424B5 1 sami2007ar4_424b5.htm sami2007-ar4_prosupp.htm
Prospectus supplement dated August 30, 2007 (to prospectus dated June 28, 2007)
 

 
$1,202,796,000
(Approximate)
 
Structured Asset Mortgage Investments II Trust 2007-AR4
Issuing Entity
 
Structured Asset Mortgage Investments II Grantor Trust 2007-AR4
Grantor Trust Issuing Entity
 
EMC Mortgage Corporation
Servicer and Sponsor
 
Structured Asset Mortgage Investments II Inc.
Depositor
 
Structured Asset Mortgage Investments II Trust 2007-AR4
Mortgage Pass-Through Certificates, Series 2007-AR4
 
and
 
Structured Asset Mortgage Investments II Grantor Trust 2007-AR4
Mortgage Pass-Through Certificates, Series 2007-AR4
 
 
 You should consider carefully the risk factors beginning on page S-12 in this prospectus supplement.
 
The Trust and the Grantor Trust
 
The trust will consist primarily of a pool of 30-year and 40-year conventional, adjustable rate, negative amortization mortgage loans secured by first liens on one- to four-family residential properties.
 
The trust will issue the following classes of certificates that are offered under this prospectus supplement:
 
 
·
9 classes of  senior certificates designated Class A-1, Class A-2, Class A-3, Class A-4A, Class A-5, Class A-6, Class A-7, Class X-1 and Class X-2 Certificates, and
 
 
·
9 classes of  subordinate certificates designated Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates,
 
each as more fully described in the tables beginning on page S-2 of this prospectus supplement.
 
The grantor trust will issue 1 class of senior certificates, the grantor trust Class A-4B Certificates (referred to herein as the grantor trust certificates), which are offered pursuant to this prospectus supplement and which will represent the entire beneficial interest in the grantor trust as further described herein.
 
The certificates are obligations only of the trust and the grantor trust as the issuing entities. Neither the certificates nor the mortgage loans are insured or guaranteed by any person except as described herein. Distributions on the certificates will be payable solely from the assets transferred to the related trust for the benefit of the related certificateholders.
 
Credit Enhancement
 
Credit enhancement for the offered certificates (with respect to the grantor trust certificates, indirectly through the underlying Class A-4B certificates that are issued by the trust but not offered under this prospectus supplement) will consist of excess spread, overcollateralization and additional classes of subordinated certificates.  The Class A-5 Certificates and the Class A-6 Certificates may receive additional distributions in respect of interest from payments under the related corridor contracts, as described herein.  The grantor trust certificates may receive additional distributions in respect of interest payments under the swap agreement, as described herein.
 
Distributions on the certificates will be on the 25th of each month, or, if the 25th is not a business day, on the next business day, beginning in September 2007.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved the certificates or determined if this prospectus supplement or the prospectus is accurate or complete.  Any representation to the contrary is a criminal offense.
 
The Attorney General of the State of New York has not passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful.
 
The price to investors will vary from time to time and will be determined at the time of sale. The proceeds to the depositor from the offering are expected to be approximately 97.75% of the aggregate principal amount of the offered certificates, plus accrued interest thereon, less expenses. See “Method of Distribution” in this prospectus supplement.
 
The underwriter will deliver to purchasers the offered certificates in book-entry form through The Depository Trust Company, Clearstream Banking, société anonyme and the Euroclear System, in each case, on or about August 31, 2007.
 


Bear, Stearns & Co. Inc.
Underwriter

Important notice about information presented in this prospectus supplement
and the accompanying prospectus

You should rely only on the information contained in this document. We have not authorized anyone to provide you with different information.
 
 
We provide information to you about the offered certificates in two separate documents that progressively provide more detail:
 
 
·
the accompanying prospectus, which provides general information, some of which may not apply to these series of certificates; and
 
 
·
this prospectus supplement, which describes the specific terms of your certificates.
 
 
Annex I, Annex II, Schedule A and Schedule B are incorporated into and comprise a part of this prospectus supplement as if fully set forth herein.
 
The description of your certificates in this prospectus supplement is intended to enhance the related description in the prospectus and you should rely on the information in this prospectus supplement as providing additional detail not available in the prospectus.
 
The Depositor’s principal offices are located at 383 Madison Avenue, New York, New York 10179 and its telephone number is (212) 272-2000.
 
NOTWITHSTANDING ANY OTHER EXPRESS OR IMPLIED AGREEMENT TO THE CONTRARY, THE SPONSOR, THE SERVICER, THE TRUSTEE, THE GRANTOR TRUSTEE, THE CORRIDOR COUNTERPARTY, THE SWAP COUNTERPARTY, EACH RECIPIENT OF THE RELATED PROSPECTUS SUPPLEMENT AND, BY ITS ACCEPTANCE THEREOF, EACH HOLDER OF A CERTIFICATE, AGREES AND ACKNOWLEDGES THAT EACH PARTY HERETO HAS AGREED THAT EACH OF THEM AND THEIR EMPLOYEES, REPRESENTATIVES AND OTHER AGENTS MAY DISCLOSE, IMMEDIATELY UPON COMMENCEMENT OF DISCUSSIONS, TO ANY AND ALL PERSONS THE TAX TREATMENT AND TAX STRUCTURE OF THE CERTIFICATES AND THE REMICS, THE TRANSACTIONS DESCRIBED HEREIN AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO ANY OF THEM RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE.
 
European Economic Area
 
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (referred to herein as a Relevant Member State), the 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 (referred to herein as a Relevant Implementation Date) it has not made and will not make an offer of notes to the public in that Relevant Member State prior to the publication of a prospectus in relation to the notes 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 notes 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 €43,000,000 and (3) an annual net turnover of more than €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 notes to the public” in relation to any notes 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 notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression referred to herein as Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
 
United Kingdom
 
The Underwriter has represented and agreed that:
 
(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 FSMA) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuing Entity; 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 notes in, from or otherwise involving the United Kingdom.
 

 
 TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
 
   
   
Caption
Page
   
SUMMARY OF PROSPECTUS SUPPLEMENT
S-1
RISK FACTORS
S-12
DESCRIPTION OF THE MORTGAGE LOANS
S-24
General
S-24
Billing and Payment Procedures
S-26
Prepayment Charges on the Mortgage Loans
S-26
Negative Amortization
S-26
Indices on the Mortgage Loans
S-27
Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account
S-27
The Interest Coverage Account
S-29
STATIC POOL INFORMATION
S-29
THE ISSUING ENTITY
S-29
THE DEPOSITOR
S-30
THE SPONSOR
S-30
THE SERVICER
S-31
General
S-31
The Servicer
S-32
MORTGAGE LOAN ORIGINATION
S-33
General
S-33
EMC
S-33
DESCRIPTION OF THE CERTIFICATES
S-39
General
S-39
Book-Entry Registration
S-41
Definitive Certificates
S-42
Distributions on the Certificates
S-42
Swap Agreement
S-45
Principal Distributions on the Grantor Trust Certificates
S-46
Monthly Advances
S-46
Allocation of Realized Losses; Subordination
S-47
Excess Spread and Overcollateralization Provisions
S-48
Pass-Through Rates
S-48
Calculation of One-Month LIBOR
S-49
Optional Purchase of Defaulted Loans
S-49
Restrictions on Transfer of the Residual Certificates
S-50
THE CORRIDOR CONTRACTS
S-50
YIELD AND PREPAYMENT CONSIDERATIONS
S-51
General
S-51
Prepayment Considerations
S-51
Interest Shortfalls and Realized Losses
S-54
Pass-Through Rates
S-55
Assumed Final Distribution Date
S-55
Weighted Average Life
S-55
Yield Sensitivity of the Subordinate Certificates
S-66
Yield Sensitivity of the Class X Certificates
S-66
THE POOLING AND SERVICING AGREEMENT AND THE GRANTOR TRUST AGREEMENT
S-67
General
S-67
Assignment of the Mortgage Loans
S-67
Representations and Warranties
S-67
The Custodian
S-68
The Trustee and the Grantor Trustee
S-68
Servicing and Other Compensation and Payment of Expenses
S-70
Servicing Responsibilities
S-71
Table of Fees
S-71
Realization Upon Defaulted Mortgage Loans
S-71
Monthly Reports to Certificateholders
S-72
Collection and Other Servicing Procedures and Modifications
S-74
Hazard Insurance
S-75
Evidence as to Compliance
S-75
The Custodial Account
S-76
The Distribution Account
S-76
The Grantor Trust Distribution Account
S-76
The Adjustable Rate Supplemental Fund
S-77
The Reserve Fund
S-77
Voting Rights
S-77
Termination
S-77
FEDERAL INCOME TAX CONSEQUENCES
S-78
Special Tax Considerations Applicable to the Class A Certificates and Class B Certificates
S-79
Taxation of the Grantor Trust and Grantor Trust Certificates
S-79
Characterization of the Offered Certificates
S-80
Backup Withholding
S-81
Penalty Protection
S-81
METHOD OF DISTRIBUTION
S-81
SECONDARY MARKET
S-81
LEGAL MATTERS
S-82
LEGAL PROCEEDINGS
S-82
AFFILIATIONS, RELATIONSHIPS AND RELATED TRANSACTIONS
S-82
RATINGS
S-82
LEGAL INVESTMENT
S-83
ERISA CONSIDERATIONS
S-84
INCORPORATION OF INFORMATION BY REFERENCE
S-86
GLOSSARY
S-87
ANNEX I
S-102
ANNEX II
S-105
SCHEDULE A
A-1
SCHEDULE B
B-1

 



TRANSACTION STRUCTURE


 
SUMMARY OF PROSPECTUS SUPPLEMENT
 
The following summary is a very broad overview of the offered certificates and does not contain all of the information that you should consider in making your investment decision. To understand all of the terms of the offered certificates, read carefully this entire prospectus supplement and the entire accompanying prospectus. A glossary is included at the end of this prospectus supplement. Capitalized terms used but not defined in the glossary at the end of this prospectus supplement or in the following summary have the meanings assigned to them in the glossary at the end of the prospectus.
 
Issuing Entity
Structured Asset Mortgage Investments II Trust 2007-AR4.
   
Grantor Trust Issuing Entity
Structured Asset Mortgage Investments II Grantor Trust 2007-AR4.
   
Titles of Series
Structured Asset Mortgage Investments II Trust 2007-AR4 Mortgage Pass-Through Certificates, Series 2007-AR4 and Structured Asset Mortgage Investments II Grantor Trust 2007-AR4 Mortgage Pass-Through Certificates, Series 2007-AR4.
   
Cut-off Date
August 1, 2007.
   
Closing Date
On or about August 31, 2007.
   
Depositor
Structured Asset Mortgage Investments II Inc.
   
Sponsor and Servicer
EMC Mortgage Corporation, an affiliate of the depositor.
   
Originators
American Home Mortgage Corporation (or an affiliate thereof), EMC Mortgage Corporation, Greenpoint Mortgage Funding Inc. and various other originators, none of which will originate more than 10% of the mortgage loans in the aggregate.
   
Trustee and Grantor Trustee
Wells Fargo Bank, National Association.
   
Swap Counterparty
Bear Stearns Capital Markets Inc.
   
Corridor Counterparty
Bear Stearns Financial Products Inc.
   
Distribution Dates
Distributions on the offered certificates will be made on the 25th day of each month or, if such day is not a business day, on the next succeeding business day, beginning in September 2007.
   
Offered Certificates
The classes of offered certificates and their pass-through rates and initial current principal amounts are set forth in the table below.

 

 
Offered Certificates
 
Class
Pass-Through
Rate
Initial Current
Principal Amount
Initial Rating
(S&P/Moody’s)
Designation
A-1
Variable Rate
$155,800,000
AAA/Aaa
 Super Senior
A-2
Variable Rate
$93,100,000
AAA/Aaa
 Super Senior
A-3
Variable Rate
$237,179,000
AAA/Aaa
Super Senior
A-4A
Variable Rate
$201,406,000
AAA/Aaa
Super Senior
Grantor Trust A-4B
Variable Rate
$100,000,000
AAA/Aaa
Grantor Trust A-4B Certificate
A-5
Variable Rate
$100,469,000
AAA/Aaa
Level 1 Senior Support
A-6
Variable Rate
$110,994,000
AAA/Aaa
Level 2 Senior Support
A-7
Variable Rate
$110,994,000
AAA/Aaa
Leve1 3 Senior Support
X-1
Fixed Rate
Notional
AAA/Aaa
 Senior Interest Only
X-2
Fixed Rate
Notional
AAA/Aaa
 Senior Interest Only
B-1
Variable Rate
$19,678,000
AA+/Aa1
 Subordinate
B-2
Variable Rate
$17,833,000
AA+/Aa2
 Subordinate
B-3
Variable Rate
$10,454,000
AA/Aa3
 Subordinate
B-4
Variable Rate
$9,839,000
AA-/A1
 Subordinate
B-5
Variable Rate
$7,994,000
A+/A2
 Subordinate
B-6
Variable Rate
$7,379,000
A/A3
 Subordinate
B-7
Variable Rate
$6,149,000
A-/Baa1
 Subordinate
B-8
Variable Rate
$6,149,000
BBB+/Baa2
 Subordinate
B-9
Variable Rate
$7,379,000
BBB/Baa3
 Subordinate
Total  Offered Certificates:
$1,202,796,000
   
 
Non-Offered Certificates
 
Class
 
Pass-Through
Rate
 
Initial Current
Principal Amount
 
Initial Rating
(S&P/Moody’s)
 
 
Designation
Underlying A-4B
Variable Rate
$100,000,000
AAA/Aaa
 Super Senior
 XP-1
N/A
N/A
NR
 Subordinate
 XP-2
N/A
N/A
NR
 Subordinate
B-IO
N/A
$0
NR
 Subordinate
Total  Non-Offered Certificates:
$100,000,000
   
 
Total Certificates                                           $1,302,796,000

 Residual Certificates

 
Class
 
Pass-Through
Rate
 
Initial Current
Principal Amount
 
Initial Rating
(S&P/Moody’s)
 
 
Designation
R
N/A
$0
NR
Residual
R-X
N/A
$0
NR
Residual
Total Residual Certificates:
$0
   
 
 
Other Information:
 
The pass-through rates on the certificates are described in detail on pages S-7 and S-8 in this prospectus supplement.
 
Grantor Trust Certificates:
 
Payments on the grantor trust certificates will be made indirectly from certain payments made on the underlying Class A-4B certificates (sometimes referred to herein as the underlying certificates), and from certain payments that may be made pursuant to the swap agreement, in each case as described in this prospectus supplement.
 
Class X Certificates:
 
The Class X-1 Certificates and the Class X-2 Certificates are sometimes referred to herein as the Class X Certificates. The Class X Certificates do not have a principal amount.
 
The Class X-2 Certificates will have a notional amount equal to the aggregate outstanding principal balance of the mortgage loans generally having (i) "hard" prepayment charges for a term of three years (or in limited cases, 30 months) from origination and (ii) "combo" prepayment charges for a term of three years (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months) from origination. The Class X-1 Certificates will have a notional amount equal to the aggregate outstanding principal balance of the mortgage loans having all other prepayment charges.
 
The Class X-1 Certificates will have an initial notional amount of approximately $330,204,694, and the Class X-2 Certificates will have an initial notional amount of approximately $625,532,976.
 
The Issuing Entities
 
The depositor will establish a trust with respect to the Structured Asset Mortgage Investments II Trust 2007-AR4 Mortgage Pass-Through Certificates, Series 2007-AR4, pursuant to a pooling and servicing agreement dated as of August 1, 2007, among the depositor, the servicer and sponsor and the trustee.
 
The depositor will establish a grantor trust with respect to the Structured Asset Mortgage Investments II Grantor Trust 2007-AR4 Mortgage Pass-Through Certificates, Series 2007-AR4, pursuant to a grantor trust agreement dated as of August 1, 2007, between the depositor and the grantor trustee.  The trust and the grantor trust, collectively, are sometimes referred to herein as the issuing entities.
 
The certificates (other than the grantor trust Class A-4B Certificates, which are sometimes referred to herein as the grantor trust certificates) represent (in the aggregate) the entire beneficial ownership interest in the trust.  The grantor trust certificates represent the entire beneficial interest in the grantor trust.  The assets of the grantor trust will include the underlying Class A-4B certificates (which are sometimes referred to herein as the underlying certificates) and the swap agreement, as described herein.
 
Distributions of interest and/or principal on the offered certificates (other than the grantor trust certificates) and the underlying certificates will be made only from payments received in connection with the mortgage loans. Distributions of interest and principal on the grantor trust certificates will be made indirectly, from certain payments received on the underlying certificates and from certain payments that may be made to the grantor trust pursuant to the swap agreement.
 
See“Description of the Certificates” in this prospectus supplement.
 
The Sponsor
 
EMC Mortgage Corporation, in its capacity as mortgage loan seller, a Delaware corporation and an affiliate of the depositor and the underwriter, will sell the mortgage loans to the depositor. EMC Mortgage Corporation is sometimes referred to herein as the sponsor or EMC.
 
The Originators
 
Approximately 65.48% of the mortgage loans were originated by American Home Mortgage Corporation (or an affiliate thereof), or American Home. Approximately 6.32% of the mortgage loans were acquired by EMC from various sellers and were originated in accordance with the guidelines of EMC.  Approximately 8.79% of the mortgage loans were originated by Greenpoint Mortgage Funding Inc. The remainder of the mortgage loans were originated by various originators, none of which have originated more than 10% of the mortgage loans in the aggregate.
 
The Servicer
 
All of the mortgage loans will be serviced by EMC Mortgage Corporation.
 
The Swap Counterparty
 
Bear Stearns Capital Markets Inc., a Delaware corporation and an affiliate of the sponsor, the depositor and the underwriter, will enter into swap agreement with the grantor trustee on behalf of the grantor trust and the holders of the grantor trust certificates.
 
The Mortgage Loans
 
The mortgage pool consists of approximately 3,042 first lien adjustable rate negative amortization mortgage loans secured by one- to four-family residential real properties and individual condominium units.
 
The mortgage loans have an aggregate principal balance of approximately $1,149,645,357 as of the cut-off date, which includes approximately $39,950,512 of subsequent mortgage loans that have been identified by the sponsor to be included in the trust within 90 days of the closing date.
 
The characteristics of the mortgage loans as described in this prospectus supplement and in schedule A to this prospectus supplement may differ from the final pool as of the closing date due to, among other things, the possibility that certain mortgage loans may become delinquent or default or may be removed or substituted and that similar or different mortgage loans may be added to the pool prior to the closing date.
 
All percentages, amounts and time periods with respect to the characteristics of the mortgage loans shown in this prospectus supplement and in schedule A to this prospectus supplement are subject to a variance of plus or minus 5%.
 
Approximately $120,157,587 of mortgage loans are expected to be transferred to the trust within ninety days of the closing date.  Such mortgage loans are referred to herein as the subsequent mortgage loans.  The initial mortgage loans and the subsequent mortgage loans, collectively, are sometimes referred to herein as the mortgage loans.  However, unless otherwise indicated herein, all percentages with respect to the characteristics of the mortgage loans shown in this prospectus supplement do not include information pertaining to the subsequent mortgage loans, other than approximately $39,950,512 of subsequent mortgage loans that have been identified by the sponsor.
 
All of the mortgage loans have a negative amortization feature, under which accrued interest on a mortgage loan will be deferred and added to the principal balance of that mortgage loan if the minimum monthly payment on any payment date is less than the amount of accrued interest due on the mortgage loan on that payment date. See “Description of the Mortgage Loans—General—Negative Amortization” in this prospectus supplement.
 
The mortgage rate on each mortgage loan is adjustable, generally after a period of one, two, three or six months following its origination, and thereafter adjusts monthly. Approximately 19.24% of the mortgage loans are still in their initial fixed rate period.
 
Each of the mortgage loans will have an initial minimum monthly payment based on an amount that would fully amortize the mortgage loan over a 30 or 40 year term at the initial mortgage rate in effect on the mortgage loan.  The initial mortgage rate in effect on a mortgage loan will generally be lower, and may be significantly lower, than the mortgage rate that would have been in effect based on the related index and note margin.  While the interest rate on each mortgage loan will adjust monthly, the minimum monthly payment will adjust less frequently on a date specified in the related mortgage note.  On such date, the minimum monthly payment will adjust to an  amount that would pay interest and amortize fully the then unpaid principal balance of the mortgage loan over its remaining term to maturity in substantially equal payments, subject to the conditions that (i) the amount of the monthly payment (with the exception of each fifth payment adjustment date or the final payment adjustment date) will not increase or decrease by an amount that is more than 7.50% of the monthly payment prior to the adjustment, (ii) as of the fifth payment adjustment date and on the same day every fifth year thereafter and on the last payment adjustment date, the monthly payment will be recast without regard to the limitation in clause (i) above and (iii) if the unpaid principal balance exceeds a percentage (either 110%, 115%, 120% or 125%, depending on the maximum negative amortization for that mortgage loan) of the original principal balance due to deferred interest, the monthly payment will be recast without regard to the limitation in clause (i) to amortize fully the then unpaid principal balance over its remaining term to maturity.
 
Generally, in addition to the minimum monthly payment option, the mortgagor is offered additional payment options to the extent they result in a larger payment than the minimum monthly payment.  These payment options generally include an interest-only payment, a fully amortizing payment and a 15-year amortizing payment.  If a payment option would not result in an amount greater than the minimum payment due, the payment option will not be available to a mortgagor.
 
See “Description of the Mortgage Loans—General” in this prospectus supplement.
 
After the initial fixed-rate period, the interest rate on each  mortgage loans will adjust monthly based on One-Month LIBOR or One-Year MTA, the 12-month moving average yield on United States Treasury Securities adjusted to a constant maturity of one year. The rate adjustments are subject to limitations set forth under “Description of the Mortgage Loans” in this prospectus supplement.
 
Pre-Funding
 
On the closing date, the depositor will pay to the trustee from proceeds of the initial offering approximately $120,157,587 referred to herein as the pre-funded amount.  The pre-funded amount will be held by the trustee in an account referred to herein as the pre-funding account. From the closing date up to and including November 15, 2007, referred to herein as the pre-funding period, the depositor may sell and the trust will purchase, using funds on deposit in the pre-funding account, subsequent mortgage loans to be included in the trust, provided that such subsequent mortgage loans satisfy the requirements described in “Description of the Mortgage Loans—Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account" and "—The Interest Coverage Account” in this prospectus supplement.
 
The amounts on deposit in the pre-funding account will be reduced by any amounts used to purchase subsequent mortgage loans during the pre-funding period.  Any amounts remaining in the pre-funding account after November 15, 2007, will be distributed to the certificates on the distribution date immediately following the termination of the pre-funding period.
 
In addition, on the closing date, the depositor will pay to the trustee, from proceeds of the initial offering, for deposit in an account, referred to herein as the interest coverage account, an amount which will be applied by the trustee to cover shortfalls in the amount of interest generated by the subsequent mortgage loans attributable to the pre-funding feature. Any amounts remaining in the interest coverage account after November 15, 2007 will be distributed on the next distribution date either to the distribution account described in this prospectus supplement or the depositor or its designee, as provided in the pooling and servicing agreement.
 
Mortgage Pool Characteristics
 
The Mortgage Loans
 
The following table summarizes the approximate characteristics of the mortgage loans as of the cut-off date:
 
Number of mortgage loans:
3,042
   
Aggregate principal balance:
$1,149,645,357
   
Range of principal balances:
$38,921 to $6,460,074
   
Average principal balance:
$377,924
   
Range of mortgage rates (per annum):
 1.000% to 10.622%
   
Weighted average mortgage rate (per annum):
8.100%
   
Range of remaining terms to stated maturity (months):
338 to 480
   
Weighted average remaining term to stated maturity (months):
417
   
Weighted average loan-to-value ratio at origination:
79.28%
   
Weighted average gross margin (per annum):
3.713%
   
Weighted average maximum lifetime mortgage rate (per annum):
10.347%
   
Weighted average months to next interest adjustment date (months):
1
   
Loan Index:
 
   
One-Year MTA
97.06%
   
One-Month LIBOR
2.94%
 
For additional information regarding the mortgage loans, see “Description of the Mortgage Loans” in this prospectus supplement and Schedule A, which is attached and is part of this prospectus supplement.
 
Removal and Substitution of a Mortgage Loan
 
The trustee will acknowledge the sale, transfer and assignment to it (or the custodian as its agent) by the depositor and receipt of the mortgage loans, subject to further review and the exceptions which may be noted pursuant to the procedures described in the pooling and servicing agreement. If the trustee (or the custodian as its agent) finds that any mortgage loan appears defective on its face, appears to have not been executed or received, or appears to be unrelated to the mortgage loans identified in the mortgage loan schedule (determined on the basis of the mortgagor name, original principal balance and loan number), the trustee (or the custodian as its agent) will promptly notify the sponsor. The sponsor must then correct or cure any such defect within 90 days from the date of notice from the trustee (or the custodian as its agent) of the defect and if the sponsor fails to correct or cure such defect within such period and such defect materially and adversely affects the interests of the certificateholders in the mortgage loan, the sponsor will, in accordance with the terms of the pooling and servicing agreement and the mortgage loan purchase agreement, within 90 days of the date of notice, provide the trustee with a substitute mortgage loan (if within two years of the closing date) or repurchase the mortgage loan; provided that, if such defect would cause the mortgage loan to be other than a “qualified mortgage” as defined in Section 860G(a)(3)(a) of the Internal Revenue Code, any such cure or substitution must occur within 90 days from the date such breach was discovered.
 
Description of the Certificates
 
General
 
The trust will issue the certificates (other than the grantor trust certificates).  Payments on the certificates will be made from payments on the mortgage loans.
 
The grantor trust will issue the grantor trust certificates.  Payments on the grantor trust certificates will be made from payments made on the underlying certificates, as described herein.  In addition, certain payments may also be made to the grantor trust certificates from amounts received by the grantor trust from the swap counterparty pursuant to the swap agreement.
 
The Class A-1, Class A-2, Class A-3, Class A-4A, underlying Class A-4B, Class A-5, Class A-6, Class A-7 and Class X Certificates are sometimes referred to herein as the senior certificates.
 
The Class A-1, Class A-2, Class A-3, Class A-4A, underlying Class A-4B, Class A-5, Class A-6 and Class A-7 Certificates are sometimes referred to herein as the Class A Certificates.
 
The Class X-1 Certificates and Class X-2 Certificates are sometimes referred to herein as the Class X Certificates.
 
