PROSPECTUS SUPPLEMENT
to Prospectus dated April 20, 2006

$395,239,100

(Approximate)

Sponsor, Seller and Master Servicer

First Horizon Asset Securities Inc.

Depositor

FIRST HORIZON ALTERNATIVE MORTGAGE SECURITIES TRUST 2006-AA3

Issuing Entity

MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-AA3

      The following six classes of mortgage pass-through certificates are being offered by this prospectus supplement and the accompanying prospectus:

Class	Initial Class Certificate Balance		Initial Pass-Through Rate(1)	Class	Initial Class Certificate Balance		Initial Pass-Through Rate(1)
Class A-1	$	356,489,000	6.4378%	Class B-1	$	11,001,000	6.4378%
Class A-2	$	21,148,000	6.4378%	Class B-2	$	3,801,000	6.4378%
Class A-R	$	100	6.4378%	Class B-3	$	2,800,000	6.4378%

(1) The pass-through rates for each class of certificates listed above for each distribution date will be variable and will be calculated as described under “Description of the Certificates—Distributions on the Certificates—Interest” in this prospectus supplement.

      The offered certificates will represent interests in the assets deposited with the trust only and will not represent interests in or obligations of the sponsor, the depositor, the underwriter, the trustee or any of their affiliates.

Investing in these
certificates involves risks.
You should carefully
consider the risk factors
beginning on page S-12 of
this prospectus supplement
and on page 6 of the
accompanying prospectus. The assets of the trust will include a pool of primarily 30-year adjustable rate, first lien, fully amortizing, one-to-four family residential mortgage loans. The remaining terms to maturity of the mortgage loans will range from 346 to 360 months.

Principal and interest will be payable monthly on the 25th day of each month, or if such day is not a business day, on the following business day, commencing on June 26, 2006.

      Credit enhancement for the certificates will be provided in the form of subordination and shifting interest.

      The SEC and state securities regulators have not approved or disapproved of these securities or determined if this prospectus supplement or the prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

      Credit Suisse Securities (USA) LLC will purchase the offered certificates from the depositor. Credit Suisse Securities (USA) LLC, together with FTN Financial Securities Corp., will sell the offered certificates to investors at varying prices to be determined at the time of sale. The proceeds to the depositor from the sale of the certificates will be approximately 101.167% of the total principal balance of those certificates, plus accrued interest, if any, before deducting expenses. The underwriter's commission will be the difference between the price it pays for the certificates and the amount it receives from their sale to the public. The certificates will be available for delivery to investors on or about May 30, 2006.

Credit Suisse
FTN Financial

Prospectus Supplement dated May 25, 2006.

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

          We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates.

          You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information.

          We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and the accompanying prospectus is accurate as of any date other than the dates stated on their respective covers.

          We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located.

          After the initial distribution of the certificates offered hereby, this prospectus supplement and the accompanying prospectus may be used by FTN Financial Securities Corp., an affiliate of the depositor, the seller and the master servicer, in connection with market making transactions in such certificates. FTN Financial Securities Corp. may act as principal or agent in these transactions. These transactions will be at market prices at the time of sale and not at the prices of the initial offering.

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TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

SUMMARY	S-6
Relevant Parties	S-6
Cut-off Date	S-6
Closing Date	S-6
Distribution Dates	S-6
Determination Dates	S-6
The Transaction	S-6
Offered Certificates	S-7
The Mortgage Pool	S-7
The Mortgage Loans	S-7
Substitution of Mortgage Loans	S-8
Distributions on the Certificates	S-8
Optional Termination	S-9
Fees and Expenses	S-9
Advances	S-9
Credit Enhancement	S-9
Tax Status	S-10
ERISA Considerations	S-10
Legal Investment	S-10
Ratings	S-10
RISK FACTORS	S-12
Certificates may not be appropriate investments for some investors	S-12
The mortgage loans have been underwritten under less restrictive guidelines which may result in losses on the mortgage loans	S-12
Changes to the weighted average net mortgage rate on the mortgage loans may reduce the yield with respect to the certificates	S-13
Prepayments are unpredictable and will affect the yield on your certificates	S-13
The effect of prepayments on certificates purchased at a premium or discount may be severe	S-14
Mortgage loans with interest-only payments may result in longer weighted average lives of the related certificates	S-15
We cannot guarantee you regular payments on your certificates	S-15
Subordination may not be sufficient to protect senior certificates from losses	S-15
Subordination of Senior Mezzanine Certificates increases risk of loss	S-16
Geographic concentration of mortgage loans may increase risk of losses on your certificates	S-17
Residual Certificates have adverse tax consequences	S-17
The effects of terrorist attacks and military action are not determinable	S-18
FORWARD LOOKING STATEMENTS	S-18
TRANSACTION OVERVIEW	S-19
The Parties	S-19
The Transaction	S-26
THE MORTGAGE POOL	S-26
General	S-26
Underwriting Criteria for the Mortgage Loans	S-28
Static Pool Information	S-30
Additional Information	S-31
THE TRANSACTION AGREEMENTS	S-31
The Mortgage Loan Purchase Agreement	S-31
The Servicing Rights Transfer and Subservicing Agreement	S-34
The Pooling and Servicing Agreement	S-35
The Custodial Agreement	S-43

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DESCRIPTION OF THE CERTIFICATES	S-43
General	S-43
Separate REMIC Structure	S-44
Book-Entry Certificates	S-44
Payments on Mortgage Loans; Accounts	S-44
Distributions on the Certificates	S-45
Losses Allocable to the Certificates	S-47
Voting Rights	S-48
Additional Rights of the Residual Certificateholders	S-49
Subordination	S-49
Structuring Assumptions	S-50
Optional Purchase of Defaulted Loans	S-52
Optional Termination	S-52
Restrictions on Transfer of the Residual Certificates	S-53
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS	S-53
General	S-53
General Prepayment Considerations and Risks	S-53
Prepayment Considerations and Risks for the Class B Certificates	S-55
Yield Sensitivity of the Class A-2 Certificates	S-56
Additional Information	S-56
Weighted Average Lives of the Offered Certificates	S-56
Decrement Tables	S-57
Last Scheduled Distribution Date	S-59
USE OF PROCEEDS	S-59
MATERIAL FEDERAL INCOME TAX CONSEQUENCES	S-59
ERISA CONSIDERATIONS	S-61
UNDERWRITING	S-62
LEGAL MATTERS	S-63
RATINGS	S-63
GLOSSARY OF TERMS	S-64
ANNEX I	I-1

S-4

Expected Ratings⁽⁴⁾

Class	Initial Principal Balance(1)		Initial Approximate Pass-Through Rate(2)	Principal Types(3)	Interest Types(3)	Fitch	Moody’s	Original Form(5)	Minimum Denominations			Incremental Denomination(6)			Final Scheduled Distribution Date(7)
Offered Certificates
Class A-1	$	356,489,000	6.4378%	Super Senior	Variable Rate	AAA	Aaa	BE		$	25,000		$	1,000	June 2036
Class A-2	$	21,148,000	6.4378%	Senior Mezzanine	Variable Rate	AAA	Aa1	BE		$	25,000		$	1,000	June 2036
Class A-R	$	100	6.4378%	Senior/ Residual	Variable Rate	AAA	Aaa	D		$	100			N/A	June 2036
Class B-1	$	11,001,000	6.4378%	Subordinated/ Sequential Pay	Variable Rate	AA	N/A	BE		$	100,000		$	1,000	June 2036
Class B-2	$	3,801,000	6.4378%	Subordinated/ Sequential Pay	Variable Rate	A	N/A	BE		$	100,000		$	1,000	June 2036
Class B-3	$	2,800,000	6.4378%	Subordinated/ Sequential Pay	Variable Rate	BBB	N/A	BE		$	100,000		$	1,000	June 2036
Non-Offered Certificates
Class B-4	$	2,000,000	6.4378%	Subordinated/ Sequential Pay	Variable Rate	BB	N/A	D		$	100,000		$	1,000	June 2036
Class B-5	$	1,600,000	6.4378%	Subordinated/ Sequential Pay	Variable Rate	B	N/A	D		$	100,000		$	1,000	June 2036
Class B-6	$	1,200,863	6.4378%	Subordinated/ Sequential Pay	Variable Rate	N/A	N/A	D		$	100,000		$	1,000	June 2036

(1)	Approximate. The initial principal balances are subject to adjustment as described in this prospectus supplement.
(2)	The pass-through rates for each class of certificates listed above for each distribution date will be variable and will be calculated as described under “Description of the Certificates – Distributions on the Certificates – Interest” in this prospectus supplement.
(3)	See “Description of the Securities – Categories of Classes of Securities” in the prospectus for a description of the principal and interest categories listed.
(4)	A description of the ratings of the offered certificates is set forth under the heading “Ratings” in the Summary and under “Ratings” in the main text of this prospectus supplement.
(5)	See “Description of the Securities – Book-entry Registration of the Securities” in the prospectus for a description of the forms of certificates. Book-entry form is designated as “BE” and definitive form is designated as “D” in the table above.
(6)	If necessary, in order to aggregate the initial principal balance of a class, one certificate of the class will be issued in an incremental denomination of less than that shown.
(7)	The final scheduled distribution date represents the distribution date in the month following the latest maturity date of any mortgage loan in the mortgage pool. The actual final payment on your certificates could occur earlier or later than the final scheduled distribution date.

