a nationally recognized tax counsel to the effect that such transfer is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of the Residual Certificate will not be disregarded for federal income tax purposes. The term "U.S. Person" means a citizen or resident of the United States, a corporation, 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 United States federal income tax regardless of its source, 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. 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 Certificate Upon the sale or exchange of a Residual Certificate, 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 "--Basis and Losses") of such Residual Holder in such Residual Certificate 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 -122- treated as gain from the sale or exchange of the Residual Certificate. It is possible that the termination of the REMIC Pool may be treated as a sale or exchange of a Residual Holder's Residual Certificate, in which case, if the Residual Holder has an adjusted basis in its Residual Certificate remaining when its interest in the REMIC Pool terminates, and if it holds such Residual Certificate 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. In addition, under temporary Treasury Regulations, effective generally for partnership interests first acquired on or after August 1, 2006, a U.S. partnership having a partner who is not a U.S. Person will be required to pay withholding tax in respect of excess inclusion income allocable to such non-U.S. partner, even if no cash distributions are made to such partner. Similar rules apply to excess inclusion income allocable to non-U.S. Persons through certain other pass-through entities. Any gain on the sale of a Residual Certificate will be treated as ordinary income (i) if a Residual Certificate 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 Certificateholder'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 Certificate or termination of the REMIC Pool 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 Certificates where the depositor of the Residual Certificate, during the period beginning six months before the sale or disposition of the Residual Certificate 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 Certificate. Mark to Market Regulations The Internal Revenue Service 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 Certificate 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 transactions by the REMIC Pool, called prohibited transactions, will not be part of the calculation of income or loss includible 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 mortgage 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 REMIC Pool property to prevent a default on Regular Certificates as a result of a default on qualified mortgages or to facilitate a clean-up call (generally, an optional termination to save administrative costs when no more than a small percentage of the Certificates is outstanding). The REMIC -123- 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 to 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 not exceeding the close of the third calendar year after the year in which the REMIC Pool acquired 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 Certificates 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 Trustee 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 Internal Revenue Service of any adjustments to, among other things, items of REMIC income, gain, loss, deduction, or credit in a unified administrative proceeding. The Residual Holder will be obligated to act as "tax matters person," as defined in applicable Treasury regulations, with respect to the REMIC Pool, and the Master Servicer will act as agent of the "tax matters person." If the Code or applicable Treasury regulations do not permit the Master Servicer to act as tax matters person in its capacity as agent of the Residual Holders, the Residual Holder chosen by the Residual Holders or such other person specified pursuant to Treasury regulations will be required to act as tax matters person. 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 -124- otherwise allowable for such year. These limitations will be phased out and eliminated by 2010. 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 Certificates 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 Certificates in the case of a REMIC Pool that would not qualify as a fixed investment trust in the absence of a REMIC election. However, such additional gross income and limitation on deductions will apply to the allocable portion of such expenses to holders of Regular Certificates, as well as holders of Residual Certificates, where such Regular Certificates are issued in a manner that is similar to pass-through certificates in a fixed investment trust. Unless indicated otherwise in the applicable prospectus supplement, all such expenses will be allocable to the Residual Certificates. In general, such allocable portion will be determined based on the ratio that a REMIC Certificateholder's income, determined on a daily basis, bears to the income of all holders of Regular Certificates and Residual Certificates with respect to a REMIC Pool. As a result, individuals, estates or trusts holding REMIC Certificates (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 Certificates 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 Certificates. Taxation of Certain Foreign Investors Regular Certificates Interest, including original issue discount, distributable to Regular Certificateholders who are non-resident aliens, foreign corporations, or other Non-U.S. Persons (as defined below) will be considered "portfolio interest" and, therefore, generally will not be subject to 30% United States withholding tax, provided that such Non-U.S. Person (i) is not a "10-percent shareholder" (within the meaning of Code Section 871(h)(3)(B)) of, or a controlled foreign corporation (described in Code Section 881(c)(3)(C)) related to, the REMIC (or possibly one or more mortgagors) and (ii) provides the Trustee, or the person who would otherwise be required to withhold tax from such distributions under Code Section 1441 or 1442 with appropriate documentation, signed under penalties of perjury, establishing an exemption from withholding. The appropriate documentation includes IRS Form W-8BEN, if the Non-U.S. Person is a corporation or individual eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; IRS Form W-8ECI if the Non-U.S. Person is eligible for an exemption on the basis of its income from the Regular Certificate being effectively connected to a United States trade or business; IRS Form W-8BEN or IRS Form W-8IMY if the non-U.S. Person is a trust, depending on whether such trust is classified as the beneficial owner of the Regular Certificate; and IRS 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. Person is a partnership. An intermediary (other than a partnership) must provide IRS 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 appropriate IRS Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners. If any of the foregoing forms, or any other required documentation, is not provided, 30% withholding will apply. The term "Non-U.S. Person" means any person who is not a U.S. Person. 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 Certificate. A "qualified intermediary" is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS. -125- Residual Certificates The Conference Committee Report to the 1986 Act indicates that amounts paid to Residual Holders who are Non-U.S. Persons generally should be treated as interest for purposes of the 30% (or lower treaty rate) United States withholding tax. Treasury regulations provide that amounts distributed to Residual Holders may qualify as "portfolio interest," subject to the conditions described in "--Regular Certificates" above, but only to the extent that (i) the Mortgage Loans were issued after July 18, 1984 and (ii) the Trust Estate or segregated pool of assets therein (as to which a separate REMIC election will be made), to which the Residual Certificate 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, a Residual Holder 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 Residual Certificates--Limitations on Offset or Exemption of REMIC Income." If the amounts paid to Residual Holders who are Non-U.S. Persons are effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Persons, 30% (or lower treaty rate) withholding will not apply. Instead, the amounts paid to such Non-U.S. Persons 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 Certificate is disposed of) under rules similar to withholding upon disposition of debt instruments that have original issue discount. See "--Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--Foreign Investors" above concerning the disregard of certain transfers having "tax avoidance potential" and the withholding tax obligations of U.S. partnerships having non-U.S. Persons as partners. Investors who are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning Residual Certificates. Backup Withholding Distributions made on the Regular Certificates, and proceeds from the sale of the Regular Certificates to or through certain brokers, may be subject to a "backup" withholding tax under Code Section 3406 at the rate 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 Certificateholder is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; is a non-U.S. Person and provides IRS Form W-8BEN identifying the non-U.S. Person 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)(l)(ii). Any amounts to be withheld from distribution on the Regular Certificates would be refunded by the IRS or allowed as a credit against the Regular Certificateholder's federal income tax liability. Information reporting requirements may also apply regardless of whether withholding is required. Prospective investors are encouraged to consult their own tax advisors regarding the application to them of 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 Internal Revenue Service and to individuals, estates, non-exempt and non-charitable trusts, and partnerships who are either holders of record of Regular Certificates or beneficial owners who own Regular Certificates through a broker or middleman as nominee. All brokers, nominees and all other non-exempt holders of record of Regular Certificates (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 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 Certificates. Holders through nominees must request such information from the nominee. The Internal Revenue Service'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. -126- 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 Certificates, and filed annually with the Internal Revenue Service concerning Code Section 67 expenses (see "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 Certificates, and filed annually with the Internal Revenue Service concerning the percentage of the REMIC Pool's assets meeting the qualified asset tests described above under "Status of REMIC Certificates." Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made General In the event that no election is made to treat a Trust Estate (or a segregated pool of assets therein) with respect to a Series of Certificates as a REMIC, in the opinion of Cadwalader, Wickersham & Taft LLP, the Trust Estate will be classified as a grantor trust under subpart E, Part 1 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). Where there is no Fixed Retained Yield with respect to the Mortgage Loans underlying the Certificates of a Series, and where such Certificates are not designated as "Stripped Certificates," the holder of each such Certificate in such Series will be treated as the owner of a pro rata undivided interest in the ordinary income and corpus portions of the Trust Estate represented by its Certificate 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 "--Characterization of Servicing Fees." Accordingly, the holder of a Certificate 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 Certificate, 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 Certificateholder's method of accounting. A Certificateholder generally will be able to deduct its share of the Servicing Fee and all administrative and other expenses of the Trust Estate in accordance with its method of accounting, provided that such amounts are reasonable compensation for services rendered to that Trust Estate. However, investors who are individuals, estates or trusts who own Certificates, either directly or indirectly through certain pass-through entities, will be subject to limitation 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 Trust Estate, 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. These limitations will be phased out and eliminated by 2010. As a result, such investors holding Certificates, directly or indirectly through a pass-through entity, may have aggregate taxable income in excess of the aggregate amount of cash received on such Certificates with respect to interest at the pass-through rate or as discount income on such Certificates. 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 Certificates 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 Certificates" and "--Recharacterization of Servicing Fees," respectively. Tax Status In the opinion of Cadwalader, Wickersham & Taft LLP, except as described below with respect to Stripped Certificates: 1. Certificate 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 Certificate is of the type described in such section of the Code. -127- 2. A Certificate 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 Trust Estate 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). 3. A Certificate 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 Trust Estate consist of "qualified mortgages" within the meaning of Code Section 860G(a)(3). An issue arises as to whether Buy-Down Loans may be characterized in their entirety under the Code provisions cited in clauses 1 and 2 of the immediately preceding paragraph. There is indirect authority supporting treatment of an investment in a Buy-Down 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, Certificateholders are urged to consult their own tax advisors concerning the effects of such arrangements on the characterization of such Certificateholder's investment for federal income tax purposes. Premium and Discount Certificateholders 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 Certificates or thereafter. Premium The treatment of premium incurred upon the purchase of a Certificate will be determined generally as described above under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--Treatment of Certain Items of REMIC Income and Expense--Premium." Original Issue Discount The original issue discount rules of Code Sections 1271 through 1275 will be applicable to a Certificateholder'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 are applicable to mortgages of corporations originated after May 27, 1969, mortgages of noncorporate mortgagors (other than individuals) originated after July 1, 1982, and mortgages of individuals originated after March 2, 1984. Under the OID Regulations, such 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 Certificates" below regarding original issue discount on Stripped Certificates. 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. Unless indicated otherwise in the applicable prospectus supplement, 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 includible 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 Certificateholder 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 includible by such holder. Market Discount Certificateholders 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 "Federal Income Tax Consequences for -128- REMIC Certificates--Taxation of Regular Certificates--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. Unless indicated otherwise in the applicable prospectus supplement, 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 Certificateholders. 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 the Certificate, 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. Recently issued Internal Revenue Service 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 Internal Revenue Service'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. 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 Certificates," 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 Certificates, and the original issue discount rules of the Code would apply to the holder thereof. While Certificateholders 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 Certificateholder, except that the income reported by a cash method holder may be slightly accelerated. See "Stripped Certificates" below for a further description of the federal income tax treatment of stripped bonds and stripped coupons. Sale or Exchange of Certificates Upon sale or exchange of a Certificate, a Certificateholder 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 Certificate. In general, the aggregate adjusted basis will equal the Certificateholder's cost for the Certificate, increased by the amount of any income previously reported with respect to the Certificate and decreased by the amount of any losses previously reported with respect to the Certificate and the amount of any distributions 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 Certificate was held as a capital asset. However, gain on the sale of a Certificate will be treated as ordinary income (i) if a Certificate 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 Certificateholder'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. Capital gains of certain noncorporate taxpayers generally are subject to a lower maximum tax rate than ordinary income of such taxpayers for property held for more than one year. The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains. -129- Stripped Certificates 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, Certificates that are subject to those rules will be referred to as "Stripped Certificates." The Certificates 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 "--Recharacterization of Servicing Fees" above), and (iii) a Class of Certificates are issued in two or more Classes representing the right to non-pro-rata percentages of the interest and principal payments on the Mortgage Loans. In general, a holder of a Stripped Certificate 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 Certificate'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 "--Recharacterization of Servicing Fees." Although not free from doubt, for purposes of reporting to Stripped Certificateholders, the servicing fees will be allocated to the Stripped Certificates in proportion to the respective entitlements to distributions of each Class of Stripped Certificates for the related period or periods. The holder of a Stripped Certificate generally will be entitled to a deduction each year in respect of the servicing fees, as described above under "--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 Certificates for federal income tax purposes is not clear in certain respects at this time, particularly where such Stripped Certificates are issued with respect to a Mortgage Pool containing variable-rate Mortgage Loans, in the opinion of Cadwalader, Wickersham & Taft LLP, (i) the Trust Estate 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 Certificate 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 Certificates could be made in one of the ways described below under "--Taxation of Stripped Certificates--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 OID purposes, all payments on any Stripped Certificates should be aggregated and treated as though they were made on a single debt instrument. The Pooling and Servicing Agreement will require that the Master Servicer 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 Certificate as a single debt instrument issued on the date it is purchased for purposes of calculating any original issue discount. In addition, under these regulations, a Stripped Certificate 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 Certificate would be treated as qualified stated interest under the OID Regulations, assuming it is not an interest-only or super-premium Stripped Certificate. Further, these final regulations provide that the purchaser of such a Stripped Certificate 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 Certificate 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 "Federal Income Tax -130- Consequences for REMIC Certificates--Taxation of Regular Certificates--Market Discount," without regard to the de minimis rule therein, assuming that a prepayment assumption is employed in such computation. Status of Stripped Certificates No specific legal authority exists as to whether the character of the Stripped Certificates, for federal income tax purposes, will be the same as that of the Mortgage Loans. Although the issue is not free from doubt, in the opinion of Cadwalader, Wickersham & Taft LLP, Stripped Certificates 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" 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 Certificates 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 Buy-Down Loans is uncertain. See "--Tax Status" above. Taxation of Stripped Certificates Original Issue Discount Except as described above under "--General," each Stripped Certificate 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 Certificate must be included in ordinary income as it accrues, in accordance with a constant interest method that takes into account the compounding of interest, which may be prior to the receipt of the cash attributable to the related income. Based in part on the OID Regulations and the amendments to the original issue discount sections of the Code made by the 1986 Act, the amount of original issue discount required to be included in the income of a holder of a Stripped Certificate (referred to in this discussion as a "Stripped Certificateholder") in any taxable year likely will be computed generally as described above under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--Original Issue Discount" and "--Variable Rate Regular Certificates." However, with the apparent exception of a Stripped Certificate qualifying as a market discount obligation as described above under "--General," the issue price of a Stripped Certificate 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 to be made on the Stripped Certificate to such Stripped Certificateholder, presumably under the Prepayment Assumption, other than qualified stated interest. If the Mortgage Loans prepay at a rate either faster or slower than that under the Prepayment Assumption, a Stripped Certificateholder'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 Stripped Certificateholder's Stripped Certificate. While the matter is not free from doubt, the holder of a Stripped Certificate 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 Certificate 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 Certificates 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 Certificates. However, if final regulations dealing with contingent interest with respect to the Stripped Certificates apply the same principles as the OID Regulations, such regulations may lead to different timing of income inclusion than would be the case under the OID Regulations for non-contingent debt instruments. Furthermore, application of such principles could lead to the characterization of gain on the sale of contingent interest Stripped Certificates as ordinary income. Investors should consult their tax advisors regarding the appropriate tax treatment of Stripped Certificates. -131- Sale or Exchange of Stripped Certificates Sale or exchange of a Stripped Certificate prior to its maturity will result in gain or loss equal to the difference, if any, between the amount received and the Stripped Certificateholder's adjusted basis in such Stripped Certificate, as described above under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--Sale or Exchange of Regular Certificates." To the extent that a subsequent purchaser's purchase price is exceeded by the remaining payments on the Stripped Certificates, 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 Stripped Certificateholder other than an original Stripped Certificateholder 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 Certificates When an investor purchases more than one Class of Stripped Certificates, it is currently unclear whether for federal income tax purposes such Classes of Stripped Certificates should be treated separately or aggregated for purposes of the rules described above. Possible Alternative Characterizations The characterizations of the Stripped Certificates discussed above are not the only possible interpretations of the applicable Code provisions. For example, the Stripped Certificateholder may be treated as the owner of (i) one installment obligation consisting of such Stripped Certificate's pro rata share of the payments attributable to principal on each Mortgage Loan and a second installment obligation consisting of such Stripped Certificate'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 Certificate'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 Certificates may be treated as the owner of a pro rata fractional undivided interest in each Mortgage Loan to the extent that such Stripped Certificate, or Classes of Stripped Certificates 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 those 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. Because of these possible varying characterizations of Stripped Certificates and the resultant differing treatment of income recognition, Stripped Certificateholders are urged to consult their own tax advisors regarding the proper treatment of Stripped Certificates for federal income tax purposes. Reporting Requirements and Backup Withholding The Master Servicer will furnish, within a reasonable time after the end of each calendar year, to each Certificateholder or Stripped Certificateholder at any time during such year, such information (prepared on the basis described above) as is necessary to enable such Certificateholders to prepare their federal income tax returns. Such information will include the amount of original issue discount accrued on Certificates held by persons other than Certificateholders exempted from the reporting requirements. The amount required to be reported by the Master Servicer may not be equal to the proper amount of original issue discount required to be reported as taxable income by a Certificateholder, other than an original Certificateholder that purchased at the issue price. In particular, in the case of Stripped Certificates, unless provided otherwise in the applicable prospectus supplement, such reporting will be based upon a representative initial offering price of each Class of Stripped Certificates. The Master Servicer will also file such original issue discount information with the Internal Revenue Service. If a Certificateholder fails to supply an accurate taxpayer identification number or if the Secretary of the Treasury determines that a Certificateholder has not reported all interest and dividend income required to be shown on his federal income tax -132- return, backup withholding may be required in respect of any reportable payments, as described above under "--Federal Income Tax Consequences for REMIC Certificates--Backup Withholding." Reportable Transactions Any Certificateholder that reports any item or items of income, gain, expense, or loss in respect of a Certificate for tax purposes in an amount that differs from the amount reported for book purposes by more than $10 million, on a gross basis, in any taxable year may be subject to certain disclosure requirements for "reportable transactions." Prospective investors should consult their tax advisers concerning any possible tax return disclosure obligation with respect to the Certificates. Taxation of Certain Foreign Investors To the extent that a Certificate 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 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 Certificateholder on the sale or exchange of such a Certificate 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. Person 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 "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Certain Foreign Investors--Regular Certificates." Federal Income Tax Consequences for Exchangeable Certificates Tax Status The Exchangeable Certificates should be considered to represent "real estate assets" within the meaning of Code Section 856(c)(5)(B) and assets described in Code Section 7701(a)(19)(C). Original issue discount and interest accruing on Exchangeable Certificates should be considered to represent "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). Exchangeable Certificates will be "qualified mortgages" under Code Section 860G(a)(3) for a REMIC. Prospective investors should consult their own tax advisors regarding the proper treatment of Exchangeable Certificates in respect of the above discussion. Exchangeable Certificates Representing Proportionate Interests in Two or More Exchangeable REMIC Certificates The applicable prospectus supplement for a Series will specify whether an Exchangeable Certificate represents beneficial ownership of a proportionate interest in two or more Exchangeable REMIC Certificates corresponding to that Exchangeable Certificate. Each beneficial owner of such an Exchangeable Certificate should account for its ownership interest in each Exchangeable REMIC Certificate underlying that Exchangeable Certificate as described under "--Federal Income Tax Consequences for REMIC Certificates." The beneficial owner must allocate its basis among the underlying Exchangeable REMIC Certificates in accordance with their relative fair market values as of the time of acquisition. Similarly, on the sale of such Exchangeable Certificate, the beneficial owner must allocate the amount received on the sale among the underlying Exchangeable REMIC Certificates in accordance with their relative fair market values as of the time of sale. Exchangeable Certificates Representing Disproportionate Interests in Exchangeable REMIC Certificates The applicable prospectus supplement for a Series will specify whether an Exchangeable Certificate represents beneficial ownership of a disproportionate interest in one or more Exchangeable REMIC Certificates corresponding to that Exchangeable Certificate. The beneficial owner of such an Exchangeable Certificate will be treated as -133- owning, pursuant to Code Section 1286, "stripped bonds" to the extent of its share of principal payments and "stripped coupons" to the extent of its share of interest payments on such Exchangeable REMIC Certificate. Under Code Section 1286, each beneficial owner of an Exchangeable Certificate must treat the Exchangeable Certificate as a debt instrument originally issued on the date the owner acquires it and having original issue discount equal to the excess, if any, of its "stated redemption price at maturity" over the price paid by the owner to acquire it. The stated redemption price at maturity for an Exchangeable Certificate is determined in the same manner as described with respect to Regular Certificates under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--Original Issue Discount." Each beneficial owner of such an Exchangeable Certificate should calculate original issue discount and include it in ordinary income as it accrues, which may be prior to the receipt of cash attributable to such income, in accordance with a method analogous to that described with respect to a Regular Certificate under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--Original Issue Discount." A beneficial owner should determine its yield to maturity based on the purchase price for the Exchangeable Certificate and on a schedule of payments projected using a prepayment assumption, and then make periodic adjustments to take into account actual prepayment experience. It is not clear whether the prepayment assumption a beneficial owner should use to calculate original issue discount would be one determined at the time the Exchangeable Certificate is acquired or would be the original prepayment assumption with respect to the underlying Exchangeable REMIC Certificate. While the matter is not free from doubt, if a beneficial owner acquires a combination of Exchangeable Certificates in separate transactions which in the aggregate represent a single Exchangeable REMIC Certificate, it appears that the owner should account for each such Exchangeable Certificate separately, even if it exchanges the Exchangeable Certificates for the underlying Exchangeable REMIC Certificate. However, if a beneficial owner acquires such a combination in a single transaction, it is possible that the beneficial owner's interests should be aggregated, with the beneficial owner treated as owning the underlying Exchangeable REMIC Certificate (regardless of whether it has exchanged the Exchangeable Certificates for the underlying Exchangeable REMIC Certificate). Accounting separately for the Exchangeable Certificates may lead to significantly different accruals of interest and original issue discount than would be the case if the owner aggregated such interests. Prospective investors should consult their own tax advisors as to the proper treatment of an Exchangeable Certificate in either of these circumstances. Sales, Exchanges and Other Dispositions of Exchangeable Certificates If a beneficial owner exchanges one or more underlying Exchangeable REMIC Certificates for one or more Exchangeable Certificates in the manner described under "Description of the Certificates--Exchangeable REMIC and Exchangeable Certificates" in this prospectus, the exchange will not be taxable. Likewise, if a beneficial owner exchanges one or more Exchangeable Certificates for the corresponding Exchangeable REMIC Certificate or Exchangeable REMIC Certificates, the exchange will not be taxable. Upon the sale, exchange or other disposition of an Exchangeable Certificate other than an exchange described in the preceding paragraph, a beneficial owner generally will recognize gain or loss equal to the difference between the amount realized and the beneficial owner's adjusted basis or bases in the Exchangeable REMIC Certificate or Exchangeable REMIC Certificates underlying the Exchangeable Certificate. The adjusted basis of each such Exchangeable REMIC Certificates will be determined as described above under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--Sale or Exchange of Regular Certificates." 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 -134- 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 Certificates, 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 Certificates. Certain Requirements Under ERISA General In accordance with ERISA's general fiduciary standards, before investing in a Certificate 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 Certificates 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 Master Servicer, any 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 Certificates 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 Certificate if, with respect to such assets, the Depositor, the Master Servicer, any 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 Estate were deemed to constitute Plan assets, it is possible that a Plan's investment in the Certificates might be deemed to constitute a delegation, under ERISA, of the duty to manage Plan assets by the fiduciary deciding to invest in the Certificates, and certain transactions involved in the operation of the Trust Estate 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 Estate) 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 Certificate) in such an entity. Certain exceptions are provided in the Regulations, as modified by Section 3(42) of ERISA, whereby an investing Plan's assets would be deemed merely to include its interest in the Certificates instead of being deemed to include an interest in the assets of a Trust Estate. However, it cannot be predicted in advance nor can there be any -135- 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 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 Certificates, 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: (1) The acquisition of Certificates by a Plan is on terms (including the price for the Certificates) that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated party; (2) The Certificates 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"); (3) The Trustee must not be an affiliate of any other member of the Restricted Group (as defined below) other than any underwriter; (4) The sum of all payments made to and retained by the underwriter in connection with the distribution of Certificates represents not more than reasonable compensation for underwriting the Certificates. The sum of all payments made to and retained by the Depositor pursuant to the assignment of the Mortgage Loans to the Trust Estate 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 Pooling and Servicing Agreement and reimbursement of such person's reasonable expenses in connection therewith; and (5) The Plan investing in the Certificates 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 Estate must also meet the following requirements: (i) assets of the Trust Estate must consist solely of assets of the type that have been included in other investment pools in the marketplace; (ii) certificates 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 Certificates; and (iii) certificates 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 Certificates. 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 Certificates by Plans would be exempt from the prohibited transaction provisions of ERISA and the Code. -136- 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 Certificates in a Trust Estate 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 Certificates, at least fifty percent of each class of Certificates 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 Estate 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 Estate; (iii) the Plan's investment in Certificates of any Class does not exceed twenty-five percent of all of the Certificates 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 Certificates 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 Master Servicer, the Trustee, the Servicer, any insurer, any obligor with respect to Mortgage Loans included in the Trust Estate constituting more than five percent of the aggregate unamortized principal balance of the assets in the Trust Estate, or any affiliate of such parties (the "Restricted Group"). 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 Certificates in the applicable Series. 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 Certificates 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 Estate. However, it appears that PTE 83-1 does or might not apply to the purchase and holding of (a) Certificates that evidence the beneficial ownership only of a specified percentage of future interest payments (after permitted deductions) on a Trust Estate or only of a specified percentage of future principal payments on a Trust Estate, (b) Residual Certificates, (c) Certificates evidencing ownership interests in a Trust Estate which includes Mortgage Loans secured by multifamily residential properties or shares issued by cooperative housing corporations, or (d) Certificates which are subordinated to other Classes of Certificates of such Series. Accordingly, unless exemptive relief other than PTE 83-1 applies, Plans should not purchase any such Certificates. 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 -137- 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 Certificates 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 Certificates The purchase of a Residual Certificate 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 Certificates, a prospective transferee may be required to provide an affidavit to a transferor that it is not, nor is it purchasing a Residual Certificate 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 "Material Federal Income Tax Consequences-- Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--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 Certificates. The sale of Certificates 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. LEGAL INVESTMENT If so specified in the applicable prospectus supplement, certain Classes of Certificates will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). Generally, the only Classes of Certificates 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 Estate 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 Certificates not qualifying as "mortgage related securities" for purposes of SMMEA ("Non-SMMEA Certificates") under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase such Certificates, 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 Certificates constitute legal investments for them. Those Classes of Certificates qualifying as "mortgage related securities" will constitute legal investments for persons, trusts, corporations, partnerships, associations, business trusts and business entities (including depository institutions, insurance companies, trustees 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. -138- 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," in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. Accordingly, the investors affected by such legislation will be authorized to invest in the Certificates 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 mortgage related 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 Office of the Comptroller of the Currency (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 (the "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 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 Certificates. All depository institutions considering an investment in the Certificates 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 such authorities before purchasing any of the Certificates, as certain Classes may be deemed unsuitable investments, or may otherwise be restricted, under such 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 Certificates 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 Certificates as "mortgage related securities," no representations are made as to the proper characterization of the Certificates for legal investment purposes, financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase Certificates under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Certificates) may adversely affect the liquidity of the Certificates. 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 -139- determining whether and to what extent the Certificates 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. ACCOUNTING CONSIDERATIONS Various factors may influence the accounting treatment applicable to an investor's acquisition and holding of mortgage-backed securities. Accounting standards, and the application and interpretation of such standards, are subject to change from time to time. Investors are encouraged to consult their own accountants for advice as to the appropriate accounting treatment for the Certificates. PLAN OF DISTRIBUTION The Certificates 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 Certificates 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 Certificates 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 Certificates may be made through a combination of two or more of these methods: 1. By negotiated firm commitment underwriting and public re-offering by underwriters specified in the applicable prospectus supplement; 2. By placements by the Depositor or its affiliates with investors through dealers; 3. 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 4. 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 Certificates, such Certificates 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 Certificates 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 Certificates will be obligated to purchase all such Certificates 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 Certificates 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 Certificates of such Series. Purchasers of Certificates, 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 -140- them of Certificates. Certificateholders 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 Certificates, the Depositor or any affiliate thereof may purchase some or all of one or more Classes of Certificates 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 Certificates so purchased directly, through one or more underwriters to be designated at the time of the offering of such Certificates 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 Certificates 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 Certificates 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 Certificates 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 Certificates 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 Certificates will be used by the Depositor for the purchase of the Mortgage Loans represented by the Certificates 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 Certificates of such Series. LEGAL MATTERS The legality and certain federal income tax consequences to Certificateholders of an investment in the Certificates of a Series, will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP, New York. RATING It is a condition to the issuance of the Certificates 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 CERTIFICATEHOLDERS The Master Servicer will prepare and make available to the Certificateholders 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 "The Pooling and Servicing Agreement--Reports to Certificateholders" (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 Certificates for so long as the Issuing Entity is subject to the reporting requirement of the Exchange Act. -141- In addition, each party to the servicing function for a Series of Certificates (generally the Master Servicer, any Servicer and the Custodian) will furnish any 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 "Servicing of the Mortgage Loans--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 Certificates for so long as the Issuing Entity is subject to the reporting requirement of the Exchange Act. Copies of any statements provided by any Servicer, the Master Servicer and the Custodian will be furnished to Certificateholders of each Series upon written or oral request to the Master Servicer at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention: Securities Administration Services Manager, telephone number (410) 884-2000. The Master Servicer 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 delivery of the Monthly Reports by the Master Servicer to Certificateholders. The Master Servicer also 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 Master Servicer will make the Monthly Reports and Periodic Reports relating to the related Issuing Entity available each month to Certificateholders for a Series via the Master Servicer's internet website. The Master Servicer's internet website will initially be located at "www.ctslink.com" Assistance in using the website can be obtained by calling the Master Servicer'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. WHERE YOU CAN FIND MORE INFORMATION The Depositor filed a registration statement relating to the Certificates 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 Master Servicer's website promptly, but no later than one business day, after they are filed through the EDGAR system as described under "Reports to Certificateholders." -142- 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 Certificates 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 Master Servicer at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention: Securities Administration Services Manager,, telephone number (410) 884-2000. -143- INDEX OF PROSPECTUS DEFINITIONS 1986 Act..........................................110 1998 Policy Statement.............................139 3% Solution Loans..................................39 Accretion Directed Certificates....................59 Accrual Certificates...........................56, 61 Additional Collateral..............................27 Additional Collateral Pledged Asset Mortgage Loans...................................27 Adjustable-Rate Interest Only Mortgage Loans............................................26 Advances...........................................81 ALTA...............................................36 Alt-A Adjustable-Rate Loans........................30 Alt-A Fixed-Rate Loans.............................30 Alt-A Minus........................................37 Alt-A Prime........................................37 Alt-B..............................................39 Alt-B Adjustable-Rate Loans........................30 Alt-B Fixed-Rate Loans.............................30 Assessment of Compliance...........................87 Asset Conservation Act............................105 Attestation Report.................................87 Available Master Servicing Compensation............56 Balloon Loans......................................27 Balloon Period.....................................27 Bankruptcy Code...................................101 Bankruptcy Loss....................................58 Bankruptcy Loss Amount.............................58 BBA................................................62 Beneficial Owner...................................48 Book-Entry Certificates............................48 Buy-Down Fund......................................27 Buy-Down Loans.....................................27 Cash Flow Agreement................................28 Category I Mortgage Loans..........................39 Category II Mortgage Loans.........................39 Cede...............................................48 CERCLA............................................104 Certificate Account................................78 Certificateholder.............................48, 108 Certificates.......................................47 Class..............................................47 Cleanup Costs.....................................104 Clearstream........................................49 Clearstream Participants...........................49 Closing Date.......................................47 Code..............................................108 Combination........................................66 Commission........................................142 Companion Certificates.............................59 Compensating Interest..............................56 Component..........................................59 Component Certificates.............................59 condotels..........................................23 contract underwriters..............................34 Cooperatives.......................................23 Correspondents.....................................32 Coverage Percentage................................38 Curtailment Interest Shortfalls....................57 Curtailments.......................................57 Cut-Off Date.......................................53 Debt Service Reduction.............................58 Deferred Interest..................................25 Deficient Valuation................................58 Definitive Certificates............................47 Delegated Underwriting.............................33 Department........................................135 Depositor..........................................45 Depository.........................................78 Determination Date.................................53 Disqualified Organization.........................120 Distribution Date..................................53 DTC................................................48 DTC Participants...................................48 Due Date...........................................24 EDGAR.............................................142 EFA Program........................................37 electing large partnership........................120 Eligible Custodial Account.........................78 Eligible Investments...............................80 ERISA.............................................134 Euroclear..........................................50 Euroclear Operator.................................50 Euroclear Participants.............................50 European Depositaries..............................48 Excess Bankruptcy Losses...........................58 Excess Fraud Losses................................58 Excess Special Hazard Losses.......................58 Exchange Act.......................................48 Exchangeable Certificates..........................59 Exchangeable Combination...........................66 Exchangeable REMIC Certificates....................59 FDIC...............................................78 FFIEC.............................................139 FHLBB.............................................106 FICO Score.........................................34 Financial Intermediary.............................48 Fitch.............................................136 Fixed Interest Only Mortgage Loans.................26 Fixed Rate Certificates............................61 Fixed Retained Yield...............................55 Floating Rate Certificates.........................61 Foreign National Loans.............................37 Fraud Loss.........................................58 Fraud Loss Amount..................................58 Full Documentation.................................43 -144- Full Documentation Loans...........................43 Garn Act..........................................106 Government securities.............................109 Growing Equity Mortgage Loans......................26 holder........................................48, 108 Home Asset ManagementSM Account Loan...............35 HOPA..............................................103 Indirect Participants..............................48 Interest Accrual Period............................56 Interest Only Certificates.........................61 Interest Only Mortgage Loans.......................26 Interest Settlement Rate...........................62 intermediary......................................125 Inverse Floating Rate Certificates.................61 IRA...............................................135 Issuing Entity.....................................47 Joint Ventures.....................................32 LIBOR..............................................61 LIBOR Business Day.................................62 Limited Purpose Surety Bond........................27 Liquidated Loan....................................58 Liquidated Loan Loss...............................58 Liquidation Proceeds...............................55 Liquidation Profits................................55 Loan-to-Value Ratio................................35 LOC................................................27 LOC Pledged Asset Mortgage Loans...................27 Lockout Certificates...............................59 Mark to Market Regulations........................123 Master Servicer....................................72 Master Servicing Fee...............................55 Maximum Amount.....................................28 MERS...............................................89 Mid-Month Receipt Period...........................55 Month End Interest.............................56, 57 Monthly Reports...................................141 Moody's...........................................136 Mortgage Interest Rate.............................55 Mortgage Loan Purchase Agreement...................88 Mortgage Loans.....................................23 Mortgage Notes.....................................23 Mortgage Score.....................................33 Mortgaged Properties...............................23 Mortgages..........................................23 NCUA..............................................139 Net Mortgage Interest Rate.........................55 Net Partial Liquidation Proceeds...................55 No Documentation...................................43 No Documentation Loans.............................43 No Ratio...........................................43 No Ratio Loans.....................................43 noneconomic residual interest.....................121 Non-Pro Rata Certificate..........................111 Non-SMMEA Certificates............................138 Non-U.S. Person...................................125 Notional Amount Certificates.......................60 OCC...............................................139 OID Regulations...................................111 Option ARM Mortgage Loans..........................25 Other Advances.....................................81 OTS...............................................106 PAC Certificates...................................60 PAC I..............................................60 PAC II.............................................60 Partial Liquidation Proceeds.......................55 Participants.......................................48 Pass-Through Certificates..........................60 Pass-Through Entity...............................120 Pass-Through Rate..................................56 Pay Mortgage Loans.................................26 Paying Agent.......................................81 Payment Account....................................81 Payment Cap........................................25 PCBs..............................................104 Percentage Interest................................54 Periodic Advance...................................81 Periodic Reports..................................142 Planned Amortization Certificates..................60 Plans.............................................134 Pledged Asset Mortgage Loans.......................27 Pledged Value......................................28 PMI...............................................103 PMI Advance........................................82 Pool Distribution Amount...........................54 Pooling and Servicing Agreement....................47 Prepayment Assumption.............................112 Prepayment Interest Shortfalls.....................56 Prepayments in Full................................56 Principal Only Certificates........................61 Prior Month Receipt Period.........................55 PTE 83-1..........................................137 qualified intermediary............................125 Rate Determination Date............................62 Rating Agency.....................................141 Ratio Strip Certificates...........................60 RCRA..............................................105 Realized Loss......................................58 Recovery...........................................55 Regular Certificateholder.........................110 Regular Certificates..........................47, 108 Regulations.......................................135 Related............................................66 Relevant Depositary................................48 Relief Act........................................104 RELS...............................................36 REMIC.............................................108 REMIC Certificates................................108 REMIC Combination..................................66 REMIC Pool........................................108 REMIC Regulations.................................108 Remittance Date....................................79 REO Property.......................................96 -145- Reserve Interest Rate..............................62 Residual Certificates.........................47, 108 Residual Holders..................................117 Restricted Group..................................137 retention program..................................33 Rules..............................................49 S&P...............................................136 Scheduled Amortization Certificates................60 Scheduled Certificates.............................60 Scheduled Principal Balance........................90 SEC...............................................142 Securities Act....................................136 SecuritiesLink(R)................................(142) Senior Certificates................................60 Sequential Pay Certificates........................60 Series.............................................47 Servicer...........................................75 Servicer Custodial Account.........................78 Servicing Account..................................82 Servicing Fee......................................55 SMMEA.............................................138 Special Hazard Loss................................58 Special Hazard Loss Amount.........................58 Sponsor............................................29 Standard Hazard Insurance Policy...................85 Startup Day.......................................109 Stated.............................................43 Stated Loans.......................................43 Stated Reduced.....................................43 Stated Reduced Loans...............................43 Step Coupon Certificates...........................61 Stripped Certificateholder........................131 Stripped Certificates.............................130 Subordinated Certificates..........................60 Subsidy Account....................................26 Subsidy Loans......................................26 Subsidy Payments...................................26 Super Senior Certificates..........................61 Super Senior Support Certificates..................61 Superliens........................................104 Support Certificates...............................59 Surety Bond Provider...............................27 TAC Certificates...................................61 Targeted Amortization Certificates.................61 Telerate page 3750.................................62 Terms and Conditions...............................50 Texas Home Equity Laws............................103 Tiered Payment Mortgage Loans......................26 Title V...........................................107 Treasury Regulations...............................89 Trust..............................................47 Trust Estate.......................................23 Trustee............................................96 Trustee Fee........................................55 Type 1 Loans.......................................55 Type 2 Loans.......................................55 U.S. Person.......................................122 UCC...............................................100 Underlying Servicing Agreement.....................75 Underwriter Exemption.............................136 Unscheduled Principal Receipt Period...............55 Unscheduled Principal Receipts.....................54 UST...............................................105 Variable Rate Certificates.........................61 Voting Interests...................................93 VRU................................................77 Wells Fargo........................................79 Wells Fargo Affiliates.............................30 Wells Fargo Bank...................................29 WFALT..............................................30 Window Period.....................................106 Window Period Loans...............................106 Window Period States..............................106 -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 Servicing Agreement. 10.2 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 October 5, 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 October 5, 2006 - -------------------------- David Moskowitz Executive Vice President, Chief Financial Officer and Chief * Accounting Officer October 5, 2006 - -------------------------- Franklin Codel /s/ Thomas Neary Executive Vice President and Director October 5, 2006 - -------------------------- Thomas Neary * Director October 5, 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 Servicing Agreement. 10.2 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 we3768865-ex1_1.txt UNDERWRITING AGREEMENT EXHIBIT 1.1 WELLS FARGO ASSET SECURITIES CORPORATION Mortgage Asset-Backed Pass-Through Certificates (Issuable in Series) UNDERWRITING AGREEMENT Effective as of [___________] [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 Mortgage Asset-Backed Pass-Through 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 Mortgage Asset-Backed Pass-Through Certificates may be offered through you, as underwriter (the "Underwriter"). Whenever WFASC determines to make an offering of a series of its Mortgage Asset-Backed Pass-Through 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 Mortgage Asset-Backed Pass-Through Certificates to the Underwriter. WFASC is a wholly-owned subsidiary of Wells Fargo Bank. The Mortgage Asset-Backed Pass-Through 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 Mortgage Asset-Backed Pass-Through 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 (the "Mortgage Pool") of mortgage loans acquired by WFASC (the "Mortgage Loans") and related property but excluding the Fixed Retained Yield, if any, specified in the Terms Agreement (collectively, the "Trust Estate"). The Mortgage Loans will be of the type described in, and will have the characteristics and aggregate principal balance set forth in, the Prospectus Supplement (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 master servicer (in such capacity, the "Master Servicer"), the trustee identified in the applicable Terms Agreement, as trustee (the "Trustee") and, if applicable, the trust administrator identified in the applicable Terms Agreement, as trust administrator (the "Trust Administrator"). 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 Prospectus Supplement. The Certificates will conform in all material respects to the description thereof contained in the applicable Terms Agreement 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. Each offering of Mortgage Asset-Backed Pass-Through 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 (File No. 333-133209), 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, including for these purposes any portion of the Applicable Static Pool Information (as defined in Section 9(b)(i)) deemed not part of the Registration Statement or the Prospectus on account of Item 1105(d) of Regulation AB under the Act, 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 Prospectus or any revision or amendment thereof or supplement thereto. The Issuer Free Writing Prospectus (as defined in Section 9(b)(i)), 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 (as defined in Section 7(f)) to the applicable investor, when considered in conjunction with the Time of Sale Information (as defined in Section 7(f)), provided, however, that no representation is made as to the effect of the exclusion from the Issuer Free Writing Prospectus of any information of the type specified in Exhibit B hereto as Supplemental Information. (iii) Assuming that certain of the Certificates are rated at the time of issuance in one of the two highest rating categories by a nationally recognized statistical rating organization, each such Certificate at such time will 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 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 Prospectus and, assuming the valid execution thereof by the Trustee, the Trust Administrator, if applicable, and the Master Servicer, the Pooling and Servicing Agreement 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 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 Trust 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 Estate 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 Estate any of its right, title or interest, exclusive of the Fixed Retained Yield, if any, in the Mortgage Notes. WFASC will have the power and authority to transfer the Mortgage Notes to the Trust Estate 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 Estate will own the Mortgage Notes (exclusive of the Fixed Retained Yield, if any) 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 Trust 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 Estate 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 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 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. 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 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 Prospectus Supplement. (c) The Underwriter 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 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 cause 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 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 agreed-upon procedures letter to be delivered pursuant to Section 6(g) hereof, (iv) the fees and expenses of the Trustee, the Trust Administrator, if applicable, and any agent of the Trustee or the Trust Administrator, if applicable, and the fees and disbursements of counsel for the Trustee and the Trust 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 Master Servicer to, furnish to the Underwriter, as soon as available, a copy of (i) the annual statement of compliance delivered by the Master Servicer to the Trustee under the Pooling and Servicing Agreement, (ii) the annual independent public accountants' servicing report furnished to the Trustee 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 Master 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 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 "Material 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 Estate (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; and (xii) Assuming that the Certificates are rated at the time of issuance in one of the two highest rating categories by a nationally recognized statistical rating organization, each such Certificate at such time will be a "mortgage related security" as such term is defined in Section 3(a)(41) of the Exchange Act. 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 Master Servicer shall have furnished to the Underwriter an opinion, dated the Closing Date, of counsel to the Master Servicer (who may be an employee of the Master Servicer), to the effect that: (i) The Master 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 Master 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 Master Servicer, enforceable against the Master 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 Master 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 Master 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 Master Servicer, any indenture or other agreement or instrument to which the Master Servicer is a party or by which it is bound, any federal statute or regulation applicable to the Master 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 Master 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 Master Servicer is a party, or threatened against the Master 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 Master 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 master servicing activities of the Master 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 Master 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 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 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 (iii) a bring down letter, dated the date of the Prospectus Supplement, from the Independent Accountants with respect to the letter described in (ii), 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 (the "Bid Date"), 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 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 either rating of the Certificates has been placed under review (otherwise than for possible upgrading). (j) The Underwriter shall have received an opinion of special counsel to WFASC, dated the Closing Date, in form and substance satisfactory to the Underwriter, with respect to certain state tax consequences under the tax laws of the jurisdiction in which the Trustee is located relating to the Trust Estate and the holders of the Certificates. (k) 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. (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) 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. (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 in any revision or amendment thereof or supplement thereto, including for these purposes any portion of the Applicable Static Pool Information deemed not part of the Registration Statement or the Prospectus on account of Item 1105(d) of Regulation AB under the Act, 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 (as defined in Section 9(b)(i)) or in any preliminary or final quantitive data about the Mortgage Loans ("Mortgage Loan Data") supplied by WFASC to the Underwriter, or (iii) in the case of an Issuer Free Writing Prospectus, the omission or alleged omission to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (iv) in the case of the Mortgage Loan Data delivered by WFASC to the Underwriter, the omission or alleged omission to include material data therein necessary to make the data therein not misleading, in the case of (ii), (iii) or (iv), at the Time of Sale to the applicable investor, when considered in conjunction with the Time of Sale Information, and 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 (A) 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 or (B) any omission or alleged omission to state a material fact in the Issuer Free Writing Prospectus necessary to make the statements therein not misleading at the Time of Sale to the applicable investor, when considered in conjunction with the Time of Sale Information, as a result of the exclusion from the Issuer Free Writing Prospectus of any information of the type specified in Exhibit B hereto as Supplemental Information. 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 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 (other than omissions which are the subject of Section 7(b)(B) below) or any Mortgage Loan Data 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 omission or alleged omission to state a material fact in any Issuer Free Writing Prospectus necessary to make the statements made therein, in 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, as a result of the exclusion from the Issuer Free Writing Prospectus of any information of the type specified in Exhibit B as Supplemental Information or (C) 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 selected by such indemnified party and satisfactory to the indemnifying party (or if the indemnified party fails to promptly select counsel following the receipt of the aforesaid notice, with counsel selected by the indemnifying party and satisfactory to such indemnified 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), (iii), (iv) 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)(ii)) 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 with respect to the offering of the Certificates which has been conveyed to an investor at the Time of Sale to such investor. 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 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"); provided however, that any such Free Writing Prospectus may also contain a column showing the status of subscriptions for and allotments of the Certificates. 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) (i) WFASC shall deliver to the Underwriter, not later than two business days following the Bid Date, a Free Writing Prospectus which contains general information about the offering, including the basic senior/subordinate structure of the Certificates (excluding the subdivision of the senior classes into tranches), the subordination percentage for the senior Certificates and the publicly offered subordinated Certificates, to the extent known by WFASC, the expected parameters of the Mortgage Pool, risk factors applicable to Mortgage Loans of the type included in the Mortgage Pool, the identity of and material information about transaction parties known to WFASC, the material tax and ERISA treatment of the Certificates and whether the Certificates will be "mortgage related securities" as defined in Section 3(a)(41) of the Exchange Act, and which contains a hyperlink to the Base Prospectus most recently filed by WFASC with the Commission and a hyperlink to the portion of WFASC's static pool website containing static pool information (such information, the "Applicable Static Pool Information") with respect to the series of Certificates (as determined by WFASC) (the "Issuer Free Writing Prospectus"). (ii) WFASC will endeavor to file the Issuer Free Writing Prospectus with the Commission not later than two business days following the Bid Date, and the Underwriter shall not convey or deliver the 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 (A) delivered to such investor the Issuer Free Writing Prospectus, 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 and (B) provided to such investor such of the Supplemental Information described in Exhibit B hereto that is then known or available to the Underwriter as the Underwriter, in the exercise of its judgment, shall have concluded is required to make the Issuer Free Writing Prospectus, when considered in conjunction with the Time of Sale Information, not misleading. (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 or warranty to the extent such misstatements or omissions were the result of any misstatements in or omissions from the Mortgage Loan Data supplied by WFASC to the Underwriter which misstatements or omissions 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, to the extent that such misstatements are a substantial restatement in all material respects of a misstatement made in the Issuer Free Writing Prospectus or such omissions are the result of omission from the Issuer Free Writing Prospectus (other than omissions which are the subject of Section 7(b)(B)) which misstatements or omissions 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. Any access codes or passwords needed by the Underwriter to complete the filing shall be provided by WFASC. (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] (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) Consistent with the manner in which written records are maintained for its own purposes, 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) (i) The Underwriter will not enter into, and the Underwriter will obligate in writing each dealer to whom it sells any Certificates (which obligation may be in the form of a trade stipulation and which, in any event, shall name WFASC as an intended third party beneficiary) not to enter into, any Contract of Sale with respect to the Certificates with any investor other than an institutional investor, unless the Underwriter or such dealer has delivered to such investor a copy of the final Prospectus. (ii) The Underwriter shall not enter into any Contract of Sale with respect to the Certificates with any institutional investor unless the Underwriter complies with the prospectus delivery and notice requirements of Rules 172 and 173 under the Act. (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 (other than as the result of the exclusion from the Issuer Free Writing Prospectus of information of the type specified in Exhibit B hereto as Supplemental Information) (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. (iv) In the event that the Defective Free Writing Prospectus was an Issuer Free Writing Prospectus, and the Underwriter shall in good faith incur any reasonable costs in connection with the reformation or termination of the Contract of Sale, WFASC agrees to reimburse the Underwriter for such costs promptly following presentation of reasonably detailed documentation of such costs to WFASC. The Underwriter agrees to use best efforts to mitigate such costs. (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. The foregoing covenant shall not apply to any secondary market offers or sales of the Certificates by the Underwriter. (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. (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 [address], 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. * * * 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: Date: WELLS FARGO BANK, N.A. By:__________________________ Name: Title: Date: The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. [UNDERWRITER] By: __________________________ Name: Title: Date: Exhibit A WELLS FARGO ASSET SECURITIES CORPORATION Mortgage Asset-Backed Pass-Through Certificates Form of Terms Agreement ____________, 20__ [Underwriter] [Address] Underwriting Agreement dated [_________]. Title of Certificates: Mortgage Asset-Backed Pass-Through Certificates, Series 20__, (Classes) (the "Offered Certificates"). Classes of Certificates: Each of the Class A and Class B 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 $ ___________(Approximate) of the Offered Certificates: Certificates Not Offered Hereby: The Class B-4, Class B-5 and Class B-6 Certificates (the "Other Certificates"). Subordination: "Shifting interest" structure. Minimum Denominations of Offered Certificates: Class Minimum Denomination Incremental Denomination - ----- -------------------- ------------------------ Classes A $ 25,000 $1,000 Class A-IO $ [ ] $1,000 Classes A-R $ 100 N/A Classes B-1, B-2 and B-3 $ 100,000 $1,000 Description of the Mortgage Loans: Fixed interest rate, conventional, monthly pay, fully amortizing, one- to four-family, 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 Servicer): in the prospectus supplement). Master Servicing Fee (Monthly fee [_]% per annum. payable to the Master Servicer): Fixed Retained Yield: [Yes][No]. Trustee: [Securities Administrator:] [______________] Independent Accountants: 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: The Seller will have the right to repurchase all remaining Mortgage Loans, and effect an early retirement of the Certificates, when the aggregate scheduled principal balance of the Mortgage Loans is less than 10% of the aggregate principal balance of the Mortgage Loans as of the Cut-Off Date. Required Ratings: [Ratings] 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 the Offered Certificates: Percent of Initial Aggregate Class Principal Balance ----- ---------------------------- Class A % Classes B-1, B-2 and B-3 % In each case, as offered and sold pursuant to this Terms Agreement, plus accrued interest, if applicable, thereon. 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: Exhibit B SUPPLEMENTAL INFORMATION With respect to any investor, "Supplemental Information" means any of the following types of information, to the extent omitted from the Issuer Free Writing Prospectus: 1. The structure of the Certificates being offered to such investor (such Certificates, the "Offered Certificates"), including general paydown rules, the interest rate or interest rate formula, if applicable, the anticipated price or price range, the yield to maturity and/or call, the weighted average life at the pricing speed and under such other scenarios as may be necessary to illustrate the material effects of prepayments or changes in interest rates on the Offered Certificates (with a description of any related prepayment, collateral and other assumptions), and other pricing information; 2. The "principal type" and "interest type" of the Offered Certificates, using the categories listed under "Description of the Certificates--Categories of Classes of Certificates" in the Base Prospectus; 3. The interest accrual period for the Offered Certificates; 4. Whether the Offered Certificates represent interests in the entire Mortgage Pool or in one or more mortgage loan groups, the nature of such loan groups, any differences in the subordination levels of the Offered Certificates relating to such loan groups or the "deal rates" for such loan groups from the deal rate specified in the Issuer Free Writing Prospectus as a result of the division of the Mortgage Pool into more than one loan group by the Underwriter or as a result of the Underwriter dividing the subordinated certificates into more than one group and the nature of any cross-collateralization arrangements affecting the Offered Certificates. 5. A description of any third party credit enhancement or any derivative instruments being selected by the Underwriter in connection with the Offered Certificates, together with the identity of and material information about any related provider or counterparty, to the extent known to the Underwriter, and the ratings assigned to such provider or counterparty; and 6. The identity of and material information about any special servicer or credit risk manager selected by the Underwriter with respect to the Offered Certificates. EX-4.1 3 we3768865-ex4_1.txt POOLING AND SERVICING AGREEMENT Exhibit 4.1 - -------------------------------------------------------------------------------- WELLS FARGO ASSET SECURITIES CORPORATION (Depositor) and WELLS FARGO BANK, N.A. (Master Servicer) and HSBC Bank USA, National Association (Trustee) POOLING AND SERVICING AGREEMENT Dated as of [ ], 20 $[ ] Mortgage Asset-Backed Pass-Through Certificates Series 200 - - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.01 Definitions....................................................... Section 1.02 Acts of Holders................................................... Section 1.03 Effect of Headings and Table of Contents.......................... Section 1.04 Benefits of Agreement............................................. ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF THE CERTIFICATES Section 2.01 Conveyance of Mortgage Loans...................................... Section 2.02 Acceptance by Custodian........................................... Section 2.03 Representations and Warranties of the Master Servicer and the Depositor.................................................... Section 2.04 Execution and Delivery of Certificates............................ Section 2.05 Designation of Certificates; Designation of Startup Day and Latest Possible Maturity Date................................ ARTICLE III ADMINISTRATION OF THE TRUST ESTATE; SERVICING OF THE MORTGAGE LOANS Section 3.01 Certificate Account............................................... Section 3.02 Permitted Withdrawals from the Certificate Account................ Section 3.03 Advances by Master Servicer and Trustee........................... Section 3.04 Custodian to Cooperate; Release of Owner Mortgage Loan Files and Retained Mortgage Loan Files........................... Section 3.05 Annual Compliance Statements...................................... Section 3.06 Title, Management and Disposition of Any REO Mortgage Loan............................................................. Section 3.07 Amendments to Servicing Agreements, Modification of Standard Provisions.............................................. Section 3.08 Oversight of Servicing............................................ Section 3.09 Termination and Substitution of Servicing Agreements.............. Section 3.10 Application of Net Liquidation Proceeds........................... Section 3.11 Assessment of Servicing Compliance; Registered Public Accounting Firm Attestation Reports.............................. Section 3.12 Exchange Act Reports.............................................. ARTICLE IV DISTRIBUTIONS IN RESPECT OF CERTIFICATES; PAYMENTS TO CERTIFICATEHOLDERS; STATEMENTS AND REPORTS Section 4.01 Distributions..................................................... Section 4.02 Allocation of Realized Losses..................................... Section 4.03 Paying Agent...................................................... Section 4.04 Statements to Certificateholders; Reports to the Trustee and the Depositor................................................ Section 4.05 Reports to Mortgagors and the Internal Revenue Service............ Section 4.06 Calculation of Amounts; Binding Effect of Interpretations and Actions of Master Servicer................................... Section 4.07 Determination of LIBOR............................................ ARTICLE V THE CERTIFICATES Section 5.01 The Certificates.................................................. Section 5.02 Registration of Certificates...................................... Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates................. Section 5.04 Persons Deemed Owners............................................. Section 5.05 Access to List of Certificateholders' Names and Addresses......... Section 5.06 Maintenance of Office or Agency................................... Section 5.07 Definitive Certificates........................................... Section 5.08 Notices to Clearing Agency........................................ ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER Section 6.01 Liability of the Depositor and the Master Servicer................ Section 6.02 Merger or Consolidation of the Depositor or the Master Servicer......................................................... Section 6.03 Limitation on Liability of the Depositor, the Master Servicer and Others.............................................. Section 6.04 Resignation of the Master Servicer................................ Section 6.05 Compensation to the Master Servicer............................... Section 6.06 Assignment or Delegation of Duties by Master Servicer............. Section 6.07 Indemnification of Trustee and Depositor by Master Servicer......................................................... Section 6.08 Master Servicer Errors and Omissions Policy....................... ARTICLE VII DEFAULT Section 7.01 Events of Default................................................. Section 7.02 Other Remedies of Trustee......................................... Section 7.03 Directions by Certificateholders and Duties of Trustee During Event of Default.......................................... Section 7.04 Action upon Certain Failures of the Master Servicer and upon Event of Default............................................ Section 7.05 Trustee to Act; Appointment of Successor.......................... Section 7.06 Notification to Certificateholders................................ ARTICLE VIII CONCERNING THE TRUSTEE Section 8.01 Duties of Trustee................................................. Section 8.02 Certain Matters Affecting the Trustee............................. Section 8.03 Trustee Not Required to Make Investigation........................ Section 8.04 Trustee Not Liable for Certificates or Mortgage Loans............. Section 8.05 Trustee May Own Certificates...................................... Section 8.06 The Master Servicer to Pay Fees and Expenses; Limitation on Liability..................................................... Section 8.07 Eligibility Requirements.......................................... Section 8.08 Resignation and Removal........................................... Section 8.09 Successor......................................................... Section 8.10 Merger or Consolidation........................................... Section 8.11 Authenticating Agent.............................................. Section 8.12 Separate Trustees and Co-Trustees................................. Section 8.13 Tax Matters; Compliance with REMIC Provisions..................... Section 8.14 Monthly Advances.................................................. Section 8.15 Indemnification of the Master Servicer and Depositor by the Trustee...................................................... Section 8.16 Trustee Errors and Omissions Policy............................... ARTICLE IX TERMINATION Section 9.01 Termination upon Purchase by the Depositor or Liquidation of All Mortgage Loans............................................ Section 9.02 Additional Termination Requirements............................... ARTICLE X MISCELLANEOUS PROVISIONS Section 10.01 Amendment......................................................... Section 10.02 Recordation of Agreement.......................................... Section 10.03 Limitation on Rights of Certificateholders........................ Section 10.04 Governing Law; Jurisdiction....................................... Section 10.05 Notices........................................................... Section 10.06 Severability of Provisions........................................ Section 10.07 Special Notices to Rating Agencies................................ Section 10.08 Covenant of Depositor............................................. Section 10.09 Recharacterization................................................ Section 10.10 Regulation AB Compliance; Intent of Parties; Reasonableness................................................... ARTICLE XI TERMS FOR CERTIFICATES Section 11.01 Cut-Off Date...................................................... Section 11.02 Cut-Off Date Aggregate Principal Balance.......................... Section 11.03 Original Class A Percentage....................................... Section 11.04 Original Principal Balances of the Classes of Class A Certificates..................................................... Section 11.05 Original Aggregate Non-PO Principal Balance....................... Section 11.06 Original Class B Principal Balance................................ Section 11.07 Original Principal Balances of the Classes of Class B Certificates..................................................... Section 11.08 Original Class B-1 Fractional Interest............................ Section 11.09 Original Class B-2 Fractional Interest............................ Section 11.10 Original Class B-3 Fractional Interest............................ Section 11.11 Original Class B-4 Fractional Interest............................ Section 11.12 Original Class B-5 Fractional Interest............................ Section 11.13 Original Class B-1 Percentage..................................... Section 11.14 Original Class B-2 Percentage..................................... Section 11.15 Original Class B-3 Percentage..................................... Section 11.16 Original Class B-4 Percentage..................................... Section 11.17 Original Class B-5 Percentage..................................... Section 11.18 Original Class B-6 Percentage..................................... Section 11.19 Closing Date...................................................... Section 11.20 Right to Purchase................................................. Section 11.21 Wire Transfer Eligibility......................................... Section 11.22 Single Certificate................................................ Section 11.23 Servicing Fee Rate................................................ Section 11.24 Master Servicing Fee Rate......................................... SCHEDULE I - Applicable Unscheduled Principal Receipt Period SCHEDULE II Schedules of PAC Groups EXHIBITS EXHIBIT A-1 - Form of Face of Class A-1 Certificate EXHIBIT A-2 - Form of Face of Class A-2 Certificate EXHIBIT A-3 - Form of Face of Class A-3 Certificate EXHIBIT A-4 - Form of Face of Class A-4 Certificate EXHIBIT A-5 - Form of Face of Class A-5 Certificate EXHIBIT A-6 - Form of Face of Class A-6 Certificate EXHIBIT A-7 - Form of Face of Class A-7 Certificate EXHIBIT A-8 - Form of Face of Class A-8 Certificate EXHIBIT A-9 - Form of Face of Class A-9 Certificate EXHIBIT A-10 - Form of Face of Class A-10 Certificate EXHIBIT A-11 - Form of Face of Class A-11 Certificate EXHIBIT A-12 - Form of Face of Class A-12 Certificate EXHIBIT A-13 - Form of Face of Class A-13 Certificate EXHIBIT A-14 - Form of Face of Class A-14 Certificate EXHIBIT A-15 - Form of Face of Class A-15 Certificate EXHIBIT A-R - Form of Face of Class A-R Certificate EXHIBIT A-PO - Form of Face of Class A-PO Certificate EXHIBIT B-1 - Form of Face of Class B-1 Certificate EXHIBIT B-2 - Form of Face of Class B-2 Certificate EXHIBIT B-3 - Form of Face of Class B-3 Certificate EXHIBIT B-4 - Form of Face of Class B-4 Certificate EXHIBIT B-5 - Form of Face of Class B-5 Certificate EXHIBIT B-6 - Form of Face of Class B-6 Certificate EXHIBIT C - Form of Reverse of Series 20 - Certificates EXHIBIT D - Reserved EXHIBIT E - Custodial Agreement EXHIBIT F - Addresses for Requesting Mortgage Loan Schedule EXHIBIT G - Request for Release EXHIBIT H - Affidavit Pursuant to Section 860E(e)(4) of the Internal Revenue Code of 1986, as amended, and for Non-ERISA Investors EXHIBIT I - Letter from Transferor of Residual Certificate EXHIBIT J - Transferee's Letter (Class [B-4] [B-5] [B-6] Certificates) EXHIBIT K - List of Recordation States EXHIBIT L - Servicing Agreements EXHIBIT M - Form of Special Servicing Agreement EXHIBIT N - Form of Initial Certification of the Custodian EXHIBIT O - Form of Final Certification of the Custodian EXHIBIT P Form of Sarbanes Oxley Certification EXHIBIT Q Schedule of Pledged Asset Mortgage Loans EXHIBIT R Servicing Criteria to be Addressed in Assessment of Compliance EXHIBIT S Additional Form 10-D Disclosure EXHIBIT T Additional Form 10-K Disclosure EXHIBIT U Form 8-K Disclosure Information EXHIBIT V Additional Disclosure Notification This Pooling and Servicing Agreement, dated as of [ ], 20 executed by WELLS FARGO ASSET SECURITIES CORPORATION, as Depositor, WELLS FARGO BANK, N.A., as Master Servicer and HSBC Bank USA, National Association, as Trustee. W I T N E S S E T H T H A T: In consideration of the mutual agreements herein contained, the Depositor, the Master Servicer and the Trustee agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Article. 1933 Act: The Securities Act of 1933, as amended. Accepted Master Servicing Practices: Accepted Master Servicing Practices shall consist of the customary and usual master servicing practices of prudent master servicing institutions which master service mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located, regardless of the date upon which the related Mortgage Loans were originated. Accretion Termination Date: With respect to (a) the Class A-7 Certificates, the earlier to occur of (i) the Distribution Date following the Distribution Date on which the Principal Balances of the Class A-5 and Class A-6 Certificates have been reduced to zero or (ii) the Subordination Depletion Date and (b) the Class A-9 Certificates, the earlier to occur of (i) the Distribution Date following the Distribution Date on which the Principal Balance of the Class A-8 Certificates has been reduced to zero or (ii) the Subordination Depletion Date. Accrual Certificates: Either of the Class A-7 or Class A-9 Certificates. Accrual Distribution Amount: As to any Distribution Date prior to the applicable Accretion Termination Date and a Class of Accrual Certificates, an amount equal to the sum of (i) the Class A Interest Percentage of such Class of Accrual Certificates of the Current Class A Interest Distribution Amount and (ii) the Class A Interest Shortfall Percentage of such Class of Accrual Certificates of the amount distributed in respect of the Classes of Class A Certificates pursuant to Paragraph second of Section 4.01(a) on such Distribution Date. As to any Distribution Date and a Class of Accrual Certificates on or after the Accretion Termination Date, zero. Additional Form 10-D Disclosure: As defined in Section 3.12(a). Additional Form 10-K Disclosure: As defined in Section 3.12(b). Additional Master Servicer: As defined in Section 6.06. Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off Date Aggregate Principal Balance of the Mortgage Loans minus the sum of (i) all amounts in respect of principal received in respect of the Mortgage Loans (including, without limitation, amounts received as Monthly Payments, Periodic Advances, Unscheduled Principal Receipts and Substitution Principal Amounts) and distributed to Holders of the Certificates on such Distribution Date and all prior Distribution Dates, (ii) the principal portion of all Liquidated Loan Losses incurred on such Mortgage Loans for which the Liquidation Proceeds were received from the Cut-Off Date through the end of the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date and (iii) the principal portion of all Bankruptcy Losses (other than Debt Service Reductions) incurred on the Mortgage Loans from the Cut-Off Date through the end of the period corresponding to the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date. Adjusted Pool Amount (Non-PO Portion): With respect to any Distribution Date, the difference between the Adjusted Pool Amount and the Adjusted Pool Amount (PO Portion). Adjusted Pool Amount (PO Portion): With respect to any Distribution Date, the sum of the amounts, calculated as follows, with respect to all Outstanding Mortgage Loans: the product of (i) the PO Fraction for each such Mortgage Loan and (ii) the remainder of (A) the Cut-Off Date Principal Balance of such Mortgage Loan minus (B) the sum of (x) all amounts in respect of principal received in respect of such Mortgage Loan (including, without limitation, amounts received as Monthly Payments, Periodic Advances, Unscheduled Principal Receipts and Substitution Principal Amounts) and distributed to Holders of the Certificates on such Distribution Date and all prior Distribution Dates, (y) the principal portion of any Liquidated Loan Losses incurred on such Mortgage Loans for which Liquidation Proceeds were received from the Cut-Off Date through the end of the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date and (z) the principal portion of all Bankruptcy Losses (other than Debt Service Reductions) incurred on the Mortgage Loans from the Cut-Off Date through the end of the period corresponding to the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date. Adjusted Principal Balance: As to any Distribution Date and any Class of Class B Certificates, the greater of (A) zero and (B) (i) the Principal Balance of such Class with respect to such Distribution Date minus (ii) the Adjustment Amount for such Distribution Date less the Principal Balances for any Classes of Class B Certificates with higher numerical designations. Adjustment Amount: For any Distribution Date, the difference between (A) the sum of the Class A Non-PO Principal Balance and the Class B Principal Balance as of the related Determination Date and (B) the sum of (i) the sum of the Class A Non-PO Principal Balance and the Class B Principal Balance as of the Determination Date succeeding such Distribution Date and (ii) the aggregate amount that would have been distributed to all Classes (other than the Class A-PO Certificates) as principal in accordance with Section 4.01(a) for such Distribution Date without regard to the provisos in the definitions of Class B-1 Optimal Principal Amount, Class B-2 Optimal Principal Amount, Class B-3 Optimal Principal Amount, Class B-4 Optimal Principal Amount, Class B-5 Optimal Principal Amount and Class B-6 Optimal Principal Amount. Aggregate Class A Unpaid Interest Shortfall: As to any Distribution Date, an amount equal to the sum of the Class A Unpaid Interest Shortfalls for all the Classes of Class A Certificates. Aggregate Non-PO Principal Balance: As of any Determination Date, the sum of the Class A Non-PO Principal Balance and the Class B Principal Balance as of such date. Agreement: This Pooling and Servicing Agreement and all amendments and supplements hereto. Applicable Unscheduled Principal Receipt Period: With respect to the Mortgage Loans serviced by each Servicer and each of the Full Unscheduled Principal Receipts and Partial Unscheduled Principal Receipts, the Unscheduled Principal Receipt Period specified on Schedule I hereto, as amended by the Master Servicer pursuant to Section 10.01(b) hereof. Authenticating Agent: Any authenticating agent appointed by the Trustee pursuant to Section 8.11. Initially, the Master Servicer shall be the Authenticating Agent for the Certificates. Available Master Servicer Compensation: With respect to any Distribution Date, the sum of (a) the Master Servicing Fee for such Distribution Date, (b) interest earned through the business day preceding the applicable Distribution Date on any Prepayments in Full remitted to the Master Servicer and (c) the aggregate amount of Month End Interest remitted by the Servicers to the Master Servicer pursuant to the related Servicing Agreements. Bankruptcy Code: The Bankruptcy Code of 1978, as amended. Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not be deemed a Bankruptcy Loss hereunder so long as the applicable Servicer has notified the Master Servicer and the Trustee in writing that such Servicer is diligently pursuing any remedies that may exist in connection with the representations and warranties made regarding the related Mortgage Loan and either (A) the related Mortgage Loan is not in default with regard to payments due thereunder or (B) delinquent payments of principal and interest under the related Mortgage Loan and any premiums on any applicable primary hazard insurance policy and any related escrow payments in respect of such Mortgage Loan are being advanced on a current basis by such Servicer without giving effect to any Debt Service Reduction. Beneficial Owner: With respect to a Book-Entry Certificate, the Person who is the beneficial owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency), as the case may be. Book-Entry Certificate: Any one of the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8 Certificates, Class A-9 Certificates, Class A-10 Certificates, Class A-11 Certificates, Class A-12 Certificates, Class A-13 Certificates, Class A-14 Certificates, Class A-15 Certificates, Class A-PO Certificates, Class B-1 Certificates, Class B-2 Certificates and Class B-3 Certificates, beneficial ownership and transfers of which shall be evidenced by, and made through, book entries by the Clearing Agency as described in Section 5.01(b). Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a legal holiday in the City of New York, State of Iowa, State of Maryland, State of Minnesota or State of North Carolina or (iii) a day on which banking institutions in the City of New York, or the State of Iowa, State of Maryland, State of Minnesota or State of North Carolina are authorized or obligated by law or executive order to be closed. Certificate: Any one of the Class A Certificates or Class B Certificates. Certificate Account: The separate trust account established and maintained by the Master Servicer in the name of the Master Servicer on behalf of the Trustee pursuant to Section 3.01. The Certificate Account shall be an Eligible Account. Certificate Custodian: Initially, Wells Fargo Bank; thereafter any other Certificate Custodian acceptable to The Depository Trust Company and selected by the Trustee. Certificate Register and Certificate Registrar: Respectively, the register maintained pursuant to and the registrar provided for in Section 5.02. Initially the Certificate Registrar shall be the Master Servicer. Certificateholder or Holder: The Person in whose name a Certificate is registered in the Certificate Register, except that, solely for the purposes of the taking of any action under Articles VII or VIII, any Certificate registered in the name of the Master Servicer, a Servicer or any affiliate thereof shall be deemed not to be outstanding and the Voting Interest evidenced thereby shall not be taken into account in determining whether the requisite percentage of Certificates necessary to effect any such action has been obtained. Class: All certificates whose form is identical except for variations in the Percentage Interest evidenced thereby. Class A Certificate: Any of the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8 Certificates, Class A-9 Certificates, Class A-10 Certificates, Class A-11 Certificates, Class A-12 Certificates, Class A-13 Certificates, Class A-14 Certificates, Class A-15 Certificates, Class A-R Certificate and Class A-PO Certificates. Class A Certificateholder: The registered holder of a Class A Certificate. Class A Distribution Amount: As to any Distribution Date and any Class of Class A Certificates (other than the Classes of Accrual Certificates and Class A-PO Certificates), the amount distributable to such Class of Class A Certificates pursuant to Paragraphs first, second and third clause (1) of Section 4.01(a). As to a Class of Accrual Certificates, (a) as to any Distribution Date prior to the applicable Accretion Termination Date, the amount distributable to such Class of Accrual Certificates pursuant to the provisos in Paragraphs first and second of Section 4.01(a) and Paragraph third clause (1) of Section 4.01(a) and (b) as to any Distribution Date on or after the applicable Accretion Termination Date, the amount distributable to such Class of Accrual Certificates pursuant to Paragraphs first, second and third of Section 4.01(a). As to any Distribution Date and the Class A-PO Certificates, the amount distributable to the Class A-PO Certificates pursuant to Paragraphs third clause (2) and fourth of Section 4.01(a) on such Distribution Date. Class A Interest Accrual Amount: As to any Distribution Date, the sum of the Interest Accrual Amounts for the Class A Certificates with respect to such Distribution Date. Class A Interest Percentage: As to any Distribution Date and any Class of Class A Certificates, the percentage calculated by dividing the Interest Accrual Amount of such Class (determined without regard to clause (ii) of the definition thereof) by the Class A Interest Accrual Amount (determined without regard to clause (ii) of the definition of each Interest Accrual Amount). Class A Interest Shortfall Amount: As to any Distribution Date and any Class of Class A Certificates, any amount by which the Interest Accrual Amount of such Class with respect to such Distribution Date exceeds the amount distributed in respect of such Class on such Distribution Date pursuant to Paragraph first of Section 4.01(a) including, in the case of a Class of Accrual Certificates prior to the applicable Accretion Termination Date, the amount included in the Accrual Distribution Amount pursuant to clause (i) of the definition thereof. Class A Interest Shortfall Percentage: As to any Distribution Date and any Class of Class A Certificates, the percentage calculated by dividing the Class A Unpaid Interest Shortfall for such Class by the Aggregate Class A Unpaid Interest Shortfall, in each case determined as of the day preceding the applicable Distribution Date. Class A Loss Denominator: As to any Determination Date, an amount equal to the Class A Non-PO Principal Balance (less the Principal Balances of the Classes of Accrual Certificates) and (ii) with respect to a Class of Accrual Certificates, the lesser of the Principal Balance of such Class of Accrual Certificates and the Original Principal Balance of such Class of Accrual Certificates. Class A Loss Percentage: As to any Determination Date and any Class of Class A Certificates (other than the Class A-PO Certificates), the percentage calculated by dividing the Principal Balance of such Class (or, in the case of a Class of Accrual Certificates, the Original Principal Balance of such Class of Accrual Certificates, if lower) by the Class A Loss Denominator (determined without regard to any such Principal Balance of any Class of Class A Certificates not then outstanding), in each case determined as of the preceding Determination Date. Class A Non-PO Optimal Amount: As to any Distribution Date, the sum for such Distribution Date of (i) the Class A Interest Accrual Amount, (ii) the Aggregate Class A Unpaid Interest Shortfall and (iii) the Class A Non-PO Optimal Principal Amount. Class A Non-PO Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Mortgage Loan that is an Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan, and (y) the sum of: (i) the Class A Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class A Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class A Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class A Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class A Prepayment Percentage of the Non-PO Recovery for such Distribution Date. Class A Non-PO Principal Balance: As of any date, an amount equal to the Class A Principal Balance less the Principal Balance of the Class A-PO Certificates. Class A Non-PO Principal Distribution Amount: As to any Distribution Date, the aggregate amount distributed in respect of the Classes of A Certificates pursuant to Paragraph third clause (1) of Section 4.01(a). Class A Pass-Through Rate: As to the Class A-3, Class A-4, Class A-7, Class A-8, Class A-9, Class A-10, Class A-11, Class A-12, Class A-13, Class A-14, Class A-15 and Class A-R Certificates, [ ]% per annum As to the Class A-1, Class A-2, Class A-5 and Class A-6 Certificates, the Class A-1 Pass-Through Rate, Class A-2 Pass-Through Rate, Class A-5 Pass-Through Rate and Class A-6 Pass-Through Rate, respectively. The Class A-PO Certificates are not entitled to interest and have no Class A Pass-Through Rate. Class A Percentage: As to any Distribution Date occurring on or prior to the Subordination Depletion Date, the lesser of (i) [ ]% and (ii) the percentage obtained by dividing the Class A Non-PO Principal Balance (determined as of the Determination Date preceding such Distribution Date) by the Pool Balance (Non-PO Portion). As to any Distribution Date occurring subsequent to the Subordination Depletion Date, [ ]% or such lesser percentage which will cause the Class A Non-PO Principal Balance to decline to zero following the distribution made on such Distribution Date. Class A Prepayment Percentage: As to any Distribution Date to and including the Distribution Date in [ ], [ ]%. As to any Distribution Date subsequent to [ ] to and including the Distribution Date in [ ], the Class A Percentage as of such Distribution Date plus [ ]% of the Subordinated Percentage as of such Distribution Date. As to any Distribution Date subsequent to [ ] to and including the Distribution Date in [ ], the Class A Percentage as of such Distribution Date plus [ ]% of the Subordinated Percentage as of such Distribution Date. As to any Distribution Date subsequent to [ ] to and including the Distribution Date in [ ], the Class A Percentage as of such Distribution Date plus [ ]% of the Subordinated Percentage as of such Distribution Date. As to any Distribution Date subsequent to [ ] to and including the Distribution Date in [ ], the Class A Percentage as of such Distribution Date plus [ ]% of the Subordinated Percentage as of such Distribution Date. As to any Distribution Date subsequent to [ ], the Class A Percentage as of such Distribution Date. The foregoing is subject to the following: (i) if the aggregate distribution to Holders of Class A Certificates on any Distribution Date of the Class A Prepayment Percentage provided above of Unscheduled Principal Receipts distributable on such Distribution Date would reduce the Class A Non-PO Principal Balance below zero, the Class A Prepayment Percentage for such Distribution Date shall be the percentage necessary to bring the Class A Non-PO Principal Balance to zero and thereafter the Class A Prepayment Percentage shall be zero and (ii) if the Class A Percentage as of any Distribution Date is greater than the Original Class A Percentage, the Class A Prepayment Percentage for such Distribution Date shall be [ ]%. Notwithstanding the foregoing, with respect to any Distribution Date on which the following criteria are not met, the reduction of the Class A Prepayment Percentage described in the second through sixth sentences of this definition of Class A Prepayment Percentage shall not be applicable with respect to such Distribution Date. In such event, the Class A Prepayment Percentage for such Distribution Date will be determined in accordance with the applicable provision, as set forth in the first through fifth sentences above, which was actually used to determine the Class A Prepayment Percentage for the Distribution Date occurring in the [ ] preceding such Distribution Date (it being understood that for the purposes of the determination of the Class A Prepayment Percentage for the current Distribution Date, the current Class A Percentage and Subordinated Percentage shall be utilized). No reduction in the Class A Prepayment Percentage referred to in the second through sixth sentences hereof shall be applicable, with respect to any Distribution Date if (a) the average outstanding principal balance on such Distribution Date and for the preceding five Distribution Dates on the Mortgage Loans that were delinquent 60 days or more (including for this purpose any payments due with respect to Mortgage Loans in foreclosure and REO Mortgage Loans) were greater than or equal to [ ]% of the Class B Principal Balance or (b) cumulative Realized Losses on the Mortgage Loans exceed (1) [ ]% of the Original Class B Principal Balance if such Distribution Date occurs between and including [ ] and [ ], (2) [ ]% of the Original Class B Principal Balance if such Distribution Date occurs between and including [ ] and [ ], (3) [ ]% of the Original Class B Principal Balance if such Distribution Date occurs between and including [ ] and [ ], (4) [ ]% of the Original Class B Principal Balance if such Distribution Date occurs between and including [ ] and [ ], and (5) [ ]% of the Original Class B Principal Balance if such Distribution Date occurs during or after [ ]. With respect to any Distribution Date on which the Class A Prepayment Percentage is reduced below the Class A Prepayment Percentage for the prior Distribution Date, the Master Servicer shall certify to the Trustee, based upon information provided by each Servicer as to the Mortgage Loans serviced by it that the criteria set forth in the preceding sentence are met. Class A Principal Balance: As of any date, an amount equal to the sum of the Principal Balances for the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8 Certificates, Class A-9 Certificates, Class A-10 Certificates, Class A-11 Certificates, Class A-12 Certificates, Class A-13 Certificates, Class A-14 Certificates, Class A-15 Certificates, Class A-PO Certificates and Class A-R Certificate. Class A Unpaid Interest Shortfall: As to any Distribution Date and any Class of Class A Certificates, the amount, if any, by which the aggregate of the Class A Interest Shortfall Amounts for such Class (or in the case of a Class of Accrual Certificates prior to the applicable Accretion Termination Date, the amount included in the Accrual Distribution Amount pursuant to clause (ii) of the definition thereof) for prior Distribution Dates is in excess of the amounts distributed in respect of such Class on prior Distribution Dates pursuant to Paragraph second of Section 4.01(a). Class A-1 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-1 and Exhibit C hereto. Class A-1 Certificateholder: The registered holder of a Class A-1 Certificate. Class A-1 Pass-Through Rate: With respect to the Distribution Date occurring in [ ], [ ]% per annum. With respect to each succeeding Distribution Date, a per annum rate, determined by the Paying Agent on the applicable Rate Determination Date, equal to [ ]% minus the product of [ ] times LIBOR, subject to a minimum rate of [ ]% and a maximum rate of [ ]%. Class A-2 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-2 and Exhibit C hereto. Class A-2 Certificateholder: The registered holder of a Class A-2 Certificate. Class A-2 Pass-Through Rate: With respect to the Distribution Date occurring in [ ], [ ]% per annum. With respect to each succeeding Distribution Date, a per annum rate, determined by the Paying Agent on the applicable Rate Determination Date, equal to LIBOR plus [ ]%, subject to a minimum rate of [ ]% and a maximum rate of [ ]%. Class A-3 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-3 and Exhibit C hereto. Class A-3 Certificateholder: The registered holder of a Class A-3 Certificate. Class A-3 Loss Amount: With respect to any Determination Date after the applicable Subordination Depletion Date, the amount, if any, by which the Principal Balance of the Class A-3 Certificates would be reduced as a result of the application of the third sentence of the definition of Principal Balance. Class A-4 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-4 and Exhibit C hereto. Class A-4 Certificateholder: The registered holder of a Class A-4 Certificate. Class A-5 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-5 and Exhibit C hereto. Class A-5 Certificateholder: The registered holder of a Class A-5 Certificate. Class A-5 Pass-Through Rate: With respect to the Distribution Date occurring in [ ], [ ]% per annum. With respect to each succeeding Distribution Date, a per annum rate, determined by the Paying Agent on the applicable Rate Determination Date, equal to LIBOR plus [ ]%, subject to a minimum rate of [ ]% and a maximum rate of [ ]%. Class A-6 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-6 and Exhibit C hereto. Class A-6 Certificateholder: The registered holder of a Class A-6 Certificate. Class A-6 Pass-Through Rate: With respect to the Distribution Date occurring in [ ], [ ]% per annum. With respect to each succeeding Distribution Date, a per annum rate, determined by the Paying Agent on the applicable Rate Determination Date, equal to [ ]% minus the product of [ ] times LIBOR, subject to a minimum rate of [ ]% and a maximum rate of [ ]%. Class A-7 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-7 and Exhibit C hereto. Class A-7 Certificateholder: The registered holder of a Class A-7 Certificate. Class A-8 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-8 and Exhibit C hereto. Class A-8 Certificateholder: The registered holder of a Class A-8 Certificate. Class A-9 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-9 and Exhibit C hereto. Class A-9 Certificateholder: The registered holder of a Class A-9 Certificate. Class A-10 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-10 and Exhibit C hereto. Class A-10 Certificateholder: The registered holder of a Class A-10 Certificate. Class A-11 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-11 and Exhibit C hereto. Class A-11 Certificateholder: The registered holder of a Class A-11 Certificate. Class A-12 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-12 and Exhibit C hereto. Class A-12 Certificateholder: The registered holder of a Class A-12 Certificate. Class A-12 Loss Amount: With respect to any Determination Date after the applicable Subordination Depletion Date, the amount, if any, by which the Principal Balance of the Class A-12 Certificates would be reduced as a result of the application of the third sentence of the definition of Principal Balance. Class A-13 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-13 and Exhibit C hereto. Class A-13 Certificateholder: The registered holder of a Class A-13 Certificate. Class A-14 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-14 and Exhibit C hereto. Class A-14 Certificateholder: The registered holder of a Class A-14 Certificate. Class A-14 Loss Allocation Amount: With respect to any Determination Date after the applicable Subordination Depletion Date the lesser of (a) the Principal Balance of the Class A-14 Certificates with respect to such Determination Date prior to any reduction for the Class A-14 Loss Allocation Amount and (b) the Class A-12 Loss Amount. Class A-15 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-15 and Exhibit C hereto. Class A-15 Certificateholder: The registered holder of a Class A-15 Certificate. Class A-15 Loss Allocation Amount: With respect to any Determination Date after the applicable Subordination Depletion Date the lesser of (a) the Principal Balance of the Class A-15 Certificates with respect to such Determination Date prior to any reduction for the Class A-15 Loss Allocation Amount and (b) the Class A-3 Loss Amount. Class A-PO Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-PO and Exhibit C hereto. Class A-PO Certificateholder: The registered holder of a Class A-PO Certificate. Class A-PO Deferred Amount: For any Distribution Date prior to the Subordination Depletion Date, the difference between (A) the sum of (x) the amount by which the sum of the Class A-PO Optimal Principal Amounts for all prior Distribution Dates exceeded the amounts distributed on the Class A-PO Certificates on such prior Distribution Dates pursuant to Paragraph third clause (2) of Section 4.01(a) and (y) the sum of the product for each Discount Mortgage Loan which became a Liquidated Loan at any time on or prior to the last day of the Applicable Unscheduled Principal Receipt Period for Full Unscheduled Principal Receipts for the current Distribution Date of (a) the PO Fraction for such Discount Mortgage Loan and (b) an amount equal to the principal portion of Realized Losses (other than Bankruptcy Losses due to Debt Service Reductions) incurred with respect to such Discount Mortgage Loan and (B) the sum of (x) the sum of the Class A-PO Recoveries for such Distribution Date and prior Distribution Dates and (y) amounts distributed on the Class A-PO Certificates on prior Distribution Dates pursuant to Paragraph fourth of Section 4.01(a). On and after the Subordination Depletion Date, the Class A-PO Deferred Amount will be zero. No interest will accrue on any Class A-PO Deferred Amount. Class A-PO Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Mortgage Loan that is an Outstanding Mortgage Loan, of the product of (x) the PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Scheduled Principal Balance of each Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class A-PO Recovery for such Distribution Date. Class A-PO Recovery: As to any Distribution Date prior to the Subordination Depletion Date, the lesser of (a) the Class A-PO Deferred Amount for such Distribution Date (calculated without regard to the Class A-PO Recovery for such Distribution Date) and (b) an amount equal to the sum as to each Mortgage Loan as to which there has been a Recovery during the Applicable Unscheduled Principal Receipt Period, of the product of (x) the PO Fraction with respect to such Mortgage Loan and (y) the amount of the Recovery with respect to such Mortgage Loan. As to any Distribution Date on or after the Subordination Depletion Date, the amount determined in accordance with clause (b) above. Class A-R Certificate: The Certificate executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit A-R and Exhibit C hereto. Class A-R Certificateholder: The registered holder of the Class A-R Certificate. Class B Certificate: Any one of the Class B-1 Certificates, Class B-2 Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5 Certificates or Class B-6 Certificates. Class B Certificateholder: The registered holder of a Class B Certificate. Class B Distribution Amount: Any of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Distribution Amounts. Class B Interest Accrual Amount: With respect to any Distribution Date, the sum of the Interest Accrual Amounts for the Classes of Class B Certificates with respect to such Distribution Date. Class B Interest Percentage: With respect to any Distribution Date and any Class of Class B Certificates, the percentage calculated by dividing the Interest Accrual Amount of such Class (determined without regard to clause (ii) of the definition thereof) by the Class B Interest Accrual Amount (determined without regard to clause (ii) of the definition of each Interest Accrual Amount). Class B Interest Shortfall Amount: Any of the Class B-1 Interest Shortfall Amount, Class B-2 Interest Shortfall Amount, Class B-3 Interest Shortfall Amount, Class B-4 Interest Shortfall Amount, Class B-5 Interest Shortfall Amount or Class B-6 Interest Shortfall Amount. Class B Loss Percentage: With respect to any Determination Date and any Class of Class B Certificates then outstanding, the percentage calculated by dividing the Principal Balance of such Class B Certificates by the Class B Principal Balance (determined without regard to any Principal Balance of any Class of Class B Certificates not then outstanding), in each case determined as of the preceding Determination Date. Class B Optimal Principal Amount: Any of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 or Class B-6 Optimal Principal Amounts. Class B Pass-Through Rate: As to any Distribution Date, a per annum rate equal to [ ]%. Class B Percentage: Any one of the Class B-1 Percentage, Class B-2 Percentage, Class B-3 Percentage, Class B-4 Percentage, Class B-5 Percentage or Class B-6 Percentage. Class B Prepayment Percentage: Any of the Class B-1 Prepayment Percentage, Class B-2 Prepayment Percentage, Class B-3 Prepayment Percentage, Class B-4 Prepayment Percentage, Class B-5 Prepayment Percentage or Class B-6 Prepayment Percentage. Class B Principal Balance: As of any date, an amount equal to the sum of the Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3 Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance and Class B-6 Principal Balance. Class B Unpaid Interest Shortfall: Any of the Class B-1 Unpaid Interest Shortfall, Class B-2 Unpaid Interest Shortfall, Class B-3 Unpaid Interest Shortfall, Class B-4 Unpaid Interest Shortfall, Class B-5 Unpaid Interest Shortfall or Class B-6 Unpaid Interest Shortfall. Class B-1 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-1 and Exhibit C hereto. Class B-1 Certificateholder: The registered holder of a Class B-1 Certificate. Class B-1 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-1 Certificates pursuant to Paragraphs fifth, sixth and seventh of Section 4.01(a). Class B-1 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-1 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-1 Certificates on such Distribution Date pursuant to Paragraph fifth of Section 4.01(a). Class B-1 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-1 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-1 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-1 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-1 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-1 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-1 Optimal Principal Amount will equal the lesser of (A) the Class B-1 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-1 Certificates. Class B-1 Percentage: As to any Distribution Date, the percentage calculated by multiplying the Subordinated Percentage by either (i) if any Class B Certificates (other than the Class B-1 Certificates) are eligible to receive principal distributions for such Distribution Date in accordance with Section 4.01(d), a fraction, the numerator of which is the Class B-1 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d) or (ii) except as set forth in Section 4.01(d)(ii), in the event that the Class B Certificates (other than the Class B-1 Certificates) are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), one. Class B-1 Prepayment Percentage: As to any Distribution Date, the percentage calculated by multiplying the Subordinated Prepayment Percentage by either (i) if any Class B Certificates (other than the Class B-1 Certificates) are eligible to receive principal distributions for such Distribution Date in accordance with Section 4.01(d), a fraction, the numerator of which is the Class B-1 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d) or (ii) except as set forth in Section 4.01(d)(ii), in the event that the Class B Certificates (other than the Class B-1 Certificates) are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), one. Class B-1 Principal Balance: As to the first Determination Date, the Original Class B-1 Principal Balance. As of any subsequent Determination Date, the Original Class B-1 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-1 Certificates on prior Distribution Dates (A) pursuant to Paragraph seventh of Section 4.01(a) (including any principal otherwise payable to the Class B-1 Certificates used to pay any Class A-PO Deferred Amounts) and (B) as a result of a Principal Adjustment; provided, however, if the Class B-1 Certificates are the most subordinate Certificates outstanding, the Class B-1 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the Class A Non-PO Principal Balance as of such Determination Date. Class B-1 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-1 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-1 Certificates on prior Distribution Dates pursuant to Paragraph sixth of Section 4.01(a). Class B-2 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-2 and Exhibit C hereto. Class B-2 Certificateholder: The registered holder of a Class B-2 Certificate. Class B-2 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-2 Certificates pursuant to Paragraphs eighth, ninth and tenth of Section 4.01(a). Class B-2 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-2 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-2 Certificates on such Distribution Date pursuant to Paragraph eighth of Section 4.01(a). Class B-2 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-2 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-2 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-2 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-2 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-2 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-2 Optimal Principal Amount will equal the lesser of (A) the Class B-2 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-2 Certificates. Class B-2 Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Percentage by (ii) a fraction, the numerator of which is the Class B-2 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-2 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-2 Percentage for such Distribution Date will be zero. Class B-2 Prepayment Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is the Class B-2 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-2 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-2 Prepayment Percentage for such Distribution Date will be zero. Class B-2 Principal Balance: As to the first Determination Date, the Original Class B-2 Principal Balance. As of any subsequent Determination Date, the Original Class B-2 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-2 Certificates on prior Distribution Dates (A) pursuant to Paragraph tenth of Section 4.01(a) (including any principal otherwise payable to the Class B-2 Certificates used to pay any Class A-PO Deferred Amounts) and (B) as a result of a Principal Adjustment; provided, however, if the Class B-2 Certificates are the most subordinate Certificates outstanding, the Class B-2 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the sum of the Class A Non-PO Principal Balance and the Class B-1 Principal Balance as of such Determination Date. Class B-2 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-2 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-2 Certificates on prior Distribution Dates pursuant to Paragraph ninth of Section 4.01(a). Class B-3 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-3 and Exhibit C hereto. Class B-3 Certificateholder: The registered holder of a Class B-3 Certificate. Class B-3 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-3 Certificates pursuant to Paragraphs eleventh, twelfth and thirteenth of Section 4.01(a). Class B-3 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-3 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-3 Certificates on such Distribution Date pursuant to Paragraph eleventh of Section 4.01(a). Class B-3 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-3 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-3 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-3 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-3 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-3 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-3 Optimal Principal Amount will equal the lesser of (A) the Class B-3 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-3 Certificates. Class B-3 Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Percentage by (ii) a fraction, the numerator of which is the Class B-3 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-3 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-3 Percentage for such Distribution Date will be zero. Class B-3 Prepayment Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is the Class B-3 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-3 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-3 Prepayment Percentage for such Distribution Date will be zero. Class B-3 Principal Balance: As to the first Determination Date, the Original Class B-3 Principal Balance. As of any subsequent Determination Date, the Original Class B-3 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-3 Certificates on prior Distribution Dates (A) pursuant to Paragraph thirteenth of Section 4.01(a) (including any principal otherwise payable to the Class B-3 Certificates used to pay any Class A-PO Deferred Amounts) and (B) as a result of a Principal Adjustment; provided, however, if the Class B-3 Certificates are the most subordinate Certificates outstanding, the Class B-3 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the sum of the Class A Non-PO Principal Balance, the Class B-1 Principal Balance and the Class B-2 Principal Balance as of such Determination Date. Class B-3 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-3 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-3 Certificates on prior Distribution Dates pursuant to Paragraph twelfth of Section 4.01(a). Class B-4 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-4 and Exhibit C hereto. Class B-4 Certificateholder: The registered holder of a Class B-4 Certificate. Class B-4 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-4 Certificates pursuant to Paragraphs fourteenth, fifteenth and sixteenth of Section 4.01(a). Class B-4 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-4 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-4 Certificates on such Distribution Date pursuant to Paragraph fourteenth of Section 4.01(a). Class B-4 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-4 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-4 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-4 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-4 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-4 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-4 Optimal Principal Amount will equal the lesser of (A) the Class B-4 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-4 Certificates. Class B-4 Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Percentage by (ii) a fraction, the numerator of which is the Class B-4 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-4 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-4 Percentage for such Distribution Date will be zero. Class B-4 Prepayment Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is the Class B-4 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-4 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-4 Prepayment Percentage for such Distribution Date will be zero. Class B-4 Principal Balance: As to the first Determination Date, the Original Class B-4 Principal Balance. As of any subsequent Determination Date, the Original Class B-4 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-4 Certificates on prior Distribution Dates (A) pursuant to Paragraph sixteenth of Section 4.01(a) (including any principal otherwise payable to the Class B-4 Certificates used to pay any Class A-PO Deferred Amounts) and (B) as a result of a Principal Adjustment; provided, however, if the Class B-4 Certificates are the most subordinate Certificates outstanding, the Class B-4 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the sum of the Class A Non-PO Principal Balance, the Class B-1 Principal Balance, the Class B-2 Principal Balance and the Class B-3 Principal Balance as of such Determination Date. Class B-4 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-4 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-4 Certificates on prior Distribution Dates pursuant to Paragraph fifteenth of Section 4.01(a). Class B-5 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-5 and Exhibit C hereto. Class B-5 Certificateholder: The registered holder of a Class B-5 Certificate. Class B-5 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-5 Certificates pursuant to Paragraphs seventeenth, eighteenth and nineteenth of Section 4.01(a). Class B-5 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-5 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-5 Certificates on such Distribution Date pursuant to Paragraph seventeenth of Section 4.01(a). Class B-5 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-5 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-5 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-5 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-5 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-5 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-5 Optimal Principal Amount will equal the lesser of (A) the Class B-5 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-5 Certificates. Class B-5 Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Percentage by (ii) a fraction, the numerator of which is the Class B-5 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-5 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-5 Percentage for such Distribution Date will be zero. Class B-5 Prepayment Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is the Class B-5 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-5 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-5 Prepayment Percentage for such Distribution Date will be zero. Class B-5 Principal Balance: As to the first Determination Date, the Original Class B-5 Principal Balance. As of any subsequent Determination Date, the Original Class B-5 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-5 Certificates on prior Distribution Dates (A) pursuant to Paragraph nineteenth of Section 4.01(a) (including any principal otherwise payable to the Class B-5 Certificates used to pay any Class A-PO Deferred Amounts) and (B) as a result of a Principal Adjustment; provided, however, if the Class B-5 Certificates are the most subordinate Certificates outstanding, the Class B-5 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the sum of the Class A Non-PO Principal Balance, the Class B-1 Principal Balance, the Class B-2 Principal Balance, the Class B-3 Principal Balance and the Class B-4 Principal Balance as of such Determination Date. Class B-5 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-5 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-5 Certificates on prior Distribution Dates pursuant to Paragraph eighteenth of Section 4.01(a). Class B-6 Certificate: Any one of the Certificates executed by the Paying Agent and countersigned by the Authenticating Agent in substantially the form set forth in Exhibit B-6 and Exhibit C hereto. Class B-6 Certificateholder: The registered holder of a Class B-6 Certificate. Class B-6 Distribution Amount: As to any Distribution Date, any amount distributable to the Holders of the Class B-6 Certificates pursuant to Paragraphs twentieth, twenty-first and twenty-second of Section 4.01(a). Class B-6 Interest Shortfall Amount: As to any Distribution Date, any amount by which the Interest Accrual Amount of the Class B-6 Certificates with respect to such Distribution Date exceeds the amount distributed in respect of the Class B-6 Certificates on such Distribution Date pursuant to Paragraph twentieth of Section 4.01(a). Class B-6 Optimal Principal Amount: As to any Distribution Date, an amount equal to the sum of (I) the sum, as to each Outstanding Mortgage Loan, of the product of (x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of: (i) the Class B-6 Percentage of the principal portion of the Monthly Payment due on the Due Date occurring in the month of such Distribution Date on such Mortgage Loan; (ii) the Class B-6 Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Applicable Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt; (iii) the Class B-6 Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination Date for such Distribution Date, was repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08; and (iv) the Class B-6 Percentage of the Substitution Principal Amount with respect to each Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date, less the amount allocable to the principal portion of any unreimbursed Periodic Advances previously made by the applicable Servicer, the Master Servicer or the Trustee in respect of such Mortgage Loan for which a Mortgage Loan was substituted; and (II) the Class B-6 Prepayment Percentage of the Non-PO Recovery for such Distribution Date; provided, however, that if an Optimal Adjustment Event occurs with respect to such Class and such Distribution Date, the Class B-6 Optimal Principal Amount will equal the lesser of (A) the Class B-6 Optimal Principal Amount calculated as described in the preceding provisions and (B) the Adjusted Principal Balance for the Class B-6 Certificates. Class B-6 Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Percentage by (ii) a fraction, the numerator of which is the Class B-6 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-6 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-6 Percentage for such Distribution Date will be zero. Class B-6 Prepayment Percentage: As to any Distribution Date, except as set forth in the next sentence, the percentage calculated by multiplying (i) the Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is the Class B-6 Principal Balance (determined as of the Determination Date preceding such Distribution Date) and the denominator of which is the sum of the Principal Balances of the Classes of Class B Certificates eligible to receive principal distributions for such Distribution Date in accordance with the provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in the event that the Class B-6 Certificates are not eligible to receive distributions of principal in accordance with Section 4.01(d)(i), the Class B-6 Prepayment Percentage for such Distribution Date will be zero. Class B-6 Principal Balance: As to the first Determination Date, the Original Class B-6 Principal Balance. As of any subsequent Determination Date, the Original Class B-6 Principal Balance less the sum of all amounts previously distributed in respect of the Class B-6 Certificates on prior Distribution Dates pursuant to Paragraph twenty-second of Section 4.01(a) (including any principal otherwise payable to the Class B-6 Certificates used to pay any Class A-PO Deferred Amounts); provided, however, if the Class B-6 Certificates are outstanding, the Class B-6 Principal Balance will equal the difference, if any, between the Adjusted Pool Amount (Non-PO Portion) as of the preceding Distribution Date less the sum of the Class A Non-PO Principal Balance, the Class B-1 Principal Balance, the Class B-2 Principal Balance, the Class B-3 Principal Balance, the Class B-4 Principal Balance and the Class B-5 Principal Balance as of such Determination Date. Class B-6 Unpaid Interest Shortfall: As to any Distribution Date, the amount, if any, by which the aggregate of the Class B-6 Interest Shortfall Amounts for prior Distribution Dates is in excess of the amounts distributed in respect of the Class B-6 Certificates on prior Distribution Dates pursuant to Paragraph twenty-first of Section 4.01(a). Clearing Agency: An organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. The initial Clearing Agency shall be The Depository Trust Company. Clearing Agency Participant: A broker, dealer, bank, financial institution or other Person for whom a Clearing Agency effects book-entry transfers of securities deposited with the Clearing Agency. Closing Date: The date of initial issuance of the Certificates, as set forth in Section 11.19. Code: The Internal Revenue Code of 1986, as it may be amended from time to time, any successor statutes thereto, and applicable U.S. Department of the Treasury temporary or final regulations promulgated thereunder. Commission: The United States Securities and Exchange Commission. Compensating Interest: With respect to any Distribution Date, the least of (a) the aggregate Prepayment Interest Shortfall on the Mortgage Loans for such Distribution Date, (b) the product of (i) 1/12th of 0.20% and (ii) the Pool Scheduled Principal Balance for such Distribution Date and (c) the Available Master Servicing Compensation for such Distribution Date. Co-op Shares: Shares issued by private non-profit housing corporations. Corporate Trust Office: With respect to (a) the Trustee, the office of the Trustee at which at any particular time its duties under 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: WFMBS 200 - and (b) the Paying Agent, Certificate Registrar and Authenticating Agent, for Certificate transfer purposes at Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479 Attn: Corporate Trust Services--WFMBS 200 - , and for all other purposes at 9062 Old Annapolis Blvd., Columbia, Maryland 21045 Attn: Corporate Trust Services--WFMBS 200 - . Current Class A Interest Distribution Amount: As to any Distribution Date, the amount distributed in respect of the Classes of Class A Certificates pursuant to Paragraph first of Section 4.01(a) on such Distribution Date. Current Class B Interest Distribution Amount: As to any Distribution Date, the amount distributed in respect of the Classes of Class B Certificates pursuant to Paragraphs fifth, eighth, eleventh, fourteenth, seventeenth and twentieth of Section 4.01(a) on such Distribution Date. Current Class B-1 Fractional Interest: As to any Distribution Date subsequent to the first Distribution Date, the percentage obtained by dividing the sum of the Principal Balances of the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates by the Aggregate Non-PO Principal Balance. As to the first Distribution Date, the Original Class B-1 Fractional Interest. Current Class B-2 Fractional Interest: As to any Distribution Date subsequent to the first Distribution Date, the percentage obtained by dividing the sum of the Principal Balances of the Class B-3, Class B-4, Class B-5 and Class B-6 Certificates by the Aggregate Non-PO Principal Balance. As to the first Distribution Date, the Original Class B-2 Fractional Interest. Current Class B-3 Fractional Interest: As to any Distribution Date subsequent to the first Distribution Date, the percentage obtained by dividing the sum of the Principal Balances of the Class B-4, Class B-5 and Class B-6 Certificates by the Aggregate Non-PO Principal Balance. As to the first Distribution Date, the Original Class B-3 Fractional Interest. Current Class B-4 Fractional Interest: As to any Distribution Date subsequent to the first Distribution Date, the percentage obtained by dividing the sum of the Principal Balances of the Class B-5 and Class B-6 Certificates by the Aggregate Non-PO Principal Balance. As to the first Distribution Date, the Original Class B-4 Fractional Interest. Current Class B-5 Fractional Interest: As to any Distribution Date subsequent to the first Distribution Date, the percentage obtained by dividing the Principal Balance of the Class B-6 Certificates by the Aggregate Non-PO Principal Balance. As to the first Distribution Date, the Original Class B-5 Fractional Interest. Curtailment: Any Principal Prepayment made by a Mortgagor which is not a Prepayment in Full. Curtailment Interest Shortfall: On any Distribution Date with respect to a Mortgage Loan which was the subject of a Curtailment: (A) in the case where the Applicable Unscheduled Principal Receipt Period is the Mid-Month Receipt Period and such Curtailment is received by the Servicer on or after the Determination Date in the month preceding the month of such Distribution Date but prior to the first day of the month of such Distribution Date, the amount of interest that would have accrued at the Net Mortgage Interest Rate on the amount of such Curtailment from the day of its receipt or, if earlier, its application by the Servicer through the last day of the month preceding the month of such Distribution Date; and (B) in the case where the Applicable Unscheduled Principal Receipt Period is the Prior Month Receipt Period and such Curtailment is received by the Servicer during the month preceding the month of such Distribution Date, the amount of interest that would have accrued at the Net Mortgage Interest Rate on the amount of such Curtailment from the day of its receipt or, if earlier, its application by the Servicer through the last day of the month in which such Curtailment is received. Custodial Agreement: The Custodial Agreement, dated as of [ ], among the Custodian, the Depositor, the Master Servicer and the Trustee, which agreement is attached hereto as Exhibit E, as the same may be amended or modified from time to time in accordance with the terms thereof. Custodial P&I Account: The Custodial P&I Account, as defined in each of the Servicing Agreements, with respect to the Mortgage Loans. In determining whether the Custodial P&I Account under any Servicing Agreement is "acceptable" to the Master Servicer (as may be required by the definition of "Eligible Account" contained in the Servicing Agreements), the Master Servicer shall require that any such account shall be acceptable to each of the Rating Agencies. Custodian: Wells Fargo Bank, or its successor in interest under the Custodial Agreement. Initially, the custodial functions shall be performed by the Corporate Trust Services division of Wells Fargo Bank. Cut-Off Date: The first day of the month of initial issuance of the Certificates as set forth in Section 11.01. Cut-Off Date Aggregate Principal Balance: The aggregate of the Cut-Off Date Principal Balances of the Mortgage Loans as set forth in Section 11.02. Cut-Off Date Principal Balance: As to each Mortgage Loan, its unpaid principal balance as of the close of business on the Cut-Off Date (but without giving effect to any Unscheduled Principal Receipts received or applied on the Cut-Off Date), reduced by all payments of principal due on or before the Cut-Off Date and not paid, and increased by scheduled monthly payments of principal due after the Cut-Off Date but received by the related Servicer on or before the Cut-Off Date. 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 constituting a Deficient Valuation. Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court of competent jurisdiction of the Mortgaged Property in an amount less than the then-outstanding indebtedness under 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 or reduction results from a proceeding under the Bankruptcy Code. Definitive Certificates: As defined in Section 5.01(b). Denomination: The amount, if any, specified on the face of each Certificate representing the principal portion of the Cut-Off Date Aggregate Principal Balance evidenced by such Certificate. Depositor: Wells Fargo Asset Securities Corporation, or its successor in interest. Determination Date: The 17th day of the month in which the related Distribution Date occurs, or if such 17th day is not a Business Day, the Business Day preceding such 17th day. Discount Mortgage Loan: A Mortgage Loan with a Net Mortgage Interest Rate of less than [ ]%. Distribution Date: The 25th day of any month, beginning in the month following the month of initial issuance of the Certificates, or if such 25th day is not a Business Day, the Business Day following such 25th day. Distribution Date Statement: As defined in Section 4.04(a). 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 Fitch. Due Date: With respect to any Mortgage Loan, the day of the month in which the Monthly Payment on such Mortgage Loan is scheduled to be paid. Eligible Account: One or more accounts (i) that are maintained with a depository institution (which may be the Master Servicer) whose long-term debt obligations (or, in the case of a depository institution which is part of a holding company structure, the long-term debt obligations of such parent holding company) at the time of deposit therein are rated at least "AA" (or the equivalent) by each Rating Agency, (ii) the deposits in which are fully insured by the FDIC through either the Bank Insurance Fund or the Savings Association Insurance Fund, (iii) the deposits in which are insured by the FDIC through either the Bank Insurance Fund or the Savings Association Insurance Fund (to the limit established by the FDIC) and the uninsured deposits in which accounts are otherwise secured, as evidenced by an Opinion of Counsel delivered to the Trustee, such that the Trustee, on behalf of the Certificateholders has a claim with respect to the funds in such accounts or a perfected first security interest against any collateral securing such funds that is superior to claims of any other depositors or creditors of the depository institution with which such accounts are maintained, (iv) that are trust accounts maintained with the trust department of a federal or state chartered depository institution or trust company acting in its fiduciary capacity or (v) such other account that is acceptable to each of the Rating Agencies and would not cause the Trust Estate to fail to qualify as a REMIC or result in the imposition of any federal tax on the REMIC. Eligible Investments: At any time, any one or more of the following obligations and securities which shall mature not later than the Business Day preceding the Distribution Date next succeeding the date of such investment, provided that such investments continue to qualify as "cash flow investments" as defined in Code Section 860G(a)(6): (i) obligations of the United States of America or any agency thereof, provided such obligations are backed by the full faith and credit of the United States of America; (ii) general obligations of or obligations guaranteed by any state of the United States of America or the District of Columbia receiving the highest short-term or highest long-term rating of each Rating Agency, or such lower rating as would not result in the downgrading or withdrawal of the rating then assigned to any of the Certificates by either Rating Agency or result in any of such rated Certificates being placed on credit review status (other than for possible upgrading) by either Rating Agency; (iii) commercial or finance company paper which is then rated in the highest long-term commercial or finance company paper rating category of each Rating Agency or the highest short-term rating category of each Rating Agency, or such lower rating category as would not result in the downgrading or withdrawal of the rating then assigned to any of the Certificates by either Rating Agency or result in any of such rated Certificates being placed on credit review status (other than for possible upgrading) by either Rating Agency; (iv) certificates of deposit, demand or time deposits, federal funds or banker's acceptances issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, provided that the commercial paper and/or debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) are then rated in the highest short-term or the highest long-term rating category for such securities of each of the Rating Agencies, or such lower rating categories as would not result in the downgrading or withdrawal of the rating then assigned to any of the Certificates by either Rating Agency or result in any of such rated Certificates being placed on credit review status (other than for possible upgrading) by either Rating Agency; (v) guaranteed reinvestment agreements issued by any bank, insurance company or other corporation acceptable to each Rating Agency at the time of the issuance of such agreements; (vi) repurchase agreements on obligations with respect to any security described in clauses (i) or (ii) above or any other security issued or guaranteed by an agency or instrumentality of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in (iv) above; (vii) securities (other than stripped bonds or stripped coupon securities) bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof which, at the time of such investment or contractual commitment providing for such investment, are then rated in the highest short-term or the highest long-term rating category by each Rating Agency, or in such lower rating category as would not result in the downgrading or withdrawal of the rating then assigned to any of the Certificates by either Rating Agency or result in any of such rated Certificates being placed on credit review status (other than for possible upgrading) by either Rating Agency; (viii) such other investments acceptable to each Rating Agency as would not result in the downgrading of the rating then assigned to the Certificates by either Rating Agency or result in any of such rated Certificates being placed on credit review status (other than for possible upgrading) by either Rating Agency; and (ix) any mutual fund, money market fund, common trust fund or other pooled investment vehicle, the assets of which are limited to instruments that otherwise would constitute Eligible Investments hereunder, including any such fund that is managed by the Trustee or Master Servicer or any affiliate of the Trustee or Master Servicer or for which the Trustee or Master Servicer or any of its affiliates acts as an adviser as long as such fund is rated in at least the highest rating category by each Rating Agency. In no event shall an instrument be an Eligible Investment if such instrument evidences either (i) a right to receive only interest payments with respect to the obligations underlying such instrument, or (ii) 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 the date of investment of greater than 120% of the yield to maturity at par of such underlying obligations. ERISA: The Employee Retirement Income Security Act of 1974, as amended. ERISA Prohibited Holder: As defined in Section 5.02(d). Errors and Omissions Policy: As defined in each of the Servicing Agreements. Event of Default: Any of the events specified in Section 7.01. Exchange Act: The Securities Exchange Act of 1934, as amended. FDIC: The Federal Deposit Insurance Corporation or any successor thereto. Fidelity Bond: As defined in each of the Servicing Agreements. Final Distribution Date: The Distribution Date on which the final distribution in respect of the Certificates is made pursuant to Section 9.01. Final Scheduled Maturity Date: The Final Scheduled Maturity Date for each Class of Class A Certificates (other than the Class A-8 Certificates) and Class B Certificates is [ ], which corresponds to the "latest possible maturity date" for purposes of Section 860G(a)(1) of the Internal Revenue Code of 1986, as amended. The Final Scheduled Maturity Date for the Class A-8 Certificates is [ ]. Fitch: Fitch Ratings, or its successor in interest. Fixed Retained Yield: The fixed percentage of interest on each Mortgage Loan with a Mortgage Interest Rate greater than the sum of (a) [ ]%, (b) the applicable Servicing Fee Rate and (c) the Master Servicing Fee Rate, which will be determined on a loan by loan basis and will equal the Mortgage Interest Rate on each Mortgage Loan minus the sum of the rates described in clauses (a), (b) and (c), which is not assigned to and not part of the Trust Estate. Fixed Retained Yield Rate: With respect to each Mortgage Loan, a per annum rate equal to the greater of (a) zero and (b) the Mortgage Interest Rate on such Mortgage Loan minus, the sum of (a) [ ]%, (b) the applicable Servicing Fee Rate and (c) the Master Servicing Fee Rate. Form 8-K: A Current Report on Form 8-K under the Exchange Act. Form 8-K Disclosure Information: As defined in Section 3.12(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 15: A Form 15 Suspension Notification under the Exchange Act. Full Unscheduled Principal Receipt: Any Unscheduled Principal Receipt with respect to a Mortgage Loan (i) in the amount of the outstanding principal balance of such Mortgage Loan and resulting in the full satisfaction of such Mortgage Loan or (ii) representing Liquidation Proceeds other than Partial Liquidation Proceeds. Holder: See "Certificateholder." Independent: When used with respect to any specified Person, such Person who (i) is in fact independent of the Depositor, the Master Servicer and any Servicer, (ii) does not have any direct financial interest or any material indirect financial interest in the Depositor or the Master Servicer or any Servicer or in an affiliate of either, and (iii) is not connected with the Depositor, the Master Servicer or any Servicer as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. Insurance Policy: Any insurance or performance bond relating to a Mortgage Loan or the Mortgage Loans, including any hazard insurance, special hazard insurance, flood insurance, primary mortgage insurance, mortgagor bankruptcy bond or title insurance. Insurance Proceeds: Proceeds paid by any insurer pursuant to any Insurance Policy covering a Mortgage Loan. Insured Expenses: Expenses covered by any Insurance Policy covering a Mortgage Loan. Interest Accrual Amount: As to any Distribution Date and any Class of Class A Certificates (other than the Class A-PO Certificates), (i) the product of (a) 1/12th of the Class A Pass-Through Rate for such Class and (b) the Principal Balance of such Class as of the Determination Date immediately preceding such Distribution Date minus (ii) the sum of (A) the Class A Interest Percentage of such Class of the interest portion of any Realized Losses on the Mortgage Loans on or after the Subordination Depletion Date pursuant to Section 4.02(c) and (B) the Class A Interest Percentage of such Class of any Non-Supported Interest Shortfall or Relief Act Shortfall allocated to the Class A Certificates with respect to such Distribution Date. The Class A-PO Certificates have no Interest Accrual Amount. As to any Distribution Date and any Class of Class B Certificates, an amount equal to (i) the product of 1/12th of the Class B Pass-Through Rate and the Principal Balance of such Class as of the Determination Date preceding such Distribution Date minus (ii) the Class B Interest Percentage of such Class of the sum of any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B Certificates with respect to such Distribution Date. Letter of Credit: As defined in the Wells Fargo Bank Servicing Agreement. LIBOR: As to any Distribution Date, the arithmetic mean of the London Interbank offered rate quotations for one month U.S. dollar deposits, as determined by the Paying Agent on the related Rate Determination Date in accordance with Section 4.07. LIBOR Business Day: Any Business Day on which banks are open for dealing in foreign currency and exchange in London, England and the City of New York. LIBOR Certificates: Any of the Class A-1, Class A-2, Class A-5 and Class A-6 Certificates. Liquidated Loan: A Mortgage Loan with respect to which the related Mortgaged Property has been acquired, liquidated or foreclosed and with respect to which the applicable Servicer determines that all Liquidation Proceeds which it expects to recover have been recovered. Liquidated Loan Loss: With respect to any Distribution Date, the aggregate of the amount of losses with respect to each Mortgage Loan which became a Liquidated Loan during the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date, equal to the excess of (i) the unpaid principal balance of each such Liquidated Loan, plus accrued interest thereon in accordance with the amortization schedule at the time applicable thereto at the applicable Net Mortgage Interest Rate from the Due Date as to which interest was last paid with respect thereto through the last day of the month preceding the month in which such Distribution Date occurs, over (ii) Net Liquidation Proceeds with respect to such Liquidated Loan. Liquidation Expenses: Expenses incurred by a Servicer in connection with the liquidation of any defaulted Mortgage Loan or property acquired in respect thereof (including, without limitation, legal fees and expenses, committee or referee fees, and, if applicable, brokerage commissions and conveyance taxes), any unreimbursed advances (including Periodic Advances) expended by such Servicer pursuant to its Servicing Agreement or the Master Servicer or Trustee pursuant hereto respecting the related Mortgage Loan, including any unreimbursed advances for real property taxes or for property restoration or preservation of the related Mortgaged Property. Liquidation Expenses shall not include any previously incurred expenses in respect of an REO Mortgage Loan which have been netted against related REO Proceeds. Liquidation Proceeds: Amounts received by a Servicer (including Insurance Proceeds) or PMI Advances made by a Servicer in connection with the liquidation of defaulted Mortgage Loans or property acquired in respect thereof, whether through foreclosure, sale or otherwise, including payments in connection with such Mortgage Loans received from the Mortgagor, other than amounts required to be paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be applied otherwise pursuant to law. Liquidation Profits: As to any Distribution Date and any Mortgage Loan that became a Liquidated Loan during the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date, the excess, if any, of (i) Net Liquidation Proceeds in respect of such Liquidated Loan over (ii) the unpaid principal balance of such Liquidated Loan plus accrued interest thereon in accordance with the amortization schedule at the time applicable thereto at the applicable Net Mortgage Interest Rate from the Due Date to which interest was last paid with respect thereto through the last day of the month preceding the month in which such Distribution Date occurs. Loan-to-Value Ratio: The ratio, expressed as a percentage, the numerator of which is the principal balance 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. Master Servicer: Wells Fargo Bank, or its successor in interest. Initially, the Master Servicer functions shall be performed by the Corporate Trust Services division of Wells Fargo Bank. Master Servicer Errors and Omissions Policy: An insurance policy covering losses caused by errors or omissions of the Master Servicer and its personnel. Master Servicing Fee: With respect to any Mortgage Loan and any Distribution Date, the fee payable monthly to the Master Servicer pursuant to Section 6.05 equal to a fixed percentage (expressed as a per annum rate) of the unpaid principal balance of such Mortgage Loan. Master Servicing Fee Rate: As set forth in Section 11.24. Master Servicing Officer: Any officer of the Master Servicer involved in, or responsible for, the administration and master servicing of the Mortgage Loans. 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. Mid-Month Receipt Period: With respect to each Distribution Date, the one month period beginning on the Determination Date (or, in the case of the first Distribution Date, from and including the Cut-Off-Date) occurring in the calendar month preceding the month in which such Distribution Date occurs and ending on the day preceding the Determination Date immediately preceding such Distribution Date. MIN: A MERS Mortgage Identification Number assigned to a Mortgage Loan registered under MERS. 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. Month End Interest: As defined in each Servicing Agreement. Monthly Payment: As to any Mortgage Loan (including any REO Mortgage Loan) and any Due Date, the payment of principal and interest due thereon in accordance with the amortization schedule at the time applicable thereto (after adjustment for any Curtailments and Deficient Valuations occurring prior to such Due Date but before any adjustment to such amortization schedule, other than for Deficient Valuations, by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period). Mortgage: The mortgage, deed of trust or other instrument creating a first lien on Mortgaged Property securing a Mortgage Note together with any Mortgage Loan Rider, if applicable. Mortgage Interest Rate: As to any Mortgage Loan, the per annum rate at which interest accrues on the unpaid principal balance thereof as set forth in the related Mortgage Note, which rate is as indicated on the Mortgage Loan Schedule. Mortgage Loan Purchase Agreement: The mortgage loan purchase agreement dated as of [ ] between Wells Fargo Bank, as seller, and the Depositor, as purchaser. Mortgage Loan Rider: The standard Fannie Mae/Freddie Mac riders to the Mortgage Note and/or Mortgage riders required when the Mortgaged Property is a condominium unit or a unit in a planned unit development. Mortgage Loan Schedule: The list delivered by the Depositor to the Trustee, the Master Servicer and the Custodian of the Mortgage Loans transferred to the Trustee on the Closing Date as part of the Trust Estate, which list may be amended following the Closing Date upon conveyance of a Substitute Mortgage Loan pursuant to Section 2.02 or 2.03 and which list shall set forth at a minimum the following information as of the close of business on the Cut-Off Date (or, with respect to Substitute Mortgage Loans, as of the close of business on the day of substitution) as to each Mortgage Loan: (i) the Mortgage Loan identifying number; (ii) the city, state and zip code of the Mortgaged Property; (iii) the type of property; (iv) the Mortgage Interest Rate; (v) the Net Mortgage Interest Rate; (vi) the Monthly Payment; (vii) the original number of months to maturity; (viii) the scheduled maturity date; (ix) the Cut-Off Date Principal Balance; (x) the Loan-to-Value Ratio at origination; (xi) whether such Mortgage Loan is a Subsidy Loan; (xii) whether such Mortgage Loan is covered by primary mortgage insurance; (xiii) the applicable Servicing Fee Rate; (xiv) the Master Servicing Fee Rate; (xv) Fixed Retained Yield Rate, if applicable; (xvi) in the case of any Mortgage Loan initially serviced by Wells Fargo Bank, whether such Mortgage Loan is a Type 1 Mortgage Loan or a Type 2 Mortgage Loan; and (xvii) the name of the Servicer. Such schedule may consist of multiple reports that collectively set forth all of the information required. Mortgage Loans: Each of the mortgage loans transferred and assigned to the Trustee on the Closing Date pursuant to Section 2.01(a) and any mortgage loans substituted therefor pursuant to Section 2.02 or 2.03, in each case as from time to time are included in the Trust Estate as identified in the Mortgage Loan Schedule. Mortgage Note: The note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan together with any related Mortgage Loan Riders, if applicable. Mortgaged Property: The property subject to a Mortgage, which may include Co-op Shares or residential long-term leases. Mortgagor: The obligor on a Mortgage Note. Net Liquidation Proceeds: As to any defaulted Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses. Net Mortgage Interest Rate: With respect to each Mortgage Loan, a rate equal to (i) the Mortgage Interest Rate on such Mortgage Loan minus (ii) the sum of (a) the applicable Servicing Fee Rate, as set forth in Section 11.23 with respect to such Mortgage Loan, (b) the Master Servicing Fee Rate, as set forth in Section 11.24 with respect to such Mortgage Loan and (c) the Fixed Retained Yield Rate, if any, with respect to such Mortgage Loan. Any regular monthly computation of interest at such rate shall be based upon annual interest at such rate on the applicable amount divided by twelve. Net REO Proceeds: As to any REO Mortgage Loan, REO Proceeds net of any related expenses of the Servicer. Non-permitted Foreign Holder: As defined in Section 5.02(d). Non-PO Fraction: With respect to any Mortgage Loan, the lesser of (i) 1.00 and (ii) the quotient obtained by dividing the Net Mortgage Interest Rate for such Mortgage Loan by [ ]%. Non-PO Recovery: As to any Distribution Date, the amount of all Recoveries received during the Applicable Unscheduled Principal Receipt Periods for such Distribution Date less the Class A-PO Recovery for such Distribution Date. Nonrecoverable Advance: Any portion of a Periodic Advance previously made or proposed to be made in respect of a Mortgage Loan which has not been previously reimbursed to the Servicer, the Master Servicer or the Trustee, as the case may be, and which the Servicer, the Master Servicer or the Trustee determines will not, or in the case of a proposed Periodic Advance would not, be ultimately recoverable from Liquidation Proceeds or other recoveries in respect of the related Mortgage Loan. The determination by the Servicer, the Master Servicer or the Trustee (i) that it has made a Nonrecoverable Advance or (ii) that any proposed Periodic Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officer's Certificate of the Servicer delivered to the Master Servicer for redelivery to the Trustee or, in the case of a Master Servicer determination, an Officer's Certificate of the Master Servicer delivered to the Trustee, in each case detailing the reasons for such determination. Non-Supported Interest Shortfall: With respect to any Distribution Date, the sum of (i) the excess, if any, of the aggregate Prepayment Interest Shortfall on the Mortgage Loans over the aggregate Compensating Interest with respect to such Distribution Date and (ii) Curtailment Interest Shortfalls with respect to such Distribution Date. With respect to each Distribution Date occurring on or after the Subordination Depletion Date, the Non-Supported Interest Shortfall determined pursuant to the preceding sentence will be increased by the amount of any Subordination Depletion Date Interest Shortfall for such Distribution Date. Any Non-Supported Interest Shortfall will be allocated to (a) the Class A Certificates (other than the Class A-PO Certificates) according to the percentage obtained by dividing the Class A Non-PO Principal Balance by the Aggregate Non-PO Principal Balance and (b) the Class B Certificates according to the percentage obtained by dividing the Class B Principal Balance by the Aggregate Non-PO Principal Balance. Non-U.S. Person: As defined in Section 4.01(f). NYCEMA: A New York Consolidation, Extension and Modification Agreement. Officer's Certificate: With respect to any Person, a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, the Secretary or one of the Assistant Treasurers, Assistant Secretaries or any other duly authorized officer of such Person (or, in the case of a Person which is not a corporation, signed by the person or persons having like responsibilities). Opinion of Counsel: A written opinion of counsel, who may be outside or salaried counsel for the Depositor, a Servicer or the Master Servicer, or any affiliate of the Depositor, a Servicer or the Master Servicer, acceptable to the Trustee if such opinion is to be delivered to the Trustee; provided, however, that with respect to REMIC matters, matters relating to the determination of Eligible Accounts or matters relating to transfers of Certificates, such counsel shall be Independent. Optimal Adjustment Event: With respect to any Class of Class B Certificates and any Distribution Date, an Optimal Adjustment Event will occur with respect to such Class if: (i) the Principal Balance of such Class on the Determination Date succeeding such Distribution Date would have been reduced to zero (regardless of whether such Principal Balance was reduced to zero as a result of principal distribution or the allocation of Realized Losses) and (ii) (a) the Principal Balance of any Class of Class A Non-PO Certificates would be subject to further reduction as a result of the third sentence of the definition of Principal Balance or (b) the Principal Balance of a Class of Class B Certificates with a lower numerical designation would be reduced with respect to such Distribution Date as a result of the application of the proviso in the definition of Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3 Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance or Class B-6 Principal Balance. Original Aggregate Non-PO Principal Balance: The Aggregate Non-PO Principal Balance as of the Cut-Off Date, as set forth in Section 11.05. Original Class A Percentage: The Class A Percentage as of the Cut-Off Date as set forth in Section 11.03. Original Class B Principal Balance: The sum of the Original Class B-1 Principal Balance, the Original Class B-2 Principal Balance, the Original Class B-3 Principal Balance, the Original Class B-4 Principal Balance, the Original Class B-5 Principal Balance and the Original Class B-6 Principal Balance, as set forth in Section 11.06. Original Class B-1 Fractional Interest: As to the first Distribution Date, the percentage obtained by dividing the sum of the Original Class B-2 Principal Balance, the Original Class B-3 Principal Balance, the Original Class B-4 Principal Balance, the Original Class B-5 Principal Balance and the Original Class B-6 Principal Balance by the Original Aggregate Non-PO Principal Balance. The Original Class B-1 Fractional Interest is specified in Section 11.08. Original Class B-2 Fractional Interest: As to the first Distribution Date, the percentage obtained by dividing the sum of the Original Class B-3 Principal Balance, the Original Class B-4 Principal Balance, the Original Class B-5 Principal Balance and the Original Class B-6 Principal Balance by the Original Aggregate Non-PO Principal Balance. The Original Class B-2 Fractional Interest is specified in Section 11.09. Original Class B-3 Fractional Interest: As to the first Distribution Date, the percentage obtained by dividing the sum of the Original Class B-4 Principal Balance, the Original Class B-5 Principal Balance and the Original Class B-6 Principal Balance by the Original Aggregate Non-PO Principal Balance. The Original Class B-3 Fractional Interest is specified in Section 11.10. Original Class B-4 Fractional Interest: As to the first Distribution Date, the percentage obtained by dividing the sum of the Original Class B-5 Principal Balance and the Original Class B-6 Principal Balance by the Original Aggregate Non-PO Principal Balance. The Original Class B-4 Fractional Interest is specified in Section 11.11. Original Class B-5 Fractional Interest: As to the first Distribution Date, the percentage obtained by dividing the Original Class B-6 Principal Balance by the Original Aggregate Non-PO Principal Balance. The Original Class B-5 Fractional Interest is specified in Section 11.12. Original Class B-1 Percentage: The Class B-1 Percentage as of the Cut-Off Date, as set forth in Section 11.13. Original Class B-2 Percentage: The Class B-2 Percentage as of the Cut-Off Date, as set forth in Section 11.14. Original Class B-3 Percentage: The Class B-3 Percentage as of the Cut-Off Date, as set forth in Section 11.15. Original Class B-4 Percentage: The Class B-4 Percentage as of the Cut-Off Date, as set forth in Section 11.16. Original Class B-5 Percentage: The Class B-5 Percentage as of the Cut-Off Date, as set forth in Section 11.17. Original Class B-6 Percentage: The Class B-6 Percentage as of the Cut-Off Date, as set forth in Section 11.18. Original Class B-1 Principal Balance: The Class B-1 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Class B-2 Principal Balance: The Class B-2 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Class B-3 Principal Balance: The Class B-3 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Class B-4 Principal Balance: The Class B-4 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Class B-5 Principal Balance: The Class B-5 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Class B-6 Principal Balance: The Class B-6 Principal Balance as of the Cut-Off Date, as set forth in Section 11.07. Original Principal Balance: Any of the Original Principal Balances of the Classes of Class A Certificates as set forth in Section 11.04; the Original Class B-1 Principal Balance, Original Class B-2 Principal Balance, Original Class B-3 Principal Balance, Original Class B-4 Principal Balance, Original Class B-5 Principal Balance or Original Class B-6 Principal Balance as set forth in Section 11.07. Other Servicer: Any of the Servicers other than Wells Fargo Bank. Other Servicer Mortgage Loan: Any of the Mortgage Loans, if any, identified on the Mortgage Loan Schedule as serviced by an Other Servicer, as such Mortgage Loan Schedule may be amended from time to time in connection with a substitution pursuant to Section 2.02 or 2.03, which Mortgage Loan is serviced under an Other Servicing Agreement. Other Servicing Agreements: The Servicing Agreements other than the Wells Fargo Bank Servicing Agreement. Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan (including an REO Mortgage Loan) which was not the subject of a Full Unscheduled Principal Receipt prior to such Due Date and which was not repurchased by the Depositor prior to such Due Date pursuant to Section 2.02, 2.03 or 3.08. Owner Mortgage Loan 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 Loan File pursuant to this Agreement. PAC I Group: The Class A-10, Class A-11, Class A-12, Class A-13 and Class A-14 Certificates. PAC I Group Principal Amount: As defined in Section 4.01(b). PAC II Group: The Class A-5, Class A-6 and Class A-7 Certificates. PAC II Group Principal Amount: As defined in Section 4.01(b). Partial Liquidation Proceeds: Liquidation Proceeds received by a Servicer prior to the Unscheduled Principal Receipt Period in which the related Mortgage Loan became a Liquidated Loan. Partial Unscheduled Principal Receipt: An Unscheduled Principal Receipt which is not a Full Unscheduled Principal Receipt. Paying Agent: The Person authorized to make distributions to Certificateholders with respect to the Certificates and to forward to Certificateholders the periodic and annual statements required by Section 4.04. The Paying Agent may be the Trustee. The initial Paying Agent is appointed in Section 4.03(b). Paying Agent Agreement: As defined in Section 4.03(b). Payment Account: The account maintained pursuant to Section 4.03(a). Percentage Interest: With respect to a Class A Certificate of a Class, the undivided percentage interest obtained by dividing the original principal balance of such Certificate by the Original Principal Balance of such Class of Class A Certificates. With respect to a Class B Certificate of a Class, the undivided percentage interest obtained by dividing the original principal balance of such Certificate by the Original Principal Balance of such Class of Class B Certificates. Periodic Advance: The aggregate of the advances required to be made by a Servicer on any Remittance Date pursuant to its Servicing Agreement or by the Master Servicer or the Trustee hereunder on any Distribution Date, the amount of any such advances being equal to the total of all Monthly Payments (adjusted, in each case (i) in respect of interest, to the applicable Mortgage Interest Rate less the applicable Servicing Fee in the case of Periodic Advances made by a Servicer and to the applicable Net Mortgage Interest Rate in the case of Periodic Advances made by the Master Servicer or Trustee and (ii) by the amount of any related Debt Service Reductions or reductions in the amount of interest collectable from the Mortgagor pursuant to the Servicemembers Civil Relief Act, as it may be amended from time to time, or similar legislation or regulations then in effect) on the Mortgage Loans, that (x) were delinquent as of the close of business on the related Determination Date, (y) were not the subject of a previous Periodic Advance by such Servicer or of a Periodic Advance by the Master Servicer or the Trustee, as the case may be and (z) have not been determined by the Master Servicer, such Servicer or Trustee to be Nonrecoverable Advances. Person: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Plan: As defined in Section 5.02(c). Pledge Holder: As defined in the Wells Fargo Bank Servicing Agreement. Pledged Asset Mortgage Loans: The Mortgage Loans listed on Exhibit Q for which Letters of Credit have been issued. PMI Advance: As defined in the related Servicing Agreement, if applicable. PO Fraction: With respect to any Discount Mortgage Loan, the difference between 1.0 and the Non-PO Fraction for such Mortgage Loan; with respect to any other Mortgage Loan, zero. Pool Balance (Non-PO Portion): As of any Distribution Date, the sum of the amounts for each Mortgage Loan that is an Outstanding Mortgage Loan of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such Mortgage Loan. Pool Balance (PO Portion): As of any Distribution Date, the sum of the amounts for each Mortgage Loan that is an Outstanding Mortgage Loan of the product of (i) the PO Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such Mortgage Loan. Pool Distribution Amount: As of any Distribution Date, the funds eligible for distribution to the Class A Certificates and Class B Certificates on such Distribution Date, which shall be the sum of (i) all previously undistributed payments or other receipts on account of principal and interest on or in respect of the Mortgage Loans (including, without limitation, the proceeds of any repurchase of a Mortgage Loan by the Depositor and any Substitution Principal Amount) received by the Master Servicer with respect to the applicable Remittance Date in the month of such Distribution Date and any Unscheduled Principal Receipts received by the Master Servicer on or prior to the Business Day preceding such Distribution Date, (ii) all Periodic Advances made by a Servicer pursuant to the related Servicing Agreement or Periodic Advances made by the Master Servicer or the Trustee pursuant to Section 3.03, (iii) any remaining Reimbursement Amount as provided in Section 4.01(a) and (iv) all other amounts (including any Insurance Proceeds and Compensating Interest) required to be placed in the Certificate Account by the Servicer on or before the applicable Remittance Date or by the Master Servicer or the Trustee on or prior to the Distribution Date, but excluding the following: (a) amounts received as late payments of principal or interest and respecting which the Master Servicer or the Trustee has made one or more unreimbursed Periodic Advances; (b) the portion of Liquidation Proceeds used to reimburse any unreimbursed Periodic Advances by the Master Servicer or the Trustee; (c) that portion of each payment of interest on a particular Mortgage Loan which represents (i) the Fixed Retained Yield, if any, (ii) the applicable Servicing Fee and (iii) the Master Servicing Fee; (d) all amounts representing scheduled payments of principal and interest due after the Due Date occurring in the month in which such Distribution Date occurs; (e) all Unscheduled Principal Receipts received by the Servicers after the Applicable Unscheduled Principal Receipt Period relating to the Distribution Date for the applicable type of Unscheduled Principal Receipt, and all related payments of interest on such amounts; (f) all repurchase proceeds with respect to Mortgage Loans repurchased by the Depositor pursuant to Section 2.02, 2.03 or 3.08 on or following the Determination Date in the month in which such Distribution Date occurs and the Substitution Principal Amounts with respect to any Mortgage Loans for which Mortgage Loans were substituted on or following the Determination Date in the month in which such Distribution Date occurs; (g) that portion of Liquidation Proceeds and REO Proceeds which represents any unpaid Servicing Fee or Master Servicing Fee; (h) all income from Eligible Investments that is held in the Certificate Account for the account of the Master Servicer; (i) Liquidation Profits; (j) Month End Interest; (k) all amounts reimbursable to a Servicer for PMI Advances; and (l) all other amounts permitted to be withdrawn from the Certificate Account, to the extent not covered by clauses (a) through (k) above, or not required to be deposited in the Certificate Account under this Agreement. Pool Scheduled Principal Balance: As to any Distribution Date, the aggregate Scheduled Principal Balance of all Mortgage Loans that were Outstanding Mortgage Loans on the Due Date in the month preceding the month of such Distribution Date. Premium Mortgage Loan: A Mortgage Loan with a Net Mortgage Interest Rate equal to or greater than [ ]%. Prepayment In Full: With respect to any Mortgage Loan, a Mortgagor payment consisting of a Principal Prepayment in the amount of the outstanding principal balance of such loan and resulting in the full satisfaction of such obligation. Prepayment Interest Shortfall: On any Distribution Date, the amount of interest, if any, that would have accrued on any Mortgage Loan which was the subject of a Prepayment in Full at the Net Mortgage Interest Rate for such Mortgage Loan from the date of its Prepayment in Full (but in the case of a Prepayment in Full where the Applicable Unscheduled Principal Receipt Period is the Mid-Month Receipt Period, only if the date of the Prepayment in Full is on or after the Determination Date in the month prior to the month of such Distribution Date and prior to the first day of the month of such Distribution Date) through the last day of the month prior to the month of such Distribution Date. Prepayment Shift Percentage: As to any Distribution Date, the percentage indicated below: Distribution Date Occurring In Prepayment ------------------------------ Shift Percentage ---------- [ ] through [ ]............................. [ ]% [ ] through [ ]............................. [ ]% [ ] through [ ]............................. [ ]% [ ] through [ ]............................. [ ]% [ ] through [ ]............................. [ ]% [ ] and thereafter.................................... [ ]% Principal Adjustment: In the event that the Class B-1 Optimal Principal Amount, Class B-2 Optimal Principal Amount, Class B-3 Optimal Principal Amount, Class B-4 Optimal Principal Amount, Class B-5 Optimal Principal Amount or Class B-6 Optimal Principal Amount is calculated in accordance with the proviso in such definition with respect to any Distribution Date, the Principal Adjustment for such Class of Class B Certificates shall equal the difference between (i) the amount that would have been distributed to such Class as principal in accordance with Section 4.01(a) for such Distribution Date, calculated without regard to such proviso and assuming there are no Principal Adjustments for such Distribution Date and (ii) the Adjusted Principal Balance for such Class. Principal Balance: As of the first Determination Date and as to any Class of Class A Certificates, the Original Principal Balance of such Class. As of any subsequent Determination Date prior to the Subordination Depletion Date and as to any Class of Class A Certificates (other than the Class A-PO Certificates), the Original Principal Balance of such Class (increased in the case of a Class of Accrual Certificates by the Accrual Distribution Amounts for such Class with respect to prior Distribution Dates) less the sum of all amounts previously distributed in respect of such Class on prior Distribution Dates (i) pursuant to Paragraph third clause (1) of Section 4.01(a), (ii) as a result of a Principal Adjustment and (iii), if applicable, from the Accrual Distribution Amounts for such prior Distribution Dates. After the Subordination Depletion Date, each such Principal Balance of a Class of Class A Certificates (other than the Class A-PO Certificates) will also be reduced (if clause (a) is greater than clause (b)) or increased (if clause (a) is less than clause (b)) on each Determination Date by an amount equal to the product of the Class A Loss Percentage of such Class and the difference, if any, between (a) the Class A Non-PO Principal Balance as of such Determination Date without regard to this sentence and (b) the Adjusted Pool Amount (Non-PO Portion) for the preceding Distribution Date; provided, however, that the amount of any such reduction for the Class A-3 Certificates will be decreased by the Class A-15 Loss Allocation Amount and the amount of any such reduction for the Class A-12 Certificates will be decreased by the Class A-14 Loss Allocation Amount. After the applicable Subordination Depletion Date, the Principal Balance for the Class A-15 Certificates will additionally be reduced by the Class A-15 Loss Allocation Amount and the Principal Balance for the Class A-14 Certificates will additionally be reduced by the Class A-14 Loss Allocation Amount. In addition, any increase allocated to the Class A-3 Certificates pursuant to the third sentence above will instead increase the Principal Balance of the Class A-15 Certificates and any increase allocated to the Class A-12 Certificates pursuant to the third sentence above will instead increase the Principal Balance of the Class A-14 Certificates. As of any subsequent Determination Date and as to the Class A-PO Certificates, the Original Principal Balance of such Class less the sum of all amounts previously distributed in respect of the Class A-PO Certificates on prior Distribution Dates pursuant to Paragraph third clause (2) of Section 4.01(a). The Principal Balance of the Class A-PO Certificates will also be reduced (if clause (x) is greater than clause (y)) or increased (if clause (x) is less than clause (y)) on each Determination Date by the difference, if any, between (x) the Principal Balance of the Class A-PO Certificates as of such Determination Date without regard to this sentence and (y) the Adjusted Pool Amount (PO Portion) for the preceding Distribution Date. As to the Class B Certificates, the Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3 Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance and Class B-6 Principal Balance, respectively. Notwithstanding the foregoing, no Principal Balance of a Class will be increased on any Determination Date such that the Principal Balance of such Class exceeds its Original Principal Balance (plus any Accrual Distribution Amounts previously added to the Principal Balance of a Class of Accrual Certificates) less all amounts previously distributed in respect of such Class on prior Distribution Dates pursuant to Paragraph third clause (1) of Section 4.01(a), Paragraph third clause (2) of Section 4.01(a), or Paragraphs seventh, tenth, thirteenth, sixteenth, nineteenth or twenty-second of Section 4.01(a). Principal Prepayment: Any Mortgagor payment on a Mortgage Loan which is received in advance of its Due Date and is not accompanied by an amount representing scheduled interest for any period subsequent to the date of prepayment. Prior Month Receipt Period: With respect to each Distribution Date, the calendar month preceding the month in which such Distribution Date occurs. Priority Amount: For any Distribution Date, the lesser of (i) the sum of the Principal Balances of the Class A-3 and Class A-15 Certificates and (ii) the sum of (A) the product of (1) the Priority Percentage, (2) the Shift Percentage and (3) [ ]% of the Scheduled Principal Amount and (B) the product of (1) the Priority Percentage, (2) the Prepayment Shift Percentage and (3) [ ]% of the Unscheduled Principal Amount. Priority Percentage: The sum of the Principal Balances of the Class A-3 and Class A-15 Certificates divided by the sum of the Principal Balances of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-15 Certificates. Prohibited Transaction Tax: Any tax imposed under Section 860F of the Code. Prospectus: The prospectus dated [ ] as supplemented by the prospectus supplement dated [ ], relating to the Class A, Class B-1, Class B-2 and Class B-3 Certificates. Prudent Servicing Practices: The standard of care set forth in each Servicing Agreement. Rate Determination Date: As to any Distribution Date and any Class of LIBOR Certificates, the second LIBOR Business Day preceding the 25th day of the month preceding the month in which such Distribution Date occurs. Rating Agency: Any nationally recognized statistical credit rating agency, or its successor, that rated one or more Classes of the Certificates at the request of the Depositor at the time of the initial issuance of the Certificates. The Rating Agencies for the Class A Certificates (other than the Class A-R Certificate) are [ ] and [ ]. The Rating Agency for the Class A-R Certificate is [ ]. The Rating Agency for the Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates is [ ]. If any such agency or a successor is no longer in existence, "Rating Agency" shall be such statistical credit rating agency, or other comparable Person, designated by the Depositor, notice of which designation shall be given to the Trustee and the Master Servicer. References herein to the highest short-term rating category of a Rating Agency shall mean [ ] in the case of [ ], [ ] in the case of [ ] and in the case of any other Rating Agency shall mean its equivalent of such ratings. References herein to the highest long-term rating categories of a Rating Agency shall mean AAA in the case of [ ] and Aaa in the case of [ ], and in the case of any other Rating Agency shall mean its equivalent of such ratings without any plus or minus. Realized Losses: With respect to any Distribution Date, (i) Liquidated Loan Losses incurred on Liquidated Loans for which the Liquidation Proceeds were received during the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts with respect to such Distribution Date and (ii) Bankruptcy Losses incurred during the period corresponding to the Applicable Unscheduled Principal Receipt Period with respect to Full Unscheduled Principal Receipts for such Distribution Date. Record Date: For (i) the Class A-1, Class A-2, Class A-5 and Class A-6 Certificates, the Business Day preceding the related Distribution Date and (ii) all other Certificates, the last Business Day of the month preceding the month of the related Distribution Date. Recovery: Any amount received on a Mortgage Loan subsequent to such Mortgage Loan being determined to be a Liquidated Loan. Reference Banks: Initially, the Reference Banks shall be[ ], [ ], [ ], [ ] and [ ]. If any of these banks are not available, the Paying Agent shall select from one of the following banks a substitute Reference Bank: [ ], [ ] or [ ]. If any of these banks are not available, the Paying Agent shall in its discretion select another Reference Bank. 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: As defined in Section 2.03(c). Relevant Servicing Criteria: The Servicing Criteria applicable to the Master Servicer, the Trustee, the Custodian or the Servicers, as set forth on Exhibit R attached hereto and the Servicing Criteria applicable to any Special Servicer as set forth in the applicable Special Servicing Agreement. For clarification purposes, multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Master Servicer, the Trustee, the Custodian, the Special Servicer (if applicable) or a 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 Shortfall: 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 Servicemembers Civil Relief Act, as it may be amended from time to time, or comparable state legislation. Any Relief Act Shortfall will be allocated to (a) the Class A Certificates (other than the Class A-PO Certificates) according to the percentage obtained by dividing the Class A Non-PO Principal Balance by the Aggregate Non-PO Principal Balance and (b) the Class B Certificates according to the percentage obtained by dividing the Class B Principal Balance by the Aggregate Non-PO Principal Balance. REMIC: A "real estate mortgage investment conduit" as defined in Code Section 860D. "The REMIC" means the REMIC constituted by the Trust Estate. REMIC Provisions: Provisions of the federal income tax law relating to REMICs, which appear at Sections 860A through 860G of Part IV of Subchapter M of Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department of the Treasury temporary, proposed or final regulations promulgated thereunder, as the foregoing are in effect (or with respect to proposed regulations, are proposed to be in effect) from time to time. Remittance Date: As defined in each of the Servicing Agreements. REO Mortgage Loan: Any Mortgage Loan which is not a Liquidated 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 Estate. REO Proceeds: Proceeds received in respect of any REO Mortgage Loan (including, without limitation, proceeds from the rental of the related Mortgaged Property). Reportable Event: As defined in Section 3.12(c). Repurchase Price: With respect to any Mortgage Loan repurchased pursuant to Section 2.02, 2.03 or 3.08 hereof, the sum of (a) 100% of the unpaid principal balance of such Mortgage Loan plus (b) accrued interest at the Mortgage Interest Rate less any Fixed Retained Yield, through the last day of the month in which such repurchase takes place. Request for Release: A request for release (which may be in electronic form) in substantially the form attached as Exhibit G hereto. Responsible Officer: When used with respect to the Trustee, the Master Servicer, the Custodian, the Paying Agent or the Authenticating Agent, any officer of the Corporate Trust Department of the Trustee, the Master Servicer, the Custodian, the Paying Agent or the Authenticating Agent having direct responsibility for the administration of this Agreement, including any Senior Vice President, any Vice President, any Assistant Vice President, any Assistant Secretary, any Trust Officer or Assistant Trust Officer, or any other employee of the Trustee, the Master Servicer, the Custodian, the Paying Agent or the Authenticating Agent customarily performing functions similar to those performed by any of the above-designated officers. When used with respect to a Servicer, a Servicing Officer. Retained Mortgage Loan 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 Loan File pursuant to this Agreement. Rule 144A: Rule 144A promulgated under the 1933 Act. Sarbanes-Oxley Certification: As defined in Section 3.12(b). Scheduled Principal Amount: The sum for each outstanding Mortgage Loan (including each defaulted Mortgage Loan with respect to which the related Mortgaged Property has been acquired by the Trust Estate) of the product of (A) the Non-PO Fraction for such Mortgage Loan and (B) the sum of the amounts described in clauses Iy(i) and Iy(iv) of the definition of Class A Non-PO Optimal Principal Amount. Scheduled Principal Balance: As to any Mortgage Loan and Distribution Date, the principal balance of such Mortgage Loan as of the Due Date in the month preceding the month of such Distribution Date as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any bankruptcy (other than Deficient Valuations) or similar proceeding or any moratorium or similar waiver or grace period) after giving effect to (A) Unscheduled Principal Receipts received or applied by the applicable Servicer during the related Unscheduled Principal Receipt Period for each applicable type of Unscheduled Principal Receipt related to the Distribution Date occurring in the month preceding such Distribution Date, (B) Deficient Valuations incurred prior to such Due Date and (C) the payment of principal due on such Due Date and irrespective of any delinquency in payment by the related Mortgagor. Accordingly, the Scheduled Principal Balance of a Mortgage Loan which becomes a Liquidated Loan at any time through the last day of such related Unscheduled Principal Receipt Period shall be zero. Servicer Mortgage Loan File: As defined in each of the Servicing Agreements. Servicers: Wells Fargo Bank, as a Servicer under the related Servicing Agreement. Initially the servicing functions performed by Wells Fargo Bank shall be performed by the Wells Fargo Home Mortgage division of Wells Fargo Bank. Servicing Agreements: Each of the Servicing Agreements executed with respect to a portion of the Mortgage Loans by one of the Servicers, which agreements are attached hereto, collectively, as Exhibit L. 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 any Servicer, as defined in its Servicing Agreement. Servicing Fee Rate: With respect to a Mortgage Loan, as set forth in Section 11.23. Servicing Function Participant: Any Subservicer, Subcontractor or any other Person, other than the Master Servicer, the Trustee, the Custodian, the Special Servicer (if applicable) and the Servicers, that is performing activities addressed by the Servicing Criteria. Servicing Officer: Any officer of a Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans. Shift Percentage: As to any Distribution Date, the percentage indicated below: Distribution Date Occurring In Shift ------------------------------ Percentage ---------- [ ] through [ ]............................. [ ]% [ ] and thereafter.................................... [ ]% Similar Law: As defined in Section 5.02(c). Special Servicer: As defined in Section 3.08. Special Servicing Agreement: As defined in Section 3.08. Single Certificate: A Certificate of any Class that evidences the smallest permissible Denomination for such Class, as set forth in Section 11.22. Startup Day: As defined in Section 2.05. 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 any Servicer (or a Subservicer of any Servicer), the Master Servicer, the Trustee or the Custodian. Subordinated Percentage: As to any Distribution Date, the percentage which is the difference between 100% and the Class A Percentage for such date. Subordinated Prepayment Percentage: As to any Distribution Date, the percentage which is the difference between 100% and the Class A Prepayment Percentage for such date. Subordination Depletion Date: The Distribution Date preceding the first Distribution Date on which the Class A Percentage (determined pursuant to clause (ii) of the definition thereof) equals or exceeds 100%. Subordination Depletion Date Interest Shortfall: With respect to any Distribution Date that occurs on or after the Subordination Depletion Date with respect to any Unscheduled Principal Receipt (other than a Prepayment in Full or Curtailment): (A) in the case where the Applicable Unscheduled Principal Receipt Period is the Mid-Month Receipt Period and such Unscheduled Principal Receipt is received by the Servicer on or after the Determination Date in the month preceding the month of such Distribution Date but prior to the first day of the month of such Distribution Date, the amount of interest that would have accrued at the Net Mortgage Interest Rate on the amount of such Unscheduled Principal Receipt from the day of its receipt or, if earlier, its application by the Servicer through the last day of the month preceding the month of such Distribution Date; and (B) in the case where the Applicable Unscheduled Principal Receipt Period is the Prior Month Receipt Period and such Unscheduled Principal Receipt is received by the Servicer during the month preceding the month of such Distribution Date, the amount of interest that would have accrued at the Net Mortgage Interest Rate on the amount of such Unscheduled Principal Receipt from the day of its receipt or, if earlier, its application by the Servicer through the last day of the month in which such Unscheduled Principal Receipt is received. Subservicer: Any Person that (i) services Mortgage Loans on behalf of any 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, any related Servicing Agreement or any sub-servicing agreement that are identified in Item 1122(d) of Regulation AB. Subsidy Account: If the Trust Estate contains any Subsidy Loans, the deposit account or accounts created and maintained by the Servicer for deposit of Subsidy Funds and amounts payable under interest subsidy agreements relating to mortgage loans other than the Mortgage Loans. Subsidy Funds: If the Trust Estate contains any Subsidy Loans, funds contributed by the employer of a Mortgagor in order to reduce the payments required from the Mortgagor for a specified period in specified amounts. Subsidy Loan: Any Mortgage Loan subject to a temporary interest subsidy agreement pursuant to which the monthly interest payments made by the related Mortgagor will be less than the scheduled monthly interest payments on such Mortgage Loan, with the resulting difference in interest payments being provided by the employer of the Mortgagor. Substitute Mortgage Loan: As defined in Section 2.02. Substitution Principal Amount: With respect to any Mortgage Loan substituted in accordance with Section 2.02 or pursuant to Section 2.03, the excess of (x) the unpaid principal balance of the Mortgage Loan which is substituted for over (y) the unpaid principal balance of the Substitute Mortgage Loan, each balance being determined as of the date of substitution. Trust: The New York common law trust created by this Agreement. Trust Estate: The corpus of the Trust, consisting of the Mortgage Loans (other than any Fixed Retained Yield), such amounts as may be held from time to time in the Certificate Account (other than any Fixed Retained Yield), the rights of the Trustee to receive the proceeds of all insurance policies and performance bonds, if any, required to be maintained hereunder or under the related Servicing Agreement, property which secured a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure and all other property and rights described in the first paragraph of Section 2.01(a). Trustee: HSBC Bank USA, National Association, a national banking association, or any successor trustee appointed as herein provided. Trustee Errors and Omissions Policy: An insurance policy covering losses caused by errors or omissions of the Trustee and its personnel. Type 1 Mortgage Loan: The Mortgage Loans, if any, identified as such in the Mortgage Loan Schedule as such Mortgage Loan Schedule may be amended from time to time in connection with a substitution pursuant to Section 2.02 or 2.03, serviced under the Wells Fargo Bank Servicing Agreement and having a Mid-Month Receipt Period with respect to all types of Unscheduled Principal Receipts. Type 2 Mortgage Loan: The Mortgage Loans, if any, identified as such in the Mortgage Loan Schedule as such Mortgage Loan Schedule may be amended from time to time in connection with a substitution pursuant to Section 2.02 or 2.03, serviced under the Wells Fargo Bank Servicing Agreement and having a Prior Month Receipt Period with respect to all types of Unscheduled Principal Receipts. Unpaid Interest Shortfalls: Each of the Class A Unpaid Interest Shortfalls, the Class B-1 Unpaid Interest Shortfall, the Class B-2 Unpaid Interest Shortfall, the Class B-3 Unpaid Interest Shortfall, the Class B-4 Unpaid Interest Shortfall, the Class B-5 Unpaid Interest Shortfall and the Class B-6 Unpaid Interest Shortfall. Unscheduled Principal Amount: The sum for each outstanding Mortgage Loan (including each defaulted Mortgage Loan with respect to which the related Mortgaged Property has been acquired by the Trust Estate) of the product of (A) the Non-PO Fraction for such Mortgage Loan and (B) the sum of the amounts described in clauses Iy(ii) and Iy(iii) of the definition of Class A Non-PO Optimal Principal Amount. Unscheduled Principal Receipt: Any Principal Prepayment or other recovery of principal on a Mortgage Loan, including, without limitation, the principal portion of Net Liquidation Proceeds, the principal portion of Net REO Proceeds, Recoveries and proceeds received from any condemnation award or proceeds in lieu of condemnation other than that portion of such proceeds released to the Mortgagor in accordance with the terms of the Mortgage or Prudent Servicing Practices, but excluding any Liquidation Profits and proceeds of a repurchase of a Mortgage Loan by the Depositor and any Substitution Principal Amounts. Unscheduled Principal Receipt Period: Either a Mid-Month Receipt Period or a Prior Month Receipt Period. U.S. Person: As defined in Section 4.01(f). Voting Interest: With respect to any provisions hereof providing for the action, consent or approval of the Holders of all Certificates evidencing specified Voting Interests in the Trust Estate, each Class of Certificates will be entitled to a pro rata portion of the Voting Interest equal to the ratio obtained by dividing the Principal Balance of such Class by the Class A Principal Balance and the Class B Principal Balance. 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 hereof 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. Wells Fargo Bank: Wells Fargo Bank, N.A., or its successor in interest. Wells Fargo Bank Correspondents: The entities identified on a list provided by Wells Fargo Bank to the Master Servicer, from which Wells Fargo Bank purchased the Mortgage Loans. Wells Fargo Bank Servicing Agreement: The Servicing Agreement providing for the servicing of those Mortgage Loans that are initially serviced by Wells Fargo Bank. Section 1.02. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. 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 Trustee, if made in the manner provided in this Section 1.02. The Trustee shall promptly notify the Master Servicer in writing of the receipt of any such instrument or writing. (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 a 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. When 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 or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the individual executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Certificates (whether or not such Certificates shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Trustee and the Authenticating Agent) shall be proved by the Certificate Register, and none of the Trustee, the Depositor or the Master Servicer shall be affected by any notice to the contrary. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Certificate shall bind every future Holder of the same 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 Depositor or the Master Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. Section 1.03. Effect of Headings and Table of Contents. The Article and Section headings in this Agreement and the Table of Contents are for convenience of reference only and shall not affect the interpretation or construction of this Agreement. Section 1.04. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder and the Holders of the Certificates any benefit or any legal or equitable right, power, remedy or claim under this Agreement. ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF THE CERTIFICATES Section 2.01. Conveyance of Mortgage Loans. (a) The Depositor, concurrently with the execution and delivery hereof, does hereby assign to the Trustee, without recourse all the right, title and interest of the Depositor in and to (a) the Trust Estate, including all interest (other than the portion, if any, representing the Fixed Retained Yield) and principal received by the Depositor 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 the Depositor on or before the Cut-Off Date and Unscheduled Principal Receipts 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), (b) the Insurance Policies, (c) the obligations of the Servicers under the Servicing Agreements with respect to the Mortgage Loans, (d) the right to receive amounts, if any, payable on behalf of any Mortgagor from the Subsidy Account relating to any Subsidy Loan, (e) all of the Depositor's right, title and interest in and to the proceeds of the Letters of Credit and (f) proceeds of all the foregoing. 