The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates will each represent subordinated interests in the mortgage loans and are sometimes referred to herein as the subordinate certificates or the Class B Certificates.
 
The senior certificates (other than the underlying certificates), the grantor trust certificates and the subordinate certificates are sometimes referred to herein as the offered certificates.
 
The underlying Class A-4B, Class XP-1, Class XP-2 and Class B-IO Certificates are not offered by this prospectus supplement and are sometimes referred to herein as the non-offered certificates. The Class XP-1, Class XP-2 and Class B-IO Certificates will each represent subordinated interests in the mortgage loans.
 
The Class XP-1 Certificates and the Class XP-2 Certificates are sometimes referred to herein as the Class XP Certificates.
 
The offered certificates and the non-offered certificates are sometimes referred to herein as the certificates.
 
The Class R Certificates and the Class R-X Certificates (also referred to herein as the residual certificates) are not offered by this prospectus supplement and represent the residual interests in the real estate mortgage investment conduits established by the trust.
 
The assumed final distribution date for the offered certificates is September 2047.
 
Record Date
 
For each class of offered certificates (other than the Class X Certificates), and for any distribution date, the business day preceding the applicable distribution date so long as the offered certificates remain in book-entry form. For each class of Class X Certificates and any other class of certificates that is no longer in book-entry form, and for any distribution date, the record date will be the last business day of the month preceding the month in which such distribution date occurs.
 
Denominations
 
For each class of certificates, other than the residual certificates, $25,000 and multiples of $1.00 in excess thereof.
 
Registration of Offered Certificates
 
The trust will issue the offered certificates initially in book-entry form. Persons acquiring interests in these offered certificates will hold their beneficial interests through The Depository Trust Company, in the United States, or Clearstream Banking, société anonyme or the Euroclear System, in Europe.
 
See “Description of the Certificates—Book-Entry Registration” in this prospectus supplement.
 
Interest Accrual Period
 
Interest will accrue at the rate described herein on each class of certificates.
 
The interest accrual period for the offered certificates (other than the Class X Certificates) and the underlying certificates will be the period commencing on the distribution date in the month preceding the month in which a distribution date occurs (or the closing date, in the case of the first interest accrual period) and ending on the day immediately prior to such distribution date.
 
Interest on the offered certificates (other than the Class X Certificates) and the underlying certificates will be calculated on the basis of a 360-day year and the actual number of days elapsed in the applicable interest accrual period.
 
The interest accrual period for the Class X Certificates will be the calendar month immediately preceding the calendar month in which a distribution date occurs.  Interest on the Class X Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
 
Pass -Through Rates
 
The pass-through rates on each class of offered certificates and the underlying certificates are as follows:
 
The offered certificates (other than the Class A-2, Class A-3, Class X and Class B Certificates) and the underlying certificates will bear interest at a pass-through rate equal to the lesser of (i) one-month LIBOR plus the related margin and (ii) the net rate cap of the mortgage loans.   The Class A-2, Class A-3 and Class B Certificates will bear interest at a pass-through rate equal to the least of (i) one-month LIBOR plus the related margin, (ii) 11.50% per annum and (iii) the net rate cap of the mortgage loans.
 
For any distribution date, the net rate cap for the offered certificates (other than the Class X Certificates) and the underlying certificates is equal to the weighted average of the net rates of the mortgage loans, less the sum of (x) the pass-through rate on the Class X-1 Certificates multiplied by the Class X-1 notional amount and (y) the pass-through rate on the Class X-2 Certificates multiplied by the Class X-2 notional amount, divided by the aggregate stated principal balance of the mortgage loans as of such distribution date, adjusted to actual/360 basis.
 
The related margin for the Class A-1, Class A-2, Class A-3, Class A-4A, underlying Class A-4B, grantor trust Class A-4B, Class A-5, Class A-6, Class A-7, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates will be 0.200%, 0.160%, 0.220%, 0.180%, 0.180%, 0.180%, 0.220%, 0.250%, 0.280%, 0.500%, 0.550%, 0.650%, 0.850%, 1.000%, 1.250%, 2.000%, 2.100% and 2.100% per annum, respectively, provided that, after the first possible related optional termination date, the related margin for the Class A-1, Class A-2, Class A-3, Class A-4A, underlying Class A-4B, grantor trust Class A-4B, Class A-5, Class A-6, Class A-7, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9, Certificates will be 0.400%, 0.320%, 0.440%, 0.360%, 0.360%, 0.360%, 0.440%, 0.500%, 0.560%, 0.750%, 0.825%, 0.975%, 1.275%, 1.500%, 1.875%, 3.000%, 3.150% and 3.150% per annum, respectively.
 
One-month LIBOR for the first interest accrual period and for all subsequent accrual periods will be determined as described in “Description of the Certificates—Calculation of One-Month LIBOR” in this prospectus supplement.
 
The Class X-2 Certificates will bear interest at a fixed pass-through rate equal to 0.500% per annum based on a notional amount equal to the aggregate outstanding principal balance of the mortgage loans generally having (i) "hard" prepayment charges for a term of three years (or in limited cases, 30 months) from origination and (ii) "combo" prepayment charges for a term of three years (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months) from origination immediately prior to such distribution date.  The Class X-1 Certificates will bear interest at a fixed pass-through rate equal to 0.080% per annum based on a notional amount equal to the aggregate outstanding principal balance of the mortgage loans having all other prepayment charges.  The Class X-1 Certificates will have an initial notional amount of approximately $330,204,694, and the Class X-2 Certificates will have an initial notional amount of approximately $625,532,976.
 
The Class XP-1, Class XP-2, Class B-IO, Class R and Class R-X Certificates do not have a pass-through rate and will not bear interest.
 
Interest Payments
 
On each distribution date, holders of the offered certificates (other than the grantor trust certificates, unless the swap agreement has been terminated and no replacement swap agreement has been entered into) and the underlying certificates will generally be entitled to receive:
 
·
the interest that has accrued on the current principal amount or notional amount of such certificates at the applicable pass-through rate during the related interest accrual period, and
 
·
any interest due on a prior distribution date that was not paid plus interest accrued thereon,
 
less
 
·
interest shortfalls allocated to such certificates.
 
However, the amount of interest distributable on a distribution date with respect to the offered certificates (other than the grantor trust certificates, unless the swap agreement has been terminated and no replacement swap agreement has been entered into) and the underlying certificates will be reduced by the amount, if any, of net deferred interest for the related distribution date that is allocated to such class of certificates, as described under “Description of the Certificates” in this prospectus supplement.
 
In the event that an increase in the applicable index causes interest to accrue on a mortgage loan for a given month in excess of the monthly payment for that mortgage loan, the excess interest will be added to the outstanding principal balance of that mortgage loan in the form of “negative amortization.”  For any distribution date, the excess, if any, of (i) the aggregate amount of negative amortization with respect to all mortgage loans for the calendar month prior to that distribution date, over (ii) the aggregate amount of scheduled and unscheduled payments of principal received with respect to all mortgage loans during the related due period and prepayment period, referred to herein as net deferred interest, will be deducted from interest payable to the certificates as described in this prospectus supplement. The amount deducted from the interest payable to each class of offered certificates (other than the Class X Certificates) and the underlying certificates will be added to the principal balance of that class (other than with respect to the Grantor Trust Certificates to the extent described herein).  See “Description of the Certificates” in this prospectus supplement.
 
Principal Payments
 
On each distribution date, to the extent that the scheduled and unscheduled payments of principal on the mortgage loans during the related due period and prepayment period exceed the deferred interest on the mortgage loans, principal will be paid on each class of certificates entitled to receive principal payments on each distribution date. Principal distributions on the grantor trust certificates will generally include principal payments on the mortgage loans that are paid to the underlying certificates after reimbursement for payments made by the swap counterparty in connection with net deferred interest allocated to such class of certificates. You should review the priority of payments described under “Description of the Certificates —Distributions on the Certificates” ” and “—Principal Distributions on the Grantor Trust Certificates” in this prospectus supplement.
 
The Swap Agreement
 
The grantor trust certificates will represent the entire interest in the grantor trust. The assets of the grantor trust will consist of the underlying certificates and the swap agreement. The swap agreement will only be available to make payments on the grantor trust certificates and will not be available to make payments on any other class of certificates.  Payments under the swap agreement will be equal to any net deferred interest allocated to the underlying certificates on each distribution date. In the event of the termination of the swap agreement because of a default or other event of termination by either party thereto, an amount may become due and payable either from the swap counterparty to the grantor trust (for payment to the grantor trust certificates) or to the swap counterparty from amounts otherwise payable from the grantor trust to the grantor trust certificates.  In the case of a termination of the swap agreement where no replacement swap agreement has been entered into, the grantor trust certificates will become subject to the allocation of net deferred interest as described herein. The swap agreement will be terminated following the earlier to occur of (i) the distribution date following the date on which the current principal amount of the underlying certificates is reduced to zero or (ii) September 2047.  See “Description of the Certificates—The Swap Agreement” in this prospectus supplement.
 
Advances
 
The servicer will make cash advances with respect to delinquent minimum payments of principal or interest due on the mortgage loans (not including any balloon payments required to be made under a balloon mortgage loan) for which it acts as servicer, generally to the extent that the servicer reasonably believes that such cash advances can be repaid from future payments on the mortgage loans. If the servicer fails to make any required advances, the trustee may be obligated to do so in its capacity as successor servicer, as described in this prospectus supplement. These cash advances are only intended to maintain a regular flow of scheduled interest and principal payments on the certificates and are not intended to guarantee or insure against losses.  See  “The Pooling and Servicing Agreement—Monthly Advances” in this prospectus supplement.
 
Servicing Fee, Trustee Compensation and Grantor Trustee Fee
 
The servicer will be entitled to receive a monthly servicing fee, as compensation for its activities under the pooling and servicing agreement, equal to 1/12th of the servicing fee rate multiplied by the aggregate stated principal balance of the mortgage loans serviced by it as of the due date in the month preceding the month in which such distribution date occurs.  The servicing fee rate will be a per annum rate ranging from 0.250% to 0.375%. Interest shortfalls on the mortgage loans resulting from prepayments in full in any calendar month will be offset by the servicer on the distribution date in the following calendar month to the extent of compensating interest payments as described in this prospectus supplement.
 
As compensation for its activities under the pooling and servicing agreement, the trustee will be entitled to (i) the investment income on amounts in the distribution account for the period specified in the pooling and servicing agreement and (ii) a monthly fee equal to 1/12th of the trustee fee rate multiplied by the aggregate stated principal balance of the mortgage loans as of the due date in the month preceding the month in which such distribution date occurs.  The trustee fee rate will be 0.0075% per annum.
 
The grantor trustee will be entitled to a fee as compensation for its activities under the grantor trust agreement which shall be paid by the trustee.
 
Credit Enhancement
 
Credit enhancement provides limited protection to holders of specified certificates against shortfalls in payments received on the mortgage loans. This transaction employs the following forms of credit enhancement.
 
Excess Spread and Overcollateralization. The mortgage loans are expected to generate more interest than is needed to pay interest on the certificates (with respect to the holders of the grantor trust certificates, indirectly through the underlying certificates) because we expect the weighted average net interest rate of the mortgage loans to be higher than the weighted average pass-through rate on the certificates. In addition, such higher interest rate is paid on a principal balance of mortgage loans that is larger than the current principal amount of the certificates. Interest payments received in respect of the mortgage loans in excess of the amount that is needed to pay interest on the certificates and related trust expenses will be used to reduce the total current principal amount of the certificates until a required level of overcollateralization has been achieved.
 
See “Description of the Certificates—Excess Spread and Overcollateralization Provisions” in this prospectus supplement.
 
Subordination; Allocation of Losses. By issuing senior certificates and subordinate certificates, the trust has increased the likelihood that senior certificateholders will receive regular payments of interest and principal.
 
The senior certificates will have a payment priority over the subordinate certificates.  Among the classes of subordinate certificates, each class of Class B Certificates with a lower numerical class designation will have payment priority over each class of Class B Certificates with a higher numerical class designation.
 
Subordination provides the holders of certificates having a higher payment priority protection against losses realized when the remaining unpaid principal balance on a mortgage loan exceeds the amount of proceeds recovered upon the liquidation of that mortgage loan.  In general, this loss protection is accomplished by allocating any realized losses in excess of available excess spread and any current overcollateralization to the subordinate certificates, beginning with the subordinate certificates with the lowest payment priority, until the current principal amount of that subordinate class has been reduced to zero and then allocating any loss to the next most junior class of subordinate certificates, until the current principal amount of each class of subordinate certificates is reduced to zero. If no subordinate certificates remain outstanding, the principal portion of realized losses on the mortgage loans  will be allocated to the senior certificates thereof in accordance with the priorities set forth herein under "Description of the Certificates—Allocation of Realized Losses; Subordination."
 
As of the closing date, the aggregate current principal amount of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates will equal approximately 7.55% of the aggregate principal balance of the mortgage loans as of the cut-off date.
 
See Description of the Certificates—Allocation of Realized Losses; Subordination in this prospectus supplement.
 
The Corridor Contracts
 
The Class A-5 Certificates and the Class A-6 Certificates will be entitled to the benefits provided by the corridor contracts. There can be no assurance as to the extent of benefits, if any, that may be realized by the certificateholders as a result of the corridor contracts.  No other class of certificates will be entitled to the benefits of the corridor contracts.
 
See “The Corridor Contracts” in this prospectus supplement.
 
Optional Termination
 
At its option, the depositor or its designee may purchase from the trust all of the mortgage loans, together with any properties in respect thereof acquired on behalf of the trust and thereby effect termination and early retirement of the certificates after the stated principal balance of the mortgage loans (and properties acquired in respect thereof), remaining in the trust has been reduced to less than 10% of the sum of (i) the stated principal balance of the mortgage loans as of the cut-off date (including any subsequent mortgage loans to be added to the trust) and (ii) the pre-funded amount as of the closing date.
 
See“Pooling and Servicing Agreement—Termination” in this prospectus supplement.
 
Federal Income Tax Consequences
 
One or more elections will be made to treat the mortgage loans and certain related assets as one or more real estate mortgage investment conduits for federal income tax purposes.
 
See “Federal Income Tax Consequences” in this prospectus supplement.
 
Ratings
 
It is a condition to the issuance of the certificates that the offered certificates receive the following ratings from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., which is referred to herein as S&P and Moody’s Investors Service, Inc., which is referred to herein as Moody’s:
 

 
Offered Certificates
S&P
Moody’s
Class A-1
AAA
Aaa
Class A-2
AAA
Aaa
Class A-3
AAA
Aaa
Class A-4A
AAA
Aaa
Grantor Trust Class A-4B
AAA
Aaa
Class A-5
AAA
Aaa
Class A-6
AAA
Aaa
Class A-7
AAA
Aaa
Class X-1
AAA
Aaa
Class X-2
AAA
Aaa
Class B-1
AA+
Aa1
Class B-2
AA+
Aa2
Class B-3
AA
Aa3
Class B-4
AA-
A1
Class B-5
A+
A2
Class B-6
A
A3
Class B-7
A-
Baa1
Class B-8
BBB+
Baa2
Class B-9
BBB
Baa3

A rating is not a recommendation to buy, sell or hold securities and either rating agency can revise or withdraw such ratings at any time. In general, ratings address credit risk and do not address the likelihood of prepayments.
 
See “Yield and Prepayment Considerations” and “Ratings” in this prospectus supplement and “Yield Considerations” in the prospectus.
 
Legal Investment
 
The offered certificates (other than the Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates) will constitute “mortgage related securities” for purposes of SMMEA, so long as they are rated in one of the two highest rating categories by a nationally recognized statistical rating organization.  The Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates will not constitute “mortgage related securities” for purposes of SMMEA.
 
See“Legal Investment” in this prospectus supplement and“Legal Investment Matters” in the prospectus.
 
ERISA Considerations
 
The senior certificates (other than the underlying certificates), if rated at least "AA-" or "Aa3" at the time of purchase, may be purchased by persons investing assets of employee benefit plans or individual retirement accounts, subject to important considerations.  The subordinate certificates and senior certificates rated less than "AA-" or "Aa3" at the time of purchase may be purchased to the extent described herein under "ERISA Considerations".  Plans should consult with their legal advisors before investing in the offered certificates.
 
The grantor trust certificates may not be acquired or held by a person investing assets of any such plans or individual retirement accounts before the termination of the swap agreement unless such acquisition or holding is eligible for the exemptive relief available under any of Section 408(b)(17) of ERISA or the investor-based exemptions described herein under "ERISA Considerations".
 
See “ERISA Considerations” in this prospectus supplement.

RISK FACTORS
 
You are encouraged to carefully consider the following risk factors in connection with the purchase of the offered certificates:
 
Your Yield on the Certificates Will be Subject to any Negative Amortization on the Mortgage Loans.
 
All of the mortgage loans in the trust are negative amortization loans.
 
Negative amortization may occur with respect to the mortgage loans, because, generally, after the initial fixed rate period following origination (as set forth in the related mortgage note), the interest rates on the negative amortization loans will typically adjust monthly but their monthly payments and amortization schedules adjust annually.  During a period of rising interest rates, the amount of interest accruing on the principal balance of these mortgage loans may exceed the amount of the minimum monthly payment.  In addition, in most circumstances, the amount by which a monthly payment may be adjusted on an annual payment adjustment date may be limited and may not be sufficient to amortize fully the unpaid principal balance of a mortgage loan over its remaining term to maturity. Approximately 19.24% of the mortgage loans are still in their initial fixed rate period. The initial interest rates on most of the mortgage loans during the initial fixed rate period are lower than the sum of the indices applicable and the related margins and range from not lower than 1.000% per annum and in no case exceeding 3.000% per annum. For approximately 4.06% of the mortgage loans, the interest rates are currently 1.000% per annum.
 
Negative amortization may occur because during the initial fixed rate period, monthly payments made by the mortgagor may be less than the interest accrued on such mortgage loan for the related payment period.
 
As a result, a portion of the accrued interest on negatively amortizing loans may become deferred interest which will be added to their principal balances and will also bear interest at the applicable interest rates.  The amount of any deferred interest accrued on a mortgage loan during a due period will reduce the amount of interest available to be distributed on the related classes of certificates on the related distribution date.
 
If the interest rates on the mortgage loans decrease prior to an adjustment in the monthly payment, a larger portion of the monthly payment will be applied to the unpaid principal balance of the mortgage loan, which may cause the related classes of certificates to amortize more quickly.  Conversely, if the interest rates on the mortgage loans increase prior to an adjustment in the monthly payment, a smaller portion of the monthly payment will be applied to the unpaid principal balance of the mortgage loan, which may cause the related classes of certificates to amortize more slowly.  With respect to the mortgage loans, on the fifth payment adjustment date of a mortgage loan and every fifth payment adjustment date thereafter and the last payment adjustment date prior to the mortgage loan's maturity, the monthly payment due on such mortgage loan will be reset without regard to the related periodic payment cap or if the unpaid principal balance exceeds a percentage of 110%, 115%, 120% or 125%, as applicable, of the original principal balance due to deferred interest, the monthly payment due on that mortgage loan will be reset, without regard to the related periodic payment cap, in each case 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 adjustment features are likely to substantially increase the monthly payment due from borrowers and are likely to affect the rate at which principal on these mortgage loans is paid. In addition, the adjustment features may create a greater risk of default if the borrowers are unable to pay the higher monthly payments that may result in increases in the interest rates and increased principal balances.  It is expected that if a borrower paid only the minimum monthly payment due under the mortgage loan, such mortgage loan would reach the applicable negative amortization percentage within approximately four years of origination.
 
The amount of deferred interest, if any, with respect to the mortgage loans for a given month will reduce the amount of interest collected on these mortgage loans and available to be distributed as a distribution of interest to the certificates. The resulting reduction in interest collections on the mortgage loans will be offset, in part or in whole, by applying all payments of principal prepayments received on the mortgage loans to interest distributions on the related classes of certificates.  For any distribution date, the remaining deferred interest or net deferred interest on the mortgage loans will be allocated to those classes of certificates as set forth in this prospectus supplement under “Description of the Certificates—Distributions on the Certificates."  The amount of the reduction of accrued interest distributable to a class of certificates attributable to net deferred interest will be added to the current principal amount of that class (other than the grantor trust certificates, to the extent set forth in this prospectus supplement).  Only the amount by which the payments of principal prepayments received on the mortgage loans exceed the amount of deferred interest on the mortgage loans will be distributed as principal to the related classes of certificates in accordance with the priorities set forth in this prospectus supplement under “Description of the Certificates—Distributions on the Certificates.”  The increase in the current principal amount of any class of certificates and the slower reduction in the current principal amounts due to the use of all principal collected on the mortgage loans to offset the deferred interest will have the effect of increasing the weighted average lives of the certificates and increasing your exposure to realized losses on the mortgage loans. We cannot predict the extent to which deferred interest will accrue on the mortgage loans and therefore cannot predict the extent of the effect of the allocation of net deferred interest on your certificates.  Net deferred interest allocated to the underlying certificates will not be added to the current principal amount of the grantor trust certificates unless the swap agreement is  terminated due to a default or other event of termination (as set forth in such swap agreement) and no replacement swap agreement has been entered into.  Pursuant to the swap agreement, the swap counterparty is required to make an interest payment in respect of such amount for payment to the grantor trust certificates.
 
In addition, as the principal balance of a mortgage loan subject to negative amortization will increase by the amount of deferred interest allocated to such loan, the increasing principal balance of a negative amortization loan may approach or exceed the value of the related mortgaged property, thus increasing the likelihood of defaults as well as the amount of any loss experienced with respect to any such negative amortization that is required to be liquidated. Furthermore, each mortgage loan provides for the payment of any remaining unamortized principal balance thereto (due to the addition of deferred interest, if any, to the principal balance of the mortgage loan) in a single payment at the maturity of such mortgage loan. Because the related mortgagors may be required to make a larger single payment upon maturity, it is possible that the default risk associated with mortgage loans subject to negative amortization is greater than associated with fully amortizing mortgage loans.
 
The Offered Certificates Will Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell Them at a Discount from Their Fair Market Value.
 
The underwriter intends to make a secondary market in the offered certificates, however the underwriter will not be obligated to do so. There can be no assurance that a secondary market for the offered certificates will develop or, if it does develop, that it will provide holders of the offered certificates with liquidity of investment or that it will continue for the life of the offered certificates. As a result, any resale prices that may be available for any offered certificate in any market that may develop may be at a discount from the initial offering price or the fair market value thereof. The offered certificates will not be listed on any securities exchange.
 
Credit Enhancement Is Limited; The Failure of Credit Enhancement to Cover Losses on the Trust Assets May Result in Losses Allocated to the Offered Certificates.
 
The subordination of the subordinate certificates to the senior certificates as described in this prospectus supplement, is intended to enhance the likelihood that holders of the senior certificates, the grantor trust certificates and, to a more limited extent, holders of the offered subordinate certificates will receive regular payments of interest and principal and to provide the holders of the senior certificates and, to a more limited extent, the holders of the offered subordinate certificates with a higher payment priority, with protection against losses realized when the remaining unpaid principal balance on a related mortgage loan exceeds the amount of proceeds recovered upon the liquidation of that mortgage loan.  In general, this loss protection is accomplished by allocating the principal portion of any realized losses, to the extent not covered by excess spread or any overcollateralization, among the certificates, beginning with the subordinate certificates with the lowest payment priority, until the current principal amount of that subordinate class has been reduced to zero. The principal portion of realized losses are then allocated to the next most junior class of subordinate certificates, until the current principal amount of each class of subordinate certificates is reduced to zero. If no subordinate certificates remain outstanding, the principal portion of realized losses on the mortgage loans will be allocated to the senior certificates in the order of priority set forth in this prospectus supplement under “Description of the Certificates—Allocation of Realized Losses; Subordination."  Accordingly, if the aggregate current principal amount of the subordinate certificates were to be reduced to zero, delinquencies and defaults on the mortgage loans would reduce the amount of funds available for monthly distributions to the holders of the senior certificates.  Realized losses allocated to the underlying certificates will be allocated to the grantor trust certificates.
 
The ratings of the offered certificates by the rating agencies may be lowered following the initial issuance thereof as a result of losses on the mortgage loans in excess of the levels contemplated by the rating agencies at the time of their initial rating analysis. None of the depositor, the sponsor, the trustee nor any of their respective affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain the ratings of the offered certificates.  See“Description of Credit Enhancement—Subordinate Securities” in the prospectus.
 
 
Mortgage Loan Modifications May Affect the Net Rate Caps and Distributions on the Securities
 
Modifications of mortgage loans agreed to by the servicer in order to maximize ultimate proceeds of such mortgage loans may have the effect of, among other things, reducing the loan rate, forgiving payments of principal, interest or other amounts owed under the mortgage loan or contract, such as taxes or insurance premiums, extending the final maturity date of the loan, capitalizing delinquent interest and other amounts owed under the mortgage loan or contract, or any combination of these or other modifications. Any modified loan may remain in the trust, and the reduction in collections resulting from a modification may result in a lower interest rate cap, reduced distributions of interest or principal on, may extend the final maturity of, or result in a allocation of a realized loss to, one or more classes of the related securities.
 
Developments in Specified Regions Could Have a Disproportionate Effect on the Mortgage Loans due to Geographical Concentrations of Mortgaged Properties.
 
Approximately 39.91% of the mortgage loans as of the cut-off date are secured by properties in California.  Property in certain regions may be more susceptible than properties located in other parts of the country to certain types of uninsurable hazards, such as earthquakes, floods, mudslides and other natural disasters.  In addition:
 
 
·
economic conditions in a specific region with a significant concentration of properties underlying the mortgage loans (which may or may not affect real property values) may affect the ability of borrowers to repay their loans on time;
 
 
·
declines in a region’s residential real estate market may reduce the values of properties located in that region, which would result in an increase in the loan-to-value ratios; and
 
 
·
any increase in the market value of properties located in a particular region would reduce the loan-to-value ratios and could, therefore, make alternative sources of financing available to the borrowers at lower interest rates, which could result in an increased rate of prepayment of the mortgage loans.
 
Any risks associated with mortgage loan concentration may affect the yield to maturity of the offered certificates to the extent losses caused by these risks are not covered by subordination provided by the subordinate certificates.
 
Recent Developments in the Residential Mortgage Market May Adversely Affect the Market Value of Your Securities.
 