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SUMMARY

This summary highlights selected information from this document and does not contain the information that you need to consider in making your investment decision. To understand all the terms of an offering of the certificates, you should read carefully this entire document and the accompanying prospectus.

For the definitions of certain capitalized terms used in this prospectus supplement, see “Glossary of Terms” on page S-64.

Relevant Parties

The Issuing Entity

First Horizon Alternative Mortgage Securities Trust 2006-AA3, a New York common law trust.

Depositor

First Horizon Asset Securities Inc., a Texas corporation.

Sponsor, Seller and Master Servicer

First Horizon Home Loan Corporation, a Kansas corporation and an indirect wholly owned subsidiary of First Horizon National Corporation, a Tennessee corporation.

Trustee

The Bank of New York, a New York banking corporation.

Custodian

First Tennessee Bank National Association, a national banking association.

Affiliations

First Tennessee Bank National Association, which is the custodian, is the direct parent of First Horizon Home Loan Corporation. First Horizon Home Loan Corporation, which is the sponsor, seller and master servicer, is the direct parent of the depositor. There are no relationships, agreements or arrangements outside of this transaction among the affiliated parties that are material to an understanding of the offered certificates.

Cut-off Date

May 1, 2006, the date as of which the aggregate principal balance of the mortgage loans is determined for purposes of this prospectus supplement, unless a different date is specified.

Closing Date

On or about May 30, 2006.

Distribution Dates

The 25^th day of each month, or the following business day if the 25^th day is not a business day, commencing in June 2006. The last scheduled distribution date for each class of subordinated certificates and each class of senior certificates is the distribution date in June 2036, which is the distribution date in the month following the month of the latest scheduled maturity date for any of the mortgage loans. See “Yield, Prepayment and Maturity Considerations – Last Scheduled Distribution Date” in this prospectus supplement.

Determination Dates

With respect to each distribution date, the earlier of

• the third business day after the 15th day of each month, and

• the second business day prior to the related distribution date.

The Transaction

The sponsor originated or purchased and currently services the mortgage loans. On the closing date, the sponsor will sell the mortgage loans to the depositor, who will in turn deposit them into a common law trust, which is the issuing entity. The trust will be formed by a pooling and servicing agreement to be dated as of the cut-off date, among the depositor, the master servicer and the trustee. The master servicer will master service the mortgage loans and calculate distributions and other information regarding the certificates in accordance with the pooling and servicing agreement. The trustee will have limited administrative duties under the pooling and servicing agreement.

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Offered Certificates

On the closing date, the issuing entity will issue nine classes of certificates, six of which are being offered by this prospectus supplement and the accompanying prospectus.

A summary chart of the initial principal balances, initial pass-through rates, principal types, interest types, ratings, original form, denominations and final scheduled distribution dates of the offered and non-offered certificates is set forth in the table beginning on page S-5.

The trust will also issue Class B-4, Class B-5 and Class B-6 Certificates, which are not offered by this prospectus supplement. Information provided with respect to the Class B-4, Class B-5 and Class B-6 Certificates is included solely to aid your understanding of the offered certificates.

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

See “The Mortgage Pool,” “Description of the Certificates—General” and “—Book-Entry Certificates” in this prospectus supplement and “Description of the Securities—General,” “Categories of Classes of Securities” and “—Book-entry Registration of Securities” in the prospectus.

The Mortgage Pool

The assets of the trust will consist of a pool of 1,538 mortgage loans with an aggregate stated principal balance as of the cut-off date of approximately $400,039,963. The mortgage rate for each mortgage loan will be fixed for approximately 60 months after the related origination date and will then become subject to adjustment on a semi-annual basis based on a specified index. Substantially all the mortgage loans were underwritten in accordance with the seller’s Super Expanded Underwriting Guidelines.

For a detailed description of the mortgage loans in, see “The Mortgage Pool” and Annex I to this prospectus supplement.

The depositor may remove mortgage loans from the mortgage pool, or may make substitutions for certain of the mortgage loans, prior to the closing date.

The Mortgage Loans

The sponsor originated or purchased all of the mortgage loans. The mortgage loans which are expected to be sold to the trust on the closing date have the following characteristics as of the cut-off date:

• Number of mortgage loans: 1,538

• Total current principal balance⁽¹⁾: $400,039,963

• Range of unpaid principal balances: from $42,400.00 to $1,999,999.56

• Original term to maturity: 360 months

• Range of remaining terms to stated maturity: between 346 and 360 months

• Weighted average original term to maturity maturity: 360 months

• Weighted average remaining term to stated maturity: 359 months

• Weighted average current mortgage rate: 6.813%

• Range of current mortgage rates: between 5.500% and 8.500%

• Weighted average mortgage loan age⁽²⁾: one month

• Range of original loan-to-value ratios: from 11.67% to 95.00%

• Weighted average original loan-to-value ratio: 72.68%

• Weighted average credit score: 719

• Largest geographic concentration: approximately 17.37% of the mortgage loans, by principal balance as of the cut-off date, are secured by property located in California

⁽¹⁾ Approximate, after deducting payments of principal due on or before the cut-off date, and subject to the variance described in this prospectus supplement.

⁽²⁾ Based on the number of months from and including the first monthly payment to and including the cut-off date.

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See “The Mortgage Pool — General” in this prospectus supplement.

Substitution of Mortgage Loans

Upon delivery of the mortgage loan files by the depositor to the custodian, the custodian will review each mortgage file, and if any document in a mortgage file is found to be missing or materially defective and the seller does not cure the defect, the seller will be obligated to repurchase the affected mortgage loan from the trust fund, or, at the seller’s option, remove the affected mortgage loan from the mortgage pool and substitute in its place another mortgage loan. See “The Mortgage Pool—Assignment” in this prospectus supplement.

After the issuance of the certificates, the depositor may remove certain mortgage loans from the mortgage pool, or will be required to do so for breaches of representations or warranties or as a result of defective documentation, through repurchase or, under certain circumstances and generally only during the two-year period following the closing date, may make substitutions for certain mortgage loans in the mortgage pool.

Distributions on the Certificates

On each distribution date and after the payment of fees, expenses and indemnities, the trustee will first distribute to the senior certificates the amounts of interest and principal distributable to them from available funds from the mortgage pool. The trustee will then pay interest and principal to the subordinated certificates in numerical order, beginning with the Class B-1 Certificates, from the remaining available funds from the mortgage pool.

Interest Payments

• The actual amount of interest you receive on your certificates on each distribution date will depend on:

– the amount of interest accrued on your certificates;

– the total amount of funds in the mortgage pool available for distribution; and

– the amount of any accrued interest not paid on your certificates on earlier distribution dates.

• If you are the holder of a subordinated certificate, you will receive interest payments only after the trustee has paid interest and principal to:

– all the senior certificates; and

– each class of subordinated certificates that ranks higher than your certificates.

• The trustee will calculate interest for each class of certificates on the basis of a 360-day year consisting of twelve 30-day months.

• The interest accrual period for any distribution date will be the calendar month before that distribution date.