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 Estate that is a "High-Cost Home Loan" as defined in any of (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 (which may be assigned in blank), 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; (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); and (v) For each Letter of Credit, the original advice of such Letter of Credit endorsed by the Pledge Holder and Wells Fargo Bank's notice of transfer (Exhibit A to the Letter of Credit) of beneficiary of such Letter of Credit to the Trustee. (b) The Master Servicer shall promptly notify the Depositor, the Trustee and the Custodian of the occurrence of any Document Transfer Event of which the Master 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 enforce any obligation of the Servicers under the Servicing Agreements to take all actions as are necessary to cause the Trust Estate 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 Loan 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 Estate 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 has 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 encumbrances 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 K 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 K. 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: [ ], AS TRUSTEE under the pooling and servicing agreement dated as of [date]. and its successors and assigns, [Wells Fargo Bank, N.A.] or [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: [ ], 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 Master Servicer and the Custodian. The Depositor and the Master Servicer 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 F, as the same may be amended from time to time by written notice from such party to the other parties hereto. Section 2.02 Acceptance by Custodian. Subject to the provisions of the following paragraph, pursuant to the Custodial Agreement, the Custodian, on behalf of the Trustee, will declare that it holds and will hold the documents delivered to it pursuant to Section 2.01(a) above and the other documents constituting a part of the Owner Mortgage Loan Files or Retained Mortgage Loan Files (after the occurrence of a Document Transfer Event) delivered to it in trust, upon the trusts herein set forth, for the use and benefit of all present and future Certificateholders. Upon execution of this Agreement, the Custodian will deliver to the Depositor and the Trustee an initial certification in the form of Exhibit N hereto, to the effect that, except as may be specified in a list of exceptions attached thereto, it has received the original Mortgage Notes relating to each Mortgage Loan on the Mortgage Loan Schedule. The Custodian will review each Owner Mortgage Loan 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 Depositor and the Trustee a final certification in the form of Exhibit O 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 there are exceptions attached to the final certification, the Depositor shall have a period of 60 days after the date of receipt of the final certification within which to correct or cure any such defects. The Depositor hereby covenants and agrees that, if any material defect is not so corrected or cured, the Depositor will, not later than 60 days after receipt of the final certification referred to above respecting such defect, either (i) repurchase the related Mortgage Loan or any property acquired in respect thereof from the Trust Estate at a price equal to the Repurchase Price or (ii) if within two years of the Startup Day, or such other period permitted by the REMIC Provisions, substitute for any Mortgage Loan to which such material defect relates, a new mortgage loan (a "Substitute Mortgage Loan") having such characteristics so that the representations and warranties of the Depositor set forth in Section 2.03(b) hereof (other than Section 2.03(b)(i)) would not have been incorrect had such Substitute Mortgage Loan originally been a Mortgage Loan. In no event shall any Substitute Mortgage Loan have an unpaid principal balance, as of the date of substitution, greater than the Scheduled Principal Balance (reduced by the scheduled payment of principal due on the Due Date in the month of substitution) of the Mortgage Loan for which it is substituted. In addition, such Substitute Mortgage Loan shall have a Loan-to-Value Ratio less than or equal to and a Net Mortgage Interest Rate equal to that of the Mortgage Loan for which it is substituted. The Depositor shall determine the Repurchase Price or the eligibility of any Substitute Mortgage Loan and the Trustee shall be protected in relying on such determination. In the case of a repurchased Mortgage Loan or property, the Repurchase Price shall be deposited by the Depositor in the Certificate Account maintained by the Master Servicer pursuant to Section 3.01. In the case of a Substitute Mortgage Loan, the Owner Mortgage Loan File (and Retained Mortgage Loan File, if required pursuant to Section 2.01(b) hereof) relating thereto shall be delivered to the Custodian and the Substitution Principal Amount (if any), together with (i) interest on such Substitution Principal Amount at the applicable Net Mortgage Interest Rate to the following Due Date of such Mortgage Loan which is being substituted for and (ii) an amount equal to the aggregate amount of unreimbursed Periodic Advances in respect of interest previously made by the Servicer, the Master Servicer or the Trustee with respect to such Mortgage Loan, shall be deposited in the Certificate Account. The Monthly Payment on the Substitute Mortgage Loan for the Due Date in the month of substitution shall not be part of the Trust Estate. Upon receipt by the Custodian of a Request for Release signed by an officer of the Depositor, the Custodian shall release to the Depositor the Owner Mortgage Loan File (and Retained Mortgage Loan File, if applicable) of the Mortgage Loan being removed. The Trustee shall execute and deliver such instrument of transfer or assignment (or, in the case of a Mortgage Loan registered in the name of MERS or its designee, the Master Servicer shall enforce the obligation of the applicable Servicer under the related Servicing Agreement to take all necessary action to reflect such assignment on the records of MERS), in each case without recourse, as shall be necessary to vest in the Depositor legal and beneficial ownership of such substituted or repurchased Mortgage Loan or property. It is understood and agreed that the obligation of the Depositor to substitute a new Mortgage Loan for or repurchase any Mortgage Loan or property as to which such a material defect in a constituent document exists shall constitute the sole remedy respecting such defect available to the Certificateholders or the Trustee on behalf of the Certificateholders. The failure of the Custodian to give the final certification or the Trustee to give any notice within the required time periods shall not affect or relieve the Depositor's obligation to repurchase any Mortgage Loan pursuant to this Section 2.02. The Trustee shall be responsible for enforcing the Depositor's obligations under this Section 2.02. If the Trustee receives written notice from the Custodian or the Master Servicer 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 2.02. In connection with any substitution permitted by this Section 2.02, the Master Servicer shall verify that the unpaid principal balance and the Loan-to-Value Ratio of the Substitute Mortgage Loan satisfy the requirements of this Section 2.02. Section 2.03 Representations and Warranties of the Master Servicer and the Depositor. (a) The Master Servicer hereby represents and warrants to the Trustee for the benefit of the Certificateholders that, as of the date of execution of this Agreement: (i) The Master Servicer is a national banking association duly chartered and validly existing in good standing under the laws of the United States; (ii) The execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement will not violate the Master Servicer's corporate charter or by-laws or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Master Servicer is a party or which may be applicable to the Master Servicer or any of its assets; (iii) This Agreement, assuming due authorization, execution and delivery by the Trustee and the Depositor, constitutes a valid, legal and binding obligation of the Master Servicer, enforceable against it in accordance with the terms hereof subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights generally and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law; (iv) The Master Servicer is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Master Servicer or its properties or might have consequences that would materially affect its performance hereunder; (v) Except as otherwise disclosed in the Prospectus, no legal or governmental proceedings are pending (or known to be contemplated) against the Master Servicer that would be material to Certificateholders; (vi) Except as otherwise disclosed in the Prospectus, the Master 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 Master Servicer under such securitization; (vii) Except as otherwise disclosed in the Prospectus, the Master Servicer has not been terminated as master servicer in a residential mortgage loan securitization, either due to a master servicing default or to application of a master servicing performance test or trigger; (viii) 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 Master Servicer as a master servicer has been disclosed or reported by the Master Servicer within the past three (3) years; (ix) Except as otherwise disclosed in the Prospectus, no material changes to the Master Servicer's policies or procedures with respect to the master 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; (x) Except as otherwise disclosed in the Prospectus, there is no material risk that the Master Servicer's financial condition could affect one or more aspects of the performance by the Master Servicer of its master 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 (xi) Except as disclosed in the Prospectus, there are no affiliations, relationships or transactions relating to the Master Servicer and any party identified in Item 1119 of Regulation AB of the type described therein. It is understood and agreed that the representations and warranties set forth in this Section 2.03(a) shall survive delivery of the respective Owner Mortgage Loan Files to the Trustee or the Custodian. Upon discovery by any of the Depositor, the Master Servicer or the Trustee of a breach of any of the representations and warranties set forth in this Section 2.03(a), the party discovering such breach shall give prompt written notice, which shall not exceed two days, to the other parties. The Master Servicer 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 Master Servicer on the next Distribution Date Statement prepared pursuant to Section 4.04. (b) The Depositor hereby represents and warrants to the Trustee for the benefit of Certificateholders that, as of the date of execution of this Agreement, with respect to the Mortgage Loans, or each Mortgage Loan, as the case may be: (i) The information set forth in the Mortgage Loan Schedule was true and correct in all material respects at the date or dates respecting which such information is furnished as specified in the Mortgage Loan Schedule; (ii) 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; (iii) 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 if the Mortgaged Property consists of shares of a cooperative housing corporation, any lien for amounts due to the cooperative housing corporation for unpaid assessments or charges or any lien of any assignment of rents or maintenance expenses secured by the real property owned by the cooperative housing corporation; 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; (iv) 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(a); (v) 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 the Depositor has not advanced funds, or received any advance of funds by a party other than the Mortgagor, directly or indirectly (except pursuant to any Subsidy Loan arrangement) 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; (vi) 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 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 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; (vii) 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; (viii) Except for Mortgage Loans secured by Co-op Shares and 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; (ix) The Mortgage Loan meets, or is exempt from, applicable state, federal or local laws, regulations and other requirements, pertaining to usury, and the Mortgage Loan is not usurious; (x) To the best of the Depositor's knowledge, all inspections, licenses and certificates required to be made or issued with respect to all occupied 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; (xi) All payments required to be made up to the Due Date immediately preceding the Cut-Off Date for such Mortgage Loan 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 Cut-Off Date; (xii) 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; (xiii) 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; (xiv) 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; (xv) 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; (xvi) 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; (xvii) 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; (xviii) 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; (xix) Each Mortgage Note is payable in monthly payments, resulting in complete amortization of the Mortgage Loan over a term of not more than 360 months; (xx) 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; (xxi) To the best of the Depositor's knowledge, no Mortgagor is a debtor in any state or federal bankruptcy or insolvency proceeding; (xxii) 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 or a unit in a planned unit development or, in the case of Mortgage Loans secured by Co-op Shares, leases or occupancy agreements; (xxiii) The Mortgage Loan is a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code; (xxiv) With respect to each Mortgage where a lost note affidavit has been delivered to the Custodian in place of the related Mortgage Note, the related Mortgage Note is no longer in existence; (xxv) In the event that the Mortgagor is an inter vivos "living" trust, (i) such trust is in compliance with Fannie Mae or Freddie Mac standards for inter vivos trusts and (ii) holding title to the Mortgaged Property in such trust will not diminish any rights as a creditor including the right to full title to the Mortgaged Property in the event foreclosure proceedings are initiated; (xxvi) 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; (xxvii) 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; and (xxviii) No Mortgage Loan is serviced by the Trustee or an affiliate of the Trustee. 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 2.03(b) shall survive delivery of the respective Owner Mortgage Loan Files (and Retained Mortgage Loan Files, if applicable) to the Custodian and shall inure to the benefit of the Trustee notwithstanding any restrictive or qualified endorsement or assignment. (c) Upon discovery by any of the Depositor, the Master Servicer, the Trustee or the Custodian that any of the representations and warranties made in subsection (b) above is not accurate (referred to herein as a "breach") and, except for a breach of the representation and warranty set forth in subsection (b)(i), where such breach is a result of the Cut-Off Date Principal Balance of a Mortgage Loan being greater, by $5,000 or greater, than the Cut-Off Date Principal Balance of such Mortgage Loan indicated on the Mortgage Loan Schedule, that such breach materially and adversely affects the interests of the Certificateholders in the related Mortgage Loan, the party discovering such breach shall give prompt written notice (not to exceed two days after discovery) to the other parties to this Agreement and the Custodian (any Custodian being so obligated under a Custodial Agreement). Within 60 days of the earlier of its discovery or its receipt of notice of any such breach, the Depositor shall cure such breach in all material respects or shall either (i) repurchase the Mortgage Loan or any property acquired in respect thereof from the Trust Estate at a price equal to the Repurchase Price or (ii) if within two years of the Startup Day, or such other period permitted by the REMIC Provisions, substitute for such Mortgage Loan in the manner described in Section 2.02. In addition to the foregoing, if a breach of the representation set forth in clause (b)(xiii) of this Section 2.03 occurs as a result of a violation of an applicable predatory or abusive lending law, the Depositor shall reimburse the Trust for all costs and damages including, but not limited to, reasonable attorneys' fees and costs, incurred by the Trust as a result of the violation of such law (such amount, the "Reimbursement Amount"). The Repurchase Price, the Substitution Principal Amount, if any, plus accrued interest thereon and the other amounts referred to in Section 2.02, and any Reimbursement Amount shall be deposited in the Certificate Account. It is understood and agreed, except with respect to the second preceding sentence, that the obligation of the Depositor to repurchase or substitute for any Mortgage Loan or property as to which such a breach has occurred and is continuing shall constitute the sole remedy respecting such breach available to Certificateholders or the Trustee on behalf of Certificateholders, and such obligation shall survive until termination of the Trust Estate hereunder. The Trustee shall be responsible for enforcing the Depositor's obligations under this Section 2.03. If the Trustee receives written notice from the Master Servicer or the Custodian that such breach 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 Master Servicer shall verify that the unpaid principal balance and the Loan-to-Value Ratio of the Substitute Mortgage Loan satisfy the requirements of this Section 2.03. Section 2.04 Execution and Delivery of Certificates. The Trustee acknowledges the assignment to it of the Mortgage Loans and acknowledges the delivery of the Owner Mortgage Loan Files to the Custodian, on behalf of the Trustee. The Paying Agent, concurrently with such delivery, has executed and delivered to or upon the order of the Depositor, in exchange for the Mortgage Loans, together with all other assets included in the definition of "Trust Estate," receipt of which is hereby acknowledged, Certificates in authorized denominations which evidence ownership of the entire Trust Estate. Section 2.05 Designation of Certificates; Designation of Startup Day and Latest Possible Maturity Date. The Depositor hereby designates the Classes of Class A Certificates (other than the Class A-R Certificate) and the Classes of Class B Certificates as classes of "regular interests" and the Class A-R Certificate as the single class of "residual interest" in the REMIC for the purposes of Code Sections 860G(a)(1) and 860G(a)(2), respectively. The Closing Date is hereby designated as the "Startup Day" of the REMIC within the meaning of Code Section 860G(a)(9). The "latest possible maturity date" of the regular interests in the REMIC is [ ] for purposes of Code Section 860G(a)(1). ARTICLE III ADMINISTRATION OF THE TRUST ESTATE; SERVICING OF THE MORTGAGE LOANS Section 3.01 Certificate Account. (a) The Master Servicer shall establish and maintain a Certificate Account for the deposit of funds received by the Master Servicer with respect to the Mortgage Loans serviced by each Servicer pursuant to each of the Servicing Agreements. Such account shall be maintained as an Eligible Account. The Master Servicer shall give notice to each Servicer and the Depositor of the location of the Certificate Account and of any change in the location thereof. (b) The Master Servicer shall deposit into the Certificate Account on the day of receipt thereof all amounts received by it from any Servicer pursuant to any of the Servicing Agreements and amounts received from draws on any Letters of Credit and shall, in addition, deposit into the Certificate Account the following amounts, in the case of amounts specified in clauses (i) and (iii), not later than the Business Day preceding the Distribution Date on which such amounts are required to be distributed to Certificateholders and, in the case of the amounts specified in clause (ii), not later than the Business Day next following the day of receipt and posting by the Master Servicer: (i) Periodic Advances pursuant to Section 3.03(a) made by the Master Servicer or the Trustee, if any, and any amounts deemed received by the Master Servicer pursuant to Section 3.01(d); (ii) in the case of any Mortgage Loan that is repurchased by the Depositor pursuant to Section 2.02, 2.03, 3.08 or 9.01 or that is auctioned by the Master Servicer pursuant to Section 3.08, the purchase price therefor or, where applicable, any Substitution Principal Amount and any amounts received in respect of the interest portion of unreimbursed Periodic Advances; and (iii) any Compensating Interest for such Distribution Date. (c) The Master Servicer may cause the funds in the Certificate Account to be invested in Eligible Investments. No such Eligible Investments will be sold or disposed of at a gain prior to maturity unless the Master Servicer has received an Opinion of Counsel or other evidence satisfactory to it that such sale or disposition will not cause the Trust Estate to be subject to Prohibited Transactions Tax, otherwise subject the Trust Estate to tax, or cause the Trust Estate to fail to qualify as a REMIC while any Certificates are outstanding. Any amounts deposited in the Certificate Account prior to the Distribution Date may be invested for the account of the Master Servicer and any investment income thereon shall be additional compensation to the Master Servicer for services rendered under this Agreement. The amount of any losses incurred in respect of any such investments shall be deposited in the Certificate Account by the Master Servicer out of its own funds immediately as realized, without any right of reimbursement therefor from the Trust Estate. (d) For purposes of this Agreement, the Master Servicer will be deemed to have received from a Servicer on the applicable Remittance Date for such funds all amounts deposited by such Servicer into the Custodial P&I Account maintained in accordance with the applicable Servicing Agreement, if such Custodial P&I Account is not an Eligible Account as defined in this Agreement, to the extent such amounts are not actually received by the Master Servicer on such Remittance Date as a result of the bankruptcy, insolvency, receivership or other financial distress of the depository institution in which such Custodial P&I Account is being held. To the extent that amounts so deemed to have been received by the Master Servicer are subsequently remitted to the Master Servicer, the Master Servicer shall be entitled to retain such amounts. Section 3.02 Permitted Withdrawals from the Certificate Account. (a) The Master Servicer may, from time to time, make withdrawals from the Certificate Account for the following purposes (limited, in the case of Servicer reimbursements, to cases where funds in the respective Custodial P&I Account are not sufficient therefor): (i) to reimburse the Master Servicer, the Trustee or any Servicer for Periodic Advances made by the Master Servicer or the Trustee pursuant to Section 3.03(a) or any Servicer pursuant to any Servicing Agreement with respect to previous Distribution Dates, such right to reimbursement pursuant to this subclause (i) being limited to amounts received on or in respect of particular Mortgage Loans (including, for this purpose, Liquidation Proceeds, REO Proceeds and proceeds from the purchase, sale, repurchase or substitution of Mortgage Loans pursuant to Section 2.02, 2.03, 3.08 or 9.01) respecting which any such Periodic Advance was made; (ii) to reimburse any Servicer, the Master Servicer or the Trustee for any Periodic Advances determined in good faith to have become Nonrecoverable Advances; provided, however, that any portion of Nonrecoverable Advances representing Fixed Retained Yield shall be reimbursable only from amounts constituting Fixed Retained Yield and not from assets of the Trust Estate; (iii) to reimburse the Master Servicer or any Servicer from Liquidation Proceeds for Liquidation Expenses and for amounts expended by the Master Servicer or any Servicer pursuant hereto or to any Servicing Agreement, respectively, in good faith in connection with the restoration of damaged property or for foreclosure expenses; (iv) from any Mortgagor payment on account of interest or other recovery (including Net REO Proceeds) with respect to a particular Mortgage Loan, to pay the Master Servicing Fee with respect to such Mortgage Loan to the Master Servicer; (v) to reimburse the Master Servicer, any Servicer or the Trustee (or, in certain cases, the Depositor) for expenses incurred by it (including taxes paid on behalf of the Trust Estate) and recoverable by or reimbursable to it pursuant to Section 3.03(c), Section 6.03, the second or third paragraphs of Section 8.06 or the third sentence of Section 8.13(a) or pursuant to such Servicer's Servicing Agreement, provided such expenses are "unanticipated" within the meaning of the REMIC Provisions; (vi) to pay to the Depositor or other purchaser with respect to each Mortgage Loan or property acquired in respect thereof that has been repurchased or replaced pursuant to Section 2.02, 2.03, 3.08 or 9.01 or auctioned pursuant to Section 3.08, all amounts received thereon and not required to be distributed as of the date on which the related repurchase or purchase price or Scheduled Principal Balance was determined; (vii) to remit funds to the Paying Agent in the amounts and in the manner provided for herein; (viii) to pay to the Master Servicer any interest earned on or investment income with respect to funds in the Certificate Account; (ix) to pay to the Master Servicer or any Servicer out of Liquidation Proceeds allocable to interest the amount of any unpaid Master Servicing Fee or Servicing Fee (as adjusted pursuant to the related Servicing Agreement) and any unpaid assumption fees, late payment charges or other Mortgagor charges on the related Mortgage Loan; (x) to pay to the Master Servicer as additional master servicing compensation any Liquidation Profits which a Servicer is not entitled to pursuant to the applicable Servicing Agreement; (xi) to withdraw from the Certificate Account any amount deposited in the Certificate Account that was not required to be deposited therein; (xii) to clear and terminate the Certificate Account pursuant to Section 9.01; and (xiii) to pay to Wells Fargo Bank from any Mortgagor payment on account of interest or other recovery (including Net REO Proceeds) with respect to a particular Mortgage Loan, the Fixed Retained Yield, if any, with respect to such Mortgage Loan; provided, however, that with respect to any payment of interest received by the Master Servicer in respect of a Mortgage Loan (whether paid by the Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or otherwise) which is less than the full amount of interest then due with respect to such Mortgage Loan, only that portion of such payment of interest that bears the same relationship to the total amount of such payment of interest as the Fixed Retained Yield Rate, if any, in respect of such Mortgage Loan bears to the Mortgage Interest Rate shall be allocated to the Fixed Retained Yield with respect thereto. (b) The Master Servicer shall keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any payment to and withdrawal from the Certificate Account. The Master Servicer shall notify the Depositor and the Trustee of the amount, purpose and party paid pursuant to Section 3.02(a)(v). Section 3.03 Advances by Master Servicer and Trustee. (a) In the event an Other Servicer fails to make any required Periodic Advances of principal and interest on a Mortgage Loan as required by the related Other Servicing Agreement prior to the Business Day preceding the Distribution Date occurring in the month during which such Periodic Advance is due, the Master Servicer shall make Periodic Advances to the extent provided hereby. In the event Wells Fargo Bank in its capacity as Servicer fails to make any required Periodic Advances of principal and interest on a Mortgage Loan as required by the Wells Fargo Bank Servicing Agreement prior to the Business Day preceding the Distribution Date occurring in the month during which such Periodic Advance is due, the Trustee shall, to the extent required by Section 8.14, make such Periodic Advance to the extent provided hereby, provided that the Trustee has previously received the certificate of the Master Servicer described in the following sentence. The Master Servicer shall certify to the Trustee with respect to any such Distribution Date (i) the amount of Periodic Advances required of Wells Fargo Bank in its capacity as Servicer or such Other Servicer, as the case may be, (ii) the amount actually advanced by Wells Fargo Bank in its capacity as Servicer or such Other Servicer, (iii) the amount that the Trustee or Master Servicer is required to advance hereunder and (iv) whether the Master Servicer has determined that it reasonably believes that such Periodic Advance is a Nonrecoverable Advance. Amounts advanced by the Trustee or Master Servicer shall be deposited in the Certificate Account on the Business Day preceding the related Distribution Date. Notwithstanding the foregoing, neither the Master Servicer nor the Trustee will be obligated to make a Periodic Advance that it reasonably believes to be a Nonrecoverable Advance. The Trustee may conclusively rely for any determination to be made by it hereunder upon the determination of the Master Servicer as set forth in its certificate. (b) To the extent an Other Servicer fails to make an advance on account of the taxes or insurance premiums with respect to a Mortgage Loan required pursuant to the related Other Servicing Agreement, the Master Servicer shall, if the Master Servicer has actual knowledge of such failure of the Servicer, advance such funds and take such steps as are necessary to pay such taxes or insurance premiums. To the extent Wells Fargo Bank in its capacity as Servicer fails to make an advance on account of the taxes or insurance premiums with respect to a Mortgage Loan required pursuant to the Wells Fargo Bank Servicing Agreement, the Master Servicer shall, if the Master Servicer knows of such failure of Wells Fargo Bank in its capacity as Servicer, certify to the Trustee that such failure has occurred. Upon receipt of such certification, the Trustee shall advance such funds and take such steps as are necessary to pay such taxes or insurance premiums. (c) The Master Servicer and the Trustee shall each be entitled to be reimbursed from the Certificate Account for any Periodic Advance made by it under Section 3.03(a) to the extent described in Section 3.02(a)(i) and (a)(ii). The Master Servicer and the Trustee shall be entitled to be reimbursed pursuant to Section 3.02(a)(v) for any advance by it pursuant to Section 3.03(b). The Master Servicer shall diligently pursue restoration of such amount to the Certificate Account from the related Servicer. The Master Servicer shall, to the extent it has not already done so, upon the request of the Trustee, withdraw from the Certificate Account and remit to the Trustee any amounts to which the Trustee is entitled as reimbursement pursuant to Section 3.02 (a)(i), (ii) and (v). (d) Except as provided in Section 3.03(a) and (b), neither the Master Servicer nor the Trustee shall be required to pay or advance any amount which any Servicer was required, but failed, to deposit in the Certificate Account. Section 3.04 Custodian to Cooperate; Release of Owner Mortgage Loan Files and Retained Mortgage Loan Files. In connection with the deposit by a Servicer into the Certificate Account of the proceeds from a Liquidated Loan or of a Prepayment in Full, the Master Servicer or applicable Servicer shall confirm that all amounts required to be remitted to the Certificate Account in connection with such Mortgage Loan have been so deposited, and the Master Servicer or applicable Servicer shall deliver two copies of any related 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 Loan File (and Retained Mortgage Loan File, if applicable) to the Master Servicer or such Servicer, as requested by the Master Servicer or such Servicer. No expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the Certificate 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 of such Mortgage Loan shall deliver to the Master Servicer or Custodian two copies of a Request for Release. Upon the Master Servicer's receipt of any such Request for Release, the Master Servicer shall promptly forward such request in hard copy or in electronic format acceptable to the Custodian. The Custodian shall, within five Business Days, release the related Owner Mortgage Loan File (and Retained Mortgage Loan File, if applicable) to the Master Servicer or such Servicer. Any such Request for Release shall obligate the Master Servicer or such Servicer, as the case may be, to return the Owner Mortgage Loan File (and Retained Mortgage Loan File, if applicable) to the Custodian by the sixtieth 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 Certificate Account or (ii) the Owner Mortgage Loan File (and Retained Mortgage Loan File, if applicable) or such document has 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 Certificate Account have been so deposited, or that such Mortgage Loan has become an REO Mortgage Loan, 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 Master Servicer or such Servicer, as directed by the Master 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 certification 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 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. Section 3.05 Annual Compliance Statements. The Master Servicer shall deliver in electronic form, or otherwise make available to the Depositor, the Trustee and the Master Servicer shall cause each Additional Master Servicer engaged by it and each Servicer to deliver, in electronic form, or otherwise make available, to the Master Servicer, 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 2007, 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 Master Servicer, the Additional Master Servicer or the 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 the applicable Servicing Agreement, in the case of a Servicer, or such other applicable agreement in the case of an Additional Master 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 the applicable Servicing Agreement, in the case of a Servicer, or such other applicable agreement in the case of an Additional Master 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 3.05 disclose that there has been a failure to fulfill any obligation in any material respect then the Master Servicer 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 Master Servicer as to the nature of any failure to fulfill any obligation under this Agreement or the applicable Servicing Agreement, in the case of a Servicer, or such other applicable agreement in the case of an Additional Master Servicer, in any material respect. Section 3.06 Title, Management and Disposition of Any REO Mortgage Loan. The Master Servicer shall enforce the obligations of the applicable Servicer to administer each REO Mortgage Loan at all times so that each REO Mortgage Loan qualifies as "foreclosure property" under the REMIC Provisions and that it does not earn any "net income from foreclosure property" which is subject to tax under the REMIC Provisions. In the event that a Servicer is unable to dispose of any REO Mortgage Loan within the period mandated by each of the Servicing Agreements, the Master Servicer shall monitor such Servicer to verify that such REO Mortgage Loan is auctioned to the highest bidder within the period so specified. In the event of any such sale of a REO Mortgage Loan, the Custodian shall, at the written request of the Master Servicer and upon being supported with appropriate forms therefor, within five Business Days of the deposit by the Master Servicer of the proceeds of such sale or auction into the Certificate Account, release or cause to be released to the entity identified by the Master Servicer the related Owner Mortgage Loan File, Retained Mortgage Loan File, if applicable, and Servicer Mortgage Loan File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be necessary to vest in the auction purchaser title to the REO Mortgage Loan and the Custodian shall have no further responsibility with regard to such Owner Mortgage Loan File, Retained Mortgage Loan File, if applicable, or Servicer Mortgage Loan File. Neither the Trustee, the Master Servicer nor any Servicer, acting on behalf of the Trust Estate, shall provide financing from the Trust Estate to any purchaser of an REO Mortgage Loan. Section 3.07 Amendments to Servicing Agreements, Modification of Standard Provisions. (a) Subject to the prior written consent of the Trustee pursuant to Section 3.07(b) and the prior written consent of the Depositor, the Master Servicer may, from time to time, to the extent permitted by the applicable Servicing Agreement, make such modifications and amendments to such Servicing Agreement as the Master Servicer deems necessary or appropriate to confirm or carry out more fully the intent and purpose of such Servicing Agreement and the duties, responsibilities and obligations to be performed by the Servicer thereunder. Such modifications may only be made if they are consistent with the REMIC Provisions, as evidenced by an Opinion of Counsel. Prior to the issuance of any modification or amendment, the Master Servicer shall deliver to the Trustee and the Depositor such Opinion of Counsel and an Officer's Certificate setting forth (i) the provision that is to be modified or amended, (ii) the modification or amendment that the Master Servicer desires to issue and (iii) the reason or reasons for such proposed amendment or modification. (b) The Trustee shall consent to any amendment or supplement to a Servicing Agreement proposed by the Master Servicer pursuant to Section 3.07(a), which consent and amendment shall not require the consent of any Certificateholder if it is (i) for the purpose of curing any mistake or ambiguity, to further effect or protect the rights of the Certificateholders or (ii) for any other purpose, provided such amendment or supplement for such other purpose cannot reasonably be expected to adversely affect Certificateholders. The lack of reasonable expectation of an adverse effect on Certificateholders may be established through the delivery to the Trustee of (i) an Opinion of Counsel to such effect or (ii) written notification from each Rating Agency to the effect that such amendment or supplement will not result in reduction of the current rating assigned by that Rating Agency to the Certificates. Notwithstanding the two immediately preceding sentences, the Trustee may, in its discretion, decline to enter into or consent to any such supplement or amendment if its own rights, duties or immunities shall be adversely affected. (c)(i) Notwithstanding anything to the contrary in this Section 3.07, the Master Servicer from time to time may, without the consent of any Certificateholder or the Trustee, enter into an amendment (A) to an Other Servicing Agreement for the purpose of (i) eliminating or reducing Month End Interest and (ii) providing for the remittance of Full Unscheduled Principal Receipts by the applicable Servicer to the Master Servicer not later than the 24th day of each month (or if such day is not a Business Day, on the previous Business Day), (B) to the Wells Fargo Bank Servicing Agreement for the purpose of changing the applicable Remittance Date to the 18th day of each month (or if such day is not a Business Day, on the previous Business Day) or (C) to a Servicing Agreement for the purpose of effecting or facilitating compliance by the Servicer with Regulation AB or to conform a Servicing Agreement to industry practices relating to Regulation AB. (ii) The Master Servicer may direct Wells Fargo Bank in its capacity as Servicer to enter into an amendment to the Wells Fargo Bank Servicing Agreement for the purposes described in Section 3.07(c)(i)(B) or (C). Section 3.08 Oversight of Servicing. The Master Servicer shall supervise, monitor and oversee the servicing of the Mortgage Loans by each Servicer and the performance by each Servicer of all services, duties, responsibilities and obligations (including the obligation to maintain an Errors and Omissions Policy and Fidelity Bond) that are to be observed or performed by the Servicer under its respective Servicing Agreement. In performing its obligations hereunder, the Master Servicer shall act in a manner consistent with Accepted Master Servicing Practices and in a manner consistent with the terms and provisions of any insurance policy required to be maintained by the Master Servicer or any Servicer pursuant to this Agreement or any Servicing Agreement. The Master Servicer acknowledges that prior to taking certain actions required to service the Mortgage Loans, each Servicing Agreement provides that the Servicer thereunder must notify, consult with, obtain the consent of, waiver from, or otherwise follow the instructions of the Master Servicer. In the case of any request for waiver from a Servicer, the Master Servicer shall promptly instruct such Servicer or otherwise respond to such Servicer's request. The Master Servicer shall not waive compliance by a Servicer with those provisions of its Servicing Agreement which are required to enable the Depositor and the Master Servicer to satisfy the Trust's ongoing reporting obligations under the Exchange Act. In addition, in no event will the Master Servicer instruct such Servicer to take any action, give any consent to action by such Servicer or waive compliance by such Servicer with any provision of such Servicer's Servicing Agreement if any resulting action or failure to act would be inconsistent with the requirements of the Rating Agencies that rated the Certificates, would be inconsistent with the requirements of Regulation AB or would otherwise have an adverse effect on the Certificateholders. Any such action or failure to act shall be deemed to have an adverse effect on the Certificateholders if such action or failure to act either results in (i) the downgrading of the rating assigned by either Rating Agency to the Certificates, (ii) the loss by the Trust Estate of REMIC status for federal income tax purposes or (iii) the imposition of any Prohibited Transaction Tax or any federal taxes on either the REMIC or the Trust Estate. The Master Servicer shall have full power and authority in its sole discretion to take any action with respect to the Trust Estate as may be necessary or advisable to avoid the circumstances specified including clause (ii) or (iii) of the preceding sentence. For the purposes of determining whether any modification of a Mortgage Loan shall be permitted by the Master Servicer, such modification shall be construed as a substitution of the modified Mortgage Loan for the Mortgage Loan originally deposited in the Trust Estate if it would be a "significant modification" within the meaning of Section 1.860G-2(b) of the regulations of the U.S. Department of the Treasury. No modification shall be approved unless (i) the modified Mortgage Loan would qualify as a Substitute Mortgage Loan under Section 2.02 and (ii) with respect to any modification that occurs more than three months after the Closing Date and is not the result of a default or a reasonably foreseeable default under the Mortgage Loan, there is delivered to the Trustee an Opinion of Counsel (at the expense of the party seeking to modify the Mortgage Loan) to the effect that such modification would not be treated as giving rise to a new debt instrument for federal income tax purposes as described in the preceding sentence; provided, however, that no such Opinion of Counsel need be delivered if the sole purpose of the modification is to reduce the Monthly Payment on a Mortgage Loan as a result of a Curtailment such that the Mortgage Loan is fully amortized by its original maturity date. During the term of this Agreement, the Master Servicer shall consult fully with each Servicer as may be necessary from time to time to perform and carry out the Master Servicer's obligations hereunder and otherwise exercise reasonable efforts to cause such Servicer to perform and observe the covenants, obligations and conditions to be performed or observed by it under its Servicing Agreement. The relationship of the Master Servicer to the Trustee under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent. The Master Servicer shall administer the Trust Estate on behalf of the Trustee and shall have full power and authority, acting alone or (subject to the requirements of Section 6.06) through one or more Subcontractors, to do any and all things in connection with such administration which it may deem necessary or desirable. Upon the execution and delivery of this Agreement, and from time to time as may be required thereafter, the Trustee shall furnish the Master Servicer or its Subcontractors with any powers of attorney and such other documents as may be necessary or appropriate to enable the Master Servicer to carry out its administrative duties hereunder. The Depositor shall have a limited option to repurchase any defaulted Mortgage Loan or REO Mortgage Loan during the following time periods: (i) beginning on the first day of the second month following the month in which the Master Servicer has reported that a Servicer has initiated foreclosure proceedings with respect to such a defaulted Mortgage 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 Master Servicer has reported that such defaulted Mortgage Loan has become an REO Mortgage Loan, with such repurchase option expiring on the last day of such second following month; and (iii) beginning on the day on which a Servicer accepts a contractual commitment by a third party to purchase the Mortgaged Property related to the defaulted Mortgage Loan or REO Mortgage Loan, 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 defaulted Mortgage Loan or REO Mortgage Loan. The Depositor shall be entitled to repurchase at its option any Mortgage Loan in the Trust Estate which, pursuant to paragraph 5(b) of the Mortgage Loan Purchase Agreement, Wells Fargo Bank requests the Depositor to repurchase and to sell to Wells Fargo Bank to facilitate the exercise of Wells Fargo Bank's rights against the originator or a prior holder of such Mortgage Loan. The purchase price for any Mortgage Loan repurchased pursuant to this paragraph shall be the Repurchase Price. Upon the receipt of such Repurchase Price, the Master Servicer shall provide to the Trustee the certification required by Section 3.04 and the Trustee and the Custodian, if any, shall promptly release to the Depositor the Owner Mortgage Loan File and Retained Mortgage Loan File, if applicable, relating to the Mortgage Loan being repurchased. In the event that (i) the Master Servicer determines at any time that, notwithstanding the representations and warranties set forth in Section 2.03(b), any Mortgage Loan is not a "qualified mortgage" within the meaning of Section 860G of the Code and (ii) the Trustee is unable to enforce the obligation of the Depositor to purchase such Mortgage Loan pursuant to Section 2.02 within two months of such determination, the Master Servicer shall cause such Mortgage Loan to be auctioned to the highest bidder and sold out of the Trust Estate no later than the date 90 days after such determination. In the event of any such sale of a Mortgage Loan, the Custodian shall, at the written request of the Master Servicer and upon being supported with appropriate forms therefor, within five Business Days of the deposit by the Master Servicer of the proceeds of such auction into the Certificate Account, release or cause to be released to the entity identified by the Master Servicer the related Owner Mortgage Loan File, Retained Mortgage Loan File, if applicable, and Servicer Mortgage Loan File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be necessary to vest in the auction purchaser title to the Mortgage Loan and the Custodian shall have no further responsibility with regard to such Owner Mortgage Loan File, Retained Mortgage Loan File, if applicable, or Servicer Mortgage Loan File. None of the Trustee, the Custodian, the Master Servicer or any Servicer, acting on behalf of the Trustee, shall provide financing from the Trust Estate to any purchaser of a Mortgage Loan. The Master Servicer, on behalf of the Trustee, shall, pursuant to the Servicing Agreements, object to the foreclosure upon, or other related conversion of the ownership of, any Mortgaged Property by the related Servicer if (i) the Master Servicer believes such Mortgaged Property may be contaminated with or affected by hazardous wastes or hazardous substances or (ii) such Servicer does not agree to administer such Mortgaged Property, once the related Mortgage Loan becomes an REO Mortgage Loan, in a manner which would not result in a federal tax being imposed upon the Trust Estate or the REMIC. At the direction of the Depositor, the Master Servicer may enter into a special servicing agreement with an unaffiliated holder of 100% Percentage Interest of a Class of Class B Certificates or a holder of a class of securities representing interests in the Class B Certificates and/or other subordinated mortgage asset-backed pass-through certificates (such entity, a "Special Servicer"), such agreement (a "Special Servicing Agreement") to be substantially in the form of Exhibit M hereto or subject to each Rating Agency's acknowledgment that the ratings of the Certificates in effect immediately prior to the entering into of such agreement would not be qualified, downgraded or withdrawn and the Certificates would not be placed on credit review status (except for possible upgrading) as a result of such agreement. Any such agreement may contain provisions whereby such holder may (a) purchase any Mortgage Loans that are more than 180 days delinquent and (b) instruct the Master Servicer to instruct a Servicer to the extent provided in the applicable Servicing Agreement to commence or delay foreclosure proceedings with respect to delinquent Mortgage Loans and will contain provisions for the deposit of cash by the holder that would be available for distribution to Certificateholders if Liquidation Proceeds are less than they otherwise may have been had the Servicer acted in accordance with its normal procedures. The Master Servicer 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 Depositor, Trustee and Custodian of the occurrence of such Document Transfer Event. Section 3.09 Termination and Substitution of Servicing Agreements. Upon the occurrence of any event for which a Servicer may be terminated pursuant to its Servicing Agreement, the Master Servicer shall promptly deliver to the Depositor and the Trustee an Officer's Certificate certifying that an event has occurred which may justify termination of such Servicing Agreement, describing the circumstances surrounding such event and recommending what action should be taken by the Trustee with respect to such Servicer. If the Master Servicer recommends that such Servicing Agreement be terminated, the Master Servicer's certification must state that the breach is material and not merely technical in nature. Based upon such certification, the Master Servicer, or if provided by the applicable Other Servicing Agreement and upon written direction of the Master Servicer, the Trustee, shall promptly terminate such Other Servicing Agreement. The Trustee shall terminate the Wells Fargo Bank Servicing Agreement in accordance with the provisions of Article 19 thereof. The Master Servicer shall indemnify the Trustee and hold it harmless from and against any and all claims, liabilities, costs and expenses (including, without limitation, reasonable attorneys' fees) arising out of, or assessed against the Trustee in connection with termination of a Servicing Agreement at the direction of the Master Servicer except to the extent that such claims, liabilities, costs and expenses are incurred as a result of the bad faith, willful misfeasance or gross negligence of the Trustee in the performance of its obligations hereunder. To the extent that the costs and expenses (including any amounts paid by the Master Servicer pursuant to the immediately preceding sentence) of the Master Servicer related to any termination of a Servicer, appointment of a successor Servicer or the transfer and assumption of servicing by the Master Servicer with respect to any Servicing Agreement (including, without limitation, (i) all legal costs and expenses and all due diligence costs and expenses associated with an evaluation of the potential termination of the Servicer as a result of an event of default by such Servicer, (ii) all costs and expenses associated with the complete transfer of servicing, including all servicing files and all servicing data and the completion, correction or manipulation of such servicing data as may be required by the successor servicer to correct any errors or insufficiencies in the servicing data or otherwise to enable the successor servicer to service the Mortgage Loans in accordance with the related Servicing Agreement and (iii) any costs incurred by the Trustee in connection with a servicing transfer) are not fully and timely reimbursed by the terminated Servicer, the Master Servicer shall be entitled to reimbursement of such costs and expenses from the Certificate Account. To the extent that the costs and expenses of the Trustee related to any termination of Wells Fargo Bank, as a Servicer under the Wells Fargo Bank Servicing Agreement, appointment of a successor to Wells Fargo Bank as a Servicer or the transfer and assumption of servicing by the Trustee with respect to the Wells Fargo Bank Servicing Agreement (including, without limitation, (i) all legal costs and expenses and all due diligence costs and expenses associated with an evaluation of the potential termination of Wells Fargo Bank as a Servicer as a result of an event of default by Wells Fargo Bank as Servicer and (ii) all costs and expenses associated with the complete transfer of servicing, including all servicing files and all servicing data and the completion, correction or manipulation of such servicing data as may be required by the successor servicer to correct any errors or insufficiencies in the servicing data or otherwise to enable the successor servicer to service the Mortgage Loans in accordance with the Wells Fargo Bank Servicing Agreement) are not fully and timely reimbursed by Wells Fargo Bank as a Servicer, the Trustee shall be entitled to reimbursement of such costs and expenses from the Certificate Account. If the Master Servicer or Trustee terminates an Other Servicing Agreement, the Trustee may enter into a substitute Servicing Agreement with the Master Servicer or, at the Master Servicer's nomination, with another mortgage loan service company acceptable to the Trustee, the Master Servicer and each Rating Agency under which the Master Servicer or such substitute servicer, as the case may be, shall assume, satisfy, perform and carry out all liabilities, duties, responsibilities and obligations that are to be, or otherwise were to have been, satisfied, performed and carried out by such Servicer under such terminated Servicing Agreement. If the Trustee terminates the Wells Fargo Bank Servicing Agreement, the Trustee shall enter into a substitute Servicing Agreement with another mortgage loan service company acceptable to the Trustee and each Rating Agency under which such substitute servicer shall assume, satisfy, perform and carry out all liabilities, duties, responsibilities and obligations that are to be, or otherwise were to have been, satisfied, performed and carried out by Wells Fargo Bank, in its capacity as Servicer, under such terminated Servicing Agreement. It is understood and acknowledged by the parties hereto that there will be a period of transition not to exceed ninety (90) days before the servicing functions can be transferred to such substitute servicer. Until such time as the Trustee enters into a substitute servicing agreement with respect to the Mortgage Loans previously serviced by an Other Servicer and the transition period relating to the transfer of such servicing expires, the Master Servicer shall assume, satisfy, perform and carry out all obligations which otherwise were to have been satisfied, performed and carried out by an Other Servicer under its terminated Servicing Agreement. However, in no event shall the Master Servicer be deemed to have assumed the obligations of a Servicer to advance payments of principal and interest on a delinquent Mortgage Loan in excess of the Master Servicer's independent Periodic Advance obligation under Section 3.03 of this Agreement. As compensation for the Master Servicer of any servicing obligations fulfilled or assumed by the Master Servicer, the Master Servicer shall be entitled to any servicing compensation to which a Servicer would have been entitled if the Servicing Agreement with such Servicer had not been terminated. Section 3.10 Application of Net Liquidation Proceeds. For all purposes under this agreement, Net Liquidation Proceeds received from a Servicer shall be allocated first to accrued and unpaid interest on the related Mortgage Loan and then to the unpaid principal balance thereof. Section 3.11 Assessment of Servicing Compliance; Registered Public Accounting Firm Attestation Reports. (a) The Master Servicer, at its own expense, shall furnish to the Depositor, and the Trustee, any Special Servicer (if applicable) 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, and the Master Servicer shall use reasonable effort to cause each Servicer to furnish with respect to such Servicer and each Servicing Function Participant engaged by such Servicer and identified to the Master Servicer, at such party's expense, to the Master Servicer, 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 2007, a copy of a report, followed by a hard copy to the Master Servicer within 10 calendar days, signed by an authorized officer of the Master Servicer, the Trustee, the Custodian, the Servicing Function Participant, the Special Servicer (if applicable) 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 Master Servicer 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 Master Servicer submits its assessments to the Depositor, it will also at such time include the assessment (and attestation pursuant to Section 3.11(b)) of each Servicing Function Participant engaged by it. No later than 30 days following the end of each fiscal year, each of the Trustee, any Special Servicer (if applicable) and the Custodian (so long as the Custodian is not the Master Servicer) shall forward to the Master Servicer 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 Trustee, any Special Servicer (if applicable) and the Custodian (so long as the Custodian is not the Master Servicer) submit their assessments to the Master Servicer, each such party will also at such time include the assessment (and attestation pursuant to Section 3.11(b)) of each Servicing Function Participant engaged by it. The Master Servicer shall confirm that the assessments address the Relevant Servicing Criteria for each party as set forth on Exhibit R or in the applicable Servicing Agreement or the applicable Special Servicing Agreement 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 Master Servicer, the Trustee, the Custodian, any Special Servicer (if applicable) and any Servicing Function Participant as to the nature of any material instance of noncompliance with the Relevant Servicing Criteria by the Master Servicer, the Trustee, the Custodian, any Servicer, any Special Servicer (if applicable), or any Servicing Function Participant engaged by such parties. (b) The Master Servicer, 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 Custodian and any Special Servicer (if applicable) 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, and the Master Servicer shall use reasonable efforts to cause each Servicer, at such Servicer's expense, with respect to such Servicer and each Servicing Function Participant engaged by such Servicer and identified to the Master Servicer, to cause a registered public accounting firm which is a member of the Institute of Certified Public Accountants to furnish to the Master Servicer, 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 2007, 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 Master Servicer 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 Master Servicer, the Depositor shall review the report and, if applicable, consult with the Master Servicer 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, the Special Servicer (if applicable), or any Servicing Function Participant engaged by such parties, the Master Servicer 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 Master Servicer shall consult with the parties to which such report relates. The Master Servicer shall make available any report from the Master Servicer, the Trustee, the Custodian, the Servicer, the Special Servicer (if applicable), or any Servicing Function Participant furnished pursuant to Section 3.05 and this Section 3.11, 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 3.12 Exchange Act Reports. (a) Within 15 days after each Distribution Date, the Master Servicer shall prepare, an authorized officer of the Master Servicer shall sign, and the Master Servicer 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 Master Servicer 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 S and directed and approved by the Depositor, and the Master Servicer 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 Master Servicer will follow the procedures set forth in Section 3.12(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Master Servicer 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 S shall (i) provide to the Master Servicer 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 Master Servicer 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 V, 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 Master Servicer has no duty under this Agreement to monitor or enforce the performance by the parties listed on Exhibit S of their duties under this paragraph or proactively solicit or procure from such parties any Additional Form 10-D Disclosure; except that the Master Servicer shall enforce the obligations of the Servicers under the Servicing Agreements. After preparing the Form 10-D, if the Form 10-D contains any Additional Form 10-D Disclosure, the Master Servicer 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 Master Servicer of its duties under this Section 3.12(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 3.12(a). The Master Servicer 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 Master Servicer's inability or failure to receive, on a timely basis, any information from any other party hereto, any Servicer, the Custodian or any Special Servicer (if applicable) 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 Master Servicer 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 2007, the Master Servicer shall prepare, a senior officer of the Master Servicer in charge of the master servicing function shall sign, and the Master Servicer 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 Master Servicer within the applicable timeframes set forth in this Agreement, the related Servicing Agreements, the Custodial Agreement or, if applicable, the Special Servicing Agreement: (i) an annual compliance statement for the Master Servicer, any Additional Master Servicer and each Servicer, as described under Section 3.05; (ii) (A) the annual reports on assessment of compliance with servicing criteria for the Master Servicer, the Trustee, each Servicer, the Custodian, any Special Servicer (if applicable), and each Servicing Function Participant, as described under Section 3.11(a), and (B) if any party's report on assessment of compliance with Servicing Criteria described under Section 3.11(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 3.11(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 Master Servicer, the Trustee, each Servicer, the Custodian, any Special Servicer (if applicable), and each Servicing Function Participant, as described under Section 3.11(b), and (B) if any registered public accounting firm attestation report described under Section 3.11(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) a certification, signed by a senior officer of the Master Servicer in charge of the master servicing function, in the form attached hereto as Exhibit P 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"). 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 T and directed and approved by the Depositor, and the Master Servicer 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 Master Servicer will follow the procedures set forth in Section 3.12(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Master Servicer 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 2007, (i) the parties identified on Exhibit T shall provide to the Master Servicer 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 Master Servicer and such party, the form and substance of any Additional Form 10-K Disclosure, if applicable, and (ii) the parties identified on Exhibit T shall include with such Additional Form 10-K Disclosure, an Additional Disclosure Notification in the form attached hereto as Exhibit V, 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 Master Servicer 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-K Disclosure information; except that the Master Servicer shall enforce the obligations of the Servicers under the Servicing Agreements. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Master Servicer in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant to this paragraph. After preparing the Form 10-K, if the Form 10-K contains any Additional Form 10-K Disclosure, the Master Servicer shall forward electronically a draft copy of the Form 10-K to the Depositor for review. Each party to this Agreement acknowledges that the performance by the Master Servicer of its duties under this Section 3.12(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 3.05, 3.11 or this Section 3.12(b). The Master Servicer 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 Master Servicer's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto, any Servicer, any Special Servicer (if applicable) 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 Master Servicer shall prepare, an authorized officer of the Master Servicer shall sign, and the Master Servicer 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 U and directed and approved by the Depositor, and the Master Servicer 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 Master Servicer will follow the procedures set forth in Section 3.12(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Master Servicer 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 U shall provide to the Master Servicer 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 Master Servicer and such party, the form and substance of any Form 8-K Disclosure Information, if applicable, and (ii) the parties identified on Exhibit U shall include with such Additional Form 8-K Disclosure, an Additional Disclosure Notification in the form attached hereto as Exhibit V 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 Master Servicer 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 Form 8-K Disclosure Information; except that the Master Servicer shall enforce the obligations of the Servicers under the Servicing Agreements. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Master Servicer 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 Master Servicer 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 Master Servicer of its duties under this Section 3.12(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 3.12(c). The Master Servicer 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 Master Servicer's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto, any Servicer, the Custodian or any Special Servicer (if applicable) 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 Master Servicer 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 Master Servicer will promptly notify the Depositor and, in the case of Form 10-D or 10-K, the Master Servicer will prepare, sign and file a Form 12b-25 pursuant to Rule 12b-25 of the Exchange Act not later than the Business Day following the due date of the applicable report. Within five days following the due date of any Form 10-D as to which it has filed a Form 12b-25, the Master Servicer 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 Master Servicer shall prepare, sign and file the related Form 10-K. In the case of Form 8-K, the Master Servicer 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 Master Servicer 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. The parties to this Agreement acknowledge that the performance by the Master Servicer of its duties under this Section 3.12(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 Master Servicer 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 Master Servicer's inability or failure to obtain or receive, on a timely basis, any information from any other party hereto, any Servicer, the Custodian or any Special Servicer (if applicable) 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) On or prior to January 30 of the first year in which the Master Servicer is able to do so under applicable law, the Master Servicer shall prepare, an authorized officer of the Master Servicer shall sign, and the Master Servicer 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 Master Servicer shall recommence preparing and filing reports on Form 10-D, 10-K and 8-K as required pursuant to this Section. (f) To the extent the Master Servicer is obligated to give any notice to the Depositor pursuant to this Section 3.12, such notice may, notwithstanding the provisions of Section 10.05 in this Agreement, be delivered via facsimile to 301-816-8152 or via electronic mail to Structuredfinance-frederick@wellsfargo.com. ARTICLE IV DISTRIBUTIONS IN RESPECT OF CERTIFICATES; PAYMENTS TO CERTIFICATEHOLDERS; STATEMENTS AND REPORTS Section 4.01 Distributions. (a) On each Distribution Date, the Pool Distribution Amount will be applied in the following amounts, to the extent the Pool Distribution Amount is sufficient therefor, in the manner and in the order of priority as follows: first, to the Classes of Class A Certificates, pro rata, based upon their respective Interest Accrual Amounts, in an aggregate amount up to the Class A Interest Accrual Amount with respect to such Distribution Date; provided that prior to the applicable Accretion Termination Date, an amount equal to the amount that would otherwise be distributable in respect of interest to the Classes of Accrual Certificates pursuant to this provision will instead be distributed in reduction of the Principal Balances of certain Classes of Class A Certificates, in accordance with Section 4.01(b); second, to the Classes of Class A Certificates, pro rata, based upon their respective Class A Unpaid Interest Shortfalls in an aggregate amount up to the Aggregate Class A Unpaid Interest Shortfall; provided that prior to the applicable Accretion Termination Date, an amount equal to the amount that would otherwise be distributable in respect of unpaid interest shortfalls to the Classes of Accrual Certificates pursuant to this provision will instead be distributed in reduction of the Principal Balances of certain Classes of Class A Certificates, in accordance with Section 4.01(b); third, concurrently, to the Class A Certificates (other than the Class A-PO Certificates) and the Class A-PO Certificates, pro rata, based on their respective Class A Non-PO Optimal Principal Amount and Class A-PO Optimal Principal Amount, (1) to the Classes of Class A Certificates (other than the Class A-PO Certificates), in an aggregate amount up to the Class A Non-PO Optimal Principal Amount, such distribution to be allocated among such Classes in accordance with Section 4.01(b) or Section 4.01(c), as applicable, and (2) to the Class A-PO Certificates in an amount up to the Class A-PO Optimal Principal Amount; fourth, to the Class A-PO Certificates in an amount up to the Class A-PO Deferred Amount from amounts otherwise distributable (without regard to this Paragraph fourth) first to the Class B-6 Certificates pursuant to Paragraph twenty-second, below, second to the Class B-5 Certificates pursuant to Paragraph nineteenth, below, third to the Class B-4 Certificates pursuant to Paragraph sixteenth, below, fourth to the Class B-3 Certificates pursuant to Paragraph thirteenth, below, fifth to the Class B-2 Certificates pursuant to Paragraph tenth below, and sixth to the Class B-1 Certificates pursuant to Paragraph seventh below; fifth, to the Class B-1 Certificates in an amount up to the Interest Accrual Amount for the Class B-1 Certificates with respect to such Distribution Date; sixth, to the Class B-1 Certificates in an amount up to the Class B-1 Unpaid Interest Shortfall; seventh, to the Class B-1 Certificates in an amount up to the Class B-1 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-1 Certificates pursuant to this Paragraph seventh will be reduced by the amount, if any, that would have been distributable to the Class B-1 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; eighth, to the Class B-2 Certificates in an amount up to the Interest Accrual Amount for the Class B-2 Certificates with respect to such Distribution Date; ninth, to the Class B-2 Certificates in an amount up to the Class B-2 Unpaid Interest Shortfall; tenth, to the Class B-2 Certificates in an amount up to the Class B-2 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-2 Certificates pursuant to this Paragraph tenth will be reduced by the amount, if any, that would have been distributable to the Class B-2 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; eleventh, to the Class B-3 Certificates in an amount up to the Interest Accrual Amount for the Class B-3 Certificates with respect to such Distribution Date; twelfth, to the Class B-3 Certificates in an amount up to the Class B-3 Unpaid Interest Shortfall; thirteenth, to the Class B-3 Certificates in an amount up to the Class B-3 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-3 Certificates pursuant to this Paragraph thirteenth will be reduced by the amount, if any, that would have been distributable to the Class B-3 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; fourteenth, to the Class B-4 Certificates in an amount up to the Interest Accrual Amount for the Class B-4 Certificates with respect to such Distribution Date; fifteenth, to the Class B-4 Certificates in an amount up to the Class B-4 Unpaid Interest Shortfall; sixteenth, to the Class B-4 Certificates in an amount up to the Class B-4 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-4 Certificates pursuant to this Paragraph sixteenth will be reduced by the amount, if any, that would have been distributable to the Class B-4 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; seventeenth, to the Class B-5 Certificates in an amount up to the Interest Accrual Amount for the Class B-5 Certificates with respect to such Distribution Date; eighteenth, to the Class B-5 Certificates in an amount up to the Class B-5 Unpaid Interest Shortfall; nineteenth, to the Class B-5 Certificates in an amount up to the Class B-5 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-5 Certificates pursuant to this Paragraph nineteenth will be reduced by the amount, if any, that would have been distributable to the Class B-5 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; twentieth, to the Class B-6 Certificates in an amount up to the Interest Accrual Amount for the Class B-6 Certificates with respect to such Distribution Date; twenty-first, to the Class B-6 Certificates in an amount up to the Class B-6 Unpaid Interest Shortfall; twenty-second, to the Class B-6 Certificates in an amount up to the Class B-6 Optimal Principal Amount; provided, however, that the amount distributable to the Class B-6 Certificates pursuant to this Paragraph twenty-second will be reduced by the amount, if any, that would have been distributable to the Class B-6 Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in Paragraph fourth above; and twenty-third, to the Holder of the Class A-R Certificate, any amounts remaining in the Payment Account. Notwithstanding the foregoing, after the Principal Balance of any Class has been reduced to zero, such Class will be entitled to no further distributions of principal or interest (including, without limitation, any Unpaid Interest Shortfalls). With respect to any Distribution Date, the amount of the Principal Adjustment, if any, attributable to any Class of Class B Certificates will be allocated to the Classes of Class A Certificates (other than the Class A-PO Certificates) and any Class of Class B Certificates with a lower numerical designation pro rata based on their outstanding Principal Balances. On each Distribution Date, any Reimbursement Amount shall be distributed sequentially to the Classes of Certificates then outstanding which bore the loss to which such Reimbursement Amount relates beginning with the most senior of such Class of Certificates, up to, with respect to each Class, the amount of loss borne by such Class. Any Reimbursement Amount remaining after the application described in the preceding sentence shall be included in the Pool Distribution Amount. (b) (i) On each Distribution Date occurring prior to the Accretion Termination Date for the Class A-7 Certificates, the applicable Accrual Distribution Amount will be distributed, sequentially, as follows: first, concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and second, to the Class A-7 Certificates. (ii) On each Distribution Date occurring prior to the Accretion Termination Date for the Class A-9 Certificates, the applicable Accrual Distribution Amount will be distributed, sequentially, to the Class A-8 and Class A-9 Certificates; (iii) On each Distribution Date occurring prior to the Subordination Depletion Date, the Class A Non-PO Distribution Amount will be allocated among and distributed in reduction of the Principal Balances of the Class A Non-PO Certificates, sequentially, as follows: first, to the Class A-R Certificate; and second, concurrently, as follows: (A) [ ]%, sequentially, as follows: (i) sequentially, up to the PAC I Group Principal Amount as follows: (a) sequentially, to the Class A-10 and Class A-11 Certificates; (b) concurrently, to the Class A-12 and Class A-14 Certificates, pro rata; and (c) to the Class A-13 Certificates; (ii) sequentially, up to the PAC II Group Principal Amount, as follows: (a) concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and (b) to the Class A-7 Certificates; (iii) sequentially, to the Class A-8 and Class A-9 Certificates; (iv) sequentially, as follows: (a) concurrently, to the Class A-5 and Class A-6 Certificates, pro rata; and (b) to the Class A-7 Certificates; and (v) sequentially, as follows: (a) sequentially, to the Class A-10 and Class A-11 Certificates; (b) concurrently, to the Class A-12 and Class A-14 Certificates, pro rata; and (c) to the Class A-13 Certificates; and (B) [ ]%, sequentially, as follows: (i) to the Class A-3 and Class A-15 Certificates, pro rata, up to the Priority Amount for such Distribution Date; (ii) concurrently, to the Class A-1 and Class A-2 Certificates, pro rata; (iii) to the Class A-4 Certificates; and (iv) concurrently, to the Class A-3 and Class A-15 Certificates, pro rata. As used above, the "PAC I Group Principal Amount" for any Distribution Date means the amount, if any, that would reduce the aggregate Principal Balance of the PAC I Group to the percentage of the initial aggregate Principal Balance of the PAC I Group shown in the related table in Schedule II with respect to such Distribution Date. As used above, the "PAC II Group Principal Amount" for any Distribution Date means the amount, if any, that would reduce the aggregate Principal Balance of the PAC II Group to the percentage of the initial aggregate Principal Balance of the PAC II Group shown in the related table in Schedule II with respect to such Distribution Date. The tables in Schedule II set forth for each Distribution Date the planned Principal Balance for the PAC I Group and the planned Principal Balance for the PAC II Group, expressed as a percentage of the initial aggregate Principal Balance of the PAC I Group and the initial aggregate Principal Balance of the PAC II Group. (c) Notwithstanding the foregoing, on each Distribution Date occurring on or subsequent to the Subordination Depletion Date, (x) the Class A Non-PO Principal Distribution Amount shall be distributed among the Classes of Class A Certificates (other than the Class A-PO Certificates), pro rata, in accordance with their outstanding Principal Balances without regard to either the proportions or the priorities set forth in Section 4.01(b)(i) and (ii). (d) (i) For purposes of determining whether the Classes of Class B Certificates are eligible to receive distributions of principal with respect to any Distribution Date, the following tests shall apply: (A) if the Current Class B-1 Fractional Interest is less than the Original Class B-1 Fractional Interest and the Class B-1 Principal Balance is greater than zero, the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates shall not be eligible to receive distributions of principal; or (B) if the Current Class B-2 Fractional Interest is less than the Original Class B-2 Fractional Interest and the Class B-2 Principal Balance is greater than zero, the Class B-3, Class B-4, Class B-5 and Class B-6 Certificates shall not be eligible to receive distributions of principal; or (C) if the Current Class B-3 Fractional Interest is less than the Original Class B-3 Fractional Interest and the Class B-3 Principal Balance is greater than zero, the Class B-4, Class B-5 and Class B-6 Certificates shall not be eligible to receive distributions of principal; or (D) if the Current Class B-4 Fractional Interest is less than the Original Class B-4 Fractional Interest and the Class B-4 Principal Balance is greater than zero, the Class B-5 and Class B-6 Certificates shall not be eligible to receive distributions of principal; or (E) if the Current Class B-5 Fractional Interest is less than the Original Class B-5 Fractional Interest and the Class B-5 Principal Balance is greater than zero, the Class B-6 Certificates shall not be eligible to receive distributions of principal. (ii) Notwithstanding the foregoing, if on any Distribution Date the aggregate distributions to Holders of the Classes of Class B Certificates entitled to receive distributions of principal would reduce the Principal Balances of the Classes of Class B Certificates entitled to receive distributions of principal below zero, first the Class B Prepayment Percentage of any affected Class of Class B Certificates for such Distribution Date beginning with the affected Class with the lowest numerical Class designation and then, if necessary, the Class B Percentage of such Class of the Class B Certificates for such Distribution Date shall be reduced to the respective percentages necessary to bring the Principal Balance of such Class of Class B Certificates to zero. The Class B Prepayment Percentages and the Class B Percentages of the remaining Classes of Class B Certificates will be recomputed substituting for the Subordinated Prepayment Percentage and Subordinated Percentage in such computations the difference between (A) the Subordinated Prepayment Percentage or Subordinated Percentage, as the case may be, and (B) the percentages determined in accordance with the preceding sentence necessary to bring the Principal Balances of the affected Classes of Class B Certificates to zero; provided, however, that if the Principal Balances of all the Classes of Class B Certificates eligible to receive distributions of principal shall be reduced to zero on such Distribution Date, the Class B Prepayment Percentage and Class B Percentage of the Class of Class B Certificates with the lowest numerical Class designation which would otherwise be ineligible to receive distributions of principal in accordance with this Section shall equal the remainder of the Subordinated Prepayment Percentage for such Distribution Date minus the sum of the Class B Prepayment Percentages of the Classes of Class B Certificates having lower numerical Class designations, if any, and the remainder of the Subordinated Percentage for such Distribution Date minus the sum of the Class B Percentages of the Classes of Class B Certificates having lower numerical Class designations, if any, respectively. Any entitlement of any Class of Class B Certificates to principal payments solely pursuant to this clause (ii) shall not cause such Class to be regarded as being eligible to receive principal distributions for the purpose of applying the definition of its Class B Percentage or Class B Prepayment Percentage. (e) On each Distribution Date other than the Final Distribution Date (if such Final Distribution Date is in connection with a purchase of the assets of the Trust Estate by the Depositor), the Paying Agent shall, from funds remitted to it by the Master Servicer, distribute to each Certificateholder of record on the preceding Record Date (other than as provided in Section 9.01 respecting the final distribution to Certificateholders or in the last paragraph of this Section 4.01(e) respecting the final distribution in respect of any Class) either in immediately available funds by wire transfer to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder holds Certificates having a Denomination at least equal to that specified in Section 11.22, and has so notified the Paying Agent at least seven Business Days prior to the Distribution Date or, if such Holder holds Certificates having, in the aggregate, a Denomination less than the requisite minimum Denomination or if such Holder holds the Class A-R Certificate or has not so notified the Paying Agent, by check mailed to such Holder at the address of such Holder appearing in the Certificate Register, such Holder's share of the Class A Distribution Amount with respect to each Class of Class A Certificates and the Class B Distribution Amount with respect to each Class of Class B Certificates. In the event that, on any Distribution Date prior to the Final Distribution Date, the Principal Balance of any Class of Class A Certificates (other than the Class A-R Certificate) or the Principal Balance of any Class of Class B Certificates would be reduced to zero, the Master Servicer shall, as soon as practicable after the Determination Date relating to such Distribution Date, send notice to the Paying Agent. The Paying Agent shall then send a notice to each Certificateholder of such Class with a copy to the Certificate Registrar, specifying that the final distribution with respect to such Class will be made on such Distribution Date only upon the presentation and surrender of such Certificateholder's Certificates at the office or agency of the Certificate Registrar therein specified; provided, however, that the failure to give such notice will not entitle a Certificateholder to any interest beyond the interest payable with respect to such Distribution Date in accordance with Section 4.01(a). (f) The Paying Agent shall withhold or cause to be withheld such amounts as may be required by the Code (giving full effect to any exemptions from withholding and related certifications required to be furnished by Certificateholders and any reductions to withholding by virtue of any bilateral tax treaties and any applicable certification required to be furnished by Certificateholders with respect thereto) from distributions to be made to Persons other than U.S. Persons ("Non-U.S. Persons"). Amounts withheld pursuant to this Section 4.01(f) shall be treated as having been distributed to the related Certificateholder for all purposes of this Agreement. For the purposes of this paragraph, a "U.S. Person" is a citizen 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 whose income is subject to United States federal income tax regardless of its source, 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. 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). Section 4.02 Allocation of Realized Losses. (a) With respect to any Distribution Date, the principal portion of any Realized Loss (other than Debt Service Reductions) will be allocated as follows: first, concurrently, to the Class A-PO Certificates and Class B-6 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-6 Principal Balance has been reduced to zero; second, concurrently, to the Class A-PO Certificates and Class B-5 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-5 Principal Balance has been reduced to zero; third, concurrently, to the Class A-PO Certificates and Class B-4 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-4 Principal Balance has been reduced to zero; fourth, concurrently, to the Class A-PO Certificates and Class B-3 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-3 Principal Balance has been reduced to zero; fifth, concurrently, to the Class A-PO Certificates and Class B-2 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-2 Principal Balance has been reduced to zero; sixth, concurrently, to the Class A-PO Certificates and Class B-1 Certificates, pro rata, based on the applicable PO Fraction and the applicable Non-PO Fraction of such Mortgage Loans, respectively, until the Class B-1 Principal Balance has been reduced to zero; and seventh, concurrently, to the Class A Certificates (other than the Class A-PO Certificates) and Class A-PO Certificates, pro rata, based on the applicable Non-PO Fraction and the applicable PO Fraction of such Mortgage Loans, respectively. This allocation of Realized Losses will be effected through the reduction of the applicable Class's Principal Balance through the operation of the definition of Principal Balance and the provisos in the definitions of Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3 Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance and Class B-6 Principal Balance. (b) Any Realized Losses allocated to a Class of Class A Certificates or Class B Certificates pursuant to Section 4.02(a) shall be allocated among the Certificates of such Class based on their Percentage Interests. (c) After the Class B Principal Balance has been reduced to zero, the interest portion of Realized Losses will be allocated among the outstanding Classes of Class A Certificates based upon their Class A Interest Percentages. (d) Realized Losses allocated in accordance with this Section 4.02 will be allocated as follows: (i) Liquidated Loan Losses on Liquidated Loans for which the Liquidation Proceeds were received during, and Bankruptcy Losses incurred in a period corresponding to, an Unscheduled Principal Receipt Period for Full Unscheduled Principal Receipts that is a Mid-Month Receipt Period will be allocated on the Determination Date in the month following the month in which such Mid-Month Receipt Period ended and (ii) Liquidated Loan Losses on Liquidated Loans for which the Liquidation Proceeds were received during, and Bankruptcy Losses incurred in a period corresponding to, an Unscheduled Principal Receipt Period for Full Unscheduled Principal Receipts that is a Prior Month Receipt Period will be allocated on the Determination Date in the second month following the month which is such Prior Month Receipt Period. Section 4.03 Paying Agent. (a) The Paying Agent shall establish and maintain a Payment Account, which shall be a separate trust account (unless the Master Servicer is the Paying Agent, in which case, the Certificate Account may be the Payment Account) and an Eligible Account, in which the Master Servicer shall cause to be deposited from funds in the Certificate Account or, to the extent required hereunder, from its own funds (i) at or before 10:00 a.m., New York time, on the Business Day preceding each Distribution Date, by wire transfer of immediately available funds, any Periodic Advance for such Distribution Date, pursuant to Section 3.03 and (ii) at or before 10:00 a.m., New York time, on the Business Day preceding each Distribution Date, by wire transfer of immediately available funds, an amount equal to the Pool Distribution Amount. The Master Servicer may cause the Paying Agent to invest the funds in the Payment Account. Any such investment shall be in Eligible Investments, which shall mature not later than the Business Day preceding the related Distribution Date (unless the Eligible Investments are obligations of the institution that maintains such account, in which case such Eligible Investments shall mature not later than the Distribution Date), and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Master Servicer and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments shall be deposited in the Payment Account by the Master Servicer out of its own funds immediately as realized. The Paying Agent may withdraw from the Payment Account any amount deposited in the Payment Account that was not required to be deposited therein and may clear and terminate the Payment Account pursuant to Section 9.01. (b) Wells Fargo Bank is hereby appointed as initial Paying Agent to make distributions to Certificateholders and to make available to Certificateholders the Distribution Date Statements and the annual statements required by Section 4.04. The Trustee may, at any time, remove or replace the Paying Agent, other than Wells Fargo Bank for so long as Wells Fargo Bank is acting as the Master Servicer. If Wells Fargo Bank is no longer acting as Master Servicer, the Master Servicer shall pay, from its own funds, the reasonable compensation of any Paying Agent other than Wells Fargo Bank. The Trustee shall cause any Paying Agent that is not HSBC Bank USA, National Association or Wells Fargo Bank 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 Master Servicer 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 Trustee notice of any default by the Master Servicer in remitting any required amount; (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts held in trust by such Paying Agent; and (iv) provide to the Master Servicer the assessment of compliance and accountants report provided for in Section 3.11 with respect to the Servicing Criteria set forth in Item 1122(d) of Regulation AB applicable to the duties of the Paying Agent. Section 4.04 Statements to Certificateholders; Reports to the Trustee and the Depositor. (a) On each Distribution Date, the Master Servicer shall make available in accordance with subsection (b) of this Section 4.04 to each Holder of a Certificate, the Trustee, the Paying Agent and the Depositor a statement (the "Distribution Date Statement") setting forth: (i) the applicable Determination Date, the applicable Record Date and the actual Distribution Date; (ii) the amount of such distribution to Holders of each Class of Class A Certificates allocable to principal, separately identifying the aggregate amount of any Unscheduled Principal Receipts and Liquidation Proceeds included therein and the Principal Balance of each Class of Class A Certificates; (iii) (A) the amount of such distribution to Holders of each Class of Class A Certificates allocable to interest, (B) the amount of the Current Class A Interest Distribution Amount allocated to each Class of Class A Certificates, (C) any Interest Shortfall Amounts arising with respect to such Distribution Date and any remaining Class A Unpaid Interest Shortfall with respect to each Class after giving effect to such distribution, (D) the amount of any Non-Supported Interest Shortfalls allocated to each Class of Class A Certificates for such Distribution Date and (E) the amount of any Relief Act Shortfall allocated to each Class of Class A Certificates for such Distribution Date; (iv) the amount of such distribution to Holders of each Class of Class B Certificates allocable to principal, separately identifying the aggregate amount of any Unscheduled Principal Receipts and Liquidation Proceeds included therein and the Principal Balance of each Class of Class B Certificates; (v) (A) the amount of such distribution to Holders of each Class of Class B Certificates allocable to interest, (B) the amount of the Current Class B Interest Distribution Amount allocated to each Class of Class B Certificates, (C) any Class B Interest Shortfall Amounts arising with respect to such Distribution Date and any remaining Class B Unpaid Interest Shortfall with respect to each Class of Class B Certificates after giving effect to such distribution, (D) the amount of any Non-Supported Interest Shortfall allocated to each Class of Class B Certificates for such Distribution Date and (E) the amount of any Relief Act Shortfall allocated to each Class of Class B Certificates for such Distribution Date; (vi) the amount of any Periodic Advance by or reimbursed to any Servicer, the Master Servicer or the Trustee pursuant to the Servicing Agreements or this Agreement; (vii) the number and aggregate principal balance of Mortgage Loans outstanding, the weighted average Mortgage Interest Rate and weighted average remaining term to maturity of the Mortgage Loans outstanding and the cumulative prepayment amounts, in each case, as of the preceding Determination Date; (viii) the number and aggregate principal balances of the Mortgage Loans by range of current Mortgage Interest Rates; (ix) the pools factors for such Distribution Date; (x) the beginning and ending balance of the Certificate Account; (xi) the Class A Principal Balance, the Principal Balance of each Class of Class A Certificates, the Class B Principal Balance and the Principal Balance of each Class of Class B Certificates prior to and after giving effect to the distributions of principal made, and the principal portion of Realized Losses, if any, allocated with respect to such Distribution Date; (xii) the Adjusted Pool Amount, the Adjusted Pool Amount (Non-PO Portion), the Adjusted Pool Amount (PO Portion), the Pool Scheduled Principal Balance of the Mortgage Loans for such Distribution Date, the aggregate Scheduled Principal Balance of the Discount Mortgage Loans for such Distribution Date; (xiii) the aggregate Scheduled Principal Balances of the Mortgage Loans serviced by Wells Fargo Bank in its capacity as Servicer and, collectively, by the Other Servicers as of such Distribution Date; (xiv) the Class A Percentage for such Distribution Date; (xv) the Class A Prepayment Percentage for such Distribution Date; (xvi) the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Percentages for such Distribution Date; (xvii) the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Prepayment Percentages for such Distribution Date; (xviii) 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 180 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; (xix) the number and aggregate principal balances of the Mortgage Loans that are REO Mortgage Loans as of the Determination Date immediately preceding such Distribution Date; (xx) the aggregate amount of Realized Losses incurred during the preceding calendar month; (xxi) any expenses or indemnification amounts paid by the Trust, the specific purpose of each payment and the parties to whom the payments were made; (xxii) the amount by which the Principal Balance of each Class of Class B Certificates has been reduced as a result of Realized Losses allocated as of such Distribution Date; (xxiii) the amount of the aggregate Servicing Fees and Master Servicing Fees paid (and not previously reported) with respect to the related Distribution Date and the amount by which the aggregate Available Master Servicer Compensation has been reduced by the Prepayment Interest Shortfall for the related Distribution Date; (xxiv) the amount of PMI Advances made by a Servicer, if any; (xxv) the Class A Pass-Through Rate for each Class of Class A Certificates and the Class B Pass-Through Rate for each Class of Class B Certificates; (xxvi) the Class A-PO Deferred Amount, if any; (xxvii) any material modifications, extensions or waivers to Mortgage Loan terms, fees, penalties or payments since the previous Distribution Date; (xxviii) any material breaches of representations and warranties relating to the Mortgage Loans or material breaches of transaction covenants or representations and warranties; (xxix) if any of the Mortgage Loans have prepayment penalties, the aggregate amount of any prepayment penalties paid; and (xxx) any other customary information as is required to enable Certificateholders to prepare their tax returns. In the case of information furnished with respect to a Class of Class A Certificates pursuant to clauses (ii) and (iii) above and with respect to a Class of Class B Certificates pursuant to clauses (iv) and (v) above, the amounts shall be expressed as a dollar amount per Class A or Class B Certificate (other than the Class A-R Certificate) with a $1,000 Denomination, and as a dollar amount per Class A-R Certificate with a $100 Denomination. Within a reasonable period of time after the end of each calendar year, the Paying Agent shall, upon request, furnish or cause to be furnished to each Person who at any time during the calendar year was the Holder of a Certificate a statement containing the information set forth in clauses (ii) and (iii)(A) above in the case of a Class A Certificateholder and the information set forth in clauses (iv) and (v)(A) above in the case of a Class B Certificateholder aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of the Paying Agent shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Master Servicer or the Trustee pursuant to any requirements of the Code from time to time in force. Unless the Master Servicer is acting as the Paying Agent, prior to the close of business on the second Business Day preceding each Distribution Date, the Master Servicer shall furnish a statement to any Paying Agent (the information in such statement to be made available to Certificateholders by the Paying Agent on written request) setting forth the Class A Distribution Amount with respect to each Class of Class A Certificates and the Class B Distribution Amount with respect to each Class of Class B Certificates. The determination by the Master Servicer of such amounts shall, in the absence of obvious error, be presumptively deemed to be correct for all purposes hereunder and the Trustee and the Paying Agent shall be protected in relying upon the same without any independent check or verification. In addition to the Distribution Date Statements and the annual statements required pursuant to this Section 4.04(a), the Paying Agent shall make available upon request to each Holder and each proposed transferee of a Class B-4, Class B-5 or Class B-6 Certificate such additional information, if any, as may be required to permit the proposed transfer to be effected pursuant to Rule 144A, which information shall be provided on a timely basis to the Paying Agent by the Master Servicer. (b) The Master Servicer's responsibility for disbursing the information set forth in subsection (a) of this Section 4.04 to each Holder of a Certificate, the Depositor and other interested parties is limited to the availability, timeliness and the accuracy of the information provided by each Servicer. The Master Servicer will make a copy of each Distribution Date Statement provided pursuant to this Section 4.04 (and, at its option, any additional files containing the same information in an alternative format) available each month to Certificateholders and other interested parties, and other parties to this Agreement via the Master Servicer's internet website, which in the case of Wells Fargo Bank, is located at "www.ctslink.com." In addition, the Paying Agent shall provide copies of the Distribution Date Statement and the annual statements required pursuant to Section 4.04(a) to Persons making written requests therefor at its Corporate Trust Office. Assistance in using the internet website can be obtained by calling the Master Servicer's customer service desk, which in the case of Wells Fargo Bank, is at (301) 815-6600. Parties that are unable to use the above distribution method are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and indicating such. The Master Servicer shall have the right to change the way the Distribution Date Statement is distributed in order to make such distribution more convenient and/or more accessible and the Master Servicer shall provide timely and adequate notification to the Certificateholders and the parties to this Agreement regarding any such changes. The Master Servicer shall also be entitled to rely on but shall not be responsible for the content or accuracy of any information provided by third parties for purposes of preparing the Distribution Date Statement and may affix thereto any disclaimer it deems appropriate in its reasonable discretion (without suggesting liability on the part of any other party hereto). Section 4.05 Reports to Mortgagors and the Internal Revenue Service. The Master Servicer shall, in each year beginning after the Cut-Off Date, cause the applicable Servicers to make the reports of foreclosures and abandonments of any Mortgaged Property as required by Code Section 6050J. In order to facilitate this reporting process, the Master Servicer shall request that each Servicer, on or before January 15th of each year, shall provide to the Internal Revenue Service, with copies to the Master Servicer, reports relating to each instance occurring during the previous calendar year in which such Servicer (i) on behalf of the Trustee acquires an interest in a Mortgaged Property through foreclosure or other comparable conversion in full or partial satisfaction of a Mortgage Loan serviced by such Servicer, or (ii) knows or has reason to know that a Mortgaged Property has been abandoned. Reports from the Servicers shall be in form and substance sufficient to meet the reporting requirements imposed by Code Section 6050J. In addition, each Servicer shall provide the Master Servicer with sufficient information to allow the Master Servicer to, for each year ending after the Cut-Off Date, provide, or cause to be provided, to the Internal Revenue Service and the Mortgagors such information as is required under Code Sections 6050H (regarding payment of interest) and 6050P (regarding cancellation of indebtedness). Section 4.06 Calculation of Amounts; Binding Effect of Interpretations and Actions of Master Servicer. The Master Servicer will compute the amount of all distributions to be made on the Certificates and all losses to be allocated to the Certificates. In the event that the Master Servicer concludes that any ambiguity or uncertainty exists in any provisions of this Agreement relating to distributions to be made on the Certificates, the allocation of losses to the Certificates or otherwise, the interpretation of such provisions and any actions taken by the Master Servicer in good faith to implement such interpretation shall be binding upon Certificateholders. Section 4.07 Determination of LIBOR. On each Rate Determination Date, the Paying Agent shall determine LIBOR for the Distribution Date occurring in the succeeding month, 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 Rate Determination Date. As used herein, "Telerate page 3750" means the display designated as page 3750 on the Moneyline Telerate Service. If on any Rate Determination Date the Paying Agent is unable to determine LIBOR on the basis of the method set forth in the preceding paragraph, LIBOR for the applicable Distribution Date will be whichever is 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 Paying Agent 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 the Reference Banks 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 Paying Agent can determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate that the Reference Banks are quoting on such Rate Determination Date to leading European banks. If on any Rate Determination Date the Paying Agent is required but is unable to determine the Reserve Interest Rate in the manner provided in the preceding paragraph, LIBOR for the applicable Distribution Date will be LIBOR as determined on the previous Rate Determination Date, or, in the case of the first Rate Determination Date, [ ]%. The establishment of LIBOR by the Paying Agent and the Paying Agent's subsequent calculation of the rates of interest applicable to each of the LIBOR Certificates in the absence of manifest error, will be final and binding. After a Rate Determination Date, the Paying Agent shall provide the Class A Pass-Through Rates of the LIBOR Certificates for the related Distribution Date to Beneficial Owners or Holders of LIBOR Certificates who place a telephone call to the Paying Agent at 301-815-6600 and make a request therefor during normal working hours on any Business Day. ARTICLE V THE CERTIFICATES Section 5.01 The Certificates. (a) The Class A and Class B Certificates shall be issued only in minimum Denominations of a Single Certificate and, except for the Class A-R Certificate, integral multiples of $1,000 in excess thereof (except, if necessary, for one Certificate of each Class (other than the Class A-R Certificate) that evidences one Single Certificate plus such additional principal portion as is required in order for all Certificates of such Class to equal the aggregate Original Principal Balance of such Class), and shall be substantially in the respective forms set forth as Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-R, A-PO, B-1, B-2, B-3, B-4, B-5, B-6 and C (reverse side of Certificates) hereto. On original issue the Certificates shall be executed and delivered by the Paying Agent to or upon the order of the Depositor upon receipt by the Trustee or the Custodian of the documents specified in Section 2.01(a). The aggregate principal portion evidenced by the Class A and Class B Certificates shall be the sum of the amounts specifically set forth in the respective Certificates. The Certificates shall be executed by manual or facsimile signature on behalf of the Paying Agent by any Responsible Officer thereof. Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Paying Agent shall bind the Paying Agent notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersigning of such Certificates and delivery of such Certificates or did not hold such offices at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless manually countersigned by a Responsible Officer of the Authenticating Agent, or unless there appears on such Certificate a certificate of authentication executed by the Authenticating Agent by manual signature, and such countersignature or certificate upon a 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. Until such time as Definitive Certificates are issued pursuant to Section 5.07, each Book-Entry Certificate shall bear the following legend: "Unless this certificate is presented by an authorized representative of [the Clearing Agency] to the Depositor or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of [the Clearing Agency] or such other name as requested by an authorized representative of [the Clearing Agency] and any payment is made to [the Clearing Agency], any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful since the registered owner hereof, [the Clearing Agency], has an interest herein." (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 Trust Company, the initial Clearing Agency, by, or on behalf of, the Depositor or to, and deposited with the Certificate Custodian, on behalf of The Depository Trust Company, if directed to do so pursuant instructions from The Depository Trust Company. Such Certificates shall initially be registered in the Certificate Register in the name of the nominee of the initial Clearing Agency, and no Beneficial Owner will receive a definitive certificate representing such Beneficial Owner's interest in the Book-Entry Certificates, except as provided in Section 5.07. Unless and until definitive, fully registered certificates ("Definitive Certificates") have been issued to Beneficial Owners pursuant to Section 5.07: (i) the provisions of this Section 5.01(b) shall be in full force and effect; (ii) the Depositor, the Master Servicer, the Certificate Registrar, the Paying Agent and the Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Book-Entry Certificates and the taking of actions by the Holders of Book-Entry Certificates) as the authorized representative of the Beneficial Owners; (iii) to the extent that the provisions of this Section 5.01(b) conflict with any other provisions of this Agreement, the provisions of this Section 5.01(b) shall control; (iv) the rights of Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law, the rules, regulations and procedures of the Clearing Agency and agreements between such Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants, and all references in this Agreement to actions by Certificateholders shall, with respect to the Book-Entry Certificates, refer to actions taken by the Clearing Agency upon instructions from the Clearing Agency Participants, and all references in this Agreement to distributions, notices, reports and statements to Certificateholders shall, with respect to the Book-Entry Certificates, refer to distributions, notices, reports and statements to the Clearing Agency or its nominee, as registered holder of the Book-Entry Certificates, as the case may be, for distribution to Beneficial Owners in accordance with the procedures of the Clearing Agency; and (v) the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Certificates to the Clearing Agency Participants, for distribution by such Clearing Agency Participants to the Beneficial Owners or their nominees. For purposes of any provision of this Agreement requiring or permitting actions with the consent of, or at the direction of, Holders of Book-Entry Certificates evidencing specified Voting Interests, such direction or consent shall be given by Beneficial Owners having the requisite Voting Interests, acting through the Clearing Agency. Unless and until Definitive Certificates have been issued to Beneficial Owners pursuant to Section 5.07, copies of the Distribution Date Statements shall be available to Beneficial Owners upon written request to the Paying Agent at its Corporate Trust Office. Section 5.02 Registration of Certificates. (a) The Certificate Registrar shall cause to be kept at one of the offices or agencies to be maintained in accordance with the provisions of Section 5.06 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 Master Servicer shall act as, or shall appoint, a Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided. Upon surrender for registration of transfer of any Certificate at any office or agency maintained for such purpose pursuant to Section 5.06 (and subject to the provisions of this Section 5.02) the Paying Agent shall execute, and shall date, countersign (or cause the Authenticating Agent to countersign) and deliver, in the name of the designated transferee or transferees, one or more new Certificates of a like aggregate principal portion or Percentage Interest and of the same Class. At the option of the Certificateholders, Certificates may be exchanged for other Certificates of authorized Denominations of a like aggregate principal portion or Percentage Interest and of the same Class upon surrender of the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered for exchange, the Paying Agent shall execute, and shall date, countersign (or cause the Authenticating Agent to countersign) and deliver, the Certificates which the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for transfer or exchange shall (if so required by the Certificate Registrar or the Paying Agent) be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Certificate Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any transfer or exchange of Certificates, 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 transfer and exchange shall be canceled by the Certificate Registrar, the Paying Agent or the Authenticating Agent in accordance with their standard procedures. (b) No transfer of a Class B-4, Class B-5 or Class B-6 Certificate shall be made unless the registration requirements of the 1933 Act and any applicable State securities laws are complied with, or such transfer is exempt from the registration requirements under said Act and laws. In the event that a transfer is to be made in reliance upon an exemption from said Act or laws, (i) unless such transfer is made in reliance on Rule 144A, the Master Servicer or the Depositor may, if such transfer is to be made within three years after the later of (a) the date of the initial sale of Certificates or (b) the last date on which the Depositor or any affiliate thereof was a Holder of the Certificates proposed to be transferred, require a Class B-4, Class B-5 or Class B-6 Certificateholder to deliver a written Opinion of Counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor, to the effect that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being made pursuant to said Act and laws, which Opinion of Counsel shall not be an expense of the Depositor or the Master Servicer, and (ii) the Master Servicer shall require the transferee (other than an affiliate of the Depositor on the Closing Date) to execute an investment letter in the form of Exhibit J hereto certifying to the Depositor and the Master Servicer the facts surrounding such transfer, which investment letter shall not be an expense of the Depositor or the Master Servicer. The Holder of a Class B-4, Class B-5 or Class B-6 Certificate desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Master Servicer and any Paying Agent 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. Neither the Depositor nor the Master Servicer is under an obligation to register the Class B-4, Class B-5 or Class B-6 Certificates under said Act or any other securities law. (c) No transfer of a Class B-4, Class B-5 or Class B-6 Certificate shall be made unless the Master Servicer and the Depositor shall have received (i) a representation letter from the transferee in the form of Exhibit J hereto, to the effect that either (a) such transferee is not an employee benefit plan or other retirement arrangement subject to Title I of ERISA or Code Section 4975, or a governmental plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law ("Similar Law") which is to a material extent similar to the foregoing provisions of ERISA or the Code (collectively, a "Plan") and is not a person acting on behalf of or using the assets of any such Plan, which representation letter shall not be an expense of the Depositor or the Master Servicer or (b) if such transferee is an insurance company, (A) the source of funds used to purchase the Class B-4, Class B-5 or Class B-6 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)), (B) 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) the purchase and holding of such Class B-4, Class B-5 or Class B-6 Certificate is covered by Sections I and III of PTE 95-60 or (ii) in the case of any such Class B-4, Class B-5 or Class B-6 Certificate presented for registration in the name of a Plan, or a trustee of any such Plan, (A) an Opinion of Counsel satisfactory to the Master Servicer and the Depositor to the effect that the purchase or holding of such Class B-4, Class B-5 or Class B-6 Certificate 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 or the Master Servicer to any obligation in addition to those undertaken in this Agreement, which Opinion of Counsel shall not be an expense of the Depositor or the Master Servicer and (B) such other opinions of counsel, Officer's Certificates and agreements as the Depositor or the Master Servicer may require in connection with such transfer, which opinions of counsel, Officer's Certificates and agreements shall not be an expense of the Depositor or the Master Servicer. The Class B-4, Class B-5 and Class B-6 Certificates shall bear a legend referring to the foregoing restrictions contained in this paragraph. (d) No legal or beneficial interest in all or any portion of the Class A-R Certificate may be transferred directly or indirectly to a "disqualified organization" within the meaning of Code Section 860E(e)(5) or an agent of a disqualified organization (including a broker, nominee, or middleman), to a Plan or a Person acting on behalf of or investing the assets of a Plan (such Plan or Person, an "ERISA Prohibited Holder") or to an individual, corporation, partnership or other person unless such transferee (i) is not a Non-U.S. Person or (ii) is a Non-U.S. Person that holds the Class A-R Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Master Servicer with an effective Internal Revenue Service Form W-8ECI or (iii) is a Non-U.S. Person that has delivered to both the transferor and the Master Servicer an opinion of a nationally recognized tax counsel to the effect that the transfer of the Class A-R Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of the Class A-R Certificate will not be disregarded for federal income tax purposes (any such person who is not covered by clauses (i), (ii) or (iii) above being referred to herein as a "Non-permitted Foreign Holder"), and any such purported transfer shall be void and have no effect. The Paying Agent shall not execute, and shall not countersign (or cause the Authenticating Agent to countersign) and deliver, a new Class A-R Certificate in connection with any such transfer to a disqualified organization or agent thereof (including a broker, nominee or middleman), an ERISA Prohibited Holder or a Non-permitted Foreign Holder, and neither the Certificate Registrar nor the Paying Agent shall accept a surrender for transfer or registration of transfer, or register the transfer of, the Class A-R Certificate, unless the transferor shall have provided to the Master Servicer an affidavit, substantially in the form attached as Exhibit H hereto, signed by the transferee, to the effect that the transferee is not such a disqualified organization, an agent (including a broker, nominee, or middleman) for any entity as to which the transferee has not received a substantially similar affidavit, an ERISA Prohibited Holder or a Non-permitted Foreign Holder, which affidavit shall contain the consent of the transferee to any such amendments of this Agreement as may be required to further effectuate the foregoing restrictions on transfer of the Class A-R Certificate to disqualified organizations, ERISA Prohibited Holders or Non-permitted Foreign Holders. Such affidavit shall also contain the statement of the transferee that (i) the transferee has historically paid its debts as they have come due and intends to do so in the future, (ii) the transferee understands that it may incur liabilities in excess of cash flows generated by the residual interest, (iii) the transferee intends to pay taxes associated with holding the residual interest as they become due (iv) the transferee will not cause income from the Class A-R Certificate to be attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such transferee or any other Person, and (v) the transferee will not transfer the Class A-R Certificate to any Person who does not provide an affidavit substantially in the form attached as Exhibit H hereto. The affidavit described in the preceding paragraph, if not executed in connection with the initial issuance of the Class A-R Certificate, shall be accompanied by a written statement in the form attached as Exhibit I hereto, signed by the transferor, to the effect that as of the time of the transfer, the transferor has no actual knowledge that the transferee is a disqualified organization, ERISA Prohibited Holder or Non-permitted Foreign Holder, and has no knowledge or reason to know that the statements made by the transferee with respect to clauses (i) and (iii) of the last sentence of the preceding paragraph are not true. The Class A-R Certificate shall bear a legend referring to the foregoing restrictions contained in this paragraph and the preceding paragraph. Upon actual knowledge of a Master Servicing Officer or a Responsible Officer of the Paying Agent that any legal or beneficial interest in any portion of the Class A-R Certificate has been transferred, directly or indirectly, to a disqualified organization or agent thereof (including a broker, nominee, or middleman) in contravention of the foregoing restrictions, (i) such transferee shall be deemed to hold the Class A-R Certificate in constructive trust for the last transferor who was not a disqualified organization or agent thereof, and such transferor shall be restored as the owner of such Class A-R Certificate as completely as if such transfer had never occurred, provided that the Master Servicer may, but is not required to, recover any distributions made to such transferee with respect to the Class A-R Certificate, and (ii) the Master Servicer agrees to furnish to the Internal Revenue Service and to any transferor of the Class A-R Certificate or such agent (within 60 days of the request therefor by the transferor or agent) such information necessary to the application of Code Section 860E(e) as may be required by the Code, including but not limited to the present value of the total anticipated excess inclusions with respect to the Class A-R Certificate (or portion thereof) for periods after such transfer. At the election of the Master Servicer, the cost to the Master Servicer of computing and furnishing such information may be charged to the transferor or such agent referred to above; however, the Master Servicer shall in no event be excused from furnishing such information. Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any mutilated Certificate is surrendered to the Paying Agent, the Certificate Registrar or the Authenticating Agent, or the Paying Agent, the Certificate Registrar or the Authenticating Agent receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (ii) there is delivered to the Paying Agent, the Certificate Registrar or the Authenticating Agent such security or indemnity as may be required by them to hold each of them harmless, then, in the absence of notice to the Paying Agent, the Certificate Registrar or the Authenticating Agent that such Certificate has been acquired by a bona fide purchaser, the Paying Agent shall execute and countersign (or cause the Authenticating Agent to countersign) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and principal portion or Percentage Interest and of the same Class. Upon the issuance of any new Certificate under this Section, the Paying Agent 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 expense (including the fees and expenses of the Paying Agent or the Authenticating Agent) in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust Estate, 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. Prior to the due presentation of a Certificate for registration of transfer, the Depositor, the Master Servicer, the Trustee, the Paying Agent, the Certificate Registrar and any agent of the Depositor, the Master Servicer, the Trustee, the Paying Agent or the Certificate Registrar may treat the Person 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 for all other purposes whatsoever, and neither the Depositor, the Master Servicer, the Trustee, the Certificate Registrar, the Paying Agent nor any agent of the Depositor, the Master Servicer, the Trustee, the Certificate Registrar or the Paying Agent shall be affected by notice to the contrary. Section 5.05 Access to List of Certificateholders' Names and Addresses. (a) If the Paying Agent is not acting as Certificate Registrar, the Certificate Registrar shall furnish or cause to be furnished to the Paying Agent, within 15 days after receipt by the Certificate Registrar of a request by the Paying Agent in writing, a list, in such form as the Paying Agent may reasonably require, of the names and addresses of the Certificateholders of each Class as of the most recent Record Date. (b) If five or more Certificateholders (hereinafter referred to as "applicants") apply in writing to the Certificate Registrar, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Certificates and is accompanied by a copy of the communication which such applicants propose to transmit, then the Certificate Registrar shall, within five Business Days following the receipt of such application, afford such applicants access during normal business hours to the most recent list of Certificateholders held by the Certificate Registrar. (c) Every Certificateholder, by receiving and holding a Certificate, agrees with the Depositor, the Master Servicer, the Certificate Registrar, the Paying Agent and the Trustee that neither the Depositor, the Master Servicer, the Certificate Registrar, the Paying Agent nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names, addresses and Percentage Interests of the Certificateholders hereunder, regardless of the source from which such information was delivered. Section 5.06 Maintenance of Office or Agency. The Certificate Registrar will maintain, at its expense, an office or agency where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Certificate Registrar in respect of the Certificates and this Agreement may be served. The Certificate Registrar initially designates the Corporate Trust Office of the Certificate Registrar, if any, as its offices and agencies for said purposes. Section 5.07 Definitive Certificates. If (A) the Clearing Agency advises the Paying Agent in writing that the Clearing Agency is no longer willing or able properly to discharge its responsibilities as depository with respect to the Book-Entry Certificates, and (B) the Depositor is unable to locate a qualified successor, the Paying Agent shall notify the Beneficial Owners, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Beneficial Owners requesting the same. Upon surrender to the Paying Agent by the Clearing Agency of the Certificates held of record by its nominee, accompanied by reregistration instructions and directions to execute and authenticate new Certificates from the Depositor, the Paying Agent shall execute and cause the Authenticating Agent to countersign Definitive Certificates for delivery at its Corporate Trust Office. The Depositor shall arrange for, and will bear all costs of, the printing and issuance of such Definitive Certificates. Except with the consent of the Depositor, the Paying Agent shall not execute or cause the Authenticating Agent to countersign Definitive Certificates in exchange for Book-Entry Certificates except as set forth above. Neither the Depositor, the Master Servicer nor the Paying Agent shall be liable for any delay in delivery of such instructions by the Clearing Agency and may conclusively rely on, and shall be protected in relying on, such instructions. Section 5.08 Notices to Clearing Agency. Whenever notice or other communication to the Holders of Book-Entry Certificates is required under this Agreement, unless and until Definitive Certificates shall have been issued to Beneficial Owners pursuant to Section 5.07, the Paying Agent shall give all such notices and communications specified herein to be given to Holders of Book-Entry Certificates to the Clearing Agency. ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER Section 6.01 Liability of the Depositor and the Master Servicer. The Depositor and the Master Servicer shall each be liable in accordance herewith only to the extent of the obligations specifically imposed by this Agreement and undertaken hereunder by the Depositor and the Master Servicer. Section 6.02 Merger or Consolidation of the Depositor or the Master Servicer. Subject to the following paragraph (a) the Depositor will keep in full effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Certificates or any of the Mortgage Loans and to perform its respective duties under this Agreement and (b) the Master Servicer will keep in full effect its power and authority as a national banking association under the laws of the jurisdiction of its organization, and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Certificates or any of the Mortgage Loans and to perform its respective duties under this Agreement. The Depositor or the Master Servicer may be merged or consolidated with or into any Person, or transfer all or substantially all of its assets to any Person, in which case any Person resulting from any merger or consolidation to which the Depositor or Master Servicer shall be a party, or any Person succeeding to the business of the Depositor or Master Servicer, shall be the successor of the Depositor or Master Servicer 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) in the case of the Master Servicer, any such successor or resulting Person shall have a net worth of not less than $15,000,000 and be qualified to service mortgage loans for Fannie Mae or Freddie Mac and (b) the Master 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 Depositor, the Master Servicer and Others. Neither the Depositor nor the Master Servicer nor any subcontractor nor any of the directors, officers, employees or agents of any of them shall be under any liability to the Trust Estate or the Certificateholders and all such Persons shall be held harmless 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 any such Person against any breach of warranties or representations made herein or against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Depositor, the Master Servicer, any subcontractor, and any director, officer, employee or agent of any of them shall be entitled to indemnification by the Trust Estate and will be held harmless against any loss, liability or expense incurred in connection with the performance of their duties and obligations, the exercise of their rights or any legal action (including but not limited to, costs and expenses of litigation, and of investigation, attorney's fees, damages, judgments and amounts paid in settlement) under this Agreement, the Certificates or the Mortgage Loans (except for amounts due by the Depositor in connection with the breach of a representation or warranty covering the Mortgage Loans), including, in the case of the Master Servicer, any indemnity amounts paid by the Master Servicer to a Servicer pursuant to the applicable Servicing Agreement, other than any loss, liability or expense (including without limitation, expenses payable by the Master Servicer under Section 8.06) incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties hereunder or by reason of reckless disregard of his or its obligations and duties hereunder. The Depositor, the Master Servicer and any of the directors, officers, employees or agents of either may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any Person respecting any matters arising hereunder. Neither the Depositor nor the Master 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 involve it in any expense or liability; provided, however, that the Depositor or the Master Servicer may in its discretion undertake any such action 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 if the Certificateholders offer to the Depositor or the Master Servicer, as the case may be, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Estate, and the Depositor or the Master Servicer shall be entitled to be reimbursed therefor out of the Certificate Account, and such amounts shall, on the following Distribution Date or Distribution Dates, be allocated in reduction of distributions on the Class A Certificates and Class B Certificates in the same manner as Realized Losses are allocated pursuant to Section 4.02(a). Section 6.04 Resignation of the Master Servicer. The Master Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon appointment of a successor master servicer and receipt by the Trustee of a letter from each Rating Agency that such a resignation and appointment will not result in a downgrading of the rating of any of the Certificates, (b) upon determination that its duties hereunder are no longer permissible under applicable law, or (c) pursuant to Section 6.06. Any such determination under clause (b) permitting the resignation of the Master Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No such resignation shall become effective until the Trustee or a successor master servicer shall have assumed the Master Servicer's responsibilities, duties, liabilities and obligations hereunder. Section 6.05 Compensation to the Master Servicer. The Master Servicer shall be entitled to receive a monthly fee equal to the Master Servicing Fee, as compensation for services rendered by the Master Servicer under this Agreement. The Master Servicer also will be entitled to any late reporting fees paid by a Servicer pursuant to its Servicing Agreement, any investment income on funds on deposit in the Certificate Account invested in accordance with Section 3.01(c), any investment income on funds on deposit in the Payment Account invested in accordance with Section 4.03(a) and any Liquidation Profits to which a Servicer is not entitled under its Servicing Agreement. Section 6.06 Assignment or Delegation of Duties by Master Servicer. (a) The Master Servicer shall not assign or transfer any of its rights, benefits or privileges under this Agreement to any other Person, or delegate to or subcontract with, or authorize or appoint any other Person to perform any of the duties, covenants or obligations to be performed by the Master Servicer without the prior written consent of the Trustee, and any agreement, instrument or act purporting to effect any such assignment, transfer, delegation or appointment shall be void. Notwithstanding the foregoing, subject to Section 6.06(b), the Master Servicer shall have the right without the prior written consent of the Trustee (i) to assign its rights and delegate its duties and obligations hereunder; provided, however, that (a) the purchaser or transferee accepting such assignment or delegation is qualified to service mortgage loans for Fannie Mae or Freddie Mac, and executes and delivers to the Trustee an agreement, in 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 Master Servicer hereunder from and after the date of such agreement; and (b) each applicable Rating Agency's rating of any Certificates in effect immediately prior to such assignment, sale or transfer is not reasonably likely to be qualified, downgraded or withdrawn as a result of such assignment, sale or transfer and the Certificates are not reasonably likely to be placed on credit review status by any such Rating Agency; and (ii) 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 this Agreement and hereby agrees 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 no case, however, shall any permitted assignment and delegation relieve the Master Servicer of any liability to the Trustee or the Depositor under this Agreement, incurred by it prior to the time that the conditions contained in clause (i) above are met. (b) Notwithstanding anything contained herein to the contrary, to the extent the Master Servicer engages any affiliate or third party vendor, in connection with the performance of any of its duties under this Agreement, the Master Servicer shall immediately notify the Depositor in writing of such engagement (to the extent it has not already notified the Depositor pursuant to clause (a) above); 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 Master 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 Master Servicer") and meets the criteria in Item 1108(a)(2)(i), (ii) or (iii) of Regulation AB. If the Master Servicer has determined that such affiliates or third party vendors are a Servicing Function Participant, the Master Servicer shall cause such Servicing Function Participant to prepare and deliver to the Master Servicer a separate assessment and attestation report, as contemplated by Section 3.11 of this Agreement. In addition, if the Master Servicer has determined that any such affiliate or third party vendor would be an Additional Master Servicer and meets the criteria in Item 1108(a)(2)(i), (ii) or (iii) of Regulation AB, the Master Servicer shall cause such Additional Master Servicer to prepare and deliver to the Master Servicer a separate compliance statement as contemplated by Section 3.05 of this Agreement. In addition, if the Master Servicer determines any such affiliate or third party vendor would be a "servicer" within the meaning of Item 1101 of Regulation AB, the Master Servicer shall not engage such affiliate or third party vendor unless it provides the Master Servicer and the Depositor the information required by Section 1108(b) and 1108(c) of Regulation AB prior to such engagement. (c) In the event of any assignment of rights or delegation of duties of the Master Servicer, the Master Servicer shall report such event on Form 8-K within four Business Days after the effective date thereof. Section 6.07 Indemnification of Trustee and Depositor by Master Servicer. The Master Servicer shall indemnify and hold harmless the Trustee and the Depositor and any director, officer or agent thereof against any loss, liability or expense, including reasonable attorney's fees, arising out of, in connection with or incurred by reason of (a) willful misfeasance, bad faith or negligence in the performance of duties of the Master Servicer under this Agreement or by reason of reckless disregard of its obligations and duties under this Agreement, including, but not limited to the Master 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 Master Servicer of any of the representations and warranties contained in Section 2.03(a). Any payment pursuant to this Section made by the Master Servicer to the Trustee or the Depositor shall be from such entity's own funds, without reimbursement therefor. The provisions of this Section 6.07 shall survive the termination of this Agreement. Section 6.08 Master Servicer Errors and Omissions Policy. The Master Servicer shall maintain, at all times and at its own expense, a Master Servicer Errors and Omissions Policy, which policy shall have such terms and coverage amounts as are comparable to those of errors and omissions policies maintained by master servicers of mortgage loans generally. The Master Servicer Errors and Omissions Policy shall insure the Master Servicer, its successors and assigns, against any losses resulting from negligence, errors or omissions on the part of officers, employees or other persons acting on behalf of the Master Servicer in the performance of its duties as Master Servicer pursuant to this Agreement. The Master Servicer shall maintain in effect the Master Servicer Errors and Omissions Policy at all times and the Master Servicer Errors and Omissions Policy may not be canceled, permitted to lapse or otherwise terminated without the acquisition of comparable coverage by the Master Servicer. ARTICLE VII DEFAULT Section 7.01 Events of Default. In case one or more of the following Events of Default by the Master Servicer shall occur and be continuing, that is to say: (i) any failure by the Master Servicer to remit any funds to the Paying Agent as required by Section 4.03 continues unremedied for a period of three business days after either (a) receipt by the Master Servicer of written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Trustee or to the Master Servicer and the Trustee by the holders of Certificates evidencing in the aggregate not less than 25% of the aggregate Voting Interest represented by all Certificates or (b) solely in the case of the failure of the Master Servicer to remit any Periodic Advance required to be remitted pursuant to Section 3.03, the date upon which the Master Servicer delivered to the Trustee the certification required by Section 3.03(a); (ii) any failure on the part of the Master Servicer to observe or perform in any material respect any of its covenants or agreements under Sections 3.05, 3.11 or 3.12 hereof, subject to any cure period set forth in such sections; (iii) any failure on the part of the Master Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Master Servicer in the Certificates or in this Agreement, which continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Trustee or the Depositor, or to the Master Servicer and the Trustee by the holders of Certificates evidencing in the aggregate not less than 25% of the aggregate Voting Interest represented by all Certificates; (iv) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, conservator, receiver or liquidator in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer and such decree or order shall have remained in force undischarged and unstayed for a period of 60 days; (v) the Master Servicer shall consent to the appointment of a trustee, conservator, receiver or liquidator or liquidating committee in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to the Master Servicer, or of or relating to all or substantially all of its property; (vi) the Master 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, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; (vii) the Master Servicer shall be dissolved, or shall dispose of all or substantially all of its assets; or consolidate with or merge into another entity or shall permit another entity to consolidate or merge into it, such that the resulting entity does not meet the criteria for a successor servicer, as specified in Section 6.02 hereof; or (viii) the Master Servicer and any Subservicer appointed by it becomes ineligible to service for both Fannie Mae and Freddie Mac, which ineligibility continues unremedied for a period of 90 days; then, and in each and every such case, subject to applicable law, so long as an Event of Default shall not have been remedied, either the Trustee or the holders of Certificates evidencing in the aggregate not less than 66 2/3% of the aggregate Voting Interest represented by all Certificates, by notice in writing to the Master Servicer (and to the Trustee if given by the Certificateholders) may terminate all of the rights and obligations of the Master Servicer under this Agreement and in and to the Mortgage Loans, but without prejudice to any rights which the Master Servicer may have to the aggregate Master Servicing Fees due prior to the date of transfer of the Master Servicer's responsibilities hereunder, reimbursement of expenses to the extent permitted by this Agreement, Periodic Advances and other advances of its own funds. Upon receipt by the Master Servicer of such written notice, all authority and power of the Master 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, subject to the provisions of Section 7.05; and, without limitation, the Trustee is hereby authorized and empowered to execute and deliver, on behalf of the Master 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 or assignment of the Mortgage Loans and related documents or otherwise. The Master Servicer agrees to cooperate with the Trustee in effecting the termination of the Master Servicer's responsibilities and rights hereunder and shall promptly provide the Trustee all documents and records reasonably requested by it to enable it to assume the Master Servicer's functions hereunder and shall promptly also transfer to the Trustee all amounts which then have been or should have been deposited in the Certificate Account by the Master Servicer or which are thereafter received by the Master Servicer with respect to the Mortgage Loans. Section 7.02 Other Remedies of Trustee. During the continuance of any Event of Default, so long as such Event of Default shall not have been remedied, the Trustee, in addition to the rights specified in Section 7.01, shall have the right, in its own name as trustee of an express trust, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Certificateholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filing of proofs of claim and debt in connection therewith). Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default. Section 7.03 Directions by Certificateholders and Duties of Trustee During Event of Default. During the continuance of any Event of Default, Holders of Certificates evidencing in the aggregate not less than 25% of the aggregate Voting Interest represented by all Certificates 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, under this Agreement; provided, however, that the Trustee shall be under no obligation to pursue any such remedy, or to exercise any of the rights or powers vested in it by this agreement (including, without limitation, (i) the conducting or defending of any administrative action or litigation hereunder or in relation hereto and (ii) the terminating of the Master Servicer from its rights and duties as servicer hereunder) at the request, order or direction of any of the Certificateholders, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which may be incurred therein or thereby and, provided further, that, subject to the provisions of Section 8.01, the Trustee shall have the right to decline to follow any such direction if the Trustee, in accordance with an Opinion of Counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would involve it in personal liability or be unjustly prejudicial to the nonassenting Certificateholders. Section 7.04 Action upon Certain Failures of the Master Servicer and upon Event of Default. In the event that the Trustee shall have knowledge of any failure of the Master Servicer specified in Section 7.01(i), (ii) or (iii) which would become an Event of Default upon the Master Servicer's failure to remedy the same after notice, the Trustee may, but need not if the Trustee deems it not in the Certificateholders' best interest, give notice thereof to the Master Servicer; provided however that, without limiting any remedy as a result of such failure, the Trustee shall be required to give notice thereof to the Master Servicer in the case of the failure by the Master Servicer to observe or perform any of its covenants under Sections 3.05, 3.11, 3.12, 6.02 or 6.06(b) of this Agreement. For all purposes of this Agreement, in the absence of actual knowledge by a Responsible Officer of the Trustee, the Trustee shall not be deemed to have knowledge of any failure of the Master Servicer as specified in Section 7.01(i), (ii) and (iii) or any Event of Default unless notified thereof in writing by the Master Servicer or by a Certificateholder. Section 7.05 Trustee to Act; Appointment of Successor. When the Master Servicer receives notice of termination pursuant to Section 7.01 or the Trustee receives the resignation of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section 6.04, the Trustee shall be the successor in all respects to the Master Servicer in its capacity as master servicer under this Agreement and the transactions set forth or provided for herein and shall have the rights and powers and be subject to all the responsibilities, duties and liabilities relating thereto placed on the Master Servicer by the terms and provisions hereof and in its capacity as such successor shall have the same limitation of liability herein granted to the Master Servicer. In the event that the Trustee is succeeding to the Master Servicer as the Master Servicer, as compensation therefor, the Trustee shall be entitled to receive monthly such portion of the Master Servicing Fee, together with such other master servicing compensation as is agreed to at such time by the Trustee and the Master Servicer, but in no event more than 25% thereof until the date of final cessation of the Master Servicer's master servicing activities hereunder. Notwithstanding the above, the Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so act or to obtain a qualifying bid as described below, appoint, or petition a court of competent jurisdiction to appoint, any housing and home finance institution, bank or mortgage servicing institution having a net worth of not less than $10,000,000 and meeting such other standards for a successor master servicer as are set forth herein, as the successor to the Master Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Master Servicer hereunder; provided, however, that until such a successor master servicer is appointed and has assumed the responsibilities, duties and liabilities of the Master Servicer hereunder, the Trustee shall continue as the successor to the Master Servicer as provided above. Upon cessation of the Master Servicer's master servicing activities hereunder, the Trustee or any other successor master servicer shall be entitled to compensation not to exceed the compensation specified in Section 6.05 hereof, which amount shall include compensation for acting as paying agent. If the Master Servicer and the Paying Agent are not the same party, the Master Servicer shall pay the compensation of the Paying Agent. In the event the Trustee is required to solicit bids as provided above, the Trustee shall solicit, by public announcement, bids from housing and home finance institutions, banks and mortgage servicing institutions meeting the qualifications set forth in the preceding sentence for the purchase of the master servicing functions. Such public announcement shall specify that the successor master servicer shall be entitled to the full amount of the Master Servicing Fee as compensation together with the other master servicing compensation in the form of late reporting fees or otherwise as provided in Section 6.05, which amount shall include compensation for acting as paying agent. Within 30 days after any such public announcement, the Trustee shall negotiate and effect the sale, transfer and assignment of the master servicing rights and responsibilities hereunder to the qualified party submitting the highest qualifying bid. The Trustee shall deduct all costs and expenses of any public announcement and of any sale, transfer and assignment of the master servicing rights and responsibilities hereunder from any sum received by the Trustee from the successor to the Master Servicer in respect of such sale, transfer and assignment. After such deductions, the remainder of such sum shall be paid by the Trustee to the Master Servicer at the time of such sale, transfer and assignment to the Master Servicer's successor. The Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. The Master Servicer agrees to cooperate with the Trustee and any successor master servicer in effecting the termination of the Master Servicer's servicing responsibilities and rights hereunder and shall promptly provide the Trustee or such successor master servicer, as applicable, all documents and records reasonably requested by it to enable it to assume the Master Servicer's function hereunder and shall promptly also transfer to the Trustee or such successor master servicer, as applicable, all amounts which then have been or should have been deposited in the Certificate Account by the Master Servicer or which are thereafter received by the Master Servicer with respect to the Mortgage Loans. Neither the Trustee nor any other successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Master Servicer to deliver, or any delay in delivering, cash, documents or records to it, or (ii) restrictions imposed by any regulatory authority having jurisdiction over the Master Servicer. Notwithstanding anything to the contrary contained in Section 7.01 above or this Section 7.05, the Master Servicer shall retain all of its rights and responsibilities hereunder, and no successor (including the Trustee) shall succeed thereto, if the assumption thereof by such successor would cause the rating assigned to any Certificates to be revoked, downgraded or placed on credit review status (other than for possible upgrading) by either Rating Agency and the retention thereof by the Master Servicer would avert such revocation, downgrading or review. All costs associated with the appointment of a successor master servicer, to the extent not deducted from any sum received by the Trustee from the successor master servicer, shall be paid to the Person that incurred them by the predecessor master servicer. Without limiting the predecessor master servicer's obligation, if the predecessor master servicer fails to pay such costs, such costs shall be reimbursed by the Trust. The predecessor Master Servicer and successor Master Servicer shall notify the Depositor and Trustee of any such appointment at least two Business Days prior to the effective date thereof and shall provide 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 Master Servicer shall report such event on Form 8-K within four business days of the occurrence of such event. Section 7.06 Notification to Certificateholders. Upon any termination of the Master Servicer or appointment of a successor master servicer, in each case as provided herein, the Trustee shall give prompt written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register. The Trustee shall also, within 45 days after the occurrence of any Event of Default known to the Trustee, give written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register, unless such Event of Default shall have been cured or waived within said 45 day period. ARTICLE VIII CONCERNING THE TRUSTEE Section 8.01 Duties of Trustee. The Trustee, prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. In case an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge has occurred (which has not been cured), the Trustee, subject to the provisions of Sections 7.01, 7.03, 7.04 and 7.05, shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee, which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they are in the form required by this Agreement; provided, however, that the Trustee shall not be responsible for the accuracy or content of any certificate, statement, instrument, report, notice or other document furnished by the Master Servicer or the Servicers hereunder. No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that: (i) Prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge and after the curing of all such Events of Default which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not 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, in the absence of bad faith on the part of the Trustee, the Trustee 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, and conforming to the requirements of this Agreement; (ii) The Trustee shall not 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 holders of Certificates which evidence in the aggregate not less than 25% of the Voting Interest represented by all Certificates relating to 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, under this Agreement; (iii) The Trustee shall not be liable for any error of judgment made in good faith by any of its Responsible Officers, unless it shall be proved that the Trustee or such Responsible Officer, as the case may be, was negligent in ascertaining the pertinent facts; and (iv) The Trustee shall not be required to take notice or be deemed to have notice or knowledge of any default or Event of Default unless a Responsible Officer of the Trustee shall have received written notice or obtained actual knowledge thereof. In absence of such notice or actual knowledge, the Trustee may conclusively assume that there is no default or Event of Default. None of the provisions contained in this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur personal 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 repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Section 8.02 Certain Matters Affecting the Trustee. Except as otherwise provided in Section 8.01: (i) The Trustee may request and rely 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 believed by it to be genuine and to have been signed or presented by the proper party or parties and the manner of obtaining consents and evidencing the authorization of the execution thereof shall be subject to such reasonable regulations as the Trustee may prescribe; (ii) The Trustee may consult with counsel, and any advice of such counsel or any 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) The Trustee shall not 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; (iv) Subject to Section 7.04, the Trustee shall not be accountable, shall have no liability and makes no representation as to any acts or omissions hereunder of the Master Servicer until such time as the Trustee may be required to act as Master Servicer pursuant to Section 7.05 and thereupon only for the acts or omissions of the Trustee as successor Master Servicer; (v) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of such agent or attorney appointed by any other party to this Agreement, including without limitation, the appointment of any custodian; (vi) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by the Agreement, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred therein or herein (which in the case of Certificateholders representing in the aggregate not less than 66-2/3% of the aggregate Voting Interests will be deemed satisfied by a letter agreement with respect to such costs from such Certificateholders); (vii) The right of the Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence of willful misconduct in the performance of such act; and (viii) The Trustee shall not be required to give any bond or surety in respect of the execution of the Trust Estate created hereby or the powers granted hereunder. Section 8.03 Trustee Not Required to Make Investigation. Prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge hereunder and after the curing of all Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, Mortgage, Mortgage Note or other paper or document (provided the same appears regular on its face), unless requested in writing to do so by holders of Certificates evidencing in the aggregate not less than 51% of the Voting Interest represented by all Certificates; provided, however, that if the payment within a reasonable time to the Trustee 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, not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require indemnity reasonably satisfactory to the Trustee against such cost, expense or liability as a condition to so proceeding. The reasonable expense of every such investigation shall be paid by the Master Servicer or, if paid by the Trustee shall be repaid by the Master Servicer upon demand from the Master Servicer's own funds. Section 8.04 Trustee Not Liable for Certificates or Mortgage Loans. The recitals contained herein and in the Certificates shall be taken as the statements of the Depositor, and the Trustee assumes no responsibility as to the correctness of the same. The Trustee makes no representation for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or related document. Subject to Section 2.04, the Trustee shall not be accountable for the use or application by the Depositor of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Master Servicer in respect of the Mortgage Loans deposited in or withdrawn from the Certificate Account by the Master Servicer or, in its capacity as trustee, for investment of any such amounts. Section 8.05 Trustee May Own Certificates. The Trustee, and any agent thereof, in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not Trustee or such agent and may transact banking and/or trust business or otherwise deal with the Depositor, the Master Servicer or their Affiliates. Section 8.06 The Master Servicer to Pay Fees and Expenses; Limitation on Liability. The Master Servicer covenants and agrees to pay to the Trustee from time to time, from its own funds, and the Trustee shall be entitled to receive, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee. In addition, except as otherwise agreed upon in writing by the Master Servicer and the Trustee, the Trust shall reimburse the Trustee for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement to the extent permitted by Treasury Regulations Section 1.860G-1(b)(3), except for (i) any such expense, disbursement or advance arising from the Trustee's gross negligence, bad faith or willful misconduct and (ii) any routine ongoing expenses incurred by the Trustee in the ordinary course of its duties as Trustee hereunder or for any other expenses. The Trustee and any director, officer, employee or agent of the Trustee shall be entitled to indemnification by the Trust Estate and held harmless against any loss, liability or expense (including reasonable attorney's fees) (a) incurred in connection with any claim or legal action relating to (i) this Agreement, (ii) the Certificates, or (iii) the performance of any of the Trustee's duties under this Agreement, unless the loss, liability or expense was incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of any of the Trustee's duties under this Agreement and (b) resulting from any tax or information return which was prepared by, or should have been prepared by, the applicable Servicer or Master Servicer. Notwithstanding anything in this Agreement to the contrary, in no event shall the Trustee be liable for any special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits) resulting from the Trustee's nonperformance of its duties or obligations to deliver any information, report, certification, accountants' letter or other material required to comply with Regulation AB, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. The obligations of the Trust Estate under this Section 8.06 shall survive the resignation and removal of the Trustee and payment of the Certificates. Section 8.07 Eligibility Requirements. The Trustee hereunder shall at all times (i) be a corporation or association having its principal office in a state and city acceptable to the Depositor, organized and doing business under the laws of such state or the United States of America, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, or shall be a member of a bank holding system, the aggregate combined capital and 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 credit rating or be otherwise acceptable to the Rating Agencies such that neither of the Rating Agencies would reduce their respective then current ratings of the Certificates (or have provided such security from time to time as is sufficient to avoid such reduction) as evidenced in writing by each Rating Agency. If such corporation or association 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 the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 8.08. Section 8.08 Resignation and Removal. The Trustee may at any time resign and be discharged from the trust hereby created by giving written notice of resignation to the Master Servicer, such resignation to be effective upon the appointment of a successor trustee. Upon receiving such notice of resignation, the Master Servicer shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning entity and one copy to its successor. If no successor trustee shall have been appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 8.07 and shall fail to resign after written request for its resignation by the Master Servicer, or if at any time the Trustee shall become incapable of acting, or an order for relief shall have been entered in any bankruptcy or insolvency proceeding with respect to such entity, or a receiver of such entity or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of the property or affairs of the Trustee for the purpose of rehabilitation, conversion or liquidation, or the Master Servicer shall deem it necessary in order to change the situs of the Trust Estate for state tax reasons, then the Master Servicer shall remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. In addition, if (a) the Trustee fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports required pursuant to Section 3.11 or (b) any Servicing Function Participant engaged by the Trustee fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports, the Master Servicer, may, after consultation with the Depositor, remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. The Holders of Certificates evidencing in the aggregate not less than 51% of the Voting Interests represented by all Certificates (except that any Certificate registered in the name of the Depositor, the Master Servicer or any affiliate thereof will not be taken into account in determining whether the requisite Voting Interests has been obtained) may at any time remove the Trustee and appoint a successor by written instrument or instruments, in triplicate, signed by such holders or their attorneys-in-fact duly authorized, one complete set of which instruments shall be delivered to the Master Servicer, one complete set of which shall be delivered to the entity or entities so removed and one complete set of which shall be delivered to the successor so appointed. Any resignation or removal of the Trustee and appointment of a successor pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor as provided in Section 8.09. Section 8.09 Successor. Any successor trustee appointed as provided in Section 8.08 shall execute, acknowledge and deliver to the Master Servicer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective, and such successor, without any further act, deed or reconveyance, 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 herein. The predecessor trustee shall deliver to its successor all documents and statements held by it hereunder, and the Depositor, the Master Servicer and the predecessor entity shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. If the predecessor trustee has resigned, or has been removed for cause, all costs associated with the appointment of a successor trustee shall be paid to the Person that incurred them by the predecessor trustee. Without limiting the predecessor trustee's obligation, if the predecessor trustee fails to pay such costs, such costs shall be reimbursed by the Trust; provided however, that if the predecessor trustee has been terminated without cause pursuant to Section 8.08, all reasonable expenses incurred in complying with this Section 8.09 shall be reimbursed by the Trust to the Person that incurred them. No successor shall accept appointment as provided in this Section unless at the time of such acceptance such successor shall be eligible under the provisions of Section 8.07. Upon acceptance of appointment by a successor as provided in this Section, the successor trustee shall mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register. Section 8.10 Merger or Consolidation. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole or any Person resulting from any merger, sale, transfer, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the business of such entity, shall be the successor of the Trustee hereunder; provided, however, that (i) such Person shall be eligible under the provisions of Section 8.07, 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) the Trustee and such successor or surviving Person shall notify the Depositor and the Master Servicer 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 Master Servicer 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 Master Servicer shall report such event on Form 8-K within four business days of the occurrence of such event. Section 8.11 Authenticating Agent. The Trustee may appoint an Authenticating Agent, which shall be authorized to act on behalf of the Trustee in authenticating Certificates. Wherever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's countersignature, such reference shall be deemed to include authentication on behalf of the Trustee by the Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by the Authenticating Agent. The Authenticating Agent must be acceptable to the Depositor and the Master Servicer and must be a corporation organized and doing business under the laws of the United States of America or of any state, having a principal office and place of business in a state and city acceptable to the Depositor and the Master Servicer, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. Any corporation into which the Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of the Authenticating Agent, shall be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. The Authenticating Agent may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee, the Depositor and the Master Servicer. Except with respect to Wells Fargo Bank, for so long as Wells Fargo Bank is acting as the Master Servicer, the Trustee may at any time terminate the agency of the Authenticating Agent by giving written notice thereof to the Authenticating Agent, the Depositor and the Master Servicer. Upon receiving a notice of resignation or upon such a termination, or in case at any time the Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 8.11, the Trustee promptly shall appoint a successor Authenticating Agent, which shall be acceptable to the Master Servicer, and shall give written notice of such appointment to the Depositor, and shall mail notice of such appointment to all Certificateholders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 8.11. The Authenticating Agent shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee. Any reasonable compensation paid to the Authenticating Agent shall be payable by the Master Servicer. Section 8.12 Separate Trustees and Co-Trustees. The Trustee shall have the power from time to time to appoint one or more persons or corporations to act either as co-trustees jointly with the Trustee, or as separate trustees, for the purpose of holding title to, foreclosing or otherwise taking action with respect to any Mortgage Loan outside the state where the Trustee has its principal place of business, where such separate trustee or co-trustee is necessary or advisable (or the Trustee is advised by the Master Servicer that such separate trustee or co-trustee is necessary or advisable) under the laws of any state in which a Mortgaged Property is located or for the purpose of otherwise conforming to any legal requirement, restriction or condition in any state in which a Mortgaged Property is located or in any state in which any portion of the Trust Estate is located. The Master Servicer shall advise the Trustee when, in its good faith opinion, a separate trustee or co-trustee is necessary or advisable as aforesaid. The separate trustees or co-trustees so appointed shall be trustees for the benefit of all of the Certificateholders and shall have such powers, rights and remedies as shall be specified in the instrument of appointment; provided, however, that no such appointment shall, or shall be deemed to, constitute the appointee an agent of the Trustee. The Depositor and the Master Servicer shall join in any such appointment, but such joining shall not be necessary for the effectiveness of such appointment. 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 powers, duties, obligations and rights conferred upon the Trustee, in respect of the receipt, custody and payment of moneys shall be exercised solely by the Trustee; (ii) all other 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, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Master Servicer hereunder) 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 Estate or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or co-trustee; (iii) no separate trustee or co-trustee hereunder shall be personally liable by reason of any act or omission of any other separate trustee or co-trustee hereunder; and (iv) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee so appointed by it, if such resignation or removal does not violate the other terms of this Agreement. 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, co-trustee, or custodian shall refer to this Agreement and the conditions of this Article. 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 furnished to the Trustee. Any separate trustee, co-trustee, or custodian 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. No separate trustee or co-trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.07 hereunder and no notice to Certificateholders of the appointment thereof shall be required under Section 8.09 hereof. The Trustee agrees to instruct its co-trustees, if any, to the extent necessary to fulfill such entity's obligations hereunder. The fees of any co-trustee whose appointment is necessary or advisable for (i) conforming to any legal requirement, restriction or condition in any state in which any Mortgaged Property or any portion of the Trust Estate is located, will be paid by the Master Servicer, without reimbursement from the Trust and (ii) any reason other than contemplated by clause (i), will be paid by the Trustee, without reimbursement from the Trust. Expenses will be reimbursable to the co-trustees to the extent, and in accordance with the standards, specified in Section 8.06 hereof. Section 8.13 Tax Matters; Compliance with REMIC Provisions. (a) Each of the Trustee and the Master Servicer covenants and agrees that it shall perform its duties hereunder in a manner consistent with the REMIC Provisions and shall not knowingly take any action or fail to take any other action that would (i) affect the determination of the Trust Estate's status as a REMIC; or (ii) cause the imposition of any federal, state or local income, prohibited transaction, contribution or other tax on either the REMIC or the Trust Estate. The Master Servicer, or, in the case of any action required by law to be performed directly by the Trustee, the Trustee, shall (i) prepare or cause to be prepared, timely cause to be signed by the Trustee and file or cause to be filed annual federal and applicable state and local income tax returns for the REMIC using a calendar year as the taxable year and the accrual method of accounting; (ii) in the first such federal tax return, make, or cause to be made, elections satisfying the requirements of the REMIC Provisions, on behalf of the Trust Estate, to treat the Trust Estate as a REMIC; (iii) prepare, execute and forward, or cause to be prepared, executed and forwarded, to the Certificateholders all information reports or tax returns required with respect to the REMIC, as and when required to be provided to the Certificateholders, and to the Internal Revenue Service and any other relevant governmental taxing authority in accordance with the REMIC Provisions and any other applicable federal, state or local laws, including without limitation information reports relating to "original issue discount" and "market discount" as defined in the Code based upon the issue prices, prepayment assumption and cash flows provided by the Depositor to the Master Servicer and calculated on a monthly basis by using the issue prices of the Certificates; (iv) make available information necessary for the application of any tax imposed on transferors of residual interests to "disqualified organizations" (as defined in the REMIC Provisions); (v) file Form 8811 and apply for an Employee Identification Number with a Form SS-4 or any other permissible method and respond to inquiries by Certificateholders or their nominees concerning information returns, reports or tax returns; (vi) maintain (or cause to be maintained by the Servicers) such records relating to the REMIC, including but not limited to the income, expenses, individual Mortgage Loans (including REO Mortgage Loans) other assets and liabilities of the REMIC, and the fair market value and adjusted basis of the property of the REMIC determined at such intervals as may be required by the Code, as may be necessary to prepare the foregoing returns or information reports; (vii) exercise reasonable care not to allow the creation of any "interests" in the REMIC within the meaning of Code Section 860D(a)(2) other than the interests in the REMIC represented by the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class A-10, Class A-11, Class A-12, Class A-13, Class A-14, Class A-15, Class A-R and Class A-PO Certificates and the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates; (viii) exercise reasonable care not to allow the occurrence of any "prohibited transactions" within the meaning of Code Section 860F(a), unless the Master Servicer shall have provided an Opinion of Counsel to the Trustee that such occurrence would not (a) result in a taxable gain, (b) otherwise subject either the REMIC or the Trust Estate to tax or (c) cause the Trust Estate to fail to qualify as a REMIC; (ix) exercise reasonable care not to allow the REMIC to receive income from the performance of services or from assets not permitted under the REMIC Provisions to be held by a REMIC and (x) pay (on behalf of the REMIC) the amount of any federal income tax, including, without limitation, prohibited transaction taxes, taxes on net income from foreclosure property, and taxes on certain contributions to a REMIC after the Startup Day, imposed on the REMIC when and as the same shall be due and payable (but such obligation shall not prevent the Master Servicer or any other appropriate Person from contesting any such tax in appropriate proceedings and shall not prevent the Master Servicer from withholding or depositing payment of such tax, if permitted by law, pending the outcome of such proceedings). The Master Servicer shall be entitled to be reimbursed pursuant to Section 3.02 for any taxes paid by it pursuant to clause (x) of the preceding sentence, except to the extent that such taxes are imposed as a result of the bad faith, willful misfeasance or gross negligence of the Master Servicer in the performance of its obligations hereunder. In order to enable the Master Servicer or the Trustee, as the case may be, to perform its duties as set forth above, the Depositor shall provide, or cause to be provided, to the Master Servicer within ten days after the Closing Date all information or data that the Master Servicer determines to be relevant for tax purposes to the valuations and offering prices of the Certificates, including, without limitation, the price, yield, prepayment assumption and projected cash flows of each Class of Certificates and the Mortgage Loans in the aggregate. Thereafter, the Depositor shall provide to the Master Servicer or the Trustee, as the case may be, promptly upon request therefor, any such additional information or data that the Master Servicer or the Trustee, as the case may be, may from time to time request in order to enable the Master Servicer to perform its duties as set forth above. The Depositor hereby indemnifies the Master Servicer or the Trustee, as the case may be, for any losses, liabilities, damages, claims or expenses of the Master Servicer or the Trustee arising from any errors or miscalculations by the Master Servicer or the Trustee pursuant to this Section that result from any failure of the Depositor to provide, or to cause to be provided, accurate information or data to the Master Servicer or the Trustee, as the case may be, on a timely basis. The Master Servicer hereby indemnifies the Depositor and the Trustee for any losses, liabilities, damages, claims or expenses of the Depositor or the Trustee arising from the Master Servicer's willful misfeasance, bad faith or gross negligence in preparing any of the federal, state and local tax returns of the REMIC as described above. In the event that the Trustee prepares any of the federal, state and local tax returns of the REMIC as described above, the Trustee hereby indemnifies the Depositor and the Master Servicer for any losses, liabilities, damages, claims or expenses of the Depositor or the Master Servicer arising from the Trustee's willful misfeasance, bad faith or negligence in connection with such preparation. (b) Notwithstanding anything in this Agreement to the contrary, each of the Master Servicer and the Trustee shall pay from its own funds, without any right of reimbursement therefor, the amount of any costs, liabilities and expenses incurred by the Trust Estate (including, without limitation, any and all federal, state or local taxes, including taxes imposed on "prohibited transactions" within the meaning of the REMIC Provisions) if and to the extent that such costs, liabilities and expenses arise from a failure of the Master Servicer or the Trustee, respectively, to perform its obligations under this Section 8.13. The Holder of the Class A-R Certificate is hereby designated as the "tax matters person" for the REMIC within the meaning of Treasury Regulations Section 1.860F- 4(d). The "tax matters person" shall have the same duties with respect to the REMIC as those of a "tax matters partner" under Subchapter C of Chapter 63 of Subtitle F of the Code. By its acceptance of the Class A-R Certificate, such Holder irrevocably appoints the Master Servicer (and the Master Servicer hereby agrees to act) as agent to perform all of the duties of the "tax matters person." Section 8.14 Monthly Advances. In the event that Wells Fargo Bank in its capacity as Servicer fails to make a Periodic Advance required to be made pursuant to the Wells Fargo Bank Servicing Agreement on or before the Distribution Date, the Trustee shall make a Periodic Advance as required by Section 3.03 hereof; provided, however, the Trustee shall not be required to make such Periodic Advances if prohibited by law or if it determines that such Periodic Advance would be a Nonrecoverable Advance. With respect to those Periodic Advances which should have been made by Wells Fargo Bank, the Trustee shall be entitled, pursuant to Section 3.02(a)(i), (ii) or (v) hereof, to be reimbursed from the Certificate Account for Periodic Advances and Nonrecoverable Advances made by it. Section 8.15 Indemnification of the Master Servicer and Depositor by the Trustee. The Trustee shall indemnify and hold harmless the Master Servicer and the Depositor and any director, officer or agent thereof against any loss, liability or expense, including reasonable attorney's fees, arising out of, in connection with or incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties of the Trustee or by reason of reckless disregard of its obligation to deliver any information, report, certification, accountants' letter or other material required to comply with Regulation AB. Any payment pursuant to this Section made by the Trustee to the Master Servicer or the Depositor shall be from such entity's own funds, without reimbursement therefor. The provisions of this Section 8.15 shall survive the termination of this Agreement. Section 8.16 Trustee Errors and Omissions Policy. The Trustee shall maintain, at all times and at its own expense, a Trustee Errors and Omissions Policy, which policy shall have such terms and coverage amounts as are comparable to those of errors and omissions policies maintained by trustees generally. The Trustee Errors and Omissions Policy shall insure the Trustee, its successors and assigns, against any losses resulting from negligence, errors or omissions on the part of officers, employees or other persons acting on behalf of the Trustee in the performance of its duties as Trustee pursuant to this Agreement. The Trustee shall maintain in effect the Trustee Errors and Omissions Policy at all times and the Trustee Errors and Omissions Policy may not be canceled, permitted to lapse or otherwise terminated without the acquisition of comparable coverage by the Trustee. ARTICLE IX TERMINATION Section 9.01 Termination upon Purchase by the Depositor or Liquidation of All Mortgage Loans. Subject to Section 9.02, the respective obligations and responsibilities of the parties to this Agreement created hereby (other than the obligation of the Paying Agent to make certain payments after the Final Distribution Date to Certificateholders and the obligation of the Master Servicer to send certain notices as hereinafter set forth and the tax reporting obligations under Sections 4.05 and 8.13 hereof) shall terminate upon the last action required to be taken by the Paying Agent on the Final Distribution Date pursuant to this Article IX following the earlier of (i) the purchase by the Depositor of all Mortgage Loans and all property acquired in respect of any Mortgage Loan remaining in the Trust Estate at a price equal to the sum of (x) 100% of the unpaid principal balance of each Mortgage Loan (other than any REO Mortgage Loan) as of the Final Distribution Date, (y) the fair market value of the Mortgaged Property related to any REO Mortgage Loan, plus with respect to clauses (x) and (y) any accrued and unpaid interest through the last day of the month preceding the month of such purchase at the applicable Mortgage Interest Rate less any Fixed Retained Yield on each Mortgage Loan (including any REO Mortgage Loan) and (z) any Reimbursement Amount owed to the Trust pursuant to Section 2.03 and (ii) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan remaining in the Trust Estate (including for this purpose the discharge of any Mortgagor under a defaulted Mortgage Loan on which a Servicer is not obligated to foreclose due to environmental impairment) or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan; provided, however, that 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 right of the Depositor to purchase all the assets of the Trust Estate pursuant to clause (i) of the preceding paragraph is subject to Section 9.02 and conditioned upon (A) the Pool Scheduled Principal Balance of the Mortgage Loans as of the Final Distribution Date being less than the amount set forth in Section 11.20 and (B) the sum of clause (i)(x) and (y) of the preceding paragraph being less than or equal to the aggregate fair market value of the Mortgage Loans (other than any REO Mortgage Loans) and the Mortgaged Properties related to the REO Mortgage Loans; provided, however, that this clause (B) shall not apply to any purchase by the Depositor if, at the time of the purchase, the Depositor is no longer subject to regulation by the Office of the Comptroller of the Currency, the FDIC, the Federal Reserve or the Office of Thrift Supervision. Fair market value for purposes of this paragraph and the preceding paragraph will be determined by the Master Servicer as of the close of business on the third Business Day next preceding the date upon which notice of any termination is furnished to Certificateholders pursuant to the third paragraph of this Section 9.01. In the case of any purchase by the Depositor pursuant to said clause (i) of the preceding paragraph, the Depositor shall give the Trustee, the Paying Agent and Master Servicer notice of its intent to purchase the assets of the Trust by the fifth day of the month of the Final Distribution Date or such later date as shall be acceptable to the Trustee and Master Servicer. The Depositor or Master Servicer shall in such case provide to the Trustee the confirmation of deposit of the purchase price required by Section 3.04 and the Trustee or the Custodian shall, promptly following payment of the purchase price and upon receipt from the Master Servicer of a Request for Release, release to the Depositor the Owner Mortgage Loan Files and Retained Mortgage Loan Files, if applicable, pertaining to the Mortgage Loans being purchased. Notice of any termination, specifying the Final Distribution Date (which shall be a date that would otherwise be a Distribution Date) upon which the Certificateholders may surrender their Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given promptly by the Paying Agent by letter to Certificateholders and the Trustee mailed not earlier than the 15th day of the month preceding the month of such final distribution and not later than the twentieth day of the month of such final distribution specifying (A) the Final Distribution Date upon which final payment of the Certificates will be made upon presentation and surrender of Certificates at the Corporate Trust Office of the Paying Agent therein designated, (B) the amount of any such final payment and (C) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made (except in the case of any Class A Certificate surrendered on a prior Distribution Date) pursuant to Section 4.01 only upon presentation and surrender of the Certificates at the Corporate Trust Office of the Paying Agent therein specified. If the Depositor is exercising its right to purchase, the Depositor shall deposit in the Certificate Account on or before the Final Distribution Date in immediately available funds an amount equal to the purchase price for the assets of the Trust Estate computed as above provided. Failure to give notice of termination as described herein shall not entitle a Certificateholder to any interest beyond the interest payable on the Final Distribution Date. Upon presentation and surrender of the Certificates, the Paying Agent shall distribute to Certificateholders on the Final Distribution Date in proportion to their respective Percentage Interests an amount equal to (i) as to the Classes of Class A Certificates, the respective Principal Balance together with any related Class A Unpaid Interest Shortfall and one month's interest in an amount equal to the respective Interest Accrual Amount, (ii) as to the Classes of Class B Certificates, the respective Principal Balance together with any related Class B Unpaid Interest Shortfall and one month's interest in an amount equal to the respective Interest Accrual Amount and (iii) as to the Class A-R Certificate, the amounts, if any, which remain on deposit in the Certificate Account (other than amounts retained to meet claims) after application pursuant to clauses (i) and (ii) above and payment to the Master Servicer of any amounts it is entitled as reimbursement or otherwise hereunder. Notwithstanding the foregoing, if the price paid pursuant to clause (i) of the first paragraph of this Section 9.01, after reimbursement to the Servicers, the Master Servicer and the Trustee of any Periodic Advances, is insufficient to pay in full the amounts set forth in clauses (i) and (ii) of this paragraph, then any shortfall in the amount available for distribution to Certificateholders shall be allocated in reduction of the amounts otherwise distributable on the Final Distribution Date in the same manner as Realized Losses are allocated pursuant to Section 4.02(a) hereof. Such distribution on the Final Distribution Date shall be in lieu of the distribution otherwise required to be made on such Distribution Date in respect of each Class of Certificates. In the event that all of the Certificateholders shall not surrender their Certificates for final payment and cancellation within three months following the Final Distribution Date, the Paying Agent shall on such date cause all funds, if any, in the Payment 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. The Paying Agent 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 three months after the second notice all the Certificates shall not have been surrendered for cancellation, the Paying Agent may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds on deposit in such escrow account. Section 9.02 Additional Termination Requirements. In the event of a termination of the Trust Estate upon the exercise by the Depositor of its purchase option as provided in Section 9.01, the Trust Estate shall be terminated in accordance with the following additional requirements, unless the Trustee and the Master Servicer have received an Opinion of Counsel to the effect that any other manner of termination (i) will constitute a "qualified liquidation" of the Trust Estate within the meaning of Code Section 860F(a)(4)(A) and (ii) will not subject the REMIC to federal tax or cause the Trust Estate to fail to qualify as a REMIC at any time that any Certificates are outstanding: (i) The notice given by the Paying Agent under Section 9.01 shall provide that such notice constitutes the adoption of a plan of complete liquidation of the REMIC as of the date of such notice (or, if earlier, the date on which the first such notice is mailed to Certificateholders). The Master Servicer shall also specify such date in a statement attached to the final tax return of the REMIC; and (ii) At or after the time of adoption of such a plan of complete liquidation and at or prior to the Final Distribution Date, the Trustee, shall sell all of the assets of the Trust Estate to the Depositor for cash at the purchase price specified in Section 9.01 and the Paying Agent shall distribute such cash within 90 days of such adoption in the manner specified in Section 9.01. ARTICLE X MISCELLANEOUS PROVISIONS Section 10.01 Amendment. (a) This Agreement or the Custodial Agreement may be amended from time to time by the Depositor, the Master Servicer and the Trustee without the consent of any of the Certificateholders, (i) to cure any ambiguity or mistake, (ii) to correct or supplement any provisions herein or therein which may be inconsistent with any other provisions herein or therein or in the related Prospectus, (iii) to modify, eliminate or add to any of its provisions to such extent as shall be necessary to maintain the qualification of the Trust Estate as a REMIC at all times that any Certificates are outstanding or to avoid or minimize the risk of the imposition of any federal tax on the Trust Estate or the REMIC pursuant to the Code that would be a claim against the Trust Estate, provided that (a) the Trustee has received an Opinion of Counsel to the effect that such action is necessary or desirable to maintain such qualification or to avoid or minimize the risk of the imposition of any such tax and (b) such action shall not, as evidenced by such Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder, (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, (v) to change the timing and/or nature of deposits into the Certificate Account provided that such change shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder, (vi) to modify, eliminate or add to the provisions of Section 5.02 or any other provisions hereof restricting transfer of the Certificates, provided that the Depositor for purposes of Section 5.02 has determined in its sole discretion that any such modifications to this Agreement will neither adversely affect the rating on the Certificates nor give rise to a risk that the REMIC or any of the Certificateholders will be subject to a tax caused by a transfer to a non-permitted transferee, (vii) to make certain provisions with respect to the denominations of, and the manner of payments on, certain Classes of Certificates initially retained by the Depositor or an affiliate of the Depositor and (viii) to make any other provisions with respect to matters or questions arising under this Agreement or such Custodial Agreement which shall not be materially inconsistent with the provisions of this Agreement, provided that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. Notwithstanding the foregoing, any amendment pursuant to clause (v) or (viii) shall not be deemed to adversely affect in any material respect the interest of Certificateholders and no Opinion of Counsel to that effect shall be required if the person requesting the amendment instead obtains a letter from each Rating Agency stating that the amendment would not result in the downgrading or withdrawal of the respective ratings then assigned to the Certificates. This Agreement or the Custodial Agreement may also be amended from time to time by the Depositor, the Master Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66-2/3% of the aggregate Voting Interests of each Class of Certificates affected thereby, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or such Custodial Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) adversely affect in any material respect the interest of the Holders of Certificates of any Class in a manner other than as described in clause (i) hereof without the consent of Holders of Certificates of such Class evidencing, as to such Class, Voting Interests aggregating not less than 66-2/3% or (iii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to consent to any such amendment, without the consent of the Holders of all Certificates of such Class then outstanding. Notwithstanding any contrary provision of this Agreement, the Trustee shall not consent to any amendment to this Agreement unless it shall have first received an Opinion of Counsel to the effect that such amendment will not subject the REMIC to tax or cause the Trust Estate to fail to qualify as a REMIC at any time that any Certificates are outstanding. Promptly after the execution of any amendment requiring the consent of Certificateholders, the Trustee shall furnish written notification of the substance of such amendment to each Certificateholder. It shall not be necessary for the consent of Certificateholders under this Section 10.01(a) to approve the particular form of any proposed amendment, but 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 Trustee may prescribe. (b) Notwithstanding any contrary provision of this Agreement, if any of the Mortgage Loans are Type 2 Mortgage Loans, as indicated on the Mortgage Loan Schedule, the Master Servicer may, from time to time, amend Schedule I hereto without the consent of any Certificateholder or the Trustee; provided, however, (i) that such amendment does not conflict with any provisions of the related Servicing Agreement, (ii) that the related Servicing Agreement provides for the remittance of each type of Unscheduled Principal Receipts received by such Servicer during the Applicable Unscheduled Principal Receipt Period (as so amended) related to each Distribution Date to the Master Servicer no later than the 24th day of the month in which such Distribution Date occurs and (iii) that such amendment is for the purpose of changing the Applicable Unscheduled Principal Receipt Period for Type 2 Mortgage Loans to a Mid-Month Receipt Period with respect to all Unscheduled Principal Receipts. Section 10.02 Recordation of Agreement. This Agreement (or an abstract hereof, if acceptable to the applicable recording office) is subject to recordation in all appropriate public offices for real property records in all the towns or other comparable jurisdictions in which any or all of the Mortgaged Properties are situated, and in any other appropriate public office or elsewhere, such recordation to be effected by the Master Servicer and at its expense on direction by the Trustee, but only upon direction 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 constitute but one and the same instrument. Section 10.03 Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust Estate, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or take any action or proceeding in any court for a partition or winding up of the Trust Estate, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Except as otherwise expressly provided herein, no Certificateholder, solely by virtue of its status as a Certificateholder, shall have any right to vote or in any manner otherwise control the operation and management of the Trust Estate, 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, solely by virtue of its status as Certificateholder, shall have any right by virtue or by availing 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 hereinbefore provided, and unless the Holders of Certificates evidencing not less than 25% of the Voting Interest represented by all Certificates 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 cost, 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 being understood and intended, and being 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 or by availing 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, or to enforce any right under this Agreement, except in the manner herein provided and for the benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 10.04 Governing Law; Jurisdiction. This Agreement shall be construed in accordance with the laws of the State of New York (without regard to conflicts of laws principles), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Section 10.05 Notices. Unless otherwise provided in this Agreement, all demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by certified or registered mail, return receipt requested or by facsimile (i) in the case of the Depositor, to Wells Fargo Asset Securities Corporation, 7430 New Technology Way, Frederick, Maryland 21703, Attention: Vice President, Structured Finance or such other address as may hereafter be furnished to the Master Servicer and the Trustee in writing by the Depositor, (ii) in the case of the Master Servicer, to Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention: Corporate Trust Services-WFMBS 200 - ; facsimile: (410) 715-2380 or such other address as may hereafter be furnished to the Depositor and the Trustee in writing by the Master Servicer and (iii) in the case of the Trustee or the Paying Agent, to the Corporate Trust Office, or such other address as may hereafter be furnished to the Depositor and the Master Servicer in writing by the Trustee or the Paying Agent. 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. Any notice mailed or transmitted within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the addressee receives such notice; provided, however, that any demand, notice or communication to or upon the Depositor, the Master Servicer or the Trustee shall not be effective until received. For all purposes of this Agreement, in the absence of actual knowledge by an officer of the Master Servicer, the Master Servicer shall not be deemed to have knowledge of any act or failure to act of any Servicer unless notified thereof in writing by the Trustee, the Servicer or a Certificateholder. Section 10.06 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever 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 10.07 Special Notices to Rating Agencies. (a) The Trustee shall give prompt notice to each Rating Agency of the occurrence of any of the following events of which a Responsible Officer has notice: (i) any amendment to this Agreement pursuant to Section 10.01(a); (ii) any assignment by the Master Servicer of its rights and delegation of its duties pursuant to Section 6.06; (iii) any resignation of the Master Servicer pursuant to Section 6.04; (iv) the occurrence of any of the Events of Default described in Section 7.01; (v) any notice of termination given to the Master Servicer pursuant to Section 7.01; or (vi) the appointment of any successor to the Master Servicer pursuant to Section 7.05. (b) The Paying Agent shall give prompt notice to each Rating Agency of any sale or transfer of the Class B Certificates pursuant to Section 5.02 to an affiliate of the Depositor. (c) The Paying Agent shall give prompt notice to each Rating Agency of the making of a final payment pursuant to Section 9.01. (d) The Master Servicer shall give prompt notice to each Rating Agency of the occurrence of any of the following events: (i) the resignation of the Custodian or the appointment of a successor Custodian pursuant to the Custodial Agreement; (ii) the resignation or removal of the Trustee pursuant to Section 8.08; (iii) the appointment of a successor trustee pursuant to Section 8.09; or (iv) the sale, transfer or other disposition in a single transaction of 50% or more of the equity interests in the Master Servicer. (e) The Master Servicer shall deliver to each Rating Agency or otherwise make available to each Rating Agency in a format acceptable to each Rating Agency: (i) reports prepared pursuant to Section 3.05 and 3.11; and (ii) the Distribution Date Statements. Section 10.08 Covenant of Depositor. The Depositor shall not amend Article Third of its Certificate of Incorporation without the prior written consent of each Rating Agency rating the Certificates. Section 10.09 Recharacterization. The Parties intend the conveyance by the Depositor to the Trustee of all of its right, title and interest in and to the Trust Estate 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 Depositor shall be deemed to have granted to the Trustee a first priority security interest in all of the Depositor's right, title and interest in and to the Trust Estate. The Master Servicer shall take all actions, including, without limitation, filing any Uniform Commercial Code continuation statements, as shall be necessary to perfect or maintain the perfection of such security interest. Section 10.10 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 Master Servicer 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 Master Servicer and the Depositor to deliver to the Master Servicer 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 Master Servicer to permit the Depositor or the Master Servicer to comply with the provisions of Regulation AB, together with such disclosures reasonably believed by the Depositor or the Master Servicer to be necessary in order to effect such compliance. ARTICLE XI TERMS FOR CERTIFICATES Section 11.01 Cut-Off Date. The Cut-Off Date for the Certificates is [ ]. Section 11.02 Cut-Off Date Aggregate Principal Balance. The Cut-Off Date Aggregate Principal Balance is $[ ]. Section 11.03 Original Class A Percentage. The Original Class A Percentage is [ ]%. Section 11.04 Original Principal Balances of the Classes of Class A Certificates. As to the following Classes of Class A Certificates, the Principal Balance of such Class as of the Cut-Off Date, as follows: Original Class Principal Balance ----- ----------------- Class A-1 $[ ] Class A-2 $[ ] Class A-3 $[ ] Class A-4 $[ ] Class A-5 $[ ] Class A-6 $[ ] Class A-7 $[ ] Class A-8 $[ ] Class A-9 $[ ] Class A-10 $[ ] Class A-11 $[ ] Class A-12 $[ ] Class A-13 $[ ] Class A-14 $[ ] Class A-15 $[ ] Class A-PO $[ ] Class A-R $[ ] Section 11.05 Original Aggregate Non-PO Principal Balance. The Original Aggregate Non-PO Principal Balance is $[ ]. Section 11.06 Original Class B Principal Balance. The Original Class B Principal Balance is $[ ]. Section 11.07 Original Principal Balances of the Classes of Class B Certificates. As to the following Classes of Class B Certificate, the Principal Balance of such Class as of the Cut-Off Date, is as follows: Original Class Principal Balance ----- ----------------- Class B-1 $[ ] Class B-2 $[ ] Class B-3 $[ ] Class B-4 $[ ] Class B-5 $[ ] Class B-6 $[ ] Section 11.08 Original Class B-1 Fractional Interest. The Original Class B-1 Fractional Interest is [ ]%. Section 11.09 Original Class B-2 Fractional Interest. The Original Class B-2 Fractional Interest is [ ]%. Section 11.10 Original Class B-3 Fractional Interest. The Original Class B-3 Fractional Interest is [ ]%. Section 11.11 Original Class B-4 Fractional Interest. The Original Class B-4 Fractional Interest is [ ]%. Section 11.12 Original Class B-5 Fractional Interest. The Original Class B-5 Fractional Interest is [ ]%. Section 11.13 Original Class B-1 Percentage. The Original Class B-1 Percentage is [ ]%. Section 11.14 Original Class B-2 Percentage. The Original Class B-2 Percentage is [ ]%. Section 11.15 Original Class B-3 Percentage. The Original Class B-3 Percentage is [ ]%. Section 11.16 Original Class B-4 Percentage. The Original Class B-4 Percentage is [ ]%. Section 11.17 Original Class B-5 Percentage. The Original Class B-5 Percentage is [ ]%. Section 11.18 Original Class B-6 Percentage. The Original Class B-6 Percentage is [ ]%. Section 11.19 Closing Date. The Closing Date is [ ], 20 . Section 11.20 Right to Purchase. The right of the Depositor to purchase all of the Mortgage Loans pursuant to Section 9.01 hereof shall be conditioned upon the aggregate Scheduled Principal Balance of the Mortgage Loans being less than $[ ] (10% of the Cut-Off Date Aggregate Principal Balance) at the time of any such purchase. Section 11.21 Wire Transfer Eligibility. With respect to the Class A Certificates (other than the Class A-R Certificate) and the Class B Certificates, the minimum Denomination eligible for wire transfer on each Distribution Date is $100,000. The Class A-R Certificate is not eligible for wire transfer. Section 11.22 Single Certificate. A Single Certificate for the Class A Certificates (other than the Class A-PO, Class A-1, Class A-6, Class A-8, Class A-9, Class A-14, Class A-15 and Class A-R Certificates) represents a $25,000 Denomination. A Single Certificate for the Class A-PO, Class A-1, Class A-6, Class A-8, Class A-9, Class A-14, Class A-15, Class B-1, Class B-2 and Class B-3 Certificates represents a $100,000 Denomination. A Single Certificate for the Class A-R Certificate represents a $100 Denomination. A Single Certificate for the Class B-4, Class B-5 and Class B-6 Certificates represents a $250,000 Denomination. Section 11.23 Servicing Fee Rate. The rate used to calculate the Servicing Fee is equal to such rate as is set forth on the Mortgage Loan Schedule with respect to a Mortgage Loan. Section 11.24 Master Servicing Fee Rate. The rate used to calculate the Master Servicing Fee for each Mortgage Loan shall be [ ]% per annum. IN WITNESS WHEREOF, the Depositor, the Master Servicer 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 Master Servicer By: -------------------------------------- Name: Title: HSBC Bank USA, National Association as Trustee By: -------------------------------------- Name: Title: Attest: By: ___________________________________ Name: _________________________________ Title: ________________________________ STATE OF ) ss.: COUNTY OF ) On this th day of [ ], 20 , before me, a notary public in and for the State of [ ], personally appeared [ ], known to me who, being by me duly sworn, did depose and say that he resides at [ ]; that he is a [ ] of Wells Fargo Asset Securities Corporation, a Delaware corporation, one of the parties that executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said corporation. _________________________ Notary Public [NOTARIAL SEAL] STATE OF ) ss.: COUNTY OF ) On this th day of [ ], 20 , before me, a notary public in and for the State of [ ], personally appeared [ ], known to me who, being by me duly sworn, did depose and say that she resides in [ ]; that she is a [ ] of Wells Fargo Bank, N.A., a national banking association, one of the parties that executed the foregoing instrument; and that she signed her name thereto by order of the Board of Directors of said association. _________________________ Notary Public [NOTARIAL SEAL] STATE OF ) ss.: COUNTY OF ) On this th day of [ ], 20 , before me, a notary public in and for the State of [ ], personally appeared [ ], known to me who, being by me duly sworn, did depose and say that s/he resides in [ ]; that s/he is a [ ] of [ ], a [ ], one of the parties that executed the foregoing instrument; and that s/he signed his/her name thereto by order of the Board of Directors of said association. STATE OF ) ss.: COUNTY OF ) On this th day of [ ], 20 , before me, a notary public in and for the State of [ ], personally appeared [ ], known to me who, being by me duly sworn, did depose and say that s/he resides in [ ]; that s/he is a [ ] of [ ], a [ ], one of the parties that executed the foregoing instrument; and that s/he signed her/his name thereto by order of the Board of Directors of said association. _________________________ Notary Public [NOTARIAL SEAL] SCHEDULE I Wells Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 20 - Applicable Unscheduled Principal Receipt Period Full Unscheduled Partial Unscheduled Servicer Principal Receipts Principal Receipts - ------------------------------------- ------------------ ------------------- Wells Fargo Bank (Exhibit F-1) Mid-Month Mid-Month SCHEDULE II Planned Principal Balances as Percentages of Initial Aggregate Principal Balance PAC I Group Percentage Percentage Percentage of of of Initial Initial Initial Aggregate Aggregate Aggregate Distribution Principal Distribution Principal Distribution Principal Date Balance Date Balance Date Balance - ------------ ---------- ------------ ---------- ------------ ---------- SCHEDULE II (continued) Planned Principal Balances as Percentages of Initial Aggregate Principal Balance PAC II Group Percentage Percentage Percentage of of of Initial Initial Initial Aggregate Aggregate Aggregate Distribution Principal Distribution Principal Distribution Principal Date Balance Date Balance Date Balance - ------------ ---------- ------------ ---------- ------------ ---------- EXHIBIT A-1 [FORM OF FACE OF CLASS A-1 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-1 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-1 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-1 Certificates required to be distributed to Holders of the Class A-1 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate applicable with respect to the Distribution Date in [_____] will be [_____]% per annum. Thereafter, the pass-through rate on the Class A-1 Certificates applicable to each Distribution Date will be an inverse floating rate of interest determined as specified in the Agreement. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-1 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-2 [FORM OF FACE OF CLASS A-2 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 20 - , CLASS A-2 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-2 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-2 Certificates required to be distributed to Holders of the Class A-2 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate applicable with respect to the Distribution Date in [_____] will be [_____]% per annum. Thereafter, the pass-through rate on the Class A-2 Certificates applicable to each Distribution Date will be a floating rate of interest determined as specified in the Agreement. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-2 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-3 [FORM OF FACE OF CLASS A-3 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-3 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-3 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-3 Certificates required to be distributed to Holders of the Class A-3 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-3 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-3 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-4 [FORM OF FACE OF CLASS A-4 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-4 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-4 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-4 Certificates required to be distributed to Holders of the Class A-4 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-4 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-4 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-5 [FORM OF FACE OF CLASS A-5 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-5 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-5 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-5 Certificates required to be distributed to Holders of the Class A-5 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate applicable with respect to the Distribution Date in [_____] will be [_____]% per annum. Thereafter, the pass-through rate on the Class A-5 Certificates applicable to each Distribution Date will be a floating rate of interest determined as specified in the Agreement. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-5 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-6 [FORM OF FACE OF CLASS A-6 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-6 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-6 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-6 Certificates required to be distributed to Holders of the Class A-6 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate applicable with respect to the Distribution Date in [_____] will be [_____]% per annum. Thereafter, the pass-through rate on the Class A-6 Certificates applicable to each Distribution Date will be an inverse floating rate of interest determined as specified in the Agreement. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-6 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-7 [FORM OF FACE OF CLASS A-7 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-7 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE. BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING AGREEMENT, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-7 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-7 Certificates required to be distributed to Holders of the Class A-7 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. Prior to the applicable Accretion Termination Date, no distribution of interest on this Certificate will be made. Prior to the applicable Accretion Termination Date, interest otherwise available for distribution on this Certificate will be added to the Principal Balance of the Class A-7 Certificates on each Distribution Date. The pass-through rate on the Class A-7 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-7 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-8 [FORM OF FACE OF CLASS A-8 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-8 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-8 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-8 Certificates required to be distributed to Holders of the Class A-8 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-8 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-8 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-9 [FORM OF FACE OF CLASS A-9 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-9 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE. BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING AGREEMENT, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-9 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-9 Certificates required to be distributed to Holders of the Class A-9 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. Prior to the applicable Accretion Termination Date, no distribution of interest on this Certificate will be made. Prior to the applicable Accretion Termination Date, interest otherwise available for distribution on this Certificate will be added to the Principal Balance of the Class A-9 Certificates on each Distribution Date. The pass-through rate on the Class A-9 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-9 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-10 [FORM OF FACE OF CLASS A-10 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-10 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-10 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-10 Certificates required to be distributed to Holders of the Class A-10 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-10 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-10 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-11 [FORM OF FACE OF CLASS A-11 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-11 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-11 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-11 Certificates required to be distributed to Holders of the Class A-11 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-11 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-11 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-12 [FORM OF FACE OF CLASS A-12 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-12 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-12 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-12 Certificates required to be distributed to Holders of the Class A-12 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-12 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-12 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-13 [FORM OF FACE OF CLASS A-13 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-13 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-13 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-13 Certificates required to be distributed to Holders of the Class A-13 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-13 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-13 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-14 [FORM OF FACE OF CLASS A-14 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-14 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) AFTER THE SUBORDINATION DEPLETION DATE, THE PRINCIPAL PORTION OF REALIZED LOSSES ALLOCATED TO THE CLASS A-12 CERTIFICATES WILL BE BORNE BY THE CLASS A-14 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-14 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-14 Certificates required to be distributed to Holders of the Class A-14 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-14 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-14 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-15 [FORM OF FACE OF CLASS A-15 CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-15 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) AFTER THE SUBORDINATION DEPLETION DATE, THE PRINCIPAL PORTION OF REALIZED LOSSES ALLOCATED TO THE CLASS A-3 CERTIFICATES WILL BE BORNE BY THE CLASS A-15 CERTIFICATES AS DESCRIBED IN THE AGREEMENT. THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-15 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-15 Certificates required to be distributed to Holders of the Class A-15 Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-15 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-15 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-R [FORM OF FACE OF CLASS A-R CERTIFICATE] FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G(a)(2) AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). A TRANSFEREE OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CERTIFICATE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY, AS SET FORTH IN SECTION 5.02(d) OF THE AGREEMENT, AND SHALL BE REQUIRED TO FURNISH AN AFFIDAVIT TO THE TRANSFEROR AND THE TRUSTEE TO THE EFFECT THAT, AMONG OTHER THINGS, IT IS NOT A DISQUALIFIED ORGANIZATION, AS SUCH TERM IS DEFINED IN CODE SECTION 860E(e)(5), AN AGENT (INCLUDING A BROKER, NOMINEE OR OTHER MIDDLEMAN) FOR A DISQUALIFIED ORGANIZATION OR A NON-PERMITTED FOREIGN HOLDER, AS DEFINED IN SECTION 5.02(d) OF THE AGREEMENT AND TO HAVE AGREED TO SUCH AMENDMENTS TO THE AGREEMENT AS MAY BE REQUIRED TO FURTHER EFFECTUATE THE RESTRICTIONS ON TRANSFERS TO DISQUALIFIED ORGANIZATIONS, AGENTS THEREOF OR NON-PERMITTED FOREIGN HOLDERS. THE HOLDER OF THIS CLASS A-R CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE AGREED TO THE DESIGNATION OF THE MASTER SERVICER AS ITS AGENT TO ACT AS "TAX MATTERS PERSON" OF THE REMIC TO PERFORM THE FUNCTIONS OF A "TAX MATTERS PARTNER" FOR PURPOSES OF SUBCHAPTER C OF CHAPTER 63 OF SUBTITLE F OF THE CODE, OR, IF SO REQUESTED BY THE MASTER SERVICER, TO ACT AS TAX MATTERS PERSON OF THE REMIC. THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), OR ANY PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN. MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-R evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: [_____] by this Certificate: [_____]% THIS CERTIFIES THAT __________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holder of the Class A-R Certificate with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-R Certificate required to be distributed to the Holder of the Class A-R Certificate on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. Distributions in reduction of the Principal Balance of certain Classes of Class A Certificates may not commence on the first Distribution Date specified above. Distributions of principal will be allocated among the Classes of Class A Certificates in accordance with the provisions of the Agreement. The pass-through rate on the Class A-R Certificate applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall, any Relief Act Shortfall and the interest portion of certain Realized Losses allocated to the Class A-R Certificate, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register. Notwithstanding the above, the final distribution on this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT A-PO [FORM OF FACE OF CLASS A-PO CERTIFICATE] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS A-PO evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ___________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class A-PO Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and the Class A Distribution Amount for the Class A-PO Certificates required to be distributed to Holders of the Class A-PO Certificates on such Distribution Date, subject to adjustment in certain events as specified in the Agreement. The Class A-PO Certificates are principal only Certificates and will not be entitled to distributions in respect of interest. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-1 [FORM OF FACE OF CLASS B-1 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-1 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ____________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-1 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates as specified in the Agreement, any Class B-1 Distribution Amount required to be distributed to Holders of the Class B-1 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-1 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-1 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-2 [FORM OF FACE OF CLASS B-2 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AND THE CLASS B-1 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-2 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ____________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-2 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates and each Class of Class B Certificates bearing a lower numerical designation as specified in the Agreement, any Class B-2 Distribution Amount required to be distributed to Holders of the Class B-2 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-2 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-2 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-3 [FORM OF FACE OF CLASS B-3 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES, THE CLASS B-1 CERTIFICATES AND THE CLASS B-2 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-3 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT _______________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-3 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates and each Class of Class B Certificates bearing a lower numerical designation as specified in the Agreement, any Class B-3 Distribution Amount required to be distributed to Holders of the Class B-3 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-3 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-3 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-4 [FORM OF FACE OF CLASS B-4 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES AND THE CLASS B-3 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT REFERRED TO HEREIN. EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE AGREEMENT REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A) THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I 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 A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE IS AN "INSURANCE COMPANY GENERAL ACCOUNT." MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-4 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ____________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-4 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates and each Class of Class B Certificates bearing a lower numerical designation as specified in the Agreement, any Class B-4 Distribution Amount required to be distributed to Holders of the Class B-4 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-4 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-4 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. No transfer of a Class B-4 Certificate will be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws or is made in accordance with said Act and laws. In the event that such a transfer is desired to be made by the Holder hereof, (i) the transferee will be required to execute an investment letter in the form described in the Agreement and (ii) if such transfer is to be made within three years from the later of (a) the date of initial issuance of the Certificates or (b) the last date on which the Depositor or any affiliate thereof was a Holder of the Certificates proposed to be transferred, and unless such transfer is made in reliance on Rule 144A of the Securities Act of 1933, as amended, the Master Servicer or the Depositor may require the Holder to deliver an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor that such transfer is exempt (describing the applicable exemption and the basis therefor) from or is being made pursuant to the registration requirements of the Securities Act of 1933, as amended, and of any applicable statute of any state. The Holder hereof desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Master Servicer, and any Paying Agent 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. In connection with any such transfer, the Master Servicer will also require (i) a representation letter, in the form as described in the Agreement, stating either (a) that the transferee is not a Plan and is not acting on behalf of a Plan or using the assets of a Plan to effect such purchase or (b) subject to certain conditions described in the Agreement, that the source of funds used to purchase this Certificate is an "insurance company general account," or (ii) if such transferee is a Plan, (a) an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor with respect to certain matters and (b) such other documentation as the Depositor or the Master Servicer may require, as described in the Agreement. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-5 [FORM OF FACE OF CLASS B-5 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS B-3 CERTIFICATES AND THE CLASS B-4 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT REFERRED TO HEREIN. EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE AGREEMENT REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A) THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I 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 A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE IS AN "INSURANCE COMPANY GENERAL ACCOUNT." MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-5 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ____________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-5 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates and each Class of Class B Certificates bearing a lower numerical designation as specified in the Agreement, any Class B-5 Distribution Amount required to be distributed to Holders of the Class B-5 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-5 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-5 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. No transfer of a Class B-5 Certificate will be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws or is made in accordance with said Act and laws. In the event that such a transfer is desired to be made by the Holder hereof, (i) the transferee will be required to execute an investment letter in the form described in the Agreement and (ii) if such transfer is to be made within three years from the later of (a) the date of initial issuance of the Certificates or (b) the last date on which the Depositor or any affiliate thereof was a Holder of the Certificates proposed to be transferred, and unless such transfer is made in reliance on Rule 144A of the Securities Act of 1933, as amended, the Master Servicer or the Depositor may require the Holder to deliver an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor that such transfer is exempt (describing the applicable exemption and the basis therefor) from or is being made pursuant to the registration requirements of the Securities Act of 1933, as amended, and of any applicable statute of any state. The Holder hereof desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Master Servicer, and any Paying Agent 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. In connection with any such transfer, the Master Servicer will also require (i) a representation letter, in the form as described in the Agreement, stating either (a) that the transferee is not a Plan and is not acting on behalf of a Plan or using the assets of a Plan to effect such purchase or (b) subject to certain conditions described in the Agreement, that the source of funds used to purchase this Certificate is an "insurance company general account," or (ii) if such transferee is a Plan, (a) an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor with respect to certain matters and (b) such other documentation as the Depositor or the Master Servicer may require, as described in the Agreement. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT B-6 [FORM OF FACE OF CLASS B-6 CERTIFICATE] THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS B-3 CERTIFICATES, THE CLASS B-4 CERTIFICATES AND THE CLASS B-5 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT REFERRED TO HEREIN. EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE AGREEMENT REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A) THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I 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 A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE IS AN "INSURANCE COMPANY GENERAL ACCOUNT." MORTGAGE PASS-THROUGH CERTIFICATE SERIES 200 - , CLASS B-6 evidencing an interest in a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans sold by WELLS FARGO ASSET SECURITIES CORPORATION (Not an interest in or obligation of the Depositor) THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER. DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY. Certificate No. [_____] Cut-Off Date: [_____] CUSIP No.: [_____] First Distribution Date: [_____] Denomination: $[_____] Percentage Interest evidenced Final Scheduled Maturity Date: by this Certificate: [_____]% [_____] THIS CERTIFIES THAT ____________________________ is the registered owner of the Percentage Interest evidenced by this Certificate in monthly distributions to the Holders of the Class B-6 Certificates with respect to a Trust Estate consisting of a pool of fixed interest rate, monthly pay, fully amortizing, first lien, one- to four-family residential mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield, if any, with respect thereto, formed by Wells Fargo Asset Securities Corporation (hereinafter called the "Depositor," which term includes any successor entity under the Agreement referred to below). The Trust Estate was created pursuant to a Pooling and Servicing Agreement dated as of [_____] (the "Agreement") among the Depositor, Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereinafter. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to such terms 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, a distribution 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 (the "Distribution Date"), commencing on the first Distribution Date specified above, to the Person in whose name this Certificate is registered at the close of business on the Record Date, in an amount equal to the product of the Percentage Interest evidenced by this Certificate and, subject to the prior rights of the Class A Certificates and each Class of Class B Certificates bearing a lower numerical designation as specified in the Agreement, any Class B-6 Distribution Amount required to be distributed to Holders of the Class B-6 Certificates on such Distribution Date, subject to adjustment, in certain events, as specified in the Agreement. The pass-through rate on the Class B-6 Certificates applicable to each Distribution Date will be [_____]% per annum. The amount of interest which accrues on this Certificate in any month will be subject to reduction with respect to any Non-Supported Interest Shortfall and any Relief Act Shortfall allocated to the Class B-6 Certificates, as described in the Agreement. Distributions on this Certificate will be made by the Paying Agent by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, unless such Person is entitled to receive payments by wire transfer in immediately available funds in accordance with the Agreement and such Person has notified the Paying Agent pursuant to the Agreement that such payments are to be made by wire transfer of immediately available funds. Notwithstanding the above, the final distribution in reduction of the Principal Balance of this Certificate will be made after due notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Paying Agent specified for that purpose in the notice of final distribution. No transfer of a Class B-6 Certificate will be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws or is made in accordance with said Act and laws. In the event that such a transfer is desired to be made by the Holder hereof, (i) the transferee will be required to execute an investment letter in the form described in the Agreement and (ii) if such transfer is to be made within three years from the later of (a) the date of initial issuance of the Certificates or (b) the last date on which the Depositor or any affiliate thereof was a Holder of the Certificates proposed to be transferred, and unless such transfer is made in reliance on Rule 144A of the Securities Act of 1933, as amended, the Master Servicer or the Depositor may require the Holder to deliver an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor that such transfer is exempt (describing the applicable exemption and the basis therefor) from or is being made pursuant to the registration requirements of the Securities Act of 1933, as amended, and of any applicable statute of any state. The Holder hereof desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Depositor, the Master Servicer, and any Paying Agent 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. In connection with any such transfer, the Master Servicer will also require (i) a representation letter, in the form as described in the Agreement, stating either (a) that the transferee is not a Plan and is not acting on behalf of a Plan or using the assets of a Plan to effect such purchase or (b) subject to certain conditions described in the Agreement, that the source of funds used to purchase this Certificate is an "insurance company general account," or (ii) if such transferee is a Plan, (a) an opinion of counsel acceptable to and in form and substance satisfactory to the Master Servicer and the Depositor with respect to certain matters and (b) such other documentation as the Depositor or the Master Servicer may require, as described in the Agreement. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Certificate constitutes a "regular interest" in a "real estate mortgage investment conduit" as those terms are defined in Section 860G(a)(1) and Section 860D, respectively, of the Internal Revenue Code of 1986, as amended. Unless this Certificate has been countersigned by an authorized officer of the Authenticating Agent, 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 Paying Agent has caused this Certificate to be duly executed as of the date set forth below. Dated: [ ], Paying Agent By____________________________ Authorized Officer Countersigned: [ ], Authenticating Agent By ________________________ Authorized Officer EXHIBIT C [Form of Reverse of Series 200 - Certificates] WELLS FARGO ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES SERIES 200 - This Certificate is one of a duly authorized issue of Certificates issued in several Classes designated as Mortgage Pass-Through Certificates of the Series specified hereon (herein collectively called the "Certificates"). The 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. In the event funds are advanced with respect to any Mortgage Loan by a Servicer, the Master Servicer or the Trustee, such advances are reimbursable to such Servicer, the Master Servicer or the Trustee to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or from other cash that would have been distributable to Certificateholders. As provided in the Agreement, withdrawals from the Certificate Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time for purposes other than distributions to Certificateholders, such purposes including reimbursement to a Servicer, the Master Servicer or the Trustee, as applicable, of advances made by such Servicer, the Master Servicer or the Trustee. The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement and the modification of the rights and obligations of the Depositor, the Master Servicer and the Trustee and the rights of the Certificateholders under the Agreement at any time by the Depositor, the Master Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66 2/3% of the Voting Interests of each Class of Certificates affected thereby. 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 hereof or in lieu hereof whether or not notation of such consent is made upon the Certificate. The Agreement also permits the amendment thereof in certain 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 office or agency maintained by the Certificate Registrar, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of transfer in form satisfactory to 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 authorized Denominations evidencing the same Class and aggregate Percentage Interest will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in Classes and Denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of authorized Denominations evidencing the same Class and 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, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Depositor, the Master Servicer, the Trustee, the Paying Agent and the Certificate Registrar, and any agent of the Depositor, the Master Servicer, the Trustee, the Paying Agent or the Certificate Registrar, may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Depositor, the Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall be affected by notice to the contrary. The obligations created by the Agreement in respect of the Certificates and the Trust Estate created thereby shall terminate upon the last action required to be taken by the Paying Agent on the Final Distribution Date pursuant to the Agreement following the earlier of (i) the payment or other liquidation (or advance with respect thereto) of the last Mortgage Loan subject thereto or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan, and (ii) the purchase by the Depositor from the Trust Estate of all remaining Mortgage Loans and all property acquired in respect of such Mortgage Loans; provided, however, that the Trust Estate will in no event 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 of the Agreement. The Agreement permits, but does not require, the Depositor to purchase all remaining 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 option will effect early retirement of the Certificates, the Depositor's right to exercise such option being subject to the Pool Scheduled Principal Balance of the Mortgage Loans as of the Distribution Date upon which the proceeds of such repurchase are distributed being less than ten percent of the Cut-Off Date Aggregate Principal Balance. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address including postal zip code of assignee) the beneficial interest evidenced by the within Mortgage Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to assignee on the Certificate Register of the Trust Estate. I (We) further direct the Certificate Registrar to issue a new Certificate of a like Denomination or Percentage Interest and Class, to the above named assignee and deliver such Certificate to the following address: ________________________________________________________________________________ ________________________________________________________________________________ Social Security or other Identifying Number of Assignee: 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, if the assignee is eligible to receive distributions in immediately available funds, 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 RESERVED EXHIBIT E [Custodial Agreement] EXHIBIT F 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 Master Servicer: Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attention: Corporate Trust Services - WFMBS 200 - EXHIBIT G REQUEST FOR RELEASE OF DOCUMENTS To: Wells Fargo Bank, N.A. 1015 10th Avenue S.E. Minneapolis., MN 55414 Attn: ________________ Re: Custodial Agreement, dated as of [_____], among HSBC Bank USA, National Association, as Trustee, Wells Fargo Asset Securities Corporation, as Depositor, Wells Fargo Bank, N.A., as Master Servicer, and Wells Fargo Bank, N.A., as Custodian, relating to the Wells Fargo Asset Securities Corporation; Mortgage Pass-Through Certificates, Series 200 - . In connection with the administration of the Mortgage Loans held by you as Custodian for the Trust Estate pursuant to the above-captioned Custodial Agreement, we request the release, and hereby acknowledge receipt, of the Custodian's Owner Mortgage Loan 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 Wells Fargo Bank, N.A. Please acknowledge the execution of the above request by your signature and date below: ____________________________________ _________________ Signature Date Documents returned to Custodian: ____________________________________ _________________ Custodian Date EXHIBIT H AFFIDAVIT PURSUANT TO SECTION 860E(e)(4) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND FOR NON-ERISA INVESTORS STATE OF ) ) ss.: COUNTY OF ) [NAME OF OFFICER], being first duly sworn, deposes and says: 1. That he is [Title of Officer] of [Name of Purchaser] (the "Purchaser"), a [description of type of entity] duly organized and existing under the laws of the [State of ] [United States], on behalf of which he makes this affidavit. 2. That the Purchaser's Taxpayer Identification Number is [_____________]. 3. That the Purchaser is not a "disqualified organization" within the meaning of Section 860E(e)(5),of the Internal Revenue Code of 1986, as amended (the "Code"), or an ERISA Prohibited Holder, and will not be a "disqualified organization" or an ERISA Prohibited Holder, as of [date of transfer], and that the Purchaser is not acquiring Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series 200 - , Class A-R Certificate (the "Residual Certificate") for the account of, or as agent (including a broker, nominee, or other middleman) for, any person or entity from which it has not received an affidavit substantially in the form of this affidavit. For these purposes, a "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 (other than an instrumentality if all of its activities are subject to tax and a majority of its board of directors is not selected by such governmental entity), any cooperative organization furnishing electric energy or providing telephone service to persons in rural areas as described in Code Section 1381(a)(2)(C), or any organization (other than a farmers' cooperative described in Code Section 521) 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. For these purposes, an "ERISA Prohibited Holder" means an employee benefit plan or other retirement arrangement subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Code Section 4975 or a governmental plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, a "Plan") or a Person acting on behalf of or investing the assets of such a Plan. 4. That the Purchaser historically has paid its debts as they have come due and intends to pay its debts as they come due in the future and the Purchaser intends to pay taxes associated with holding the Residual Certificate as they become due. 5. That the Purchaser understands that it may incur tax liabilities with respect to the Residual Certificate in excess of cash flows generated by the Residual Certificate. 6. That the Purchaser will not transfer the Residual Certificate to any person or entity from which the Purchaser has not received an affidavit substantially in the form of this affidavit and as to which the Purchaser has actual knowledge that the requirements set forth in paragraph 3, 4 or 10 hereof are not satisfied or that the Purchaser has reason to know does not satisfy the requirements set forth in paragraph 4 hereof. 7. That the Purchaser is aware that the Residual 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. 8. That the Purchaser will not cause income from the Residual Certificate to be attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of the Purchaser or any other person. 9. That, if the Purchaser is purchasing the Residual Certificate in a transfer intended to meet the safe harbor provisions of Treasury Regulations Sections 1.860E-1(c), the Purchaser has executed and attached Attachment A hereto. 10. That the Purchaser (i) is a U.S. Person or (ii) is a person other than a U.S. Person (a "Non-U.S. Person") that holds the Residual Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Trustee with an effective Internal Revenue Service Form W-8ECI or successor form at the time and in the manner required by the Code or (iii) is a Non-U.S. Person that has delivered to both the transferor and the Trustee an opinion of a nationally recognized tax counsel to the effect that the transfer of the Residual Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of the Residual Certificate will not be disregarded for federal income tax purposes. "U.S. Person" means a citizen 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 whose income is subject to United States federal income tax regardless of its source, 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. 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). 11. That the Purchaser agrees to such amendments of the Pooling and Servicing Agreement as may be required to further effectuate the restrictions on transfer of the Residual Certificate to such a "disqualified organization," an agent thereof, an ERISA Prohibited Holder or a person that does not satisfy the requirements of paragraph 4, paragraph 5 and paragraph 10 hereof. 12. That the Purchaser consents to the designation of the Master Servicer as its agent to act as "tax matters person" of the REMIC pursuant to Section 8.13 of the Pooling and Servicing Agreement, and if such designation is not permitted by the Code and applicable law, to act as tax matters person if requested to do so. IN WITNESS WHEREOF, the Purchaser has caused this instrument to be executed on its behalf, pursuant to authority of its Board of Directors, by its [Title of Officer] this ___ day of , 20__. [NAME OF PURCHASER] By:______________________________ [Name of Officer] [Title of Officer] Personally appeared before me the above-named [Name of Officer], known or proved to me to be the same person who executed the foregoing instrument and to be the [Title of Officer], of the Purchaser, and acknowledged to me that he [she] executed the same as his [her] free act and deed and the free act and deed of the Purchaser. Subscribed and sworn before me this __ day of , 20__. Notary Public COUNTY OF____________________ STATE OF_____________________ 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, AND FOR NON-ERISA INVESTORS Check the appropriate box: |_| The consideration paid to the Purchaser to acquire the Residual 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 Purchaser. OR |_| The transfer of the Residual Certificate complies with U.S. Treasury Regulations Sections 1.860E-1(c)(5) and (6) and, accordingly: (i) the Purchaser is an "eligible corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i), as to which income from Residual Certificate will only be taxed in the United States; (ii) at the time of the transfer, and at the close of the Purchaser's two fiscal years preceding the year of the transfer, the Purchaser had gross assets for financial reporting purposes (excluding any obligation of a person related to the Purchaser 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 Purchaser will transfer the Residual 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 Purchaser has determined the consideration paid to it to acquire the Residual 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 Purchaser) that it has determined in good faith; and (v) in the event of any transfer of the Residual Certificate by the Purchaser, the Purchaser 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 Residual Certificate. EXHIBIT I [Letter from Transferor of Residual Certificate] [Date] Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attn: Corporate Trust Services WFMBS 200 - Re: Wells Fargo Asset Securities Corporation, Series 200 - , Class A-R Ladies and Gentlemen: [Transferor] has reviewed the attached affidavit of [Transferee], and has no actual knowledge that such affidavit is not true and has no reason to know that the information contained in paragraph 4 thereof is not true. Very truly yours, [Transferor] _______________________ EXHIBIT J WELLS FARGO ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES SERIES 200 - CLASS [B-4][B-5][B-6] CERTIFICATES TRANSFEREE'S LETTER _________________ __, ____ Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attn: Corporate Trust Services WFMBS 200 - Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 The undersigned (the "Purchaser") proposes to purchase Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series 200 - , Class [B-4][B-5][B-6] Certificates (the "Class [B-4][B-5][B-6] Certificates") in the principal amount of $___________. In doing so, the Purchaser hereby acknowledges and agrees as follows: Section 1. Definitions. Each capitalized term used herein and not otherwise defined herein shall have the meaning ascribed to it in the Pooling and Servicing Agreement, dated as of [_____] (the "Pooling and Servicing Agreement") among Wells Fargo Asset Securities Corporation, as depositor (the "Depositor"), Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and HSBC Bank USA, National Association, as trustee (the "Trustee"), of Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series 200 - . Section 2. Representations and Warranties of the Purchaser. In connection with the proposed transfer, the Purchaser represents and warrants to the Depositor, the Master Servicer and the Trustee that: (a) The Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction in which the Purchaser is organized, is authorized to invest in the Class [B-4][B-5][B-6] Certificates, and to enter into this Agreement, and duly executed and delivered this Agreement. (b) The Purchaser is acquiring the Class [B-4][B-5][B-6] Certificates for its own account as principal and not with a view to the distribution thereof, in whole or in part. [(c) The Purchaser has knowledge of financial and business matters and is capable of evaluating the merits and risks of an investment in the Class [B-4][B-5][B-6] Certificates; the Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision; and the Purchaser is able to bear the economic risk of an investment in the Class [B-4][B-5][B-6] Certificates and can afford a complete loss of such investment.] [(c) The Purchaser is a "Qualified Institutional Buyer" within the meaning of Rule 144A of the Act.] (d) The Purchaser confirms that (a) it has received and reviewed a copy of the Private Placement Memorandum dated __________ __, 20__, relating to the Class [B-4][B-5][B-6] Certificates and reviewed, to the extent it deemed appropriate, the documents attached thereto or incorporated by reference therein, (b) it has had the opportunity to ask questions of, and receive answers from the Depositor concerning the Class [B-4][B-5][B-6] Certificates and all matters relating thereto, and obtain any additional information (including documents) relevant to its decision to purchase the Class [B-4][B-5][B-6] Certificates that the Depositor possesses or can possess without unreasonable effort or expense and (c) it has undertaken its own independent analysis of the investment in the Class [B-4][B-5][B-6] Certificates. The Purchaser will not use or disclose any information it receives in connection with its purchase of the Class [B-4][B-5][B-6] Certificates other than in connection with a subsequent sale of Class [B-4][B-5][B-6] Certificates. (e) Either (i) the Purchaser is not an employee benefit plan or other retirement arrangement subject to Title I 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 a governmental plan, as defined in Section 3(32) of ERISA subject to any federal, state or local law ("Similar Law") which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, a "Plan"), an agent acting on behalf of a Plan, or a person utilizing the assets of a Plan or (ii) if the Purchaser is an insurance company, (A) the source of funds used to purchase the Class [B-4][B-5][B-6] 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), (B) 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) the purchase and holding of such Class [B-4][B-5][B-6] Certificates are covered by Sections I and III of PTE 95-60 or (iii) the Purchaser has provided (a) a "Benefit Plan Opinion" satisfactory to the Depositor and the Master Servicer of the Trust Estate and (b) such other opinions of counsel, officers' certificates and agreements as the Depositor or the Master Servicer may have required. A Benefit Plan Opinion is an opinion of counsel to the effect that the proposed transfer 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 or the Master Servicer to any obligation in addition to those undertaken in the Pooling and Servicing Agreement (including any liability for civil penalties or excise taxes imposed pursuant to ERISA, Section 4975 of the Code or Similar Law). (f) If the Purchaser is a depository institution subject to the jurisdiction of the Office of the Comptroller of the Currency ("OCC"), the Board of Governors of the Federal Reserve System ("FRB"), the Federal Deposit Insurance Corporation ("FDIC"), the Office of Thrift Supervision ("OTS") or the National Credit Union Administration ("NCUA"), the Purchaser has reviewed the "Supervisory Policy Statement on Securities Activities" dated January 28, 1992 of the Federal Financial Institutions Examination Council and the April 15, 1994 Interim Revision thereto as adopted by the OCC, FRB, FDIC, OTS and NCUA (with modifications as applicable), as appropriate, other applicable investment authority, rules, supervisory policies and guidelines of these agencies and, to the extent appropriate, state banking authorities and has concluded that its purchase of the Class [B-4][B-5][B-6] Certificates is in compliance therewith. Section 3. Transfer of Class [B-4][B-5][B-6] Certificates. (a) The Purchaser understands that the Class [B-4][B-5][B-6] Certificates have not been registered under the Securities Act of 1933 (the "Act") or any state securities laws and that no transfer may be made unless the Class [B-4][B-5][B-6] Certificates are registered under the Act and applicable state law or unless an exemption from registration is available. The Purchaser further understands that neither the Depositor nor the Master Servicer is under any obligation to register the Class [B-4][B-5][B-6] Certificates or make an exemption available. In the event that such a transfer is to be made in reliance upon an exemption from the Act or applicable state securities laws, (i) the Master Servicer shall require, in order to assure compliance with such laws, that the Certificateholder's prospective transferee certify to the Depositor and the Master Servicer as to the factual basis for the registration or qualification exemption relied upon, and (ii) unless the transferee is a "Qualified Institutional Buyer" within the meaning of Rule 144A of the Act, the Master Servicer or the Depositor may, if such transfer is made within three years from the later of (a) the Closing Date or (b) the last date on which the Depositor or any affiliate thereof was a holder of the Certificates proposed to be transferred, require an Opinion of Counsel that such transfer may be made pursuant to an exemption from the Act and state securities laws, which Opinion of Counsel shall not be an expense of the Master Servicer or the Depositor. Any such Certificateholder desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Master Servicer, any Paying Agent 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. (b) No transfer of a Class [B-4][B-5][B-6] Certificate shall be made unless the transferee provides the Depositor and the Master Servicer with a Transferee's Letter, substantially in the form of this Agreement. (c) The Purchaser acknowledges that its Class [B-4][B-5][B-6] Certificates bear a legend setting forth the applicable restrictions on transfer. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be validly executed by its duly authorized representative as of the day and the year first above written. [PURCHASER] By: ______________________________ Its: ______________________________ EXHIBIT K LIST OF RECORDATION STATES Florida Maryland EXHIBIT L SERVICING AGREEMENTS Wells Fargo Bank Servicing Agreement EXHIBIT M [FORM OF SPECIAL SERVICING AGREEMENT] SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement") is made and entered into as of [_____], between Wells Fargo Bank, N.A. (the "Company" or the "Master Servicer") and [_____] (the "Purchaser"). PRELIMINARY STATEMENT The Purchaser is the holder of the entire interest in Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series [_____], Class [_____] (the "Class B Certificates"), which are the Lowest Priority Certificates (as defined below) outstanding with respect to such Series. The Class B Certificates were issued pursuant to a Pooling and Servicing Agreement dated as of [_____] among Wells Fargo Asset Securities Corporation, as depositor (the "Depositor"), Wells Fargo Bank, N.A., as Master Servicer and HSBC Bank USA, National Association, as Trustee. In connection with the ownership by the Purchaser of the Lowest Priority Certificates, the Purchaser and the Company have agreed that (i) the Purchaser, for so long as it owns 100% of the Lowest Priority Certificates, will have the unilateral right to control foreclosure decisions with respect to delinquent mortgage loans and (ii) the Company will provide to the Purchaser certain information with respect to the Mortgage Loans; The parties hereto have agreed that the Company will cause, to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreements, the related servicers (each a related "Servicer"), which service the Mortgage Loans which comprise the Trust Estate related to the above referenced series under the related servicing agreements (each a related "Servicing Agreement"), to engage in certain special servicing procedures relating to foreclosures for the benefit of the Purchaser, and that the Purchaser will deposit funds in a collateral fund to cover any losses attributable to such procedures as well as all advances and costs in connection therewith, as set forth herein. In consideration of the mutual agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchaser agree that the following provisions shall become effective and shall be binding on and enforceable by the Company and the Purchaser: ARTICLE I DEFINITIONS Section 1.02. Defined Terms. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of New York are required or authorized by law or executive order to be closed. Collateral Fund: The fund established and maintained pursuant to Section 3.01 hereof. Collateral Fund Permitted Investments: Either (i) obligations of, or obligations fully guaranteed as to 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 money market fund rated in the highest rating category by a nationally recognized rating agency selected by the Company, (iii) cash, (iv) mortgage pass-through certificates issued or guaranteed by Government National Mortgage Association, FNMA or FHLMC, (v) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date), the issuer of which may be an affiliate of the Company, having at the time of such investment a rating of at least P-1 by Moody's Investors Service, Inc. ("Moody's") or at least F-1 by Fitch Ratings ("Fitch") or (vi) demand and time deposits in, certificates of deposit of, any depository institution or trust company (which may be an affiliate of the Company) 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 banking authorities, so long as at the time of such investment either (x) the long-term debt obligations of such depository institution or trust company have a rating of at least AA by Fitch or Aa2 by Moody's, (y) the certificate of deposit or other unsecured short-term debt obligations of such depository institution or trust company have a rating of at least F-1 by Fitch or P-1 by Moody's or (z) the depository institution or trust company is one that is acceptable to either Fitch or Moody's and, for each of the preceding clauses (i), (iv), (v) and (vi), the maturity thereof shall be not later than the earlier to occur of (A) 30 days from the date of the related investment and (B) the next succeeding Distribution Date as defined in the related Pooling and Servicing Agreement. Commencement of Foreclosure: The first official action required under local law in order to commence foreclosure proceedings or to schedule a trustee's sale under a deed of trust, including (i) in the case of a mortgage, any filing or service of process necessary to commence an action to foreclose, or (ii) in the case of a deed of trust, posting, the publishing, filing or delivery of a notice of sale, but not including in either case (x) any notice of default, notice of intent to foreclose or sell or any other action prerequisite to the actions specified in (i) or (ii) above, (y) the acceptance of a deed-in-lieu of foreclosure (whether in connection with a sale of the related property or otherwise) or (z) initiation and completion of a short pay-off. Current Appraisal: With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, an appraisal of the related Mortgaged Property obtained by the Purchaser at its own expense from an independent appraiser (which shall not be an affiliate of the Purchaser) acceptable to the Company as nearly contemporaneously as practicable to the time of the Purchaser's election, prepared based on the Company's customary requirements for such appraisals. Election to Delay Foreclosure: Any election by the Purchaser to delay the Commencement of Foreclosure, made in accordance with Section 2.02(b). Election to Foreclose: Any election by the Purchaser to proceed with the Commencement of Foreclosure, made in accordance with Section 2.03(a). Lowest Priority Certificates: The most subordinate class of certificates issued under the Pooling and Servicing Agreement that is outstanding from time to time. If the Lowest Priority Certificates are reduced to zero as a result of losses or otherwise, and if the Purchaser at that time owns 100% of the most subordinate class of certificates issued under the Pooling and Servicing Agreement then remaining outstanding, then such most subordinate class remaining outstanding shall thereafter be deemed to be the Lowest Priority Certificates for all purposes of this Agreement. Monthly Advances: Principal and interest advances and servicing advances including costs and expenses of foreclosure. Required Collateral Fund Balance: As of any date of determination, an amount equal to the aggregate of all amounts previously required to be deposited in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section 2.02(g) and Section 2.03(d). Section 1.03. Definitions Incorporated by Reference. All capitalized terms not otherwise defined in this Agreement shall have the meanings assigned in the Pooling and Servicing Agreement. ARTICLE II SPECIAL SERVICING PROCEDURES Section 2.01. Reports and Notices. (a) In connection with the performance of its duties under the Pooling and Servicing Agreement relating to the realization upon defaulted Mortgage Loans, the Company as Master Servicer shall provide to the Purchaser the following notices and reports: Within five Business Days after each Distribution Date (or included in or with the monthly statements to Certificateholders pursuant to the Pooling and Servicing Agreement), the Company shall provide to the Purchaser a report identifying all loans delinquent 30 days or more (including all loans in foreclosure, bankruptcy or "real estate owned" status) (each, a "Delinquency Report"). The Delinquency Report shall use the same methodology and calculations employed in the Company's standard servicing reports, indicating the number of Mortgage Loans that are (i) thirty days delinquent, (ii) sixty days delinquent, (iii) ninety days or more delinquent, (iv) in foreclosure, (v) in bankruptcy or (vi) real estate owned, and indicating for each such Mortgage Loan the loan number, the property address and the outstanding principal balance. (b) If requested by the Purchaser, the Company shall cause the Servicer (to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement) to make its servicing personnel available (during their normal business hours) to respond to reasonable inquiries, by phone or in writing by facsimile, electronic, or overnight mail transmission, by the Purchaser in connection with any Mortgage Loan (i) identified in a report under Section 2.01 (a) (ii), (a) (iii), (a) (iv), (a) (v) or (a) (vi); provided, that (1) the related Servicer shall only be required to provide information that is readily accessible to its servicing personnel and (2) the related Servicer shall respond within five Business Days orally or in writing by facsimile transmission. (c) In addition to the foregoing, the Company shall cause the Servicer (to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement) to provide to the Company (for prompt transmission to the Purchaser) such information as the Purchaser may reasonably request provided, however, that such information is consistent with normal reporting practices, concerning each Mortgage Loan that is at least ninety days delinquent and each Mortgage Loan which has become real estate owned, through the final liquidation thereof; provided, that the related Servicer shall only be required to provide information that is readily accessible to its servicing personnel; provided, however, that the Purchaser will reimburse the Company and the related Servicer for any out of pocket expenses. Section 2.02. Purchaser's Election to Delay Foreclosure Proceedings. (a) The Purchaser shall be deemed to direct the Company to direct (to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement) the related Servicer that in the event that the Company does not receive written notice of the Purchaser's election pursuant to subsection (b) below within 48 hours (exclusive of any intervening non-Business Days) of transmission of the Delinquency Report provided by the Company under Section 2.01 (a) (subject to extension as set forth in Section 2.02(b), the related Servicer may proceed with the Commencement of Foreclosure in respect of each Mortgage Loan reported under Section 2.01 (a)(ii) or 2.01 (a)(iii) in accordance with its normal foreclosure policies without further notice to the Purchaser. Any foreclosure that has been initiated may be discontinued (i) without notice to the Purchaser if the Mortgage Loan has been brought current or if a refinancing or prepayment occurs with respect to the Mortgage Loan (including by means of a short payoff approved by the related Servicer) or (ii) if the related Servicer has reached the terms of a forbearance agreement with the borrower. (b) In connection with any Mortgage Loan reported in a Delinquency Report under Section 2.01(a)(ii) or 2.01 (a)(iii), the Purchaser may elect to instruct the Company to cause, to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement, the related Servicer to delay the Commencement of Foreclosure until such time as the Purchaser determines that the related Servicer may proceed with the Commencement of Foreclosure. Such election must be evidenced by written notice received within 48 hours (exclusive of any intervening non-Business Days) of transmission of the Delinquency Report provided by the Company under Section 2.01(a). Such 48 hour period shall be extended for no longer than an additional four Business Days after the receipt of the information if the Purchaser requests additional information related to such foreclosure; provided, however, that the Purchaser will have at least one Business Day to respond to any requested additional information. Any such additional information shall be provided only to the extent it is obtainable by the related Servicer from existing reports, certificates or statements or is otherwise readily accessible to its servicing personnel. The Purchaser agrees that it has no right to deal with the mortgagor during such period. However, if such servicing activities include acceptance of a deed-in-lieu of foreclosure or short payoff, the Purchaser will be notified and given two Business Days to respond. (c) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the Purchaser shall obtain a Current Appraisal as soon as practicable, but in no event more than 15 Business Days thereafter, and shall provide the Company with a copy of such Current Appraisal. (d) Within two Business Days of making any Election to Delay Foreclosure, the Purchaser shall remit by wire transfer to the Company, for deposit in the Collateral Fund, an amount, as calculated by the Company, equal to the sum of (i) 125% of the greater of the unpaid principal balance of the Mortgage Loan and the value shown in the Current Appraisal referred to in subsection (c) above (or, if such Current Appraisal has not yet been obtained, the Company's estimate thereof, in which case the required deposit under this subsection shall be adjusted upon obtaining such Current Appraisal), and (ii) three months' interest on the Mortgage Loan at the applicable Mortgage Interest Rate. If any Election to Delay Foreclosure extends for a period in excess of three months (such excess period being referred to herein as the "Excess Period"), within two Business Days the Purchaser shall remit by wire transfer in advance to the Company for deposit in the Collateral Fund the amount of each additional month's interest, as calculated by the Company, equal to interest on the Mortgage Loan at the applicable Mortgage Interest Rate for the Excess Period. The terms of this Agreement will no longer apply to the servicing of any Mortgage Loan upon the failure of the Purchaser to deposit any of the above amounts relating to the Mortgage Loan within two Business Days of the Election to Delay Foreclosure or within two Business Days of the commencement of the Excess Period subject to Section 3.01. (e) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the Company may withdraw from the Collateral Fund from time to time amounts necessary to reimburse the related Servicer for all related Monthly Advances and Liquidation Expenses thereafter made by such Servicer in accordance with the Pooling and Servicing Agreement and the related Servicing Agreement. To the extent that the amount of any such Liquidation Expenses is determined by the Company based on estimated costs, and the actual costs are subsequently determined to be higher, the Company may withdraw the additional amount from the Collateral Fund. In the event that the Mortgage Loan is brought current by the mortgagor and the foreclosure action is discontinued, the amounts so withdrawn from the Collateral Fund shall be redeposited if and to the extent that reimbursement therefor from amounts paid by the mortgagor is not prohibited pursuant to the Pooling and Servicing Agreement or the related Servicing Agreement, applicable law or the related mortgage note. Except as provided in the preceding sentence, amounts withdrawn from the Collateral Fund to cover Monthly Advances and Liquidation Expenses shall not be redeposited therein or otherwise reimbursed to the Purchaser. If and when any such Mortgage Loan is brought current by the mortgagor, all amounts remaining in the Collateral Fund in respect of such Mortgage Loan (after adjustment for all permitted withdrawals and deposits pursuant to this subsection) shall be released to the Purchaser. (f) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the related Servicer shall continue to service the Mortgage Loan in accordance with its customary procedures (other than the delay in Commencement of Foreclosure as provided herein). If and when the Purchaser shall notify the Company that it believes that it is appropriate to do so, the related Servicer may proceed with the Commencement of Foreclosure. In any event, if the Mortgage Loan is not brought current by the mortgagor by the time the loan becomes 6 months delinquent, the Purchaser's election shall no longer be effective and at the Purchaser's option, either (i) the Purchaser shall purchase the Mortgage Loan from the related Trust Estate at a purchase price equal to the sum of (x) accrued and unpaid interest on the Mortgage Loan at the applicable Mortgage Interest Rate through the last day of the month of repurchase, (y) 100% of the unpaid principal balance of the Mortgage Loan as of such purchase date and (z) any additional amount needed to reimburse any unreimbursed related Periodic Advance or other servicing advances made in respect of such Mortgage Loan, to be paid by (A) applying any balance in the Collateral Fund to such purchase price, and (B) to the extent of any deficiency, by wire transfer of immediately available funds from the Purchaser to the Company for deposit in the related Certificate Account; or (ii) the related Servicer shall proceed with the Commencement of Foreclosure. In the event that the Purchaser purchases any such Mortgage Loan, the Servicer shall continue to service the Mortgage Loan for the Purchaser pursuant to the applicable Servicing Agreement. (g) Upon the occurrence of a liquidation with respect to any Mortgage Loan as to which the Purchaser made an Election to Delay Foreclosure and as to which the related Servicer proceeded with the Commencement of Foreclosure in accordance with subsection (f) above, the Company shall calculate the amount, if any, by which the value shown on the Current Appraisal obtained under subsection (c) exceeds the actual sales price obtained for the related Mortgaged Property (net of Liquidation Expenses and accrued interest related to the extended foreclosure period), and the Company shall withdraw the amount of such excess from the Collateral Fund, shall remit the same to the Trust Estate and in its capacity as Master Servicer shall apply such amount as additional Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After making such withdrawal, all amounts remaining in the Collateral Fund in respect of such Mortgage Loan (after adjustment for all permitted withdrawals and deposits pursuant to this Agreement) shall be released to the Purchaser. Section 2.03. Purchaser's Election to Commence Foreclosure Proceedings. (a) In connection with any Mortgage Loan identified in a Delinquency Report under Section 2.01(a)(ii), the Purchaser, for so long as the Purchaser owns 100% of the Lowest Priority Certificates, may elect to instruct the Company to cause, to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement, the related Servicer to proceed with the Commencement of Foreclosure as soon as practicable. Such election must be evidenced by written notice received by the Company by 5:00 p.m., New York City time, on the third Business Day following the delivery of such Delinquency Report. (b) Within two Business Days of making any Election to Foreclose, the Purchaser shall remit to the Company, for deposit in the Collateral Fund, an amount, as calculated by the Company, equal to 125% of the current unpaid principal balance of the Mortgage Loan and three months interest on the Mortgage Loan at the applicable Mortgage Interest Rate. If and when any such Mortgage Loan is brought current by the mortgagor, all amounts in the Collateral Fund in respect of such Mortgage Loan (after adjustment for all permitted withdrawals and deposits pursuant to this Agreement) shall be released to the Purchaser if and to the extent that reimbursement therefor from amounts paid by the mortgagor is not prohibited pursuant to the Pooling and Servicing Agreement or the related Servicing Agreement, applicable law or the related mortgage note. The terms of this Agreement will no longer apply to the servicing of any Mortgage Loan upon the failure of the Purchaser to deposit the above amounts relating to the Mortgage Loan within two Business Days of the Election to Foreclose subject to Section 3.01. (c) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Foreclose, the related Servicer shall continue to service the Mortgage Loan in accordance with its customary procedures (other than Commencement of Foreclosure as provided herein). In connection therewith, the Company shall have the same rights to make withdrawals for Monthly Advances and Liquidations Expenses from the Collateral Fund as are provided under Section 2.02(e), and the Company shall make reimbursements thereto to the limited extent provided under such subsection in accordance with its customary procedures. The Company shall not be required to cause, to the extent that the Company as Master Servicer is granted such authority in the related Servicing Agreement, the related Servicer to proceed with the Commencement of Foreclosure if (i) the same is stayed as a result of the mortgagor's bankruptcy or is otherwise barred by applicable law, or to the extent that all legal conditions precedent thereto have not yet been complied with, or (ii) the Company believes there is a breach of representations or warranties by the Company, a Servicer, or a Depositor, which may result in a repurchase or substitution of such Mortgage Loan, or (iii) the Company or related Servicer reasonably believes the Mortgaged Property may be contaminated with or affected by hazardous wastes or hazardous substances (and, without limiting the related Servicer's right not to proceed with the Commencement of Foreclosure, the Company supplies the Purchaser with information supporting such belief). Any foreclosure that has been initiated may be discontinued (x) without notice to the Purchaser if the Mortgage Loan has been brought current or if a refinancing or prepayment occurs with respect to the Mortgage Loan (including by means of a short payoff) or (y) if the related Servicer has reached the terms of a forbearance agreement. (d) Upon the occurrence of a liquidation with respect to any Mortgage Loan as to which the Purchaser made an Election to Foreclose and as to which the related Servicer proceeded with the Commencement of Foreclosure in accordance with subsection (c) above, the Company shall calculate the amount, if any, by which the unpaid principal balance of the Mortgage Loan at the time of liquidation (plus all unreimbursed interest and servicing advances and Liquidation Expenses in connection therewith other than those paid from the Collateral Fund) exceeds the actual sales price obtained for the related Mortgaged Property, and the Company shall withdraw the amount of such excess from the Collateral Fund, shall remit the same to the Trust Estate and in its capacity as Master Servicer shall apply such amount as additional Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After making such withdrawal, all amounts remaining in the Collateral Fund (after adjustment for all withdrawals and deposits pursuant to subsection (c) in respect of such Mortgage Loan shall be released to the Purchaser. Section 2.04. Termination. (a) With respect to all Mortgage Loans included in the Trust Estate, the Purchaser's right to make any Election to Delay Foreclosure or any Election to Foreclose and the Company's obligations under Section 2.01 shall terminate (i) at such time as the Principal Balance of the Class B Certificates has been reduced to zero, (ii) if the greater of (x) 43% (or such lower or higher percentage that represents the related Servicer's actual historical loss experience with respect to the Mortgage Loans in the related pool as determined by the Company) of the aggregate principal balance of all Mortgage Loans that are in foreclosure or are more than 90 days delinquent on a contractual basis and REO properties or (y) the aggregate amount that the Company estimates through the normal servicing practices of the related Servicer will be required to be withdrawn from the Collateral Fund with respect to Mortgage Loans as to which the Purchaser has made an Election to Delay Foreclosure or an Election to Foreclosure, exceeds (z) the then-current principal balance of the Class B Certificates, (iii) upon any transfer by the Purchaser of any interest (other than the minority interest therein, but only if the transferee provides written acknowledgment to the Company of the Purchaser's right hereunder and that such transferee will have no rights hereunder) in the Class B Certificates (whether or not such transfer is registered under the Pooling and Servicing Agreement), including any such transfer in connection with a termination of the Trust Estate or (iv) upon any breach of the terms of this Agreement by the Purchaser. (b) Except as set forth in 2.04(a), this Agreement and the respective rights, obligations and responsibilities of the Purchaser and the Company hereunder shall terminate upon the later to occur of (i) the final liquidation of the last Mortgage Loan as to which the Purchaser made any Election to Delay Foreclosure or any Election to Foreclose and the withdrawal of all remaining amounts in the Collateral Fund as provided herein and (ii) ten Business Days' notice. The Purchaser's right to make an election pursuant to Section 2.02 or Section 2.03 hereof with respect to a particular Mortgage Loan shall terminate if the Purchaser fails to make any deposit required pursuant to Section 2.02(d) or 2.03(b) or if the Purchaser fails to make any other deposit to the Collateral Fund pursuant to this Agreement. ARTICLE III COLLATERAL FUND; SECURITY INTEREST Section 3.01. Collateral Fund. Upon receipt from the Purchaser of the initial amount required to be deposited in the Collateral Fund pursuant to Article II, the Company shall establish and maintain with [_______________] as a segregated account on its books and records an account (the "Collateral Fund"), entitled "Wells Fargo Bank, N.A., as Master Servicer, for the benefit of registered holders of Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series [_____]." Amounts held in the Collateral Fund shall continue to be the property of the Purchaser, subject to the first priority security interest granted hereunder for the benefit of the Certificateholders, until withdrawn from the Collateral Fund pursuant to Section 2.02 or 2.03 hereof. The Collateral Fund shall be an "outside reserve fund" within the meaning of the REMIC Provisions, beneficially owned by the Purchaser for federal income tax purposes. All income, gain, deduction or loss with respect to the Collateral Fund shall be that of the Purchaser. All distributions from the Trust Fund to the Collateral Fund shall be treated as distributed to the Purchaser as the beneficial owner thereof. Upon the termination of this Agreement and the liquidation of all Mortgage Loans as to which the Purchaser has made any Election to Delay Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the Company shall distribute or cause to be distributed to the Purchaser all amounts remaining in the Collateral Fund (after adjustment for all deposits and permitted withdrawals pursuant to this Agreement) together with any investment earnings thereon. In the event the Purchaser has made any Election to Delay Foreclosure or any Election to Foreclose, prior to any distribution to the Purchaser of all amounts remaining in the Collateral Fund, funds in the Collateral Fund shall be applied consistent with the terms of this Agreement. Section 3.02. Collateral Fund Permitted Investments. The Company shall, at the written direction of the Purchaser, invest the funds in the Collateral Fund in Collateral Fund Permitted Investments. Such direction shall not be changed more frequently than quarterly. In the absence of any direction, the Company shall select such investments in accordance with the definition of Collateral Fund Permitted Investments in its discretion. All income and gain realized from any investment as well as any interest earned on deposits in the Collateral Fund (net of any losses on such investments) and any payments of principal made in respect of any Collateral Fund Permitted Investment shall be deposited in the Collateral Fund upon receipt. All costs and realized losses associated with the purchase and sale of Collateral Fund Permitted Investments shall be borne by the Purchaser and the amount of net realized losses shall be deposited by the Purchaser in the Collateral Fund promptly upon realization. The Company shall periodically (but not more frequently than monthly) distribute to the Purchaser upon request an amount of cash, to the extent cash is available therefore in the Collateral Fund, equal to the amount by which the balance of the Collateral Fund, after giving effect to all other distributions to be made from the Collateral Fund on such date, exceeds the Required Collateral Fund Balance. Any amounts so distributed shall be released from the lien and security interest of this Agreement. Section 3.03. Grant of Security Interest. The Purchaser hereby grants to the Company for the benefit of the Certificateholders under the Pooling and Servicing Agreement a security interest in and lien on all of the Purchaser's right, title and interest, whether now owned or hereafter acquired, in and to: (1) the Collateral Fund, (2) all amounts deposited in the Collateral Fund and Collateral Fund Permitted Investments in which such amounts are invested (and the distributions and proceeds of such investments) and (3) all cash and non-cash proceeds of any of the foregoing, including proceeds of the voluntary conversion thereof (all of the foregoing collectively, the "Collateral"). The Purchaser acknowledges the lien on and the security interest in the Collateral for the benefit of the Certificateholders. The Purchaser shall take all actions requested by the Company as may be reasonably necessary to perfect the security interest created under this Agreement in the Collateral and cause it to be prior to all other security interests and liens, including the execution and delivery to the Company for filing of appropriate financing statements in accordance with applicable law. The Company shall file appropriate continuation statements, or appoint an agent on its behalf to file such statements, in accordance with applicable law. Section 3.04. Collateral Shortfalls. In the event that amounts on deposit in the Collateral Fund at any time are insufficient to cover any withdrawals therefrom that the Company is then entitled to make hereunder, the Purchaser shall be obligated to pay such amounts to the Company immediately upon demand. Such obligation shall constitute a general corporate obligation of the Purchaser. The failure to pay such amounts within two Business Days of such demand (except for amounts to cover interest on a Mortgage Loan pursuant to Sections 2.02(d) and 2.03 (b)), shall cause an immediate termination of the Purchaser's right to make any Election to Delay Foreclosure or Election to Foreclose and the Company's obligations under this Agreement with respect to all Mortgage Loans to which such insufficiencies relate, without the necessity of any further notice or demand on the part of the Company. ARTICLE IV Section 4.01. Assessment of Servicing Compliance; Registered Public Accounting Firm Attestation Reports; Exchange Act Reporting. (a) The Purchaser shall furnish, or cause to be furnished in the case of clause (iii), to the Master Servicer, no 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 20 , the following: (i) a report (in form and substance reasonably satisfactory to the Master Servicer and the Depositor) regarding the Purchaser's assessment of compliance with the Servicing Criteria applicable to it during the immediately preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall be addressed to the Master Servicer and signed by an authorized officer of the Purchaser, and shall address, at a minimum, each of the Servicing Criteria applicable to the Purchaser; (ii) a report of a registered public accounting firm reasonably acceptable to the Master Servicer and the Depositor that attests to, and reports on, the assessment of compliance made by the Purchaser and delivered pursuant to the preceding paragraph. Such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. If requested by the Master Servicer 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; and (iii) an assessment of compliance and accountants' attestation as described in paragraphs (i) and (ii) of this Section 4.01(a) with respect to each Subcontractor determined by the Purchaser pursuant to Section 4.02 to be "participating in the servicing function" within the meaning of Item 1122 of Regulation AB. An assessment of compliance provided by a Subcontractor pursuant to Section 4.01(a)(iii) need not address any elements of the Servicing Criteria applicable to it other than those specified by the Purchaser pursuant to Section 4.02. No later than 30 days following the end of each fiscal year for the Trust for which a Form 10-K is required to be filed, the Purchaser shall forward to the Master Servicer the name of each Subcontractor engaged by it and what Servicing Criteria will be addressed in the report on assessment of compliance prepared by such Subcontractor. When the Purchaser submits its assessment to the Master Servicer, it will also at such time include the assessment (and attestation pursuant to Section 4.01(a)(ii) hereof) of each Subcontractor engaged by it. (b) Within five (5) calendar days after a Distribution Date, the Purchaser shall provide to the Master Servicer, to the extent known, in EDGAR-compatible format, or in such other form as otherwise agreed upon by the Master Servicer and the Purchaser, the form and substance of any Additional Form 10-D Disclosure applicable to the Purchaser, as indicated in the table in Exhibit S to the Pooling and Servicing Agreement. The Purchaser acknowledges that the performance by the Master Servicer of its duties under Section 3.12(a) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 10-D is contingent upon the Purchaser strictly observing all applicable deadlines in the performance of its duties under this Section 4.01(b). (c) 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 20 , the Purchaser shall provide to the Master Servicer, to the extent known, in EDGAR-compatible format, or in such other form as otherwise agreed upon by the Master Servicer and the Purchaser, the form and substance of any Additional Form 10-K Disclosure applicable to the Purchaser, as indicated in the table in Exhibit T to the Pooling and Servicing Agreement. The Purchaser acknowledges that the performance by the Master Servicer of its duties under Section 3.12(b) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 10-K is contingent upon the Purchaser strictly observing all applicable deadlines in the performance of its duties under this Section 4.01(c). (d) 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 applicable to the Purchaser, the Purchaser shall provide to the Master Servicer, to the extent known, in EDGAR-compatible format, or in such other form as otherwise agreed upon by the Master Servicer and the Purchaser, the form and substance of any Form 8-K Disclosure Information applicable to the Purchaser, as indicated in the table in Exhibit U to the Pooling and Servicing Agreement. The Purchaser acknowledges that the performance by the Master Servicer of its duties under Section 3.12(c) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 8-K is contingent upon the Purchaser strictly observing all applicable deadlines in the performance of its duties under this Section 4.01(d). (e) The Purchaser shall provide such information regarding itself as the Master Servicer or the Depositor request for the purpose of complying with Item 1108 of Regulation AB, including at a minimum, the information set forth in Exhibit A (f) The Purchaser shall indemnify the Master Servicer, each affiliate of the Master Servicer, the Trust, each broker dealer acting as underwriter or initial purchaser of the Certificates, each Person who controls any of such parties and the Depositor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act); and the respective present and former directors, officers, employees and agents of each of the foregoing and of the Depositor (each such entity, an "Indemnified Party"), and shall hold each of them harmless from and against any losses, damages, penalties, fines, forfeitures, legal fees and expenses and related costs, judgments, and any other costs, fees and expenses that any of them may sustain arising out of or based upon: (i) (A) any untrue statement of a material fact contained or alleged to be contained in any information, report, certification, accountants' letter or other material provided in written or electronic form under this Section 4.01 or Section 4.02 hereof by or on behalf of the Purchaser, or provided under Sections 4.01 or 4.02 by or on behalf of any Subcontractor (collectively, the "Purchaser Information"), or (B) the omission or alleged omission to state in the Purchaser Information a material fact required to be stated in the Purchaser Information or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, by way of clarification, that clause (B) of this paragraph shall be construed solely by reference to the Purchaser Information and not to any other information communicated in connection with a sale or purchase of securities, without regard to whether the Purchaser Information or any portion thereof is presented together with or separately from such other information; or (ii) any failure by the Purchaser or any Subcontractor engaged by the Purchaser to deliver any information, report, certification, accountants' letter or other material when and as required under Sections 4.01 or 4.02, including any failure by the Purchaser to identify pursuant to Section 4.02 any Subcontractor "participating in the servicing function" within the meaning of Item 1122 of Regulation AB. In the case of any failure of performance described in clause (ii) of this Section, the Purchaser shall promptly reimburse the Master Servicer and the Depositor, as applicable, for all costs reasonably incurred by each such party in order to obtain the information, report, certification, accountants' letter or other material not delivered as required by the Purchaser or any Subcontractor. If the indemnification provided for herein is unavailable to hold harmless any Indemnified Party, then the Purchaser agrees that it shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities of such Indemnified Party in such proportion as is appropriate to reflect the relative fault of such Indemnified Party on the one hand and the Purchaser on the other in connection with a breach of the Purchaser's obligations under this Section 4.1 or the Purchaser's negligence, bad faith or willful misconduct in connection therewith. (g) Notwithstanding anything contained in this Section 4.01 to the contrary, the provisions of this Section 4.01 shall not apply to the Purchaser with respect to any calendar year unless the Purchaser exercises its rights set forth under Sections 2.02 or 2.03 of this Agreement in such calendar year. Section 4.02. Engagement of Affiliates or Third-Parties. The Purchaser shall not hire any Subservicer without the consent of the Master Servicer and the Depositor. The Purchaser shall not hire or otherwise utilize the services of any Subcontractor to fulfill any of the obligations of the Purchaser as servicer under this Agreement unless the Purchaser complies with the provisions of this Section. It shall not be necessary for the Purchaser to seek the consent of the Master Servicer or the Depositor to the utilization of any Subcontractor. The Purchaser shall promptly upon request provide to the Master Servicer (or any designee of Master Servicer) a written description (in form and substance satisfactory to the Master Servicer and the Depositor) of the role and function of each Subcontractor utilized by the Purchaser, specifying (i) the identity of each such Subcontractor, (ii) which (if any) of such Subcontractors are "participating in the servicing function" within the meaning of Item 1122 of Regulation AB, and (iii) which elements of the Servicing Criteria will be addressed in assessments of compliance provided by each Subcontractor identified pursuant to clause (ii) of this paragraph. As a condition to the utilization of any Subcontractor determined to be "participating in the servicing function" within the meaning of Item 1122 of Regulation AB, the Purchaser shall cause any such Subcontractor used by the Purchaser, for the benefit of the Master Servicer and the Depositor to comply with the provisions of Section 4.01 of this Agreement to the same extent as if such Subcontractor were the Purchaser. The Purchaser shall be responsible for obtaining from each Subcontractor and delivering to the Master Servicer any assessment of compliance and attestation required to be delivered by such Subcontractor under Section 4.01, in each case as and when required to be delivered. Section 4.03. Notification of Merger. The Purchaser and such successor or surviving Person shall notify the Depositor, the Master Servicer and the Trustee 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 Master Servicer with all information required by the Depositor to comply with its reporting obligations not later than the effective date of such merger, conversion or consolidation (unless giving 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 4.04. Compliance with Article IV. If (a) the Purchaser fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports required pursuant to this Article IV or (b) any Subcontractor engaged by the Purchaser fails to comply with its obligations to deliver any assessment of servicing compliance or registered public accounting firm attestation reports, the Master Servicer, may, after consultation with the Depositor, terminate this Agreement pursuant to Section 2.04(a)(iv). ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01. Amendment. This Agreement may be amended from time to time by the Company and the Purchaser by written agreement signed by the Company and the Purchaser, subject to the acknowledgement of the Rating Agencies as contemplated in Section 3.08 of the Pooling and Servicing Agreement with respect to such amendment. Section 5.02. Counterparts. 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 constitute but one and the same instrument. Section 5.03. Governing Law. 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. Section 5.04. Notices. All demands, notices and direction hereunder shall be in writing or by telecopy and shall be deemed effective upon receipt to: (a) in the case of the Company, Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, MD 21045 Attention: Vice President, Master Servicing Phone: 410-884-2000 Fax: 410-715-1573 (b) in the case of the Purchaser, [ ] Section 5.05. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever, including regulatory, held invalid, then such 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. Section 5.06. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Certificateholders; provided, however, that the rights under this Agreement cannot be assigned by the Purchaser without the consent of the Company. Section 5.07. Article and Section Headings. The article and section headings herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Section 5.08. Confidentiality. The Purchaser agrees that all information supplied by or on behalf of the Company pursuant to Sections 2.01 or 2.02, including individual account information, is the property of the Company and the Purchaser agrees to hold such information confidential and not to disclose such information. Each party hereto agrees that neither it, nor any officer, director, employee, affiliate or independent contractor acting at such party's direction will disclose the terms of Section 5.09 of this Agreement to any person or entity other than such party's legal counsel except pursuant to a final, non-appealable order of court, the pendency of such order the other party will have received notice of at least five business days prior to the date thereof, or pursuant to the other party's prior express written consent. Section 5.09. Indemnification. The Purchaser agrees to indemnify and hold harmless the Company, the Depositor, and each Servicer and each person who controls the Company, the Depositor, or a Servicer and each of their respective officers, directors, affiliates and agents acting at the Company's, the Depositor's, or a Servicer's direction (the "Indemnified Parties") against any and all losses, claims, damages or liabilities to which they may be subject, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, actions taken by, or actions not taken by, the Company, the Depositor, or a Servicer, or on their behalf, in accordance with the provisions of this Agreement and (i) which actions conflict with the Company's, the Depositor's, or a Servicer's obligations under the Pooling and Servicing Agreement or the related Servicing Agreement, or (ii) give rise to securities law liability under federal or state securities laws with respect to the Certificates. The Purchaser hereby agrees to reimburse the Indemnified Parties for the reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. The indemnification obligations of the Purchaser hereunder shall survive the termination or expiration of this Agreement. Section 5.10 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 Master Servicer 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 Master Servicer and the Depositor to deliver to the Master Servicer and/or the Depositor (including its assignees or designees), 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 Master Servicer to permit the Depositor or the Master Servicer to comply with the provisions of Regulation AB, together with such disclosures reasonably believed by the Depositor or the Master Servicer to be necessary in order to effect such compliance. IN WITNESS WHEREOF, the Company and the Purchaser 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 BANK, N.A. By: ----------------------------------- Name: Title: [NAME OF PURCHASER] By: ----------------------------------- Name: Title: EXHIBIT A PURCHASER INFORMATION (A) the Purchaser's form of organization; (B) a description of how long the Purchaser has been servicing residential mortgage loans; a general discussion of the Purchaser's experience in servicing assets of any type as well as a more detailed discussion of the Purchaser's experience in, and procedures for, the servicing function it will perform under the Agreement; information regarding the size, composition and growth of the Purchaser's portfolio of residential mortgage loans of a type similar to the Mortgage Loans and information on factors related to the Purchaser that may be material, in the good faith judgment of the Master Servicer or the Depositor, to any analysis of the servicing of the Mortgage Loans or the related asset-backed securities, as applicable, including, without limitation: (1) whether any prior securitizations of mortgage loans of a type similar to the Mortgage Loans involving the Purchaser have defaulted or experienced an early amortization or other performance triggering event because of servicing during the three-year period immediately preceding the date of engagement of the Purchaser; (2) the extent of outsourcing the Purchaser utilizes; (3) whether there has been previous disclosure of material noncompliance with the applicable servicing criteria with respect to securitizations of residential mortgage loans involving the Purchaser as a servicer during the three-year period immediately preceding the date of engagement of the Purchaser; (4) whether the Purchaser has 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; and (5) such other information as the Master Servicer or the Depositor may reasonably request for the purpose of compliance with Item 1108(b)(2) of Regulation AB; (C) a description of any material changes during the three-year period immediately preceding the date of engagement of the Purchaser to the Purchaser's policies or procedures with respect to the servicing function it will perform under the Agreement for mortgage loans of a type similar to the Mortgage Loans; (D) information regarding the Purchaser's financial condition, to the extent that there is a material risk that an adverse financial event or circumstance involving the Purchaser could have a material adverse effect on the performance by the Purchaser of its servicing obligations under the Agreement; (E) information regarding advances made by the Purchaser on the Mortgage Loans and the Purchaser's overall servicing portfolio of residential mortgage loans for the three-year period immediately preceding the date of engagement of the Purchaser, which may be limited to a statement by an authorized officer of the Purchaser to the effect that the Purchaser has made all advances required to be made on residential mortgage loans serviced by it during such period, or, if such statement would not be accurate, information regarding the percentage and type of advances not made as required, and the reasons for such failure to advance; (F) a description of the Purchaser's processes and procedures designed to address any special or unique factors involved in servicing loans of a similar type as the Mortgage Loans; (G) a description of the Purchaser's processes for handling delinquencies, losses, bankruptcies and recoveries, such as through liquidation of mortgaged properties, sale of defaulted mortgage loans or workouts; and (H) information as to how the Purchaser defines or determines delinquencies and charge-offs, including the effect of any grace period, re-aging, restructuring, partial payments considered current or other practices with respect to delinquency and loss experience. EXHIBIT N FORM OF INITIAL CERTIFICATION OF THE CUSTODIAN [ ] Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attn: Corporate Trust Services WFMBS 200 - Re: The Pooling and Servicing Agreement, dated [_____], among Wells Fargo Asset Securities Corporation, as Depositor, Wells Fargo Bank, N.A., as Master Servicer, and HSBC Bank USA, National Association, as Trustee, relating to the Wells Fargo Asset Securities Corporation; Mortgage Pass-Through Certificates, Series 200 - . Ladies and Gentlemen: In accordance with the provisions of Section 2.02 of the above-referenced Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as Custodian on behalf of the Trustee, hereby certifies that, except as specified in any list of exceptions attached hereto, it has received the original Mortgage Note relating to each of the Mortgage Loans listed on the Mortgage Loan Schedule. 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 terms used but not defined herein shall have the meanings ascribed to such terms in the Pooling and Servicing Agreement. WELLS FARGO BANK, N.A., as Custodian on behalf of the Trustee By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- EXHIBIT O FORM OF FINAL CERTIFICATION OF THE CUSTODIAN [____________ __, ____] Wells Fargo Asset Securities Corporation 7430 New Technology Way Frederick, Maryland 21703 Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045-1951 Attn: Corporate Trust Services WFMBS 200 - Re: The Pooling and Servicing Agreement, dated [_____], among Wells Fargo Asset Securities Corporation, as Depositor, Wells Fargo Bank, N.A., as Master Servicer, and HSBC Bank USA, National Association, as Trustee, relating to the Wells Fargo Asset Securities Corporation; Mortgage Pass-Through Certificates, Series 200 - . Ladies and Gentlemen: In accordance with the provisions of Section 2.02 of the above-referenced Pooling and Servicing Agreement (the "P ooling and Servicing Agreement"), the undersigned, as Custodian on behalf of the Trustee, hereby certifies that, as to each Mortgage Loan listed in the Mortgage Loan Schedule, except as may be specified in any list of exceptions attached hereto, such Mortgage File contains all of the items required to be delivered pursuant to Section 2.01 of the Pooling and Servicing Agreement. 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 terms used but not defined herein shall have the meanings ascribed to such terms in the Pooling and Servicing Agreement. WELLS FARGO BANK, N.A., as Custodian on behalf of the Trustee By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- EXHIBIT P FORM OF SARBANES-OXLEY CERTIFICATION Wells Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series 200 - I, [________], 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 Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 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 Master Servicer and based upon 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 Master 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 master 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. [The following is included only for a transaction where there are Servicers other than Wells Fargo Bank: In giving the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties: [Name of Servicers other than Wells Fargo Bank], as Servicer.] Date: [_____] By: Name: Title: EXHIBIT Q SCHEDULE OF PLEDGED ASSET MORTGAGE LOANS EXHIBIT R Servicing Criteria to be Addressed in Assessment of Compliance
SERVICING CRITERIA APPLICABLE SERVICING CRITERIA - ------------------------------------------------------------------------------------------------------------------------------------ Master Reference Criteria Servicer Trustee Servicer Custodian - ------------------------------------------------------------------------------------------------------------------------------------ General Servicing Considerations - ------------------------------------------------------------------------------------------------------------------------------------ 1122(d)(1)(i) Policies and procedures are instituted to monitor any X X(1) X 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 X X 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 X X X X 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 X X 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 X X an investor are made only by authorized personnel. 1122(d)(2)(iii) Advances of funds or guarantees regarding collections, cash flows X X(2) X 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 X X 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 X X 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 X X access. 1122(d)(2)(vii) Reconciliations are prepared on a monthly basis for all X X 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 X X 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 X X 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 X X 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 X X 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 X X X by the transaction agreements or related mortgage loan documents. 1122(d)(4)(ii) Mortgage loan and related documents are safeguarded as required by X X the transaction agreements 1122(d)(4)(iii) Any additions, removals or substitutions to the asset pool are X X X 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 X 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 X 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 X X 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, X X 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 X 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 X 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 X 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 X 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 X 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 X 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 X X recognized and recorded in accordance with the transaction agreements. 1122(d)(4)(xv) Any external enhancement or other support, identified in X(3) Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.