Recently, the residential mortgage market in the United States has experienced a variety of difficulties and changed economic conditions that may adversely affect the performance and market value of your securities. Securities backed by residential mortgage loans (“RMBS Securities”) originated in 2006 and 2007 have had a higher and earlier than expected rate of delinquencies. Additionally, there may be evidence that other earlier vintages of RMBS Securities are not performing well. Many RMBS Securities, include those from securitizations of the sponsor, have been downgraded by the rating agencies during the past few months. As a result, the market for your securities may be adversely affected for a significant period of time.
 
The increase in delinquencies described above has not been limited to “subprime” mortgage loans, which are made to borrowers with impaired credit.  The increase in delinquencies has also affected “alt-A” mortgage loans, which are made to borrowers with limited documentation, and also “prime” mortgage loans, which are made to borrowers with excellent credit who provide full documentation.
 
In recent months housing prices and appraisal values in many states have declined or stopped appreciating, after extended periods of significant appreciation. A continued decline or an extended flattening of those values may result in additional increases in delinquencies and losses on residential mortgage loans generally, particularly with respect to second homes and investor properties and with respect to any residential mortgage loans whose aggregate loan amounts (including any subordinate liens) are close to or greater than the related property values.
 
Another factor that may in the future contribute to higher delinquency rates is the potential increase in monthly payments on adjustable rate mortgage loans. Borrowers with adjustable payment mortgage loans may be exposed to increased monthly payments if the related mortgage interest rate adjusts upward from the initial fixed rate or a low introductory rate, as applicable, in effect during the initial period of the mortgage loan to the rate computed in accordance with the applicable index and margin. This increase in borrowers’ monthly payments, together with any increase in prevailing market interest rates, after the initial fixed rate period, may result in significantly increased monthly payments for borrowers with adjustable rate mortgage loans and an increase in default on their obligations.
 
Current market conditions may impair borrowers’ ability to refinance or sell their properties, which may contribute to higher delinquency and default rates. Borrowers seeking to avoid increased monthly payments by refinancing may no longer be able to find available replacement loans at comparably low interest rates. A decline in housing prices may also leave borrowers with insufficient equity in their homes to permit them to refinance. Borrowers who intended to sell their homes or refinance their existing mortgage loan on or before the expiration of the fixed rate periods on their mortgage loans may find that they cannot sell their property for an amount equal to or greater than the unpaid principal balance of their loans or obtain new financing. In addition, some mortgage loans may include prepayment premiums that would further inhibit refinancing.
 
Recently, a number of originators of mortgage loans have experienced serious financial difficulties and, in many cases, have entered bankruptcy proceedings. These difficulties have resulted in part from declining markets for their mortgage loans as well as from claims for repurchases of mortgage loans previously sold under provisions that require repurchase in the event of early payment defaults or for breaches of representations regarding loan quality. In addition to the reduction of the number of originators, a rising interest rate environment and declining real estate values may decrease the number of borrowers seeking or able to refinance their mortgage loans, resulting in a decrease in overall originations.
 
Various federal, state and local regulatory authorities have taken or proposed actions that could hinder the ability of the servicer to foreclose promptly on defaulted mortgage loans. Any such actions may adversely affect the performance of the loans and the yield on and value of the securities.
 
You are encouraged to consider that the general market conditions discussed above may adversely affect the performance and market value of your securities.
 
The Bankruptcy or Closure of an Originator May Adversely Affect the Performance and Market Value of Your Securities.
 
The depositor is aware that American Home Mortgage Corporation (or an affiliate thereof), or American Home, the originator of approximately 65.48% of the mortgage loans, by aggregate principal balance as of the cut-off date, has filed for bankruptcy protection under the United States Bankruptcy Code.  See "Mortgage Loan Origination—American Home Mortgage Corporation" in this prospectus supplement.  In addition, the depositor is aware that as of August 20, 2007, Greenpoint Mortgage Funding Inc., or Greenpoint, has announced that effective immediately it will cease its residential mortgage originations operations.  Notwithstanding the foregoing, Greenpoint will continue its servicing operations.  Any originator whose financial condition was weak or deteriorating at the time of origination may have experienced personnel changes that adversely affected its ability to originate and service mortgage loans in accordance with its customary standards.  It may also have experienced reduced management oversight or controls with respect to its underwriting standards and servicing capabilities.  Accordingly, the rate of delinquencies and defaults on these mortgage loans may be higher than would otherwise be the case.
 
Your distributions could be adversely affected by the bankruptcy or insolvency of certain parties.
 
The sponsor believes that the transfers of the mortgage loans by the originators to the sponsor constitute a sale of the mortgage loans.  The sponsor will treat its transfer of the mortgage loans to the depositor as a sale of the mortgage loans.  However, if an originator, the sponsor or the depositor becomes bankrupt, a party in interest (including the originator, the sponsor or the depositor) may argue that the mortgage loans were not sold but were only pledged to secure a loan to the sponsor, the depositor or the trust, as applicable, or that the transfer was otherwise improper.  If such an argument is made, you could experience delays in payments on the certificates.  If the argument is successful, there could be delays or reductions in payments on the certificates, or there could be a significant prepayment of the certificates.  You might also suffer reinvestment loss in a lower interest rate environment.
 
In addition, if the servicer becomes bankrupt, a bankruptcy trustee or receiver may have the power to prevent the appointment of a successor servicer.  Any related delays in servicing could result in increased delinquencies or losses on the mortgage loans.
 
A Transfer of Servicing May Result in an Increased Risk of Delinquency and Loss on the Mortgage Loans.
 
It is expected that the primary servicing for a majority of the mortgage loans will be transferred to EMC prior to the closing date; including a portion of the mortgage loans originated by American Home.  However, the servicer will be obligated to service the mortgage loans as of the closing date.  Any servicing transfer will involve notifying mortgagors to remit payments to a new servicer, transferring physical possession of loan files and records to the new servicer and entering loan and mortgagor data on the management information systems of the new servicer.  In addition, with respect to the mortgage loans originated by American Home and Greenpoint, the filing of the bankruptcy by American Home and the closure of the origination unit by Greenpoint and corresponding personnel issues may adversely affect the transfer of any mortgage loans to EMC.  Accordingly, such transfers could result in misdirected notices, misapplied payments, data input problems and other problems.  In addition, investors should note that when the servicing of mortgage loans is transferred, there is generally an increase in delinquencies associated with such transfer.  Such increase in delinquencies and problems incurred with the transfer to the new servicer may result in losses, which, to the extent they are not absorbed by credit enhancement, will cause losses or shortfalls to be incurred by the holders of the offered certificates.  In addition, any higher default rate resulting from such transfer may result in an acceleration of prepayments on those mortgage loans.
 
The Underwriting Standards of Some of the Mortgage Loans Do Not Conform to the Standards of Fannie Mae or Freddie Mac, And May Present a Greater Risk of Loss with Respect to those Mortgage Loans.
 
Some of the mortgage loans were underwritten generally in accordance with underwriting standards which are primarily intended to provide for single family “non-conforming” mortgage loans. A “non-conforming” mortgage loan means a mortgage loan which is ineligible for purchase by Fannie Mae or Freddie Mac due to either credit characteristics of the related mortgagor or documentation standards in connection with the underwriting of the mortgage loan that do not meet the Fannie Mae or Freddie Mac underwriting guidelines for “A” credit mortgagors. These credit characteristics include mortgagors whose creditworthiness and repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines and mortgagors who may have a record of credit write-offs, outstanding judgments, prior bankruptcies and other credit items that do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines. These documentation standards may include mortgagors who provide limited or no documentation in connection with the underwriting of the mortgage loan. Accordingly, mortgage loans underwritten under the related originator's non-conforming credit underwriting standards are likely to experience rates of delinquency, foreclosure and loss that are higher, and may be substantially higher, than mortgage loans originated in accordance with the Fannie Mae or Freddie Mac underwriting guidelines. Any resulting losses, to the extent not covered by credit enhancement, may affect the yield to maturity of the offered certificates.
 
Book-Entry Securities May Delay Receipt of Payment and Reports.
 
If the trust issues certificates in book-entry form, certificateholders may experience delays in receipt of payments and/or reports since payments and reports will initially be made to the book-entry depository or its nominee.  In addition, the issuance of certificates in book-entry form may reduce the liquidity of certificates so issued in the secondary trading market since some investors may be unwilling to purchase certificates for which they cannot receive physical certificates.
 
The Yield to Maturity on the Offered Certificates Will Depend on a Variety of Factors.
 
The yield to maturity on the offered certificates will depend, in general, on:
 
 
·
the applicable purchase price; and
 
 
·
the rate and timing of principal payments (including prepayments and collections upon defaults, liquidations and repurchases) relative to the amount and timing of deferred interest on the mortgage loans and the allocation thereof to reduce or increase the current principal amount of the offered certificates or, with respect to the grantor trust certificates, to reduce the current principal amount of the underlying certificates, as well as other factors.
 
The yield to investors on the offered certificates will be adversely affected by any allocation thereto (or, with respect to the grantor trust certificates, by any allocation to the underlying certificates) of interest shortfalls on the mortgage loans.
 
In general, if the offered certificates are purchased at a premium and principal distributions on the mortgage loans occur at a rate faster than anticipated at the time of purchase, the investor’s actual yield to maturity will be lower than that assumed at the time of purchase. Conversely, if the offered certificates are purchased at a discount and principal distributions on the mortgage loans occur at a rate slower than that anticipated at the time of purchase, the investor’s actual yield to maturity will be lower than that originally assumed.
 
The proceeds to the depositor from the sale of the offered certificates were determined based on a number of assumptions, including a 25% constant rate of prepayment each month or CPR, relative to the then outstanding principal balance of the mortgage loans. No representation is made that the mortgage loans will prepay at this rate or at any other rate or that the mortgage loans will prepay at the same rate. The yield assumptions for the offered certificates will vary as determined at the time of sale. See “Yield and Prepayment Considerations” in this prospectus supplement.
 
The rate and timing of distributions allocable to principal on the offered certificates will depend, in general, on the rate and timing of principal payments (including prepayments, collections upon defaults, liquidations and repurchases and the allocation of deferred interest) on the mortgage loans and the allocation thereof to pay principal on such certificates as provided in this prospectus supplement.  As is the case with mortgage pass-through certificates generally, the offered certificates are subject to substantial inherent cash-flow uncertainties because the mortgage loans may be prepaid at any time. However, with respect to approximately 77.38% of the mortgage loans, a prepayment within four months to five years of its origination may subject the related mortgagor to a prepayment charge, which may act as a deterrent to prepayment of the mortgage loan during the applicable period.  However, under certain circumstances, the prepayment charge may be waived by the servicer. There can be no assurance that any prepayment charges will have any effect on the prepayment performance of the mortgage loans. See “Description of the Mortgage Loans” in this prospectus supplement.
 
The sponsor may, from time to time, implement programs designed to encourage refinancing. These programs may include, without limitation, modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications, reduced origination fees or closing costs or other financial incentives. Targeted solicitations may be based on a variety of factors, including the credit of the borrower or the location of the mortgaged property. In addition, the sponsor may encourage assumptions of mortgage loans, including defaulted mortgage loans, under which creditworthy borrowers assume the outstanding indebtedness of the mortgage loans which may be removed from the related mortgage pool. As a result of these programs, with respect to the mortgage pool underlying any trust, the rate of principal prepayments of the mortgage loans in the mortgage pool may be higher than would otherwise be the case and, in some cases, the average credit or collateral quality of the mortgage loans remaining in the mortgage pool may decline.
 
Generally, when prevailing interest rates increase, prepayment rates on mortgage loans tend to decrease. A decrease in the prepayment rates on the mortgage loans will result in a reduced rate of return of principal to investors in the offered certificates at a time when reinvestment at higher prevailing rates would be desirable.
 
Conversely, when prevailing interest rates decline, prepayment rates on mortgage loans tend to increase. An increase in the prepayment rates on the mortgage loans will result in a greater rate of return of principal to investors in the offered certificates at a time when reinvestment at comparable yields may not be possible.
 
During at least the first three years after the closing date, the entire amount of payments of principal with respect to the mortgage loans will be allocated to the senior certificates, as described herein, unless the current principal amount of the senior certificates has been reduced to zero. This will accelerate the amortization of the senior certificates as a whole while, in the absence of losses in respect of the mortgage loans, increasing the percentage interest in the principal balance of the mortgage loans that  the subordinate certificates evidence.
 
As described in this prospectus supplement, the sponsor has the option to repurchase mortgage loans that are 90 days or more delinquent.  The sponsor may exercise such option on its own behalf or may assign this right to a third party, including a holder of a class of certificates, that may benefit from the repurchase of such loans.  These repurchases will have the same effect on the holders of the certificates as a prepayment of the mortgage loans.  You should also note that the removal of any such delinquent mortgage loan from the issuing entity may affect the loss and delinquency tests that determine the distributions to the certificates or could otherwise affect the level of the overcollateralization target amount, which may reduce the amount of overcollateralization available to meet shortfalls and which may adversely affect the market value of the certificates.  However, for purposes of the delinquency tests described in this prospectus supplement, any mortgage loans so repurchased will be incorporated into the delinquency triggers as described in this prospectus supplement.  A third party is not required to take your interests into account when deciding whether or not to direct the exercise of this option and may direct the exercise of this option when the sponsor would not otherwise exercise it.  As a result, the performance of this transaction may differ from transactions in which this option was not granted to a third party.
 
For further information regarding the effect of principal prepayments on the weighted average lives of the offered certificates, see “Yield and Prepayment Considerations” in this prospectus supplement.
 
Excess Spread May be Inadequate to Cover Losses on the Mortgage Loans and/or to Build Overcollateralization.
 
The mortgage loans are expected to generate more interest than is needed to pay interest on the offered certificates (with respect to the grantor trust certificates, indirectly through the underlying certificates) and the underlying certificates because we expect the weighted average net interest rate on the mortgage loans to be higher than the weighted average pass-through rate on the offered certificates (with respect to the grantor trust certificates, indirectly through the underlying certificates) and the underlying certificates.  If the mortgage loans generate more interest than is needed to pay interest on the offered certificates (with respect to the grantor trust certificates, indirectly through the underlying certificates), the underlying certificates and related trust expenses, such “excess spread” will be used to make additional principal payments on the offered certificates (with respect to the grantor trust certificates, indirectly through the underlying certificates) and the underlying certificates, which will reduce the total principal amount of such certificates below the aggregate principal balance of the mortgage loans, thereby creating “overcollateralization.” Overcollateralization is intended to provide limited protection to certificateholders by absorbing the certificate's share of losses from liquidated mortgage loans. However, we cannot assure you that enough excess spread will be generated on the mortgage loans to establish or maintain the required level of overcollateralization. On the closing date the required level of overcollateralization is expected to be met. If the protection afforded by overcollateralization is insufficient, then you could experience a loss on your investment.
 
The excess spread available on any distribution date will be affected by the actual amount of interest received, advanced or recovered in respect of the mortgage loans during the preceding month. Such amount may be influenced by changes in the weighted average of the mortgage rates resulting from prepayments, defaults and liquidations of the mortgage loans. The amount of deferred interest on a mortgage loan resulting from negative amortization will decrease the amount of excess spread available to increase the overcollateralization, which may reduce the amount of overcollateralization available to provide credit enhancement on the certificates.
 
If at any time the amount of overcollateralization is at a level below the required level, the overcollateralization provisions are intended to result in an accelerated rate of principal distributions to holders of the classes of certificates then entitled to distributions of principal. An earlier return of principal to the holders of the offered certificates as a result of the overcollateralization provisions will influence the yield on such certificates in a manner similar to the manner in which principal prepayments on the mortgage loans will influence the yield on the offered certificates.
 
You bear the reinvestment risks resulting from a faster or slower rate of principal payments than you expected.
 
The Subordinate Certificates Have a Greater Risk of Loss than the Senior Certificates.
 
When certain classes of certificates provide credit enhancement for other classes of certificates it is sometimes referred to as “subordination.” For purposes of this prospectus supplement, subordination with respect to the offered certificates (other than the Class X Certificates, and with respect to the grantor trust certificates, indirectly through the underlying certificates) and the underlying certificates or “subordinated classes” generally means:
 
 
·
with respect to the Class A-1 Certificates:  the Class A-6, the Class A-7 and the Class B Certificates;
 
 
·
with respect to the Class A-2 Certificates:  the Class A-6, the Class A-7 and the Class B Certificates;
 
 
·
with respect to the Class A-3 Certificates:  the Class A-6, the Class A-7 and the Class B Certificates;
 
 
·
with respect to the Class A-4A Certificates and the underlying Class A-4B Certificates: the Class A-5, the Class A-6, the Class A-7 and the Class B Certificates;
 
 
·
with respect to the Class A-5 Certificates:  the Class A-6, the Class A-7 and the Class B Certificates;
 
 
·
with respect to the Class A-6 Certificates:  the Class A-7 Certificates and the Class B Certificates;
 
 
·
with respect to the Class A-7 Certificates:  the Class B Certificates;
 
 
·
with respect to the Class B-1 Certificates: the Class B-2, the Class B-3, the Class B-4, the Class B-5, the Class B-6, the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-2 Certificates: the Class B-3, the Class B-4, the Class B-5, the Class B-6, the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-3 Certificates: the Class B-4, the Class B-5, the Class B-6, the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-4 Certificates: the Class B-5, the Class B-6, the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-5 Certificates: the Class B-6, the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-6 Certificates: the Class B-7, the Class B-8 and the Class B-9 Certificates;
 
 
·
with respect to the Class B-7 Certificates: the Class B-8 Certificates and the Class B-9 Certificates;
 
 
·
with respect to the Class B-8 Certificates: the Class B-9 Certificates.
 
In addition to excess spread and the overcollateralization features, credit enhancement for the senior certificates will be provided by the right of the holders of the senior certificates to receive certain payments of interest and principal, as applicable, prior to the subordinated classes and by the allocation of realized losses to the subordinated classes before allocation to the senior certificates. This form of credit enhancement uses collections on the mortgage loans otherwise payable to the holders of the subordinate classes to pay amounts due on the more senior classes.  Realized losses in excess of any available excess spread and any current overcollateralization are allocated to the subordinate certificates, beginning with the Class B Certificates with the highest numerical designation, until the current principal amount of the Class B Certificates has been reduced to zero.  Accordingly, if the aggregate current principal amount of a subordinated class were to be reduced to zero, delinquencies and defaults on the mortgage loans would reduce the amount of funds available for monthly distributions to holders of the remaining subordinated class or classes of certificates and, if the aggregate current principal amount of all the subordinated classes were to be reduced to zero, delinquencies and defaults on the mortgage loans  would reduce the amount of funds available for monthly distributions to holders of the senior certificates.  You should fully consider the risks of investing in a subordinate certificate, including the risk that you may not fully recover your initial investment as a result of realized losses.  See “Description of the Certificates” in this prospectus supplement.
 
The weighted average lives of, and the yields to maturity on, the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates will be progressively more sensitive, in that order, to the rate and timing of mortgage defaults and the severity of ensuing losses on the mortgage loans.  If the actual rate and severity of losses on the mortgage loans is higher than those assumed by an investor in such certificates, the actual yield to maturity of such certificates may be lower than the yield anticipated by such holder based on such assumption. The timing of losses on the mortgage loans will also affect an investor's actual yield to maturity, even if the rate of defaults and severity of losses over the life of the mortgage loans are consistent with an investor's expectations. In general, the earlier a loss occurs, the greater the effect on an investor's yield to maturity. Realized losses on the mortgage loans, to the extent they exceed the amount of excess spread and overcollateralization following distributions of principal on the related distribution date, will reduce the current principal amounts of the Class B-9, Class B-8, Class B-7, Class B-6, Class B-5, Class B-4, Class B-3, Class B-2 and Class B-1 Certificates, in that order.  As a result of such reductions, less interest will accrue on such class of subordinate certificates than would otherwise be the case. Once a realized loss is allocated to a subordinate certificate, no interest will be distributable with respect to such written down amount. However, the amount of any realized losses allocated to the subordinate certificates may be reimbursed to the holders of the subordinate certificates according to the priorities set forth under “Description of the Certificates—Distributions on the Certificates” in this prospectus supplement.
 
Unless the current principal amounts of the senior certificates have been reduced to zero, the subordinate certificates will not be entitled to any principal distributions until at least the distribution date occurring in September 2010 or during any period in which delinquencies or losses on the mortgage loans exceed certain levels. As a result, the weighted average life of the subordinate certificates will be longer than would otherwise be the case if distributions of principal were allocated among all of the certificates at the same time. As a result of the longer weighted average lives of the subordinate certificates, the holders of such certificates have a greater risk of suffering a loss on their investments. Furthermore, because such certificates might not receive any principal if certain delinquency levels occur, it is possible for such certificates to receive no principal distributions even if no losses have occurred on the mortgage pool.
 
In addition, the multiple class structure of the subordinate certificates causes the yield of such classes to be particularly sensitive to changes in the rates of prepayment of the mortgage loans. Because distributions of principal will be made to the holders of such certificates according to the priorities described herein, the yield to maturity on such classes of certificates will be sensitive to the rates of prepayment on the mortgage loans experienced both before and after the commencement of principal distributions on such classes.  The yield to maturity on such classes of certificates will also be extremely sensitive to losses due to defaults on the mortgage loans and the timing thereof, to the extent such losses are not covered by overcollateralization, excess spread, or a class of subordinate certificates with a lower payment priority. Furthermore, the timing of receipt of principal and interest by the subordinate certificates may be adversely affected by losses even if such classes of certificates do not ultimately bear such loss.
 
The Net Rate Cap May Reduce the Yields on the Class A Certificates and the Class B Certificates.
 
The pass-through rates on the offered certificates (other than the Class X Certificates) and the underlying certificates are each subject to a net rate cap equal to, approximately, the weighted average of the net mortgage rates on the mortgage loans adjusted on an actual/360 basis (less the sum of (x) the pass-through rate on the Class X-1 Certificates multiplied by the Class X-1 notional amount and (ii) the pass-through rate on the Class X-2 Certificates multiplied by the Class X-2 notional amount, divided by the aggregate stated principal balance of the mortgage loans as of such distribution date), as more fully described in this prospectus supplement.  If on any distribution date the pass-through rate for a class of offered certificates or the underlying certificates is limited by the net rate cap, the holders of that class of certificates will receive a smaller amount of interest than they would have received on that distribution date had the pass-through rate for that class not been calculated based on the net rate cap. The holders of those certificates will not be entitled to recover any resulting shortfall in interest on that distribution date or on any other distribution date except to the extent of excess cashflow available for that purpose.  If mortgage loans with relatively higher mortgage rates prepay or default, the net rate cap would result in lower interest than otherwise would be the case.
 
The Class A Certificates and the Class B Certificates May Not Always Receive Interest Based on One-Month LIBOR Plus the Related Margin.
 
The offered certificates (other than the Class A-2, Class A-3 and Class B Certificates) and the underlying certificates will receive interest at a pass-through rate equal to the lesser of (i) one-month LIBOR plus the related margin and (ii) the net rate cap (less the sum of (x) the pass-through rate on the Class X-1 Certificates multiplied by the Class X-1 notional amount and (y) the pass-through rate on the Class X-2 Certificates multiplied by the Class X-2 notional amount, divided by the aggregate stated principal balance of the mortgage loans as of such distribution date).  The Class A-2, Class A-3 and Class B Certificates will receive interest at a pass-through rate equal to the least of (i) one-month LIBOR plus the related margin, (ii) 11.50% per annum and (iii) the net rate cap (less the sum of (x) the pass-through rate on the Class X-1 Certificates multiplied by the Class X-1 notional amount and (y) the pass-through rate on the Class X-2 Certificates multiplied by the Class X-2 notional amount, divided by the aggregate stated principal balance of the mortgage loans as of such distribution date).  For any class of such certificates, the prepayment of the mortgage loans with relatively higher pass-through rates may cause the net rate cap to be lower than one-month LIBOR plus the related margin, in which case the pass-through rate for such certificates will be more likely to be limited to the net rate cap.
 
If on any distribution date the pass-through rate for any class of the certificates is limited by the net rate cap, a carryover shortfall amount, equal to the difference between (I) in the case of the offered certificates (other than the Class A-2, Class A-3 and Class B Certificates) (i) interest that would have accrued at the lesser of one-month LIBOR plus the related margin and (ii) interest accrued on that class of certificates as limited by the net rate cap, and (II) in the case of the Class A-2, Class A-3 and Class B Certificates, (i) interest that would have accrued at the lesser of one-month LIBOR plus the related margin and 11.50% per annum and (ii) interest accrued on that class of certificates as limited by the net rate cap, in each case, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution dates, provided that any basis risk shortfall carry-forward amount will be reduced by the amount of net deferred interest that is added to the current principal amount of that class of certificates. Such shortfall will be covered to the extent of excess cash flow available for that purpose, and, for the Class A-5 Certificates and the Class A-6 Certificates, to the extent of available payments under the corridor contracts.   However, payments under the corridor contracts are based on the lesser of the actual current principal amount of the related class of certificates and an assumed principal amount of such certificates based on certain prepayment assumptions regarding the mortgage loans.  If the mortgage loans do not prepay according to those assumptions, it may result in the corridor contracts providing insufficient funds to cover such shortfalls.  In addition, each corridor contract provides for payment of the excess of the lesser of One-Month LIBOR or the related ceiling rate over a specified per annum rate, which also may not provide sufficient funds to cover such shortfalls. Accordingly, such shortfalls may remain unpaid on the final distribution date, including the optional termination date..   The holders of the certificates will be subject to the risk that interest distributable to those classes will be limited by the applicable net rate cap.  See "Description of the Certificates—Distributions on the Certificates" in this prospectus supplement.
 
In addition, although the Class A-5 Certificates and the Class A-6 Certificates are entitled to payments under the corridor contracts during periods of increased One-Month LIBOR rates, the counterparty thereunder will only be obligated to make such payments under certain circumstances.
 
To the extent that payments on the Class A-5 Certificates and the Class A-6 Certificates depend in part on payments to be received under the corridor contracts, the ability of the trust to make payments on those classes of certificates will be subject to the credit risk of the corridor counterparty.
 
The corridor contracts terminate in accordance with their terms and on the dates set forth therein. This date was selected based on certain prepayment assumptions regarding the mortgage loans and that the optional termination right becomes exercisable and is exercisable at that time. These prepayment assumptions were used to determine the projected principal balance of the applicable class of certificates under the corridor contracts.  If prepayments on the mortgage loans occur at rates that are slower than those assumptions, or even if such mortgage loans prepay according to those assumptions, if the optional termination right is not exercised, the contracts will terminate prior to the repayment in full of the related classes of certificates.  See “The Corridor Contracts” in this prospectus supplement.
 