Principal Payments

• After interest payments have been made on all senior certificates, each class of those senior certificates will also be entitled to receive a payment of principal. If you are the holder of subordinated certificates, you will receive principal payments after (1) interest and principal have been paid on all the senior certificates and the subordinated certificates ranking senior to yours (if any) and (2) interest has been paid on your certificates. You should refer to “Description of the Certificates —Distributions on the Certificates” in this prospectus supplement for a description of the amount of principal payable to you and the priority in which it will be paid.

• The amount and timing of principal you receive on your certificates will depend on:

– the various priorities and formulas described in this prospectus supplement that determine the allocation of principal payments to your certificates; and

– the amounts actually available in the mortgage pool for distribution as principal.

• Because of the principal allocation formulas described in this prospectus supplement, the senior certificates will receive principal payments at a faster rate than the subordinated certificates for at least the first

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eleven years after the issuance of the certificates, except as otherwise described in this prospectus supplement.

You should refer to “Description of the Certificates Distributions on the Certificates —Allocation of Available Funds” in this prospectus supplement.

Priority of Distributions

In general, on any distribution date, Available Funds will be distributed in the following order:

• to the classes of senior certificates, the Accrued Certificate Interest on each such class for such distribution date;

• to the classes of senior certificates, any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates, to the extent of remaining Available Funds;

• to the senior certificates entitled to receive distributions of principal, in the order and amounts set forth in “Description of the Certificates—Distributions on the Certificates —Allocation of Available Funds”;

• to each class of subordinated certificates, the interest on and principal of such class, in the order of their numerical designations, beginning with the Class B-1 Certificates; and

• to the Class A-R Certificates.

You should refer to the priorities of distribution under “Description of the Certificates Distributions on the Certificates —Allocation of Available Funds” in this prospectus supplement.

Optional Termination

The master servicer may purchase all the remaining assets of the trust after the aggregate stated principal balance of the mortgage loans owned by the trust declines below 10% of the aggregate stated principal balance of the mortgage loans as of the cut-off date. Except as described under “Description of the Certificates — Optional Termination” in this prospectus supplement, if the trust assets are purchased, certificateholders will be paid accrued interest and principal equal to the outstanding principal amount of the certificates.

See “Description of the Certificates — Optional Termination” in this prospectus supplement.

Fees and Expenses

Before payments are made on the certificates on each distribution date, the master servicer will be entitled to retain a monthly fee calculated as 0.375% per annum on the principal balance of each mortgage loan. The master servicer will pay the monthly fees of the trustee out of its master servicing fee. Expenses and indemnities of the master servicer and the trustee will be reimbursed before payments are made on the certificates. See “The Transaction Agreements — The Pooling and Servicing Agreement — Fees and Expenses” and “— Adjustment to Master Servicing Fee in Connection with Principal Prepayments” in this prospectus supplement.

Advances

The master servicer will make cash advances with respect to delinquent payments of principal and interest on the mortgage loans to the extent the master servicer reasonably believes that the cash advances can be repaid from future payments on the mortgage loans. 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 Transaction Agreements — The Pooling and Servicing Agreement — Advances” in this prospectus supplement.

Credit Enhancement

Subordination

If you are the holder of a senior certificate, your certificate will benefit from the credit enhancement provided by the subordination of the subordinated certificates.

This subordination will benefit the senior certificates in two ways:

• The senior certificates will have a preferential right over the subordinated certificates to receive funds available from the mortgage pool for interest and principal distributions.

• The subordinated certificates will absorb losses on the mortgage loans up to their

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class certificate balances or, with respect to certain types of losses, up to the level described in this prospectus supplement.

If you are the holder of a senior certificate, you should keep in mind, however, that the subordination of the subordinated certificates offers only limited protection against the loss of your investment. If you are the holder of a subordinated certificate, your certificate will benefit from the credit enhancement provided by the subordination of any lower-ranking classes of subordinated certificates. This subordination will, however, offer only limited protection against the loss of your investment.

If you are the holder of Class A-1 Certificates, your certificates will also benefit from the credit enhancement provided by the Class A-2 Certificates. On any distribution date on or after the date on which the class certificate balance of each class of subordinated certificates has been reduced to zero, the principal portion of any realized loss (other than excess losses) allocable to the Class A-1 will instead be allocated to the Class A-2 Certificates in the manner described in this prospectus supplement, until the class certificate balance of the Class A-2 Certificates has been reduced to zero.

See “Description of the Certificates — Subordination” in this prospectus supplement

Shifting of Interests

In order to increase the period during which the subordinated certificates remain available as credit enhancement to the senior certificates, the senior certificates in the aggregate will receive 100% of principal prepayments and certain unscheduled recoveries with respect to the mortgage loans until the seventh anniversary of the first distribution date. During the four years following that anniversary and assuming certain loss and delinquency tests are met, the senior certificates in the aggregate will receive a disproportionately large, but decreasing, share of principal prepayments and such other unscheduled recoveries. This will result in an accelerated amortization of principal to the senior certificates and, in the absence of realized losses on the mortgage loans, an increase in the percentage interest in the principal balance of the mortgage loans evidenced by the subordinated certificates, thereby increasing the likelihood that holders of the senior certificates will be paid the full amount of principal to which they are entitled. You should refer to the definition of “Senior Prepayment Percentage” in the Glossary in this prospectus supplement for a description of the loss and delinquency tests referenced above.

Tax Status

For federal income tax purposes, the trust will consist of one or more real estate mortgage investment conduits, one or more underlying REMICs (if any) and the master REMIC. The assets of the lowest underlying REMIC in this tiered structure (or the master REMIC if there are no underlying REMICs) will consist of the mortgage loans and any other assets designated in the pooling and servicing agreement. The master REMIC will issue several classes of certificates, which, other than the Class A-R Certificates, will represent the regular interests in the master REMIC. The Class A-R Certificates will represent ownership of both the residual interest in the master REMIC and the residual interests in any underlying REMICs.

See “Material Federal Income Tax Consequences” in this prospectus supplement and in the prospectus.

ERISA Considerations

A pension or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974 or Section 4975 of the Internal Revenue Code of 1986 may purchase the offered certificates, other than the Class A-R Certificates, so long as the conditions described under “ERISA Considerations” are met.

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

Legal Investment

The senior certificates and the Class B-1 Certificates will be mortgage related securities for purposes of the Secondary Mortgage Market Enhancement Act of 1984 as long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization. The Class B-2 and Class B-3 Certificates will not be mortgage related securities for purposes of that act.

See “Legal Investment” in the prospectus.

Ratings

The issuance of the offered certificates is conditioned on the certificates receiving the ratings from Fitch and Moody’s indicated under the heading “Expected

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Ratings” in the chart shown on page S-5 of this prospectus supplement. The ratings on the offered certificates address the likelihood of the receipt by holders of offered certificates of all distributions on the underlying mortgage loans to which they are entitled. They do not address the likely actual rate of prepayments. Such rate of prepayments, if different than you originally anticipated, could adversely affect your yield. A rating is not a recommendation to buy, sell or hold securities. These ratings may be lowered or withdrawn at any time by either of the rating agencies. You should refer to “Ratings” in this prospectus supplement to learn more about the significance and limitations of ratings.

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RISK FACTORS

          The following information, which you should carefully consider, identifies known material sources of risk associated with an investment in the certificates. You should also carefully consider the information set forth under “Risk Factors” on page 6 of the prospectus.