[_______________________] Date: _________________________ By:_____________________________ Name: Title: (1) This Servicing Criterion applies to the Trustee with respect to Events of Default as set forth in the Pooling and Servicing Agreement. (2) This Servicing Criterion applies to the Trustee if the Trustee was required during the preceding calendar year to make an Advance in accordance with Section 8.14 of the Pooling and Servicing Agreement. (3) This Servicing Criterion applies to the Master Servicer only for transactions that contain any external credit enhancement or other support identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB. EXHIBIT S Additional Form 10-D Disclosure - -------------------------------------------------------------------------------- Item on Form 10-D Party Responsible - -------------------------------------------------------------------------------- Item 1: Distribution and Pool Master Servicer, Depositor Performance Information Any information required by 1121 which is NOT included on the Distribution Date Statement Item 2: Legal Proceedings per (i) All parties to the Pooling and Item 1117 of Regulation AB Servicing Agreement, the Custodian, each Servicer and, if applicable the Special Servicer (as to themselves), (ii) the Master Servicer 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 Depositor Use of Proceeds Item 4: Defaults Upon Senior Master Servicer Securities Item 5: Submission of Matters to Master Servicer, Trustee a Vote of Security Holders Item 6: Significant Obligors of Depositor, if applicable Pool 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, Master Servicer EXHIBIT T Additional Form 10-K Disclosure - -------------------------------------------------------------------------------- Item on Form 10-K Party Responsible - -------------------------------------------------------------------------------- Item 1B: Unresolved Staff Depositor Comments Item 9B: Other Information Any party responsible for disclosure items on Form 8-K Item 15: Exhibits, Financial Master Servicer Statement Schedules Depositor Additional Item: (i) All parties to the Pooling and Servicing Agreement, the Custodian, each Disclosure per Item 1117 of Servicer and, if applicable the Special Regulation AB Servicer (as to themselves), (ii) the Master Servicer 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 and Servicing Agreement, the Custodian, each Disclosure per Item 1119 of Servicer and, if applicable the Special Regulation AB Servicer (as to themselves), (ii) the Master Servicer 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 Regulation AB Additional Item: Depositor, if applicable Disclosure per Items 1114(b) and 1115(b) of Regulation AB EXHIBIT U 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 Servicing Definitive Agreement Agreement, each Servicer, the Custodian and, if applicable, the Special Servicer, as to each agreement to which it is a party Item 1.02- Termination of a All parties to the Pooling and Servicing Material Definitive Agreement, each Servicer, the Custodian Agreement and, if applicable, the Special Servicer, as to each agreement to which it is a party Item 1.03- Bankruptcy or (i) Depositor, as to itself, the sponsor, Receivership 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) each Servicer as to itself, (iv) Master Servicer, as to itself and any other transaction party, to the extent known to the Master Servicer Item 2.04- Triggering Events Master Servicer that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement Item 3.03- Material Modification Master Servicer to Rights of Security Holders Item 5.03- Amendments of Master Servicer Articles of Incorporation or Bylaws; Change of Fiscal Year Item 6.01- ABS Informational and Depositor Computational Material Item 6.02- Change of Servicer or Servicer, Master Servicer Master Servicer Item 6.03- Change in Credit Depositor/Master Servicer Enhancement or External Support Item 6.04- Failure to Make a Master Servicer Required Distribution Item 6.05- Securities Act Depositor Updating Disclosure Item 7.01- Reg FD Disclosure Depositor Item 8.01- Other Events Depositor, Master Servicer Item 9.01 Depositor, Master Servicer EXHIBIT V 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 Master Servicer Old Annapolis Road Columbia, Maryland 21045 Attn: Corporate Trust Services- [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 Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as master servicer, and HSBC Bank USA, National Association, as trustee. 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 we3768865-ex5_1.txt OPINION OF CWT Exhibit 5.1 [Letterhead of Cadwalader, Wickersham & Taft LLP] October 5, 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 on Form S-3 (File No. 333-133209) filed with the Securities and Exchange Commission (the "Commission") on April 11, 2006 (as amended, the "Registration Statement"), pursuant to the Securities Act of 1933, as amended (the "Act"). The Registration Statement covers Mortgage Asset-Backed Pass-Through Certificates ("Certificates") to be sold by Wells Fargo Asset Securities Corporation (the "Company") in one or more series (each, a "Series") of Certificates. 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 (a "Trustee") to be identified in the Prospectus Supplement for such Series of Certificates and Wells Fargo Bank, N.A., as master servicer (the "Master Servicer"). A form of Pooling and Servicing Agreement is included as an exhibit to the Registration Statement. 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, (ii) the form of the Pooling and Servicing Agreement, substantially in the form as filed with the Commission and (iii) such other documents, records and instruments as we have deemed necessary for the purposes of this opinion. Based on the foregoing, we are of the opinion that 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 and the 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 legally issued, fully paid and non-assessable. 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 we3768865-ex8_1.txt OPINION RE TAX MATTERS EXHIBIT 8.1 October 5, 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 on Form S-3 (File No. 333-133209) filed with the Securities and Exchange Commission (the "Commission") on April 11, 2006 (as amended, the "Registration Statement"), pursuant to the Securities Act of 1933, as amended (the "Act"). The Registration Statement covers Mortgage Asset-Backed Pass-Through Certificates ("Certificates") to be sold by Wells Fargo Asset Securities Corporation (the "Company") in one or more series (each, a "Series") of Certificates. 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 (a "Trustee") to be identified in the Prospectus Supplement for such Series of Certificates and Wells Fargo Bank, N.A., as master servicer (the "Master Servicer"). A form of Pooling and Servicing Agreement is included as an exhibit to the Registration Statement. 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, (ii) the form of the Pooling and Servicing Agreement, substantially in the form as filed with the Commission and (iii) 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. The descriptions of federal income tax consequences appearing under the headings "Material Federal Income Tax Consequences" in the Prospectus and "Federal Income Tax Considerations" in the form of Prospectus Supplement accurately describe the material federal income tax consequences to holders of a Series of Certificates, 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 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 with numerous different characteristics, the particular characteristics of each Series of Certificates must be considered in determining the applicability of this opinion to a particular Series of Certificates. 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. No opinion has been sought and none has been given concerning the tax treatment of the issuance and sale of the Certificates under the laws of any state. Very truly yours, /s/ Cadwalader, Wickhersham & Taft LLP EX-10.1 6 we3768865-ex10_1.txt FORM OF SERVICING AGREEMENT EXHIBIT 10.1 WELLS FARGO BANK, N.A. (Master Servicer) and WELLS FARGO BANK, N.A. (Servicer) SERVICING AGREEMENT Dated as of [_____], 20 TABLE OF CONTENTS ARTICLE 1 Definitions Section 1.1 Definitions.................................................. ACH.......................................................... Additional Form 10-D Disclosure.............................. Additional Form 10-K Disclosure.............................. Adjusted Tangible Net Worth.................................. Administration Disclosure.................................... Advance...................................................... Affiliate.................................................... Amounts Held for Future Distribution......................... Applicable Unscheduled Principal Receipt Period.............. Appraisal Report............................................. ARM Loan..................................................... Assigned Letter of Credit.................................... Assignment................................................... Assumption................................................... Balloon Amount............................................... Balloon Loan................................................. Bankruptcy Code.............................................. BIF.......................................................... Borrower..................................................... Business Day................................................. Buydown Agreement............................................ Buydown Funds................................................ Certificate Account.......................................... Certificates................................................. Certificateholders........................................... Code......................................................... Commission................................................... Condominium Project.......................................... Condominium Unit............................................. Converted Mortgage Loan...................................... Co-op Shares................................................. Current Value................................................ Curtailment.................................................. Custodial Agreement.......................................... Custodial Buydown Account.................................... Custodial Principal and Interest (P&I) Account............... Custodial Subsidy Account.................................... Custodial Taxes and Insurance (T&I) Account.................. Custodian.................................................... Cut-Off Date................................................. Debt Service Reduction....................................... Deficient Valuation.......................................... Delinquency/Delinquent....................................... Depositor.................................................... Determination Date........................................... Directly Operate............................................. Distribution Date............................................ Document Transfer Date....................................... Document Transfer Event...................................... Due Date..................................................... Due-On-Sale Clause........................................... Eligible Account............................................. Eligible Custodial P&I Account............................... Eligible Investments......................................... Errors and Omissions Policy.................................. Escrow Funds................................................. Escrow Item.................................................. Exchange Act................................................. FDIC......................................................... FHA.......................................................... FHLMC........................................................ Fidelity Bond................................................ Final Title Condition Report................................. Flood Insurance.............................................. FNMA......................................................... Form 8-K..................................................... Form 8-K Disclosure Information.............................. Form 10-D.................................................... Form 10-K.................................................... Full Unscheduled Principal Receipt........................... GNMA......................................................... GPM (or GPARM) Loan.......................................... Gross Margin................................................. Hazard Insurance............................................. HUD.......................................................... Index........................................................ Insurance Policy............................................. Insurance Proceeds........................................... Interest Adjustment Date..................................... Letter of Credit............................................. Liquidation.................................................. Liquidation Proceeds......................................... Liquidation Profits.......................................... Loan Originator.............................................. Loan-to-Value (LTV).......................................... Lost Note Affidavit.......................................... Master Servicer.............................................. Master Servicer Loan Number.................................. Maximum Lifetime Mortgage Interest Rate...................... Maximum Negative Amortization Amount......................... MERS......................................................... Mid-Month Receipt Period..................................... Minimum Lifetime Mortgage Interest Rate...................... Month End Interest........................................... Month End Interest Shortfall................................. Monthly Accounting Reports................................... Monthly Payment.............................................. Monthly Remittance........................................... Mortgage Interest Rate....................................... Mortgage Loan................................................ Mortgage Loan Documents...................................... Mortgage Loan Purchase Agreement............................. Mortgage Note................................................ Mortgage Note Assumption Rider............................... Mortgage Asset-Backed Pass-Through Certificates.............. Mortgaged Property........................................... Mortgagee.................................................... Net Mortgage Interest Rate................................... Non-Assigned Letter of Credit................................ Non-Recoverable Advance...................................... Notice of Periodic Adjustment................................ Officer...................................................... Opinion of Counsel........................................... Owner Mortgage Loan File..................................... P&I Advance.................................................. Partial Liquidation Proceeds................................. Partial Liquidation Receipt Period........................... Partial Unscheduled Principal Receipt........................ Payment Adjustment Date...................................... Periodic Payment Cap......................................... Periodic Rate Cap............................................ Person....................................................... Pledge Holder................................................ Pledged Asset Mortgage Loan.................................. PMI Advance.................................................. Pool Insurance............................................... Pool Insurer................................................. Pooling and Servicing Agreement.............................. Preliminary Title Report..................................... Prepayment In Full........................................... Primary Mortgage Insurance................................... Primary Mortgage Insurer..................................... Prior Month Receipt Period................................... Property Inspection Report................................... Prospectus................................................... Prudent Servicing Practices.................................. PUD (Planned Unit Development)............................... PUD Unit..................................................... Purchase Price............................................... Rating Agency................................................ Real Estate Owned (REO)...................................... Realized Loss................................................ Recovery..................................................... Reference Bank............................................... Regulation AB................................................ Relevant Servicing Criteria.................................. REMIC........................................................ REMIC Provisions............................................. Remittance Date.............................................. Rents from Real Property..................................... REO Disposition.............................................. REO Disposition Period....................................... Reportable Event............................................. Representing Party........................................... Retained Mortgage Loan File.................................. SAIF......................................................... Sarbanes-Oxley Certification................................. Scheduled Principal Balance.................................. Securities Act............................................... Security Instrument.......................................... Servicer..................................................... Servicer Loan Mortgage Number................................ Servicer Mortgage Loan File.................................. Servicer Mortgage Loan Schedule.............................. Servicing Criteria........................................... Servicing Fee................................................ Servicing Fee Percentage..................................... Single Family Property....................................... Subcontractor................................................ Subservicer.................................................. Subsidy Funds................................................ Subsidy Loan................................................. Tangible Net Worth........................................... T&I Advance.................................................. Threshold Amount............................................. Title Insurance.............................................. Transfer of Ownership........................................ Trust........................................................ Trust Administrator.......................................... Trustee...................................................... Type 1 Mortgage Loans........................................ Type 2 Mortgage Loans........................................ Unpaid Principal Balance..................................... Unscheduled Principal Receipt................................ Value........................................................ Wells Fargo Bank............................................. ARTICLE 2 Construction Section 2.1 Legal Construction........................................... 2.1.1. Compliance with Applicable Law.............................. 2.1.2. Potential Conflict.......................................... 2.1.3. Consistent Legal Compliance................................. 2.1.4. General Interpretive Rules.................................. 2.1.5. Construction of Provisions.................................. Section 2.2 Servicer Practices........................................... 2.2.1. Prudent Servicing Practices................................. 2.2.2. Non-Discrimination Practices................................ Section 2.3 General Provisions........................................... 2.3.1. Servicer's Agreement........................................ 2.3.2. Term of Agreement........................................... 2.3.3. Amended Mortgage Loan Schedule.............................. 2.3.4. Assignment and Replacement.................................. 2.3.5. Notices..................................................... 2.3.6. Change of Accountants....................................... ARTICLE 3 REMIC Compliance Section 3.1 General...................................................... 3.1.1. Applicability................................................ 3.1.2. Modifications of Mortgage.................................... 3.1.3. Indemnification with Respect to Certain Taxes and Loss of REMIC Status........................................ Section 3.2 REO Qualification............................................ 3.2.1. Foreclosure Property........................................ 3.2.2. Foreclosure Property Qualification Restrictions............. 3.2.3. REO Disposition............................................. Section 3.3 Prohibited Transactions and Activities....................... 3.3.1. Mortgage Loan Disposition Restriction....................... 3.3.2. Personal Property........................................... Section 3.4 Eligible Investments......................................... 3.4.1. Custodial Account........................................... 3.4.2. Escrow Account.............................................. ARTICLE 4 Servicer Considerations Section 4.1 Servicer Eligibility Standards............................... 4.1.1. Regulatory Approvals and Licensing........................... 4.1.2. Net Worth and Portfolio Requirements......................... 4.1.3. Auditor's Opinion; Other Annual Reports and Exchange Act Reporting...................................... 4.1.4. Use of Subservicers and Subcontractors...................... 4.1.5. Servicing Experience........................................ 4.1.6. Material Changes............................................ Section 4.2 Errors and Omissions Insurance................................. 4.2.1. E & O Requirement........................................... 4.2.2. E & O Scope................................................. 4.2.3. E & O Policy Maintenance.................................... 4.2.4. E & O Deductible............................................ 4.2.5. E & O Qualifications........................................ Section 4.3 Fidelity Bond Coverage....................................... 4.3.1. Fidelity Bond Requirement................................... 4.3.2. Fidelity Bond Coverage...................................... 4.3.3. Fidelity Bond Scope......................................... 4.3.4. Fidelity Bond Maintenance................................... 4.3.5. Fidelity Bond Deductible.................................... 4.3.6. Fidelity Bond Rating Requirement............................ Section 4.4 Servicer's Liability......................................... 4.4.1. Liability Exposure.......................................... 4.4.2. Scope of Liability.......................................... Section 4.5 Indemnification.............................................. 4.5.1. Scope of Indemnity by Servicer.............................. 4.5.2. Survival of Indemnity....................................... Section 4.6 Servicer's Compensation; Indemnification..................... 4.6.1. Servicing Fee Amount........................................ 4.6.2. Servicing Fee Source........................................ 4.6.3. Indemnification of Servicer................................. ARTICLE 5 Representations and Warranties Section 5.1 General...................................................... 5.1.1. Reliance.................................................... 5.1.2. Survival of Representations and Warranties.................. 5.1.3. Breach of Representation or Warranty........................ 5.1.4. Assignment of Representations and Warranties................ Section 5.2 Servicer Representations and Warranties...................... 5.2.1. Qualification of Servicer................................... 5.2.2. Requisite................................................... 5.2.3. No Conflicts................................................ 5.2.4. Enforceable Agreement....................................... 5.2.5. No Consents................................................. 5.2.6. Agency Approval............................................. 5.2.7. Financial Condition......................................... 5.2.8. Servicing Practices......................................... 5.2.9. No Impairment............................................... 5.2.10. No Inquiries................................................ 5.2.11. No Performance Triggering Event............................. 5.2.12. No Termination.............................................. 5.2.13. No Material Noncompliance................................... 5.2.14. Servicing Policies and Procedures........................... 5.2.15. No Affiliations............................................. 5.2.16. Legal or Governmental Proceedings........................... 5.2.17. Custodial and Escrow Accounts Current....................... 5.2.18. Insurance Maintenance....................................... ARTICLE 6 Custodial Accounting Section 6.1 In General................................................... 6.1.1. Custodial Account Establishment............................. 6.1.2. Custodial Account Separateness.............................. 6.1.3. Custodial Account Maintenance............................... 6.1.4. Escrow Investment........................................... 6.1.5. Clearing Account............................................ 6.1.6. Custodial Buydown Account................................... 6.1.7. Certificate Account......................................... 6.1.8. Custodial Subsidy Account................................... Section 6.2 Custodial P&I Account........................................ 6.2.1. Mandatory Deposits.......................................... 6.2.2. Optional Deposits........................................... 6.2.3. Permissible Withdrawals..................................... 6.2.4. Account Beneficiary......................................... 6.2.5. Use of Accounts............................................. Section 6.3 Custodial T&I Account........................................ 6.3.1. Mandatory Deposits.......................................... 6.3.2. Permissible Withdrawals..................................... 6.3.3. Account Requirements........................................ 6.3.4. Account Balance............................................. Section 6.4 Eligible Account Investments................................. 6.4.1. Eligible Investments Permitted.............................. 6.4.2. Eligible Investment Restrictions............................ 6.4.3. Eligible Investment Income.................................. 6.4.4. Eligible Investment Losses.................................. 6.4.5. Eligible Investments Reports................................ 6.4.6. Inter-Company Uses of Funds................................. ARTICLE 7 Mortgage Loan Accounting Section 7.1 In General................................................... 7.1.1. Mortgage Loan Accounting Practices.......................... 7.1.2. Record Keeping.............................................. 7.1.3. Record Review............................................... Section 7.2 Mortgage Loan Records........................................ 7.2.1. Account Records............................................. 7.2.2. Account Record Information.................................. 7.2.3. Accounting Practice......................................... 7.2.4. Access to Certain Documentation and Information Regarding the Mortgage Loans................................ Section 7.3 Accounting Procedures........................................ 7.3.1. Principal and Interest Computation.......................... 7.3.2. Amortization Requirement.................................... 7.3.3. Negative Amortization....................................... 7.3.4. Interest Calculations....................................... 7.3.5. Buydown Loans............................................... Section 7.4 Application Procedure........................................ 7.4.1. Application Priority........................................ 7.4.2. [Reserved].................................................. 7.4.3. Advance Payments............................................ Section 7.5 Curtailments................................................. 7.5.1. Curtailment Amount.......................................... 7.5.2. Curtailment Application..................................... 7.5.3. Effect of Curtailment....................................... 7.5.4. Curtailment Transmission.................................... Section 7.6 Liquidations................................................. 7.6.1. Month End Interest.......................................... 7.6.2. Liquidation Reports......................................... 7.6.3. Deposit of Funds............................................ 7.6.4. Document Request............................................ Section 7.7 Realized Losses.............................................. 7.7.1. Liquidation Realized Loss Determination..................... 7.7.2. Bankruptcy Realized Loss Determination...................... 7.7.3. Reporting Requirement....................................... 7.7.4. Servicer's Liability........................................ ARTICLE 8 ARM Loans Section 8.1 ARM Loan Servicing........................................... 8.1.1. In General.................................................. 8.1.2. Servicer's Liability........................................ 8.1.3. Adjustment Reports.......................................... 8.1.4. Substitute Index............................................ Section 8.2 Notice of Periodic Adjustment................................ 8.2.1. Notice Requirement.......................................... 8.2.2. Notice Contents............................................. Section 8.3 ARM Loan Conversion.......................................... 8.3.1. Servicer's Determination.................................... 8.3.2. Conversion Notification..................................... 8.3.3. Purchase by Servicer........................................ ARTICLE 9 Mortgage Loan Files Section 9.1 Owner Mortgage Loan Files and Retained Mortgage Loan Files... 9.1.1. Owner Mortgage Loan File and Retained Mortgage Loan File Requirements...................................... 9.1.2. Custodian.................................................... 9.1.3. Release of Documents from Owner Mortgage Loan File or Retained Mortgage Loan File.............................. 9.1.4. Execution by Trustee........................................ 9.1.5. Representing Party Officers' Certificate.................... 9.1.6. Custodial Fees.............................................. Section 9.2 Servicer Mortgage Loan Files................................. 9.2.1. Servicer Mortgage Loan File Requirements.................... 9.2.2. Servicer Mortgage Loan File Access.......................... 9.2.3. Alternate Media............................................. Section 9.3 Requisite Form............................................... 9.3.1. Form of Endorsements........................................ 9.3.2. Form of Assignment.......................................... ARTICLE 10 Escrows Section 10.1 Escrow Criteria.............................................. 10.1.1. Escrow Requirement.......................................... 10.1.2. Mortgage Loans without Escrow............................... Section 10.2 Payment of Escrow Items...................................... 10.2.1. Escrow Payment Obligation................................... 10.2.2. Escrow Item Payments........................................ 10.2.3. Escrow Fund Insufficiency................................... 10.2.4. Nonpayment Notice........................................... Section 10.3 Escrow Fund Determination.................................... 10.3.1. Escrow Funds Analysis....................................... 10.3.2. Escrow Fund Surplus......................................... 10.3.3. Escrow Fund Deficiency...................................... Section 10.4 Records...................................................... 10.4.1. Escrow Funds Records........................................ 10.4.2. Escrow Obligations Records.................................. Section 10.5 Escrow Waiver................................................ 10.5.1. Waiver Conditions........................................... 10.5.2. Waiver Rescission........................................... ARTICLE 11 Collection and Servicing Practices Section 11.1 General Servicing Requirements............................... 11.1.1. Servicing Practices......................................... 11.1.2. Tax Returns and Other Reports............................... 11.1.3. Servicer Internal Controls.................................. 11.1.4. Pool Insurance Compliance................................... 11.1.5. Primary Mortgage Insurance Compliance....................... 11.1.6. Letter of Credit Compliance................................. Section 11.2 Delegation of Duties......................................... 11.2.1. Permissible Delegations..................................... 11.2.2. Delegee's Qualifications.................................... 11.2.3. Responsibility for Costs.................................... 11.2.4. Servicer's Liability........................................ Section 11.3 Due-on-Sale Clause Enforcement............................... 11.3.1. Enforcement Requirement..................................... 11.3.2. [Reserved................................................... 11.3.3. Approval Requirement........................................ 11.3.4. Exempt Transactions......................................... Section 11.4. Assumptions.................................................. 11.4.1. Assumption Requirements..................................... 11.4.2. Approval and Release........................................ 11.4.3. Assumption Agreement Provided to Custodian.................. 11.4.4. Assumption Fees............................................. 11.4.5. Disclosure Requirement...................................... Section 11.5 Partial Releases and Easements............................... 11.5.1. Prerequisites............................................... 11.5.2. Release or Modification of Lien............................. 11.5.3. Master Servicer's Approval.................................. Section 11.6 Recordation of Assignments................................... 11.6.1. Recordation Requirement..................................... 11.6.2. Extension of Recording Period............................... 11.6.3. Delivery Requirement........................................ 11.6.4. Waiver of Recordation....................................... Section 11.7 General Servicing Considerations............................. 11.7.1. Abandonment................................................. 11.7.2. Buydown Funds............................................... 11.7.3. Maintenance of Records...................................... 11.7.4. Eminent Domain.............................................. 11.7.5. Late Charges................................................ Section 11.8 Borrower Bankruptcy.......................................... 11.8.1. Servicer's Duty............................................. 11.8.2. Responsibility for Costs.................................... 11.8.3. Challenge Bankruptcy Reductions............................. 11.8.4. Bankruptcy Adjustments...................................... 11.8.5. Bankruptcy Plan Surveillance................................ ARTICLE 12 Delinquency Management Section 12.1 In General................................................... 12.1.1. Servicing Practices......................................... 12.1.2. Servicer's Capabilities..................................... 12.1.3. Servicing Objectives........................................ 12.1.4. Servicer's Expenses......................................... Section 12.2 Delinquency Servicing Procedures............................. 12.2.1. Late Notice................................................. 12.2.2. Telephonic Inquiry.......................................... 12.2.3. Notice of Default........................................... 12.2.4. Borrower Interview.......................................... 12.2.5. Continuing Contacts......................................... 12.2.6. Property Inspection......................................... Section 12.3 Relief of Borrowers.......................................... 12.3.1. Servicer's Role............................................. 12.3.2. Servicer's Discretion....................................... 12.3.3. Relief Requirement.......................................... 12.3.4. Primary Mortgage Insurance Considerations................... 12.3.5. Responsibility for Costs.................................... 12.3.6. Forbearance Plan............................................ 12.3.7. Accommodation Limitations................................... 12.3.8. Pool Insurance Considerations............................... Section 12.4 Special Delinquency Servicing Considerations................. 12.4.1. Advance Responsibility During Delinquency................... 12.4.2. Primary Mortgage Insurance Compliance....................... 12.4.3. Pool Insurance Compliance................................... ARTICLE 13 Foreclosure Administration Section 13.1 Foreclosure Prerequisites.................................... 13.1.1. Foreclosure/Alternative to Foreclosure Initiation........... 13.1.2. Foreclosure Expenses........................................ 13.1.3. Hazardous Wastes............................................ Section 13.2 Deed-in-Lieu of Foreclosure.................................. 13.2.1. Conditions.................................................. 13.2.2. Subsequent Actions.......................................... Section 13.3 Actions Prior to Foreclosure................................. 13.3.1. Notice Requirements.......................................... 13.3.2. Initiation of Proceedings.................................... 13.3.3. Short Sale of Defaulted Mortgage Loans in Lieu of Foreclosure................................................. Section 13.4 Foreclosure Procedures....................................... 13.4.1. Foreclosure Expenses........................................ 13.4.2. Bidding Instructions........................................ 13.4.3. Buydown Funds Use........................................... 13.4.4. Servicer's Responsibilities................................. 13.4.5. Conveyance Documents........................................ Section 13.5 Mortgage Loan Reinstatement.................................. 13.5.1. Borrower's Full Payment..................................... 13.5.2. Borrower's Partial Payment.................................. 13.5.3. Obligations upon Reinstatement.............................. 13.5.4. Certain Assumptions Permitted............................... ARTICLE 14 REO Administration Section 14.1 General Provisions........................................... 14.1.1. REO Action Plan............................................. Section 14.2 REO Servicing................................................ 14.2.1. REO Servicing Requirements.................................. 14.2.2. Servicer's Responsibilities................................. 14.2.3. [Reserved].................................................. Section 14.3 REO Records and Reports...................................... 14.3.1. Records Retention........................................... 14.3.2. Evidence of Title........................................... 14.3.3. REO Expenses................................................ 14.3.4. REO Documents............................................... Section 14.4 REO Marketing................................................ 14.4.1. REO Marketing Efforts....................................... 14.4.2. REO Sales................................................... 14.4.3. Primary Mortgage Insurance Considerations................... 14.4.4. Master Servicer Instructions................................ 14.4.5. Pool Insurance Considerations............................... Section 14.5 REO Rehabilitation........................................... 14.5.1. REO Rehabilitation Requirement.............................. 14.5.2. [Reserved].................................................. 14.5.3. Written Contractor Bids..................................... 14.5.4. Primary Mortgage Insurance Considerations................... Section 14.6 REO Administration Failure................................... 14.6.1. Servicer Removal............................................ 14.6.2. Servicer's Continuing Obligations........................... 14.6.3. Servicer's Duty to Compensate............................... ARTICLE 15 Insurance and Letter of Credit Section 15.1 General Provisions........................................... 15.1.1. Insurance Requirements...................................... 15.1.2. Uninsured Losses............................................ 15.1.3. Servicer's Obligation to Maintain Insurance................. 15.1.4. Insurance Notices........................................... 15.1.5. Default by Insurer.......................................... 15.1.6. Insurance Carrier Rating.................................... 15.1.7. Insurance Carrier Licenses.................................. 15.1.8. Risk Exposure............................................... 15.1.9. Evidence of Insurance....................................... Section 15.2 Primary Mortgage Insurance................................... 15.2.1. Primary Mortgage Insurance Requirement...................... 15.2.2. Primary Mortgage Insurance Coverage......................... 15.2.3. Primary Mortgage Insurer Downgrading........................ 15.2.4. Primary Mortgage Insurance Cancellation..................... 15.2.5. Primary Mortgage Insurance Claims........................... Section 15.3. Hazard Insurance............................................. 15.3.1. Hazard Insurance Requirement................................ 15.3.2. Hazard Insurance Coverage................................... 15.3.3. Hazard Insurance Deductible................................. 15.3.4. Hazard Insurance Vacancy Coverage........................... 15.3.5. Hazard Insurance Mortgagee Provisions....................... Section 15.4 Flood Insurance.............................................. 15.4.1. Flood Insurance Requirement................................. 15.4.2. Flood Insurance Coverage.................................... 15.4.3. Flood Insurance Deductible.................................. Section 15.5. Title Insurance.............................................. 15.5.1. Servicer's Obligations...................................... 15.5.2. Policy Custody.............................................. 15.5.3. Title Insurance Claims...................................... Section 15.6 Insurance Loss Settlements................................... 15.6.1. Settlement Approval......................................... 15.6.2. Settlement Disbursements.................................... 15.6.3. Settlement Funds............................................ 15.6.4. Settlement Notice........................................... 15.6.5. Continuing Coverage......................................... 15.6.6. Property Inspections........................................ Section 15.7 Letters of Credit............................................ 15.7.1. Letter of Credit Draws...................................... 15.7.2. Draws in the Event of Servicer Termination.................. ARTICLE 16 Condominium and PUD Insurance Section 16.1 General Provisions........................................... 16.1.1. Applicability............................................... 16.1.2. Premiums.................................................... 16.1.3. Deductible Reserves......................................... 16.1.4. Name of Insured............................................. 16.1.5. Mortgagee Clause............................................ 16.1.6. Reconstruction Coverage..................................... Section 16.2 Common Area Multiple Peril Insurance......................... 16.2.1. Common Area Multiple Peril Insurance Requirement............ 16.2.2. Common Area Multiple Peril Insurance Coverage............... 16.2.3. Common Area Multiple Peril Insurance Deductible............. 16.2.4. Boiler and Machinery Coverage............................... Section 16.3 Blanket Hazard Insurance..................................... 16.3.1. Blanket Hazard Insurance Requirement........................ 16.3.2. Blanket Hazard Insurance Coverage........................... 16.3.3. Blanket Hazard Insurance Deductible......................... Section 16.4 Common Area Comprehensive General Liability (CGL) Insurance.. 16.4.1. Common Area CGL Insurance Requirement....................... 16.4.2. Common Area CGL Insurance Coverage.......................... Section 16.5 Owners' Association Fidelity Insurance....................... 16.5.1. Owners' Association Fidelity Insurance Requirement.......... 16.5.2. Owners' Association Fidelity Insurance Coverage............. Section 16.6 Blanket Flood Insurance...................................... 16.6.1. Blanket Flood Insurance Requirement......................... 16.6.2. Blanket Flood Insurance Coverage............................ 16.6.3. Blanket Flood Insurance Deductible.......................... ARTICLE 17 Advances Section 17.1 Principal and Interest Advances.............................. 17.1.1. P&I Advance Requirement..................................... 17.1.2. P&I Advance Limitation...................................... 17.1.3. P&I Advance Recovery........................................ 17.1.4. Advance During Bankruptcy and Foreclosure................... Section 17.2 Foreclosure Advances......................................... 17.2.1. Foreclosure Advance Requirement............................. 17.2.2. Foreclosure Advance Limitation.............................. 17.2.3. Foreclosure Advance Recovery................................ 17.2.4. Foreclosure Advance Records................................. Section 17.3 Tax & Insurance Advances..................................... 17.3.1. T&I Advance Requirement..................................... 17.3.2. T&I Advance Recovery........................................ 17.3.3. T&I Advance Limitation...................................... 17.3.4. Advance During Bankruptcy and Foreclosure................... Section 17.4 Non-Recoverable Advances..................................... 17.4.1. Ordinary Recovery........................................... 17.4.2. Final Recovery.............................................. 17.4.3. Non-Recoverable Advance Determination....................... Section 17.5 Failure to Advance........................................... 17.5.1. Grounds for Termination..................................... 17.5.2. Servicer Reimbursement...................................... 17.5.3. Servicer Notification....................................... Section 17.6 Rehabilitation Advance....................................... 17.6.1. Rehabilitation Advance Requirement.......................... 17.6.2. Rehabilitation Advance Limitation........................... 17.6.3. Rehabilitation Advance Recovery............................. Section 17.7 PMI Advances................................................. 17.7.1. PMI Advance Option.......................................... 17.7.2. PMI Advance Recovery........................................ ARTICLE 18 Reporting Requirements Section 18.1 Monthly Accounting Reports................................... 18.1.1. Monthly Accounting Report Requirement....................... 18.1.2. Monthly Accounting Report Elements.......................... 18.1.3. Automated Reports........................................... 18.1.4. Electronic Reporting........................................ 18.1.5. Machine Readable Records.................................... Section 18.2 Account Reconciliations...................................... 18.2.1. Reconciliation Preparation.................................. 18.2.2. Account Records............................................. Section 18.3 Monthly Remittance Requirements.............................. 18.3.1. Remittance of Funds......................................... 18.3.2. Servicer Compensation....................................... ARTICLE 19 Transfers and Termination of Servicing Section 19.1 Transfer of Servicing........................................ 19.1.1. Transfer Prohibition........................................ 19.1.2. Transfer Request............................................ 19.1.3. Servicer Liability.......................................... 19.1.4. Master Servicer's Determination............................. Section 19.2 Termination of Servicing..................................... 19.2.1. Grounds for Termination..................................... 19.2.2. Trustee Notification........................................ 19.2.3. Servicer Termination........................................ 19.2.4. Consequences of Termination................................. 19.2.5. Effect of Termination....................................... 19.2.6. Custodial Account Threshold Reduction....................... 19.2.7. Expenses of Termination..................................... ARTICLE 20 Miscellaneous Provisions Section 20.1 Amendments................................................... 20.1.1. Unilateral Authority........................................ 20.1.2. Consensual Amendment........................................ 20.1.3. Trustee Notification........................................ 20.1.4. Trustee Disapproval......................................... Section 20.2 General Construction......................................... 20.2.1. Binding Nature.............................................. 20.2.2. Entire Agreement............................................ 20.2.3. Governing Law............................................... 20.2.4. Indulgences Not Waivers..................................... 20.2.5. Titles Not to Affect Interpretation......................... 20.2.6. Provisions Severable........................................ 20.2.7. Servicer an Independent Contractor.......................... 20.2.8. Third Party Beneficiary..................................... 20.2.9. Counterparts................................................ Section 20.3 Regulation AB Compliance; Intent of Parties; Reasonableness.. EXHIBIT A Wells Fargo & Company Master Guarantee Agreement Regarding Custodial P&I Account Funds EXHIBIT B Form of Annual Certification EXHIBIT C Subservicer Information This Servicing Agreement, made as of this [___]th day of [_____], 20 (the "Agreement"), between Wells Fargo Bank, N.A., a national banking association (the "Servicer") and Wells Fargo Bank, N.A., a national banking association, (the "Master Servicer"), recites and provides as follows: RECITALS WHEREAS, the Servicer is engaged in the business of servicing residential mortgage loans and the Servicer desires to be retained to service the Mortgage Loans identified on the Servicer Mortgage Loan Schedule subject to and in accordance with the terms of this Agreement; and WHEREAS, the Master Servicer, acting pursuant to the Pooling and Servicing Agreement related to the Wells Fargo Asset Securities Corporation, Mortgage Asset-Backed Pass-Through Certificates, Series 20 - , will supervise, monitor and oversee the performance of the Servicer under this Agreement. NOW THEREFORE, in consideration of the mutual promises, covenants, representations and warranties hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Servicer and the Master Servicer agree as follows: ARTICLE 1 Definitions Section 1.1 Definitions. ACH: Automated Clearing House. Additional Form 10-D Disclosure: As defined in the Pooling and Servicing Agreement. Additional Form 10-K Disclosure: As defined in the Pooling and Servicing Agreement. Adjusted Tangible Net Worth: As of the date of determination thereof, the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent (1%) of the amount of Servicer's servicing portfolio, as determined by the Master Servicer in the Master Servicer's reasonable discretion. Administration Disclosure: With respect to a Pledged Asset Mortgage Loan, the Pledged Asset Mortgage Loan Administration and Information Sharing Disclosure and Acknowledgment executed by the related Borrower. Advance: Any payment made with respect to a Mortgage Loan or the related Mortgaged Property by the Servicer from its own funds made in the nature of an advance pursuant to the provisions of this Agreement. Affiliate: Any person or entity controlling, controlled by or under common control with a specified entity. The term "control" means the power to direct the management and policies of a person or entity, directly or indirectly, whether through ownership of voting securities, by contract or otherwise. "controlling" and "controlled" shall have meanings correlative to the foregoing. Amounts Held for Future Distribution: As to any Remittance Date, amounts on account of (i) all Unscheduled Principal Receipts received after the last day of the Applicable Unscheduled Principal Receipt Period ending in the month of such Remittance Date and all related payments of interest on such principal prepayments and amounts received from the Servicer or a Representing Party in the month of such Remittance Date as the Purchase Price for any repurchased Mortgage Loan and (ii) payments which represent early receipt of scheduled payments of principal and interest due on a date or dates subsequent to the related Due Date. Applicable Unscheduled Principal Receipt Period: With respect to the Type 1 Mortgage Loans and both Full Unscheduled Principal Receipts and Partial Unscheduled Principal Receipts, the Mid-Month Receipt Period. With respect to the Type 2 Mortgage Loans and both Full Unscheduled Principal Receipts and Partial Unscheduled Principal Receipts, the Prior Month Receipt Period. Appraisal Report: A report setting forth the fair market value of a Mortgaged Property as determined by an appraiser who, at the time the appraisal was conducted, met the minimum qualifications of FNMA and FHLMC for appraisers of conventional residential mortgage loans. ARM Loan: A Mortgage Loan, if any, the Mortgage Interest Rate of which is subject to periodic adjustment in accordance with the terms of the related Mortgage Note. Assigned Letter of Credit: A Letter of Credit related to a Pledged Asset Mortgage Loan originated on or after June 14, 2002 where the named beneficiary has been changed from Wells Fargo Bank to the Trustee. Assignment: The document which transfers all the rights of the secured party pursuant to a Security Instrument to a transferee for valid consideration. Assumption: The process whereby, on sale or transfer of a legal or beneficial interest in a Mortgaged Property, the new owner of such Mortgaged Property becomes legally obligated under the terms of the related existing Security Instrument, Mortgage Note and any addenda and riders to such Security Instrument or Mortgage Note. Subsequent to the Assumption, the new owner of the property shall be deemed to be the Borrower under the related Mortgage Loan Documents. Balloon Amount: The remaining principal balance to be paid at maturity of a Balloon Loan by the related Borrower pursuant to the terms of the related Mortgage Note. Balloon Loan: A Mortgage Loan, if any, which amortizes its principal payments over a period which is longer than the stated maturity of such Mortgage Loan pursuant to the terms of the related Mortgage Note so as to require the payment of the Balloon Amount at maturity in order to retire the Mortgage Loan. Bankruptcy Code: The Bankruptcy Code of 1978, as amended. BIF: The Bank Insurance Fund. Borrower: The individual obligated to repay a Mortgage Loan. (The Borrower may be the beneficiary or beneficiaries of an Illinois land trust when the Mortgaged Property is located in Illinois.) Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a legal holiday in the City of New York, State of Maryland, State of Minnesota or State of Iowa or (iii) a day on which banking institutions in the City of New York, or the State of Maryland, State of Minnesota or State of Iowa are authorized or obligated by law or executive order to be closed. Buydown Agreement: An agreement governing the application of Buydown Funds with respect to a Mortgage Loan. Buydown Funds: Money advanced by a builder, seller or other interested party to reduce a Borrower's Monthly Payment during the initial years of a Mortgage Loan. Certificate Account: A segregated custodial account established by the Master Servicer into which the Servicer shall remit funds from the related Custodial P&I Account. Certificates: As defined in the Pooling and Servicing Agreement. Certificateholders: As defined in the Pooling and Servicing Agreement. Code: The Internal Revenue Code of 1986, as it may be amended from time to time, any successor statutes thereto, and applicable U.S. Department of the Treasury temporary or final regulations promulgated thereunder. Commission: The United States Securities and Exchange Commission. Condominium Project: Real estate including the separate ownership in fee, or on a satisfactory leasehold estate, of a particular residential unit with an indivisible interest in the real estate designated for common ownership strictly by unit owners. Condominium Unit: A Single Family Property within a Condominium Project. Converted Mortgage Loan: An ARM Loan with respect to which the Borrower has complied with the applicable requirements of the related Mortgage Note to convert the related Mortgage Interest Rate to a fixed rate of interest, and the Servicer has processed such conversion. Co-op Shares: Shares issued by private non-profit housing corporations. Current Value: The appraised value of the related Mortgaged Property (a) from an Appraisal Report conducted within six (6) months of the use of such value under this Agreement or (b) determined by such other method acceptable to the Master Servicer. Curtailment: A partial prepayment by the Borrower of principal on a Mortgage Loan that otherwise is current, which prepayment is not accompanied by an amount representing the full amount of scheduled interest due on the related Mortgage Loan. Custodial Agreement: As defined in the Pooling and Servicing Agreement. Custodial Buydown Account: An account maintained by the Servicer specifically to hold all Buydown Funds to be applied to individual Mortgage Loans. Custodial Principal and Interest (P&I) Account: An account maintained by the Servicer, specifically for the collection of principal and interest, Insurance Proceeds, Liquidation Proceeds and other amounts received with respect to Mortgage Loans. Custodial Subsidy Account: An account maintained by the Servicer specifically to hold all Subsidy Funds to be applied to individual Mortgage Loans. Custodial Taxes and Insurance (T&I) Account: An account maintained by the Servicer, specifically for the payment of real estate tax assessments and insurance premiums in respect of Mortgaged Property related to Mortgage Loans. Custodian: The Corporate Trust Services division of Wells Fargo Bank or its successor in interest under the Custodial Agreement. Cut-Off Date: As specified in Article XI of the Pooling and Servicing Agreement. 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 constituting a Deficient Valuation. Deficient Valuation: With respect to any Mortgage Loan the related Mortgaged Property of which is involved in a bankruptcy proceeding, the reduction by the bankruptcy court of the Unpaid Principal Balance of the Mortgage Note. Delinquency/Delinquent: A Delinquency with respect to a Mortgage Loan occurs, or a Mortgage Loan is Delinquent when all or part of a Borrower's Monthly Payment or, where applicable, an Escrow Item is paid after the applicable Due Date. For reporting purposes, a Delinquency that remains uncured for 30 days or more, but less than 60 days, is considered a 30-day Delinquency. A Delinquency that has been uncured for more than 60 days, but less than 90 days, is considered a 60-day Delinquency. A Delinquency that has been uncured for 90 days or more is considered a 90-day Delinquency. The foregoing shall be determined based on an assumption of a year comprised of twelve 30-day months. Depositor: Wells Fargo Asset Securities Corporation. Determination Date: The 17th day of the month in which the related Remittance Date occurs, or if such 17th day is not a Business Day, the Business Day preceding such 17th day. Directly Operate: With respect to any REO, the direct or indirect furnishing or rendering of services to the tenants thereof, management or operation of such REO, the holding of such REO primarily for sale to customers, performance of any construction work thereon or any use of such REO in a trade or business, in each case other than with the approval of the Master Servicer; provided, however, that the Servicer shall not be considered to Directly Operate an REO solely because it establishes rental terms, chooses tenants, enters into or renews leases, deals with taxes and insurance, or makes decisions as to repairs or capital expenditures with respect to such REO. Distribution Date: As defined in the Pooling and Servicing Agreement. Document Transfer Date: As defined in the Pooling and Servicing Agreement. Document Transfer Event: As defined in the Pooling and Servicing Agreement. Due Date: With respect to a Mortgage Loan, the day of each month on which a Monthly Payment and, where applicable, any Escrow Funds payment is due as stated in the related Mortgage Note. The Due Date for all Mortgage Loans shall be the first day of each month. Due-On-Sale Clause: The clause in a Security Instrument requiring the payment of the Unpaid Principal Balance of the related Mortgage Loan upon the sale of, or the transfer of an interest in, the related Mortgaged Property. Eligible Account: As defined in the Pooling and Servicing Agreement. Eligible Custodial P&I Account: As defined in Section 6.1.2. Eligible Investments: As defined in the Pooling and Servicing Agreement. Errors and Omissions Policy: An insurance policy naming the Trustee, its successors and assigns as loss payees relative to losses caused by errors or omissions of the Servicer and its personnel, including, but not limited to losses caused by the failure to pay insurance premiums or taxes, to record or perfect liens, to effect valid transfers of Mortgage Notes, or to properly service Mortgage Loans. Escrow Funds: All funds collected with respect to a Mortgage Loan by the Servicer to cover related Escrow Items according to the provisions of this Agreement. Escrow Item: An expense required to be paid by a Borrower under the related Security Instrument including, without limitation, taxes, special assessments, ground rents, water, sewer and other governmental impositions or charges that are or may become liens on the related Mortgaged Property prior to that of the related Security Instrument, as well as Hazard Insurance, Flood Insurance and Primary Mortgage Insurance premiums. Exchange Act: The Securities Exchange Act of 1934, as amended. FDIC: Federal Deposit Insurance Corporation and its successors. FHA: The Federal Housing Administration and its successors. FHLMC: Federal Home Loan Mortgage Corporation and its successors. Fidelity Bond: An insurance policy naming the Trustee, its successors and assigns as loss payees relative to losses caused by improper or unlawful acts of the Servicer's personnel. Final Title Condition Report. A title condition report issued by American Land Title Company, Inc., a wholly-owned subsidiary of the Servicer, evidencing that according to the records of the county in which the Mortgaged Property is located, the Security Instrument is a valid first lien on the related Mortgaged Property subject only to permitted encumbrances. Flood Insurance: An insurance policy insuring against flood damage to a Mortgaged Property, where required. FNMA: Federal National Mortgage Association and its successors. Form 8-K: As defined in the Pooling and Servicing Agreement. Form 8-K Disclosure Information: As defined in the Pooling and Servicing Agreement. Form 10-D: As defined in the Pooling and Servicing Agreement. Form 10-K: As defined in the Pooling and Servicing Agreement. Full Unscheduled Principal Receipt: Any Unscheduled Principal Receipt with respect to a Mortgage Loan (i) in the amount of the outstanding principal balance of such Mortgage Loan and resulting in the full satisfaction of such Mortgage Loan or (ii) representing Liquidation Proceeds other than Partial Liquidation Proceeds. GNMA: Government National Mortgage Association and its successors. GPM (or GPARM) Loan: A fixed rate Mortgage Loan or ARM Loan, if any, that provides during a portion of its term that the interest portion of the Monthly Payment on such Mortgage Loan shall be less than the full amount of interest due on such Mortgage Loan based on the related Mortgage Interest Rate. Gross Margin: With respect to each ARM Loan, the fixed percentage specified in the related Mortgage Note that is added to the applicable Index on each Interest Adjustment Date to determine the new Mortgage Interest Rate for such ARM Loan. Hazard Insurance: A fire and casualty extended coverage insurance policy insuring against loss or damage from fire and other perils covered within the scope of standard extended hazard coverage naming the Servicer, its successors and assigns, as a mortgagee under a standard mortgagee clause, together with all riders and endorsements thereto. HUD: The United States Department of Housing and Urban Development and its successors. Index: With respect to each ARM Loan, the applicable index specified in the related Mortgage Note that is added to the related Gross Margin on each Interest Adjustment Date to determine the new Mortgage Interest Rate for such ARM Loan. Insurance Policy: Any insurance policy for a Mortgage Loan required hereunder, including, without limitation, Primary Mortgage Insurance, Hazard Insurance, Flood Insurance, Pool Insurance and Title Insurance policies. Insurance Proceeds: Proceeds from an Insurance Policy, other than such proceeds which are applied by the Borrower or held to be applied by the Borrower to the restoration of the related Mortgaged Property. Interest Adjustment Date: With respect to each ARM Loan, the date on which the related Mortgage Interest Rate changes in accordance with the terms of such Mortgage Note, the first of which is set forth in such Mortgage Note and on the respective Servicer Mortgage Loan Schedule. Letter of Credit: With respect to a Pledged Asset Mortgage Loan, a letter of credit issued by the Pledge Holder which may be drawn on by the Servicer in the event that the related Pledged Asset Mortgage Loan continues in default for 90 days. Liquidation: Application of full payment to a Mortgage Loan which results in the release of the lien of the related Security Instrument on any related Mortgaged Property, whether through foreclosure and sale of the related REO, condemnation, prepayment in full or otherwise, or the realization of all sums from the final disposition of the related REO, provided that when a PMI Advance is made with respect to a Mortgage Loan, for purposes of Sections 7.6, 7.7, 18.1 and 18.3, the Liquidation of a Mortgage Loan will be deemed to have occurred upon the application of all payments to the Mortgage Loan other than the Primary Mortgage Insurance proceeds covered by such PMI Advance. Liquidation Proceeds: The amount received or advanced by the Servicer which ultimately relates to the Liquidation of a Mortgage Loan, including any PMI Advances and amounts received by drawing on a Letter of Credit in connection with the Liquidation of a Mortgage Loan. Liquidation Profits: As defined in the Pooling and Servicing Agreement. Loan Originator: The entity that closes a Mortgage Loan in its own name. Loan-to-Value (LTV): The ratio that results when the Unpaid Principal Balance of a Mortgage Loan is divided by the Value of the related Mortgaged Property. Lost Note Affidavit: An affidavit executed by an Officer of the Servicer identifying the applicable Mortgage Note, stating that such Mortgage Note has not been located after a thorough and diligent search and agreeing to indemnify the purchaser of the Mortgage Loan against any loss from the unavailability of the original Mortgage Note. Attached to such affidavit shall be a true and correct copy of the original Mortgage Note. Master Servicer: Wells Fargo Bank or any successors or assigns. Initially, the maser servicing function will be performed by the Corporate Trust Services division of Wells Fargo Bank. Master Servicer Loan Number: A unique number assigned by the Master Servicer to each Mortgage Loan set forth in the Servicer Mortgage Loan Schedule. Maximum Lifetime Mortgage Interest Rate: With respect to each ARM (or GPARM) Loan, the interest rate set forth in the related Mortgage Note as the maximum Mortgage Interest Rate thereunder. Maximum Negative Amortization Amount: With respect to any Mortgage Loan that provides for negative amortization, the maximum principal balance which is permitted under the terms of the related Mortgage Note. MERS: Mortgage Electronic Registration Systems, Inc. or its designee. Mid-Month Receipt Period: With respect to each Remittance Date, the one month period beginning on the Determination Date occurring in the calendar month preceding the month in which such Remittance Date occurs and ending on the day preceding the Determination Date immediately preceding such Remittance Date. Minimum Lifetime Mortgage Interest Rate: With respect to each ARM Loan, the interest rate set forth in the related Mortgage Note as the minimum Mortgage Interest Rate thereunder, if any. Month End Interest: In the event that any Prepayments in Full of any Mortgage Loans are received by the Servicer after the Applicable Unscheduled Principal Receipt Period in the month in which such prepayments occurred, the lesser of (i) the aggregate of the difference for each such Mortgage Loan between the interest payment that would have been paid on such Mortgage Loan that was prepaid through the last day of the month in which such prepayment occurred and the interest payment actually received by the Servicer on such Mortgage Loan that was prepaid and (ii) the product of 1/12th of 0.20% and the aggregate of the Scheduled Principal Balance of all the Mortgage Loans serviced hereunder. Month End Interest Shortfall: The excess of the amount described in clause (i) of the definition of Month End Interest over the amount described in clause (ii) of the definition thereof. Monthly Accounting Reports: The reports due from the Servicer on a monthly basis (in the case of Type 2 Mortgage Loans, due no later than the tenth calendar day of the month, or the preceding Business Day if the tenth day is not a Business Day and, in the case of Type 1 Mortgage Loans, due no later than the 18th calendar day of the month, or the preceding Business Day if the 18th day is not a Business Day) relative to all Mortgage Loans serviced by the Servicer, which reports are required to be submitted to the Master Servicer. Monthly Payment: With respect to any Mortgage Loan, the scheduled monthly payment of principal and interest due in the applicable month under the terms of the related Mortgage Note. Monthly Remittance: The Servicer's aggregate payment due each month to the Certificate Account as specified in Section 18.3.1. Mortgage Interest Rate: The interest rate payable by the Borrower on a Mortgage Loan according to the terms of the Mortgage Note which, in the case of ARM Loans, may be adjusted periodically as provided in such Mortgage Note. Mortgage Loan: A mortgage loan identified on the Servicer Mortgage Loan Schedule. "Mortgage Loan" includes all of the Trustee's right, title and interest in and to such Mortgage Loan, including, without limitation, the related Mortgage Loan Documents and all other material and information collected by the Servicer in connection with the Mortgage Loan including Monthly Payments, Liquidation Proceeds, Insurance Proceeds and all other rights, benefits and proceeds arising from or in connection with such Mortgage Loan. Mortgage Loan Documents. With respect to a Mortgage Loan, the documents to be delivered to the Custodian pursuant to Section 2.01 of the Pooling and Servicing Agreement, and all other documents described in Article 9 hereof. Mortgage Loan Purchase Agreement: As defined in the Pooling and Servicing Agreement. Mortgage Note: A manually executed written instrument evidencing the related Borrower's promise to repay a stated sum of money, plus interest, to the related Loan Originator by a specific date according to a schedule of monthly principal and interest payments. Mortgage Note Assumption Rider: A rider attached to a Mortgage Note which states the terms upon which an Assumption may occur, including, but not limited to, consent in writing by the insurer under any Primary Mortgage Insurance Policy with respect to the related Mortgage Loan. Mortgage Asset-Backed Pass-Through Certificates: The specific series of Wells Fargo Asset Securities Corporation, mortgage asset-backed pass-through certificates specified on page 1 of this Agreement. Mortgaged Property: Land, improvements thereon and other property subject to the lien of a Security Instrument, which may include Co-op Shares or residential long-term leases, securing repayment of the debt evidenced by the related Mortgage Note. Mortgagee: The secured party to which a Security Instrument initially grants a lien on the related Mortgaged Property. Net Mortgage Interest Rate: With respect to a Mortgage Loan, the difference between (a) the Mortgage Interest Rate on such Mortgage Loan and (b) the Servicing Fee Percentage. Non-Assigned Letter of Credit: A Letter of Credit where the named beneficiary is Wells Fargo Bank. Non-Recoverable Advance: Any amount previously advanced by the Servicer with respect to a Mortgage Loan which the Servicer has determined, pursuant to the terms of this Agreement, not to be recoverable from Insurance Proceeds, Liquidation Proceeds or other payments with respect to such Mortgage Loan. Notice of Periodic Adjustment: With respect to each ARM Loan, a notice provided to the Borrower of any changes or adjustments to the related Mortgage Interest Rate or the related Monthly Payment. Officer: An officer of a corporation or a principal of a partnership, who is authorized to execute documents on behalf of his corporation or partnership, respectively. Opinion of Counsel: A written opinion of counsel, reasonably acceptable in form and substance to the Master Servicer, and who may be in-house or outside counsel to the Servicer but which must be Independent outside counsel with respect to any such opinion of counsel concerning the taxation, or status for tax purposes, of the Trustee. Owner Mortgage Loan File: With respect to each Mortgage Loan, a file maintained by the Custodian for such Mortgage Loan, which file contains the documents specified in Section 2.01(a) of the Pooling and Servicing Agreement, as well as any other documents required to be added to the Owner Mortgage Loan File pursuant to the Pooling and Servicing Agreement. P&I Advance: An advance by the Servicer of any principal and interest payments not timely paid by the related Borrower (other than with respect to a Balloon Loan, any amounts of principal payments in respect of Balloon Amounts) to ensure that there are sufficient funds to cover the Monthly Remittance on each Remittance Date. Partial Liquidation Proceeds: As to any Remittance Date, Liquidation Proceeds received by the Servicer on a Mortgage Loan during the related Partial Liquidation Receipt Period other than those Liquidation Proceeds received during such Partial Liquidation Receipt Period which result from the complete and final Liquidation of such Mortgage Loan. Partial Liquidation Receipt Period: As to any Remittance Date, the period from and including the Determination Date occurring in the month preceding the month of such Remittance Date (or, in the case of the first Remittance Date, from and including the Cut-off Date) to but not including the Determination Date occurring in the month of such Remittance Date. Partial Unscheduled Principal Receipt: An Unscheduled Principal Receipt which is not a Full Unscheduled Principal Receipt. Payment Adjustment Date: With respect to each ARM Loan, the date on which the Borrower's Monthly Payment changes in accordance with the terms of the related Mortgage Note. Periodic Payment Cap: With respect to an ARM Loan, the limit on the percentage increase that may be made on the related Monthly Payment on any Payment Adjustment Date, as set forth in the related Mortgage Note. Periodic Rate Cap: With respect to an ARM Loan, the limit, expressed as incremental percentage points, on the increase or decrease that may be made to the related Mortgage Interest Rate on any Interest Adjustment Date from such Mortgage Interest Rate immediately prior to such Interest Adjustment Date, as set forth in the related Mortgage Note. Person: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust or unincorporated organization. Pledge Holder: The entity which issued a Letter of Credit. Pledged Asset Mortgage Loan : A Mortgage Loan as to which, at the time of origination, a Letter of Credit was issued in favor of the initial holder of such Mortgage Loan. PMI Advance: As defined in Section 17.7.1. Pool Insurance: An insurance policy insuring against certain credit risk losses on certain Mortgage Loans up to a certain amount. Pool Insurer: With respect to any Mortgage Loan, the insurer under the Pool Insurance policy relating to such Mortgage Loan. Pooling and Servicing Agreement: The pooling and servicing agreement among Wells Fargo Asset Securities Corporation, as depositor, Wells Fargo Bank, N.A., as master servicer, the Trustee, and, if applicable, the Trust Administrator, relating to the issuance of the Mortgage Asset-Backed Pass-Through Certificates. Preliminary Title Report: A report issued by a title insurance company in anticipation of issuing a Title Insurance policy which evidences existing liens and gives a preliminary opinion as to the absence of any encumbrance on title to a Mortgaged Property, except liens to be removed on or before purchase or refinance, as the case may be, by the Borrower and Permitted Encumbrances. Prepayment In Full: With respect to any Mortgage Loan, any payment by the Borrower in the amount of the outstanding principal balance of such Mortgage Loan which is received in advance of its Due Date and is not accompanied by an amount representing scheduled interest for any period subsequent to the date of prepayment. Primary Mortgage Insurance: Insurance obtained from a Primary Mortgage Insurer which insures the holder of a Mortgage Note against loss in the event the related Borrower defaults under such Mortgage Note or the related Security Instrument, including all riders and endorsements thereto. Primary Mortgage Insurer: With respect to any Mortgage Loan, the insurer under the Primary Mortgage Insurance policy relating to such Mortgage Loan. Prior Month Receipt Period: With respect to each Remittance Date, the calendar month preceding the month in which such Remittance Date occurs. Property Inspection Report: A report, submitted by the Servicer to the Master Servicer, describing the related Mortgaged Property. Prospectus: As defined in the Pooling and Servicing Agreement. Prudent Servicing Practices: Such practices observed generally by servicers in discharging their servicing obligations in a prudent manner in accordance with industry standards for mortgage loans similar to the Mortgage Loans. PUD (Planned Unit Development): A parcel of real estate that contains property and improvements owned and maintained by a homeowners' association, corporation or trust for the enjoyment and use of individual PUD Unit owners within that parcel of land. The shared portions of the parcel are known as common property. PUD Unit: A single family residential property within a PUD. Purchase Price: With respect to any Mortgage Loan required to be purchased by the Servicer pursuant to Section 5.1.3 or Section 8.3.3 hereof, an amount equal to (a) the Unpaid Principal Balance of the Mortgage Loan, plus (b) accrued interest thereon at the Mortgage Interest Rate through the last day of the month in which the purchase occurs, and, if the Servicer is the entity paying the Purchase Price, minus (c) any unreimbursed advances of principal and interest made by the Servicer on such Mortgage Loan and any outstanding Servicing Fee owed with respect to such Mortgage Loan. Further, in connection with any such purchase of a Mortgage Loan as a result of a breach of a representation or warranty under this Agreement, the Servicer shall provide the Trustee with an indemnity, in form and substance satisfactory to the Master Servicer, against additional costs, expenses and taxes arising out of the repurchase. With respect to any Mortgage Loan purchased or repurchased from the Trustee pursuant to an agreement other than this Agreement, the purchase price specified in such other agreement. Rating Agency: As defined in the Pooling and Servicing Agreement. Real Estate Owned (REO): Any Mortgaged Property the title to which is acquired on behalf of the Trustee through foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation from bankruptcy in connection with a defaulted Mortgage Loan. Realized Loss: As to any defaulted Mortgage Loan, any loss realized by the Trustee of such Mortgage Loan as calculated pursuant to Section 7.7 hereof. Recovery : As defined in the Pooling and Servicing Agreement. Reference Bank: Wells Fargo Bank, N.A. or if such entity is no longer lending money or no longer quoting a prime rate, such other entity as the Master Servicer may specify by written notice to the Servicer. 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. Relevant Servicing Criteria: The Servicing Criteria applicable to the Servicer, as set forth on Exhibit R to the Pooling and Servicing Agreement. For clarification purposes, multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Subcontractor or Subservicer engaged by the Servicer, the term "Relevant Servicing Criteria" refers to the portion of the Relevant Servicing Criteria applicable to the Servicer insofar as the functions required to be performed by the Servicer are to be performed by the Subcontractor or Subservicer, as applicable. REMIC: The segregated pool or pools of assets designated as one or more real estate mortgage investment conduits, within the meaning of the REMIC Provisions, pursuant to the Pooling and Servicing Agreement. REMIC Provisions: The provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Sections 860A through 860G of the Code, and related provisions, and regulations and rulings promulgated thereunder, as the foregoing may be in effect from time to time and including any proposed legislation or regulations which, as proposed, would have an effective date prior to enactment thereof. Remittance Date: The 24th day of each month (or the preceding Business Day if the 24th day is not a Business Day). Each month, the Servicer must transfer all required funds from the Custodial P&I Account to the Certificate Account on or before the Remittance Date. Rents from Real Property: With respect to any REO, gross income of the character described in Section 856(d) of the Code (generally, rent for the use of real property, the amount of which is not dependent, in whole or in part, upon the income or profit of any person, including certain payments for certain services and personal property incidental to and customarily provided in connection with the rental of such real property.) REO Disposition: The receipt by the Servicer of Liquidation Proceeds and other payments and recoveries (including proceeds of a final sale) from the sale or other disposition of the REO. REO Disposition Period: The period of time in which the Servicer shall dispose or cooperate with the Trustee in disposing of an REO as set forth in Section 14.4.2. Reportable Event: As defined in the Pooling and Servicing Agreement. Representing Party: A Person that has transferred Mortgage Loans, directly or through one or more intermediaries, to the Trustee pursuant to an agreement for the sale of Mortgage Loans pursuant to which a Representing Party has made representations and warranties with respect to certain Mortgage Loans, and under which the Trustee, its successors and assigns has recourse against such Representing Party for any breach thereunder with respect to such Mortgage Loans. Retained Mortgage Loan File: A file for each Mortgage Loan maintained by the Servicer prior to any Document Transfer Date and by the Custodian after any Document Transfer Date that contains the documents specified in Section 2.01(b) of the Pooling and Servicing Agreement and any additional documents required to be added to the Retained Mortgage Loan File pursuant to the Pooling and Servicing Agreement. SAIF: The Savings Association Insurance Fund. Sarbanes-Oxley Certification: As defined in the Pooling and Servicing Agreement. Scheduled Principal Balance: With respect to each Mortgage Loan (or related REO), the principal balance of such Mortgage Loan as of the applicable Due Date calculated by taking into account the application of any Monthly Payments due on or before such Due Date (whether or not such Monthly Payments were received from the Borrower), and Curtailments, Insurance Proceeds or Liquidation Proceeds, and Realized Losses received or realized by the Servicer prior to such Due Date. Securities Act: The Securities Act of 1933, as amended. Security Instrument: A written instrument creating a valid first lien on a Mortgaged Property. A Security Instrument may be in the form of a mortgage, deed of trust, deed to secure debt or security deed, including any riders and addenda thereto. Servicer: Wells Fargo Bank, the entity that has entered into this Agreement with the Master Servicer and any successors or assigns of Wells Fargo Bank. Initially the servicing functions will be performed by the Wells Fargo Home Mortgage division of Wells Fargo Bank. Servicer Loan Mortgage Number: A unique number assigned by the Servicer to a Mortgage Loan. Servicer Mortgage Loan File: A file maintained by the Servicer for each Mortgage Loan that contains the documents specified in Section 9.2 hereof, as well as any other documents that come into the Servicer's possession with respect to a Mortgage Loan. Servicer Mortgage Loan Schedule: The Mortgage Loans on the Mortgage Loan Schedule (as defined in the Pooling and Servicing Agreement) that are serviced by the Servicer. 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: For each Mortgage Loan, the compensation due the Servicer in an amount equal to the product of (i) one-twelfth of the Servicing Fee Percentage and (ii) the Scheduled Principal Balance of the Mortgage Loan as of the immediately preceding Due Date (without taking into account any payment of principal due on such Due Date). Servicing Fee Percentage: With respect to each Mortgage Loan, the percentage specified on the Servicer Mortgage Loan Schedule. Single Family Property: A one-unit residential property. Subcontractor: Any vendor, subcontractor or other Person that is not responsible for the overall servicing (as "servicing" is commonly understood by participants in the mortgage-backed securities market) of the Mortgage Loans but performs one or more discrete functions identified in Item 1122(d) of Regulation AB with respect to the Mortgage Loans under the direction or authority of the Servicer or a Subservicer. Subservicer: Any Person that services the Mortgage Loans on behalf of the Servicer or any Subservicer and 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 by the Servicer under this Agreement that are identified in Item 1122(d) of Regulation AB. Subsidy Funds: Funds contributed by the employer of a Borrower in order to reduce the payments required from the Borrower for a specified period in specified amounts. Subsidy Loan: A Mortgage Loan, if any, subject to a temporary interest subsidy agreement pursuant to which the monthly interest payments made by the related Borrower will be less than the scheduled monthly interest payments on such Mortgage Loan, with the resulting difference in interest payments being provided by the employer of the Borrower. Tangible Net Worth: As of the date of determination thereof, the par value (or value stated on the Servicer's books) of the capital stock of all classes of the Servicer, plus, or minus in the case of a deficiency, the amount of paid in capital and retained earnings of the Servicer, all determined in accordance with generally accepted accounting principles as are then in effect. The Master Servicer may exclude assets that are unacceptable, in the Master Servicer's reasonable discretion, from the determination of the Servicer's Tangible Net Worth. T&I Advance: An advance by the Servicer of any taxes and insurance premiums due with respect to any Mortgage Loan. Threshold Amount: With respect to any Custodial P&I Account, (i) $100,000 or, in the case of any Eligible Custodial P&I Account, the aggregate amount on deposit therein (i.e., an unlimited amount); or (ii) after any notice has been given pursuant to Section 19.2.6, the amount specified in such notice. Title Insurance: An American Land Title Association (ALTA) mortgage loan title policy form 1970, or other form of Title Insurance Policy acceptable to FNMA or FHLMC, including all riders and endorsements thereto, insuring that the Security Instrument constitutes a valid first lien on the related Mortgaged Property subject only to permitted encumbrances. Transfer of Ownership: Includes, but is not limited to, the conveyance of a Mortgaged Property, whether legal or equitable, voluntary or involuntary, by any of the following methods: (a) outright sale; (b) deed; (c) installment sale contract; (d) land contract; (e) contract for deed; (f) leasehold interest with the term greater than three years; (g) lease with option to purchase; (h) land trust; or (i) any other conveyance of an interest in real property, including those involving secondary financing. Trust : The trust created by the Pooling and Servicing Agreement. Trust Administrator: If applicable, the trust administrator specified in the Pooling and Servicing Agreement, its successors and assigns. Trustee: The trustee specified in the Pooling and Servicing Agreement, its successors and assigns. Type 1 Mortgage Loans: The Mortgage Loans identified on the Mortgage Loan Schedule as Type 1 Mortgage Loans. Type 2 Mortgage Loans: The Mortgage Loans identified on the Mortgage Loan Schedule as Type 2 Mortgage Loans. Unpaid Principal Balance: With respect to any Mortgage Loan, the outstanding principal balance payable by the Borrower under the terms of the Mortgage Note. Unscheduled Principal Receipt: Any Mortgagor payment or other recovery of principal on a Mortgage Loan which is received in advance of its Due Date and is not accompanied by an amount representing scheduled interest for any period subsequent to the date of prepayment, including, without limitation, prepayments of principal (whether full or partial), Liquidation Proceeds, Partial Liquidation Proceeds, Insurance Proceeds, proceeds of REO Dispositions, Recoveries and proceeds received from any condemnation award or proceeds in lieu of condemnation other than that portion of such proceeds released to the mortgagor in accordance with the terms of the Mortgage Loan Documents or Prudent Servicing Practices and excluding any proceeds of a repurchase of a Mortgage Loan by the Servicer or a Representing Party. Value: The lesser of the appraised value or sales price of the related Mortgaged Property at the time the Mortgage Loan is closed. For a refinanced Mortgage Loan, the Value of the related Mortgaged Property is its appraised value at the time the refinanced Mortgage Loan is closed. Wells Fargo Bank: Wells Fargo Bank, N.A., or its successor in interest. ARTICLE 2 Construction Section 2.1 Legal Construction 2.1.1. Compliance with Applicable Law. The obligations of the Servicer pursuant to this Agreement shall at all times be performed in compliance with all applicable laws. 2.1.2. Potential Conflict. If any obligation of the Servicer pursuant to this Agreement shall give rise to a potential conflict with applicable law, such obligation shall be construed so as to (a) comply with all applicable laws and (b) effectuate with respect to such obligations, to the fullest extent permitted by law, the intention of the parties hereto as expressed in this Agreement. 2.1.3. Consistent Legal Compliance. The fact that certain provisions of this Agreement contain language which expressly requires compliance with all applicable laws, shall not give rise to an implication that other provisions, which do not expressly include such language, operate in derogation of the requirement for such legal compliance. 2.1.4. General Interpretive Rules. For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender; (ii) reference herein to "Article", "Section", "Clause", and other subdivisions, and to "Exhibits", without reference to a document, are to designated Articles, Sections, Clauses and other subdivisions of, and to Exhibits to, this Agreement; (iii) reference to a Clause without further reference to a Section is a reference to such Clause as contained in the same Section in which the reference appears, and this rule shall also apply to other subdivisions; (iv) "including" means "including but not limited to"; and (v) the words "herein", "hereof", "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular provision. 2.1.5. Construction of Provisions. Although certain provisions of this Agreement contain express language which precludes the Servicer's recovery of, or reimbursement for, expenses incurred hereunder, no inference to the contrary shall be drawn from absence of such, or similar, language in any other provision hereof regarding expenses. Section 2.2 Servicer Practices 2.2.1. Prudent Servicing Practices. Where not inconsistent with the provisions of this Agreement, the Servicer shall at all times perform its obligations hereunder in accordance with Prudent Servicing Practices, which shall not be less exacting than the Servicer employs and exercises in servicing and administering mortgage loans for its own account, or for the account of FNMA or FHLMC, including exploring alternatives to foreclosure to mitigate Realized Losses. 2.2.2. Non-Discrimination Practices. The Servicer shall at all times perform its obligations under this Agreement so as to (a) treat Borrowers on the basis of their individual merits and (b) not discriminate against Borrowers on the basis of their race, creed or national origin. Section 2.3 General Provisions 2.3.1. Servicer's Agreement. The Servicer agrees with the Master Servicer to service the Mortgage Loans in accordance with the provisions of this Agreement and, to the extent of any instructions of the Master Servicer that are given, such instructions and, subject to the provisions hereof and without any further instruction by the Master Servicer except as shall be expressly provided for herein, shall have full power and authority to do all things necessary in connection therewith. 2.3.2. Term of Agreement. Except as otherwise provided herein, the duties, responsibilities and obligations to be performed and carried out by the Servicer under this Agreement shall commence upon the execution of this Agreement and shall continue until (a) each Mortgage Loan is (i) liquidated or (ii) otherwise paid in full, (b) all payments related thereto are remitted in accordance with this Agreement, and (c) all obligations hereunder related thereto are discharged. 2.3.3. Amended Mortgage Loan Schedule. From time to time as additional Mortgage Loans are transferred to be serviced hereunder by the Servicer, the Servicer Mortgage Loan Schedule shall be amended by the Master Servicer to include the new Mortgage Loans. Due to defects in documentation and for other reasons, certain Mortgage Loans referred to in the Servicer Mortgage Loan Schedule may be deleted and other Mortgage Loans may be added. The Servicer hereby agrees to any such addition and/or deletion of any Mortgage Loans and, in the event any Mortgage Loans are added and/or deleted from the Servicer Mortgage Loan Schedule, the Servicer authorizes the Master Servicer to amend the Servicer Mortgage Loan Schedule. The Master Servicer shall provide the Servicer with the corrected and updated Servicer Mortgage Loan Schedule. 2.3.4. Assignment and Replacement. The Servicer acknowledges and agrees that in the event that the Master Servicer resigns as Master Servicer under this Agreement, any successor master servicer has the right to assume the Master Servicer's rights and obligations and to enforce the Servicer's obligations under this Agreement. 2.3.5. Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received upon actual receipt of registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below: (a) if to the Master Servicer: Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, Maryland 21045 Attention: Director of Master Servicing (b) if to the Servicer: Wells Fargo Bank, N.A. 7001 Westown Parkway West Des Moines, Iowa 50266 Attention: Senior Vice President, Servicing (c) if to the Custodian: Wells Fargo Bank, N.A. 1015 10th Avenue South East Minneapolis, Minnesota 55414 Attention: Bradley Johnson, Assistant Vice President (d) if to the Trustee: [ ] [ ] [ ] (e) if to the Depositor: 7430 New Technology Way Frederick, Maryland 21703 Attention: Structured Finance Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. 2.3.6. Change of Accountants. During the term of this Agreement, the Servicer shall not change, or make any substitution of, its certified public accountants except upon written notice to the Master Servicer given 30 days prior to such change or substitution. ARTICLE 3 REMIC Compliance Section 3.1 General 3.1.1. Applicability. The provisions of this Article 3 apply to all the Mortgage Loans or Mortgaged Property unless the Mortgage Loan has not been transferred (or been identified for a future transfer) to an entity with respect to which an election to be characterized as a REMIC has been (or is expected to be) made. 3.1.2. Modifications of Mortgage. With the prior written consent of the Master Servicer, the Servicer may modify the terms of a Mortgage Loan which is in default or a Mortgage Loan as to which default is reasonably foreseeable; provided, however, that (i) such modification may not reduce the amount of principal owed under the related Mortgage Note or permanently reduce the Mortgage Interest Rate for such Mortgage Loan and (ii) the Servicer and the Master Servicer have determined that such modification is likely to increase the proceeds of such Mortgage Loan over the amount expected to be collected pursuant to foreclosure. Notwithstanding anything to the contrary in this Agreement, the Servicer shall not permit any modification of any material term of a Mortgage Loan (including the Mortgage Interest Rate, the principal balance, the amortization schedule, or any other term affecting the amount or timing of payments on the Mortgage Loan) where such modification is not the result of a default or as to which default is reasonably foreseeable under the Mortgage Loan unless the Master Servicer has consented thereto and the Servicer has received an Opinion of Counsel or a ruling from the Internal Revenue Service (at the expense of the Servicer or the party making the request of the Servicer to modify the Mortgage Loan) to the effect that such modification would not be treated as giving rise to a new debt instrument for federal income tax purposes or a disposition of the modified Mortgage Loan and that such modification is permitted under the REMIC Provisions. 3.1.3. Indemnification with Respect to Certain Taxes and Loss of REMIC Status. In the event that the REMIC fails to qualify as a REMIC, loses its status as a REMIC, or incurs state or local taxes, or tax as a result of a prohibited transaction or contribution subject to taxation under the REMIC Provisions due to the negligent performance by the Servicer of its duties and obligations set forth herein, the Servicer shall indemnify the Trustee, the Trust Administrator (if applicable), the Master Servicer and the holders of the related Certificates against any and all losses, claims, damages, liabilities or expenses ("REMIC Failure Losses") resulting from such negligence; provided, however, that the Servicer shall not be liable for any such REMIC Failure Losses attributable to the action or inaction of the Master Servicer or the holders of such Certificates nor for any such REMIC Failure Losses resulting from misinformation provided by the Master Servicer on which the Servicer has relied. The foregoing shall not be deemed to limit or restrict the rights and remedies of the other holders of the Certificates now or hereafter existing at law or in equity. Section 3.2 REO Qualification 3.2.1. Foreclosure Property. Notwithstanding any other provision of this Agreement, the Servicer, shall not rent, lease, or otherwise earn income on behalf of the REMIC with respect to any REO which might cause such REO to fail to qualify as "foreclosure" property within the meaning of section 860G(a)(8) of the Code (e.g., rent based upon the earnings of the lessee) or result in the receipt by the REMIC of any "income from non-permitted assets" within the meaning of section 860F(a)(2) of the Code (e.g., income attributable to any asset which is not a qualified mortgage, a cash flow or reserve fund investment, or personal property not incidental to the REO) or any "net income from foreclosure property" which is subject to tax under the REMIC Provisions unless the Master Servicer has received an Opinion of Counsel (at the Servicer's expense) to the effect that, under the REMIC Provisions and (where appropriate, any relevant proposed legislation) any income generated for the REMIC by the REO would not result in the imposition of a tax upon the REMIC. In general, the purpose of this Section 3.2 and the REMIC Provisions (which this section is intended to implement) is to ensure that the income earned by the REMIC is passive type income such as interest on mortgages and passive type rental income on real property. 3.2.2. Foreclosure Property Qualification Restrictions. Without limiting the generality of the foregoing, the Servicer shall not: (a) permit the REMIC to enter into, renew or extend any lease with respect to any REO, if the lease by its terms will give rise to any income that does not constitute Rents from Real Property; (b) permit any amount to be received or accrued under any lease other than amounts that will constitute Rents from Real Property; (c) authorize or permit any construction on any REO, other than the completion of a building or other improvement thereon, and then only if more than ten percent of the construction of such building or other improvement was completed before default on the related Mortgage Loan became imminent, all within the meaning of Section 856(e)(4)(B) of the Code; or (d) Directly Operate or allow any other Person to Directly Operate, any REO on any date more than 90 days after its acquisition date, other than through an "independent contractor," within the meaning of Section 856(e) of the Code; unless, in any such case, the Servicer has requested and received an Opinion of Counsel (at the Servicer's expense) to the effect that such action will not cause such REO to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code at any time that it is held by the REMIC, in which case the Servicer may take such actions as are specified in such Opinion of Counsel. 3.2.3. REO Disposition. Within 30 days following an REO Disposition, the Servicer shall provide to the Master Servicer a statement of accounting for the related REO, including without limitation, (i) the loan number of the related Mortgage Loan, (ii) the date such Mortgaged Property was acquired in foreclosure or by deed in lieu of foreclosure, (iii) the date of REO Disposition, (iv) the gross sales price and related selling and other expenses, (v) accrued interest calculated from the date of acquisition to the disposition date and (vi) such other information as the related trustee may reasonably request. Section 3.3 Prohibited Transactions and Activities 3.3.1. Mortgage Loan Disposition Restriction. The Servicer shall not permit the sale, disposition or substitution for any of the Mortgage Loans (except in a disposition pursuant to (i) the foreclosure or default of a Mortgage Loan, (ii) the bankruptcy or insolvency of the REMIC, (iii) the termination of the REMIC in a "qualified liquidation" or "clean-up" call as defined in Section 860F of the Code or (iv) a substitution of a Qualifying Substitution Mortgage Loan as permitted under the REMIC Provisions), nor acquire any assets for the REMIC, after the startup day of the REMIC, nor sell or dispose of any investments in any of the accounts established by the Servicer for the REMIC for gain, nor accept any contributions to the REMIC (other than certain cash contributions permitted by Section 860G(c) of the Code) unless it has received an Opinion of Counsel (at the expense of the Person requesting the Servicer to take such action) to the effect that such disposition, acquisition, substitution, or acceptance will not (a) affect adversely the status of the REMIC as a REMIC or of the Certificates, other than the Certificates representing the residual interest in the REMIC, as the regular interests therein within the meaning of the REMIC Provisions, (b) affect the distribution of interest or principal on the Certificates, (c) result in the encumbrance of the assets transferred or assigned to the REMIC (except pursuant to the provisions of this Agreement) or (d) cause the REMIC to be subject to a tax on "prohibited transactions" or "prohibited contributions" pursuant to the REMIC Provisions. 3.3.2. Personal Property. The Servicer shall not acquire any personal property relating to any Mortgage Loan unless either: (a) such personal property is incident to real property (within the meaning of Section 856(e)(1) of the Code) so acquired by the Servicer; or (b) the Servicer shall have requested and received an Opinion of Counsel, at the expense of the Servicer, to the effect that the holding of such personal property by the REMIC will not cause the imposition of a tax on the REMIC under the REMIC Provisions or cause the REMIC to fail to qualify as a REMIC at any time that any Certificate is outstanding. Section 3.4 Eligible Investments 3.4.1. Custodial Account. Funds in any custodial accounts established by the Servicer and maintained in respect of the REMIC may be invested and, if invested, shall be invested in Eligible Investments selected by the Servicer which shall mature not later than the Business Day immediately preceding the next Remittance Date, and any such Eligible Investment shall not be sold or disposed of prior to its maturity. All such Eligible Investments shall be made in the name of the REMIC or its nominee. All income and gain realized from any such investment shall be, as long as the Servicer is servicing the Mortgage Loans held by the REMIC, for the benefit of the Servicer as additional compensation and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments shall be deposited in the relevant account by the Servicer out of its own funds immediately as realized. The foregoing requirements for deposit in such account are exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments of interest on funds in such account and, as long as the Servicer is servicing the Mortgage Loans held by the REMIC, payments in the nature of prepayment fees, late payment charges, assumption fees or any similar fees customarily associated with the servicing mortgage loans paid by any mortgagor need not be deposited by the Servicer in such account and may be retained by the Servicer as additional servicing compensation. If the Servicer deposits in such account any amount not required to be deposited therein, it may at any time withdraw such amount, any provision herein to the contrary notwithstanding. 3.4.2. Escrow Account. Subject to the terms of the related Mortgage Notes and Security Instrument, and further subject to applicable law, any funds in any escrow account shall be invested in Eligible Investments that mature prior to the date on which payments have to be made out of the related escrow account and any such Eligible Investment shall not be sold or disposed of prior to its maturity; provided that, if any loss is incurred on any such investment, the Servicer shall cover such loss by making a deposit into the appropriate escrow account out of its own funds in the amount of such loss. Withdrawals from any escrow account may be made (to the extent amounts have been escrowed for such purpose and to the extent permitted by the related Security Instrument and Mortgage Note) only (i) to effect timely payment of Escrow Items in connection with the related Mortgage Loan, (ii) to reimburse the Master Servicer or Servicer out of related collections for advances with respect to Escrow Items, (iii) to refund to any mortgagors any sums determined to be overages, (iv) to pay interest, if any, owed to mortgagors on such account to the extent required by law, (v) for application to restoration or repair of the Mortgaged Property, (vi) to clear and terminate the escrow account on the termination of this Agreement or (vii) to remove funds placed in such escrow account in error. The Servicer shall be entitled to all investment income on any escrow account not required to be paid to mortgagors pursuant to the preceding sentence. ARTICLE 4 Servicer Considerations Section 4.1 Servicer Eligibility Standards To service Mortgage Loans under this Agreement the Servicer must satisfy the eligibility standards set forth in this Section 4.1 initially and at all times thereafter. 4.1.1. Regulatory Approvals and Licensing. The Servicer must be: (a) FNMA or FHLMC approved and in good standing; (b) a HUD approved mortgagee in good standing; (c) in compliance with all applicable capital requirements and other requirements from time to time specified by any governmental agency or quasi-governmental authority having jurisdiction over the Servicer; and (d) properly licensed to service the Mortgage Loans in all relevant jurisdictions where such licenses are required. 4.1.2. Net Worth and Portfolio Requirements. (a) The Servicer must maintain a Tangible Net Worth of at least $1,000,000. (b) The Servicer must maintain an Adjusted Tangible Net Worth of at least $1,000,000. (c) The Servicer must maintain a servicing portfolio of at least $1,000,000,000. 4.1.3. Auditor's Opinion; Other Annual Reports and Exchange Act Reporting. (a) For so long as the Mortgage Loans are master serviced by the Master Servicer, the Servicer shall provide, or cause to be provided in the case of clause (iii), to the Master Servicer, no 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 2007, the following: (i) a report (in form and substance reasonably satisfactory to the Master Servicer and the Depositor) regarding the Servicer's assessment of compliance with the Servicing Criteria applicable to it during the immediately preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall be addressed to the Master Servicer and the Depositor and signed by an authorized officer of the Servicer, and shall address, at a minimum, each of the Servicing Criteria applicable to the Servicer, as specified in the table in Exhibit R to the Pooling and Servicing Agreement; (ii) a report of a registered public accounting firm reasonably acceptable to the Master Servicer and the Depositor that attests to, and reports on, the assessment of compliance made by the Servicer and delivered pursuant to the preceding paragraph. Such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. If requested by the Master Servicer 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; and (iii) an assessment of compliance and accountants' attestation described in paragraphs (i) and (ii) of this Section 4.1.3(a) with respect to each Subservicer, and each Subcontractor determined by the Servicer pursuant to Section 4.1.4(b) to be "participating in the servicing function" within the meaning of Item 1122 of Regulation AB. (b) Each assessment of compliance provided by a Subservicer pursuant to Section 4.1.3(a)(iii) shall address each of the Relevant Servicing Criteria. An assessment of compliance provided by a Subcontractor pursuant to Section 4.1.3(a)(iii) need not address any elements of the Servicing Criteria applicable to it other than those specified by the Servicer pursuant to Section 4.1.4(b). (c) On or before March 5 of each calendar 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 2007, the Servicer shall deliver to the Master Servicer a certificate signed by an authorized officer of the Servicer, for the benefit of the Master Servicer and its officers, directors and affiliates in the event that the Master Servicer is required under the Pooling and Servicing Agreement to file a Sarbanes-Oxley Certification directly with the Commission in connection with the securitization of the Mortgage Loans (the "Transaction"), a certification in the form attached hereto as Exhibit B. The foregoing certification shall also be given upon thirty (30) days written request by the Master Servicer in connection with any additional Sarbanes-Oxley Certifications directly filed by the Master Servicer involving the Mortgage Loans. The Servicer acknowledges that the Master Servicer may rely on the certification provided by the Servicer pursuant to this Section 4.1.3(c) in signing a Sarbanes-Oxley Certification and filing such with the Commission. The Master Servicer will not request delivery of a certification under this Section 4.1.3(c) unless the Depositor is required under the Exchange Act to file an annual report on Form 10-K with respect to the Transaction. (d) On or before March 5 of each calendar 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 2007, the Servicer shall (i) deliver to the Master Servicer a statement of compliance addressed to the Master Servicer and signed by an authorized officer of the Servicer, to the effect that (A) a review of the Servicer's activities during the immediately preceding calendar year (or applicable portion thereof) and of its performance under this Agreement during such period has been made under such officer's supervision, and (B) to the best of such officers' knowledge, based on such review, the Servicer has fulfilled all of its obligations under this Agreement in all material respects throughout such calendar year (or applicable portion thereof) or, if there has been a failure to fulfill any such obligation in any material respect, specifically identifying each such failure known to such officer and the nature and the status thereof and (ii) cause each Subservicer to deliver to the Master Servicer a statement of compliance addressed to the Master Servicer and signed by an authorized officer of the Subservicer, to the effect that (A) a review of the Subservicer's activities during the immediately preceding calendar year (or applicable portion thereof) and of its performance under the applicable agreement during such period has been made under such officer's supervision, and (B) to the best of such officers' knowledge, based on such review, the Subservicer has fulfilled all of its obligations under the applicable agreement in all material respects throughout such calendar year (or applicable portion thereof) or, if there has been a failure to fulfill any such obligation in any material respect, specifically identifying each such failure known to such officer and the nature and the status thereof. (e) For so long as the Mortgage Loans are master serviced by the Master Servicer, the Servicer shall provide to the Master Servicer, no 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 2007, financial statements for the most recently closed fiscal year, together with an unqualified opinion thereon of an independent certified public accountant who is a member of the American Institute of Certified Public Accountants, unless the Master Servicer, in its reasonable discretion, decides to waive this requirement regarding qualification. (f) Within five (5) calendar days after a Distribution Date, the Servicer shall provide to the Master Servicer, to the extent known, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Master Servicer and the Servicer, the form and substance of any Additional Form 10-D Disclosure applicable to the Servicer, as indicated in the table in Exhibit S to the Pooling and Servicing Agreement. The Servicer acknowledges that the performance by the Master Servicer of its duties under Section 3.12(a) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 10-D is contingent upon the Servicer strictly observing all applicable deadlines in the performance of its duties under this Section 4.1.3(f). (g) 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 2007, the Servicer shall provide to the Master Servicer, to the extent known, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Master Servicer and the Servicer, the form and substance of any Additional Form 10-K Disclosure applicable to the Servicer, as indicated in the table in Exhibit T to the Pooling and Servicing Agreement. The Servicer acknowledges that the performance by the Master Servicer of its duties under Section 3.12(b) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 10-K is contingent upon the Servicer strictly observing all applicable deadlines in the performance of its duties under this Section 4.1.3(g). (h) 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 applicable to the Servicer, the Servicer shall provide to the Master Servicer, to the extent known, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Master Servicer and the Servicer, the form and substance of any Form 8-K Disclosure Information applicable to the Servicer, as indicated in the table in Exhibit U to the Pooling and Servicing Agreement. The Servicer acknowledges that the performance by the Master Servicer of its duties under Section 3.12(c) of the Pooling and Servicing Agreement relating to the timely preparation and filing of Form 8-K is contingent upon the Servicer strictly observing all applicable deadlines in the performance of its duties under this Section 4.1.3(h). (i) The Servicer shall indemnify the Master Servicer, each affiliate of the Master Servicer, the Trust, each broker dealer acting as underwriter or initial purchaser, each Person who controls any of such parties and the Depositor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the respective present and former directors, officers, employees and agents of each of the foregoing and of the Depositor (each such entity, a "Servicer Information Indemnified Party"), and shall hold each of them harmless from and against any losses, damages, penalties, fines, forfeitures, legal fees and expenses and related costs, judgments, and any other costs, fees and expenses that any of them may sustain arising out of or based upon: (i) (A) any untrue statement of a material fact contained or alleged to be contained in any information, report, certification, accountants' letter or other material provided in written or electronic form under Sections 4.1.3 and 4.1.4 hereof by or on behalf of the Servicer, or provided under Sections 4.1.3 or 4.1.4 by or on behalf of any Subservicer or Subcontractor (collectively, the "Servicer Information"), or (B) the omission or alleged omission to state in the Servicer Information a material fact required to be stated in the Servicer Information or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, by way of clarification, that clause (B) of this paragraph shall be construed solely by reference to the Servicer Information and not to any other information communicated in connection with a sale or purchase of securities, without regard to whether the Servicer Information or any portion thereof is presented together with or separately from such other information; (ii) any failure by the Servicer, any Subservicer or any Subcontractor to deliver any information, report, certification, accountants' letter or other material when and as required under Sections 4.1.3 and 4.1.4, including any failure by the Servicer to identify pursuant to Section 4.1.4(b) any Subcontractor "participating in the servicing function" within the meaning of Item 1122 of Regulation AB; or (iii) any breach by the Servicer of a representation or warranty set forth in Section 5.2. In the case of any failure of performance described in clause (ii) of this Section, the Servicer shall promptly reimburse the Master Servicer and the Depositor, as applicable, for all costs reasonably incurred by each such party in order to obtain the information, report, certification, accountants' letter or other material not delivered as required by the Servicer, any Subservicer or any Subcontractor. If the indemnification provided for herein is unavailable to hold harmless any Servicer Information Indemnified Party, then the Servicer agrees that it shall contribute to the amount paid or payable by such Servicer Information Indemnified Party as a result of the losses, claims, damages or liabilities of such Servicer Information Indemnified Party in such proportion as is appropriate to reflect the relative fault of such Servicer Information Indemnified Party on the one hand and the Servicer on the other in connection with a breach of the Servicer's obligations under this Section 4.1.3 or the Servicer's negligence, bad faith or willful misconduct in connection therewith. 