Specific Considerations for the Class X Certificates.
 
Interest accruing on the Class X-2 Certificates will be based on a fixed rate of 0.500% per annum and a notional balance equal to the aggregate outstanding principal balance of the mortgage loans generally having (i) "hard" prepayment charges for a term of three years (or in limited cases, 30 months) from origination and (ii) "combo" prepayment charges for a term of three years (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months) from origination, calculated on the basis of a year of 360 days with twelve 30-day months.  Interest accruing on the Class X-1 Certificates will be based on a fixed rate of 0.080% per annum and a notional balance equal to the aggregate outstanding principal balance of the mortgage loans having all other prepayment charges, calculated on the basis of a year of 360 days with twelve 30-day months.  Prepayments on mortgage loans with relatively higher pass-through rates may cause the weighted average net rates of the mortgage loans to be lower, which could reduce the amount of interest accrued on the Class X Certificates.  See "Description of the Certificates—Distributions on the Certificates" in this prospectus supplement.
 
The Grantor Trust Certificates Are Subject to Special Risks.
 
To the extent that any net deferred interest is allocated to the underlying certificates on a distribution date, the swap counterparty will make a payment to the grantor trust equal to such allocation of net deferred interest pursuant to the swap agreement.  As a result, the ability of the grantor trust to make such payments on the grantor trust certificates may be subject to the credit risk of the swap counterparty.
 
The Securities Are Not Suitable Investments for All Investors.
 
The certificates are complex investments that are not appropriate for all investors.  The interaction of the factors described above is difficult to analyze and may change from time to time while the certificates are outstanding. It is impossible to predict with any certainty the amount or timing of distributions on the certificates or the likely return on an investment in any such securities.  As a result, only sophisticated investors with the resources to analyze the potential risks and rewards of an investment in the certificates should consider such an investment.
 
Reimbursement of Advances to the Servicer Could Delay Distributions on the Certificates.
 
Under the pooling and servicing agreement, the servicer will make advances to cover delinquent payments of principal and interest to the extent it reasonably believes that the advances are recoverable from future payments or recoveries on the mortgage loans.  The servicer may make such advances from Amounts Held for Future Distribution.  In addition, the servicer may withdraw from the collection account funds that were not included in available funds for the preceding distribution date to reimburse itself for advances previously made.  Any such amounts withdrawn by the servicer in reimbursement of advances previously made are generally required to be replaced by the servicer on or before the next distribution date, subject to subsequent withdrawal.  To the extent that the servicer is unable to replace any amounts withdrawn in reimbursement of advances previously made, there could be a delay in distributions on the certificates.  Furthermore, the servicer's right to reimburse itself for advances previously made from funds held for future distribution could lead to amounts required to be restored to the collection account by the servicer that are higher, and potentially substantially higher, than one month’s advance obligation.
 
Statutory and Judicial Limitations on Foreclosure Procedures May Delay Recovery in Respect of the Mortgaged Property and, in Some Instances, Limit the Amount that May Be Recovered by the Foreclosing Lender, Resulting in Losses on the Mortgage Loans That Might be Allocated to the Offered Certificates.
 
Foreclosure procedures may vary from state to state. Two primary methods of foreclosing a mortgage instrument are judicial foreclosure, involving court proceedings, and non-judicial foreclosure pursuant to a power of sale granted in the mortgage instrument. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are asserted. Delays may also result from difficulties in locating necessary defendants. Non-judicial foreclosures may be subject to delays resulting from state laws mandating the recording of notice of default and notice of sale and, in some states, notice to any party having an interest of record in the real property, including junior lienholders. Some states have adopted “anti-deficiency” statutes that limit the ability of a lender to collect the full amount owed on a loan if the property sells at foreclosure for less than the full amount owed. In addition, United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions that are perceived by the court as harsh or unfair. The effect of these statutes and judicial principles may be to delay and/or reduce distributions in respect of the offered certificates.  See “Legal Aspects of Mortgage Loans—Foreclosure on Mortgages and Some Contracts” in the prospectus.
 
The Value of the Mortgage Loans May Be Affected By, Among Other Things, a Decline in Real Estate Values, Which May Result in Losses on the Offered Certificates.
 
No assurance can be given that values of the mortgaged properties have remained or will remain at their levels on the dates of origination of the mortgage loans. If the residential real estate market should experience an overall decline in property values so that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, in the mortgage pool become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry. In some areas of the United States, real estate values have risen at a greater rate in recent years than in the past. In particular, mortgage loans with high principal balances or high loan-to-value ratios will be affected by any decline in real estate values. Real estate values in any area of the country may be affected by several factors, including population trends, mortgage interest rates, and the economic well-being of that area. Any decrease in the value of the mortgage loans may result in the allocation of losses which are not covered by credit enhancement to the offered certificates.
 
The Ratings on the Offered Certificates are Not a Recommendation to Buy, Sell or Hold the Offered Certificates and are Subject to Withdrawal at any Time, Which May Affect the Liquidity or the Market Value of the Offered Certificates.
 
It is a condition to the issuance of the offered certificates that each class of offered certificates be rated in the categories shown on page S-2 of this prospectus supplement.  A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.  In general, ratings address credit risk and do not address the likelihood of prepayments or basis risk shortfalls.  No person is obligated to maintain the rating on any offered certificate, and, accordingly, there can be no assurance that the ratings assigned to any offered certificate on the date on which the offered certificates are initially issued will not be lowered or withdrawn by a rating agency at any time thereafter. In the event any rating is revised or withdrawn, the liquidity or the market value of the offered certificates may be adversely affected. See“Ratings” in this prospectus supplement and“Ratings” in the prospectus.
 
The Mortgage Loans May Have Limited Recourse to the Related Borrower, Which May Result in Losses with Respect to These Mortgage Loans.
 
Some or all of the mortgage loans included in the trust will be non-recourse loans or loans for which recourse may be restricted or unenforceable. As to those mortgage loans, recourse in the event of mortgagor default will be limited to the specific real property and other assets, if any, that were pledged to secure the mortgage loan. However, even with respect to those mortgage loans that provide for recourse against the mortgagor and its assets generally, there can be no assurance that enforcement of the recourse provisions will be practicable, or that the other assets of the mortgagor will be sufficient to permit a recovery in respect of a defaulted mortgage loan in excess of the liquidation value of the related mortgaged property. Any risks associated with mortgage loans with no or limited recourse may affect the yield to maturity of the offered certificates to the extent losses caused by these risks which are not covered by credit enhancement are allocated to the offered certificates (or, with respect to the grantor trust certificates, to the extent losses caused by these risks which are not covered by credit enhancement are allocated to the underlying certificates).
 
The Mortgage Loans May Have Environmental Risks, Which May Result in Increased Losses with Respect to These Mortgage Loans.
 
To the extent that the servicer or the trustee (in its capacity as successor servicer) for a mortgage loan acquires title to any related mortgaged property on behalf of the trust, which is contaminated with or affected by hazardous wastes or hazardous substances, these mortgage loans may incur additional losses. See “Servicing of Mortgage Loans—Realization Upon or Sale of Defaulted Mortgage Loans” and “Legal Aspects of Mortgage Loans—Environmental Legislation” in the prospectus. To the extent these environmental risks result in losses on the mortgage loans, the yield to maturity of the offered certificates, to the extent not covered by credit enhancement, may be affected.
 
Violation of Various Federal, State and Local Laws May Result in Losses on the Mortgage Loans.
 
Applicable state and local laws generally regulate interest rates and other charges, require specific disclosure, and require licensing of the related originator. In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of the mortgage loans.  The mortgage loans are also subject to various federal laws.
 
Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these federal or state laws, policies and principles may limit the ability of the trust to collect all or part of the principal of or interest on the mortgage loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the trust to damages and administrative enforcement. See “Legal Aspects of Mortgage Loans” in the prospectus.
 
Under the anti-predatory lending laws of some states, the borrower is required to meet a net tangible benefits test in connection with the origination of the mortgage loan. This test may be highly subjective and open to interpretation. As a result, a court may determine that a mortgage loan does not meet the test even if the originator reasonably believed that the test was satisfied at the time of origination. Any determination by a court that a mortgage loan does not meet the test will result in a violation of the state anti-predatory lending law, in which case the sponsor will be required to purchase that mortgage loan from the trust.
 
On the closing date, the sponsor will represent that each mortgage loan at the time it was made complied in all material respects with all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and recording laws and all predatory lending laws; and each mortgage loan has been serviced in all material respects in accordance with all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and recording laws and all predatory lending laws and the terms of the related mortgage note, the mortgage and other loan documents. In the event of a breach of this representation, the sponsor will be obligated to cure the breach or repurchase or replace the affected mortgage loan in the manner described in the prospectus.
 
The Return on the Offered Certificates Could be Reduced by Shortfalls Due to The Application of the Servicemembers’ Civil Relief Act and Similar State Laws.
 
The Servicemembers’ Civil Relief Act or the Relief Act and similar state or local laws provide relief to mortgagors who enter active military service and to mortgagors in reserve status who are called to active military service after the origination of their mortgage loans.  The military operations by the United States in Iraq and Afghanistan has caused an increase in the number of citizens in active military duty, including those citizens previously in reserve status. Under the Relief Act, the interest rate applicable to a mortgage loan for which the related mortgagor is called to active military service will be reduced from the percentage stated in the related mortgage note to 6.00%. This interest rate reduction and any reduction provided under similar state or local laws will result in an interest shortfall because the servicer will not be able to collect the amount of interest which otherwise would be payable with respect to such mortgage loan if the Relief Act or similar state law was not applicable thereto. This shortfall will not be paid by the mortgagor on future due dates or advanced by the servicer and, therefore, will reduce the amount available to pay interest to the certificateholders on subsequent distribution dates. We do not know how many mortgage loans in the mortgage pool have been or may be affected by the application of the Relief Act or similar state law. In addition, the Relief Act imposes limitations that would impair the ability of the servicer to foreclose on an affected single family loan during the mortgagor’s period of active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, in the event that the Relief Act or similar legislation or regulations applies to any mortgage loan which goes into default, there may be delays in payment and losses on the certificates in connection therewith. Any other interest shortfalls, deferrals or forgiveness of payments on the mortgage loans resulting from similar legislation or regulations may result in delays in payments or losses to holders of the offered certificates.  
 
To the Extent Amounts on Deposit in the Pre-Funding Account Are Not Used, There May Be a Mandatory Prepayment on the Certificates.
 
To the extent that the pre-funded amount on deposit in the pre-funding account has not been fully applied to the purchase of subsequent mortgage loans for inclusion in the trust on or before November 15, 2007, the holders of the certificates will receive on the distribution date immediately following November 15, 2007, the remaining pre-funded amount. Although no assurance can be given, the depositor intends that the principal amount of subsequent mortgage loans sold to the trustee on behalf of the trust will require the application of substantially all amounts on deposit in the pre-funding account and that there will be no material principal payment to the holders of the certificates on such distribution date.
 
 
DESCRIPTION OF THE MORTGAGE LOANS
 
General
 
References to percentages of the mortgage loans unless otherwise noted are calculated based on the aggregate unpaid principal balance of the mortgage loans as of the Cut-off Date.
 
All of the mortgage loans will be acquired by the Depositor on the date of issuance of the Offered Certificates from the Sponsor, an affiliate of the Depositor and the Underwriter, pursuant to the Mortgage Loan Purchase Agreement. The Sponsor acquired the mortgage loans directly in privately negotiated transactions.  See “Mortgage Loan Origination—General” in this prospectus supplement.
 
We have provided below and in Schedule A to this prospectus supplement information with respect to the conventional mortgage loans that we expect to include in the pool of mortgage loans in the Trust as of the Closing Date.  Prior to the closing date of August 31, 2007, we may remove mortgage loans from the mortgage pool and we may substitute other mortgage loans for the mortgage loans we remove. The Depositor believes that the information set forth in this prospectus supplement will be representative of the characteristics of the mortgage pool as it will be constituted at the time the Certificates are issued, although the range of mortgage rates and maturities and other characteristics of the mortgage loans may vary. The characteristics of the mortgage loans as described in this prospectus supplement and in schedule A to this prospectus supplement may differ from the final pool as of the Closing Date due, among other things, to the possibility that certain mortgage loans may become delinquent or default or may be removed or substituted and that similar or different mortgage loans may be added to the pool prior to the closing date.  The actual mortgage loans included in the Trust as of the Closing Date may vary from the mortgage loans as described in this prospectus supplement by up to plus or minus 5% as to any material characteristics described herein.  If, as of the Closing Date, any material pool characteristic differs by 5% or more from the description in this prospectus supplement, revised disclosure will be provided either in a supplement or in a Current Report on Form 8-K.
 
The mortgage pool will consist of approximately 3,042 first lien adjustable-rate negative amortization mortgage loans secured by one- to four-family residences and individual condominium units, having an aggregate unpaid principal balance as of the Cut-off Date of approximately $1,149,645,357. Approximately $120,157,587 of mortgage loans are expected to be transferred to the Trust within ninety days of the Closing Date.  Such mortgage loans are referred to herein as the Subsequent Mortgage Loans.  The initial mortgage loans and the Subsequent Mortgage Loans, collectively, are sometimes referred to herein as the mortgage loans.  Unless otherwise indicated herein, all percentages with respect to the mortgage loans refer only to the initial mortgage loans as of the Cut-off Date and do not refer to the Subsequent Mortgage Loans, other than approximately $39,950,512 of Subsequent Mortgage Loans that have been identified by the Sponsor.  The mortgage loans generally have original terms to maturity of not greater than 30 years, provided, however, approximately all of the mortgage loans have original terms to maturity of not greater than 40 years.
 
The mortgage loans will be selected for inclusion in the mortgage pool based on rating agency criteria, compliance with representations and warranties, and conformity to criteria relating to the characterization of securities for tax, ERISA, SMMEA, Form S-3 eligibility and other legal purposes.
 
The mortgage loans are being serviced as described below under “The Servicer—EMC” in this prospectus supplement. The mortgage loans were originated generally in accordance with the guidelines described under “Mortgage Loan Origination” in this prospectus supplement.
 
The current and historical delinquency disclosure included in this prospectus supplement regarding the mortgage loans, the representation of the Sponsor with respect to the delinquency status of the mortgage loans and the representation of the Sponsor with respect to the delinquency status of the static pool information of the Sponsor utilizes the OTS Method. In addition, delinquency information included in reports to certificateholders, delinquencies for purposes of the trigger tests and delinquencies for the purposes of the optional purchase of the mortgage loans described in this prospectus supplement will use the OTS Method. See "The Mortgage Pools- Methods of Delinquency Calculation" in the prospectus.
 
All of the mortgage loans have scheduled monthly payments due on the Due Date.
 
Approximately 20.10% of the mortgage loans are assumable under some circumstances if, in the sole judgment of the Servicer, the prospective purchaser of a mortgaged property is creditworthy and the security for the mortgage loan is not impaired by the assumption.  The remainder of the mortgage loans are subject to customary due-on-sale provisions.
 
Approximately 0.66% of the mortgage loans are balloon mortgage loans.
 
Approximately 16.30% of the mortgage loans are covered by a lender-paid primary mortgage insurance policy.
 
Any mortgage loan may be prepaid in full or in part at any time. However, certain of the mortgage loans provided at origination for the payment by the borrower of a prepayment charge on voluntary prepayments typically made up to the first three years from the date of execution of the related mortgage note. The holders of the Class XP-2 Certificates will generally be entitled to the "hard" prepayment charges received on the mortgage loans having a three-year (or in limited cases, 30-month) prepayment charge term and the "combo" prepayment charges on the mortgage loans with a three-year prepayment charge term (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months).  The holders of the Class XP-1 Certificates will be entitled to all other prepayment charges received on the mortgage loans.  No prepayment charges will be available for distribution on the other classes of Certificates.  There can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans.
 
The mortgage rates are fixed for the one, two, three or six month period following their origination.  After the initial fixed-rate period, the interest rate borne by each mortgage loan will be adjusted monthly based on One-Year MTA or One-Month LIBOR, referred to herein as an Index as described below, computed in accordance with the related note, plus (or minus) the related gross margin and generally subject to rounding.  The mortgage loans generally contain a maximum lifetime mortgage rate and a minimum lifetime mortgage rate.  As of the Cut-off Date, approximately 19.24% of the mortgage loans are in their initial fixed rate period.
 
Each month, the mortgagor will be required to pay a minimum monthly payment as provided in the related mortgage note.  The minimum monthly payment will be an interest-only payment in an amount equal to the full amount of accrued interest of the mortgage loan calculated based on the outstanding principal balance of the mortgage loan and the interest rate then in effect.  The minimum monthly payment will adjust annually on a date specified in the related mortgage note in an amount that would pay interest and amortize fully the then unpaid principal balance over its remaining term to maturity in substantially equal payments, subject to the conditions that (i) the amount of the monthly payment (with the exception of each fifth payment adjustment date or the final payment adjustment date) will not increase or decrease by an amount that is more than 7.50% of the monthly payment prior to the adjustment, (ii) as of the fifth payment adjustment date and on the same day every fifth year thereafter and on the last payment adjustment date, the monthly payment will be recast without regard to the limitation in clause (i) above and (iii) if the unpaid principal balance exceeds a percentage (either 110%, 115%, 120% or 125%, depending on the maximum negative amortization for that mortgage loan) of the original principal balance due to deferred interest, the monthly payment will be recast without regard to the limitation in clause (i) to amortize fully the then unpaid principal balance over its remaining term to maturity.
 
In addition to the minimum monthly payment option, under each mortgage note, the mortgagor is generally offered additional payment options to the extent they result in a larger payment than the minimum monthly payment.  These payment options generally include: (i) the Interest Only Payment, where the mortgagor would pay the full amount of accrued interest on the mortgage loan at the current interest rate and the principal balance would not be decreased by any amount, (ii) the Fully Amortized Payment, where the mortgagor would make payments in an amount that would pay interest and amortize fully the then unpaid principal balance over its remaining term to maturity in substantially equal payments (assuming the interest rate was not adjusted prior to maturity) and (iii) the 15 Year Amortized Payment, where the mortgagor would make payments in an amount that would pay interest and amortize fully the then unpaid principal balance over a remaining term of fifteen (15) years in substantially equal payments (assuming the then current interest rate remains in effect until maturity).  If a payment option would not result in an amount greater than the minimum payment due, the payment option will not be available to a mortgagor.
 
Billing and Payment Procedures
 
The mortgage loans require monthly payments to be made no later than either the 1st or 15th day of each month, with a grace period as specified in the related mortgage note.  Each month, the Servicer sends monthly invoices to borrowers which provide the payment options available to each borrower.  Borrowers may elect for monthly payments to be deducted automatically from deposit accounts and may make payments by various means, including online transfers and phone payment although an additional fee may be charged for these payment methods.
 
Prepayment Charges on the Mortgage Loans
 
Approximately 77.38% of the mortgage loans provide for payment by the mortgagor of a prepayment charge in connection with some prepayments.  The amount of the prepayment charge is as provided in the related mortgage note, and the prepayment charge will generally apply if, in any twelve-month period, three-year period or other period (as provided in the related mortgage note) from the date of origination of the mortgage loan, the mortgagor prepays an aggregate amount exceeding 20% of the original principal balance of the mortgage loan or another amount permitted by applicable law.  The amount of the prepayment charge will, for the majority of the mortgage loans, be equal to 6 months’ advance interest calculated on the basis of the mortgage rate in effect at the time of the prepayment on the amount prepaid in excess of 20% of the original principal balance of the mortgage loan, but it may be a lesser or greater amount as provided in the related mortgage note. A prepayment charge may not apply with respect to a sale of the related mortgaged property, and in some circumstances, such as illegality, may be unenforceable.
 
Generally, the Servicer shall not waive any prepayment charge unless: (i) the enforceability thereof shall have been limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally, (ii) the enforcement thereof is illegal, or any local, state or federal agency has threatened legal action if the prepayment penalty is enforced, (iii) the mortgage debt has been accelerated in connection with a foreclosure or other involuntary payment or (iv) such waiver is standard and customary in servicing similar mortgage loans and relates to a default or a reasonably foreseeable default and would, in the reasonable judgment of the Servicer, maximize recovery of total proceeds taking into account the value of such prepayment charge and the mortgage loan.  Accordingly, there can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans.
 
Certain prepayment charges are classified as “hard” prepayment charges, meaning that the mortgagor has to cover the prepayment charge regardless of the reason for prepayment, while others are classified as “soft,” meaning that the mortgagor has to cover the prepayment charge unless the mortgagor has conveyed the related mortgaged property to a third-party. Certain prepayment charges are also classified as "combo" prepayment charges, meaning that they are some combination of the hard and soft prepayment charges described above. Approximately 75.08% of the mortgage loans have hard prepayment charges, approximately 1.65% of the mortgage loans have soft prepayment charges and approximately 0.66% of the mortgage loans have combo prepayment charges.
 
Negative Amortization
 
All of the mortgage loans have a negative amortization feature, under which accrued interest may be deferred and added to the principal balance of the mortgage loan.  In the case of the mortgage loans, negative amortization results from the fact that while the interest rate on a negative amortization loan adjusts monthly, the amount of the monthly payment adjusts only on an annual basis. In addition, the monthly payment may not fully amortize the principal balance of the loan on an annual adjustment date if a payment cap applies.
 
In any given month, the mortgage loan may be subject to:
 
 
(1)
reduced amortization if the monthly payment is sufficient to pay current accrued interest at the mortgage rate but is not sufficient to reduce principal in accordance with a fully amortizing schedule;
 
 
(2)
negative amortization, if current accrued interest is greater than the monthly payment, which would result in the accrued interest not currently paid being treated as Deferred Interest; or
 
 
(3)
accelerated amortization if the monthly payment is greater than the amount necessary to pay Current Interest and to reduce principal in accordance with a fully amortizing schedule.
 
Deferred Interest may result in a final lump sum payment at maturity significantly greater than the monthly payment that would otherwise be payable.
 
The total amount of Deferred Interest that may be added is limited by a provision in the mortgage note to the effect that the principal amount of the mortgage loan may not exceed a percentage or periodic cap, multiplied by the principal amount of the loan at origination.
 
Indices on the Mortgage Loans
 
One-Year MTA. The interest rate on approximately 97.06% of the mortgage loans will adjust monthly based on One-Year MTA.  One-Year MTA will be a per annum rate equal to the twelve-month moving average monthly yield on United States Treasury Securities adjusted to a constant maturity of one year as published by the Federal Reserve Board in the Federal Reserve Statistical Release “Selected Interest Rates (H.15),” determined by averaging the monthly yields for the most recently available twelve months.  The index figure used for each interest rate adjustment date will be the most recent index figure available as of fifteen days before that date.
 
The following levels of One-Year MTA do not purport to be representative of future levels of One-Year MTA.  No assurance can be given as to the level of One-Year MTA on any adjustment date or during the life of any mortgage loan with an Index of One-Year MTA.
 
   
One-Year MTA
 
 
Date
 
2002
   
2003
   
2004
   
2005
   
2006
   
2007
 
January 1
    3.260 %     1.935 %     1.234 %     2.022 %     3.751 %     4.983 %
February 1
   
3.056
     
1.858
     
1.229
     
2.171
     
3.888
     
5.014
 
March 1
   
2.912
     
1.747
     
1.225
     
2.347
     
4.011
     
5.027
 
April 1
   
2.786
     
1.646
     
1.238
     
2.504
     
4.143
     
5.029
 
May 1
   
2.668
     
1.548
     
1.288
     
2.633
     
4.282
     
5.022
 
June 1
   
2.553
     
1.449
     
1.381
     
2.737
     
4.432
     
5.005
 
July 1
   
2.414
     
1.379
     
1.463
     
2.865
     
4.563
     
4.983
 
August 1
   
2.272
     
1.342
     
1.522
     
3.019
     
4.664
         
September 1
   
2.180
     
1.302
     
1.595
     
3.163
     
4.758
         
October 1
   
2.123
     
1.268
     
1.677
     
3.326
     
4.827
         
November 1
   
2.066
     
1.256
     
1.773
     
3.478
     
4.883
         
December 1
   
2.002
     
1.244
     
1.887
     
3.618
     
4.933
         
 
One-Month LIBOR.  The interest rate on approximately 2.94% of the mortgage loans will adjust monthly based on One-Month LIBOR.  One-Month LIBOR will be a per annum rate equal to the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and are most recently available as of the time specified in the related mortgage note.
 
Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account
 
The Trust is expected to purchase from the Depositor during the Pre-Funding Period, subject to the availability thereof, Subsequent Mortgage Loans secured by conventional, adjustable rate, negative amortization mortgage loans secured by first liens on residential mortgage properties for inclusion.  The Subsequent Mortgage Loans will be transferred to the Trustee, on behalf of the Trust, pursuant to subsequent transfer instruments between the Depositor and the Trustee, each date of such transfer being referred to herein as a Subsequent Transfer Date. In connection with the purchase of Subsequent Mortgage Loans on such Subsequent Transfer Dates, the Trustee, on behalf of the Trust, will be required to pay to the Depositor, from amounts on deposit in the Pre-Funding Account, a cash purchase price of 100% of the principal balance thereof.  The related amount paid from the Pre-Funding Account on each Subsequent Transfer Date will not include accrued interest on the Subsequent Mortgage Loans. Following each Subsequent Transfer Date, the aggregate principal balance of the mortgage loans will increase by an amount equal to the aggregate principal balance of the Subsequent Mortgage Loans so purchased and transferred to the Trust and the amount in the Pre-Funding Account will decrease accordingly. Although it is intended that the principal amount of Subsequent Mortgage Loans sold to the Trust will require application of substantially all of the amounts deposited into the Pre-Funding Account on the Closing Date and it is not currently anticipated that there will be any material principal payments from amounts remaining on deposit in the Pre-Funding Account, no assurance can be given that such distributions will not occur on the distribution date immediately following the termination of the Pre-Funding Period. In any event, it is unlikely that the Depositor will be able to deliver Subsequent Mortgage Loans with aggregate principal balances that exactly equal the amount deposited into the Pre-Funding Account on the Closing Date. The aggregate characteristics of the mortgage loans in the Trust will change upon the acquisition of the Subsequent Mortgage Loans.  It is expected that approximately $120,157,587 in Subsequent Mortgage Loans will be transferred to the Trust within ninety days of the Closing Date.
 