Certificates may not be appropriate
investments for some investors	The certificates may not be an appropriate investment for you if you do not have sufficient resources or expertise to evaluate the particular characteristics of the applicable class of certificates. This may be the case because, among other things:
	•	if you purchase your certificates at a price other than par, your yield to maturity will be sensitive to the uncertain rate and timing of principal prepayments on the mortgage loans;
	•	the certificates may be inappropriate investments for you if you require a distribution of a particular amount of principal on a specific date or an otherwise predictable stream of distributions because the rate of principal distributions on, and the weighted average lives of, the certificates will be sensitive to the uncertain rate and timing of principal payments on the mortgage loans and the priority of principal distributions among the classes of certificates;
	•	you may not be able to reinvest the principal amounts distributed on your certificates, which in general are expected to be greater during periods of relatively low interest rates, at a rate that is as high as the applicable pass-through rate or the expected yield of your certificates;
	•	unless a secondary market for the certificates develops, the certificates may be illiquid investments; and
	•	you must report interest as well as original issue discount, if any, on your certificates using the accrual method of accounting, even if you are otherwise using the cash method of accounting.
	You should also carefully consider the further risks discussed below and under the heading “Yield, Prepayment and Maturity Considerations” in this prospectus supplement and under the heading “Risk Factors” in the prospectus.
The mortgage loans have been
underwritten under less restrictive
guidelines which may result in losses
on the mortgage loans	Substantially all the mortgage loans were underwritten pursuant to the seller’s “Super Expanded Underwriting Guidelines,” which guidelines generally allow for FICO scores, loan-to-value ratios and debt-to-income ratios that are less restrictive than those in the seller’s standard full/alternative documentation loan programs. Accordingly, substantially all the mortgage loans may have higher loan-to-value ratios, higher loan amounts and higher debt-to-income ratios and different documentation requirements than mortgage loans underwritten in accordance with the seller’s standard full/alternative documentation loan programs. In addition, the borrowers under such mortgage loans may have lower FICO scores than borrowers under mortgage loans that were underwritten in accordance with the seller’s standard full/alternative documentation loan programs. Many of the

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	mortgage loans underwritten in accordance with the seller’s Super Expanded Underwriting Guidelines are not eligible for sale to Fannie Mae or Freddie Mac for reasons other than their principal balance. Because the mortgage loans were underwritten under guidelines that are less restrictive than the seller’s standard underwriting guidelines, the mortgage loans are likely to experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten in accordance with the seller’s standard underwriting guidelines. See “The Mortgage Pool – General” in this prospectus supplement and “Loan Program — Underwriting Standards — General Standards for First- Lien Mortgage Loans” and “— Guide Standards” in the prospectus.
Changes to the weighted average net
mortgage rate on the mortgage loans
may reduce the yield with respect to
the certificates	On each distribution date the pass-through rates on the certificates will be equal to the weighted average of the net mortgage rates of the mortgage loans in the mortgage pool. Therefore, to the extent that the weighted average net mortgage rate of the mortgage pool decreases, investors in the related certificates may experience a lower yield.
	The mortgage rate of each mortgage loan will be fixed for an initial period of approximately five years from the date of origination of that mortgage loan. Thereafter, each mortgage loan provides for adjustments to the mortgage rate on a semi-annual basis. On each adjustment date, the mortgage rate of each mortgage loan will adjust to equal the sum of an index and a gross margin. Mortgage rate adjustments will be subject to the limitations stated in the mortgage note with respect to increases and decreases for any adjustment (i.e., a “periodic cap”). In addition, the mortgage rate will be subject to an initial cap, an overall maximum lifetime interest rate and a minimum interest rate.
	The weighted average net mortgage rate of the mortgage loans in the mortgage pool may decrease, and may decrease significantly, after the mortgage rates of the mortgage loans begin to adjust as a result of, among other facts, the dates of adjustment, the gross margins and changes in the index. If, as a result of such interest rate adjustments, the weighted average net mortgage rate of the mortgage loans in the mortgage pool is reduced, investors in the certificates will experience a lower yield. In addition, if, despite increases in the index, the mortgage rate of any mortgage loan in the mortgage pool cannot increase due to a maximum mortgage interest limitation or a periodic cap, the yield on the certificates could be adversely affected. Finally, because the pass-through rate of each certificate will be based on the weighted average net mortgage rate of all the mortgage loans, disproportionate principal payments on the mortgage loans having net mortgage rates higher or lower than the then-current pass-through rate of such certificate will affect the pass-through rate for such certificate for future periods and the yield on such certificate.
Prepayments are unpredictable and
will affect the yield on your
certificates	Borrowers may prepay their mortgage loans in whole or in part at any time. We cannot predict the rate at which borrowers will repay their mortgage loans. A prepayment of a mortgage loan, however, will usually result in an accelerated payment on the certificates and will affect the yield to maturity on the certificates. In addition, you will be subject to any reinvestment risks

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	resulting from faster or slower prepayments of mortgage loans.
	The rate of principal payments on the mortgage loans will be affected by, among other things:
	•	the amortization schedules of the mortgage loans;
	•	the rate of principal prepayments, including partial prepayments and those resulting from refinancing, by mortgagors;
	•	liquidations of defaulted mortgage loans;
	•	repurchases of mortgage loans by the seller as a result of defective documentation or breaches of representations and warranties;
	•	optional purchase by the master servicer of defaulted mortgage loans; and
	•	the optional purchase by the master servicer of all the mortgage loans in connection with the termination of the trust.
	The rate of payments, including prepayments, on the mortgage loans may also be influenced by a variety of economic, geographic, social and other factors, including the following:
	•	If prevailing rates for similar mortgage loans fall below the mortgage rates of the mortgage loans owned by the trust, we would expect the rate of prepayment to increase. Increased prepayments could result in a faster return of principal to you at a time when you may not be able to reinvest the principal at an interest rate as high as the pass-through rate or expected yield on your certificates.
	•	If interest rates on similar mortgage loans rise above the mortgage rates of the mortgage loans owned by the trust, we would expect the rate of prepayment to decrease. Reduced prepayments could result in a slower return of principal to you at a time when you may be able to reinvest the principal at a higher rate of interest than the pass-through rate or expected yield on your certificates.
	•	Refinancing programs, which may involve soliciting all or some of the mortgagors to refinance their mortgage loans, may increase the rate of prepayments on the mortgage loans. The master servicer or its affiliates may offer these refinancing programs from time to time, including streamlined documentation programs as well as programs under which a mortgage loan is modified to reduce the interest rate.
	See “Yield, Prepayment and Maturity Considerations” and “Description of the Certificates — Optional Termination” in this prospectus supplement and “The Agreements — Assignment of the Trust Fund Assets,” and “— Termination; Optional Termination” in the prospectus.
The effect of prepayments on
certificates purchased at a premium
or discount may be severe	The effect of prepayments on certificates purchased at a premium or discount

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may be severe. The rate of payments, including prepayments, on the mortgage loans can adversely affect the yield you receive on your certificates.
For example:
•	If you purchase your certificates at a discount and principal is repaid slower than you anticipate, then your yield may be lower than you anticipate.
•	If you purchase your certificates at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate.

	See “Yield, Prepayment and Maturity Considerations” in this prospectus supplement.
Mortgage loans with interest-only
payments may result in longer
weighted average lives of the related
certificates	Approximately 86.05% of the mortgage loans provide for payment of interest at the related mortgage interest rate, but no payment of principal, for a period of ten years following the origination of the mortgage loan. Following that ten-year period, the monthly payment with respect to each of the mortgage loans will be increased to an amount sufficient to amortize the principal balance of the mortgage loan over the remaining term and to pay interest at the mortgage rate. A borrower may view the absence of any obligation to make a payment of principal during the first ten years of the term of a mortgage loan as a disincentive to prepayment.
	The presence of those mortgage loans will, absent other considerations, result in longer weighted average lives of the related certificates than would have been the case had those mortgage loans not been included in the trust fund. If you purchase your certificates at a discount, you should consider that the extension of weighted average lives could result in a lower yield than would be the case if these mortgage loans provided for payment of principal and interest on every payment date.
	If a recalculated monthly payment as described above is substantially higher than a borrower’s previous interest-only monthly payment, that mortgage loan may be subject to an increased risk of delinquency and loss.
We cannot guarantee you regular
payments on your certificates	The amounts you receive on your certificates will depend on the amount of the payments borrowers make on the mortgage loans. Because we cannot predict the rate at which borrowers will repay their loans, you may receive distributions on your certificates in amounts that are larger or smaller than you expect. In addition, the life of your certificates may be longer or shorter than anticipated. Because of this, we cannot guarantee that you will receive distributions at any specific future date or in any specific amount.
Subordination may not be sufficient to
protect senior certificates from losses	The certificates are not insured by any financial guaranty insurance policy. Credit enhancement in the form of subordination will be provided for the certificates, first, by the right of the holders of certificates to receive payments of principal before the classes subordinate to them and, second, by the allocation of realized losses to subordinated classes in the inverse order of