4.1.4. Use of Subservicers and Subcontractors. The Servicer shall not hire or otherwise utilize the services of any Subservicer to fulfill any of the obligations of the Servicer as servicer under this Agreement unless the Servicer complies with the provisions of paragraph (a) of this Section. The Servicer shall not hire or otherwise utilize the services of any Subcontractor, and shall not permit any Subservicer to hire or otherwise utilize the services of any Subcontractor, to fulfill any of the obligations of the Servicer as servicer under this Agreement unless the Servicer complies with the provisions of paragraph (b) of this Section. (a) It shall not be necessary for the Servicer to seek the consent of the Master Servicer or the Depositor to the utilization of any Subservicer. The Servicer shall cause any Subservicer used by the Servicer (or by any Subservicer) for the benefit of the Master Servicer and the Depositor to comply with the provisions of this Section and with Sections 4.1.3 and 5.2 of this Agreement to the same extent as if such Subservicer were the Servicer, and to provide such information regarding the Subservicer as the Master Servicer or the Depositor request for the purpose of complying with Item 1108 of Regulation AB, including at a minimum, the information set forth in Exhibit C. The Servicer shall be responsible for obtaining from each Subservicer and delivering to the Master Servicer any servicer compliance statement required to be delivered by such Subservicer under Section 4.1.3(d), any assessment of compliance and attestation required to be delivered by such Subservicer under Section 4.1.3(a) and any certification required to be delivered to the Person that will be responsible for signing the Sarbanes-Oxley Certification under Section 4.1.3(c) as and when required to be delivered. (b) It shall not be necessary for the Servicer to seek the consent of the Master Servicer or any Depositor to the utilization of any Subcontractor. The Servicer shall promptly upon request provide to the Master Servicer (or any designee of Master Servicer) a written description (in form and substance satisfactory to the Master Servicer and the Depositor) of the role and function of each Subcontractor utilized by the Servicer or any Subservicer, specifying (i) the identity of each such Subcontractor, (ii) which (if any) of such Subcontractors are "participating in the servicing function" within the meaning of Item 1122 of Regulation AB, and (iii) which elements of the Servicing Criteria will be addressed in assessments of compliance provided by each Subcontractor identified pursuant to clause (ii) of this paragraph. As a condition to the utilization of any Subcontractor determined to be "participating in the servicing function" within the meaning of Item 1122 of Regulation AB, the Servicer shall cause any such Subcontractor used by the Servicer (or by any Subservicer) for the benefit of the Master Servicer and the Depositor to comply with the provisions of Section 4.1.3 (other than subsection (d)) of this Agreement to the same extent as if such Subcontractor were the Servicer. The Servicer shall be responsible for obtaining from each Subcontractor and delivering to the Master Servicer any assessment of compliance and attestation required to be delivered by such Subcontractor under Section 4.1.3, in each case as and when required to be delivered. 4.1.5. Servicing Experience. The Servicer shall satisfactorily demonstrate to the Master Servicer, in the Master Servicer's reasonable discretion, the following experience: (a) that it has at least three (3) years of conventional mortgage loan servicing experience; (b) that it has a staff knowledgeable in servicing of Mortgage Loans and the administration of REO; and (c) that it has experience maintaining a servicing portfolio in excess of $1 billion. 4.1.6. Material Changes. The Servicer shall promptly report to the Master Servicer any change in its business operations, financial condition, properties or assets since the date of the latest submitted financial statements which could have a material adverse effect on the Servicer's ability to perform its obligations hereunder. Events for which the Master Servicer must receive notice include, but are not limited to, the following: (a) any change in the Servicer's business address and/or telephone number; (b) any merger, consolidation, or significant reorganization; (c) any changes in the Servicer's ownership whether by direct or indirect means. Indirect means include any change in ownership of the Servicer's parent; (d) any change in the Servicer's corporate name; (e) if the Servicer is a savings and loan association, any change in the Servicer's charter from federal to state or vice versa; (f) any decreases in capital, adverse alteration of debt/equity ratios, or changes in management ordered or required by a regulatory authority supervising or licensing the Servicer; (g) any significant adverse change in the Servicer's financial position; (h) entry of any court judgment or regulatory order in which the Servicer is or may be required to pay a claim or claims which, in the Master Servicer's reasonable opinion, have a material adverse effect on the Servicer's financial condition; and (i) the Servicer admits to committing, or is found to have committed, a material, in the Master Servicer's reasonable opinion, violation of any law, regulation, or order. Section 4.2 Errors and Omissions Insurance 4.2.1. E & O Requirement. A Servicer shall maintain, at all times and at its own expense, an Errors and Omissions Policy in an amount and with an insurer acceptable to FNMA or FHLMC. 4.2.2. E & O Scope. The Errors and Omissions Policy shall insure the Servicer, its successors and assigns, against any losses resulting from negligence, errors or omissions on the part of officers, employees or other persons acting on behalf of the Servicer in the performance of its duties as a Servicer pursuant to this Agreement. 4.2.3. E & O Policy Maintenance. The Servicer shall maintain in effect the Errors and Omissions Policy at all times and the Errors and Omissions Policy may not be canceled, permitted to lapse or otherwise terminated without the acquisition of comparable coverage by the Servicer. 4.2.4. E & O Deductible. The terms of the Errors and Omissions Policy shall provide for a deductible amount that is acceptable to FNMA or FHLMC with respect to its approved mortgage loan servicers. 4.2.5. E & O Qualifications. The Errors and Omissions Policy shall be obtained by the Servicer from an insurer which satisfies FNMA or FHLMC standards in this regard. Section 4.3 Fidelity Bond Coverage 4.3.1. Fidelity Bond Requirement. A Servicer must maintain, at all times, at its own expense, a Fidelity Bond in an amount and with an insurer acceptable to FNMA or FHLMC and having terms that are acceptable to FNMA or FHLMC. 4.3.2. Fidelity Bond Coverage. The amount of Fidelity Bond coverage shall be an amount acceptable to FNMA or FHLMC. 4.3.3. Fidelity Bond Scope. The coverage of the Fidelity Bond must explicitly insure the Servicer, its successors and assigns, against any losses resulting from dishonest, fraudulent or criminal acts on the part of Officers, employees or other persons acting on behalf of the Servicer. 4.3.4. Fidelity Bond Maintenance. The Servicer must maintain in effect the Fidelity Bond at all times and the Fidelity Bond may not be canceled, permitted to lapse or otherwise terminated without thirty Business Days' prior written notice by registered mail to the Master Servicer. Further, the Fidelity Bond must provide that, or the insurer must state in writing to the Master Servicer that, the Fidelity Bond shall not be cancelable without the giving of notice as provided for in the prior sentence. 4.3.5. Fidelity Bond Deductible. The terms of the Fidelity Bond must provide for a deductible amount that does not exceed FNMA or FHLMC requirements. 4.3.6. Fidelity Bond Rating Requirement. The Fidelity Bond must be obtained from a company which satisfies FNMA or FHLMC standards in this regard. Section 4.4 Servicer's Liability 4.4.1. Liability Exposure. Any and all losses not covered under the Fidelity Bond or Errors and Omissions Policy, as a result of (i) the respective deductible provisions thereof, (ii) the limits of coverage of the Fidelity Bond or Errors and Omissions Policy or (iii) any claim denied which should have been covered by the Fidelity Bond or the Errors and Omissions Policy, as the case may be, according to the terms of this Agreement had the Fidelity Bond or Errors and Omissions Policy been properly obtained and maintained and respective claim been properly submitted for payment, shall be borne by the Servicer, where the Servicer has acted in a manner in which the Servicer is not relieved from liability as described in Section 4.4.2 hereof. 4.4.2. Scope of Liability. Neither the Servicer or any subservicer appointed by it, nor any of their respective partners, directors, officers, employees or agents, or its delegees pursuant to Section 11.2.1 hereof, shall be under any liability to the Master Servicer, the Trustee or, if applicable, the Trust Administrator 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 Servicer, any subservicer or any of their respective partners, directors, officers, employees or agents, or its delegees pursuant to Section 11.2.1 hereof, against any liability which 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 hereunder. The Servicer, any subservicer and any of their respective partners, directors, officers, employees or agents, or its delegees pursuant to Section 11.2.1 hereof, 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. Section 4.5 Indemnification 4.5.1. Scope of Indemnity by Servicer. The Servicer hereby agrees to indemnify and hold harmless (a) the Master Servicer, (b) the Trustee, (c) the Trust Administrator (if applicable), (d) the Depositor and (e) the officers, directors, employees, agents and Affiliates of any of the foregoing (any of the foregoing hereinafter referred to as the "Indemnified Party"), from and against any and all claims, losses, damages, liabilities, fines, settlements, awards, offsets, defenses, counterclaims, actions, penalties, forfeitures, legal fees, judgments and any other costs, fees and expenses (including, without limitation, reasonable attorneys' fees and court costs) (any of the foregoing which satisfy the criteria of this paragraph are collectively referred to as "Claims"), either directly or indirectly arising out of, based upon, or relating to (i) a breach by the Servicer, its officers, directors, employees, or agents, or its delegees pursuant to Section 11.2.1 hereof, of any representation or warranty contained herein, or any failure to disclose any matter that makes such representation and warranty misleading or inaccurate, or any inaccuracy in material information furnished by the Servicer regarding itself, (ii) a breach of any representation or warranty made by any Indemnified Party in reliance upon any such representation or warranty, failure to disclose, or inaccuracy in information furnished by the Servicer regarding itself, (iii) any failure of the Servicer, its officers, directors, employees, or agents, or its delegees pursuant to Section 11.2.1 hereof, to perform any of its obligations under this Agreement in a manner in which the Servicer is not relieved from liability as described in Section 4.4.2 hereof, and (iv) any acts or omissions of the Servicer, its officers, directors, employees, or agents, or its delegees pursuant to Section 11.2.1 hereof, in a manner in which the Servicer is not relieved from liability as described in Section 4.4.2 hereof. Each Indemnified Party shall cooperate with the Servicer in the defense of such Claims and shall not settle any such Claim without the prior written consent of the Servicer. 4.5.2. Survival of Indemnity. This indemnification shall survive purchase, transfer of any interest in a Mortgage Loan by any indemnified party, the Liquidation of such Mortgage Loan, termination of the Servicer's servicing rights with respect to such Mortgage Loan and termination or expiration of this Agreement between the Servicer and the Master Servicer and its successors and assigns. Section 4.6 Servicer's Compensation; Indemnification 4.6.1. Servicing Fee Amount. In consideration of the services rendered under this Agreement, absent default by the Servicer, the Servicer shall on each Remittance Date be entitled to a monthly aggregate servicing compensation (the "Monthly Servicing Compensation") for the preceding month which shall equal the sum of (a) the Servicing Fee payable with respect to each Mortgage Loan serviced during such month and (b) any interest earnings on each Custodial P&I Account with respect to such month other than interest earnings thereon which are payable to the Borrower pursuant to the Security Instrument or applicable law, subject to any adjustment for Month End Interest as described in Section 7.6.1. Absent default by the Servicer, the Servicer shall also be entitled to retain in addition to the Monthly Servicing Compensation any late charges, prepayment fees, penalty interest, assumption fees, modification fees or deficiency recovery fees paid by the Borrower, any Liquidation Profits or any other customary income or any payments of interest related to any Prepayment in Full received by the Servicer prior to the Applicable Unscheduled Receipt Period, which amounts are not required to be deposited into the Custodial P&I Account. The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically provided for herein. 4.6.2. Servicing Fee Source. The Servicing Fee for each Mortgage Loan shall be payable solely from the interest portion of the related Monthly Payment paid by the Borrower or other payment of interest paid with respect to the Mortgage Loan, whether from the proceeds of foreclosure or any judgment, writ of attachment or levy against the Borrower or his assets, or from funds paid in connection with any prepayment in full or from Insurance Proceeds or Liquidation Proceeds. 4.6.3. Indemnification of Servicer. The Master Servicer hereby agrees to indemnify and hold harmless the Servicer, any Subservicer appointed by it, any of their respective directors, officers, employees or agents, or its delegees for any action taken by the Servicer, any Subservicer or any of their respective directors, officers, employees or agents, or its delegees or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that the Servicer, any Subservicer or any of their respective directors, officers, employees or agents, or its delegees are not protected against any liability which 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 under this Agreement. ARTICLE 5 Representations and Warranties Section 5.1 General 5.1.1. Reliance. The Master Servicer relies upon the representations and warranties contained in this Article 5 hereof, in the acceptance of the Servicer. The representations, warranties and covenants contained herein shall inure to the benefit of the Master Servicer, the Trustee and, if applicable, the Trust Administrator. 5.1.2. Survival of Representations and Warranties. The representations and warranties made herein shall survive termination of this Agreement, and shall inure to the benefit of the Master Servicer, its respective successors, Affiliates and assigns and each indemnified party under Section 4.5.1, its respective successors, Affiliates and assigns, in each case, regardless of any review or investigation made by or on behalf of such parties with respect to any Mortgage Loan. 5.1.3. Breach of Representation or Warranty. Upon breach of any requirement or representation or warranty included in this Agreement relative to any Mortgage Loan, the Servicer must: (a) Give written notice within two (2) days to the Master Servicer of the nature of the breach, the date on which the breach occurred or began and the Servicer's plans, if any, for curing the breach; (b) Effect a cure of the breach within 30 days after its occurrence or onset and a reasonable extension will be granted if warranted and necessary to fully cure the breach but in no event greater than 90 days; and (c) If no complete cure has been effected within such period the Master Servicer shall take such action against the Servicer as it deems necessary to protect the Trustee's interest in the Mortgage Loan. 5.1.4. Assignment of Representations and Warranties. The Servicer agrees that each of the Trustee and, if applicable, Trust Administrator may, at any time, assign the representations and warranties given by the Servicer as set forth in this Article 5 which it then possesses, in whole or in part, or an undivided interest therein, to one or more Persons. Section 5.2 Servicer Representations and Warranties The Servicer represents and warrants, as of the date of this Agreement and, except as otherwise provided, throughout the term of this Agreement, that the statements set forth below in this Section 5.2 are true and accurate. Relative to the Servicer: 5.2.1. Qualification of Servicer. The Servicer is duly incorporated, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified to do business and is in good standing under the laws of each jurisdiction that requires such qualification wherein it owns or leases any material properties, or in which it conducts any material business or in which the performance of its duties under this Agreement would require such qualification, except where the failure to so qualify would not have a material adverse effect on (a) the Servicer's performance of its obligations under this Agreement, (b) the value or marketability of the Mortgage Loans, or (c) the ability to foreclose on the related Mortgaged Properties. 5.2.2. Requisite. The Servicer has the corporate power and authority to own its properties and conduct any and all business required or contemplated by this Agreement and to perform the covenants and obligations to be performed by it under this Agreement. The Servicer holds all material licenses, certificates and permits from all governmental authorities necessary for conducting its business as it is presently conducted. 5.2.3. No Conflicts. The execution and delivery of this Agreement are within the corporate power of the Servicer and have been duly authorized by all necessary actions on the part of the Servicer; neither the execution and delivery of this Agreement by the Servicer, nor the consummation by the Servicer of the transactions herein contemplated, nor compliance with the provisions hereof by the Servicer, will (i) conflict with or result in a breach of, or constitute a default under, any of the provisions of the articles of incorporation or bylaws of the Servicer or any law, governmental rule or regulation, or any judgment, decree or order binding on the Servicer or any of its properties, or any of the provisions of any indenture, mortgage, deed of trust, contract or other instrument to which it is a party or by which it is bound or (ii) result in the creation or imposition of any lien, charge or encumbrance upon any of its properties pursuant to the terms of any such indenture, mortgage, deed of trust, contract or other instrument. 5.2.4. Enforceable Agreement. This Agreement, when duly executed and delivered by the Servicer, will constitute a legal, valid and binding agreement of the Servicer, enforceable in accordance with its terms, subject, as to enforcement or remedies, to applicable bankruptcy, reorganization, insolvency or other similar laws affecting creditors' rights generally from time to time in effect, and to general principles of equity. 5.2.5. No Consents. No consent, approval, order or authorization of any governmental authority or registration, qualification or declaration with any such authority is required in order for the Servicer to perform its obligations under this Agreement. 5.2.6. Agency Approval. The Servicer has been approved by FNMA or FHLMC and will remain approved as an "eligible seller/servicer" of conventional, residential mortgage loans as provided in FNMA or FHLMC guidelines and in good standing. The Servicer has not received any notification from FNMA or FHLMC that the Servicer is not in compliance with the requirements of the approved seller/servicer status or that such agencies have threatened the servicer with revocation of its approved seller/servicer status. 5.2.7. Financial Condition. The Servicer is not, and, with passage of time, does not expect to become, insolvent or bankrupt. Except as 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. The Servicer shall promptly notify the Master Servicer of any material adverse change of its financial condition. 5.2.8. Servicing Practices. The servicing practices used by the Servicer under this Agreement have been and are in all respects in compliance with all federal, state and local laws, rules, regulations and requirements in connection therewith and are in accordance with Prudent Servicing Practices. 5.2.9. No Impairment. There is no action, suit, proceeding or investigation pending or, to the best of the Servicer's knowledge after due inquiry, threatened, against the Servicer which, either in any one instance or in the aggregate, may result in any material adverse change in 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 which if adversely determined would affect the validity of this Agreement or of any action taken or to be taken in connection with the obligations of the Servicer contemplated herein, or which would be likely to impair materially the ability of the Servicer to perform under the terms of this Agreement. 5.2.10. No Inquiries. The Servicer has not been the subject of an audit by any of the Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any Primary Mortgage Insurer, which audit included material allegations of failure to comply with applicable loan origination, servicing or claims procedures, or resulted in a request for repurchase of Mortgage Loans or indemnification in connection with the Mortgage Loans. 5.2.11. No Performance Triggering Event. Except as 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 securitization due to any act or failure to act of the Servicer under such securitization. 5.2.12. No Termination. Except as 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. 5.2.13. No Material Noncompliance. Except as disclosed in the Prospectus, no material noncompliance with the applicable servicing criteria with respect to 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. 5.2.14. Servicing Policies and Procedures. Except as 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. 5.2.15. No Affiliations. 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. 5.2.16. Legal or Governmental Proceedings. Except as disclosed in the Prospectus, there are no material legal or governmental proceedings pending (or known to be contemplated) against the Servicer or any Subservicer that would be material to Certificateholders. Relative to the Mortgage Loans: 5.2.17. Custodial and Escrow Accounts Current. All Custodial P&I Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow Funds are maintained by the Servicer and have been maintained in accordance with applicable law and the terms of the Mortgage Loans. The Escrow Items required by the Mortgages which have been paid to the Servicer for the account of the Borrower are on deposit in the appropriate Custodial Account. All funds received by the Servicer in connection with the Mortgage Loans, including, without limitation, foreclosure proceeds, Insurance Proceeds, condemnation proceeds and principal reductions, have promptly been deposited in the appropriate Custodial Account, and all such funds have been applied to reduce the principal balance of the Mortgage Loans in question, or for reimbursement of repairs to the Mortgaged Property or as otherwise required by applicable law. 5.2.18. Insurance Maintenance. Pursuant to the terms of the related Security Instrument, all buildings or other improvements upon the related Mortgaged Property are insured by an insurance policy or policies meeting the requirements of Articles 15 and 16 hereof. The related Security Instrument obligates the Borrower thereunder to maintain the hazard insurance policy at the Borrower's cost and expense and, upon the Borrower's failure to do so, authorizes the Mortgagee under the related Security Instrument to obtain and maintain such insurance at the Borrower's cost and expense and to seek reimbursement therefor from the Borrower. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of the Trustee. The Servicer and the Borrower have not engaged in any act or omission that would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either. The Mortgage Loan Documents permit the maintenance of an escrow account to pay the premiums for the above mentioned insurance, and the requirement for such escrows has not been waived, unless otherwise required by applicable state law. ARTICLE 6 Custodial Accounting Section 6.1 In General 6.1.1. Custodial Account Establishment. The Servicer must establish appropriate custodial accounts for the benefit of the Trustee, its successors and assigns for the deposit of funds collected in connection with such Mortgage Loans. All custodial accounts and related records must be maintained in accordance with sound and controlled accounting practices. The custodial accounts maintained pursuant to this Agreement may be custodial accounts for one or more other series of mortgage asset-backed pass-through certificates issued by Wells Fargo Asset Securities Corporation; provided, however, that (a) the trustee for such other series under the related pooling and servicing agreement(s) is the Trustee and (b) the master servicer for such other series under the related pooling and servicing agreement(s) is the Master Servicer. 6.1.2. Custodial Account Separateness. (a) At least one custodial account for principal and interest (i.e., a Custodial P&I Account), one custodial account for taxes and insurance (i.e., a Custodial T&I Account), one custodial account for Subsidy Funds, if applicable (i.e., a Custodial Subsidy Account) and one custodial account for Buydown Funds, if applicable (i.e., a Custodial Buydown Account), shall be established and maintained for the Mortgage Loans. Except as specified in 6.1.2(b), without the written consent of the Master Servicer, funds in these accounts may not be commingled with other funds held by the Servicer. Each Custodial P&I Account shall be established as an Eligible Account ("Eligible Custodial P&I Account"). (b) Notwithstanding anything to the contrary elsewhere in this Agreement, the Servicer may employ the Custodial T&I Account as the Custodial Subsidy Account and/or the Custodial Buydown Account to the extent that the Servicer can separately identify any Subsidy Funds or Buydown Funds, as applicable, deposited therein. 6.1.3. Custodial Account Maintenance. The Servicer must ensure that each Custodial P&I Account, Custodial T&I Account, Custodial Subsidy Account and Custodial Buydown Account meets the following guidelines: (a) the accounts must be Eligible Accounts; (b) the name of each Custodial P&I Account, Custodial T&I Account and Custodial Buydown Account shall include a reference to the name of the Trustee and the designation of the series of Mortgage Asset-Backed Pass-Through Certificates or, where such accounts are accounts maintained for multiple series of mortgage asset-backed pass-through certificates as described in Section 6.1.1, a reference to "[______________], as trustee for Wells Fargo Asset Securities Corporation, Mortgage Asset-Backed Pass-Through Certificates;" (c) the Servicer must transfer all funds on hand relating to such Mortgage Loans, Monthly Payments due on or after the related Cut-Off Date and any principal prepayments received after the related Cut-Off Date, into the appropriate custodial accounts meeting the requirements of Sections 6.1.1 and 6.1.2 hereof; (d) beginning with any payment due on or after the related Cut-Off Date, all collections on the Mortgage Loans must be credited to the appropriate custodial account no later than the second Business Day following receipt; (e) (i) the Servicer shall not permit the balance of any Custodial P&I Account to exceed the Threshold Amount or include any amounts then required to be remitted to the Certificate Account pursuant to Section 18.3.1, (ii) in the event the Servicer collects amounts in excess of the Threshold Amount prior to the next scheduled transfer of funds to the respective Certificate Account, the Servicer must transfer the excess funds directly to the related Certificate Account by wire before the close of business on any day on which the amount on deposit in such account exceeds the Threshold Amount and (iii) in the event that the Servicer fails to transfer the funds in excess of the Threshold Amount to the related Certificate Account or to remit to the Certificate Account the Monthly Remittance on the Remittance Date pursuant to Section 18.3.1, the Master Servicer is authorized to debit such Custodial P&I Account and transfer such amounts to the related Certificate Account; (f) (i) the Servicer must file with the Master Servicer the appropriate ACH Debit Form for each Custodial P&I Account; (ii) the Master Servicer may monitor the principal balance of each Custodial P&I Account and may issue an ACH debit for amounts on deposit in any such account in excess of the Threshold Amount or otherwise in violation of Section 6.1.3(e); (iii) such amounts will immediately be deposited into the appropriate Certificate Account; and (iv) the ability of the Master Servicer to withdraw and remit such funds to the appropriate Certificate Account does not relieve the Servicer of its obligations to remit such funds to the related Certificate Account; (g) upon the establishment of a Custodial P&I Account, Custodial T&I Account or Custodial Buydown Account, the Servicer shall promptly advise the Master Servicer in writing of, or of any change in, the name and address of the depository, the individual employee of the depository who is responsible for overseeing such account, the account number, the title of the account and the individuals whose names appear on the signature card; and (h) (i) establishment and maintenance of the Custodial P&I Account, Custodial T&I Account and Custodial Buydown Account will be an expense of the Servicer; (ii) such custodial accounts may be interest-bearing accounts provided that such accounts comply with all local, state and federal laws and regulations governing interest-bearing accounts and, in the case of a Custodial T&I Account or Custodial Buydown Account, governing Borrower escrow accounts; and (iii) the Servicer must ensure that all interest credited to any custodial account that is not due the Borrower is removed by the Servicer within 30 days after receipt of such interest. 6.1.4. Escrow Investment. If the Servicer elects or is required by law to deposit the Borrower's Escrow Funds into an interest-bearing custodial account, the Servicer shall either (a) deposit such funds into an account which permits withdrawal on demand so as to pay Escrow Items as they come due, or (b) invest such funds in an Eligible Account so that adequate funds mature the Business Day prior to the date payment is due for each Escrow Item. 6.1.5. Clearing Account. If the Servicer finds it necessary to use a clearing account, the following guidelines must be followed: (a) the titles of such accounts must reflect that they are custodial in nature, and the depository in which the accounts are maintained must be informed in writing that the accounts are custodial accounts; (b) a check drawn on or funds transferred from a Custodial P&I Account or Custodial T&I Account must be deposited to a disbursement clearing account before or at the same time as any checks on the clearing account are issued; (c) a single clearing account must not be utilized both as a collection and disbursement clearing account; (d) the accounts must be held at depository institutions in which accounts are insured by the FDIC, through either the BIF or SAIF; (e) the Servicer must maintain adequate records and audit trails to support all debits and credits of each Borrower's payment records and accounts; and (f) collections deposited to a depository clearing account must be credited to the appropriate custodial account no later than one Business Day following receipt by the Servicer. 6.1.6. Custodial Buydown Account. The Servicer must establish a separate custodial account to hold Buydown Funds on Mortgage Loans being serviced for the Trustee, its successors and assigns. These accounts must be clearly marked to indicate that the Servicer is a custodian for Buydown Funds being held for the Trustee, its successors and assigns. 6.1.7. Certificate Account. The Master Servicer shall establish a segregated Certificate Account in accordance with Section 3.01 of the Pooling and Servicing Agreement. 6.1.8. Custodial Subsidy Account. The Servicer must establish a separate custodial account to hold Subsidy Funds on Mortgage Loans being serviced for the Trustee, its successors and assigns. These accounts must be clearly marked to indicate that the Servicer is a custodian for Subsidy Funds being held for the Trustee, its successors and assigns. Section 6.2 Custodial P&I Account 6.2.1. Mandatory Deposits. The following funds must be deposited into each related Custodial P&I Account within two Business Days after the Servicer's receipt of such amounts, or in the case of clauses (d) and (e) hereof, on the Remittance Date or, in the case of clause (g) hereof, on the Business Day after the Servicer's receipt of the Borrower's required monthly payment under the related subsidy agreement: (a) Principal collections from related Mortgage Loans (including Prepayments in Full and Curtailments), together with Month End Interest, if applicable; (b) Interest collections from related Mortgage Loans (net of Servicing Fees or other compensation of the Servicer as set forth in Section 4.6.1); (c) Liquidation Proceeds and Insurance Proceeds from related Mortgage Loans other than proceeds held in an escrow account and applied to the restoration and repair of the related Mortgaged Property; (d) related P&I Advances; (e) any related PMI Advances; (f) the proceeds of any purchase, or substitution under a purchase agreement, of a related Mortgage Loan by the Servicer or a Representing Party, or sale of an REO; (g) an amount from the Custodial Subsidy Account that when added to the Borrower's payment will equal the full monthly amount due under the related Mortgage Note; and (h) any amounts received pursuant to Section 15.7. 6.2.2. Optional Deposits. The following funds may, but are not required to, be deposited into each related Custodial P&I Account: (a) late charges; (b) prepayment fees; (c) penalty interest; (d) assumption fees; (e) Liquidation Profits; and (f) unapplied funds if the Borrower that remitted such funds is not required to maintain Escrow Funds. The Servicer shall maintain separate accounting for each of the foregoing types of funds. Provided that the Servicer is not in default of its obligations hereunder, the Servicer may retain any late charges, prepayment fees, penalty interest, assumption fees and Liquidation Profits as additional servicing compensation. 6.2.3. Permissible Withdrawals. The Servicer may make withdrawals from each related Custodial P&I Account solely for the following: (a) remittances to the related Certificate Account; (b) reimbursement to itself for advances which have been recovered by subsequent collections including late payments, Liquidation Proceeds or Insurance Proceeds, to the extent funds on deposit recovered by such subsequent collections relate to the Mortgage Loans as to which such advances were made; (c) interest earnings on deposits to the related Custodial P&I Account, but only to the extent that such interest has been credited; (d) removal of amounts deposited in error; (e) removal of charges or other such amounts deposited on a temporary basis in the account; (f) removal of Servicing Fees to the extent deposited therein; and (g) termination of the account. 6.2.4. Account Beneficiary. Each Custodial P&I Account (other than any Eligible Custodial P&I Account) must be titled to show the respective interests of the Servicer as trustee and of the Master Servicer as beneficiary. 6.2.5. Use of Accounts. The Servicer shall not use the Custodial P&I Account as a collection clearing account. Section 6.3 Custodial T&I Account 6.3.1. Mandatory Deposits. The following funds must be deposited into each respective Custodial T&I Account: (a) related Borrowers' Escrow Funds; (b) related T&I Advances; (c) the remaining balance of Title Insurance loss drafts; (d) rent receipts to offset any related T&I Advances by the Servicer; (e) unapplied funds; and (f) Liquidation Proceeds from a related Mortgage Loan that offset a deficit balance in the related Borrower's Escrow Funds. 6.3.2. Permissible Withdrawals. With respect to each related Borrower, the Servicer may make withdrawals from each respective Custodial T&I Account to the extent of the balance of such related Borrower's Escrow Funds for the following: (a) timely payment of such related Borrower's taxes and insurance premiums; (b) refunds to such related Borrower of excess Escrow Funds collected from such Borrower; (c) recovering T&I Advances made with respect to such related Borrower by the Servicer; (d) payment of interest, if required, to such related Borrower on his Escrow Funds; (e) removal of any deposits made in error; and (f) termination of the account. 6.3.3. Account Requirements. Each Custodial T&I Account is to be designated in the name of the Servicer acting as an agent for the individual related Borrowers to make such Escrow Item payments in order to show that the account is custodial in nature. The Servicer is required to keep records identifying each Borrower's payment deposited into the account. 6.3.4. Account Balance. The Servicer must never allow any Custodial T&I Account to become overdrawn as to any individual related Borrower. If there are insufficient funds in the account, the Servicer must advance its own funds to cure the overdraft. Section 6.4 Eligible Account Investments 6.4.1. Eligible Investments Permitted .Unless prevented or restricted by written notice of the Master Servicer pursuant to Section 6.4.5 hereof, the Servicer may, from time to time, withdraw funds from a Custodial P&I Account, Custodial Subsidy Account or Custodial Buydown Account, and immediately invest such funds in Eligible Investments in accordance with this Agreement. Upon the maturity of such Eligible Investments, such funds shall be redeposited into the Eligible Account from which they were drawn or into the Certificate Account. 6.4.2. Eligible Investment Restrictions. No Eligible Investment shall be sold or disposed of at a gain prior to maturity unless the Servicer has obtained the consent of the Master Servicer. 6.4.3. Eligible Investment Income. All income (other than any gain from a sale or disposition of the type referred to in Section 6.4.2 hereof) realized from any such Eligible Investment shall be for the benefit of the Servicer as additional servicing compensation. 6.4.4. Eligible Investment Losses. The amount of any losses incurred in respect of any investments permitted under this Section 6.4 shall be deposited in the Certificate Account by the Servicer out of its own funds immediately as realized. The Master Servicer may, in its reasonable discretion, from time to time, require the Servicer to provide a reasonable amount of security to cover the risk of such investment losses. To the extent that the Servicer shall not immediately deposit the amount of such losses in the Certificate Account, the Master Servicer may immediately act against such security as well as pursue all other remedies permitted by law. 6.4.5. Eligible Investments Reports. The Servicer shall, at any time provide such information and reports regarding its Eligible Investments under this Agreement as the Master Servicer may request. 6.4.6. Inter-Company Uses of Funds .Notwithstanding anything herein to the contrary, and subject to the proviso set forth below, the Servicer is permitted to withdraw funds from a Custodial P & I Account and commingle such funds with the general assets of the Servicer to be used for general corporate purposes until such time as such funds are required to be remitted to the related Certificate Account; provided, however, that the provisions of this Section 6.4.6 shall be applicable only for so long as (i) a master guarantee substantially in the form of Exhibit A attached hereto has been issued by Wells Fargo & Company for the benefit of the certificateholders of the Mortgage Asset-Backed Pass-Through Certificates and is currently in force and (ii) the short-term debt or long-term debt of Wells Fargo & Company is rated by each of the Rating Agencies in its highest short-term or highest long-term rating category or in such lower rating category as would not result in a downgrading or withdrawing of the rating then assigned to any of the Mortgage Asset-Backed Pass-Through Certificates by either Rating Agency or result in any of such rated Mortgage Asset-Backed Pass-Through Certificates being placed on credit review status by either Rating Agency. ARTICLE 7 Mortgage Loan Accounting Section 7.1 In General 7.1.1. Mortgage Loan Accounting Practices. The Servicer shall administer the application and accounting of payments made on the Mortgage Loans in accordance with the provisions of this Agreement. 7.1.2. Record Keeping. The Servicer must maintain complete and accurate records of all transactions affecting any Mortgage Loan. Each Mortgage Loan must be clearly marked to indicate that it is being serviced for the Trustee, its successors and assigns. 7.1.3. Record Review. The Master Servicer and its designee have the right to: (a) conduct reviews and audits of the Servicer's records and operating procedures during any Business Day; and (b) examine the Servicer's financial records, the Borrowers' Escrow Funds records and any and all other relevant documents and materials, whether held by the Servicer or by another on behalf of the Servicer, to ensure compliance with terms and conditions of this Agreement and the Master Servicer's standards. Section 7.2 Mortgage Loan Records 7.2.1. Account Records. Permanent Mortgage Loan account records must be maintained by the Servicer for each Mortgage Loan. Each account record must be identifiable by the Servicer Loan Number. 7.2.2. Account Record Information. The Servicer shall maintain the following information for each Mortgage Loan in a readily accessible form: (a) the Master Servicer Loan Number; (b) the current Unpaid Principal Balance; (c) the date of receipt, amount of payment and distribution of such payment for each Monthly Payment received with respect to such Mortgage Loan as to each related Due Date; (d) for ARM Loans, the current Mortgage Interest Rate, all limitations contained in the Mortgage Note with respect to periodic adjustments in the Mortgage Interest Rate, the scheduled Interest Adjustment Dates, Payment Adjustment Dates, the Gross Margin and the Index; (e) other transactions affecting the amounts due from or payable to the related Borrower; (f) the current outstanding balances of principal and interest deposits, advances, taxes and insurance deposits and unapplied payments with respect to such Mortgage Loan; (g) any overdraft of the Borrower's Escrow Funds; (h) any servicing reports or loan histories; and (i) any other information customarily maintained by a mortgage loan servicer of one to four family residential mortgages. 7.2.3. Accounting Practice. Except as otherwise provided herein, all Mortgage Loan account records must be maintained according to (a) the Uniform Single Attestation Program for Mortgage Bankers and (b) where applicable, sound and generally accepted accounting practices. 7.2.4. Access to Certain Documentation and Information Regarding the Mortgage Loans At the request of the Master Servicer, the Servicer shall provide to the Master Servicer, the Office of Thrift Supervision, the FDIC and the supervisory agents and examiners of the Office of Thrift Supervision and the examiners of the FDIC, as appropriate, access to the documentation regarding the Mortgage Loans required by applicable regulations of the Office of Thrift Supervision or the FDIC, such access being afforded without charge but only upon reasonable request and during normal business hours at the offices of the Servicer designated by it. The Servicer shall permit such representatives to photocopy any such documentation and shall provide equipment for that purpose at a charge reasonably approximating the cost of such photocopying to the Servicer. Section 7.3 Accounting Procedures 7.3.1. Principal and Interest Computation. All Mortgage Loans must amortize with interest calculated and paid in arrears. Under this method, the interest due from a Borrower on a Due Date is calculated based on (a) the Unpaid Principal Balance of the related Mortgage Loan prior to application of the principal portion of the related current Monthly Payment, (b) thirty days interest at the related Mortgage Interest Rate and (c) adjusted as herein provided for the effects of Curtailments, Partial Liquidation Proceeds, Prepayments in Full and Liquidations. The calculated interest portion is then subtracted from the related Monthly Payment to obtain the principal portion. The principal portion is then applied to the Unpaid Principal Balance of the related Mortgage Loan. The amount to be applied to interest for a multiple installment must be calculated using the Unpaid Principal Balance of the related Mortgage Loan remaining after the previous interest calculation and principal application. 7.3.2. Amortization Requirement. The amortization of each Mortgage Loan must reduce to zero, or as to Balloon Loans, the respective Balloon Amount, at the end of the Mortgage Loan term through the application of regular monthly payments. Capitalization of interest is not permitted, except as provided by the terms of any Mortgage Loan that provides for negative amortization. 7.3.3. Negative Amortization. To the extent any Mortgage Loan provides for negative amortization, such as a GPM or GPARM Loan, the Servicer must assure that the Unpaid Principal Balance of such Mortgage Loan never exceeds the related Maximum Negative Amortization Amount, and that the related Monthly Payment is recast as provided for in the Mortgage Note such that the balance fully amortizes within the remaining term of such Mortgage Loan. 7.3.4. Interest Calculations. Monthly interest calculations for periods of a full month must be based on a 30-day month and a 360-day year. Factors used for such calculations should be carried to a minimum of three decimal places. The dollar amount of any interest payment shall be carried out to a minimum of three decimal places. Interest calculations for a period of less than a full month must be based on a 365-day year. 7.3.5. Buydown Loans. The Servicer must amortize a Mortgage Loan for which Buydown Funds are applied at the Mortgage Interest Rate, not at the buy-down rate, in order to ensure that payments are collected to amortize properly the Mortgage Loan. Section 7.4 Application Procedure 7.4.1. Application Priority. A payment from a Borrower will normally consist of interest, principal, deposits for insurance and taxes and late charges, if applicable. Payments received from Borrowers must be applied in the order provided for in the related Security Instrument. To the extent not inconsistent with the related Security Instrument, such payments shall be applied in the following order: (a) required monthly interest; (b) required monthly principal; (c) deposits for taxes and insurance; (d) prepayment charges; and (e) any fees which may be retained by the Servicer, including late charges, returned check fees, and assumption fees. 7.4.2. [Reserved]. 7.4.3. Advance Payments. Payments made by the Borrower to satisfy future installments must be accounted for as prepaid installments of principal and interest. The Servicer should contact the Borrower if there is a question about the Borrower's intention in making any unscheduled payment. Section 7.5 Curtailments 7.5.1. Curtailment Amount. The Servicer may accept Curtailments at any time. If a Mortgage Loan is delinquent, funds received must first be applied to bring the Mortgage Loan current. If there are excess funds after the application of amounts received from the Borrower to pay the related Monthly Payment, the excess funds represent a Curtailment and may be applied as a partial principal prepayment. 7.5.2. Curtailment Application. If a Curtailment is received on or after the Due Date, the Servicer may either (i) retroactively apply the Curtailment to the Scheduled Principal Balance of the related Mortgage Loan as of the Due Date, or (ii) to the extent permitted by law and the Mortgage Loan, apply such Curtailment at the end of the current period. The interest portion of the next installment due is then calculated based on the Unpaid Principal Balance of the related Mortgage Loan after application of the Curtailment. 7.5.3. Effect of Curtailment. A Curtailment may not be used to reduce the related Mortgage Interest Rate for any Mortgage Loan or to postpone the Due Date of any payment. 7.5.4. Curtailment Transmission. Each Curtailment must be deposited into the related Custodial P&I Account within one Business Day after receipt and must be remitted no later than the regularly scheduled Monthly Remittance to the related Certificate Account. Section 7.6 Liquidations 7.6.1. Month End Interest. If a Prepayment in Full of a Mortgage Loan occurs, such prepayment is received by the Servicer after the Applicable Unscheduled Receipt Period ending in the month in which such prepayment occurs, and the Servicer does not receive a full 30 days of interest (calculated on a 30-day month, 360-day year basis) on the prepaid amount for the month in which such Prepayment in Full occurs, the Servicer must pay the Month End Interest on all such Mortgage Loans so prepaid in full on the Remittance Date in the month following the month of such prepayment. Any Month End Interest Shortfall for any month shall not be recoverable from the Servicer or any other source in the future. The payment of Month End Interest by the Servicer, as provided for above, shall not be an "advance" and shall not be reimbursable from the proceeds of any Mortgage Loan. 7.6.2. Liquidation Reports. The Servicer will report information with respect to Liquidations in the monthly reports delivered to the Master Servicer by the eighteenth calendar day of each succeeding month. 7.6.3. Deposit of Funds. Within one day after the Liquidation of a Mortgage Loan, the Servicer shall deposit the related Liquidation Proceeds together with the related Month End Interest into the related Custodial P&I Account. 7.6.4. Document Request. After any Liquidation, the Servicer must complete and send a Request for Release of Documents to the Custodian to ensure the release of documents within the period required by applicable state law. Section 7.7 Realized Losses 7.7.1. Liquidation Realized Loss Determination. With respect to the calculation of a Realized Loss suffered on the related Mortgage Loan on a Liquidation of such Mortgage Loan or pursuant to Section 17.7.3, the amount of such Realized Loss is equal to (a) the sum of: (i) Unpaid Principal Balance; (ii) unpaid interest accrued at the related Mortgage Interest Rate; (iii) attorneys' fees and other foreclosure and sale expenses; (iv) unpaid taxes; (v) unpaid property maintenance expenses; (vi) unpaid insurance premiums; and (vii) hazard loss expenses; less the sum of: (i) the balance of Escrow Funds, if any; (ii) any refund of any Hazard Insurance premium; (iii) rental income receipts; (iv) Insurance Proceeds or PMI Advances; (v) cash proceeds of any foreclosure sale; (vi) proceeds from sale of a REO; and (vii) any amounts received pursuant to bankruptcy or insolvency proceedings. 7.7.2. Bankruptcy Realized Loss Determination. With respect to the calculation of a Realized Loss on a Mortgage Loan subject to a Deficient Valuation, the amount of the Realized Loss is the difference between the Unpaid Principal Balance of the related Mortgage Loan immediately prior to the Deficient Valuation and the Unpaid Principal Balance as reduced by the Deficient Valuation. 7.7.3. Reporting Requirement. As to any defaulted Mortgage Loan, the Servicer must account to, and report in writing to, the Master Servicer as to any Realized Loss (or gain) upon the Liquidation or Deficient Valuation in respect of such Mortgage Loan. 7.7.4. Servicer's Liability. Except in the case of a purchase by the Servicer of a Mortgage Loan from the Trustee thereof due to a breach of a representation or warranty by the Servicer or failure to perform the servicing procedures as set forth in this Agreement, the Servicer is not liable for any Realized Loss on any Mortgage Loan. ARTICLE 8 ARM Loans Section 8.1 ARM Loan Servicing 8.1.1. In General. It is the Servicer's responsibility to enforce each ARM Loan (and any other Mortgage Loan) according to its terms and in conformity with all applicable law. The Servicer's records must, at all times, reflect the then-current Mortgage Interest Rate and Monthly Payment for such ARM Loan and the Servicer must timely notify the Borrower of any changes to the Mortgage Interest Rate and/or the Borrower's Monthly Payment. 8.1.2. Servicer's Liability. If the Servicer fails to make either a timely or accurate adjustment to the Mortgage Interest Rate or Monthly Payment for an ARM Loan or to notify the Borrower of such adjustments, and subsequently receives a short Monthly Payment, the Servicer must pay from its own funds any shortage until the Servicer has made the necessary corrections in conformance with applicable law so as to secure the correct Monthly Payment from the Borrower. In the event that such error results in the Borrower making a Monthly Payment in excess of the amount which he should have made if such adjustment were properly calculated, then the Servicer shall promptly (a) make the required adjustment to the Borrower's Monthly Payment and Mortgage Interest Rate so that they reflect the amounts as properly calculated as of the related Payment Adjustment Date, (b) refund to the Borrower the amount of any such excess received by the Servicer from the related Payment Adjustment Date and (c) deduct from the respective Custodial P&I Account or the Certificate Account the amount of such refund to reimburse the Servicer for making such refund. Any amounts paid by the Servicer pursuant to this Section shall not be an advance and shall not be reimbursable from the proceeds of any Mortgage Loan. 8.1.3. Adjustment Reports. All Mortgage Interest Rate and Monthly Payment adjustments must be reported to the Master Servicer in a ARM Loan change report. 8.1.4. Substitute Index. If the Index required to be used to determine the Mortgage Interest Rate for a Mortgage Loan is not available on an Interest Adjustment Date, the Servicer, will select an index that is based on comparable information, over which the Servicer has no control and that is readily verifiable. Section 8.2 Notice of Periodic Adjustment 8.2.1. Notice Requirement. The Notice of Periodic Adjustment is the legal and official announcement to the Borrower of an ARM Loan of a change in the Mortgage Interest Rate or the Monthly Payment. The Servicer must send this notice to the Borrower, as stated in the related Mortgage Note and in accordance with applicable law, and at least 25 days before each Payment Adjustment Date. 8.2.2. Notice Contents. Each Notice of Periodic Adjustment pertaining to an ARM Loan shall meet the requirements and specifications of the Security Instrument, the Mortgage Loan, and applicable federal or state laws or regulations. Section 8.3 ARM Loan Conversion 8.3.1. Servicer's Determination. In the event a Borrower with a convertible ARM Loan exercises its option to convert such Mortgage Loan to a fixed interest rate, the Servicer will determine whether the conditions and qualifications for conversion have been met and determine the fixed rate to be applied to such Mortgage Loan pursuant to the terms of the related Mortgage Note. 8.3.2. Conversion Notification. Upon any such conversion, the Servicer shall prepare an ARM Loan conversion notification and send such notification to the Master Servicer within three Business Days after the conversion. 8.3.3. Purchase by Servicer. The Servicer shall purchase such Converted Mortgage Loan from the applicable Trustee at the Purchase Price by depositing the Purchase Price into the Custodial P&I Account. ARTICLE 9 Mortgage Loan Files Section 9.1 Owner Mortgage Loan Files and Retained Mortgage Loan Files 9.1.1. Owner Mortgage Loan File and Retained Mortgage Loan File Requirements. For each Mortgage Loan, the Master Servicer shall ensure that the Custodian will maintain an Owner Mortgage Loan File on behalf of the Trustee that contains each of the documents or instruments specified in Section 2.01(a) of the Pooling and Servicing Agreement. For each Mortgage Loan after a Document Transfer Event, the Servicer shall deliver to the Custodian the Retained Mortgage Loan File that contains each of the documents or instruments specified in Section 2.01(b) of the Pooling and Servicing Agreement and the Custodian will maintain such Retained Mortgage Loan File on behalf of the Trustee. 9.1.2. Custodian .If the original Security Instrument or the Assignment from the respective prior owner of the related Mortgage Loan to the Trustee or, if applicable, to the Trust Administrator, on behalf of the Trustee, has not been delivered to the Custodian on the date of the transfer of ownership of such Mortgage Loan to the Trustee because it is in the process of being recorded, the Servicer shall, within five Business Days after its receipt of the original recorded document, deliver it to the Custodian. The Servicer shall promptly deliver to the Custodian any other Mortgage Loan Document to be included in an Owner Mortgage Loan File, charged to the custody of the Custodian, that comes into Servicer's possession. 9.1.3. Release of Documents from Owner Mortgage Loan File or Retained Mortgage Loan File. In the event any document contained in an Owner Mortgage Loan File or, after the Document Transfer Event, a Retained Mortgage Loan File, is needed by the Servicer for the proper servicing of a Mortgage Loan, the Servicer must send to the Trustee or the Custodian, as the case may be, two copies of a Request for Release as defined in the Pooling and Servicing Agreement of documents. The Master Servicer hereby authorizes the Trustee or the Custodian, as the case may be, to release such Owner Mortgage Loan Files or Retained Mortgage Loan Files after receipt of such Servicer's request (i) upon payment in full of such Mortgage Loan, (ii) when necessary for foreclosure or (iii) for such other cause as the Master Servicer deems appropriate, in its reasonable discretion. The Servicer shall be responsible for such Mortgage Loan Documents while they are in its possession and will be deemed to hold such Owner Mortgage Loan Files or Retained Mortgage Loan Files in trust for the benefit of the Trustee. If such Mortgage Loan has not been paid in full or otherwise liquidated, the Servicer shall promptly return such Owner Mortgage Loan Files or Retained Mortgage Loan Files when they are no longer required. Notwithstanding the foregoing, unless such Mortgage Loan has been liquidated or the related Owner Mortgage Loan Files or Retained Mortgage Loan Files have been delivered to an attorney, a public trustee or other public official in order to foreclose on the related Mortgaged Property, all such Owner Mortgage Loan Files or Retained Mortgage Loan Files released by the Trustee or the respective Custodian, as the case may be, must be returned within 60 calendar days after their release. 9.1.4. Execution by Trustee. In the event the Trustee's signature is required on any document with respect to a Mortgage Loan for any reason, including payment in full, assumption or foreclosure, the Servicer shall deliver to the Trustee a written notice requesting that the Trustee execute such documents and certifying as to the reason such documents are required. Upon receipt of such executed documents, the Servicer shall record, file or deliver such documents as appropriate for the proper servicing of such Mortgage Loan. 9.1.5. Representing Party Officers' Certificate. If it is necessary for the respective Representing Party to deliver an Officers' certificate with respect to the existence of a Title Insurance policy or a Primary Mortgage Insurance policy for several Mortgage Loans, the Master Servicer may consent to the delivery of a single Officers' certificate of the respective Representing Party for a schedule of mortgage loans in lieu of a separate Officers' certificate for each such Mortgage Loan. 9.1.6. Custodial Fees. The Servicer is responsible for the related ongoing fees of each Custodian. If for any reason at any time the Master Servicer pays custodial fees (including any payment made by the Master Servicer pursuant to Section 3.4 of the Custodial Agreement), the Servicer will promptly reimburse the Master Servicer for such payments. Section 9.2 Servicer Mortgage Loan Files 9.2.1. Servicer Mortgage Loan File Requirements. The Servicer must maintain a Servicer Mortgage Loan File for each Mortgage Loan, which may be distributed among several different files, each of which shall be clearly marked with the Servicer Loan Number and shall be readily accessible to the Master Servicer during regular business hours, that includes the following: (a) copies of each of the documents listed in Section 2.01 of the Pooling and Servicing Agreement that are held by the Custodian as part of the Owner Mortgage Loan File or Retained Mortgage Loan File, if applicable; (b) where such coverage is not provided under a blanket policy maintained by the Servicer, an original Hazard Insurance policy, or a copy thereof, or a certificate of insurance issued by the applicable insurer or its agent indicating such a policy is in effect for the related Mortgaged Property; (c) a Flood Insurance policy or a certificate of insurance issued by the insurer or its agent indicating that such a policy is in effect with respect to the related Mortgaged Property, if Flood Insurance is required pursuant to the provisions of Section 15.4 or Section 16.6 hereof for such Mortgaged Property; (d) originals or copies of all documents submitted to a Primary Mortgage Insurer for credit and property underwriting approval with respect to the related Mortgaged Property, if Primary Mortgage Insurance is required pursuant to the provisions of Section 15.2 hereof for such Mortgaged Property; (e) the originals of all RESPA and Regulation Z disclosure statements executed by the Borrower with respect to such Mortgage Loan; (f) the related Appraisal Report made at the time such Mortgage Loan was originated; (g) the HUD-1 or other settlement statement for the purchase or refinance, as the case may be, of the Mortgaged Property by the Borrower and mortgagor under the related Mortgage Note and Security Instrument with respect to such Mortgage Loan; (h) evidence of any tax service contract, if any; (i) copies of documentation, including the appropriate approval by the Master Servicer, relating to any modifications to the related original Mortgage Loan Documents; (j) documentation, including the appropriate approval by the Master Servicer, relating to any releases of any collateral supporting such Mortgage Loan; (k) collection letters or form notices sent to the Borrower with respect to such Mortgage Loan, but only if the Servicer does not maintain separate collection files, including all collection letters or notices, indexed by Borrower; (l) foreclosure correspondence, bankruptcy correspondence and legal notifications, if applicable with respect to the related Mortgaged Property; and (m) all other related Mortgage Loan Documents which are customarily maintained in accordance with Prudent Servicing Practices in a mortgage loan file in order to properly service a mortgage loan including, without limitation, documents regarding title claims. 9.2.2. Servicer Mortgage Loan File Access. The Servicer acknowledges that each Servicer Mortgage Loan File shall be held in trust for the Trustee. The Servicer further acknowledges that the Master Servicer may, from time-to-time, request immediate delivery of any or all Mortgage Loan records and documents to the Master Servicer, the Trustee, the Custodian or another entity designated by the Master Servicer, and the Servicer shall thereupon immediately deliver such records and documents, at the expense of the Servicer. The Servicer agrees to permit the Master Servicer, from time to time to conduct audits or inspections of any Servicer Mortgage Loan Files at one or more of the Servicer's offices during normal business hours with advance notice. The Servicer must grant the Master Servicer access to all books, records and files relating to the Servicer's systems and procedures for servicing Mortgage Loans as to all Servicer Mortgage Loan Files or to the Servicer's compliance with the terms and conditions of this Agreement. 9.2.3. Alternate Media. Subject to any applicable law concerning document retention requirements, the Servicer may maintain any Servicer Mortgage Loan File, or any portion thereof, on microfilm, microfiche, optical storage or magnetic media and may retain the microfilm, microfiche, optical storage or magnetic media in lieu of hard copies of the documents required to be maintained in such Servicer Mortgage Loan Files. The following requirements must be met: (a) the process must accurately reproduce originals onto a durable medium; (b) unless the Master Servicer provides otherwise by notice to the Servicer, the Master Servicer Loan Number must be clearly marked on the copies or optical storage or magnetic media; (c) the copies or optical storage or magnetic media must be easily transferable to legible hard copies of the material relating to the Mortgage Loans; and (d) backup copies of the microfilm, microfiche, optical storage or magnetic media must be made by the Servicer and retained off-site to protect against fire and other hazard losses. If the copies, optical storage or magnetic media become damaged or lost for any reason, the Servicer must bear the entire cost of restoring each Servicer Mortgage Loan File and any other related documents which had been transferred to microfilm, microfiche, optical storage or magnetic media. The Servicer also must bear all costs of reproducing legible hard copies reasonably requested by the Master Servicer. The Master Servicer may reasonably request copies of any Servicer Mortgage Loan File in optical storage or magnetic media which the Servicer has previously transferred to magnetic media or optical storage, as the case may be. The Servicer shall furnish to the Master Servicer optical storage or magnetic media copies of the requested Servicer Mortgage Loan File in such format as maintained by the Servicer at the Servicer's expense. Section 9.3 Requisite Form 9.3.1. Form of Endorsements. Except for endorsements in blank, the Servicer shall require that endorsements of any Mortgage Notes comply with the format specified in Section 2.01(c) of the Pooling and Servicing Agreement. 9.3.2. Form of Assignment. Except for assignments in blank or in the case of any Security Instrument registered in the name of MERS, the Servicer shall require that assignments of any Security Instrument comply with the following format specified in Section 2.01(c) of the Pooling and Servicing Agreement. ARTICLE 10 Escrows Section 10.1 Escrow Criteria 10.1.1. Escrow Requirement. Unless, (a) at the origination of a Mortgage Loan the Borrower is not required to make Escrow Item payments thereafter, (b) Escrow Funds collection has been waived pursuant to Section 10.5.1 hereof, or (c) the collection of Escrow Funds is precluded by applicable law, the Servicer must continue to collect 1/12th of the annual total for all Escrow Items with each Monthly Payment on such Mortgage Loan, as determined pursuant to Section 10.3.1 hereof. 10.1.2. Mortgage Loans without Escrow. If the Servicer is not required to collect Escrow Funds on a Mortgage Loan, the Servicer shall require proof of payment of all taxes, ground rents, assessments, insurance or other charges, or use other means commonly used in the mortgage industry to ascertain that such items are paid on a timely basis. Section 10.2 Payment of Escrow Items 10.2.1. Escrow Payment Obligation. Where the Servicer is responsible for the collection of Escrow Funds with respect to a Mortgage Loan, the Servicer shall promptly pay all bills for any Escrow Items in such a manner as to avoid late charges or penalties and to take advantage of any available discount. 10.2.2. Escrow Item Payments. Where (a) the Servicer has been collecting Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has not been obliged to make Escrow Funds payments or such payments have been waived and such Borrower has failed to timely pay obligations which otherwise would be Escrow Items, the Servicer must pay any obligation (i) which could become a first lien on the related Mortgaged Property, or (ii) to maintain in force the applicable Insurance Policies. Where Escrow Funds are maintained by the Servicer, such obligations should be paid from the Borrower's Escrow Funds, or in accordance with Section 10.2.3 hereof. 10.2.3. Escrow Fund Insufficiency. When a Borrower's Escrow Funds are insufficient to pay taxes, assessments and premiums, when due, subject to applicable law, the Servicer must attempt to obtain the additional funds from such Borrower. If sufficient additional funds have not been recovered by the time the payment is due, the Servicer must advance its own funds to ensure prompt payment. The Servicer may elect to advance funds prior to attempting to obtain the additional funds from such Borrower; however, to the extent permitted by applicable law, the Servicer shall thereafter attempt to obtain the advanced funds from the Borrower or collect such advanced funds as described in Section 10.3.3. 10.2.4. Nonpayment Notice. The Servicer must notify the Master Servicer immediately of any Escrow Item that does not conform to either FNMA or FHLMC standards. Section 10.3 Escrow Fund Determination 10.3.1. Escrow Funds Analysis. Subject to all applicable Federal, State and local laws, the Servicer must conduct an analysis of each Borrower's Escrow Funds at least annually to determine the monthly deposits which must be made by such Borrower. The analysis shall be performed based upon (a) reasonable projections of the expenses to be paid from the Escrow Funds and (b) that as such expenses come due, the Escrow Funds balance shall at all times be sufficient to effect the payment of such expenses, unless a lower amount is required by applicable law. Each Borrower must receive a statement of this analysis. The analysis also must determine whether there is a surplus or deficiency in such Borrower's Escrow Funds. 10.3.2. Escrow Fund Surplus. A surplus in a Borrower's Escrow Funds shall be refunded to such Borrower or taken into consideration in determining the amount to be collected for Escrow Funds. 10.3.3. Escrow Fund Deficiency. Where it is determined that a deficiency exists in such Borrower's Escrow Funds, such Borrower may be requested to pay the shortage in full or the deficiency may be taken into consideration in determining the amount to be collected for Escrow Funds during the next twelve months. Section 10.4 Records 10.4.1. Escrow Funds Records. The Servicer shall keep records of Escrow Funds collected from each Borrower. 10.4.2. Escrow Obligations Records. The Servicer must maintain accurate records of the imposition of Escrow Item obligations and the payment of Escrow Items. Section 10.5 Escrow Waiver 10.5.1. Waiver Conditions. For any Mortgage Loan (other than a GPM or GPARM Loan which provides for negative amortization in the future) that has amortized down so that its current LTV is 80% or less, the Servicer may waive the Borrower's future obligation to make Escrow Funds payments provided: (a) the Unpaid Principal Balance of such Mortgage Note divided by the value of the Mortgaged Property based on an appraisal made within 60 days of the date of determination is 80% or less; (b) such Mortgage Loan is at least 12 months old; and (c) such Mortgage Loan has not been more than 30 days delinquent during the preceding 12 months. 10.5.2. Waiver Rescission. The Servicer shall enforce the Escrow Funds requirements with respect to any Mortgage Loan if the related Borrower fails to act responsibly in making the required payments. ARTICLE 11 Collection and Servicing Practices Section 11.1 General Servicing Requirements 11.1.1. Servicing Practices. The Servicer agrees to service Mortgage Loans in accordance with the requirements of this Agreement. In general, where not otherwise expressly required by the provisions of this Agreement, the Servicer shall service the Mortgage Loans in accordance with Prudent Servicing Practices and generally in accordance with FNMA guidelines. As to each Mortgage Loan, the Servicer shall take all such actions as may be necessary to preserve the lien of the related Security Instrument upon the related Mortgaged Property. 11.1.2. Tax Returns and Other Reports. Unless otherwise instructed by notice from the Master Servicer, the Servicer shall forward to each Mortgagor such forms and furnish such information within the control of the Servicer as are required by the Code to be furnished to them and shall prepare and file annual reports required by the state authorities. By way of example, the Servicer shall provide the Mortgagors with the reports required under Code Sections 6050H (e.g., reporting on Form 1098 any mortgage interest, including points, received and any reimbursements of qualified mortgage interest) and 6050J (Abandonments and Foreclosure of Real Property, Form 1099-A). 11.1.3. Servicer Internal Controls. The Servicer shall maintain at all times an adequate system of audit and internal controls in accordance with Prudent Servicing Practices. 11.1.4. Pool Insurance Compliance. Notwithstanding any other provision of this Agreement, the Servicer shall at all times comply with all applicable Pool Insurance policy requirements so as to assure the full benefit of such Pool Insurance policy to the Trustee. 11.1.5. Primary Mortgage Insurance Compliance. Notwithstanding any other provision of this Agreement, the Servicer shall at all times comply with all applicable Primary Mortgage Insurance policy requirements so as to assure the full benefit of such Primary Mortgage Insurance policy to the Trustee. 11.1.6. Letter of Credit Compliance. . Notwithstanding any other provision of this Agreement, the Servicer shall comply with all the requirements of any Letter of Credit so as to assure the full benefit of such Letter of Credit to the Trustee. Section 11.2 Delegation of Duties 11.2.1. Permissible Delegations. Without the written consent of the Master Servicer authorizing further delegations, the only servicing duties which the Servicer may elect to delegate, by agency, subcontract or otherwise, and the only categories of such delegees, are as follows: (a) professional collection agencies to perform those duties and functions for the collection of delinquent amounts due on any Mortgage Loan that are customarily performed by such agencies in the locality where the related Mortgaged Property are located; (b) title insurance companies, escrow companies and trust companies to issue or provide reports reflecting the condition of title to any Mortgaged Property and services incidental to the foreclosure or acquisition in lieu of foreclosure of any Mortgaged Property, or the sale or disposition of any Mortgaged Property acquired by the Servicer; (c) attorneys licensed to practice in the state where the related Mortgaged Property is located to perform customary legal services in connection with the foreclosure or acquisition of such Mortgaged Property or the sale or disposition of such Mortgaged Property acquired by the Servicer at or in lieu of foreclosure, or for the collection of delinquent sums owed on any Mortgage Loan; (d) professional property inspection companies and appraisers to conduct routine inspections of, and provide written inspection reports on, any Mortgaged Property as required by this Agreement; (e) title companies, escrow companies and real estate tax service companies to provide periodic reports as to the amount of real estate taxes due on any Mortgaged Property and the due date or dates of each required installment; (f) credit bureaus or credit reporting companies to provide credit reports on Borrowers or persons who have applied to assume any Mortgage Loans; (g) construction companies, contractors and laborers to provide labor, materials and supplies necessary to protect, preserve and repair any Mortgaged Property as required by this Agreement; (h) lock box providers or payment processing administrators to provide payment processing services; (i) hazard insurance servicing companies to provide periodic reports as to the amount of hazard insurance premiums due on any Mortgaged Property and the Due Date or Due Dates of each required premium payment; and (j) such other third party service providers as the Servicer, in accordance with Prudent Servicing Practices, may deem appropriate. 11.2.2. Delegee's Qualifications. The Servicer shall assure that each Person retained to provide any of the services set forth in Section 11.2.1 hereof is fully licensed and holds all required Federal, State or local governmental franchises, certificates and permits necessary to conduct the business in which he is engaged and that such Person is reputable, knowledgeable, skilled and experienced and has the necessary personnel, facilities and equipment required to provide the services for which he is retained. 11.2.3. Responsibility for Costs. Any Person retained in accordance with Section 11.2.1 hereof shall be retained solely for the Servicer's account and at the Servicer's sole expense and shall not be deemed to be an agent or representative of the Trustee, its successors or assigns, or the Master Servicer or its successors or assigns. 11.2.4. Servicer's Liability. The Servicer shall remain liable to the Master Servicer for the performance of the Servicer's duties and obligations under this Agreement, notwithstanding the delegation of any servicing function pursuant to this Section 11.2. Section 11.3 Due-on-Sale Clause Enforcement 11.3.1. Enforcement Requirement. The Servicer is required to enforce the Due-on-Sale Clause on any Mortgage Loan to the extent permitted by applicable law upon the transfer of title of the related Mortgaged Property unless (a) a Mortgage Loan is assumable pursuant to the terms of the related Mortgage Note Assumption Rider, or (b) enforcement of the Due-on-Sale Clause will jeopardize the Primary Mortgage Insurance coverage on such Mortgage Loan. 11.3.2. [Reserved. 11.3.3. Approval Requirement. In all circumstances of an unapproved transfer of a Mortgaged Property initiated by the Borrower, the Servicer is required to promptly notify, where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer, of such transfer and obtain written approval before initiating enforcement proceedings. 11.3.4. Exempt Transactions. (a) The Servicer shall not be required to enforce the due-on-sale (or transfer) provision of this Agreement for certain types of property transfers or related transactions. The Servicer shall process these exempt transactions without the approval or notification of the Master Servicer. In each case, the Mortgaged Property shall remain subject to the lien of the related Mortgage Loan, and each transferee or grantee described below shall take subject to such lien. The following transactions shall be deemed to be exempt transactions and shall require the review and approval of the Servicer only prior to transfer: (i) a transfer of the Mortgaged Property to the surviving party on the death of a joint tenant or a tenant by the entirety; (ii) a transfer of the Mortgaged Property to a junior lienholder as the result of a foreclosure or the acceptance of a deed in lieu of foreclosure for the subordinate mortgage; (iii) a transfer of the Mortgaged Property (or, if the Borrower is an inter vivos revocable trust, a transfer of a beneficial interest in such trust) to a relative of a deceased Borrower (or, in the case of an inter vivos revocable trust Borrower, to a relative of the individual who established the trust), provided that the transferee will occupy the Mortgaged Property; (iv) a transfer of the Mortgaged Property (or, if the Borrower is an inter vivos revocable trust, a transfer of a beneficial interest in such trust) to the spouse, child(ren), parent(s), brother(s), or sister(s), grandparent(s), or grandchild(ren) of the Borrower (or, in the case of an inter vivos revocable trust Borrower, of the individual who established the trust), provided that the transferee will occupy the Mortgaged Property; (v) a transfer of the Mortgaged Property (or, if the Borrower is an inter vivos revocable trust, a transfer of a beneficial interest in such trust) to a spouse of the Borrower (or, in the case of an inter vivos revocable trust Borrower, of the individual who established the trust) under a divorce decree or legal separation agreement or from an incidental property settlement agreement, provided that the transferee will occupy the Mortgaged Property; (vi) a transfer of a Mortgaged Property that is jointly owned by unrelated co-borrowers from one of the Borrowers to the other, provided that the Borrower who is gaining full ownership of the Mortgaged Property shall continue to occupy it and the transfer occurs after at least 12 months have elapsed since the Mortgage Loan was closed; (vii) a transfer of the Mortgaged Property (or, if the Borrower is an inter vivos revocable trust, a transfer of a beneficial interest in such trust) into an inter vivos revocable trust (or, if the Borrower is an inter vivos revocable trust, into a new trust), so long as the Borrower (or the individual who established the original inter vivos revocable trust) will be the beneficiary of the trust and the occupant of the Mortgaged Property; (viii) the granting of a leasehold interest in the Mortgaged Property that has a term of three or fewer years and does not provide an option to purchase the Mortgaged Property, or a renewal option that would allow the term to extend beyond three years; (ix) the creation of a subordinate lien upon the Mortgaged Property, provided that there is no transfer of occupancy rights therein; or (x) the creation of a purchase money security interest for household appliances which are situated in or upon the Mortgaged Property. (b) If the individual or entity transferring the Mortgaged Property requests a release of liability, the Servicer must review the credit and financial capacity of the individual or entity receiving the Mortgaged Property. The Servicer may approve the release of liability if it believes the recipient is capable of assuming the mortgage obligations and, where applicable, with the consent of the respective Primary Mortgage Insurer and/or the respective Pool Insurer. If the Servicer does not believe that the recipient is credit worthy or if the consent of the respective Primary Mortgage Insurer and/or the respective Pool Insurer is required but not obtained, the Servicer shall deny the request for the release of liability, although the transfer may still be processed without the release. If the request is denied based solely on the Primary Mortgage Insurer's or the respective Pool Insurer's decision, the denial letter should state that fact. (c) The Servicer shall advise (i) each insurance company providing Hazard Insurance and Flood Insurance, where applicable, (ii) the relevant tax authorities, where applicable, (iii) the respective Primary Mortgage Insurer and/or the respective Pool Insurer and (iv) other interested parties when it processes transactions under this Section 11.3.4. The Master Servicer does not need to be notified about such a transaction unless the Servicer agrees to a release of liability under Section 11.3.4(b). Section 11.4 Assumptions 11.4.1. Assumption Requirements. Any Assumption permitted under this Agreement shall be performed in accordance with Prudent Servicing Practices. In connection with an Assumption of an assumable Mortgage Loan, the Servicer shall process such Assumption as provided for in the Mortgage Note or the Mortgage Note Assumption Rider and shall verify that: (a) no material term of the Mortgage Note (including, but not limited to, the Mortgage Interest Rate, the remaining term to maturity, the Gross Margin, the Index, the Maximum Lifetime Mortgage Interest Rate, the Minimum Lifetime Mortgage Interest Rate, and any Periodic Rate Cap or any Periodic Payment Cap) may be changed in connection with such Assumption; (b) that the new Borrower qualifies for credit under the Master Servicer's criteria and standards for similar loans; (c) where applicable, the respective Primary Mortgage Insurer, and/or the respective Pool Insurer has in advance approved in writing such Assumption of such Mortgage Loan by the new Borrower and such Mortgage Loan will continue to be insured by such Primary Mortgage Insurer and/or such Pool Insurer; (d) the documents relating to such Assumption (i) create a valid and enforceable promise to pay the Unpaid Principal Balance of the related Mortgage Loan, together with interest thereon in accordance with the related Mortgage Note by the new Borrower and (ii) the related Security Instrument continues to evidence a valid and perfected first lien on the related Mortgaged Property; and (e) such Mortgage Loan will continue to be a valid first priority security interest upon the related Mortgaged Property. 11.4.2. Approval and Release. In connection with an Assumption of an assumable Mortgage Loan and in accordance with the provisions of the related Mortgage Loan Documents, upon such verification, (a) the Servicer may approve such Assumption and (b) only with the prior written approval of, where applicable, the Primary Mortgage Insurer and/or the Pool Insurer, unless such approval is precluded by the terms of the Mortgage Loan Documents, release the previous Borrower from liability. 11.4.3. Assumption Agreement Provided to Custodian. The Servicer shall provide to the Custodian the original assumption agreement. 11.4.4. Assumption Fees. Subject to applicable law or regulation and the provisions of the related Mortgage Note, the Servicer may charge the Borrower and retain a reasonable and customary assumption fee. Such fee is receivable only from the Borrower directly and may not be withdrawn from any of the custodial accounts maintained hereunder. 11.4.5. Disclosure Requirement. In connection with an Assumption of an assumable Mortgage Loan, the Servicer shall make all disclosures required by applicable law. Section 11.5 Partial Releases and Easements 11.5.1. Prerequisites. The Servicer must take the following actions prior to permitting the grant of a partial release of a Mortgaged Property from the lien of the related Security Instrument, easement, consent to substantial alterations and any other changes affecting the related Mortgage Loan or such Mortgaged Property: (a) where applicable, obtain the respective Primary Mortgage Insurer's and/or the respective Pool Insurer's prior written approval; (b) if the value of the released property is more than five thousand ($5,000) dollars, obtain an acceptable Appraisal Report showing the current market value of such Mortgaged Property before and after the release and showing individually both the value of the land and of the improvements thereon; (c) ensure that any and all cash consideration received at least equals the current market value of property or rights to be released regarding such Mortgaged Property; (d) ensure that any and all cash consideration received is applied to the Unpaid Principal Balance of such Mortgage Loan to the extent of the diminution of the value of such Mortgaged Property; (e) cause all legal documents for the transaction to be reviewed; (f) ensure that such Mortgaged Property, following such release or change, adequately secures the Unpaid Principal Balance of the Mortgage Loan and accrued interest thereon and that the related Loan-to-Value ratio will not be greater than 80%, after giving effect to clause (d) hereof; and (g) obtain written notification from the respective Title Insurer that the related Title Insurance policy remains fully in effect with respect to such Mortgaged Property, as modified, following such release or change. 11.5.2. Release or Modification of Lien. With the consent, where applicable, of the respective Primary Mortgage Insurer, and/or the respective Pool Insurer, the Servicer may approve applications for partial release of a Mortgaged Property from the lien of the related Security Instrument, easements, consent to substantial alterations and any other changes affecting the related Mortgage Loan or such Mortgaged Property if the perquisites in Section 11.5.1 have been satisfied. 11.5.3. Master Servicer's Approval. If the Servicer is not able to meet the prerequisites specified in Section 11.5.1 or if the amount of consideration received is less than the reduction in the value of the Mortgaged Property due to the partial release or other changes, the Servicer must obtain the approval of the Master Servicer prior to permitting an application described in Section 11.5.2. The Servicer shall furnish such information as the Master Servicer shall request in connection with an application under this Section 11.5.3. Section 11.6 Recordation of Assignments 11.6.1. Recordation Requirement. The Servicer must, at its own expense, record the Assignment of each Security Instrument (other than with respect to any Mortgage Loan registered in the name of MERS) to the Trustee or, if applicable, to the Trust Administrator on behalf of the Trustee, as well as any previously unrecorded intervening Assignments. In the case of any Mortgage Loan registered in the name of MERS, the Servicer shall take all actions as are necessary to cause the Trustee or, if applicable, to the Trust Administrator on behalf of the Trustee, 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. If any Security Instrument or Assignment is not recorded within the later to occur of (i) the date 120 days after the acquisition of the a Mortgage Loan by the Trustee or, if applicable, the Trust Administrator on behalf of the Trustee, if the Servicer has been servicing such Mortgage Loan from the Trustee's or, if applicable, the Trust Administrator's date of acquisition or (ii) the date 120 days after the date the Servicer began servicing such Mortgage Loan, the Master Servicer shall have the right to so effect such recordation at the Servicer's expense. 11.6.2. Extension of Recording Period. The time to record an Assignment of a Security Instrument may be extended from the end of permissible recordation period set forth in Section 11.6.1 if the Servicer provides an Officer's certificate acceptable to the Master Servicer certifying that the Servicer has used its best efforts to complete the recordation process for the Security Instrument and/or Assignment, as applicable, and that the factors preventing completion of the recordation process are beyond the Servicer's control. 11.6.3. Delivery Requirement. Promptly following the recordation of any Security Instrument or an Assignment, the Servicer shall deliver to the Custodian, unless otherwise directed in writing by the Master Servicer, such Security Instrument or Assignment bearing evidence of recordation or, if the original Security Instrument or Assignment is retained by the recording office, a certified copy of the original recorded Security Instrument or Assignment. 11.6.4. Waiver of Recordation. The Master Servicer shall generally require the Servicer to record an Assignment of the Security Instrument for each Mortgage Loan to the Trustee or, if applicable, to the Trust Administrator on behalf of the Trustee. However, the recordation requirement with respect to an Assignment may be waived for a Mortgage Loan if (a) the related Mortgaged Property is in a state in which recordation of such an Assignment is not required to protect the Trustee's right, title and interest in and to the related Mortgage Loan and the Depositor or the Servicer has delivered to the Master Servicer an Opinion of Counsel, acceptable to the Master Servicer, to that effect or (b) the Master Servicer has been advised by the Depositor that the nonrecordation of an Assignment in a state will not result in a reduction of the rating assigned by each Rating Agency at the time of the initial issuance of the Wells Fargo Asset Securities Corporation, Mortgage Asset-Backed Pass-Through Certificates, Series 20 - . Section 11.7 General Servicing Considerations 11.7.1. Abandonment. If the Servicer discovers that any Mortgaged Property is not occupied, the Servicer must immediately attempt to contact the Borrower in order to determine the reason for the vacancy. If the Servicer determines that such Mortgaged Property has been abandoned, the Servicer, at its own expense, must take all necessary actions to protect such Mortgaged Property from waste, damage and vandalism. Such expenses shall be recoverable by the Servicer solely from the Liquidation Proceeds of the related Mortgage Loan, if any, or directly from the Borrower. 11.7.2. Buydown Funds. The Servicer must distribute any Buydown Funds in each Custodial Buydown Account in accordance with the terms of the applicable Buydown Agreement. 11.7.3. Maintenance of Records. Based upon information obtained pursuant to its obligations under Section 12.2.6, the Servicer shall maintain accurate records of the occurrence of any of the following: (a) deterioration of, waste of, or lack of repair to, any Mortgaged Property, which materially and adversely affects the Value of such Mortgaged Property and the Borrower refuses or is not financially able to make the necessary repairs; (b) sale or transfer of any Mortgaged Property in a manner not approved by the Servicer pursuant to the provisions of this Agreement; (c) material litigation involving any Mortgaged Property; (d) abandonment of any Mortgaged Property; (e) a material default, determined in accordance with Prudent Servicing Practices, under the terms of any Security Instrument, Mortgage Note, Condominium Project or PUD constituent document or similar obligations of a Borrower; or (f) any other situation that may materially and adversely affect the value of any Mortgage Loan. 11.7.4. Eminent Domain. The Servicer must submit appropriate recommendations and documentation to, where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer, of any taking by eminent domain if: (a) the Mortgaged Property will be taken in whole and the consideration to be paid to the Borrower will be insufficient to satisfy the Unpaid Principal Balance (plus any unreimbursed Advances) of the related Mortgage Loan, or (b) the Mortgaged Property will be taken in part and (i) the ratio of the (A) Unpaid Principal Balance (plus any unreimbursed Advances) of the Mortgage Loan to (B) the Current Value of the remaining Mortgaged Property is higher than (ii) the LTV ratio of the Mortgage Loan immediately before the taking, even after applying any consideration to the Unpaid Principal Balance of the Mortgage Loan. The Servicer must take all steps necessary to prevent loss of any Primary Mortgage Insurance or Pool Insurance benefits due to any taking by eminent domain. 11.7.5. Late Charges. Late charges may not be assessed unless a Borrower failed to make payments in accordance with the Mortgage Note. Section 11.8 Borrower Bankruptcy 11.8.1. Servicer's Duty. The Servicer shall be responsible for representing the interests of the Trustee in any bankruptcy proceedings involving a Borrower. 11.8.2. Responsibility for Costs. The costs of protecting the interests of the Trustee shall be advanced by the Servicer and are not (a) chargeable to the related Borrower's Escrow Funds or (b) reimbursable from the Master Servicer. 11.8.3. Challenge Bankruptcy Reductions. If the bankruptcy judge or trustee should propose to (a) reduce the Unpaid Principal Balance of a Mortgage Note, (b) reduce the related Mortgage Interest Rate, (c) extend the final maturity of such Mortgage Note, or (d) reduce the level of any monthly payment on such Mortgage Note, the Servicer shall (i) challenge any such modification on a timely basis and (ii) exercise reasonable judgment to protect the interests of the Trustee. 11.8.4. Bankruptcy Adjustments. If the action of any court results in a Deficient Valuation or Debt Service Reduction, the Servicer shall provide a calculation of the effects of such modification notifying the Master Servicer of the new principal balance, Mortgage Interest Rate, new final maturity, or monthly payment level, as the case may be, of such Mortgage Loan. 11.8.5. Bankruptcy Plan Surveillance. With respect to each Mortgage Loan which is the subject of a Deficient Valuation or a Debt Service Reduction, the Servicer shall verify that payments are being made in accordance with the plan approved in the related bankruptcy proceedings. ARTICLE 12 Delinquency Management Section 12.1 In General 12.1.1. Servicing Practices. The provisions set forth in this Article constitute the minimum guidelines and procedures for servicing Delinquent Mortgage Loans. The Servicer must use collection procedures which meet or exceed these guidelines. The Servicer's procedures must be sufficient for promptly dealing with delinquencies. The Master Servicer retains the right to require the Servicer to perform additional collection procedures which the Master Servicer deems, in its reasonable discretion, necessary to realize the objectives set forth herein or otherwise to protect the interests of the Trustee. 12.1.2. Servicer's Capabilities. The Servicer's collection staff must be sufficiently skilled in financial counseling and mortgage servicing techniques to assist a Borrower to bring his Mortgage Loan current and to protect his equity and credit rating, while at the same time protecting the interests of the Trustee and of the Master Servicer. 12.1.3. Servicing Objectives. The purpose of any collection effort is to cure a Delinquency in the shortest possible time. The Servicer should treat each Delinquency individually. Discussions with the Borrower must cover the cause of such Delinquency and the time frame in which such Delinquency shall be cured. The Servicer should use notices, letters, telegrams, telephone calls, face-to-face contact and other responsible collection techniques consistent with Prudent Servicing Practices. The Servicer is required to maintain all collection records. The Servicer must vary its collection techniques to fit individual circumstances, avoiding a fixed collection pattern which may be ineffective in dealing with particular Borrowers. The Servicer should recognize the importance of telephone and face-to-face contact in any collection program. As part of its collection procedures, the Servicer shall closely monitor all newly originated Mortgage Loans. 12.1.4. Servicer's Expenses. Unless otherwise specified, the cost of any of the servicing procedures detailed in this Agreement shall be borne solely by the Servicer. The Servicer may not charge such expenses against the Borrower's Escrow Funds. The foregoing shall not preclude the Servicer from recovering such expenses from the Borrower to the extent permitted by applicable law and the related Mortgage Loan Documents. Section 12.2 Delinquency Servicing Procedures 12.2.1. Late Notice. A late notice shall be mailed by the Servicer to the Borrower by the 18th day of such Delinquency. 12.2.2. Telephonic Inquiry. The Servicer shall use best efforts to make telephone contact with the Borrower by the 22nd day of such Delinquency. 12.2.3. Notice of Default. Notification of default of such Mortgage Loan shall be mailed by the Servicer to the Borrower by the 35th day of such Delinquency. 12.2.4. Borrower Interview. The Servicer shall comply with applicable FNMA and FHLMC requirements with regard to Borrower interviews. 12.2.5. Continuing Contacts. If satisfactory arrangements have not been made to cure such Delinquency by the 90th day, the Servicer must continue to contact the Borrower until either the related Mortgage Loan has been brought current or the Servicer has made the decision to commence foreclosure of such Mortgaged Property or other action. 12.2.6. Property Inspection. The Servicer is required to inspect each Delinquent Mortgaged Property at such time and in such manner as is in accordance with Prudent Servicing Practices. The Servicer must prepare a Property Inspection Report following each inspection. All Property Inspection Reports must be retained by the Servicer and copies thereof must be forwarded to the Master Servicer promptly upon request. All expenses related to the foregoing shall be recoverable by the Servicer from the Principal or from Liquidation Proceeds, Insurance Proceeds, payments on the related Mortgage Loan or any other source relating to the related Mortgage Loan or the related Mortgaged Property. The foregoing shall not preclude the Servicer from recovering such expenses from the Borrower to the extent permitted by applicable law and the related Mortgage Loan Documents. Section 12.3 Relief of Borrowers 12.3.1. Servicer's Role. The Servicer shall be readily available to Borrowers to offer skilled financial counsel and advice and shall make personal contact with delinquent Borrowers as often as possible to achieve a solution that will bring the Mortgage Loan current as soon as possible. The Servicer shall be fully familiar with the form of relief to Borrowers provided for herein and shall employ such relief. 12.3.2. Servicer's Discretion. The Servicer shall have reasonable discretion to extend appropriate relief to Borrowers who encounter hardship and who are cooperative and demonstrate proper regard for their obligations. However, no such relief shall be granted to any Borrower under a Mortgage Loan unless the Servicer reasonably believes that there is a reasonable expectation that such Borrower shall bring his Mortgage Loan current within a period conforming to acceptable servicing practices; provided that such period will not exceed 21 months from the Due Date of the earliest unpaid installment and will not result in a "significant modification" of the Mortgage Loan under the REMIC Provisions. 12.3.3. Relief Requirement. Prior to granting relief with respect to a delinquent Mortgage Loan as herein provided, the Servicer shall ascertain that (i) the reasons for the default and (ii) the attitude and circumstances of such Borrower justify the relief to be granted. 12.3.4. Primary Mortgage Insurance Considerations. Where applicable, the Servicer shall satisfy all requirements under the applicable Primary Mortgage Insurance policy regarding the relief granted with respect to a delinquent Mortgage Loan. 12.3.5. Responsibility for Costs. The Servicer is responsible for collection from such Borrower of any recording or similar costs or expenses incidental to the granting of relief with respect to a delinquent Mortgage Loan. 12.3.6. Forbearance Plan. (a) Where relief is appropriate, the Servicer shall arrange with a Borrower a "Forbearance Plan" giving such Borrower a definite period in which to reinstate his Mortgage Loan by immediately commencing payments in excess of the regular Monthly Payments. Without the prior written consent of the Master Servicer, special forbearance relief agreements reducing or suspending the regular Monthly Payment of the related Mortgage Loan for a specified period of time are not permitted. To the extent that (i) the priority of the lien represented by such Mortgage Loan remains in effect and is not adversely affected, (ii) where applicable, the related Primary Mortgage Insurance policy remains in full force and effect and (iii) where applicable, the related Pool Insurance policy remains in full force and effect, the Servicer, in its discretion, may enter into a Forbearance Plan that provides that the total amount owed during such Delinquency, including costs and expenses, will be repaid within the shortest period practicable, commencing immediately. With respect to such Mortgage Loan, the Forbearance Plan shall provide that such Delinquency will be cured within a period conforming to acceptable servicing practices; provided that such period will not exceed 21 months from the Due Date of the earliest unpaid installment and will not result in a "significant modification" of the Mortgage Loan under the REMIC Provisions. The Forbearance Plan for such Mortgage Loan shall be set forth in writing and executed by the Borrower and by the Servicer in the form of a letter agreement if the earliest unpaid installment is more than 60 days past due. (b) With the consent of the Master Servicer, the Servicer may modify the payment terms of Mortgage Loans that are in default, or as to which default is reasonably foreseeable; provided that no such modification shall reduce the Unpaid Principal Balance of such Mortgage Loan or permanently reduce the Mortgage Interest Rate of such Mortgage Loan; and provided further that prior to entering into any such modification the Servicer and the Master Servicer shall determine that such modification is likely to increase the proceeds of such Mortgage Loan over the amount expected to be collected pursuant to a foreclosure or other similar procedure. 