The Pre-Funding Account will be established to provide the Trustee, on behalf of the Trust, with access to sufficient funds to fund the purchase of Subsequent Mortgage Loans. During the Pre-Funding Period, the related Pre-Funded Amount will be reduced by the amounts used to purchase Subsequent Mortgage Loans in accordance with the Agreement.  Any investment income on funds in the Pre-Funding Account will either be transferred to the Distribution Account or paid to the Depositor or its designee as provided in the Agreement.
 
Any conveyance of Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to certain conditions, including but not limited to the following:
 
(a)           Each such Subsequent Mortgage Loan must satisfy the representations and warranties specified in the related subsequent transfer instrument and the Agreement;
 
(b)           The depositor will not select such Subsequent Mortgage Loans in a manner that it believes to be adverse to the interests of the certificateholders;
 
(c)           As of the related Subsequent Cut-off Date (as defined in the Agreement), each such Subsequent Mortgage Loan will satisfy the following criteria:
 
(i)           such Subsequent Mortgage Loan may not be 30 or more days delinquent as of the last day of the month preceding the Subsequent Cut-off Date;
 
(ii)          the original term to stated maturity of such Subsequent Mortgage Loan will not exceed 480 months;
 
(iii)         each Subsequent Mortgage Loan must be a One Month LIBOR, or One-Year MTA adjustable rate mortgage loan with a first lien on the related mortgaged property;
 
(iv)         no Subsequent Mortgage Loan will have a first payment date occurring after August 1, 2007;
 
(v)          the latest maturity date of any Subsequent Mortgage Loan will be no later than August 1, 2047;
 
(vi)         if applicable, such Subsequent Mortgage Loan will have a credit score of not less than 641;
 
(vii)        such Subsequent Mortgage Loan will have a gross margin as of the subsequent Cut-Off Date ranging from approximately 2.250% per annum to approximately 4.750% per annum;
 
(viii)       such Subsequent Mortgage Loan will have a maximum mortgage rate as of the related Subsequent Cut-Off Date greater than 12.000%; and
 
(ix)         such Subsequent Mortgage Loan shall have been underwritten in accordance with the underwriting guidelines of the applicable originator;
 
(d)           As of the related Subsequent Cut-off Date, the Subsequent Mortgage Loans in the aggregate will satisfy the following criteria:
 
(i)           have a weighted average gross margin of 3.442% per annum;
 
(ii)          have a weighted average credit score greater than 717;
 
(iii)         have no less than 71.70% of the mortgaged properties be owner occupied;
 
(iv)         have no less than 83.83% of the mortgaged properties be single family detached or planned unit developments;
 
(v)          have no more than 40.97% of the Subsequent Mortgage Loans be cash out refinance;
 
(vi)         for Subsequent Mortgage Loans with a Loan-to-Value Ratio greater than 80.00%, be covered by Primary Insurance Policies (as defined in the prospectus);
 
(vii)        have a weighted average maximum mortgage rate greater than or equal to 11.794%; and
 
(viii)       be acceptable to the Rating Agencies.
 
To the extent that the Pre-Funded Amount on deposit in the Pre-Funding Account has not been fully applied to the purchase of Subsequent Mortgage Loans on or before November 15, 2007, the holders of the certificates will receive on the distribution date immediately following November 15, 2007, the remaining Pre-Funded Amount.
 
Any such amounts transferred from the Pre-Funding Account will be included in Principal Funds.
 
The Interest Coverage Account
 
On the Closing Date and if required pursuant to the Agreement, the Depositor will deposit (or cause to be deposited) cash into the interest coverage account. The amount on deposit in the interest coverage account  will be specifically allocated to cover shortfalls in interest on each class of Certificates that may arise as a result of the utilization of the pre-funding feature for the purchase by the Trust of Subsequent Mortgage Loans after the Closing Date. Any amounts remaining in the interest coverage account and not needed for such purposes will be paid to the Depositor and will not thereafter be available for payment to the certificateholders. Amounts on deposit in the interest coverage account will be invested in permitted investments. All such permitted investments are required to mature no later than the Business Day prior to the next distribution date as specified in the Agreement. The interest coverage account  will not be included as an asset of any REMIC created pursuant to the Agreement.
 
STATIC POOL INFORMATION
 
The Depositor will provide static pool information, material to this offering, with respect to the experience of the Sponsor and American Home in securitizing asset pools of a type similar to the mortgage loans at  http://www.bearstearns.com/transactions/sami_ii/sami2007-ar4/.
 
Information provided through the internet address above will not be deemed to be a part of this prospectus supplement or the registration statement for the securities offered hereby if it relates to any prior securities pool formed before January 1, 2006 or vintage data related to periods before January 1, 2006, or with respect to the mortgage pool (if applicable) for any period before January 1, 2006.
 
THE ISSUING ENTITIES
 
Structured Asset Mortgage Investments II Trust 2007-AR4, referred to herein as an Issuing Entity or the Trust,  is a common law trust formed under the laws of the State of New York pursuant to the Agreement. The Agreement constitutes the “governing instrument” under the laws of the State of New York. After its formation, the Trust will not engage in any activity other than (i) acquiring and holding the mortgage loans and the other assets of the trust and proceeds therefrom, (ii) issuing the certificates, (iii) making payments on the certificates and (iv) engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith.  The foregoing restrictions are contained in the Agreement.  For a description of other provisions relating to amending the Pooling and Servicing Agreement, please see “The Agreements— Amendment” in the prospectus.
 
The assets of the Trust will consist of the mortgage loans and certain related assets.
 
The Trust's fiscal year end is December 31.
 
Structured Asset Mortgage Investments II Grantor Trust 2007-AR4, referred to herein as an Issuing Entity or the Grantor Trust,  is a common law trust formed under the laws of the State of New York pursuant to the Grantor Trust Agreement. After its formation, the Grantor Trust will not engage in any activity other than (i) acquiring and holding the Underlying Certificates, the Swap Agreement and the other assets of the Grantor Trust and proceeds therefrom, (ii) issuing the Grantor Trust Certificates, (iii) making payments on the Grantor Trust Certificates and to the Swap Counterparty pursuant to the Swap Agreement and (iv) engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith.  The foregoing restrictions are contained in the Grantor Trust Agreement.  These restrictions cannot be amended without the consent of the holders of the Grantor Trust Certificates evidencing at least 51% of the voting rights.
 
The assets of the Grantor Trust will consist of the Underlying Certificates, the Swap Agreement and certain related assets.
 
The Grantor Trust’s fiscal year end is December 31.
THE DEPOSITOR
 
Structured Asset Mortgage Investments II Inc., referred to herein as the Depositor, was formed in the state of Delaware on  June 10, 2003, and is a wholly-owned subsidiary of The Bear Stearns Companies Inc.  The Depositor was organized for the sole purpose of serving as a private secondary mortgage market conduit. The Depositor does not have, nor is it expected in the future to have, any significant assets.
 
The Depositor has been serving as a private secondary mortgage market conduit for residential mortgage loans since 2003.  As of June 30, 2007, the Depositor has been involved in the issuance of securities backed by residential mortgage loans in excess of approximately $153,129,931,188. In conjunction with the Sponsor’s acquisition of the mortgage loans, the Depositor will execute a mortgage loan purchase agreement through which the loans will be transferred to itself.  These loans are subsequently deposited in a common law or statutory trust, described herein, which will then issue the Certificates.
 
After issuance and registration of the securities contemplated in this prospectus supplement and any supplement hereto, the Depositor will have no significant duties or responsibilities with respect to the pool assets or the securities.
 
The Depositor’s principal executive offices are located at 383 Madison Avenue, New York, New York 10179.  Its telephone number is (212) 272-2000.
 
THE SPONSOR
 
EMC Mortgage Corporation, referred to herein as EMC or the Sponsor, was incorporated in the State of Delaware on September 26, 1990, as a wholly owned subsidiary corporation of The Bear Stearns Companies Inc., and is an affiliate of the Depositor and the Underwriter.  The Sponsor was established as a mortgage banking company to facilitate the purchase and servicing of whole loan portfolios containing various levels of quality from “investment quality” to varying degrees of “non-investment quality” up to and including real estate owned assets (“REO”). The Sponsor commenced operation in Texas on October 9, 1990.
 
The Sponsor maintains its principal office at 2780 Lake Vista Drive, Lewisville, Texas 75067.  Its telephone number is (214) 626-3800.
 
Since its inception in 1990, the Sponsor has purchased over $100 billion in residential whole loans and servicing rights, which include the purchase of newly originated alternative A, jumbo (prime) and sub-prime loans.  Loans are purchased on a bulk and flow basis.  The Sponsor is one of the United States’ largest purchasers of scratch and dent and sub-performing residential mortgages and REO from various institutions, including banks, mortgage companies, thrifts and the U.S. government.  Loans are generally purchased with the ultimate strategy of securitization into an array of Bear Stearns’ securitizations based upon product type and credit parameters, including those where the loan has become re-performing or cash-flowing.
 
Performing loans include first lien fixed rate and ARMs, as well as closed end fixed rate second liens and lines of credit (“HELOCs”).  Performing loans acquired by the Sponsor are subject to varying levels of due diligence prior to purchase.  Portfolios may be reviewed for credit, data integrity, appraisal valuation, documentation, as well as compliance with certain laws.  Performing loans purchased will have been originated pursuant to the Sponsor’s underwriting guidelines or the related originator’s underwriting guidelines that are acceptable to the Sponsor.
 
Subsequent to purchase by the Sponsor, performing loans are pooled together by product type and credit parameters and structured into RMBS, with the assistance of Bear Stearns’ Financial Analytics and Structured Transactions Group, for distribution into the primary market.
 
The Sponsor has been securitizing residential mortgage loans since 1999.  The following table describes size, composition and growth of the Sponsor’s total portfolio of assets it has securitized as of the dates indicated.
 
   
December 31, 2004
   
December 31, 2005
   
December 31, 2006
   
June 30, 2007
 
Loan Type
 
Number
   
Total Portfolio of
Loans
   
Number
   
Total Portfolio of
Loans
   
Number
   
Total Portfolio of
Loans
   
Number
   
Total Portfolio of
Loans
 
Alt-A ARM
   
44,821
    $
11,002,497,283.49
     
73,638
    $
19,087,119,981.75
     
61,738
    $
18,656,292,603.55
     
7,138
    $
2,494,803,672.06
 
Alt-A Fixed
   
15,344
     
4,005,790,504.28
     
17,294
     
3,781,150,218.13
     
11,514
     
2,752,302,975.51
     
8,236
     
2,075,303,106.07
 
HELOC
   
-
     
-
     
9,309
     
509,391,438.93
     
18,730
     
1,280,801,433.05
     
15,042
     
1,017,791,517.28
 
Prime ARM
   
30,311
     
11,852,710,960.78
     
27,384
     
13,280,407,388.92
     
7,050
     
3,481,137,519.89
     
7,682
     
3,862,873,812.85
 
Prime Fixed
   
1,035
     
509,991,605.86
     
3,526
     
1,307,685,538.44
     
6,268
     
1,313,449,131.86
     
1,972
     
1,010,954,509.35
 
Prime Short Duration ARM (incl. Neg-Am ARM)
   
23,326
     
7,033,626,375.35
     
38,819
     
14,096,175,420.37
     
61,973
     
23,396,979,620.82
     
22,178
     
8,446,018,065.76
 
Reperforming
   
2,802
     
311,862,677.46
     
2,877
     
271,051,465.95
     
1,084
     
115,127,847.83
     
-
     
-
 
Seconds
   
14,842
     
659,832,093.32
     
114,899
     
5,609,656,263.12
     
116,576
     
6,697,082,133.33
     
24,405
     
1,600,581,704.33
 
SubPrime
   
98,426
     
13,051,338,552.19
     
101,156
     
16,546,152,274.44
     
60,796
     
11,394,775,124.07
     
29,857
     
6,488,993,035.10
 
Totals
   
230,907
    $
48,427,650,052.73
     
388,902
    $
74,488,789,990.05
     
345,729
    $
69,087,948,389.91
     
116,510
    $
26,997,319,422.80
 

 
With respect to some of the securitizations organized by the Sponsor, a "step-down" trigger has occurred with respect to the loss and delinquency experience of the mortgage loans included in those securitizations, resulting in a sequential payment of principal to the Offered Certificates, from the certificates with the highest credit rating to the one with the lowest rating.  In addition, with respect to one securitization organized by the Sponsor, a servicing trigger required by the related financial guaranty insurer has occurred; however, the insurer has granted extensions enabling the normal servicing activities to continue.
 
The Sponsor has received a civil investigative demand (CID), from the Federal Trade Commission (FTC), seeking documents and data relating to the Sponsor’s business and servicing practices.  The CID was issued pursuant to a December 8, 2005 resolution of the FTC authorizing non-public investigations of various unnamed subprime lenders, loan servicers and loan brokers to determine whether there have been violations of certain consumer protections laws.  The Sponsor is cooperating with the FTC’s inquiry.
 
THE SERVICER
 
General
 
EMC will act as the Servicer of the mortgage loans pursuant to the Pooling and Servicing Agreement, referred to herein as the Agreement, dated as of the Cut-off Date, among the Depositor, EMC, in its capacity as Sponsor and Servicer and the Trustee.  Among other things, the Agreement will require that the Servicer accurately and fully report its borrower credit files to credit repositories in a timely manner.
 
The information set forth in the following paragraphs with respect to the Servicer has been provided by the Servicer. None of the Depositor, the Underwriter, the Trustee or any of their respective affiliates (other than the Servicer) have made or will make any representation as to the accuracy or completeness of such information.
 
The Servicer
 
EMC
 
For a further description of EMC, please see "—The Sponsor" in this prospectus supplement.  EMC will service the mortgage loans in accordance with the description of the applicable servicing procedures contained in this section of the prospectus supplement.
 
The principal business of EMC since inception has been specializing in the acquisition, securitization, servicing and disposition of mortgage loans.  EMC's servicing portfolio consists primarily of two categories:
 
 
·
"performing loans," or performing investment quality loans serviced for EMC's own account or the account of Fannie Mae, Freddie Mac, private mortgage conduits and various institutional investors; and
 
 
·
"non-performing loans," or non-investment grade, sub-performing loans, non-performing loans and REO properties serviced for EMC's own account and for the account of investors in securitized performing and non-performing collateral transactions.
 
EMC has been servicing residential mortgage loans since 1990.  As of June 30, 2007, EMC was acting as servicer for approximately 312 series of residential mortgage-backed securities and other mortgage loans with an outstanding principal balance of approximately $80.6 billion. From year end 2004 to June 30, 2007 the loan count of EMC’s servicing portfolio grew by approximately 102.3% and the unpaid principal balance of EMC’s servicing portfolio grew by approximately 190.3%.
 
Due to an industry wide increase in the number of delinquencies and foreclosures, EMC recently initiated an expanded loss mitigation program to assist borrowers in avoiding foreclosure and benefit investors by reducing the loss typically associated with foreclosure.  As part of the program, this team is implementing various strategies to contact and assist borrowers that are in default or are having difficulties making their mortgage payments.  EMC is engaging in one-on-one meetings with borrowers, working with local community groups and holding educational workshops in an effort to reach out to these homeowners.  Various financial restructuring alternatives are being offered, including different types of loan modifications.  There have been no other appreciable changes to EMC’s servicing procedures outside of the normal changes warranted by regulatory and product type changes in the portfolio.
 
The following table describes size, composition and growth of EMC’s total residential mortgage loan servicing portfolio as of the dates indicated.
 
   
As of December 31, 2004
   
As of December 31, 2005
 
Loan Type
 
No. of Loans
   
Dollar Amount
   
Percent by
No. of Loans
   
Percent by Dollar
Amount
   
No. of Loans
   
Dollar Amount
   
Percent by
No. of Loans
   
Percent by Dollar Amount
 
Alt-A Arm
   
19,498
    $
4,427,820,708
      7.96 %     15.94 %    
57,510
    $
13,625,934,322
      12.69 %     23.00 %
Alt-A Fixed
   
25,539
     
4,578,725,473
     
10.43
     
16.48
     
17,680
     
3,569,563,859
     
3.90
     
6.03
 
PrimeArm
   
8,311
     
1,045,610,015
     
3.39
     
3.76
     
7,428
     
1,010,068,679
     
1.64
     
1.71
 
PrimeFixed
   
14,560
     
1,573,271,574
     
5.95
     
5.66
     
15,975
     
2,140,487,566
     
3.52
     
3.61
 
Seconds             
   
39,486
     
1,381,961,155
     
16.13
     
4.98
     
155,510
     
7,164,515,426
     
34.31
     
12.10
 
Subprime             
   
114,436
     
13,706,363,250
     
46.74
     
49.34
     
142,890
     
20,373,550,691
     
31.53
     
34.40
 
Other             
   
23,010
     
1,063,682,459
     
9.40
     
3.83
     
56,216
     
11,347,144,056
     
12.40
     
19.16
 
Total             
   
244,840
    $
27,777,434,635
      100.00 %     100.00 %    
453,209
    $
59,231,264,599
      100.00 %     100.00 %

   
As of December 31, 2006
   
As of June 30, 2007
 
Loan Type
 
No. of Loans
   
Dollar Amount
   
Percent by
No. of Loans
   
Percent by Dollar Amount
   
No. of Loans
   
Dollar Amount
   
Percent by
No. of Loans
   
Percent by Dollar
Amount
 
Alta-A Arm
   
52,563
    $
13,691,917,206
      10.87 %     19.03 %    
52,729
    $
13,832,608,749
      10.65 %     17.15 %
Alt-A Fixed
   
24,841
     
5,066,670,855
     
5.14
     
7.04
     
31,561
     
6,871,224,020
     
6.37
     
8.52
 
Prime Arm
   
6,374
     
879,656,182
     
1.32
     
1.22
     
6,260
     
929,778,835
     
1.26
     
1.15
 
Prime Fixed
   
14,872
     
2,152,608,940
     
3.08
     
2.99
     
15,078
     
2,409,083,088
     
3.04
     
2.99
 
Seconds            
   
169,022
     
8,428,612,513
     
34.97
     
11.71
     
168,229
     
8,554,440,442
     
33.97
     
10.61
 
Subprime
   
132,808
     
20,106,000,306
     
27.47
     
27.94
     
137,526
     
22,509,787,024
     
27.77
     
27.91
 
Other            
   
82,918
     
21,636,703,709
     
17.15
     
30.07
     
83,874
     
25,542,370,332
     
16.94
     
31.67
 
Total            
   
483,398
    $
71,962,169,710
      100.00 %     100.00 %    
495,257
    $
80,649,292,489
      100.00 %     100.00 %

 
MORTGAGE LOAN ORIGINATION
 
General
 
Approximately 6.32% of the mortgage loans were originated or acquired by the Sponsor from various sellers and were originated generally in accordance with the underwriting guidelines established by the Sponsor as set forth below.  Approximately 65.48% of the mortgage loans were originated by American Home generally in accordance with the underwriting guidelines established by American Home as set forth below.  Approximately 8.79% of the mortgage loans in the aggregate were originated by Greenpoint Mortgage Funding Inc.  The remainder of the mortgage loans were originated by various originators, none of which have originated more than 10% of the mortgage loans.
 
EMC
 
The following describes the underwriting guidelines established by the Sponsor.
 
EMC Underwriting Guidelines
 
The following is a description of the underwriting policies customarily employed by EMC with respect to the residential mortgage loans that EMC originated during the period of origination of the mortgage loans.  EMC has represented to the Depositor that the mortgage loans were originated generally in accordance with such policies.
 
The mortgage loans originated by EMC, or EMC mortgage loans, are “conventional non-conforming mortgage loans” (i.e., loans that are not insured by the Federal Housing Authority, or FHA, or partially guaranteed by the Veterans Administration or which do not qualify for sale to Fannie Mae or Freddie Mac) and are secured by first liens on one-to four-family residential properties. These loans typically differ from those underwritten to the guidelines established by Fannie Mae and Freddie Mac primarily with respect to the original principal balances, loan-to-value ratios, borrower income, required documentation, interest rates, borrower occupancy of the mortgaged property, property types and/or mortgage loans with loan-to-value ratios over 80% that do not have primary mortgage insurance. The EMC mortgage loans have either been originated or purchased by an originator and were generally underwritten in accordance with the standards described herein.  Exceptions to the underwriting guidelines are permitted when the seller's performance supports such action and the variance request is approved by credit management.
 
Such underwriting standards are applied to evaluate the prospective borrower’s credit standing and repayment ability and the value and adequacy of the mortgaged property as collateral. These standards are applied in accordance with the applicable federal and state laws and regulations. Exceptions to the underwriting standards are permitted where compensating factors are present and are managed through a formal exception process.
 
Generally, each mortgagor will have been required to complete an application designed to provide to the lender pertinent credit information concerning the mortgagor. The mortgagor will have given information with respect to its assets, liabilities, income (except as described below), credit history, employment history and personal information, and will have furnished the lender with authorization to obtain a credit report which summarizes the mortgagor’s credit history. In the case of investment properties and two- to four-unit dwellings, income derived from the mortgaged property may have been considered for underwriting purposes, in addition to the income of the mortgagor from other sources. With respect to second homes or vacation properties, no income derived from the property will have been considered for underwriting purposes.
 
With respect to purchase money or rate/term refinance loans secured by single family residences the following loan-to-value ratios and original principal balances are allowed: loan-to-value ratios at origination of up to 97% for EMC mortgage loans with original principal balances of up to $375,000 if the loan is secured by the borrower’s primary residence, up to 95% for EMC mortgage loans secured by one-to-four family, primary residences and single family second homes with original principal balances of up to $650,000, up to 90% for EMC mortgage loans secured by one-to-four family, primary residences, single family second homes with original principal balances of up to $1,000,000 and up to 70% for mortgage loans secured by one-to-four, primary residences and single family second homes with original principal balances of up to $2,000,000, or super jumbos. For cash out refinance loans, the maximum loan-to-value ratio generally is 95% and the maximum “cash out” amount permitted is based in part on the original amount of the related EMC mortgage loan.
 
With respect to mortgage loans secured by investment properties, loan-to-value ratios at origination of up to 90% for mortgage loans with original principal balances up to $500,000 are permitted. Mortgage loans secured by investment properties may have higher original principal balances if they have lower loan-to-value ratios at origination. For cash out refinance loans, the maximum loan-to-value ratio generally is 90% and the maximum “cash out” amount permitted is based in part on the original amount of the mortgage loan.
 
Substantially all other EMC mortgage loans included in the mortgage pool with a loan-to-value ratio at origination exceeding 80%, have primary mortgage insurance policies insuring a portion of the balance of the EMC Loan at least equal to the product of the original principal balance of the mortgage loan and a fraction, the numerator of which is the excess of the original principal balance of such mortgage loan over 75% of the lesser of the appraised value and the selling price of the related mortgaged property and the denominator of which is the original principal balance of the mortgage loan, plus accrued interest thereon and related foreclosure expenses is generally required.  No such primary mortgage insurance policy will be required with respect to any such EMC Loan after the date on which the related loan-to-value ratio decreases to 80% or less or, based upon new appraisal, the principal balance of such mortgage loan represents 80% or less of the new appraised value.  All of the insurers that have issued primary mortgage insurance policies with respect to the EMC mortgage loans meet Fannie Mae’s or Freddie Mac’s standard or are acceptable to the Rating Agencies.
 
In determining whether a prospective borrower has sufficient monthly income available (i) to meet the borrower’s monthly obligation on their proposed mortgage loan and (ii) to meet the monthly housing expenses and other financial obligations on the proposed mortgage loan, each lender generally considers, when required by the applicable documentation program, the ratio of such amounts to the proposed borrower’s acceptable stable monthly gross income. Such ratios vary depending on a number of underwriting criteria, including loan-to-value ratios, and are determined on a loan-by-loan basis.
 
Each lender also examines a prospective borrower’s credit report. Generally, each credit report provides a credit score for the borrower. Credit scores generally range from 350 to 840 and are available from three major credit bureaus: Experian (formerly TRW Information Systems and Services), Equifax and Trans Union. If three credit scores are obtained, the originator applies the middle score of the primary wage earner. If a primary wage earner cannot be determined because of the documentation type, the lowest middle score of all borrowers is used. Credit scores are empirically derived from historical credit bureau data and represent a numerical weighing of a borrower’s credit characteristics over a two-year period. A credit score is generated through the statistical analysis of a number of credit-related characteristics or variables. Common characteristics include the number of credit lines (trade lines), payment history, past delinquencies, severity of delinquencies, current levels of indebtedness, types of credit and length of credit history. Attributes are the specific values of each characteristic. A scorecard (the model) is created with weights or points assigned to each attribute. An individual loan applicant’s credit score is derived by adding together the attribute weights for that applicant.
 
EMC Documentation Types
 
The mortgage loans have been underwritten under one of the following documentation programs: "Full/Alternative Documentation" (Full/ALT Doc), "Stated Income/Verified Assets" (SIVA), "Limited Documentation", "Lite Documentation", "No Ratio/Verified Assets" (No Ratio), "No Income/No Employment/Verified Assets" (NIVA), "Stated Income/Stated Assets" (SISA), "No Income/No Assets/Verified Employment" (NINA w/employment), and "No Income/No Assets/No Employment" (NINA (No Doc)). All of the programs require that the applicant submit a signed and dated current Fannie Mae Residential Loan Application Form 1003.
 
Full/Alternative (Full/ALT Doc): The Full/ALT Doc type is based upon current year to date income documentation as well as the previous two year’s income documentation (i.e., W-2 forms for salaried borrowers and tax returns, including schedules, for self-employed borrowers). Salaried borrowers must submit a written verification of employment (VOE) or most recent pay stub(s) covering a 30-day period and indicating year-to-date earnings. Each loan is required to have a verbal VOE within 10 calendar days of funding.  In addition, the borrower must submit a written verification of deposit (VOD) with 2 months' average balance or his/her most recent bank statements covering a 2-month period.  The borrower's employment must be located within 100 miles of his or her residence. In addition, self-employed borrowers must provide a year to date profit-and-loss statement and a signed IRS Form 4506-T (as revised on June 1, 2004). Business funds for such applicant may be used in the provision of the required VOD as long as the business is a sole proprietorship and a CPA letter is provided asserting that (i) 100% of the funds can be withdrawn and (ii) there will be no negative impact on the business as a result of such withdrawal of funds.
 