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	their subordination. The first form of subordination is provided by using collections on the mortgage loans otherwise payable to holders of subordinated classes to pay amounts due on the senior classes. Collections otherwise payable to subordinated classes are the sole source of funds from which this type of credit enhancement is provided. With respect to the second form of subordination, realized losses are allocated to the subordinated certificates, beginning with the class of subordinated certificates with the lowest payment priority, until the principal amount of that class has been reduced to zero. Subsequent realized losses will be allocated to the next most subordinate classes of subordinated certificates sequentially, until the class certificate balance of each succeeding class has been reduced to zero.
	Accordingly, if the class certificate balance of each 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 senior certificates.
	Furthermore, the subordinated classes will provide only limited protection against some categories of losses such as special hazard losses, bankruptcy losses and fraud losses in excess of the amounts specified in this prospectus supplement. Any losses in excess of those amounts will be allocated pro rata to each class of the senior certificates and the subordinated certificates, even if the class certificate balance of each subordinated class has not been reduced to zero. Among the subordinated certificates the Class B-l Certificates are the least subordinated, that is, they have the highest payment priority. Then come the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates, in that order. See “Description of the Certificates— Subordination” in this prospectus supplement.
	Unlike some other senior/subordinated structures, there will be no overcollateralization built up to provide protection for the subordinated certificates over the life of the transaction. The only credit enhancement for the subordinated certificates will be the certificates that are junior to each such class. Once the principal balance of a certificate is reduced by the amount of a loss on the mortgage loans, certain unanticipated recoveries, if any, will be the only amounts available thereafter to reimburse the holder of such certificate for the amount of such reduction. See “The Transaction Agreements — The Pooling and Servicing Agreement — Unanticipated Recoveries of Losses on the Mortgage Loans” in this prospectus supplement.
	You should fully consider the risks of investing in a subordinated certificate, including the risk that you may not fully recover your initial investment as a result of realized losses. See “Description of the Certificates – Losses Allocable to the Certificates” in this prospectus supplement.
Subordination of Senior Mezzanine
Certificates increases risk of loss	If you purchase Class A-2 Certificates, you should consider the risk that after the date on which the respective class certificate balance of each class of subordinated certificates has been reduced to zero, the principal portion of realized losses, other than excess losses, allocable to the A-1 Certificates, will be borne first by the Class A-2 Certificates (in addition to other respective realized losses allocable to the Class A-2 Certificates) in the manner described in this prospectus supplement, and not by the Class A-1 Certificates so long as the class certificate balance of the Class A-2 Certificates is greater than zero. See “Description of the Certificates — Losses Allocable to the

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	Certificates” and “— Subordination” in this prospectus supplement.
Geographic concentration of
mortgage loans may increase risk of
losses on your certificates	Approximately 17.37%, 13.82% and 8.48% of the mortgage loans (by principal balance as of the cut-off date) expected to be in the trust on the closing date are secured by property in California, Arizona and Virginia, respectively. Accordingly, you should consider the following risks associated with property located in those states:
	•	Property in California may be more susceptible than homes located in other parts of the country to certain types of uninsurable or uninsured hazards, such as earthquakes, fires, floods, mudslides and other natural disasters.
	•	Economic conditions in California, Arizona and Virginia which may or may not affect real property values, may affect the ability of borrowers to repay their loans on time.
	•	Economic conditions and housing markets in California, Arizona and Virginia may be adversely affected by a variety of events, including natural disasters such as earthquakes, hurricanes, floods and eruptions, mudslides and brushfires and civil disturbances such as riots. If these occur, the rates of delinquency, foreclosure, bankruptcy and loss on the related mortgage loans may increase.
	•	Declines in the residential real estate market in California, Arizona and Virginia may reduce the values of properties located in those states, which would result in an increase in the loan-to-value ratios of the related mortgage loans.
	•	Any increase in the market value of properties located in California, Arizona and Virginia 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 related mortgage loans.
	See “Transaction Overview — The Transaction Parties — The Master Servicer— Management’s Discussion and Analysis of Delinquency and Foreclosure Trends” in this prospectus supplement.
Residual Certificates have
adverse tax consequences	The Class A-R Certificates will represent the “residual interests” in the master REMIC and each of the underlying REMICs (if any) for federal income tax purposes.
	Holders of Class A-R Certificates must report as ordinary income or loss their pro rata share of the net income or the net loss of each REMIC whether or not any cash distributions are made to them. This allocation of income or loss may result in a zero or negative after-tax return. No cash distributions are expected to be made with respect to the Class A-R Certificates, except for the initial principal balance for each such class of $100 and related interest.
	Due to their tax consequences, the Class A-R Certificates will be subject to restrictions on transfer that may affect their liquidity. In addition, the Class

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	A-R Certificates may not be acquired by employee benefit plans subject to ERISA.
	See “Description of the Certificates — Restrictions on Transfer of the Residual Certificates,” “ERISA Considerations” and “Material Federal Income Tax Consequences” in this prospectus supplement.
The effects of terrorist attacks and military action are not determinable	The effects that possible future terrorist attacks or other incidents and related military action, or the military action by United States forces in Iraq and other regions, may have on the performance of the mortgage loans or on the values of the related mortgaged properties cannot be determined at this time. Investors should consider the possible effects of such incidents on delinquency, default and prepayment experience of the mortgage loans. Federal agencies and non-government lenders have and may continue to defer, reduce or forgive payments and delay foreclosure proceedings in respect of loans to borrowers affected in some way by future attacks or other incidents and the related military action.
	The current deployment of U.S. military reservists and members of the National Guard, and any further such deployments, may significantly increase the proportion of loans whose interest rates are reduced by application of the Servicemembers Civil Relief Act (the “Relief Act”). The Relief Act provides, generally, that a borrower who is covered by the Relief Act may not be charged interest on the related mortgage loan in excess of 6% annually during the period of the borrower’s active duty. Under the Military Reservist Relief Act, which is a California statute, under certain circumstances, California residents called into active duty with the reserves can delay payments on mortgage loans for a period not to exceed 180 days, beginning with the order to active duty and ending 30 days after release. Interest payable to holders of the certificates will be reduced by any reductions in the amount of interest not collectible as a result of the application of such Acts. These shortfalls are not required to be paid by the borrower at any future time. None of the seller, the depositor or the master servicer is required to advance these shortfalls as delinquent payments, and such shortfalls are not covered by any form of credit enhancement on the certificates. Any reductions resulting from such Acts will be allocated pro rata among the senior certificates and the subordinated certificates.
	In addition, legislation granting similar loan payment relief to certain persons not covered by the Relief Act has been proposed and may be enacted in various states.

FORWARD LOOKING STATEMENTS

          We caution you that certain statements contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus consist of forward-looking statements relating to future economic performance or projections and other financial items. These statements can be identified by the use of forward-looking words such as “may,” “will,” “should,” “expects,” “believes,” “anticipates,” “estimates,” or other comparable words. Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual results to differ from the projected results. Those risks and uncertainties include, among others, general economic and business conditions, regulatory initiatives and compliance with governmental regulations, customer preferences, effects of prepayments, changes in interest rates and various other matters, many of which are beyond our control.

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Because we cannot predict the future, what actually happens may be very different from what we predict in our forward-looking statements.

TRANSACTION OVERVIEW

The Parties

          The Sponsor and Master Servicer. First Horizon Home Loan Corporation, a Kansas corporation (“First Horizon”). The principal executive office of First Horizon is located at 4000 Horizon Way, Irving, Texas 75063, and its telephone number is (214) 441-4000. First Horizon is an indirect wholly owned subsidiary of First Tennessee Bank National Association. First Horizon was established in 1995 through a merger between the former Carl I. Brown and Co., MNC Mortgage Corp., and Sunbelt National Mortgage Corp. On March 4, 2000, First Horizon officially changed its name from FT Mortgage Cos. to First Horizon Home Loan Corporation. For over 27 years, First Horizon and its predecessors in interest have been engaged principally in the business of origination, purchasing and selling residential mortgage loans in its own name and through its affiliates. First Horizon is engaged primarily in the mortgage banking business, and as such, originates, purchases, sells and services mortgage loans. First Horizon has originated and serviced residential mortgage loans for 20 years through a retail branch system and through mortgage loan brokers and correspondents nationwide. First Horizon’s mortgage loans are principally first-lien, fixed or adjustable rate mortgage loans secured by single-family residences.

          At March 31, 2006, First Horizon provided servicing for approximately $97.260 billion aggregate principal amount of mortgage loans. First Horizon is servicing substantially all these mortgage loans for unaffiliated persons.