12.3.7. Accommodation Limitations. No modification, recast, extension, or capitalization of delinquent payments of a Mortgage Loan other than as provided in Section 12.3.6 hereof shall be permitted with respect to a Mortgage Loan. 12.3.8. Pool Insurance Considerations. Where applicable, the Servicer shall satisfy all requirements under the applicable Pool Insurance policy regarding the relief granted with respect to a delinquent Mortgage Loan, including, without limitation, securing the prior written consent of the respective Pool Insurer regarding (a) any change in any term of such Mortgage Loan, (b) the release of the related Borrower from any liability related to such Mortgage Loan, or (c) the release of any portion of, or interest in, the Mortgaged Property from the lien of the related Security Instrument. Section 12.4 Special Delinquency Servicing Considerations 12.4.1. Advance Responsibility During Delinquency. In the event of a Delinquency with respect to a Mortgage Loan, the Servicer agrees to advance from its own funds the full amount of Monthly Payments (which may be net of the related Servicing Fee) for such Mortgage Loan. These advances shall provide the Trustee with a regular flow of funds on such delinquent Mortgage Loan. The advance obligation stated above is in addition to any other advance obligations which the Servicer has pursuant to the provisions of this Agreement. The Servicer must still advance funds in accordance with the provisions of this Agreement even if a forbearance has been granted. 12.4.2. Primary Mortgage Insurance Compliance. Where applicable, the Servicer shall be familiar with and shall satisfy all requirements of the applicable Primary Mortgage Insurance policy with respect to a delinquent Borrower. The Servicer shall have adequate controls to assure timely filing of all notices to the appropriate Primary Mortgage Insurer. The Servicer shall prepare and file all appropriate claims with respect to the applicable Primary Mortgage Insurance policy and the Servicer shall prepare and, upon request, deliver to the Master Servicer, copies of all claims forms and other papers received from or presented to any Primary Mortgage Insurer in connection with any claims presented under any such policy. 12.4.3. Pool Insurance Compliance. Where applicable, the Servicer shall be familiar with and shall satisfy all requirements of the applicable Pool Insurance policy with respect to a delinquent Borrower. The Servicer shall have adequate controls to assure timely filing of all notices to the appropriate Pool Insurer. Copies of all such notices shall be sent to the Master Servicer upon request. The Servicer shall prepare and file all appropriate claims with respect to the applicable Pool Insurance policy and the Servicer shall prepare and, upon request, deliver to the Master Servicer, copies of all claims forms and other papers received from or presented to any Pool Insurer in connection with any claims presented under any such policy. ARTICLE 13 Foreclosure Administration Section 13.1 Foreclosure Prerequisites 13.1.1. Foreclosure/Alternative to Foreclosure Initiation. (a) When a Borrower reaches the 90th day of Delinquency and the Servicer has exhausted all reasonable means of curing the Delinquency, the Servicer shall either begin the foreclosure process or suggest an alternative to foreclosure in accordance with Prudent Servicing Practices. In conjunction with the Servicer's decision to begin the foreclosure action or seek an alternative to foreclosure, the Servicer shall provide written notice to, where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer no later than ten days after the initiation of foreclosure proceedings or the alternative to foreclosure. Notwithstanding anything to the contrary in this Section 13.1.1, the Master Servicer may direct the Servicer to stop the foreclosure action or to modify any alternative to foreclosure. The Servicer shall prepare all necessary documentation to initiate the foreclosure proceedings. (b) Notwithstanding anything to the contrary in this Section 13.1, if the Master Servicer has entered into a special servicing agreement pursuant to Section 3.08 of the Pooling and Servicing Agreement, the Master Servicer may direct the Servicer to commence foreclosure proceedings as contemplated by such special servicing agreement. 13.1.2. Foreclosure Expenses. All fees and expenses shall be consistent with FNMA standards and, where applicable, shall not exceed those permitted under the respective Pool Insurance policy and/or the respective Primary Mortgage Insurance policy. Fees in excess of the amount permitted by FNMA guidelines or extraordinary legal services must be approved in writing in advance, where applicable, by the respective Primary Mortgage Insurer or the respective Pool Insurer, as the case may be, if required by the applicable policy. All attorneys' fees, and other costs in excess of FNMA's standards in respect of any foreclosure or acquisition in lieu of foreclosure shall be identified in advance and a detailed estimate of the amounts thereof shall be set forth in the Servicer's written recommendation. The billing by a foreclosure attorney must demonstrate the appropriateness of any extraordinary fees by the services required. In cases of full or partial reinstatement of the related Mortgage Loan, the fees shall be reasonable and in proportion to the authorized fee for services rendered for a completed foreclosure. Unless otherwise expressly agreed in writing, neither the Master Servicer, any of its Affiliates, their respective officers, directors, employees, agents, successors or assigns, the Trustee nor, if applicable, the Trust Administrator shall be liable for any attorneys' fees, trustees' fees, witness fees, title search fees, court costs or other expenses incurred by the Servicer in respect of any foreclosure or acquisition in lieu of foreclosure, except to the extent that such fees, costs and expenses are fully reimbursable under a Primary Mortgage Insurance policy and in fact are reimbursed. 13.1.3. Hazardous Wastes. In the event that the Mortgaged Property, related to a Mortgage Loan which is being considered for liquidation by foreclosure or the transfer of a deed-in-lieu of foreclosure, contains, and the Servicer has reason to believe that it contains, hazardous or regulated substances which may impose liability, for damages, remediation or otherwise, upon the owner of such Mortgaged Property pursuant to Federal, State or local law, the Servicer shall not, except with the express prior written approval of the Master Servicer, which approval makes specific reference to the presence of such hazardous or regulated substances, undertake or continue the process of foreclosure with respect to such Mortgaged Property. Section 13.2 Deed-in-Lieu of Foreclosure 13.2.1. Conditions. If the Master Servicer and the respective Primary Mortgage Insurer and/or the respective Pool Insurer, if applicable, have approved the liquidation of a Mortgage Loan by accepting a deed-in-lieu of foreclosure of the related Mortgaged Property, the Servicer may accept such deed without any further action or approval by the Master Servicer or, where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer, provided that: (a) the Servicer determines that the pursuit of a deficiency judgment is not practical or warranted; (b) the Mortgaged Property has been listed for sale at a market value for three months or more without a reasonable sales offer; (c) there reasonably appear to be legal impediments to pursuing foreclosure; (d) the acceptance of the deed-in-lieu of foreclosure will enable the Trustee to acquire the Mortgaged Property earlier than under a foreclosure action; (e) the Borrower acknowledges in writing that the deed is being accepted as an accommodation to him or her; (f) where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer has agreed to the acceptance of a deed-in-lieu; (g) the Borrower has not received cash consideration to deed the Mortgaged Property over to the Trustee, unless the Master Servicer otherwise approves; (h) the Borrower can convey acceptable marketable title, evidenced by a Title Insurance policy; (i) the Mortgaged Property is vacant (unless, where applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer has agreed to accept an occupied property); (j) the Mortgaged Property is not subject to liens (held by others), judgments, or attachments; and (k) the Borrower agrees to assign and transfer to the benefit of the Trustee, where applicable, any rents if the Mortgaged Property is rented, and the Servicer agrees to collect any rental income. 13.2.2. Subsequent Actions. Upon acquisition by the Trustee, the Servicer shall promptly notify, if applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer, indicating the details of the transaction and reasons for the conveyance and providing such other information as is required under a Primary Inspection Report to, if applicable, the Primary Mortgage Insurer and/or the Pool Insurer. Title shall be conveyed directly from the Borrower to the Trustee or to such other Person designated by the Master Servicer. Section 13.3 Actions Prior to Foreclosure 13.3.1. Notice Requirements. The Servicer shall send the Borrower a letter, not less than 30 days before the commencement of foreclosure proceedings, setting out (i) the nature of the default, (ii) the steps that must be taken by the Borrower to cure the default and (iii) the date when foreclosure proceedings will begin. If the Servicer has reason to believe that the related Mortgaged Property has been abandoned or if the Borrower has displayed an obvious disregard for his obligations under such Mortgage Loan, the foregoing notice shall be forwarded at the earliest possible date following the Borrower's default. 13.3.2. Initiation of Proceedings. If foreclosure approval has not been withheld by the Master Servicer and, where applicable, by the respective Primary Mortgage Insurer and/or the respective Pool Insurer, with respect to a Mortgaged Property, including Co-op Shares, the Servicer shall, unless it arranges for the sale by the Borrower of the Mortgaged Property to a third party pursuant to Section 13.3.3, initiate or cause to be initiated such foreclosure actions as are authorized by law and consistent with practices in the locality where the Mortgaged Property is located, including, in the case where such Mortgaged Property includes a residential long-term lease, the succession by the Servicer to the rights of the Borrower under the lease by foreclosure, assignment in lieu of foreclosure or other comparable means. If such Mortgaged Property has been abandoned or vacated by the Borrower and the Borrower has evidenced no intention of honoring his obligations under the related Mortgage Loan, the foreclosure process shall be expedited to the fullest extent permitted by law. 13.3.3. Short Sale of Defaulted Mortgage Loans in Lieu of Foreclosure. With respect to any defaulted Mortgage Loan for which the Servicer would otherwise be required to initiate foreclosure proceedings, the Servicer may arrange for the sale of the Mortgaged Property by the Borrower to a third party if, in the good faith judgment of the Servicer, the net proceeds from such sale would be equal to or greater than the net proceeds of a bid conducted in accordance with Section 13.4.2. Section 13.4 Foreclosure Procedures 13.4.1. Foreclosure Expenses. During the period in which the Mortgaged Property related to a Mortgage Loan is being foreclosed, remaining Escrow Funds, if any, as well as any rent receipts, shall be used to pay all taxes and insurance premiums that become due with respect to such Mortgaged Property to the extent permitted by law. Except where other arrangements have been made with the applicable Primary Mortgage Insurer, the Servicer shall, with respect to each Mortgaged Property undergoing foreclosure, advance payment of attorneys' fees, trustees' fees and other foreclosure costs from the commencement of foreclosure proceedings pertaining to such Mortgaged Property. 13.4.2. Bidding Instructions. . The Servicer shall issue bidding instructions to the attorney or trustee in a foreclosure proceeding in accordance with Prudent Servicing Practices. Where applicable, the Servicer shall incorporate any bidding requirements issued by the respective Primary Mortgage Insurer and/or the respective Pool Insurer. Any proceeds received from an insurance loss settlement shall be included as part of the bid amount. Where a claim or claim settlement under a Hazard Insurance or Flood Insurance policy is pending, the Servicer shall contact the Hazard Insurance or Flood Insurance carrier to verify that the proposed bid will not invalidate the claim, in that, in certain jurisdictions, a bid for the total indebtedness will be considered as satisfaction of the debt and would thus bar the Hazard Insurance or Flood Insurance claim. 13.4.3. Buydown Funds Use. Unless the related Buydown Agreement provides otherwise, the Servicer may not use Buydown Funds relating to a Mortgage Loan to cure a Delinquency with respect to such Mortgage Loan. Any Buydown Funds remaining in the associated Custodial Buydown Account of a Mortgage Loan in foreclosure must be disposed of in accordance with the terms of the related Buydown Agreement. 13.4.4. Servicer's Responsibilities. Subject to the provisions of Article Three hereof, after acquisition of a Mortgaged Property, through foreclosure or a deed-in-lieu of foreclosure, or after the Servicer shall have taken possession of the Mortgaged Property, whichever occurs first, the Servicer shall be responsible for the management of such Mortgaged Property. The Servicer shall remain responsible until possession has been assumed by the applicable Primary Mortgage Insurer or the applicable Pool Insurer or until such Mortgaged Property are otherwise disposed of, as the case may be. The Servicer shall take such action as is necessary to protect the Trustee's security or, after acquisition thereof, ownership interest in such Mortgaged Property. Such action shall include, without limitation, (i) management of such Mortgaged Property, (ii) maintenance of such Mortgaged Property and (iii) if such Mortgaged Property are vacant, protection of such Mortgaged Property against vandals and the elements. 13.4.5. Conveyance Documents. Where applicable, any conveyance by the Servicer to the respective Primary Mortgage Insurer or the respective Pool Insurer of a Mortgaged Property shall be made by the form of deed commonly used in the particular jurisdiction where such Mortgaged Property is located. The Servicer shall prepare the necessary documents within two weeks after the date of sale at foreclosure or confirmation of sale, if applicable, or within a reasonable time frame. The documents shall be forwarded to the Trustee for approval and execution. After execution by the Trustee, such documents will be returned to the Servicer for delivery to the respective Primary Mortgage Insurer or the respective Pool Insurer which is acquiring such Mortgaged Property. Section 13.5 Mortgage Loan Reinstatement 13.5.1. Borrower's Full Payment. If a Borrower offers to fully reinstate his Mortgage Loan during the foreclosure process, the Servicer shall accept the offer. To achieve full reinstatement of his Mortgage Loan, a Borrower shall make payment of all (i) payments due to bring such Mortgage Loan current, (ii) attorneys' fees, (iii) trustees' fees, (iv) any additional legal costs, (v) all applicable late fees and (vi) any other expenditures or Advances made by the Servicer during the foreclosure process. 13.5.2. Borrower's Partial Payment. Except where otherwise required by applicable law, the Servicer may not accept an amount in payment from a Borrower which is less than the amount required for full reinstatement pursuant to Section 13.5.1 hereof toward reinstatement of a Mortgage Loan during the foreclosure process without the prior written approval from, if applicable, the respective Primary Mortgage Insurer and/or the respective Pool Insurer. 13.5.3. Obligations upon Reinstatement. Upon accepting the reinstatement of a Mortgage Loan, the Servicer shall immediately contact the appropriate foreclosure attorney or trustee to avoid incurring additional legal costs or fees. The Servicer must apply the reinstatement Funds upon receipt from a Borrower in payment of the expenses enumerated in Section 13.5.1 hereof. Upon receipt of the reinstatement funds from a Borrower the Servicer must return to the Custodian the related Mortgage Note and other related Mortgage Loan Documents for reinclusion in the related Mortgage Loan File. 13.5.4. Certain Assumptions Permitted. The Servicer is authorized, notwithstanding the other provisions of this Article 13, 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 the underwriting guidelines that originally applied to such Mortgage Loan. ARTICLE 14 REO Administration Section 14.1 General Provisions 14.1.1. REO Action Plan. With regard to each REO which is acquired, the Servicer shall prepare a plan of action within 30 Business Days after the date on which the Trustee acquires marketable title to such REO. Each plan of action shall set forth (i) a recommendation for the most effective manner to dispose of the REO, based on a current appraisal report, a broker's price opinion and a market analysis; (ii) the steps to be taken by the Servicer to secure such REO; and (iii) an estimate of the amount of time that is required to dispose of such REO. The Servicer shall promptly submit copies of each plan of action to the Master Servicer and, where applicable, to the respective Primary Mortgage Insurer, and/or the respective Pool Insurer. The Servicer shall implement each plan of action in an expeditious manner. The Servicer shall maintain monthly progress reports with regard to each plan of action detailing the status of the related REO and the progress achieved in implementing the plan of action. Section 14.2 REO Servicing 14.2.1. REO Servicing Requirements. The Servicer shall service each REO from its acquisition through its disposition and shall ensure that all funds received with respect to such REO are deposited to the appropriate Custodial P&I Account for remittance to the Trustee, unless the Master Servicer has relieved the Servicer of these responsibilities by written notification. 14.2.2. Servicer's Responsibilities. In addition to any other obligations set forth herein, upon acquisition of each REO, the Servicer shall be responsible for: (a) managing, maintaining, securing and, where applicable, renting such REO until it is conveyed or sold; (b) inspecting such REO at least once every 30 days and promptly sending the Master Servicer an updated Property Inspection Report upon request; (c) paying all taxes, insurance, maintenance, management and foreclosure costs relating to such REO; (d) submitting recommendations for listing and soliciting offers on such REO; (e) marketing such REO; (f) completing the sale of such REO; (g) depositing sales proceeds relating to such REO into the appropriate Custodial P&I Account for remittance to the Trustee; (h) where applicable, satisfying all of the Primary Mortgage Insurer's procedural requirements and filing all required forms and claims; (i) where applicable, depositing Primary Mortgage Insurance or Pool Insurance proceeds relating to such REO into the applicable Custodial P&I Account for remittance to the Trustee; and (j) processing the conveyance of such REO to the Primary Mortgage Insurer, where applicable. 14.2.3. [Reserved]. Section 14.3 REO Records and Reports 14.3.1. Records Retention. The Servicer shall retain in its files copies of all documents, reports and invoices described in this Section. 14.3.2. Evidence of Title. Evidence that title to a REO is held by the Trustee shall be submitted by the Servicer to the Master Servicer and, if applicable, to the Primary Mortgage Insurer and/or the Pool Insurer, within ten Business Days after marketable title to such REO has been acquired. 14.3.3. REO Expenses. At the request of the Master Servicer, Primary Mortgage Insurer and/or the Pool Insurer, the Servicer shall send a report listing all expenses in administering each REO. The Servicer shall retain such invoices in its records and shall, by request, (i) produce any such invoices for inspection or (ii) at its own expense, provide copies of any such invoices to the Master Servicer and, if applicable, to the Primary Mortgage Insurer and/or the Pool Insurer, as directed. The foregoing expense invoices shall include, without limitation, the following: (a) insurance premiums; (b) real estate tax bills; (c) special assessments; (d) owners' association dues; and (e) utility bills. 14.3.4. REO Documents. Upon request, the Servicer shall send copies to the Master Servicer and, where applicable, to the respective Primary Mortgage Insurer and/or the respective Pool Insurer, of the following documents relating to each REO: (a) any forced placed Hazard Insurance policy or Flood Insurance policy, if applicable; (b) any maintenance contracts; (c) any contractor bids relating to the rehabilitation of such REO pursuant to Section 14.5.3 hereof; (d) an updated Title Insurance policy which reflects the occurrence of foreclosure; and (e) plat map or house location survey, if already available. Section 14.4 REO Marketing 14.4.1. REO Marketing Efforts. The Servicer shall begin efforts to market a REO as soon as marketable title is acquired by the Trustee. 14.4.2. REO Sales. (a) The Servicer shall obtain the best market price for a REO for the Trustee while disposing of such REO in a timely and efficient manner. The Servicer, acting on behalf of the Trustee, shall dispose or cooperate with the Trustee in disposing of such REO prior to the close of the third calendar year following the year of its acquisition by the Trustee (the "REO Disposition Period") or, if an extension has been obtained from the Internal Revenue Service pursuant to Section 14.4.2(b), within such period. If the Servicer is otherwise unable to sell such REO, the Servicer shall before the end of the REO Disposition Period or, if an extension has been obtained from the Internal Revenue Service pursuant to Section 14.4.2(b), before the end of such period, following the acquisition of such REO, auction such REO to the highest bidder in an auction reasonably designed to bring a fair price. The Servicer is eligible to bid in such an auction. (b) The Servicer may apply to the Internal Revenue Service, in the manner contemplated by Code Section 856(e)(3), for an extension of the REO Disposition Period with respect to an REO. 14.4.3. Primary Mortgage Insurance Considerations. The Servicer must ensure that any action taken with respect to the sale of a REO does not jeopardize the maximum benefits available under the related Primary Mortgage Insurance Policy, if any, with respect to the related Mortgage Loan. The Servicer must inform the related Primary Mortgage Insurer of any listing agreements or purchase offers that are received before the related Primary Mortgage Insurer has finalized the disposition of the claim. 14.4.4. Master Servicer Instructions. Where the Servicer receives instructions from the Master Servicer regarding the marketing and sale of a REO, either with respect to a specific property or generally, such instructions shall govern the Servicer's actions, notwithstanding any provision herein. 14.4.5. Pool Insurance Considerations. The Servicer must ensure that any action taken with respect to the sale of a REO does not jeopardize the maximum benefits available under the related Pool Insurance Policy, if any, with respect to the related Mortgage Loan. The Servicer must inform the related Pool Insurer of any listing agreements or purchase offers that are received before the Primary Mortgage Insurer has finalized the disposition of the claim. Section 14.5 REO Rehabilitation 14.5.1. REO Rehabilitation Requirement. Unless the Master Servicer shall otherwise direct, and subject to Section 3.2.2(ii) and Section 17.6.2, the Servicer must ensure that any rehabilitation work (which shall not include the cleaning of a recently acquired REO property) to any REO which is necessary to restore such REO to a marketable condition is performed and that such work is performed in a professional and workmanlike manner. 14.5.2. [Reserved]. 14.5.3. Written Contractor Bids. The Servicer shall solicit detailed written bids from independent contractors when the value of a contract for rehabilitation of a REO exceeds five hundred dollars ($500.00) (which shall not include the cleaning of a recently acquired REO property). Where the value of a contract exceeds five thousand dollars ($5,000.00) (which shall not include the cleaning of a recently acquired REO property), the Servicer shall receive bids from a minimum of two independent and unrelated contractors and, upon request, forward copies of such bids to the Master Servicer. Where the value of a contract exceeds fifty thousand dollars ($50,000.00) (which shall not include the cleaning of a recently acquired REO property), the Servicer shall receive bids from a minimum of three independent and unrelated contractors and, upon request, forward copies of such bids to the Master Servicer. 14.5.4. Primary Mortgage Insurance Considerations. If a Mortgaged Property which has become a REO and the related Mortgage Loan is covered by a policy of Primary Mortgage Insurance, the Servicer shall notify the related Primary Mortgage Insurer of such rehabilitation plans before the completion of the Primary Mortgage Insurance claim to ensure reimbursement from the Primary Mortgage Insurer. If the related Primary Mortgage Insurer elects not to reimburse all rehabilitation expenses, work should be postponed until after final disposition of the Primary Mortgage Insurance claim. Section 14.6 REO Administration Failure. 14.6.1. Servicer Removal. The Master Servicer may in its reasonable discretion, in the event that the Servicer's actions or omissions result in damage to any REO or a failure to sell any REO property within a reasonable time, the Master Servicer may remove the servicing of such REO from the Servicer and assume responsibility for management, control, maintenance, security, rehabilitation and disposition of such REO. 14.6.2. Servicer's Continuing Obligations. In the event that the Servicer is removed from servicing a REO by virtue of the provisions of Section 14.6.1, the Servicer, as to such REO, shall nevertheless remain responsible to (a) pay when due all insurance premiums, property taxes and assessments; (b) file when due all claims for Primary Mortgage Insurance, Pool Insurance, Hazard Insurance and, if applicable, Flood Insurance benefits; and (c) fulfill any other related responsibilities required by the Master Servicer. 14.6.3. Servicer's Duty to Compensate. Whether or not a Servicer is removed from servicing with respect to a particular REO, the Servicer must compensate the Master Servicer for any damages caused as a result of the Servicer's breach of its obligation to service efficiently each REO. The Servicer acknowledges that any damages suffered as a result of the Servicer's inefficiency in managing a REO may not be quantified in advance of the Master Servicer assuming responsibility for such REO. ARTICLE 15 Insurance and Letter of Credit Section 15.1 General Provisions 15.1.1. Insurance Requirements. The Servicer must verify that each Mortgage Loan has the insurance coverage required pursuant to Article 15 and 16. All claims arising under Insurance Policies maintained hereunder must be settled or otherwise disposed of by the Servicer, and all such Insurance Policies must be maintained, including, without limitation, the payment of premiums on a timely basis, by the Servicer at no expense to the Trustee, the Trust Administrator (if applicable) or the Master Servicer. If the Insurance Proceeds paid in respect of any Mortgage Loan are not used to repair the related Mortgaged Property due to the particular circumstances of the loss, and instead such Insurance Proceeds are applied to reduce the Unpaid Principal Balance of such Mortgage Loan and such application causes the Unpaid Principal Balance of such Mortgage Loan to reduce to zero, the Servicer must treat the application of such proceeds as a Liquidation, and notify the Master Servicer of such Liquidation. 15.1.2. Uninsured Losses. The Servicer must take the following actions in the event of loss or damage to any Mortgaged Property caused by an earthquake, flood, tornado or other natural disaster immediately following, the earlier to occur of (x) its notification or discovery of such loss or damage or (y) the time at which the Servicer reasonably should have known of such loss or damage in the exercise of Prudent Servicing Practices: (a) determine the extent of the losses or damages; (b) secure any abandoned Mortgaged Property from vandalism and the elements; (c) communicate with and counsel the respective Borrower on any disaster relief programs or other assistance which is available; and (d) take appropriate action to protect the interests of the Trustee and the respective Borrower. 15.1.3. Servicer's Obligation to Maintain Insurance. If the Servicer discovers that a Borrower does not have adequate insurance coverage as required pursuant to the provisions of this Article, the Servicer must obtain and maintain at its own expense the required insurance coverage on the related Mortgaged Property. The Servicer may, in its discretion, cause the required coverage to be maintained through a blanket insurance policy. Such expenses shall not be recoverable by the Servicer from the Master Servicer or from payments on the Mortgage Loan or any other source relating to the related Mortgage Loan or the related Mortgaged Property, other than from Liquidation Proceeds or Insurance Proceeds from the related Mortgage Loan. To the extent permitted by applicable law and the related Mortgage Loan Documents, the Servicer may initiate forced placed coverage with respect to such Mortgaged Property and thereafter attempt to recover such expenses from the related Borrower. 15.1.4. Insurance Notices. The Servicer must arrange for all insurance drafts, notices, policies, invoices, or other correspondence to be delivered directly to the Servicer. The Servicer, its successors and assigns must be named as the Mortgagee, the endorsement must show the Servicer's address as shown in the following example: Wells Fargo Bank, N.A. 7001 Westown Parkway West Des Moines, Iowa 50266 15.1.5. Default by Insurer. If the Servicer knows or has reasonable cause to suspect that an insurer under any applicable insurance policy required pursuant to the provisions of this Article will, for any reason, be unable to pay a valid claim, the Servicer shall immediately (i) find a substitute insurer and (ii) pay any premiums to the insurer. In any case, the Servicer shall not be liable in any way for the financial inability of any insurer under any insurance policy required herein to pay a valid claim so long as the provisions of Article 15 and 16 hereof are complied with. 15.1.6. Insurance Carrier Rating. Each Insurance Policy must be underwritten by an insurance carrier that is a FNMA or FHLMC approved Mortgage Insurer. 15.1.7. Insurance Carrier Licenses. Each insurance carrier must be licensed or otherwise authorized by law to conduct business in each state in which a related Mortgaged Property is located. 15.1.8. Risk Exposure. If any Mortgaged Property is exposed to hazards not fully covered by Hazard Insurance or Flood Insurance, the Servicer must notify the Master Servicer immediately with a recommendation for additional coverage. 15.1.9. Evidence of Insurance. (a) The Servicer must maintain the following documentation with respect to insurance coverage on each Mortgage Loan: (i) if Primary Mortgage Insurance is required, a copy of the Primary Mortgage Insurance policy and any related endorsements; (ii) for one- to four-unit dwellings where such coverage is not provided under a blanket policy maintained by the Servicer, an original of the Hazard Insurance policy, if applicable, and any related endorsements; (iii) a copy of the Title Insurance policy and any related endorsements, unless a Final Title Condition Report was obtained; (iv) For properties covered under a blanket policy, an original of any blanket policy, and any related endorsements; and (v) an original of any Flood Insurance policy, if Flood Insurance is required, and any related endorsements. (b) A certificate of insurance is acceptable in lieu of any of the foregoing policies if it contains the following information: (i) named insured and Mortgagee or, for PUD or Condominium Units, named insured association, unit owner and unit owner Mortgagee; (ii) address of the Mortgaged Property; (iii) type, amount and effective dates of coverage; (iv) deductible amount; (v) any endorsement or optional coverage obtained and made part of the original policy; (vi) insurer's agreement to provide at least ten day's prior written notice to the Servicer and Borrower (or applicable unit owner Mortgagee if for a PUD or Condominium Unit) before any reduction in coverage or cancellation of the policy; and (vii) signature of an authorized representative of the insurer, if required by applicable law. Section 15.2 Primary Mortgage Insurance 15.2.1. Primary Mortgage Insurance Requirement. Unless Primary Mortgage Insurance coverage with respect to a Mortgage Loan is canceled as provided in Section 15.2.4 herein, the Servicer must maintain at all times Primary Mortgage Insurance on any Mortgage Loan with an original LTV ratio in excess of 80%. 15.2.2. Primary Mortgage Insurance Coverage. As to each Mortgage Loan which is required to have Primary Mortgage Insurance, pursuant to this Agreement or the related Mortgage Loan Documents, Primary Mortgage Insurance must at least provide coverage which insures against loss of that portion of the Unpaid Principal Balance of the Mortgage Loan that exceeds 75% of the Value of the Mortgaged Property. If the Mortgage Loan provides for negative amortization or for the potential of negative amortization, the Primary Mortgage Insurance policy must also insure any increase in the Unpaid Principal Balance from the original principal balance of the related Mortgage Note. 15.2.3. Primary Mortgage Insurer Downgrading. In the event that the rating assigned by a Rating Agency to the claims paying ability of any Primary Mortgage Insurer is reduced below the level permitted under Section 15.1.6, the Servicer shall use its best efforts to replace each Primary Mortgage Insurance Policy issued by such Primary Mortgage Insurer with a new Primary Mortgage Insurance policy issued by an insurer whose claims paying ability is acceptable to the Master Servicer. The premium for any replacement Primary Mortgage Insurance policy shall not exceed the premium for the discontinued Primary Mortgage Insurance policy. 15.2.4. Primary Mortgage Insurance Cancellation. If a Borrower requests cancellation of the Primary Mortgage Insurance policy with respect to his Mortgaged Property, the following requirements must be met: (a) The current LTV ratio must be 80% or less. The current LTV ratio must be calculated by dividing the Unpaid Principal Balance of the related Mortgage Loan by the Current Value of the Mortgaged Property; (b) The related Mortgage Loan may not have been 30 days or more delinquent within the preceding twelve months; and (c) There may not have been any other default under the terms of the related Mortgage Loan at any time during the preceding twelve months. If there are indications that the Current Value of the Mortgaged Property has declined, the Servicer shall obtain an Appraisal Report with respect to such Mortgaged Property that is not more than 60 days old. The Current Value of such Mortgaged Property set forth the Appraisal Report shall be used as the divisor in clause (a) hereof to determine whether the recalculated current LTV is 80% or less. If the recalculated current LTV is greater, the Primary Mortgage Insurance cancellation request will be denied. 15.2.5. Primary Mortgage Insurance Claims. The Servicer must take all steps to ensure the payment of the maximum benefits payable under the terms of any Primary Mortgage Insurance policy. The Servicer must work diligently with each Primary Mortgage Insurer to determine whether such insurer will settle the claim by taking title to the Mortgaged Property in question or in some other manner. Upon receipt of any Primary Mortgage Insurance proceeds, the Servicer must deposit such amounts in the appropriate Custodial P&I Account. The Servicer shall promptly notify the Master Servicer in writing if any Primary Mortgage Insurer at any time denies any or all of a claim filed under its Primary Mortgage Insurance policy. Section 15.3 Hazard Insurance 15.3.1. Hazard Insurance Requirement. Unless alternative coverage is provided pursuant to Section 16.3 hereunder, the Servicer must ensure that each Mortgaged Property is covered at all times by Hazard Insurance. 15.3.2. Hazard Insurance Coverage. As to each Mortgaged Property, the amount of Hazard Insurance must be at least equal to the lesser of (a) the Unpaid Principal Balance of the related Mortgage Loan or (b) 100% of the insurable value of the improvements on the Mortgaged Property; provided, however, that in no case shall the amount of Hazard Insurance be less than the amount required to fully compensate for any damage to the improvements on the Mortgaged Property on a replacement cost basis. 15.3.3. Hazard Insurance Deductible. Except as a greater amount may be required by an applicable law, each Hazard Insurance deductible may not exceed FNMA or FHLMC's required deductible. 15.3.4. Hazard Insurance Vacancy Coverage. The Servicer must ensure that each Mortgaged Property is adequately covered even when vacant and, where available, must obtain a vacancy permit endorsement. 15.3.5. Hazard Insurance Mortgagee Provisions. Each Hazard Insurance Policy must contain or have attached a standard mortgagee clause in the form customarily used by or required by private institutional mortgage loan investors. Such clause must provide that the Hazard Insurance carrier shall notify the named Mortgagee at least ten days before any reduction in coverage or cancellation of the policy. All mortgagee clauses must be properly endorsed, necessary notices of transfer must be given and any other action must be taken that is necessary in order to protect the interests of the Trustee, its successors and/or assigns. The standard mortgagee clause should read as follows: "Insuring Wells Fargo Bank, N.A., as agent for [___________], its successors and/or assigns." Section 15.4 Flood Insurance 15.4.1. Flood Insurance Requirement. Unless alternate coverage is provided pursuant to Section 16.6 hereunder, the Servicer must ensure that Flood Insurance is maintained at all times on Mortgaged Property that are in a special flood hazard area identified by the Secretary of HUD or the Director of the Federal Emergency Management Agency. 15.4.2. Flood Insurance Coverage. As to each Mortgaged Property, the amount of Flood Insurance must be at least equal to the lesser of (a) the maximum amount available under the National Flood Insurance Program's regular program or its emergency program, (b) the Unpaid Principal Balance of the related Mortgage Loan or (c) 100% of the replacement cost of the improvements on the Mortgaged Property. 15.4.3. Flood Insurance Deductible. Except as a greater amount may be required by applicable law, each Flood Insurance deductible may not exceed the lesser of (a) $1,000 or (b) one percent of the applicable amount of coverage. Section 15.5 Title Insurance 15.5.1. Servicer's Obligations. The Servicer shall perform and comply with all requirements and conditions of each Title Insurance policy for each Mortgage Loan and the related Mortgaged Property that are to be performed or observed by the "Insured" or obligee thereunder as a condition to maintaining and keeping it in force, or making a claim under, such Title Insurance policy. The Servicer shall be named as a payee on all Title Insurance policy loss drafts, and upon receipt thereof, the funds shall be credited to the extent of the sum of (i) the Unpaid Principal Balance of such Mortgage Loan and any interest accrued thereon, (ii) any outstanding advances thereon (iii) any outstanding Advances relating to such Mortgage Loans and (iv) any expenses owed by such Borrower which are due the Trustee, the Master Servicer or the Servicer, whether for its own account or others, to the appropriate Custodial P&I Account and the balance of such funds, if any, shall be credited to the appropriate Custodial T&I Account. 15.5.2. Policy Custody. [Reserved] 15.5.3. Title Insurance Claims. The Master Servicer must be notified contemporaneously with the making of any claim under the Title Insurance policy. Section 15.6 Insurance Loss Settlements 15.6.1. Settlement Approval. The approval of the Master Servicer need not be requested for disposition of insurance loss settlements and the Servicer may disburse the loss proceeds as provided herein. 15.6.2. Settlement Disbursements. For each Mortgage Loan, including a Mortgage Loan secured by Mortgaged Property located in a Condominium Project or PUD, the Servicer is fully responsible for the disbursement of insurance loss settlements under each Hazard Insurance policy and each Flood Insurance policy where property damage is $10,000 or more, including but not limited to: (a) arranging for and authorizing the restoration and rehabilitation of the related damaged Mortgaged Property in cooperation with the Borrower; (b) subject to applicable law, applying the Insurance Proceeds to reduction of the Unpaid Principal Balance of such Mortgage Loan, provided that the Servicer (i) shall have determined that such proceeds are insufficient to repair and restore the related Mortgaged Property, or that the repair and restoration of such Mortgaged Property is not feasible; and (ii) shall have obtained authorization of the Master Servicer to make such application of the Insurance Proceeds; (c) collecting, endorsing and disbursing the Insurance Proceeds and arranging for progress inspections and payments, if necessary; (d) complying with all requirements of any Primary Mortgage Insurance policy pertaining to the filing of claims and the settlement of insurance losses to assure that the security of such Mortgage Loan is not impaired and that the coverage of such Primary Mortgage Insurance policy is not jeopardized or otherwise adversely affected; (e) assuring, through the receipt of Borrower's affidavits, repair contract copies, lien waivers and the like, that the priority of the lien of the Security Instrument is preserved, and that the Insurance Proceeds are applied to the restoration or repair of the related Mortgaged Property if not applied in payment of such Mortgage Loan; (f) obtain releases or waivers of liens and taking such other actions as are necessary to avoid the filing of laborers', materialmen's or mechanic's liens against the related Mortgaged Property; and (g) maintaining procedures and practices acceptable to the Master Servicer and in conformity with Prudent Servicing Practices for the control and disposition of insurance loss drafts. 15.6.3. Settlement Funds. The Servicer shall be named as a payee on all insurance loss drafts and upon receipt thereof, the funds shall be credited to the Borrower's Insurance Proceeds balance and deposited into (a) where such funds will be applied to the repair and restoration of the related Mortgaged Property and where required by applicable state law, one or more separate escrow accounts, so that the balance on deposit in such accounts is fully insured at all times by the FDIC through either the BIF or SAIF or (b) where such funds will not be applied to the repair and restoration of the related Mortgaged Property, the respective Custodial P&I Account. 15.6.4. Settlement Notice. Upon written request received from the Master Servicer, the Servicer shall provide any report relating to such settlement to the Master Servicer on a Hazard Insurance Loss Draft Notification, together with a summary of the disposition of the proceeds. 15.6.5. Continuing Coverage. If a letter of assurance is obtained from any insurer under a Hazard Insurance policy or a Flood Insurance policy that the insurance coverage shall continue in full force and effect, the Servicer shall deposit such letter in the appropriate Servicer Mortgage Loan File. 15.6.6. Property Inspections. The Servicer shall conduct property inspections in accordance with the milestones of the repair and rehabilitation plan for such Mortgaged Property and prepare Property Inspection Reports on any Mortgaged Property involving property damage over $15,000. The Servicer shall furnish a copy of the repair and rehabilitation plan for such Mortgaged Property to the Master Servicer upon request. Section 15.7 Letters of Credit 15.7.1. Letter of Credit Draws. The Servicer shall take all steps necessary to make draws under any Letter of Credit in accordance with the provisions thereof. The Servicer shall notify the Master Servicer promptly in writing if the Pledge Holder does not renew a Letter of Credit. Upon receipt of any amounts as a result of a draw on a Letter of Credit because of the nonrenewal of such Letter of Credit, the Servicer shall deposit such amounts in the appropriate Custodial P&I Account and such amount shall be treated as a prepayment of principal. Upon receipt of any amounts as a result of a draw on a Letter of Credit for a reason other than the nonrenewal of such Letter of Credit, the Servicer shall deposit such amounts in the appropriate Custodial P&I Account for application in accordance with the provisions of the applicable Administration Disclosure. 15.7.2. Draws in the Event of Servicer Termination. Notwithstanding anything to the contrary in this Agreement (including without limitation the termination or transfer of the servicing rights and/or obligations of the Servicer pursuant to Article 19 hereof), Wells Fargo Bank, as beneficiary under the Non-Assigned Letters of Credit, shall continue to make draws thereunder in accordance with the provisions thereof. Under this provision, in the event a Pledged Asset Mortgage Loan is ninety days delinquent, the Servicer shall deliver a copy of the related Letter of Credit to Wells Fargo Bank and shall notify both the Master Servicer and Wells Fargo Bank that the Pledged Asset Mortgage Loan is ninety days delinquent. Any funds received from draws on the Non-Assigned Letters of Credit after Wells Fargo Bank is no longer the Servicer hereunder shall be remitted by Wells Fargo Bank to the Servicer for deposit into the related Custodial P&I Account. Under this provision, in the event a Pledged Asset Mortgage Loan is liquidated or paid in full the Master Servicer shall notify Wells Fargo Bank in writing. ARTICLE 16 Condominium and PUD Insurance Section 16.1 General Provisions 16.1.1. Applicability. The provisions of this Article pertain solely to Mortgage Loans secured by Condominium Units or PUD Units. 16.1.2. Premiums. The premiums for insurance policies required pursuant to this Article must be paid as a common expense by the Owners' Association. 16.1.3. Deductible Reserves. Funds for each of the deductibles associated with the insurance policies required pursuant to this Article must be included in the Owners' Association's reserves and must be so designated. 16.1.4. Name of Insured. The name of the insured stated under each Insurance Policy required pursuant to the provisions of this Article must be similar in form and substance to the following: "Association of Owners of the [Name of Condominium Project or PUD] for use and benefit of the individual Condominium or PUD Unit owners" (designated by name, if required). 16.1.5. Mortgagee Clause. Each insurance policy required pursuant to the provisions of this Article must contain the standard mortgagee clause endorsed to provide that any disbursements shall be paid to the Owners' Association for the use and benefit of Mortgagees as their interests may appear, or otherwise endorsed to fully protect the interest of (a) the Trustee and (b) the holders of a beneficial interest therein, if any. 16.1.6. Reconstruction Coverage. If, with respect to a PUD or Condominium Project in which a Mortgaged Property is located, there is a construction code provision that would require changes to undamaged portions of the PUD or Condominium Project's building(s) even when only part of a building is destroyed by an insured hazard, then the Servicer must ensure that each insurance policy required by this Article contains the necessary construction code endorsements to cover this exposure. Section 16.2 Common Area Multiple Peril Insurance 16.2.1. Common Area Multiple Peril Insurance Requirement. The Servicer must ensure that the Owner's Association maintains, with respect to the PUD or Condominium Project in which a Mortgaged Property is located, a policy of Common Area Multiple Peril Insurance, with premiums being paid as a common expense. The Common Area Multiple Peril Insurance policy must at least protect against loss or damage by fire and all other hazards that are normally covered by the standard extended coverage endorsement, and all of the perils customarily covered for similar types of projects, including those covered by the standard "all risk" endorsement. 16.2.2. Common Area Multiple Peril Insurance Coverage. As to each Condominium Project or PUD in which a Mortgaged Property is located, a Common Area Multiple Peril Insurance policy must cover 100% of the current replacement cost of all of the common areas (other than the land and foundation), common elements including fixtures and building service equipment, as well as common personal property and supplies. 16.2.3. Common Area Multiple Peril Insurance Deductible. Except as a greater amount may be required by applicable law, each Common Area Multiple Peril Insurance deductible may not exceed the lesser of (a) $10,000 or (b) one percent of the applicable amount of coverage. 16.2.4. Boiler and Machinery Coverage. If a steam boiler is operating within the Condominium Project or PUD in which a Mortgaged Property is located, then the Servicer must ensure that boiler and machinery coverage is in force at all times. This coverage must be evidenced by the standard form of boiler and machinery endorsement. The minimum liability coverage per accident under boiler and machinery coverage must equal the insurable value of the boiler and equipment and the building housing such boiler or machinery, based upon current replacement cost, or $2 million, whichever is less. Section 16.3 Blanket Hazard Insurance 16.3.1. Blanket Hazard Insurance Requirement. Unless alternative coverage is provided pursuant to Section 16.3 hereunder, the Servicer must verify that each such Mortgaged Property is covered at all times by Hazard Insurance policy which provides blanket coverage for the individual units in the Condominium Project or PUD. 16.3.2. Blanket Hazard Insurance Coverage. As to each Condominium Project or PUD which contains a Mortgaged Property for which its Hazard Insurance coverage is provided through a blanket policy, the amount of Hazard Insurance for a blanket policy a Condominium Project or PUD must be at least equal to the lesser of (a) the aggregate of the outstanding principal balances of all mortgage notes secured by units within the Condominium Project or PUD (including the Mortgage Notes secured by Mortgaged Properties) or (b) 100% of the replacement cost of the improvements on the Condominium Project or PUD Unit site. 16.3.3. Blanket Hazard Insurance Deductible. Except as a greater amount may be required by an applicable law, each Hazard Insurance deductible for a blanket policy covering a Condominium Project or PUD may not exceed the lesser of (a) $10,000 or (b) one percent of the applicable amount of coverage. Section 16.4 Common Area Comprehensive General Liability (CGL) Insurance 16.4.1. Common Area CGL Insurance Requirement. The Servicer must ensure that the Owners' Association maintains a Comprehensive General Liability Insurance policy covering all of the common areas, common elements, commercial spaces and public ways in the Condominium Project or PUD in which a Mortgaged Property is located. 16.4.2. Common Area CGL Insurance Coverage. As to each Condominium Project or PUD in which a Mortgaged Property is located, a CGL Insurance policy should provide coverage of at least $1,000,000 for personal injury, bodily injury or property damage for any single occurrence. Each CGL Insurance policy must contain a severability of interest endorsement preventing the insurer from denying the claim of a Condominium or PUD Unit owner because of negligent acts of the Owners' Association or other unit owners. Each CGL Insurance policy must include all other types of coverage and endorsements in the types and amounts required by private institutional mortgage loan investors for developments similar in construction, location and use. Section 16.5 Owners' Association Fidelity Insurance 16.5.1. Owners' Association Fidelity Insurance Requirement. The Servicer must ensure that the Owners' Association maintains a fidelity bond or insurance against dishonest and fraudulent acts on the part of directors, managers, trustees, employees or volunteers responsible for handling funds belonging to or administered by the association. 16.5.2. Owners' Association Fidelity Insurance Coverage. The Owners' Association fidelity bond or insurance must name the Owners' Association as the insured and must be written in an amount sufficient to provide protection at least 150% of the insured's estimated annual operating expenses and reserves. An appropriate endorsement to the policy to cover any persons who serve without remuneration must be added if the policy would not otherwise cover volunteers. Owners' Association fidelity insurance coverage must be in an amount equal to at least 3 months assessments on all units in the Condominium Project or PUD. Owners' Association fidelity insurance coverage is not required if the Condominium Project or the PUD have fewer than 20 units. Section 16.6 Blanket Flood Insurance 16.6.1. Blanket Flood Insurance Requirement. Where a Mortgaged Property is a Condominium Unit or PUD Unit and is not individually covered by a Flood Insurance policy in accordance with the provisions of Section 15.4 hereof, the Servicer must verify that a Flood Insurance policy which provides blanket coverage for the individual units in the Condominium Project or PUD, is maintained at all times on Mortgaged Property that are in a special flood hazard area identified by the Secretary of HUD or the Director of the Federal Emergency Management Agency. 16.6.2. Blanket Flood Insurance Coverage. As to each Condominium Project or PUD which contains a Mortgaged Property for which its Flood Hazard Insurance coverage is provided through a blanket policy, the amount of Flood Insurance must be at least equal to the lesser of (a) the maximum amount available under the National Flood Insurance Program's regular program or the its emergency program, (b) the aggregate of the outstanding principal balances of all mortgage notes secured by units within the Condominium Project or PUD (including the Mortgage Notes secured by Mortgaged Properties), or (c) 100% of the replacement cost of the improvements on the Condominium Project or PUD Unit site. 16.6.3. Blanket Flood Insurance Deductible. Except as a greater amount may be required by applicable law, each Flood Insurance deductible for a blanket policy covering a Condominium Project or PUD may not exceed the lesser of (a) $5,000 or (b) one percent of the applicable amount of coverage. ARTICLE 17 Advances Section 17.1 Principal and Interest Advances 17.1.1. P&I Advance Requirement. The Servicer shall advance P&I Advances and deposit to the respective Custodial P&I Account on or before each Remittance Date an amount equal to the aggregate of the difference between (a) the Monthly Payment that each Borrower was required to pay to the Servicer on the immediately preceding Due Date (excluding the amount of the related Servicing Fee) and (b) the amount actually received with respect to the related Monthly Payment by the Servicer (excluding the amount of the related Servicing Fee), which deposit may be made in whole or in part from any Amounts Held for Future Distribution. Any Amount Held for Future Distribution so used shall be replaced by the Servicer from its own funds by deposit in the Custodial P&I Account on or before the Business Day preceding any future Remittance Date to the extent that funds in the Custodial P&I Account on such Remittance Date shall be less than the amount required to be remitted on such date The Servicer shall designate on its records the specific Mortgage Loans and related installments (or portions thereof) as to which such P&I Advance shall be deemed to have been made, such determination and related reimbursement allocations pursuant to the following paragraphs being conclusive for purposes of Section 17.1.3. 17.1.2. P&I Advance Limitation. The Servicer is required to make P&I Advances with respect to a Mortgage Loan unless a P&I Advance is reasonably determined by the Servicer to be eventually non-recoverable from any Insurance Proceeds, Liquidation Proceeds, or the Borrower. 17.1.3. P&I Advance Recovery. The Servicer's P&I Advance shall be recoverable from subsequent Borrower Monthly Payments, Insurance Proceeds, Liquidation Proceeds related to the Mortgage Loan as to which such P&I Advance was made or, if the Representing Party is obligated to purchase such Mortgage Loan from the Trustee, from the price paid for such Mortgage Loan or pursuant to Section 17.4. 17.1.4. Advance During Bankruptcy and Foreclosure. During litigation, bankruptcy proceedings or foreclosure proceedings pertaining to any Mortgage Loan or while REO transferred to the Trustee through foreclosure or a deed-in-lieu of foreclosure is held by the Trustee or its successors, the Servicer must continue to make monthly P&I Advances in respect of each such Mortgage Loan or REO to the respective Custodial P&I Account. Subject to the provisions of Section 17.1.2 hereof, these P&I Advances must be made until the (i) Liquidation of each Mortgage Loan subject to such proceedings or (ii) in the case of REO transferred to the Trustee through foreclosure or a deed-in-lieu of foreclosure, the Liquidation of such REO. Advances with respect to REO shall be made as if the related Mortgage Loan and Mortgage Note remained in effect. Section 17.2 Foreclosure Advances 17.2.1. Foreclosure Advance Requirement. During foreclosure proceedings, the Servicer must advance from its own funds all foreclosure expenses as they occur in accordance with the terms of this Agreement. Such advances must be made by the Servicer up to the time of final disposition of the related Mortgaged Property. 17.2.2. Foreclosure Advance Limitation. The Servicer is required to make advances pursuant to Section 17.2.1 with respect to a Mortgage Loan unless the Servicer reasonably determines (i) that such foreclosure will not increase the proceeds to the Trustee of liquidation of such Mortgage Loan after reimbursement of the Servicer for its expenses or (ii) that such expenses will be eventually non-recoverable from any Insurance Proceeds, Liquidation Proceeds or the Borrower. 17.2.3. Foreclosure Advance Recovery. If foreclosure proceedings are terminated, the Servicer must collect all legal fees and costs from the Borrower. Otherwise, the Servicer's advances for reasonable foreclosure expenses shall be recoverable from Insurance Proceeds, Liquidation Proceeds or, if the Representing Party is obligated to purchase a Mortgage Loan from the Trustee, from the price paid for such Mortgage Loan. 17.2.4. Foreclosure Advance Records. All foreclosure advances by the Servicer and reimbursements to the Servicer must be clearly identifiable in the respective Custodial T & I Account. Section 17.3 Tax & Insurance Advances 17.3.1. T&I Advance Requirement. If a Borrower's Escrow Funds are insufficient to pay taxes or insurance premiums, the Servicer must advance from its own funds to the respective Custodial T&I Account an amount sufficient to cover the shortage and so as to assure the maintenance of a first lien position of the related Security Instrument on the related Mortgaged Property. 17.3.2. T&I Advance Recovery. T&I Advances may be recovered from the Borrower's subsequent monthly escrow payments, Insurance Proceeds, Liquidation Proceeds or the Borrower, but must never be recovered from scheduled principal or interest collections. The Servicer may not recover T&I Advances from another Borrower's Escrow Funds. 17.3.3. T&I Advance Limitation. The Servicer is required to make a T&I Advance with respect to a Mortgage Loan unless such T&I Advance is reasonably determined by the Servicer to be eventually non-recoverable from any Insurance Proceeds, Liquidation Proceeds, or the Borrower. 17.3.4. Advance During Bankruptcy and Foreclosure. During litigation, bankruptcy proceedings or foreclosure proceedings pertaining to any Mortgage Loan or while REO transferred to the Trustee through foreclosure or a deed-in-lieu of foreclosure is held by the Trustee, the Servicer must continue to make required T&I Advances in respect of each such Mortgage Loan or REO to the respective Custodial T&I Account. These T&I Advances must be made until each Mortgage Loan subject to such proceedings is liquidated or in the case of REO transferred to the Trustee through foreclosure or a deed-in-lieu of foreclosure is liquidated. Advances with respect to REO shall be made as if the related Mortgage Loan and Mortgage Note remained in effect. Section 17.4 Non-Recoverable Advances 17.4.1. Ordinary Recovery. If at any time an advance made by a Servicer hereunder is determined by the Servicer to be a Non-Recoverable Advance, then the Servicer shall be entitled to be reimbursed for such advance by withdrawing from the Custodial P&I Account an amount equal to the Non-Recoverable Advance. 17.4.2. Final Recovery. If the amounts on deposit in the related Custodial P&I Account are insufficient to reimburse the Servicer, then prior to any distribution to the Trustee, the Servicer shall be entitled to reimbursement from the payments made and the proceeds received with respect to such Mortgage Loan. 17.4.3. Non-Recoverable Advance Determination. To determine whether an Advance is a Non-Recoverable Advance, the Servicer shall employ a broker's price opinion, which is no more than twelve months old when so employed, of the fair market value of the Mortgaged Property related to the Mortgage Loan which is subject to such Advance, and calculate the difference between (a) the fair market value of such Mortgaged Property and (b) the sum of (i) a reasonable estimate of foreclosure costs which may be incurred in the foreclosure of such Mortgaged Property, and (ii) the amount of unreimbursed Advances made by the Servicer with respect to the related Mortgage Loan pursuant to the terms of this Agreement, is greater than zero. If such a difference is greater than zero, then such difference represents the maximum amount of additional Advances which the Servicer shall make before determining that any additional Advances in excess of such amount are Non-Recoverable Advances. If such difference is negative, then the magnitude of such difference is the amount of previously made unreimbursed Advances which the Servicer may now regard as Non-Recoverable Advances. The Servicer shall provide the Master Servicer with an Officer's certificate upon the determination that any Advance is a Non-Recoverable Advance. Section 17.5 Failure to Advance 17.5.1. Grounds for Termination. The failure of the Servicer to advance any funds required to be advanced by the Servicer under this Article 17 is cause for termination of Servicer under this Agreement. 17.5.2. Servicer Reimbursement. To the extent the Master Servicer or the respective trustee, if any, must advance their respective funds due to the failure of the Servicer to advance as provided for in this Agreement or to remit funds to the Certificate Account as required by Section 18.3.1, the Servicer shall reimburse the advancing party for such amounts, on demand, together with all costs and expenses incurred by the advancing party, including, but not limited to, interest on the funds advanced. Such interest shall be calculated at the lesser of the "prime rate" (as set forth in The Wall Street Journal) and the maximum interest rate permitted by law. 17.5.3. Servicer Notification. The Servicer must notify the Master Servicer of any failure of the Servicer to advance as provided for in this Agreement or to remit funds to the Certificate Account as required by Section 18.3.1 on the day of such failure to advance or remit. Section 17.6 Rehabilitation Advance 17.6.1. Rehabilitation Advance Requirement. The Servicer must advance from its own funds such amounts as are necessary to restore any damaged REO not covered by Hazard Insurance or Special Hazard Insurance in accordance with Section 14.5. 17.6.2. Rehabilitation Advance Limitation. The Servicer is required to make advances pursuant to Sections 17.6.1 and 14.5 with respect to a Mortgage Loan unless the Servicer reasonably determines (i) that such rehabilitation will not increase the proceeds to the Trustee on liquidation of such Mortgage Loan after reimbursement of the Servicer for its expenses or (ii) that such expenses will be eventually non-recoverable from any Insurance Proceeds, Liquidation Proceeds or the Borrower. 17.6.3. Rehabilitation Advance Recovery. The Servicer's advances for reasonable rehabilitation expenses shall be recoverable from Insurance Proceeds, Liquidation Proceeds, or, if the Representing Party is obligated to purchase a Mortgage Loan from the Trustee, from the price paid for such Mortgage Loan. Section 17.7 PMI Advances 17.7.1. PMI Advance Option. .In the event that the Servicer has recovered all Liquidation Proceeds with respect to a Mortgage Loan other than any amounts as to which a Primary Mortgage Insurance claim has been made, the Servicer shall have the option, but not the obligation, to advance the amount of such claim (a "PMI Advance"). 17.7.2. PMI Advance Recovery. . The Servicer's PMI Advance shall be recoverable from the related Primary Mortgage Insurance proceeds; provided, however that if such PMI Advance or a portion thereof is eventually determined to be a Non-Recoverable Advance, the Servicer shall be entitled to reimbursement pursuant to Section 17.4. Notwithstanding the foregoing, the Servicer shall not be entitled to reimbursement for a PMI Advance if the amount is not recoverable from the related Primary Mortgage Insurance proceeds as a result of an action by the Servicer which violates Section 4.4.2. ARTICLE 18 Reporting Requirements Section 18.1 Monthly Accounting Reports 18.1.1. Monthly Accounting Report Requirement. With respect to any Remittance Date, the period for monthly accounting reports shall be from the first Business Day of the prior month through the last Business Day of the prior month, provided that (I) the reporting period for Prepayments in Full, Curtailments and Partial Liquidation Proceeds shall be from the Determination Date in the month of such Remittance Date, and (ii) such report shall include only (a) Monthly Payments received by the Servicer by the close of business on the Business Day preceding the Determination Date in the month of such Remittance Date which relate to the Due Date in such month, or in prior months to the extent not previously remitted and reported, and (b) any P&I Advances made in respect of such Monthly Payments. With respect to Type 2 Mortgage Loans, all monthly reports prepared by the Servicer must be complete and must be received by the Master Servicer by the tenth calendar day of the following month. With respect to Type 1 Mortgage Loans, all monthly reports prepared by the Servicer must be complete and must be received by the Master Servicer by the eighteenth calendar day of the following month. All monthly accounting reports must show information in, and must be submitted in, a sequence according to Servicer Loan Number order. 18.1.2. Monthly Accounting Report Elements. The Servicer shall forward to the Master Servicer a Monthly Accounting Report setting forth substantially the information required by FNMA Form 2010. The Servicer must also complete and forward to the Master Servicer any other form or report as provided for in this Agreement, or as reasonably requested by the Master Servicer. 18.1.3. Automated Reports. The Servicer may submit to the Master Servicer for review the Servicer's automated reports which include all of the information required by the provisions of Section 18.1.2 hereof. Upon approval by the Master Servicer, the Servicer may submit approved automated reports to the Master Servicer instead of the Forms listed in Section 18.1.2 hereof. 18.1.4. Electronic Reporting. With the prior written consent of the Master Servicer, all reports to be made by the Servicer to the Master Servicer may be transmitted electronically in lieu of written reporting. If the Servicer services more than one hundred Mortgage Loans for the Master Servicer, it shall arrange for electronic transmission of the required reports. Any expenses occasioned by the electronic transmission of reports shall be borne by the Servicer. 18.1.5. Machine Readable Records. At the request of the Master Servicer, the Servicer shall provide to the Master Servicer, in a mutually agreed machine readable format, the current names and mailing addresses of each Borrower. The Master Servicer shall utilize such information solely for audit purposes, or in the event the Servicer is terminated hereunder. Section 18.2 Account Reconciliations 18.2.1. Reconciliation Preparation. The Servicer shall prepare reconciliations for each Custodial P&I Account, Custodial T&I Account and Custodial Buydown Account on a monthly basis and shall forward the same to the Master Servicer upon request. 18.2.2. Account Records. Upon request of the Master Servicer, the Servicer shall also cause the depository for each of the accounts described in Section 18.2.1 hereof to forward directly to the Master Servicer, copies of all monthly account statements for the preceding monthly reporting period. Section 18.3 Monthly Remittance Requirements 18.3.1. Remittance of Funds. On each Remittance Date the Servicer shall transfer, to the extent not previously transferred as required pursuant to Section 6.1.3(e), from the funds in (or required hereunder to be in) the respective Custodial P&I Account as of the close of the Business Day immediately preceding the Determination Date in the month of such Remittance Date to the related Certificate Account, the following (other than any Amounts Held for Future Distribution in respect of such Remittance Date not exceeding the Threshold Amount and any amounts permitted to be retained by the Servicer or withdrawn from such account by the Servicer pursuant to the terms of this Agreement): (a) all payments on account of principal (including Prepayments in Full and Curtailments received during the Applicable Unscheduled Principal Receipt Period) and interest (other than payments of interest related to any Unscheduled Principal Receipt as to which the Applicable Unscheduled Principal Receipt Period is a Mid-Month Receipt Period received by the Servicer on or before the last day of the Applicable Unscheduled Principal Receipt Period ending in the month in which such prepayment occurs), all net REO Disposition proceeds and proceeds received from any condemnation award or proceeds in lieu of condemnation other than that portion of such proceeds released to the mortgagor in accordance with the terms of the Mortgage Loan Documents or Prudent Servicing Practices; (b) all net Liquidation Proceeds, all net Partial Liquidation Proceeds and Insurance Proceeds, other than any portion of Insurance Proceeds to be applied to the restoration or repair of the related Mortgaged Property or released to the Borrower in accordance with the requirements of law or Prudent Servicing Practices; (c) all P&I Advances made by the Servicer; (d) the Purchase Price, or portion thereof, paid for any Mortgage Loans or property acquired in respect thereof repurchased or substituted by a Representing Party; and (e) all other amounts required to be deposited in the Custodial P&I Account or the Certificate Account pursuant to this Agreement. (f) Notwithstanding Section 18.3.1, the Servicer shall be entitled to withhold and to pay to itself the applicable Servicing Fee (as adjusted pursuant to Section 7.6.1) from any payment on account of interest or other recovery (including Net REO Proceeds) as received and prior to deposit of such payments in the Certificate Account; provided further that with respect to any payment of interest received by the Servicer in respect of a Mortgage Loan (whether paid by the Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or otherwise) which is less than the full amount of interest then due with respect to such Mortgage Loan, only that portion of such payment that bears the same relationship to the total amount of such payment of interest as the per annum rate used to calculate the Servicing Fee, as set forth in Section 4.6, bears to the Mortgage Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing Fee with respect to such Mortgage Loan. 18.3.2. Servicer Compensation. The Servicer shall withdraw its Servicing Fee for each Mortgage Loan net of any Month End Interest payable pursuant to Section 7.6.1 from the related Custodial P&I Account prior to the remittance of such amounts to the Certificate Account with all other payments received with respect to the Mortgage Loans. ARTICLE 19 Transfers and Termination of Servicing Section 19.1 Transfer of Servicing 19.1.1. Transfer Prohibition. The Servicer may not sell or transfer its portfolio serviced hereunder without the prior written consent of the Master Servicer, which consent cannot be unreasonably withheld. Further, the Servicer may not subcontract any of its servicing duties, except as set forth in Section 11.2.1. 19.1.2. Transfer Request. Any request for sale or transfer of servicing shall be reviewed on an individual basis. For a request to be considered, however, the transferor must submit a written request to the Master Servicer. The transferee must agree to enter into a servicing agreement with the Master Servicer substantially in the form of this Agreement and must be approved by the Master Servicer, and, if applicable, any rating agency with respect Mortgage Loans which are owned by a trust which has issued mortgage-backed securities, securitized by such Mortgage Loans, which have been rated at the request of such trust by such rating agency. The Master Servicer must receive this documentation at least 45 days prior to the requested date of transfer. The transferor shall be notified in writing of the Master Servicer's approval or denial. Such transfer shall be denied if the transferee does not meet the approval requirements of the Master Servicer, or any such rating agency. 19.1.3. Servicer Liability. The transferor of servicing shall be liable to the Master Servicer and the Trustee for any servicing obligation violations that occur before, during, and up to and including the day the portfolio is actually transferred. The transferee of servicing shall be liable for any breach of servicing obligations that occurs after the transfer of the servicing portfolio. 19.1.4. Master Servicer's Determination. If the transferor and transferee disagree about liability for violations of representations and warranties and servicing requirements hereunder, the Master Servicer has the right, in its reasonable discretion, to determine which party or parties are liable for such violations. Section 19.2 Termination of Servicing 19.2.1. Grounds for Termination. The Trustee shall have the right to terminate for cause the servicing privileges of the Servicer under this Agreement, either with respect to certain Mortgage Loans serviced hereunder or with respect to all Mortgage Loans serviced hereunder in the event that (i) any of the following occur, (ii) the Trustee has given the Servicer prior written notice of the occurrence of such event, (iii) with respect to clauses (a), (e) or (j) hereof, the Servicer has failed to cure such event within a reasonable time, which shall in all cases be no less than ninety (90) days and (iv) with respect to clause (i), the Servicer has failed to cure such event by 5:00 PM New York time on the Business Day following receipt of notice of such failure to advance provided by the Master Servicer or trustee: (a) the Servicer has made one or more false or misleading representations or warranties in this Agreement or any Mortgage Loan Purchase Agreement, or in any documents relating to the foregoing agreements; (b) the appointment of a trustee or receiver for the Servicer or any of its property; (c) the execution by the Servicer of an assignment for the benefit of its creditors; (d) any material change in the financial status of the Servicer that, in the opinion of the Trustee, could materially adversely affect the Trustee, or the Servicer's ability to service the Mortgage Loans; (e) the Servicer's placement on probation or suspension by a federal or state government agency, including, without limitation, FHLMC, FNMA or GNMA; (f) the Servicer's assignment or attempted assignment of any of its interests, rights, or obligations set forth herein without the Master Servicer's prior written consent; (g) the Servicer has been terminated for cause pursuant to the terms of another servicing agreement with the Master Servicer; (h) failure by the Servicer to duly perform, within the required time periods, its obligations under Sections 4.1.3 or 4.1.4, subject to any cure period set forth in such Sections; (i) failure by the Servicer to make a P&I Advance pursuant to Section 17.1 hereof; or (j) the Servicer has breached any material obligation set forth or incorporated by reference in this Agreement (other than any obligation referred to in clauses (a) through (i) of this Section 19.2.1) or the Mortgage Loan Purchase Agreement, including, without limitation, the Servicer's failure to maintain the requisite Fidelity Bond and Errors and Omissions Policy in the amounts specified herein. 19.2.2. Trustee Notification. The Master Servicer shall notify the Trustee of the occurrence of any of the events set forth in Section 19.2.1, together with the Master Servicer's recommended course of action regarding the termination of the Servicer. 19.2.3. Servicer Termination. (a) Following the occurrence of any of the events set forth in Section 19.2.1, the Trustee may elect, at its reasonable discretion, to terminate the Servicer under this Agreement with respect to the Mortgage Loans. The Trustee shall provide a written termination notice to the Servicer. (b) Notwithstanding anything to the contrary in this Agreement, the Trustee or, if applicable, the Trust Administrator may terminate the Servicer following the occurrence of any of the events set forth in Section 3.09 of the Pooling and Servicing Agreement, in accordance with the procedure for termination set forth therein. 19.2.4. Consequences of Termination. If this Agreement with the Servicer is terminated pursuant to Section 19.2.3 hereof, the Servicer shall deliver all Servicer Mortgage Loan Files, in their entirety, for those Mortgage Loans serviced under this Agreement, as well as any other documents or reports held by the Servicer concerning such Mortgage Loans, to the transferee designated by the Trustee and shall assist in the efficient and timely transfer of the servicing to such transferee. The Servicer shall not be entitled to compensation for servicing following its termination. 19.2.5. Effect of Termination. In the event of the termination of this Agreement, the Servicer is not released from its obligations under this Agreement. If its servicing is terminated for cause, the Servicer must pay the expenses of the Master Servicer incurred in connection with transfer of the servicing and any actual and direct damages, including, without limitation, actual and direct damages or losses of the Trustee resulting from such termination. 19.2.6. Custodial Account Threshold Reduction. In the event that any of the events specified in clauses (a) through (g) or clause (j) of Section 19.2.1 or in clauses (g), (h) or (i) of Section 4.1.6 occur, the Master Servicer, in its reasonable discretion, may notify the Servicer in writing that the applicable Threshold Amount has been reduced to such amount not less than $1,000 as shall be specified in such notice. 19.2.7. Expenses of Termination. The Servicer shall promptly reimburse the Master Servicer (or any designee of the Master Servicer), the Trustee and the Depositor for all reasonable expenses incurred by the Master Servicer (or such designee), the Trustee or the Depositor, as such are incurred, in connection with the termination of the Servicer as servicer and the transfer of servicing of the Mortgage Loans to a successor servicer. The provisions of this paragraph shall not limit whatever rights the Master Servicer, the Trustee or the Depositor may have under other provisions of this Agreement or otherwise, whether in equity or at law, such as an action for damages, specific performance or injunctive relief. ARTICLE 20 Miscellaneous Provisions Section 20.1 Amendments 20.1.1. Unilateral Authority. The Servicer acknowledges that the Master Servicer may, upon written notice, supplement or amend the provisions of this Agreement from time to time, without the need to obtain the Servicer's consent to (a) correct ambiguous or erroneous provisions in this Agreement; (b) make changes necessary or helpful to maintain compliance with applicable law, including any supplement or amendment necessary to effect or facilitate compliance by the Servicer with Regulation AB or to conform this Agreement to industry practices relating to Regulation AB; (c) conform to evolving industry standards regarding the servicing of residential mortgage loans generally; (d) modify the Servicer Mortgage Loan Schedule to reflect the purchase of any Mortgage Loan pursuant to this Agreement or another agreement or to change the applicable loan Type for any Mortgage Loan; (e) to change the definition of Applicable Unscheduled Receipt Period with respect to any Mortgage Loan and any type of Unscheduled Principal Receipt from a Mid-Month Receipt Period to a Prior Month Receipt Period or from a Prior Month Receipt Period to a Mid-Month Receipt Period; or (f) make such other modifications or amendments thereto, which the Master Servicer deems advisable, provided that no such modification or amendment shall have a material adverse impact so as to materially increase the obligations of, or to materially decrease the benefits to, the Servicer. 20.1.2. Consensual Amendment. Except as provided for in Section 20.1.1 hereof, the Master Servicer must obtain the written consent of the Servicer to any amendment hereto that would either increase materially the obligations of the Servicer or decrease materially the benefits to the Servicer. 20.1.3. Trustee Notification. The Trustee shall be provided with notice of the substance of any amendments or modifications made to this Servicing Agreement pursuant to the provisions of this Section 20.1. 20.1.4. Trustee Disapproval. With regard to any proposed modification or amendment to this Agreement which shall have a material adverse impact upon the beneficial rights enjoyed hereunder by the Trustee, the Trustee shall receive written notice of the substance of any proposed amendments or modifications at least ten business days prior to the proposed date of enactment of such amendment or modification which shall also state therein the proposed date of enactment. If the Trustee notifies the Master Servicer in writing, prior to the proposed date of enactment, of its opposition to the adoption of such an amendment or modifications, the Master Servicer shall not proceed with such modification or amendment. Section 20.2 General Construction 20.2.1. Binding Nature. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 20.2.2. Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous servicing agreements, understandings, inducements and conditions, expressed or implied, oral or written, of any nature whatsoever with respect to the subject matter thereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. 20.2.3. Governing Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of New York, notwithstanding any New York or other choice-of-law rules to the contrary. 20.2.4. Indulgences Not Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege, with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 20.2.5. Titles Not to Affect Interpretation. The titles of the articles and sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof. 20.2.6. Provisions Severable. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 20.2.7. Servicer an Independent Contractor. All services, duties and responsibilities of the Servicer under this Agreement shall be performed and carried out by the Servicer as an independent contractor, and none of the provisions of this Agreement shall be deemed to make, authorize or appoint the Servicer as agent or representative of any Trustee of any Mortgage Loans or of the Master Servicer. 20.2.8. Third Party Beneficiary. (a) The parties agree that the Trustee and, if applicable, the Trust Administrator are intended third party beneficiaries of the representations, warranties, covenants and agreements of the Servicer set forth in this Agreement. The Trustee shall have full authorization to enforce directly against the Servicer any of the obligations of the Servicer provided for herein. (b) For purposes of this Agreement, including but not limited to Section 4.1.3, any Master Servicer shall be considered a third party beneficiary to this Agreement entitled to all the rights and benefits accruing to any Master Servicer herein as if it were a direct party to this Agreement. (c) The parties agree that the Depositor is an intended third party beneficiary of the representations, warranties, covenants and agreements of the Servicer set forth in this Agreement. The Depositor shall have full authorization to enforce directly against the Servicer any of the obligations of the Servicer provided for herein. 20.2.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and such counterparts shall constitute one and the same instrument. Section 20.3 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 Master Servicer 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 Servicer shall cooperate fully with the Master Servicer and the Depositor to deliver to the Master Servicer and/or the Depositor (including its assignees or designees), 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 Master Servicer to permit the Depositor to comply with the provisions of Regulation AB, together with such disclosures relating to the Servicer reasonably believed by the Depositor or the Master Servicer to be necessary in order to effect such compliance. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date set forth above. WELLS FARGO BANK, N.A. as Servicer By:________________________________ Name: Title: WELLS FARGO BANK, N.A. as Master Servicer By:________________________________ Name: Title: EXHIBIT A WELLS FARGO & COMPANY MASTER GUARANTEE AGREEMENT REGARDING CUSTODIAL P&I ACCOUNT FUNDS THIS MASTER GUARANTEE AGREEMENT (the "Guarantee") dated as of May 1, 1999 is entered into by Wells Fargo & Company ("Wells Fargo"), a Delaware corporation, in favor of each trustee now or hereafter acting in such capacity for the benefit of the certificateholders of each outstanding and future series of Wells Fargo Asset Securities Corporation mortgage backed securities transactions (collectively, the "MBS Transactions"), including without limitation the trustees identified in Paragraph 8 hereof, and any successor trustee, all of which trustees are referred collectively in this Guarantee as the "Trustee." WHEREAS, this Guarantee has been required by Standard & Poor's, Fitch, Inc., Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc. (collectively, the "Rating Agencies") (each of which has assigned ratings to certain of the classes issued in certain of the MBS Transactions) in connection with their agreement to permit Wells Fargo Bank, N.A., as servicer in the MBS Transactions (in such capacity, "Servicer"), to hold among Servicer's general corporate funds for a period of time principal and interest payments, insurance proceeds, liquidation proceeds and other amounts received by Servicer pertaining to the mortgage loans underlying the MBS Transactions serviced by Servicer (collectively, the "Mortgage Loans"). WHEREAS, Servicer is an indirect, wholly-owned subsidiary of Wells Fargo, a bank holding company, and Wells Fargo derives substantial benefit from Servicer's servicing of the Mortgage Loans pursuant to the terms of a separate servicing agreement between Wells Fargo Bank, N.A., as master servicer, and Servicer, as servicer, for each MBS Transaction (each, a "Servicing Agreement"). WHEREAS, to further induce the Rating Agencies to permit Servicer to withdraw funds from the Custodial P&I Accounts and commingle such funds with the general assets of Servicer to be used for general corporate purposes until such time as such funds are required by the terms of the applicable Servicing Agreement to be remitted to the related Certificate Account, Wells Fargo has agreed to guarantee the performance of Servicer's obligation under the Servicing Agreements to timely remit to the related Certificate Accounts the amounts, if any, so withdrawn from the Custodial P&I Accounts and so used by Servicer. NOW THEREFORE, in consideration of the Rating Agencies' permitting the described arrangement, and for other good and valuable consideration the receipt and sufficiency of which Wells Fargo hereby acknowledges, Wells Fargo hereby agrees for the benefit of each Trustee for the benefit of the certificateholders of each MBS Transaction as follows: 1. Defined Terms. Capitalized terms used but not defined in this Guarantee shall have the respective meanings ascribed to such terms in each Servicing Agreement. 2. Guarantee of Certain Obligation of Servicer under Servicing Agreement. Wells Fargo hereby absolutely, unconditionally and irrevocably guarantees to each Trustee for the benefit of the certificateholders of each MBS Transaction the full and prompt performance, satisfaction and discharge of Servicer's obligation under each Servicing Agreement to remit to the related Certificate Account by the time specified in each Servicing Agreement amounts, if any, withdrawn by the Servicer from the related Custodial P&I Account and commingled with the Servicer's general assets (such obligation, the "Servicer's Obligation"). 3. Guarantee Absolute. The liability of Wells Fargo under this Guarantee shall be absolute and unconditional irrespective of: (i) any change in the time, manner of place of performance of, or in any other term of, the Servicer's Obligation; (ii) the avoidance or subordination of any Servicer's Obligation, or the invalidity or unenforceability thereof; (iii) the waiver, consent, extension, forbearance or granting of any indulgence, or other modification or amendment to any obligation of Servicer under the Servicing Agreement; including without limitation the Servicer's Obligation; (iv) the disallowance under bankruptcy or similar laws relating to insolvency applicable to Servicer of all or any portion of any claim by the Trustee or certificate holders for the performance, satisfaction, and discharge of the Servicer's Obligation; or (v) any other circumstance that might otherwise constitute a defense to, or a discharge of the Servicer's Obligation (except for an express written release or discharge of Servicer by the Trustee), all of the foregoing being expressly waived by Wells Fargo as defenses to its obligations under this Guarantee. 4. Waiver. Wells Fargo hereby waives any requirement of promptness, diligence, presentment, demand, filing of claims with a court in the event of receivership or bankruptcy of Servicer, protest, or notice of protest with respect to the Servicer's Obligation, and notice of acceptance of this Guarantee. 5. Reinstatement. Guarantor further agrees that, to the extent that the Servicer or the Guarantor makes a payment or payments to the Trustee, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to the Servicer or the Guarantor or their respective estate, trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, this Guarantee and the advances or part thereof which have been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payments, reduction or satisfaction occurred. 6. No Waiver of Rights. No failure or delay on the part of the Trustee or the Trust Administrator, if applicable, in exercising any right or remedy arising under this Guarantee shall operate as a waiver of the Trustee's rights hereunder; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise hereunder or the exercise of any other right by or on behalf of the Trustee. 7. Representation and Warranties. Wells Fargo hereby represents and warrants to the Trustee as follows: (a) Organization. Wells Fargo is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Wells Fargo is duly qualified and in good standing to transact business in each jurisdiction in which such qualification is necessary, other than those jurisdictions where the failure to be so qualified would not have a material adverse effect upon the business, assets or financial condition of Wells Fargo. (b) Authority. Wells Fargo has all requisite corporate power and authority to execute and enter into this Guarantee and to perform the obligations required of it hereunder. The execution and delivery of this Guarantee and the consummation of the undertakings contemplated hereby, have each been duly and validly authorized by all necessary corporate action, and this Guarantee constitutes a valid and legally binding agreement of Wells Fargo enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, moratorium, reorganization or other laws and regulations affecting the rights and remedies of creditors generally. (c) No Conflicts. The execution, delivery, and performance of this Guarantee by Wells Fargo will not constitute (a) a violation or breach of any terms or provisions of Wells Fargo's Restated Certificate of Incorporation or by-laws or (b) a violation or breach of any terms or provisions of, or a default under any provision of statutory law or published regulation or any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Wells Fargo is a party or by which Wells Fargo is bound, or any order, rule or regulation binding on Wells Fargo and known to Wells Fargo of any court or governmental agency or body having jurisdiction over Wells Fargo. 8. Notices. All notices and other communications hereunder shall be in writing (including a writing delivered by facsimile transmission) and shall be deemed to have been duly given (a) when delivered, if sent by registered or certified mail (return receipt requested), or (b) when delivered, if delivered personally or by facsimile, or (c) on the following business day, if sent by overnight mail or overnight courier, in each case to Wells Fargo and the Trustee at the following addresses (or at such other addresses as shall be specified by like notice): If to Wells Fargo : Corporate Secretary Wells Fargo & Company Wells Fargo Center Sixth and Marquette Minneapolis, MN 55479-1026 Facsimile No.: 612-667-6082 With a copy to: Corporate Treasury Wells Fargo & Company Wells Fargo Center Sixth and Marquette Minneapolis, MN 55479-1019 Facsimile No.: 612-667-9908 If to the Trustee: Wachovia Bank, National Association, as Trustee 401 South Tryon Street Charlotte, North Carolina 28202 or to such other address to receive any such confirmation or notice as the notice party may have designated by written notice to the other notice party at the above address. 9. Successors and Assigns. This Guarantee shall be binding upon Wells Fargo, its successors, transferees, and assigns, and shall inure to the benefit of and be enforceable by the Trustee and its successors, transferees and assigns. 10. Waiver of Subrogation. As long as any Servicer's Obligation has not been satisfied and discharged in full, Wells Fargo shall have no right of subrogation and hereby waives any right to enforce any remedy which the Trustee now has or may hereafter have against Servicer or any other guarantor of all or any part of the Servicer's Obligation. 11. Subordination. Wells Fargo agrees that any and all claims of Wells Fargo against Servicer or any other guarantor of all or any part of the Servicer's Obligation, whether arising by reason of any payment by Wells Fargo pursuant to the provisions hereof or otherwise, and all indebtedness of Servicer to Wells Fargo, shall be subordinate and subject in right of payment to the full and prompt performance, satisfaction, and discharge, of Servicer's Obligation. 12. Entire Agreement; Amendment and Waivers. This Guarantee contains the complete and entire agreement of Wells Fargo with respect to its provisions, and no change, waiver or amendment hereto shall be binding upon Wells except as separately set forth in a writing and duly executed by Wells Fargo. 13. Severability. The invalidity, illegality, or unenforceability of any provision of this Guarantee pursuant to judicial decree shall not affect the validity, legality, or enforceability of any other provisions of this Guarantee, all of which other provisions shall remain in full force and effect as written. 14. Governing Law. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable principles of conflicts of law or comity). IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Guarantor, has executed this Guarantee on behalf of the Guarantor as of the day and year first written above. WELLS FARGO & COMPANY By ___________________________ [ ] [ ] B-2 EXHIBIT B FORM OF ANNUAL CERTIFICATION Re: The Servicing Agreement dated as of [______], (the "Agreement"), between Wells Fargo Bank, N.A., a national banking association (the "Servicer") and Wells Fargo Bank, N.A., a national banking association, (the "Master Servicer"), I, ________________________________, the _______________________ of Wells Fargo Bank, N.A., certify to the Depositor and the Master Servicer, and their officers, with the knowledge and intent that they will rely upon this certification, that: (1) I have reviewed the servicer compliance statement of the Servicer provided in accordance with Item 1123 of Regulation AB (the "Compliance Statement"), the report on assessment of the Servicer's compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the "Servicing Criteria"), provided in accordance with Rules 13a-18 and 15d-18 under Securities Exchange Act of 1934, as amended (the "Exchange Act") and Item 1122 of Regulation AB (the "Servicing Assessment"), the registered public accounting firm's attestation report provided in accordance with Rules 13a-18 and 15d-18 under the Exchange Act and Section 1122(b) of Regulation AB (the "Attestation Report"), and all servicing reports, officer's certificates and other information relating to the servicing of the Mortgage Loans by the Servicer during 200[_] that were delivered by the Depositor and the Master Servicer pursuant to the Agreement (collectively, the "Servicer Servicing Information"); (2) Based on my knowledge, the Servicer Servicing Information, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which such statements were made, not misleading with respect to the period of time covered by the Servicer Servicing Information; (3) Based on my knowledge, all of the Servicer Servicing Information required to be provided by the Servicer under the Agreement has been provided to the Depositor and the Master Servicer; (4) I am responsible for reviewing the activities performed by the Servicer as servicer under the Agreement, and based on my knowledge and the compliance review conducted in preparing the Compliance Statement and except as disclosed in the Compliance Statement, the Servicing Assessment or the Attestation Report, the Servicer has fulfilled its obligations under the Agreement in all material respects; and (5) The Compliance Statement required to be delivered by the Servicer pursuant to the Agreement, and the Servicing Assessment and Attestation Report required to be provided by the Servicer and by any Subservicer or Subcontractor pursuant to the Agreement, have been provided to the Depositor and the Master Servicer. Any material instances of noncompliance described in such reports have been disclosed to the Depositor and the Master Servicer. Any material instance of noncompliance with the Servicing Criteria has been disclosed in such reports. Date: _________________________ By: Name: ________________________________ Title: ________________________________ EXHIBIT C SUBSERVICER INFORMATION (A) the Subservicer's form of organization; (B) a description of how long the Subservicer has been servicing residential mortgage loans; a general discussion of the Subservicer's experience in servicing assets of any type as well as a more detailed discussion of the Subservicer's experience in, and procedures for, the servicing function it will perform under the Agreement; information regarding the size, composition and growth of the Subservicer's portfolio of residential mortgage loans of a type similar to the Mortgage Loans and information on factors related to the Subservicer that may be material, in the good faith judgment of the Master Servicer or the Depositor, to any analysis of the servicing of the Mortgage Loans or the related asset-backed securities, as applicable, including, without limitation: (1) whether any prior securitizations of mortgage loans of a type similar to the Mortgage Loans involving the Subservicer have defaulted or experienced an early amortization or other performance triggering event because of servicing during the three-year period immediately preceding the date of engagement of the Subservicer; (2) the extent of outsourcing the Subservicer utilizes; (3) whether there has been previous disclosure of material noncompliance with the applicable servicing criteria with respect to securitizations of residential mortgage loans involving the Subservicer as a servicer during the three-year period immediately preceding the date of engagement of the Subservicer; (4) whether the Subservicer has 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; and (5) such other information as the Master Servicer or the Depositor may reasonably request for the purpose of compliance with Item 1108(b)(2) of Regulation AB; (C) a description of any material changes during the three-year period immediately preceding the date of engagement of the Subservicer to the Subservicer's policies or procedures with respect to the servicing function it will perform under the Agreement for mortgage loans of a type similar to the Mortgage Loans; (D) information regarding the Subservicer's financial condition, to the extent that there is a material risk that an adverse financial event or circumstance involving the Subservicer could have a material adverse effect on the performance by the Subservicer of its servicing obligations under the Agreement; (E) information regarding advances made by the Subservicer on the Mortgage Loans and the Subservicer's overall servicing portfolio of residential mortgage loans for the three-year period immediately preceding the date of engagement of the Subservicer, which may be limited to a statement by an authorized officer of the Subservicer to the effect that the Subservicer has made all advances required to be made on residential mortgage loans serviced by it during such period, or, if such statement would not be accurate, information regarding the percentage and type of advances not made as required, and the reasons for such failure to advance; (F) a description of the Subservicer's processes and procedures designed to address any special or unique factors involved in servicing loans of a similar type as the Mortgage Loans; (G) a description of the Subservicer's processes for handling delinquencies, losses, bankruptcies and recoveries, such as through liquidation of mortgaged properties, sale of defaulted mortgage loans or workouts; and (H) information as to how the Subservicer defines or determines delinquencies and charge-offs, including the effect of any grace period, re-aging, restructuring, partial payments considered current or other practices with respect to delinquency and loss experience. EX-10.2 7 we3768865-ex10_2.txt FORM OF MORTGAGE LOAN PURCHASE AGREEMENT Exhibit 10.2 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 (the "Seller" or "Wells Fargo Bank"). The Company and the Seller 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 master servicer (the "Master Servicer"), and [ ], as trustee (the "Trustee"), relating to the issuance of the Company's Mortgage Asset-Backed Pass-Through Certificates, Series 20 - (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. The Seller agrees to sell, and the Company agrees to purchase, the mortgage loans (the "Mortgage Loans"), other than the Fixed Retained Yield with respect to the Mortgage Loans, listed on the Mortgage Loan Schedule and all of the Seller's interest with respect to the Mortgage Loans as the owner in, to and under each 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 the Seller on the Closing Date in immediately available funds. Upon payment of the Purchase Price, the Seller shall be deemed to have transferred, assigned, set over and otherwise conveyed to the Company all the right, title and interest of the Seller in and to the Mortgage Loans including all interest and principal received or receivable by the Seller 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 the Seller 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 the Seller's right, title and interest in and to the proceeds of any related title, hazard, primary mortgage or other insurance policies, the Seller's right to receive amounts, if any, payable on behalf of any Mortgagor from the Subsidy Account relating to any Subsidy Loan, the Seller's right, title and interest in and to the proceeds of the Letters of Credit, all of the Seller'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 the Seller, and the Seller 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). The Seller further agrees to deliver such other documents, instruments and agreements as the Company or the Trustee shall reasonably request. 4. Representations and Warranties; Covenants. The Seller hereby represents and warrants to the Company that (i) the Company's representations and warranties to the Trustee pursuant to Section 2.03(b) of the Pooling and Servicing Agreement are true and correct, as of the date thereof, and (ii) Seller 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. The Seller hereby agrees to cure any breach of such representations and warranties in accordance with the terms of the Pooling and Servicing Agreement. The Seller 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 the Seller 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) the Seller 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) The Seller hereby agrees to repurchase any Mortgage Loan (i) for which any document is not delivered, as provided in paragraph 3 above, (ii) which is found by the Trustee or the Custodian 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 the Seller does not deliver or which defect or breach the Seller 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 Repurchase Price. In addition, the Seller hereby agrees to reimburse the Company for any Reimbursement Amount. Alternatively, the Seller 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. The Seller further agrees that a substituted mortgage loan will have (i) an unpaid principal balance no greater than the Scheduled 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 for which such mortgage loan is substituted) and (ii) a Net Mortgage Interest Rate equal to and a Loan-to-Value Ratio no greater than that of the Mortgage Loan for which it is substituted. The Seller 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 the event that the Seller 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, the Seller may request the Company to repurchase the Mortgage Loan from the Trust Estate pursuant to Section 3.08 of the Pooling and Servicing Agreement and the Seller agrees that at the time of the repurchase by the Company, the Seller will repurchase the Mortgage Loan from the Company at a price equal to the Repurchase Price. At the time of any such repurchase by the Seller, the Seller agrees either to promptly (i) liquidate such Mortgage Loan, to the extent that the Seller'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 the Seller to the Company. 6. Underwriting. The Seller 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) The Seller hereby represents to the Company that the Mortgage Loans are serviced by the Servicers. The Seller has delivered copies of each Servicing Agreement to the Company, though omitting schedules of mortgage loans which are serviced thereunder, but which are not being sold in this transaction. (b) With respect to each Mortgage Loan, the Servicing Fee Rate and the Master Servicing Fee Rate (which is in addition to the Servicing Fee Rate) shall be as set forth on the Mortgage Loan Schedule. (c) On the Closing Date, the Seller 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 the Seller, 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 the Seller 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. 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. 12. 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 the Seller and their respective successors and assigns. IN WITNESS WHEREOF, the Company and the Seller 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-----