Stated Income/Verified Assets (SIVA): Under the SIVA program, more emphasis is placed on the value and adequacy of the mortgaged property as collateral, credit history and other assets of the borrower than on the verified income of the borrower.  Income is stated on the application. However, the income must be reasonable given the employment stated.  The borrower’s assets are verified.  In addition, the applicant must submit a written verification of deposit with 2 months' average balance or his/her most recent bank statements covering a 2-month period.  A verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence.  For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
Limited Documentation: The Limited Documentation program is based on the recent twelve (12) months of consecutive personal bank statements (or business bank statements for sole proprietors).  All individuals shown on the bank statement must be borrowers on the loan, and the income must be reasonable given the employment stated. In determining the borrower's eligibility for a loan, monthly income is calculated by averaging deposits of a consistent amount for each month.  Large and unusual deposits are excluded as are deposits transferred from another account or line of credit. Particular attention is paid to borrowers whose income is derived from seasonal employment and recurrences of insufficient and overdraft charges.  Assets must be verified for reserves, closing costs and required down payment, as applicable.  A verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence. For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
Lite Documentation:  The Lite Documentation type is based on the recent six (6) months of personal bank statements (or business bank statements for sole proprietorships). The borrower's Form 1003 covers a 2-year period. All individuals shown on the bank statement must be borrowers on the loan, and the borrower's income must be reasonable given the employment stated.  In determining the borrower's eligibility for a loan, monthly income is calculated by averaging deposits of a consistent amount for each month. Large and unusual deposits are excluded as are deposits transferred from another account or line of credit. Particular attention is paid to borrowers whose income is derived from seasonal employment and recurrences of insufficient and overdraft charges.  Assets must be verified for reserves, closing costs and required down payment, as applicable.  A verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence. For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
No Ratio/Verified Assets (No Ratio):  Under the No Ratio program, the borrower’s employment and assets are stated on the Form 1003, but his/her income is not stated. The borrower's assets are verified through a written verification of deposit with 2 months' average balance or his/her most recent bank statements covering a 2-month period.  In addition, a verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence. For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
No Income/No Employment/Verified Assets (NIVA): The NIVA program requires that the borrower state his/her assets on the Form 1003, but the borrower's employment or income need not be stated.  The applicant must submit a written verification of deposit with 2 months' average balance or his/her most recent bank statements covering a 2-month period. Any large increases between the average balance and the current balance of the account must be satisfactorily explained.
 
Stated Income/Stated Assets (SISA): Under the SISA program, the borrower’s employment, income and assets are stated on the Form 1003, but income and assets are not verified. The borrower's income must be reasonable given the employment stated. A verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence. For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
No Income/No Assets/Verified Employment (NINA w/Employment):  Under the NINA w/employment  program, the borrower states his/her employment on the Form 1003 but not his/her income or assets. A verbal verification of employment is required within 10 calendar days of funding the loan, and the borrower's employment must be located within 100 miles of his or her residence. For self-employed borrowers, a CPA's certification or a copy of a business license is also required.
 
No Income/No Assets/No Employment (NINA (No Doc)): Under the NINA (No Doc) program, the borrower does not provide his/her employment, income, or assets on the Form 1003.
 
Each mortgaged property relating to an EMC mortgage loan has been appraised by a qualified independent appraiser who is approved by each lender.  All appraisals are required to conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standard Board of the Appraisal Foundation. Each appraisal must meet the requirements of Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac require, among other things, that the appraiser, or its agent on its behalf, personally inspect the property inside and out, verify whether the property was in good condition and verify that construction, if new, had been substantially completed. The appraisal generally will have been based on prices obtained on recent sales of comparable properties, determined in accordance with Fannie Mae and Freddie Mac guidelines. In certain cases an analysis based on income generated from the property or a replacement cost analysis based on the current cost of constructing or purchasing a similar property may be used.
 
Reserves are calculated based on a borrower's qualifying payment. For investment properties, reserves are required for all properties owned and not just the subject property. Gift funds may not be used to satisfy reserve requirements, and reserves must be sourced and seasoned for 60 days. The use of proceeds from a cash-out refinance to satisfy one's reserve requirements is permitted for primary residences and second homes when the combined loan-to-value (CLTV) of such properties is less than or equal to 80%. Such use of proceeds is not permitted for primary residences and second homes when the CLTV of such properties is greater than 80% or for investment properties.
 
The following table describes the amount that a home buyer must have available to pay for a property's principal, interest, taxes, and insurance (or PITI reserves) under EMC's documentation programs.
 

Primary and Secondary Homes
Full/Alt, Lite, Limited and SIVA Documentation
Required PITI Reserves
CLTV <= 90%
CLTV 90.01 - 95.00%
CLTV 95.01 - 100.00%
2 months
3 months
4 months
No Ratio and NIVA Documentation
CLTV <= 90%
CLTV 90.01 - 95.00%
CLTV 95.01 - 100.00%
3 months
4 months
5 months
SISA Documentation
 
CLTV <= 90%
CLTV 90.01 - 95.00%
CLTV 95.01 - 100.00%
4 months
6 months
8 months
Investment Property
Full/Alt, Lite, Limited and SIVA Documentation
All CLTVs
6 months
No Ratio, NIVA and SISA Documentation
All CLTVs
8 months

 
American Home Mortgage Corporation
 
The following description of American Home and its underlying guidelines has been included in this prospectus supplement because over 20% of the mortgage loans, by aggregate principal balance as of the cut-off date, were originated by American Home.  Investors should note that such information was previously filed by American Home in connection with a recent securitization transaction, and has not been updated by American Home because American Home filed for bankruptcy on August 6, 2007 under Chapter 11 of the United States Bankruptcy Code.
 
American Home is a New York corporation that operates as a mortgage origination company, primarily engaged in the origination (and some servicing) of residential mortgage loans generally secured by one- to four-family dwellings. American Home conducts lending through retail and wholesale loan production offices and its correspondent channel as well as its direct-to-consumer channel supported by American Home’s call center. American Home operates more than 600 retail and wholesale loan production offices located in 45 states and the District of Columbia and makes loans throughout all 50 states and the District of Columbia. American Home has been originating mortgage loans since its incorporation in 1988, and has been originating fixed rate mortgage loans and adjustable-rate mortgage loans, or ARMs, since such date. American Home currently operates as a taxable REIT subsidiary of American Home Mortgage Investment Corp., a Maryland corporation, which operates, and has elected to be treated, as a REIT for federal income tax purposes. The principal executive offices of American Home are located at 538 Broadhollow Road, Melville, New York 11747.  On August 6th, American Home Mortgage Holdings, Inc. together with certain of its subsidiaries, including American Home Mortgage Corporation, the originator hereunder, filed a petition with the United States Bankruptcy Court, District of Delaware under Chapter 11 of the U.S. Bankruptcy Code. 
 
The following table reflects American Home’s originations of short-reset adjustable-rate mortgage loans as of the dates indicated:
 
Short Reset ARMs
Year Ended
December 31, 2004
Year Ended
December 31, 2005
Year Ended
December 31, 2006
Three Months Ended
March 31, 2007
Number Of Loans
21,772
28,179
53,299
9,016
Principal Balance
$5,243,914,215
$9,539,586,012
$20,291,229,888
$3,291,921,408

With respect to the table above, a short reset ARM is any adjustable-rate mortgage loan without an initial fixed rate period or with an initial fixed rate period of three years or less. American Home is not aware of any material legal proceeds pending against it or against any of its property, including any proceedings known to be contemplated by governmental authorities material to the holders of the Certificates.
 
Underwriting Standards
 
The following information generally describes American Home’s underwriting guidelines with respect to mortgage loans originated pursuant to its “conforming” or “prime” underwriting standards and its Alt-A underwriting guidelines. Investors should note that such information was previously filed by American Home in connection with a recent securitization transaction, and has not been updated by American Home because American Home, together with certain of its affiliates, filed for bankruptcy on August 6, 2007 under Chapter 11 of the United States Bankruptcy Code.
 
The mortgage loans have been purchased or originated, underwritten and documented in accordance with the guidelines of Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the US Department of Agriculture Guaranteed Rural Housing Program (GRH), Ginnie Mae, the underwriting guidelines of specific private investors, and the non-conforming or Alt-A underwriting guidelines established by American Home. Conforming conventional loans must generally be approved by the Desktop Underwriter and Loan Prospector automated underwriting systems of Fannie Mae and Freddie Mac. FHA and VA loans are generally approved by these same automated underwriting systems.
 
American Home's non-conforming underwriting guidelines are similar to those of the government sponsored enterprises Fannie Mae and Freddie Mac but these loans are “non-conforming” in that they may not conform to the maximum loan amounts and in some cases to the underwriting guidelines of Fannie Mae and Freddie Mac. These non-conforming loans do not conform to and are not insurable by the Federal Housing Administration nor can they be guaranteed by the Department of Veterans Affairs.
 
American Home's underwriting philosophy is to weigh all risk factors inherent in the loan file, giving consideration to the individual transaction, borrower profile, the level of documentation provided and the property used to collateralize the debt. Because each loan is different, American Home expects and encourages underwriters to use professional judgment based on their experience in making a lending decision.
 
American Home underwrites a borrower’s creditworthiness based solely on information that American Home believes is indicative of the applicant’s willingness and ability to pay the debt they would be incurring.
 
The non-conforming loans are generally documented to the requirements of Fannie Mae and Freddie Mac in that the borrower provides the same information on the loan application along with documentation to verify the accuracy of the information on the application such as income, assets, other liabilities, etc. Certain non-conforming stated income or stated asset products allow for less verification documentation than Fannie Mae or Freddie Mac require. Certain non-conforming Alt-A products also allow for less verification documentation than Fannie Mae or Freddie Mac require. For these Alt-A products the borrower may not be required to verify employment income, assets required to close or both.
 
For some other Alt-A products the borrower is not required to provide any information regarding employment income, assets required to close or both. Alt-A products with less verification documentation generally have other compensating factors such as higher credit score or lower loan-to-value requirements.
 
American Home obtains a credit report that summarizes each borrower’s credit history. The credit report contains information from the three major credit repositories, Equifax, Experian and TransUnion.
 
These companies have developed scoring models to identify the comparative risk of delinquency among applicants based on characteristics within the applicant’s credit report. A borrower’s credit score represents a comprehensive view of the borrower’s credit history risk factors and is indicative of whether a borrower is likely to default on a loan. Some of the factors used to calculate credit scores are a borrower’s incidents of previous delinquency, the number of credit accounts a borrower has, the amount of available credit that a borrower has utilized, the source of a borrower’s existing credit, and recent attempts by a borrower to obtain additional credit. Applicants who have higher credit scores will, as a group, have fewer defaults than those who have lower credit scores. The minimum credit score allowed by American Home’s non-conforming loan guidelines for these loans is 620 and the average is typically over 700. For American Home’s Alt-A products, the minimum credit score is generally 580. If the borrowers do not have a credit score they must have an alternative credit history showing at least three trade lines with no payments over 60 days past due in the last 12 months.
 
In addition to reviewing the borrower’s credit history and credit score, American Home’s underwriters closely review the borrower’s housing payment history. In general, for non-conforming loans the borrower should not have made any mortgage payments over thirty days after the due date for the most recent twelve months. In general, for Alt-A loans the borrower may have no more than one payment that was made over thirty days after the due date for the most recent twelve months.
 
In order to determine if a borrower qualifies for a non-conforming loan, the loans have been either approved by Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector automated underwriting systems or they have been manually underwritten by American Home’s underwriters. American Home's Alt-A loan products have been approved manually by contract underwriters provided by certain mortgage insurance companies. American Home Solutions products must receive an approval from the Assetwise automated underwriting system. For manually underwritten loans, the underwriter must ensure that the borrower’s income will support the total housing expense, on an ongoing basis.
 
Underwriters may give consideration to borrowers who have demonstrated an ability to carry a similar or greater housing expense for an extended period. In addition to the monthly housing expense the underwriter must evaluate the borrower’s ability to manage all recurring payments on all debts, including the monthly housing expense. When evaluating the ratio of all monthly debt payments to the borrower’s monthly income (debt-to-income ratio), the underwriter should be aware of the degree and frequency of credit usage and its impact on the borrower’s ability to repay the loan. For example, borrowers who lower their total obligations should receive favorable consideration and borrowers with a history of heavy usage and a pattern of slow or late payments should receive less flexibility.
 
Every American Home mortgage loan is secured by a property that has been appraised by a licensed appraiser in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. The appraisers perform on site inspections of the property and report on the neighborhood and property condition in factual and specific terms. Each appraisal contains an opinion of value that represents the appraiser’s professional conclusion based on market data of sales of comparable properties, a logical analysis with adjustments for differences between the comparable sales and the subject property and the appraiser’s judgment. In addition, each appraisal is reviewed for accuracy and consistency by an underwriter of American Home or a mortgage insurance company contract underwriter.
 
The appraiser’s value conclusion is used to calculate the ratio (loan-to-value) of the loan amount to the value of the property. For loans made to purchase a property, this ratio is based on the lower of the sales price of the property and the appraised value. American Home sets various maximum loan-to-value ratios based on the loan amount, property type, loan purpose and occupancy of the subject property securing the loan. In general, American Home requires lower loan-to-value ratios for those loans that are perceived to have a higher risk, such as high loan amounts, loans in which additional cash is being taken out on a refinance transaction or loans on second homes. A lower loan-to-value ratio requires a borrower to have more equity in the property which is a significant additional incentive to the borrower to avoid default on the loan. In addition, for all conventional loans in which the loan-to-value ratio exceeds 80%, American Home requires that the loan be insured by a private mortgage insurance company that is approved by Fannie Mae and Freddie Mac. Loans with higher loan-to-value ratios require higher coverage levels.
 
For example, non-conforming loans with loan-to-value ratios of 85%, 90% and 95% require mortgage insurance coverage of 12%, 25% and 30%, respectively. Alt-A loans with full or alternative documentation and loan-to-value ratios of 85%, 90%, 95% and 97% require mortgage insurance coverage of 12-20%, 25%, 30% and 35%, respectively. Alt-A loans with loan-to-value ratios up to 100% require 35% coverage.
 
American Home realizes that there may be some acceptable quality loans that fall outside published guidelines and encourages “common sense” underwriting. Because a multitude of factors are involved in a loan transaction, no set of guidelines can contemplate every potential situation. Therefore, each case is weighed individually on its own merits and exceptions to American Home’s underwriting guidelines are allowed if sufficient compensating factors exist to offset any additional risk due to the exception.
 
DESCRIPTION OF THE CERTIFICATES
 
The Trust will issue the Certificates (other than the Grantor Trust Certificates) pursuant to the Agreement. The Grantor Trust will issue the Grantor Trust Certificates pursuant to the Grantor Trust Agreement. The Certificates consist of the classes of offered certificates reflected on pages S-2 of this prospectus supplement (which we refer to collectively as the Offered Certificates), the Underlying Certificates, Class XP, Class B-IO and Residual Certificates.  The Underlying Certificates, the Class XP, Class B-IO and Residual Certificates are not offered publicly and are collectively referred to herein as the Non-Offered Certificates. The various classes of Class A Certificates and Class X Certificates are also referred to collectively as the Senior Certificates, and the various classes of Class B Certificates are referred to herein as the Subordinate Certificates.
 
Holders of the Class B-IO Certificates and the Residual Certificates will be entitled to receive any residual cash flow from the mortgage pool, which is not expected to be significant.  A holder of a Class B-IO Certificate or a Residual Certificate will not have a right to alter the structure of the transaction.  The initial owner of the Class B-IO Certificates and Residual Certificates is expected to be Bear, Stearns Securities Corp.
 
General
 
The certificates issued by the Trust will consist of the Offered Certificates (other than the Grantor Trust Certificates) and the Non-Offered Certificates.  The certificates issued by the Grantor Trust will consist of the Grantor Trust Certificates. Only the Offered Certificates are offered by this prospectus supplement.

The Certificates (other than the Grantor Trust Certificates) represent in the aggregate the entire beneficial ownership interest in a trust consisting of the following:

 
·
all of the Depositor’s right, title and interest in and to the mortgage loans, the related mortgage notes, mortgages and other related documents, including all interest and principal due with respect to the mortgage loans after the Cut-off Date, but excluding any payments of principal or interest due on or prior to the Cut-off Date;
 
 
·
any mortgaged properties acquired on behalf of certificateholders by foreclosure or by deed in lieu of foreclosure and any revenues received thereon;
 
 
·
the rights of the Trustee under all insurance policies required to be maintained pursuant to the Agreement;
 
 
·
the rights of the Depositor under the Mortgage Loan Purchase Agreement between the Depositor and EMC, any subsequent mortgage loan purchase agreements and any subsequent transfer instruments relating to the Subsequent Mortgage Loans;
 
 
·
the rights of the Depositor with respect to the Corridor Contracts;
 
 
·
such assets relating to the mortgage loans as from time to time may be held in the Custodial Account and the Distribution Account;
 
 
·
the Pre-Funding Account and the interest coverage account; and
 
 
·
any proceeds of the foregoing.
 
The Grantor Trust Certificates represent the entire beneficial interest in the Grantor Trust consisting of the Underlying Certificates, the Grantor Trust Distribution Account and the Swap Agreement.
 
The aggregate principal balance of the mortgage loans as of the Cut-off Date, is approximately $1,149,645,356.75, subject to a permitted variance as described in this prospectus supplement under “Additional Information.”
 
Each class of the Certificates will have the approximate initial Current Principal Amount or notional amount as set forth on pages S-2 hereof and will have the Pass-Through Rate as set forth under “Summary of Prospectus Supplement—Description of the Certificates—Pass Through Rates” and "—Pass Through Rates” in this prospectus supplement.  The Residual Certificates also represent the right to receive additional distributions in respect of the Trust on any distribution date after all required payments of principal and interest have been made on such date in respect of the other classes of Certificates, although it is not anticipated that funds will be available for any additional distribution. The Underlying, Certificates, Class XP, Class B-IO and Residual Certificates are not being offered by this prospectus supplement.
 
For each distribution date, the Class X Certificates will accrue interest on a notional amount. The Class X-2 Certificates will have a notional amount equal to the aggregate outstanding principal balance of the mortgage loans generally having (i) "hard" prepayment charges for a term of three years (or in limited cases, 30 months) from origination and (ii) "combo" prepayment charges for a term of three years (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months") from origination.  The Class X-1 Certificates will have a notional amount equal to the aggregate outstanding principal balance of the mortgage loans having all other prepayment charges.
 
The initial notional amount of the Class X-1 Certificates will be approximately $330,204,694, and the initial notional amount of the Class X-2 Certificates will be approximately $625,532,976.
 
The Offered Certificates (other than the Residual Certificates) will be issued, maintained and transferred on the book-entry records of DTC, Clearstream, Luxembourg and the Euroclear System and each of their participants in minimum denominations of $25,000 and integral multiples of $1.00 in excess thereof. One certificate of each of these classes may be issued in a different principal amount to accommodate the remainder of the initial principal amount of the certificates of such class.  The Offered Certificates will be issued as global securities.  See Annex II to this prospectus supplement and “Description of the Securities” in the prospectus.
 
The Book-Entry Certificates will initially be represented by one or more Global Securities registered in the name of a nominee of DTC. The Depositor has been informed by DTC that DTC’s nominee will be Cede & Co.  No person acquiring an interest in any class of the Book-Entry Certificates will be entitled to receive a certificate representing such person’s interest, except as set forth below under “—Definitive Certificates”. Unless and until definitive certificates are issued under the limited circumstances described in this prospectus supplement, all references to actions by certificateholders with respect to the Book-Entry Certificates shall refer to actions taken by DTC upon instructions from its participants and all references in this prospectus supplement to distributions, notices, reports and statements to certificateholders with respect to the Book-Entry Certificates shall refer to distributions, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Book-Entry Certificates, for distribution to Certificate Owners in accordance with DTC procedures. See “—Book-Entry Registration” and “—Definitive Certificates” in this prospectus supplement.
 
The Residual Certificates may not be purchased by or transferred to a Plan except upon delivery of a certification of facts or an opinion of counsel, as provided in this prospectus supplement. See“—Restrictions on Transfer of the Residual Certificates” and“ERISA Considerations” in this prospectus supplement. Transfer of the Residual Certificates will be subject to additional restrictions and transfer of the Residual Certificates to any non-United States person will be prohibited, in each case as described under “Federal Income Tax Consequences—REMICS—Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations” and“—Taxation of Owners of REMIC Residual Certificates—Noneconomic REMIC Residual Certificates” in the prospectus. No service charge will be imposed for any registration of transfer or exchange, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.
 
All distributions to holders of the Offered Certificates, other than the final distribution on any class of Offered Certificates, will be made on each distribution date by or on behalf of the Trustee or the Grantor Trustee, as applicable, to the persons in whose names the Offered Certificates are registered at the close of business on the related Record Date.  Distributions will be made either (a) by check mailed to the address of each certificateholder as it appears in the certificate register or (b) upon written request to the Trustee or the Grantor Trustee, as applicable, at least five Business Days prior to the relevant Record Date by any holder of Offered Certificate, by wire transfer in immediately available funds to the account of the certificateholders specified in the request. The final distribution on any class of Offered Certificates will be made in a like manner, but only upon presentment and surrender of the certificate at the corporate trust office of the Trustee and Grantor Trustee, for these purposes located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate Trust Group, Structured Asset Mortgage Investments II Trust 2007-AR4, or any other location specified in the notice to certificateholders of the final distribution.
 
The Certificates will not be listed on any securities exchange or quoted in the automated quotation system of any registered securities association. As a result, investors in the Certificates may experience limited liquidity. See “Risk Factors—The Offered Certificates Will Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell Them at a Discount from Their Fair Market Value” in this prospectus supplement.
 
Book-Entry Registration
 
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 the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book entries, thereby eliminating the need for physical movement of certificates.
 
Certificate Owners that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Book-Entry Certificates may do so only through participants and indirect participants. In addition, Certificate Owners will receive all distributions of principal of and interest on the Book-Entry Certificates from the Trustee or the Grantor Trustee, as applicable, through DTC and DTC participants.  The Trustee or the Grantor Trustee, as applicable, will forward payments to DTC in same day funds and DTC will forward payments to participants in next day funds settled through the New York Clearing House. Each participant will be responsible for disbursing the payments. Unless and until definitive certificates are issued, it is anticipated that the only certificateholders of the Book-Entry Certificates will be Cede & Co., as nominee of DTC.  Certificate Owners will not be recognized by (i) the Trustee as certificateholders, as such term is used in the Agreement and (ii) the Grantor Trustee as the holder of the Grantor Trust Certificates, as such term is used in the Grantor Trust Agreement, and Certificate Owners will be permitted to exercise the rights of the holders of the certificates (other than the Grantor Trust Certificates) or the Grantor Trust Certificates, as applicable, only indirectly through DTC and its participants.
 
Under the Rules, DTC is required to make book-entry transfers of Book-Entry Certificates among participants and to receive and transmit distributions of principal of, and interest on, the Book-Entry Certificates. Participants and indirect participants with which Certificate Owners have accounts with respect to the Book-Entry Certificates similarly are required to make book-entry transfers and receive and transmit these payments on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess definitive certificates, the Rules provide a mechanism by which Certificate Owners through their participants and indirect participants will receive payments and will be able to transfer their interest.
 
Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and on behalf of certain banks, the ability of a Certificate 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 Book-Entry Certificates, may be limited due to the absence of physical certificates for the Book-Entry Certificates. In addition, under a book-entry format, Certificate Owners may experience delays in their receipt of payments since distribution will be made by the Trustee or the Grantor Trustee, as applicable, to Cede & Co., as nominee for DTC.
 
Under the Rules, DTC will take action permitted to be taken by a certificateholders under the Agreement only at the direction of one or more participants to whose DTC account the Book-Entry Certificates are credited. Additionally, under the Rules, DTC will take actions with respect to specified voting rights only at the direction of and on behalf of participants whose holdings of Book-Entry Certificates evidence these specified voting rights. DTC may take conflicting actions with respect to voting rights, to the extent that participants whose holdings of Book-Entry Certificates evidence voting rights authorize divergent action.
 
The Depositor, the Servicer, the Trustee and the Grantor Trustee will have no liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to beneficial ownership interests or transfers thereof.
 
Definitive Certificates
 
Definitive certificates will be issued to Certificate Owners or their nominees, respectively, rather than to DTC or its nominee, only if (1) the Depositor advises the Trustee or the Grantor Trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as clearing agency with respect to the Book-Entry Certificates and the Depositor is unable to locate a qualified successor within 30 days or (2) the Depositor, at its option, elects to terminate the book-entry system through DTC. Additionally, after the occurrence of an event of default under the Agreement or the Grantor Trust Agreement, as applicable, any Certificate Owner materially and adversely affected thereby may, at its option, request and, subject to the procedures set forth in the Agreement or the Grantor Trust Agreement, as applicable, receive a definitive certificate evidencing such Certificate Owner’s fractional undivided interest in the related class of Certificates.
 
Upon its receipt of notice of the occurrence of any event described in the immediately preceding paragraph, the Trustee or the Grantor Trustee, as applicable, is required to request that DTC notify all Certificate Owners through its participants of the availability of definitive certificates. Upon surrender by DTC of the definitive certificates representing the Book-Entry Certificates and receipt of instructions for re-registration, the Trustee or the Grantor Trustee, as applicable, will reissue the Book-Entry Certificates as definitive certificates issued in the respective principal amounts owned by individual Certificate Owners, and thereafter the Trustee will recognize the holders of such definitive certificates as certificateholders under the Agreement.
 
Distributions on the Certificates
 
 (I)           On each distribution date, the Trustee will withdraw the available funds from the Distribution Account for such distribution date and apply such amounts as follows:
 
First, from Interest Funds, to pay any accrued and unpaid interest on the Offered Certificates (other than the Grantor Trust Certificates) and the Underlying Certificates  in the following order of priority:
 
(1) to each class of Class A Certificates and Class X Certificates, the Current Interest and then any Interest Carry Forward Amount for each such class, pro rata, based on the Current Interest and Interest Carry Forward Amount due to each such class;
 
(2) to the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates, sequentially, in that order, the Current Interest for each such class of certificates;
 
(3) any Excess Spread to the extent necessary to meet a level of overcollateralization equal to the Overcollateralization Target Amount will be the Extra Principal Distribution Amount and will be included as part of the Principal Distribution Amount and distributed in accordance with Second (A) and (B) below; and
 
(4) any remaining Excess Spread will be the Remaining Excess Spread and will be applied, together with the Overcollateralization Release Amount, as Excess Cashflow pursuant to clauses Third through Seventeenth below.
 