          First Horizon initially services substantially all the mortgage loans it originates or acquires. In addition, First Horizon has purchased in bulk the rights to service mortgage loans originated by other lenders. Servicing includes collecting and remitting loan payments, accounting for principal and interest, holding escrow (impound) funds for payment of taxes and insurance, making inspections as required of the mortgaged premises, contacting delinquent mortgagors, supervising foreclosures in the event of unremedied defaults and generally administering the loans, for which First Horizon receives servicing fees. First Horizon has in the past and may in the future sell to other mortgage bankers a portion of its portfolio of loan servicing rights. For a description of the annual servicing report and the report of the independent public accountants required to be provided by First Horizon in its capacity as master servicer under the pooling and servicing agreement, see “The Agreements — Evidence as to Compliance” in the prospectus.

          S&P has assigned First Horizon a rating of “Strong” as a residential mortgage loan servicer. S&P’s rating reflects First Horizon’s seasoned management team, stable internal controls and risk management, dedicated, extensive and comprehensive training programs, solid policies and procedures; demonstrated default management expertise, excellent level of automation; and effective use of technology.

          Fitch Ratings has assigned First Horizon a residential primary servicer rating of “RPS2”. Fitch’s ratings are based on First Horizon’s experienced management team, effective internal control environment and the financial strength of First Horizon’s parent, First Tennessee Bank, N.A. Fitch’s ratings also reflect First Horizon’s effective loan administration and collection procedures for both first and second-lien mortgages.

          Moody’s has assigned First Horizon a rating of “SQ2+” as primary servicer of prime residential mortgage loans. Moody’s ratings are based on First Horizon’s above-average collections abilities, average loss mitigation results, above average timeline management, and strong servicing stability.

          During 2005, 2004 and 2003, First Horizon, as sponsor, securitized approximately $12.871 billion, $8.163 billion and $5.751 billion of residential mortgage loans, respectively. During 2005, 2004 and 2003, First Horizon originated directly or purchased through its correspondent network approximately $37.408 billion, $30.684 billion and $47.867 billion of prime/alternative-A residential mortgage loans, respectively. During 2005, 2004 and 2003, First Horizon originated directly or purchased through its correspondent network approximately $1.745 billion, $1.292 billion and $464.666 million of subprime residential mortgage loans, respectively. During 2005, 2004 and 2003, First Horizon originated directly or purchased through its correspondent network approximately $5.044 billion, $5.065 billion and $3.366 billion of home equity loans, respectively.

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          First Horizon structures securitization transactions in which it assembles a pool or pools of mortgage loans that are sold to the depositor. The depositor causes the issuance of the securities supported by the cash flows generated by the mortgage loans. First Horizon or one or more affiliates will make certain representations and warranties to the depositor and the trustee regarding the mortgage loans. If it is later determined that the mortgage loans fail to conform to the specified representations and warranties, First Horizon may be obligated to repurchase such mortgage loans from the depositor (or directly from the trustee) or it may be obligated to substitute one or more similar mortgage loans for the affected mortgage loans as described under “The Transaction Agreements – The Mortgage Loan Purchase Agreement.”

Collection/Default Procedures

          When a mortgagor fails to make a payment due on a mortgage loan, First Horizon attempts to cause the delinquency to be cured by contacting and corresponding with the mortgagor. First Horizon generally mails to the mortgagor a notice of default after the loan becomes 61 days past due (three payments due but not received). Generally within 44 days thereafter, if the loan is not subject to a bankruptcy case or in a loss mitigation plan, First Horizon institutes appropriate legal action to foreclose on the mortgaged property. Foreclosure proceedings may be terminated if the delinquency is cured. Mortgage loans to borrowers in bankruptcy proceedings will be restructured in accordance with law. During the foreclosure process, First Horizon’s loss mitigation specialists continue to attempt contact with the borrower for the purpose of discussing possible alternatives to foreclosure including repayment plans, forbearance or pursuing short sale or deed in lieu. If the borrower does not qualify for or is unable to comply with the requirements for a loss mitigation alternative to foreclosure then the case proceeds to foreclosure sale.

          Once foreclosure is initiated by First Horizon, a foreclosure tracking system is used to monitor the progress of the proceedings. The system includes state specific parameters to monitor whether proceedings are progressing within the time frame typical for the state in which the mortgaged property is located. During the foreclosure proceedings and prior to foreclosure sale, First Horizon will request the attorneys handling the foreclosure to enter a bid equal to the total indebtedness at the foreclosure sale.

          At the foreclosure sale, the total indebtedness bid is made and if there are no higher bids, the title is acquired. If title is acquired at foreclosure sale, First Horizon will liquidate the mortgaged property by selling it for current market value and will report and remit the liquidation proceeds to the trust.

          Servicing and charge-off policies and collection practices with respect to mortgage loans may change over time in accordance with applicable laws and regulations.

Foreclosure, Delinquency and Loss Experience

          Historically, a variety of factors, including the appreciation of real estate values, have limited First Horizon’s loss and delinquency experience on its portfolio of serviced mortgage loans. There can be no assurance that factors beyond First Horizon’s control, such as weakening national or local economic conditions, higher interest rates, higher unemployment rates, a decline in the availability of refinancing, or downturns in real estate markets, will not result in increased rates of delinquencies and foreclosure losses in the future.

          A general deterioration of the real estate market in regions where the Mortgaged Properties are located may result in increases in delinquencies of loans secured by real estate, slower absorption rates of real estate into the market and lower sales prices for real estate. A general weakening of the economy may result in decreases in the financial strength of borrowers and decreases in the value of collateral serving as security for loans. If the real estate market and economy were to decline, First Horizon may experience an increase in delinquencies on the loans it services and higher net losses on liquidated loans.

          First Horizon began servicing mortgage loans underwritten under its Super Expanded Underwriting Guidelines in late 2003. Thus, First Horizon currently has limited historical delinquency, foreclosure or loss statistics for this type of loan product. There can be no assurance that the experience shown in the following tables will be indicative of future delinquency, foreclosure and loss experience of mortgage loans underwritten in accordance with First Horizon’s Super Expanded Underwriting Guidelines, including the mortgage loans in the mortgage pool.

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          The following table summarizes the delinquency, foreclosure and loss experience, respectively, on the dates indicated, of all jumbo first lien mortgage loans serviced, subserviced, or master serviced by First Horizon. The delinquency, foreclosure and loss percentages may be affected by the size and relative lack of seasoning of First Horizon’s jumbo loan servicing portfolio which increased from approximately $9.815 billion at December 31, 2004 to approximately $14.011 billion at December 31, 2005 and increased to approximately $14.430 billion at March 31, 2006. The delinquency and foreclosure experience set forth in the following table includes mortgage loans with various terms to stated maturity, and includes mortgage loans having a variety of payment characteristics. Accordingly, the information should not be considered as a basis for assessing the likelihood, amount or severity of delinquency or losses on the mortgage loans, and no assurances can be given that the foreclosure, delinquency and loss experience presented in the table below will be indicative of the experience on the mortgage loans underlying the certificates:

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Delinquency and Foreclosure Experience in First Horizon’s Portfolio
of One-to-Four Family, Jumbo Residential Mortgage Loans

			As of December 31, 2003										As of December 31, 2004
	No. of Loans		% of Loans			Principal Balance($)		% of Balance			No. of Loans		% of Loans			Principal Balance($)		% of Balance
JUMBO LOAN PORTFOLIO
Total Portfolio		16,424					7,603,793					20,602					9,814,558
Period of Delinquency
30-59 Days		128		0.78	%		50,030		0.66	%		139		0.67	%		67,344		0.69	%
60-89 Days		22		0.13	%		7,690		0.10	%		20		0.10	%		8,100		0.08	%
90 Days or more		20		0.12	%		6,797		0.09	%		25		0.12	%		10,793		0.11	%
Foreclosures Pending		25		0.15	%		9,894		0.13	%		19		0.09	%		8,121		0.08	%
Total Delinquencies		195		1.19	%		74,411		0.98	%		203		0.99	%		94,358		0.96	%

			As of December 31, 2005										As of March 31, 2006
	No. of Loans		% of Loans			Principal Balance($)		% of Balance			No. of Loans		% of Loans			Principal Balance($)		% of Balance
JUMBO LOAN PORTFOLIO
Total Portfolio		28,100					14,010,565					28,601					14,429,552
Period of Delinquency
30-59 Days		219		0.78	%		110,910		0.79	%		161		0.56	%		76,194		0.53	%
60-89 Days		35		0.12	%		18,845		0.13	%		25		0.09	%		10,800		0.07	%
90 Days or more		39		0.14	%		18,922		0.14	%		30		0.10	%		14,286		0.10	%
Foreclosures Pending		27		0.10	%		12,208		0.09	%		29		0.10	%		14,866		0.10	%
Total Delinquencies		320		1.14	%		160,886		1.15	%		245		0.86	%		116,145		0.80	%

          The above table shows mortgage loans which were delinquent or for which foreclosure proceedings had been instituted as of the date indicated. All dollar amounts are reported in thousands.