As described in the definition of “Current Interest,” the Current Interest on each class of  Offered Certificates (other than the Grantor Trust Certificates) and the Underlying Certificates is subject to reduction in the event of specified interest shortfalls and, and, other than with respect to the Grantor Trust Certificates to the extent the Swap Agreement has not been terminated, shortfalls resulting from Net Deferred Interest on the mortgage loans allocated to such class of  Offered Certificates or Underlying Certificates, as applicable, and the interest portion of Realized Losses on the mortgage loans allocated to such class of Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates).
 
On any distribution date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest Shortfalls to the extent not covered by Compensating Interest Payments will be allocated, first, in reduction of amounts otherwise distributable to the Class B-IO and the Residual Certificates, and thereafter, to the Current Interest payable to the Class A Certificates and Class X Certificates (in each case, with respect to shortfalls resulting from the mortgage loans) and Class B Certificates, pro rata, based on the respective amounts of interest accrued on such certificates for such distribution date.  The holders of the Class A, Class X and Class B Certificates will not be entitled to reimbursement for any such interest shortfalls.
 
Second, to pay as principal on the Class A Certificates and Class B Certificates, in the following order of priority:
 
(A)
On each distribution date (i) prior to the related Stepdown Date or (ii) on which a Trigger Event is in effect, the Principal Distribution Amount for such distribution date will be distributed as follows:
 
1.      to each class of Class A Certificates, until the Current Principal Amount of each such class is reduced to zero, as follows:  concurrently and on a pro rata basis (x) to the Class A-1, Class A-2 and Class A-3 Certificates, sequentially, in that order, until the Current Principal Amount of each such class is reduced to zero and (y) to the Class A-4A, the underlying Class A-4B, the Class A-5, Class A-6 and the Class A-7 Certificates, pro rata, until the Current Principal Amount of each such class is reduced to zero;
 
2.      to the Class B-1 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
3.      to the Class B-2 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
4.      to the Class B-3 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
5.      to the Class B-4 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
6.      to the Class B-5 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
7.      to the Class B-6 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
8.      to the Class B-7 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero;
 
9.      to the Class B-8 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero; and
 
10.           to the Class B-9 Certificates, any remaining Principal Distribution Amount until the Current Principal Amount thereof is reduced to zero.
 
(B)
On each distribution date on or after the related Stepdown Date, so long as a Trigger Event is not in effect, the Principal Distribution Amount for such distribution date will be distributed as follows:
 
1.      to the Class A Certificates, from the Principal Distribution Amount, an amount equal to the Class A Principal Distribution Amount will be distributed to each class of Class A Certificates until the Current Principal Amount of each such class is reduced to zero, as follows:  concurrently and on a pro rata basis (x) to the Class A-1, Class A-2 and Class A-3 Certificates, sequentially, in that order, until the Current Principal Amount of each such class is reduced to zero and (y) to the Class A-4A, the underlying Class A-4B, the Class A-5, Class A-6 and the Class A-7 Certificates, pro rata, until the Current Principal Amount of each such class is reduced to zero;
 
2.      to the Class B-1 Certificates, from any remaining Principal Distribution Amount, the Class B-1 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
3.      to the Class B-2 Certificates, from any remaining Principal Distribution Amount, the Class B-2 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
4.      to the Class B-3 Certificates, from any remaining Principal Distribution Amount, the Class B-3 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
5.      to the Class B-4 Certificates, from any remaining Principal Distribution Amount, the Class B-4 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
6.      to the Class B-5 Certificates, from any remaining Principal Distribution Amount, the Class B-5 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
7.      to the Class B-6 Certificates, from any remaining Principal Distribution Amount, the Class B-6 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
8.      to the Class B-7 Certificates, from any remaining Principal Distribution Amount, the Class B-7 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
 
9.      to the Class B-8 Certificates, from any remaining Principal Distribution Amount, the Class B-8 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero; and
 
10.           to the Class B-9 Certificates, from any remaining Principal Distribution Amount, the Class B-9 Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero.
 
Third, from any Excess Cashflow, to the Class A Certificates, pro rata in accordance with the respective amounts owed to each such class an amount equal to (a) any remaining Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Fourth, from any remaining Excess Cashflow, to the Class B-1 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Fifth, from any remaining Excess Cashflow, to the Class B-2 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Sixth, from any remaining Excess Cashflow, to the Class B-3 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Seventh, from any remaining Excess Cashflow, to the Class B-4 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Eighth, from any remaining Excess Cashflow, to the Class B-5 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Ninth, from any remaining Excess Cashflow, to the Class B-6 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Tenth, from any remaining Excess Cashflow, to the Class B-7 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Eleventh, from any remaining Excess Cashflow, to the Class B-8 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Twelfth, from any remaining Excess Cashflow, to the Class B-9 Certificates, an amount equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
 
Thirteenth, from amounts in the Adjustable Rate Supplemental Fund (only with respect to the initial distribution date as described herein) and from any remaining Excess Cashflow, to the Class A Certificates, any Basis Risk Shortfall Carry-forward Amount for each such class for such distribution date, pro rata, based on the Basis Risk Shortfall Carry-forward Amount owed to each such class;
 
Fourteenth, from amounts in the Adjustable Rate Supplemental Fund (only with respect to the initial distribution date as described herein) and from any remaining Excess Cashflow, to the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class B-8 and Class B-9 Certificates, sequentially, in that order, any Basis Risk Shortfall Carry-forward Amount, in each case for such class for such distribution date;
 
Fifteenth,  if the Adjustable Rate Supplemental Fund has not been terminated, to the Adjustable Rate Supplemental Fund, the lesser of (A) any remaining Excess Cashflow and (B) the amount which, when added to amounts on deposit in the Adjustable Rate Supplemental Fund, would equal approximately $25,000;
 
Sixteenth, from any remaining Excess Cashflow, to the Class B-IO certificates an amount specified in the Agreement; and
 
Seventeenth, any remaining amounts to the Residual Certificates.
 
(II)           On each distribution date, the Grantor Trust Available Funds relating to the Underlying Certificates and the Swap Counterparty Payment (if any) will be distributed by the Grantor Trustee as follows:
 
First, to the Swap Counterparty, the Swap Counterparty Payment (if any) and certain termination payments (as set forth in the Swap Agreement), if applicable, for such distribution date (other than where the Swap Counterparty is the sole defaulting or the sole affected party);
 
Second, to the extent of remaining related Grantor Trust Available Funds, to the Grantor Trust Certificates, the Current Interest on such class for such distribution date;
 
Third, to the extent of remaining related Grantor Trust Available Funds, to the Grantor Trust Certificates, any principal distributions received from the Underlying Certificates, in reduction of the Current Principal Amount thereof, until the Current Principal Amount thereof has been reduced to zero; and
 
Fourth, to the extent of remaining related Grantor Trust Available Funds to the Swap Counterparty, any termination payments (as set forth in the Swap Agreement) where the Swap Counterparty is the sole defaulting or sole affected party.
 
On each distribution date, all amounts representing prepayment charges in respect of the mortgage loans received during the related Prepayment Period will be withdrawn from the Distribution Account and shall not be available for distribution to the holders of the Offered Certificates.  All amounts generally representing (i) the "hard" prepayment charges on the mortgage loans with a three-year (or in limited cases, 30-month) prepayment charge term and (ii) the "combo" prepayment charges on the mortgage loans with a three-year prepayment charge term (which prepayment charges are "hard" for the first 12 months and "soft" for the following 24 months) will be distributed to the Class XP-2 Certificates.  All amounts representing all other prepayment charges on the mortgage loans will be distributed to the Class XP-1 Certificates.
 
When a borrower prepays all or a portion of a mortgage loan between Due Dates, the borrower pays interest on the amount prepaid only to the date of prepayment. Accordingly, an interest shortfall will result equal to the difference between the amount of interest collected and the amount of interest that would have been due absent such prepayment. We refer to this interest shortfall as a Prepayment Interest Shortfall.  Any Prepayment Interest Shortfalls resulting from a prepayment in full or in part that are distributed to the certificateholders in the calendar month following the month in which the prepayment was made are required to be paid by the Servicer, but only to the extent that such amount does not exceed the aggregate of the Servicing Fees on the mortgage loans serviced by it for the applicable distribution date.  The Servicer is not obligated to fund interest shortfalls resulting from the application of the Relief Act. The amount of the Servicing Fees used to offset such Prepayment Interest Shortfalls is referred to herein as Compensating Interest Payments.
 
The Swap Agreement
 
On the Closing Date, the Underlying Certificates, together with the Swap Agreement, will be deposited into the Grantor Trust.  The Grantor Trust Certificates will be entitled to payments from the Swap Agreement.  With respect to any distribution date on or prior to the Swap Termination Date, the Swap Agreement will provide for the payment to the Grantor Trust of the Swap Payment (if and to the extent applicable).  Conversely, with respect to any distribution date on or prior to the Swap Termination Date, the Grantor Trust will pay to the Swap Counterparty the Swap Counterparty Payment (if and to the extent applicable) in accordance with priorities First and Fourth of paragraph (II) under “—Distributions on the Certificates” with respect to the Underlying Certificates. In the event of a Swap Default under the Swap Agreement, either (i) an amount may become immediately due and payable to the Swap Counterparty, which shall be paid by the Grantor Trust to the Swap Counterparty from amounts otherwise payable by the Grantor Trust to the related Grantor Trust Certificates or (ii) an amount may become immediately due and payable to the Grantor Trust on behalf of such Grantor Trust Certificates by the Swap Counterparty.  To the extent the Swap Agreement is terminated due to such Swap Default, the related Grantor Trust Certificates will be subject to the allocation of Net Deferred Interest as described herein. The Swap Agreement will be terminated following the earlier to occur of (i) the distribution date following the date on which the Current Principal Amount of the Underlying Certificates is reduced to zero or (ii) September 2047.
 
The Swap Counterparty
 
Bear Stearns Capital Markets Inc., or the Swap Counterparty, is incorporated in the State of Delaware. The Swap Counterparty is engaged in fixed income derivatives transactions and hedges associated therewith.  The Swap Counterparty is a subsidiary of The Bear Stearns Companies Inc., or BSC.  The Swap Counterparty’s obligations under the Swap Agreement will be guaranteed by BSC.  The Swap Counterparty and BSC are affiliates of the Underwriter, EMC, the Corridor Counterparty, the Depositor and the Issuing Entities.
 
The most recent Annual Report on Form 10-K, the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K of BSC are on file with and available from the Securities and Exchange Commission. Copies of these documents will be provided upon request and without charge to each person, including any certificate holder, who receives a copy of this Prospectus Supplement.  Written requests may be addressed to Bear, Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179, Attention: Head of Interest Rate Derivatives.
 
The Depositor has determined that the significance percentage of payments under the Swap Agreement, as calculated in accordance with Regulation AB under the Securities Act of 1933, is less than 10%.
 
Principal Distributions on the Grantor Trust Certificates
 
Distributions in reduction of the Current Principal Amount of the Grantor Trust Certificates will be made on each distribution date pursuant to priority Third of paragraph (II) under “—Distributions on the Certificates” with respect to the Grantor Trust Certificates.  In accordance with the applicable Third priority, the Grantor Trust Available Funds remaining after the distribution to the Swap Counterparty of any Swap Counterparty Payment for such distribution date and the distribution of interest on the Grantor Trust Certificates will be allocated on such distribution date to the Grantor Trust Certificates.
 
Monthly Advances
 
If the minimum payment of principal or interest on a mortgage loan which was due on a related Due Date (not including any balloon payments required to be made under a balloon mortgage loan) is delinquent other than for certain reasons as set forth in the Agreement, for example as a result of application of the Relief Act or similar state law, the Servicer will be required to deposit in to the Custodial Account on the date specified in the Agreement an amount equal to such delinquency, net of the Servicing Fee, except to the extent the Servicer determines any such advance to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or from future payments on the mortgage loan for which such advance was made. Subject to the foregoing, such advances will be made by the Servicer or subservicer, if applicable, through final disposition or liquidation of the related mortgaged property.  Any failure of the Servicer to make such advances would constitute an Event of Default under the Agreement, in which case the Trustee, as successor servicer, will be required to make such advance in accordance with the Agreement.  If the Servicer is terminated, the Trustee acting as successor servicer or an appointed successor servicer will be obligated to advance such amounts to the Custodial Account to the extent provided in the Agreement. If the Trustee acting as successor servicer is required to make an advance, and fails to make such advance, such failure would constitute an Event of Default under the Agreement.  See “The Agreements—Events of Default and Rights Upon Event of Default” in the prospectus.
 
All Monthly Advances will be reimbursable to the party making such Monthly Advance from late collections, Insurance Proceeds, Liquidation Proceeds and Subsequent Recoveries from the mortgage loan as to which the unreimbursed Monthly Advance was made. In addition, any Monthly Advances previously made in respect of any mortgage loan that are deemed by the Servicer or a subservicer to be nonrecoverable from related late collections, Insurance Proceeds, Liquidation Proceeds or Subsequent Recoveries may be reimbursed to such party out of any funds in the Custodial Account prior to the distributions on the Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates).   The right of the Servicer to such reimbursements under the Agreement are limited to (i) amounts received on a mortgage loan (including, for this purpose, the Repurchase Price therefor, Insurance Proceeds, Liquidation Proceeds and Subsequent Recoveries) which represent late payments or recoveries of the principal of or interest on such Mortgage Loan with respect to which such Monthly Advance was made and (ii) to the extent of Amounts Held for Future Distribution; provided, that any such Amounts Held for Future Distribution so applied to reimburse the Servicer will be replaced by the Servicer by deposit in the Distribution Account no later than the close of business on the Distribution Account Deposit Date immediately preceding the Distribution Date on which such funds are required to be distributed pursuant to the Agreement.
 
Allocation of Realized Losses; Subordination
 
General
 
Subordination provides the holders of the Offered Certificates (other than the Grantor Trust Certificates) and the Underlying Certificates having a higher payment priority with protection against Realized Losses on the mortgage loans.  In general, this loss protection is accomplished by allocating any Realized Losses in excess of available Excess Spread and any current overcollateralization (if any) among the Subordinate Certificates, beginning with the Subordinate Certificates with the lowest payment priority until the Current Principal Amount of that subordinate class has been reduced to zero.
 
With respect to any defaulted mortgage loan that is finally liquidated through foreclosure sale, disposition of the related mortgaged property if acquired on behalf of the certificateholders by deed-in-lieu of foreclosure or otherwise, the amount of loss realized, if any, will equal the portion of the unpaid principal balance remaining, if any, plus interest thereon through the last day of the month in which such mortgage loan was finally liquidated, after application of all amounts recovered (net of amounts reimbursable to the Servicer for Monthly Advances, the Servicing Fee, servicing advances and certain other amounts specified in the Agreement) towards interest and principal owing on the mortgage loan. The amount of such loss realized on a mortgage loan, together with the amount of any Bankruptcy Loss (if any) in respect of a mortgage loan is referred to in this prospectus supplement as a Realized Loss.
 
There are two types of Bankruptcy Losses that can occur with respect to a mortgage loan. The first type of Bankruptcy Loss, referred to in this prospectus supplement as a Deficient Valuation, results if a court, in connection with a personal bankruptcy of a mortgagor, establishes the value of a mortgaged property at an amount less than the unpaid principal balance of the mortgage loan secured by such mortgaged property.  In such a case, the holder of such mortgage loan would become an unsecured creditor to the extent of the difference between the unpaid principal balance of such mortgage loan and such reduced unsecured debt.  The second type of Bankruptcy Loss, referred to in this prospectus supplement as a Debt Service Reduction, results from a court reducing the amount of the monthly payment on the mortgage loan, in connection with the personal bankruptcy of a mortgagor.
 
The principal portion of Debt Service Reductions will not be allocated in reduction of the Current Principal Amount of any class of Certificates.  Regardless of when they occur, Debt Service Reductions may reduce the amount of available funds that would otherwise be available for distribution on a distribution date.  As a result of the subordination of the Subordinate Certificates in right of distribution of available funds to the Senior Certificates, any Debt Service Reductions will be borne by the Subordinate Certificates (to the extent then outstanding) in inverse order of priority.
 
Any allocation of a principal portion of a Realized Loss to a Certificate will be made by reducing the Current Principal Amount thereof by the amount so allocated as of the distribution date in the month following the calendar month in which such Realized Loss was incurred.
 
An allocation of a Realized Loss on a pro rata basis among two or more classes of Certificates means an allocation to each such class of Certificates on the basis of its then outstanding Current Principal Amount prior to giving effect to distributions to be made on such distribution date.
 
The interest portion of Realized Losses will be allocated among the outstanding related classes of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) to the extent described under “Distributions on the Certificates—Interest” above.
 
In the event that the Servicer or any subservicer recovers any amount in respect of a Liquidated Mortgage Loan with respect to which a Realized Loss has been incurred after liquidation and disposition of such mortgage loan, any such amount, which is referred to in this prospectus supplement as a Subsequent Recovery, will be distributed as part of available funds in accordance with the priorities described under “Description of the Certificates—Distributions on the Certificates” in this prospectus supplement.  Additionally, the Current Principal Amount of each class of Subordinate Certificates that has been reduced by the allocation of a Realized Loss to such Certificate will be increased, in order of seniority, by the amount of such Subsequent Recovery, but not in excess of the amount of any Realized Losses previously allocated to such class of Certificates and not previously offset by Subsequent Recoveries.  Holders of such Certificates will not be entitled to any payment in respect of Current Interest on the amount of such increases for an Interest Accrual Period preceding the distribution date on which such increase occurs.
 
Allocation of Realized Losses
 
The Applied Realized Loss Amount for the mortgage loans will be allocated first to the Class B-9, Class B-8, Class B-7, Class B-6, Class B-5, Class B-4, Class B-3, Class B-2 and Class B-1 Certificates, sequentially in that order, in each case until the Current Principal Amount of each such class has been reduced to zero.  Thereafter, the principal portion of Realized Losses on the mortgage loans will be allocated on any distribution date to the Class A-7 Certificates and the Class A-6 Certificates, sequentially in that order, until the Current Principal Amount of each such class has been reduced to zero.  Thereafter, the principal portion of Realized Losses on the mortgage loans will be allocated on any distribution date concurrently (a) to the Class A-1, Class A-2 and Class A-3 Certificates, on a pro rata basis and (b) (i) to the Class A-5 Certificates and (ii) the Class A-4A Certificates and Underlying Class A-4B Certificates on a pro rata basis, sequentially in that order, until the Current Principal Amount of each such class has been reduced to zero.  Realized Losses allocated to the Underlying Certificates will be allocated to the Grantor Trust Certificates. Realized Losses will not be allocated to the Class X Certificates.
 
No reduction of the Current Principal Amount of any class will be made on any distribution date on account of Realized Losses to the extent that such allocation would result in the reduction of the aggregate Current Principal Amounts of all Certificates as of such distribution date, after giving effect to all distributions and prior allocations of Realized Losses on the mortgage loans on such date, to an amount less than the aggregate Stated Principal Balance of all of the mortgage loans as of the first day of the month of such distribution date. The limitation described in this paragraph is referred to herein as the Loss Allocation Limitation.
 
Excess Spread and Overcollateralization Provisions
 
Excess Spread will be required to be applied as an Extra Principal Distribution Amount with respect to the Offered Certificates (other than the Grantor Trust Certificates) and the Underlying Certificates whenever the Overcollateralization Amount is less than the Overcollateralization Target Amount. If on any distribution date, after giving effect to allocations of Principal Distribution Amount, the aggregate Current Principal Amount of the Offered Certificates (other than the Grantor Trust Certificates) and the Underlying Certificates exceeds the aggregate Stated Principal Balance of the mortgage loans for such distribution date, the Current Principal Amounts of the Subordinate Certificates will be reduced, in inverse order of seniority (beginning with the related Class B Certificates with the highest numerical designation) by an amount equal to such excess.  Any such reduction is an Applied Realized Loss Amount.
 
Pass-Through Rates
 
The pass-through rate per annum for the Offered Certificates (other than the Class A-2, Class A-3, Class X and Class B Certificates) and the Underlying Certificates will be equal to the lesser of:
 
 
1.
the London interbank offered rate for one month United States dollar deposits, which we refer to as One-Month LIBOR, calculated as described below under “—Calculation of One-Month LIBOR”, plus the related Margin; and
 
 
2.
the Net Rate Cap.
 
The pass-through rate per annum for the Class A-2, Class A-3 and Class B Certificates will be equal to the least of:
 
 
1.
LIBOR plus the related Margin;
 
 
2.
11.50% per annum; and
 
 
3.
the Net Rate Cap.
 
The pass-through rate for the Class X-1 Certificates will be a fixed rate equal to 0.080% per annum, and the pass-through rate for the Class X-2 Certificates will be a fixed rate equal to 0.500% per annum.
 
Calculation of One-Month LIBOR
 
On the second LIBOR business day preceding the commencement of each Interest Accrual Period for the Offered Certificates, which date we refer to as an interest determination date, the Trustee will determine One-Month LIBOR for such Interest Accrual Period on the basis of such rate as it appears on Reuters Screen LIBOR01 Page (or such other page as may replace such Reuters Screen LIBOR01 for the purpose of displaying comparable rates), as of 11:00 a.m. London time on such interest determination date. If such rate does not appear on such page, or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be reasonably selected by the Trustee, One-Month LIBOR for the applicable Interest Accrual Period will be the Reference Bank Rate. If no such quotations can be obtained and no Reference Bank Rate is available, One-Month LIBOR will be the One-Month LIBOR applicable to the preceding Interest Accrual Period.
 
The Reference Bank Rate with respect to any Interest Accrual Period, means the arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of 0.03125%, of the offered rates for United States dollar deposits for one month that are quoted by the Reference Banks, as described below, as of 11:00 a.m., New York City time, on the related interest determination date to prime banks in the London interbank market for a period of one month in amounts approximately equal to the aggregate Current Principal Amount of all classes of Offered Certificates for such Interest Accrual Period, provided that at least two such Reference Banks provide such rate. If fewer than two offered rates appear, the Reference Bank Rate will be the arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of 0.03125%, of the rates quoted by one or more major banks in New York City, selected by the Trustee, as of 11:00 a.m., New York City time, on such date for loans in U.S. dollars to leading European banks for a period of one month in amounts approximately equal to the aggregate Current Principal Amount of all classes of Offered Certificates. As used in this section, LIBOR business day means a day on which banks are open for dealing in foreign currency and exchange in London and New York City; and Reference Banks means leading banks selected by the Trustee and engaged in transactions in Eurodollar deposits in the international Eurocurrency market:
 
 
1.
with an established place of business in London;
 
 
2.
which have been designated as such by the Trustee; and
 
 
3.
which are not controlling, controlled by, or under common control with, the Depositor or the Sponsor.
 
The establishment of one-month LIBOR on each interest determination date by the Trustee and the Trustee's calculation of the Pass-Through Rates applicable to the Offered Certificates for the related Interest Accrual Period shall, in the absence of manifest error, be final and binding.
 
Optional Purchase of Defaulted Loans
 
With respect to any mortgage loan which as of the first day of a Fiscal Quarter is delinquent in payment by 90 days or more or is an REO Property, the Sponsor shall have the right, but not the obligation,  to purchase such mortgage loan from the trust at a price equal to the Repurchase Price; provided, however (i) that such mortgage loan is still 90 days or more delinquent or is an REO Property as of the date of such purchase and (ii) this purchase option, if not theretofore exercised, shall terminate on the date prior to the last day of the related Fiscal Quarter.  This purchase option, if not exercised, shall not be thereafter reinstated unless the delinquency is cured and the mortgage loan thereafter again becomes 90 days or more delinquent or becomes an REO Property, in which case the option shall again become exercisable as of the first day of the related Fiscal Quarter.
 
In addition, the Sponsor will have the right, but not the obligation, to purchase any mortgage loan from the Trust for which (i) the initial scheduled payment due to the Sponsor or (ii) the initial scheduled payment due to the Trust after the Closing Date becomes 30 or more days delinquent; provided however, such optional purchase shall be exercised no later than the 270th day after such mortgage loan is subject to such optional repurchase.  Such purchase shall be made at a price equal to 100% of the Stated Principal Balance thereof plus accrued interest thereon at the applicable mortgage rate, from the date through which interest was last paid by the related mortgagor or advanced to the first day of the month in which such amount is to be distributed.
 
These optional purchase rights described above may be assigned by the Sponsor to a third party, including a holder of a class of Certificates. Investors should note that the removal of any such mortgage loan from the Trust may affect the loss and delinquency tests which determine the level of the Overcollateralization Target Amount, which may adversely affect the market value of the Certificates.
 
Restrictions on Transfer of the Grantor Trust Certificates and the Residual Certificates
 
The Grantor Trust Certificates and the Underlying Certificates will be subject to additional restrictions as described under “Federal Income Tax Consequences—The Grantor Trust and Grantor Trust Certificates” and "ERISA Considerations" in this prospectus supplement.  The Residual Certificates will be subject to additional restrictions described under “Federal Income Tax Consequences—Special Tax Considerations Applicable to Residual Certificates” in this prospectus supplement and “Federal Income Tax Consequences—REMICS—Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations” and “—Taxation of Owners of REMIC Residual Certificates—Noneconomic REMIC Residual Certificates” in the prospectus.
 
THE CORRIDOR CONTRACTS
 
The Trustee, on behalf of the Trust, will enter into one or more corridor contracts, or Corridor Contracts, with Bear Stearns Financial Products Inc. that provide for payments to the Trustee for the benefit of the holders of the related Certificates.  The Corridor Contracts are intended to provide partial protection to the Class A-5 Certificates and the Class A-6 Certificates in the event that the applicable Pass-Through Rate for such classes of Certificates is limited by the Net Rate Cap and to cover certain interest shortfalls.  No other class of Certificates will be entitled to the benefits of the Corridor Contracts.
 