          First Horizon believes that the delinquency levels for its jumbo loan servicing portfolio are attributable primarily to the growth and relative lack of seasoning in its jumbo loan servicing portfolio over this time period. There can be no assurance that the experience shown in the above tables will be indicative of future loss and delinquency experience of First Horizon’s jumbo loan servicing portfolio or of the mortgage loans. In addition, because the jumbo mortgage loans were underwritten under guidelines that are less restrictive than First Horizon’s standard underwriting guidelines, the jumbo mortgage loans are likely to experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than those set forth in the tables above.

          The following table summarizes the delinquency and foreclosure experience, respectively, on the dates indicated, of all mortgage loans serviced or master serviced by First Horizon, including certain mortgage loans for which First Horizon has sold, but not yet transferred, the servicing rights. These mortgage loans have a variety of underwriting, payment and other characteristics, many of which differ from those of the mortgage loans underlying the certificates, and no assurances can be given that the delinquency and foreclosure experience presented in the table below will be indicative of the experience of the mortgage loans underlying the certificates.

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Delinquency and Foreclosure Experience in First Horizon’s Total Portfolio
of One-to-Four Family, Residential Mortgage Loans

			As of December 31, 2003										As of December 31, 2004
	No. of Loans		% of Loans			Principal Balance($)		% of Balance			No. of Loans		% of Loans			Principal Balance($)		% of Balance
TOTAL SERVICING PORTFOLIO
Total Portfolio		505,502					68,855,658					556,185					79,738,340
Period of Delinquency
30-59 Days		11,599		2.29	%		1,220,816		1.77	%		11,363		2.04	%		1,278,625		1.60	%
60-89 Days		2,677		0.53	%		263,125		0.38	%		2,591		0.47	%		261,445		0.33	%
90 Days or more		4,423		0.87	%		401,377		0.58	%		4,079		0.73	%		386,851		0.49	%
Foreclosures Pending		3,093		0.61	%		252,608		0.37	%		3,157		0.57	%		265,957		0.33	%
Total Delinquencies		21,792		4.31	%		2,137,926		3.10	%		21,190		3.81	%		2,192,878		2.75	%

			As of December 31, 2005										As of March 31, 2006
	No. of Loans		% of Loans			Principal Balance($)		% of Balance			No. of Loans		% of Loans			Principal Balance($)		% of Balance
TOTAL SERVICING PORTFOLIO
Total Portfolio		617,711					95,259,730					623,435					97,260,372
Period of Delinquency
30-59 Days		14,193		2.30	%		1,722,127		1.81	%		9,251		1.48	%		1,130,708		1.16	%
60-89 Days		3,071		0.50	%		339,839		0.36	%		1,993		0.32	%		226,677		0.23	%
90 Days or more		4,682		0.76	%		471,619		0.50	%		3,633		0.58	%		372,696		0.38	%
Foreclosures Pending		2,910		0.47	%		265,067		0.28	%		3,091		0.50	%		296,964		0.31	%
Total Delinquencies		24,856		4.02	%		2,798,651		2.94	%		17,968		2.88	%		2,027,044		2.08	%

          The above table shows mortgage loans which were delinquent or for which foreclosure proceedings had been instituted as of the date indicated. All dollar amounts are reported in thousands.

          There can be no assurance that factors beyond First Horizon’s control, such as weakening national or local economic conditions, higher interest rates, higher unemployment rates, a decline in the availability of refinancing, or downturns in real estate markets, will not result in increased rates of delinquencies and foreclosure losses in the future. In addition, because substantially all the mortgage loans were underwritten under guidelines that are less restrictive than First Horizon’s standard underwriting guidelines, such mortgage loans are likely to experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than those set forth in the tables above.

Management’s Discussion and Analysis of Delinquency and Foreclosure Trends

          For First Horizon’s total portfolio, mortgage loan delinquencies generally have decreased since December 31, 2002. Although these decreases may be due to a variety of factors, First Horizon believes the amount of turnover and decreased seasoning in First Horizon’s servicing portfolio are contributing factors to the decreases in these categories. There can be no assurance that factors beyond First Horizon’s control, such as weakening national or local economic conditions, higher interest rates, higher unemployment rates, a decline in the availability of refinancing, or downturns in real estate markets, will not result in increased rates of delinquencies and foreclosure losses in the future.

          If the residential real estate market should experience an overall decline in property values such that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties by a lender, become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures and losses could be

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significantly higher than the rates indicated in the tables above. To the extent that such losses occur in connection with the mortgage loans and are not otherwise covered by the forms of credit enhancement described in this prospectus supplement, they will be passed through as losses on the related certificates and such losses will be borne by the related certificateholders. In addition, because substantially all the mortgage loans were underwritten under guidelines that are less restrictive than First Horizon’s standard underwriting guidelines, such mortgage loans are likely to experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than those set forth in the tables above.

          The Depositor. First Horizon Asset Securities Inc., a Delaware corporation. The principal executive office of the depositor is located at 4000 Horizon Way, Irving, Texas 75063, and its telephone number is (214) 441-4000. The limited purposes of the depositor are, in general, to acquire, own and sell mortgage loans; to issue, acquire, own and sell mortgage pass-through securities which evidence ownership interests in mortgage loans, collections thereon and related properties; and to engage in any acts which are incidental to, or necessary, suitable or convenient to accomplish the foregoing.

          Neither the depositor nor any of the depositor’s affiliates will insure or guarantee distributions on the securities of any series.

          After the issuance of a series of securities, the depositor may be required (to the extent specified in the pooling and servicing agreement) to perform certain actions on a continual basis, including but not limited to:

•          upon the discovery of the breach of any representation or warranty made by the seller in respect of a mortgage loan that materially and adversely affects the value of that mortgage loan, to enforce the seller’s representation and warranty to repurchase the mortgage loan from the trustee or deliver a qualified substitute mortgage loan as described below under “Loan Programs — Representations by Sellers; Repurchases”;

•          to cause to be made all initial filings establishing or creating a security interest over the mortgage loans and any other related assets and make all filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC (as defined herein) to perfect the trustee’s security interest in or lien on the mortgage loans and any such related assets;

•          to appoint a successor trustee or master servicer, as applicable, in the event either the trustee or the master servicer resigns, is removed or becomes ineligible to continue serving in such capacity under the related agreement;

•          to prepare and file, or cause the preparation and filing of, any reports required under the Exchange Act;

•          to notify the rating agencies and any other relevant parties of the occurrence of any event of default or other event specified in the related Agreements; and

•          to provide the trustee and the master servicer with any information such entity may reasonably require to comply with the terms of the pooling and servicing agreement.

          The liability of the depositor under the pooling and servicing agreement is limited to the extent described under “The Agreements – Certain Matters Regarding the Master Servicer and the Depositor” in the prospectus. In addition, the depositor will be entitled to indemnification from the trust fund to the extent described under “The Agreements – Certain Matters Regarding the Master Servicer and the Depositor” in the prospectus.

          The Issuing Entity. First Horizon Alternative Mortgage Securities Trust 2006-AA3, a common law trust formed under the laws of the State of New York. The issuing entity will be created under the pooling and servicing agreement by the depositor and its assets will consist of the trust fund. The issuing entity will not have any liabilities as of the closing date. The fiscal year end of the issuing entity will be December 31 of each year.

          The issuing entity will not have any employees, officers or directors. The trustee, the depositor, the master servicer and the custodian will act on behalf of the issuing entity, and may only perform those actions on behalf of the issuing entity that are specified in the pooling and servicing agreement. See “The Sponsor and Master Servicer” and “Assignment and Servicing of the Mortgage Loans – the Pooling and Servicing Agreement.”