The Corridor Counterparty is Bear Stearns Financial Products Inc., a Delaware corporation (“BSFP”).  BSFP is a bankruptcy remote derivatives product company based in New York, New York that has been established as a wholly owned subsidiary of The Bear Stearns Companies, Inc.  BSFP engages in a wide array of over-the-counter interest rate, currency, and equity derivatives, typically with counterparties who require a highly rated derivative provider.  As of the date of this prospectus supplement, BSFP has a ratings classification of “AAA” from Standard & Poor’s and “Aaa” from Moody’s Investors Service.  BSFP will provide upon request, without charge, to each person to whom this prospectus supplement is delivered, a copy of (i) the ratings analysis from each of Standard & Poor’s and Moody’s Investors Service evidencing those respective ratings or (ii) the most recent audited annual financial statements of BSFP.  Requests for information should be directed to the DPC Manager of Bear Stearns Financial Products Inc. at (212) 272-4009 or in writing at 383 Madison Avenue, 36th Floor, New York, New York 10179.  BSFP is an affiliate of Bear, Stearns & Co. Inc., EMC, the Swap Counterparty, the Depositor and the Issuing Entities.
 
The information contained in the preceding paragraph has been provided by the Corridor Counterparty for use in this prospectus supplement.  The Corridor Counterparty has not been involved in the preparation of, and does not accept responsibility for, this prospectus supplement as a whole or the accompanying prospectus.
 
On or prior to each distribution date through and including the distribution date set forth in the applicable Corridor Contract, payments under the applicable Corridor Contract will be made to the Trustee, under an account established and maintained by the Trustee, for the benefit of the holders of the related Certificates. The payment to be made by the Corridor Counterparty under each Corridor Contract will be equal to the interest accrued during the Interest Accrual Period on the related notional balance at a rate equal to the excess, if any, of (i) the lesser of (a) One-Month LIBOR and (b) the ceiling rate set forth in Annex I over (ii) the strike rate set forth in Annex I.  The notional balance will be equal to the lesser of (i) the Current Principal Amount of such class of Certificates for the related distribution date and (ii) the related certificate notional amount set forth in Annex I.
 
On each distribution date, amounts received under each Corridor Contract with respect to the Class A-5 Certificates and the Class A-6 Certificates will be allocated in the following order of priority:
 
First, to the holders of the related class of Certificates, the payment of any Basis Risk Shortfall Carry-forward Amount for such class, to the extent not covered by the related Excess Cashflow on such distribution date;
 
Second, from any remaining amounts, to the holders of the related class of Certificates, the payment of any Current Interest and Interest Carry Forward Amount for such class to the extent not covered by Interest Funds or Excess Cashflow on such distribution date;
 
Third, Reserved; and
 
Fourth, to the Class B-IO Certificateholders, any remaining amounts.
 
The Corridor Contracts terminate after the distribution date occurring in April 2010 and December 2015 with respect to the Class A-5 Certificates and the Class A-6 Certificates, respectively.
 
The Depositor has determined that the significance percentage of payments under the Corridor Contracts, as calculated in accordance with Regulation AB under the Securities Act of 1933, is less than 10%.
 
 
YIELD AND PREPAYMENT CONSIDERATIONS
 
General
 
The yield to maturity and weighted average life of each class of Offered Certificates (with respect to the Grantor Trust  Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates will be affected by the amount and timing of principal payments on the mortgage loans, the allocation of available funds to such class of Certificates, the applicable Pass-Through Rate for such class of Certificates, the purchase price paid for such Certificates and the amount of Excess Spread. In addition, the yields on the Certificates will be adversely affected by Realized Losses and interest shortfalls on the mortgage loans. The interaction of the foregoing factors may have different effects on the various classes of Certificates, and may have varying effects with respect to any one class of Certificates during the life of such class. No representation is made as to the anticipated rate of prepayments on the mortgage loans, the amount and timing of Realized Losses or interest shortfalls or as to the anticipated yield to maturity of any class of Certificates. Prospective investors are urged to consider their own estimates as to the anticipated rate of future prepayments on the mortgage loans and the suitability of the Certificates to their investment objectives. Investors should carefully consider the associated risks discussed below and under the heading “Legal Investment” herein and under the headings “Yield Considerations,” “Maturity and Prepayment Considerations” and “Legal Investment Matters” in the prospectus.
 
The mortgage interest rates on the mortgage loans will adjust monthly after the expiration of the applicable initial fixed-rate period, and may vary significantly over time.  When a mortgage loan begins its adjustable period, increases and decreases in the mortgage interest rate on that mortgage loan will be calculated for each monthly accrual period based on the index as of a specified date.  The index may not rise and fall consistently with mortgage interest rates.  As a result, the mortgage interest rates on the mortgage loans at any time may not equal the prevailing mortgage interest rates for similar adjustable-rate loans and accordingly the prepayment rate may be lower or higher than would otherwise be anticipated.  Moreover, each mortgage loan is subject to a maximum interest rate.
 
Monthly payments on the mortgage loans generally will adjust annually.  As a result, an increase or decrease in the index will cause the amortization of the mortgage loans to decelerate or accelerate, thereby causing a corresponding change in the amortization of the Certificates. In the event that an increase in the index causes the interest due on a mortgage loan for a given month to exceed the current minimum monthly payment for that month, the shortfall in interest will be added to the outstanding principal balance of that mortgage loan as Deferred Interest.  In addition, because the initial minimum monthly payment is set based on the initial fixed rate rather than the sum of the Margin and then-current Index, the minimum monthly payment could be less than the interest due on that mortgage loan during at least the first year of a mortgage loan. If a mortgagor only pays the minimum monthly payment due, there will likely be negative amortization on the mortgage loan until such time that the minimum monthly payment will be reset to a fully amortizing amount.
 
Prepayment Considerations
 
The rate of principal payments on each class of Offered Certificates (other than the Class X Certificates, and with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates, the aggregate amount of distributions on each such class of Certificates and the yield to maturity of each such class of Certificates will be related to the rate and timing of payments of principal on the mortgage loans. The rate of principal payments on the mortgage loans will in turn be affected by the amortization schedules of such mortgage loans and by the rate and timing of Principal Prepayments on the mortgage loans (including for this purpose payments resulting from refinancings, liquidations of the mortgage loans due to defaults, casualties, condemnations and repurchases, whether optional or required).  The mortgage loans generally may be prepaid by the mortgagors at any time; however, as described under “Description of the Mortgage Loans” in this prospectus supplement, with respect to approximately 77.38% of the mortgage loans, a prepayment may subject the related mortgagor to a prepayment charge. Prepayment charges may be restricted under some state laws as described under “Legal Aspects of Mortgage Loans—Enforceability of Certain Provisions” in the prospectus. Prepayment charges may be restricted under some state laws as described under “Legal Aspects of Mortgage Loans” in the prospectus. All amounts generally representing "hard" prepayment charges received on the mortgage loans with a three-year (or limited cases, 30-month) prepayment charge term will be paid to the holders of the Class XP-2 Certificates, and all other prepayment charges received on the mortgage loans will be paid to the holders of the Class XP-2 Certificates.  Approximately 20.10% of the mortgage loans are assumable.  The remainder of the mortgage loans are subject to customary due-on-sale provisions.
 
Because the interest rate on each mortgage loan adjusts monthly (after any initial fixed period) and the minimum monthly payment adjusts annually, the portion of the monthly payment that will be applied to reduce the principal balance of the mortgage loan may vary.
 
The negative amortization feature of the mortgage loans may affect the yield on the Certificates.  As a result of the negative amortization of the mortgage loans, the outstanding principal balance of a mortgage loan will increase by the amount of Deferred Interest as described in this prospectus supplement under “Description of the Certificates—Distributions on the Certifcates.”  During periods in which the outstanding principal balance of a mortgage loan is increasing due to the addition of Deferred Interest, the increasing principal balance of the mortgage loan may approach or exceed the value of the related mortgaged property, thus increasing both the likelihood of defaults and the risk of loss on any mortgage loan that is required to be liquidated. Furthermore, each mortgage loan provides for the payment of any remaining unamortized principal balance of such mortgage loan (due to the addition of Deferred Interest, if any, to the principal balance of the mortgage loan) in a single payment at the maturity of the mortgage loan. Because the mortgagors may be so required to make a larger single payment upon maturity, it is possible that the default risk associated with the mortgage loans is greater than that associated with fully amortizing mortgage loans.  The rate of Deferred Interest on the mortgage loans will also affect the rate of principal distributions on the certificates because scheduled and unscheduled principal collections on the mortgage loans will be applied to cover Deferred Interest on the mortgage loans.  Under the Swap Agreement, the Swap Counterparty is required to make payments that will provide an additional amount of interest on the Grantor Trust Certificates so that any Net Deferred Interest allocated to the Underlying Certificates will not be allocated to the Grantor Trust Certificates. To the extent the Swap Agreement is terminated and no replacement Swap agreement is entered into, Net Deferred Interest allocated to the Underlying Certificates will be allocated to the Grantor Trust Certificates.
 
Principal Prepayments, liquidations and repurchases of the mortgage loans will result in distributions in respect of principal to the holders of the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) then entitled to receive these principal distributions that otherwise would be distributed over the remaining terms of the mortgage loans.  See “Maturity and Prepayment Considerations” in the prospectus.  Since the rate and timing of payments of principal on the mortgage loans will depend on future events and a variety of factors (as described more fully in this prospectus supplement and in the prospectus under “Yield Considerations” and “Maturity and Prepayment Considerations”), no assurance can be given as to the rate of Principal Prepayments.  The extent to which the yield to maturity of any class of Offered Certificates may vary from the anticipated yield will depend upon the degree to which they are purchased at a discount or premium and the degree to which the timing of payments on the Offered Certificates is sensitive to prepayments on the mortgage loans.  Further, an investor should consider, in the case of any Offered Certificate purchased at a discount, the risk that a slower than anticipated rate of Principal Prepayments on the mortgage loans could result in an actual yield to an investor that is lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments could result in an actual yield to the investor that is lower than the anticipated yield. In general, the earlier a prepayment of principal on the mortgage loans, the greater will be the effect on the investor’s yield to maturity. As a result, the effect on an 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.
 
It is highly unlikely that the mortgage loans will prepay at any constant rate until maturity or that all of the mortgage loans will prepay at the same rate. Moreover, the timing of prepayments on the mortgage loans may significantly affect the actual yield to maturity on the Offered Certificates, even if the average rate of principal payments experienced over time is consistent with an investor’s expectation.
 
Because principal distributions are paid to some classes of Offered Certificates before other classes, holders of classes of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) having a later priority of payment bear a greater risk of losses than holders of classes having earlier priorities for distribution of principal.
 
The rate of payments (including prepayments) on pools of mortgage loans is influenced by a variety of economic, geographic, social and other factors. If prevailing mortgage rates fall significantly below the mortgage rates on the mortgage loans, the rate of prepayment (and refinancing) would be expected to increase. Conversely, if prevailing mortgage rates rise significantly above the mortgage rates on the mortgage loans, the rate of prepayment on the mortgage loans would be expected to decrease. Other factors affecting prepayment of mortgage loans include changes in mortgagors’ housing needs, job transfers, unemployment, mortgagors’ net equity in the mortgaged properties and servicing decisions. In addition, the existence of the applicable periodic rate cap, maximum mortgage rate and minimum mortgage rate may effect the likelihood of prepayments resulting from refinancings. There can be no certainty as to the rate of prepayments on the mortgage loans during any period or over the life of the Certificates. See “Yield Considerations” and“Maturity and Prepayment Considerations” in the prospectus.
 
Excess Spread.  The weighted average life and yield to maturity of each class of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates will also be influenced by the amount of Excess Spread generated by the mortgage loans and applied in reduction of the Current Principal Amounts of the Certificates.  The level of Excess Spread available on any distribution date to be applied in reduction of the Current Principal Amounts of the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates and will be influenced by, among other factors:
 
 
·
the overcollateralization level of the assets in the related mortgage pool at such time, i.e., the extent to which interest on the mortgage loans is accruing on a higher Stated Principal Balance than the aggregate Current Principal Amount of the Certificates;
 
 
·
the delinquency and default experience of the mortgage loans;
 
 
·
the level of One-Month LIBOR and One-Year MTA; and
 
 
·
the provisions of the Agreement that permit principal collections to be distributed to the related Class B-IO Certificates and the Residual Certificates, in each case as provided in the Agreement when required overcollateralization levels have been met.
 
To the extent that greater amounts of Excess Spread are distributed in reduction of the Current Principal Amount of a class of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) or the Underlying Certificates, the weighted average life thereof can be expected to shorten.  No assurance, however, can be given as to the amount of Excess Spread to be distributed at any time or in the aggregate.
 
The yields to maturity of the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates and in particular, the Subordinate Certificates, in the order of payment priority, will be progressively more sensitive to the rate, timing and severity of Realized Losses on the mortgage loans. If an Applied Realized Loss Amount is allocated to a class of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) or the Underlying Certificates, that class will thereafter accrue interest on a reduced Current Principal Amount. Although the Applied Realized Loss Amount so allocated may be recovered on future distribution dates to the extent Excess Cashflow is available for that purpose, there can be no assurance that those amounts will be available or sufficient.
 
In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. In addition, default rates generally are higher for mortgage loans used to refinance an existing mortgage loan. In the event of a mortgagor’s default on a mortgage loan, there can be no assurance that recourse beyond the specific mortgaged property pledged as security for repayment will be available.
 
The Sponsor may, from time to time, implement programs designed to encourage refinancing. These programs may include, without limitation, modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications, reduced origination fees or closing costs or other financial incentives. Targeted solicitations may be based on a variety of factors, including the credit of the borrower or the location of the mortgaged property. In addition, the Sponsor may encourage assumptions of mortgage loans, including defaulted mortgage loans, under which creditworthy borrowers assume the outstanding indebtedness of the mortgage loans which may be removed from the related mortgage pool. As a result of these programs, with respect to the mortgage pool underlying any trust, the rate of Principal Prepayments of the mortgage loans in the mortgage pool may be higher than would otherwise be the case and in some cases, the average credit or collateral quality of the mortgage loans remaining in the mortgage pool may decline.
 
Interest Shortfalls and Realized Losses
 
When a Principal Prepayment in full is made on a mortgage loan, the mortgagor is charged interest only for the period from the Due Date of the preceding monthly payment up to the date of the Principal Prepayment, instead of for a full month. When a partial Principal Prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for the month in which the prepayment is made. In addition, the application of the Relief Act or similar state law to any mortgage loan will adversely affect, for an indeterminate period of time, the ability of the Servicer to collect full amounts of interest on the mortgage loan. See “Legal Aspects of Mortgage Loans—The Servicemembers Civil Relief Act” in the prospectus. Any interest shortfalls resulting from a Principal Prepayment in full or a partial Principal Prepayment are required to be paid by the Servicer, but only to the extent that such amount does not exceed the Servicing Fee on the mortgage loans serviced by it for the related Due Period.  The Servicer is not obligated to fund interest shortfalls resulting from the application of the Relief Act or similar state law. See “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” in this prospectus supplement and “Legal Aspects of Mortgage Loans—The Servicemembers Civil Relief Act” in the prospectus. Accordingly, the effect of (1) any Principal Prepayments on the mortgage loans, to the extent that any resulting interest shortfall due to such Principal Prepayments exceeds any Compensating Interest Payments or (2) any shortfalls resulting from the application of the Relief Act or similar state law, will be to reduce the aggregate amount of interest collected that is available for distribution to holders of the Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates).  Any resulting shortfalls will be allocated among the Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) as provided in this prospectus supplement under “Yield and Prepayment Considerations—Interest Shortfalls and Realized Losses.”
 
The yields to maturity and the aggregate amount of distributions on the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates will be affected by the timing of mortgagor defaults resulting in Realized Losses.  The timing of Realized Losses on the mortgage loans and the allocation of Realized Losses to the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates could significantly affect the yield to an investor in such Certificates.  In addition, Realized Losses on the mortgage loans may affect the market value of the Certificates, even if these losses are not allocated to such Certificates.
 
If the Current Principal Amount of a class of Subordinate Certificates has been reduced to zero, the yield to maturity on the class of Subordinate Certificates then outstanding with the lowest payment priority will be extremely sensitive to losses on the mortgage loans and the timing of those losses because the entire amount of losses that are covered by subordination will be allocated to that class of Subordinate Certificates.  If the Current Principal Amounts of all classes of Subordinate Certificates have been reduced to zero, the yield to maturity on the related classes of Senior Certificates then outstanding will be extremely sensitive to losses on the mortgage loans and the timing of those losses because the entire amount of losses that are covered by subordination will be allocated to those classes of Senior Certificates.
 
As described under “Description of the Certificates—Allocation of Realized Losses; Subordination” in this prospectus supplement, amounts otherwise distributable to holders of the Subordinate Certificates may be made available to protect the holders of the Senior Certificates against interruptions in distributions due to mortgagor delinquencies, to the extent not covered by Monthly Advances and amounts otherwise distributable to holders of the Subordinate Certificates with a lower priority may be made available to protect the holders of Subordinate Certificates with a higher priority against interruptions in distributions.  Delinquencies on the mortgage loans may affect the yield to investors on the Subordinate Certificates, and, even if subsequently cured, will affect the timing of the receipt of distributions by the holders of the Subordinate Certificates.
 
Pass-Through Rates
 
The yields to maturity on the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates will be affected by their Pass-Through Rates. The Pass-Through Rates on the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and the Underlying Certificates will be sensitive to the adjustable mortgage rates on the mortgage loans.  As a result, these pass-through rates will be sensitive to the index on the mortgage loans, any periodic caps, maximum and minimum rates, and the related gross margins.
 
Assumed Final Distribution Date
 
The assumed final distribution date for distributions on the Offered Certificates and the Underlying Certificates is September 2047.  Since the rate of payment (including prepayments) of principal on the mortgage loans can be expected to exceed the scheduled rate of payments and could exceed the scheduled rate by a substantial amount, the disposition of the last remaining mortgage loan may be earlier and could be substantially earlier, than the assumed final distribution date.  Furthermore, the actual final distribution date with respect to each class of Offered Certificates could occur significantly earlier than the assumed final distribution date because Excess Spread to the extent available will be applied as an accelerated payment of principal on the Offered Certificates to the extent described in this prospectus supplement.  In addition, the Depositor or its designee may, at its option, repurchase all the mortgage loans from the Trust and thereby effect the termination of the Trust (and indirectly, the Grantor Trust), and early retirement of the Certificates, on or after any distribution date on which the aggregate unpaid principal balances of the mortgage loans are less than 10% of the sum of (i) the Cut-off Date Stated Principal Balance of the mortgage loans (including Subsequent Mortgage Loans to be added to the Trust) and (ii) the Pre-Funded Amount as of the Closing Date.  See “The Pooling and Servicing Agreement and the Grantor Trust Agreement—Termination” herein and “The Agreements—Termination; Retirement of Securities” in the prospectus.
 
Weighted Average Life
 
The weighted average life refers to the amount of time that will elapse from the date of issuance of a security until each dollar of principal of the security will be repaid to the investor. The weighted average life of a Certificate is determined by (a) multiplying the amount of the reduction, if any, of the Current Principal Amount of such Certificate by the number of years from the date of issuance of such Certificate to the related distribution date, (b) adding the results and (c) dividing the sum by the aggregate amount of the net reductions in the Current Principal Amount of such Certificate referred to in clause (a). The weighted average life of the Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) will be influenced by the rate at which principal on the mortgage loans is paid, which may be in the form of scheduled payments or prepayments (including prepayments of principal by the mortgagor as well as amounts received by virtue of condemnation, insurance or foreclosure with respect to the mortgage loans) and the timing thereof.
 
Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model.  The prepayment model used in this prospectus supplement with respect to the mortgage loans, assumes a constant rate of prepayment each month or CPR, relative to the then outstanding principal balance of a pool of mortgage loans similar to the mortgage loans. To assume a 25% CPR or any other CPR is to assume that the stated percentage of the outstanding principal balance of the related mortgage pool is prepaid over the course of a year. No representation is made that the mortgage loans will prepay at these or any other rates.
 
The Certificates were structured assuming, among other things, a 25% CPR on the Certificates.  The prepayment assumption to be used for pricing purposes for the respective classes may vary as determined at the time of sale. The actual rate of prepayment may vary considerably from the rate used for any prepayment assumption.
 
The tables set forth in Schedule B relating to the next paragraph indicate the percentages of the initial principal amount of the indicated classes of Offered Certificates and Underlying Certificates that would be outstanding after each of the dates shown at various percentages of the CPR and the corresponding weighted average life of the indicated class of Offered Certificates (with respect to the Grantor Trust Certificates, indirectly through the Underlying Certificates) and Underlying Certificates. The table is based on the following modeling assumptions:
 
(1)           the mortgage pool consists of 1,212 mortgage loans with the characteristics set forth in Schedule B to this prospectus supplement;
 
(2)           the mortgage loans prepay at the specified percentages of the CPR;
 
(3)           no defaults or delinquencies occur in the payment by mortgagors of principal and interest on the mortgage loans;
 
(4)           scheduled payments on the mortgage loans are received, in cash, on the first day of each month, commencing in September 2007 and are computed prior to giving effect to prepayments received on the last day of the prior month;
 
(5)           prepayments are allocated as described herein assuming the loss and delinquency tests are satisfied;
 
(6)           there are no interest shortfalls caused by (a) the application of the Relief Act or similar state law or (b) prepayments on the mortgage loans, which in the case of (b) have not been covered by Compensating Interest Payments and prepayments represent prepayments in full of individual mortgage loans and are received on the last day of each month, commencing in August 2007;
 
(7)           Scheduled Monthly Payments of principal and interest on the mortgage loans are calculated on their respective principal balances (prior to giving effect to prepayments received thereon during the preceding calendar month), mortgage rate and remaining terms to stated maturity such that the mortgage loans will fully amortize by their stated maturities;
 
(8)           the levels of One-Month LIBOR and One-Year MTA remain constant at 5.565% and 4.985%, respectively;
 
(9)           the mortgage rate on each mortgage loan will be adjusted on each interest adjustment date (as necessary) to a rate equal to the applicable Index (as described in (8) above), plus the applicable gross margin, subject to maximum lifetime mortgage rates, minimum lifetime mortgage rates and periodic caps (as applicable);
 
(10)         Scheduled Monthly Payments of principal and interest on the mortgage loans will be adjusted in the payment adjustment date set forth in the following table, subject to periodic payment caps of 7.50%, negative amortization limits of 110%, 115%, 120% or 125%, as applicable, rate change frequencies of 1 month (after expiration of the initial interest periods) and payment change frequencies of twelve months;
 
(11)         the initial principal amounts and notional amounts of the Certificates are as set forth on pages S-2 in this prospectus supplement and under “Summary of Prospectus Supplement -- Description of the Certificates”;
 
(12)         distributions in respect of the Offered Certificates are received in cash on the 25th day of each month, commencing in September 2007;
 
(13)         the Offered Certificates are purchased on the Closing Date;
 
(14)         neither the Depositor nor its designee exercises the option to repurchase the mortgage loans described under the caption “The Pooling and Servicing Agreement and the Grantor Trust Agreement—Termination”;
 
(15)         no deposits are made to the Adjustable Rate Supplemental Fund; and
 
(16)         scheduled payments on Subsequent Mortgage Loans are received beginning in September 2007.
 
For additional information regarding the mortgage loan assumptions see Schedule B to prospectus supplement.
 
There will be discrepancies between the characteristics of the actual mortgage loans and the characteristics assumed in preparing the tables below. Any discrepancy may have an effect upon the percentages of the initial principal amounts outstanding (and the weighted average lives) of the classes of Offered Certificates set forth in the tables. In addition, to the extent that the actual mortgage loans included in the mortgage pool have characteristics that differ from those assumed in preparing the tables below, the classes of Offered Certificates set forth below may mature earlier or later than indicated by the tables below. Further, Subsequent Mortgage Loans will be conveyed to the Trust during the Pre-Funding Period, which will increase the aggregate principal balance of the Mortgage Loans and otherwise affect the characteristics of the Mortgage Loans that may be reflected in the structuring assumptions.  The Subsequent Mortgage Loans will have the characteristics with respect thereto set forth in “Description of the Mortgage Loans—Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account.”   Based on the foregoing assumptions, the tables below indicate the weighted average life of each class of Offered Certificates and sets forth the percentage of the initial principal balances of each such class that would be outstanding after each of the distribution dates shown, at specified percentages of the CPR. Neither the prepayment model used in this prospectus supplement nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the mortgage loans included in the Trust. Variations in the prepayment experience and the balance of the mortgage loans that prepay may increase or decrease the percentages of the initial principal balances (and weighted average lives) shown in the following tables. Variations may occur even if the average prepayment experience of all of the mortgage loans equals any of the specified percentages of the CPR. The timing of changes in the rate of prepayment may significantly affect the actual yield to maturity to investors, even if the average rate of Principal Prepayments is consistent with the expectations of investors.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
 

 
 
Class A-1 Certificates
 
Class A-2 Certificates
 
5%
15%
25%
40%
55%
5%
15%
25%
40%
55%
Distribution Date
                   
Initial Percentage
100
100
100
100
100
100
100
100
100
100
August 2008                       
99
63
26
0
0
100
100
100
53
0
August 2009                       
97
29
0
0
0
100
100
47
0
0
August 2010                       
89
0
0
0
0
100
90
0
0
0
August 2011                       
72
0
0
0
0
100
30
0
0
0
August 2012                       
54
0
0
0
0
100
0
0
0
0
August 2013                       
37
0
0
0
0
100
0
0
0
0
August 2014                       
20
0
0
0
0
100
0
0
0
0
August 2015                       
4
0
0
0
0
100
0
0
0
0
August 2016                       
0
0
0
0
0
82
0
0
0
0
August 2017                       
0
0
0
0
0
57
0
0
0
0
August 2018                       
0
0
0
0
0
34
0
0
0
0
August 2019                       
0
0
0
0
0
12
0
0
0
0
August 2020                       
0
0
0
0
0
0
0
0
0
0
August 2021                       
0
0
0
0
0
0
0
0
0
0
August 2022                       
0
0
0
0
0
0
0
0
0
0
August 2023                       
0
0
0
0
0
0
0
0
0
0
August 2024                       
0
0
0
0
0
0
0
0
0
0
August 2025                       
0
0
0
0
0
0
0
0
0
0
August 2026                       
0
0
0
0
0
0
0
0
0
0
August 2027                       
0
0
0
0
0
0
0
0
0
0
August 2028                       
0
0
0
0
0
0
0
0
0
0
August 2029                       
0
0
0
0
0
0
0
0
0
0
August 2030                       
0
0
0
0
0
0
0
0
0
0
August 2031