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          Under the pooling and servicing agreement, the trustee on behalf of the issuing entity will not have the power to issue additional certificates representing interests in the trust fund, borrow money on behalf of the trust fund or make loans from the assets of the trust fund to any person or entity, without the amendment of the pooling and servicing agreement by certificateholders and the other parties thereto as described in the prospectus under “The Agreements — Amendment.”

          If the assets of the trust fund are insufficient to pay the certificateholders all principal and interest to which they are entitled, holders of some or all classes of certificates will not receive all of their expected distributions of interest and principal and will suffer a loss. The risk of loss to holders of subordinate certificates is greater than to holders of senior certificates. See “Risk Factors—Subordination may not be sufficient to protect senior certificates from losses” in this prospectus supplement. The issuing entity, as a common law trust, is not eligible to be a debtor in a bankruptcy proceeding. In the event of a bankruptcy of the sponsor, the depositor or any originator, it is not anticipated that the trust fund would become part of the bankruptcy estate or subject to the bankruptcy control of a third party.

          The Trustee. The Bank of New York, a banking corporation organized and existing under the laws of the state of New York. The trustee’s offices for notices under the pooling and servicing agreement are located at 101 Barclay Street, 8W, New York, New York 10286 and its telephone number is 1 (800) 254-2826. The Bank of New York has been, and currently is, serving as indenture trustee and trustee for numerous securitization transactions and programs involving pools of residential mortgages. The Bank of New York is one of the largest corporate trust providers of trust services on securitization transactions. The depositor and the master servicer may maintain other banking relationships in the ordinary course of business with The Bank of New York.

           The trustee has limited administrative responsibilities under the terms of the pooling and servicing agreement. The trustee does not monitor access to and activity in the Certificate Account, compliance with covenants of the depositor and/or the master servicer in the pooling and servicing agreement or the basis for the addition, substitution or removal of mortgage loans from the mortgage pool. Under the pooling and servicing agreement, the trustee as successor master servicer will be required to make Advances to the limited extent described herein with respect to the mortgage loans if the master servicer fails to make an Advance required by the pooling and servicing agreement and another successor master servicer has not been named. See “The Transaction Agreements – The Pooling and Servicing Agreement – Advances” in this prospectus supplement.

          The trustee may appoint one or more co-trustees if necessary to comply with the fiduciary requirements imposed by any jurisdiction in which a mortgaged property is located. In the case of any appointment of a co-trustee, all rights, powers, duties and obligations conferred or imposed upon the trustee will be conferred or imposed upon and exercised or performed by the trustee and the co-trustee jointly, unless the law of a jurisdiction prohibits the trustee from performing it duties under the pooling and servicing agreement, in which event such rights, powers, duties and obligations (including the holding of title to the trust fund or any portion of the trust fund in any such jurisdiction) shall be exercised and performed by the co-trustee at the direction of the trustee.

          See “The Transaction Agreements – The Pooling and Servicing Agreement” in this prospectus supplement for more information about the trustee and its obligations and rights (including the right to indemnity and reimbursement in certain circumstances) under the pooling and servicing agreement.

          The Custodian. First Tennessee Bank, National Association, a national banking association (“FTBNA”). The custodian’s offices for notices under the custodial agreement are located at 1555 W. Walnut Hill Lane, Suite 100, Irving, Texas 75038 and its telephone number is (214) 492-7602. FTBNA has been engaged in the mortgage document custody business for approximately 1.5 years. As of December 31, 2005, FTBNA was the custodian of mortgage files representing $103.8 billion aggregate original principal amount of mortgage loans. FTBNA maintains document custody facilities in its Irving, Texas office. For a description of the agreement under which FTBNA will act as custodian of the mortgage files, see “The Transaction Agreements – The Custodial Agreement” in this prospectus supplement.

          The Rating Agencies. Each of Fitch and Moody’s will issue ratings with respect to some or all of the offered certificates. See “Ratings” in this prospectus supplement.

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The Transaction

          First Horizon Alternative Mortgage Securities Trust 2006-AA3 will be formed and the certificates will be issued pursuant to the terms of a pooling and servicing agreement, dated as of May 1, 2006, by and among the depositor, the master servicer and the trustee. The certificates will represent undivided beneficial ownership interests in the trust fund, the assets of which will consist of:

• the mortgage loans and all interest and principal received on or with respect thereto after the cut-off date;

• all of the depositor’s rights as purchaser under the mortgage loan purchase agreement between First Horizon, as seller, and the depositor, as purchaser;

• all amounts on deposit in the Certificate Account and the Distribution Account from time to time;

• property that secured a mortgage loan and that has been acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; and

• all proceeds of the conversion, voluntarily or involuntarily, of any of the foregoing.

          The mortgage loans are described under “Description of the Mortgage Pool” in this prospectus supplement and the certificates are described under “Description of the Certificates” in this prospectus supplement.

THE MORTGAGE POOL

General

          Information with respect to the mortgage loans expected to be included in the mortgage pool on the closing date is set forth under this heading and in Annex I to this prospectus supplement. Before the closing date, mortgage loans may be removed from the mortgage pool and other mortgage loans may be substituted for them. The depositor believes that the information set forth in this prospectus supplement and Annex I with respect to the mortgage pool as presently constituted is representative of the characteristics of the mortgage pool as it will be constituted at the closing date, but some characteristics of the mortgage loans may vary. Unless otherwise indicated, information presented in this prospectus supplement and Annex I expressed as a percentage, other than rates of interest, are approximate percentages based on the aggregate Stated Principal Balances of the mortgage loans as of the cut-off date. No more than 5% of the mortgage loans relative to the aggregate cut-off date pool principal balance of the mortgage pool will deviate from the mortgage loan characteristics described under this heading or in Annex I.

          As of the cut-off date, the aggregate Stated Principal Balance of the mortgage loans expected to be included in the mortgage pool on the closing date is approximately $400,039,963, which is referred to as the cut-off date pool principal balance of the mortgage pool. The mortgage loans provide for the amortization of the amount financed over a series of monthly payments, subject to periodic interest rate adjustments; provided that, in the case of the interest-only mortgage loans, such amortization does not begin until after the 120^th due date. The due date for each mortgage loan is the first day of each calendar month. At origination, substantially all the mortgage loans had stated terms to maturity of 30 years. Scheduled monthly payments made by the mortgagors on the mortgage loans either earlier or later than their scheduled due dates will not affect the amortization schedule or the relative application of the payments to principal and interest. The mortgagors may prepay their mortgage loans at any time without penalty.

          The mortgage rate of each of the mortgage loans will be fixed for a period of five years after the origination of that mortgage loan. Each mortgage note for the mortgage loans will provide for adjustments to the mortgage rate thereon at the end of the initial five year fixed-rate period and semi-annually thereafter (each such date, an “Adjustment Date”) to equal the sum, rounded to the nearest 0.125%, of (1) the average of the London interbank offered rates for the six-month U.S. dollar deposits in the London market, as set forth in the Wall Street Journal, or, if such rate ceases to be published in the Wall Street Journal or becomes unavailable for any reason, then based upon a new index selected by the master servicer based on comparable information, in each case as most recently announced as of a date generally 45 days prior to such Adjustment

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Date (the “Six-Month LIBOR Index” or the “Mortgage Index”), and (2) a fixed percentage amount specified in the related mortgage note (the “Gross Margin”); provided, however, that the mortgage rate for all the mortgage loans will not increase or decrease by more than 2.000% every six months, as specified in the related mortgage note (each limit on adjustments in the mortgage rate is referred to as a “Subsequent Periodic Rate Cap”), with the exception of the initial Adjustment Date of the mortgage loans for which the Mortgage Rate on each mortgage loan will not increase or decrease by more than 6.000% (the limit on initial adjustments in the mortgage rate is referred to as an “Initial Periodic Rate Cap” and, together with the Subsequent Periodic Rate Cap, the “Periodic Rate Caps”). In addition, adjustments to the mortgage rate for each mortgage loan are subject to a lifetime maximum interest rate (the “Maximum Mortgage Rate”). Each mortgage loan specifies a lifetime minimum interest rate (the “Minimum Mortgage Rate”), which is equal to the Gross Margin for that mortgage loan.

          All the mortgage loans are 5/6 Mortgage Loans. A 5/6 Mortgage Loan has a mortgage rate that is fixed for approximately 60 months after origination thereof before the mortgage rate for that mortgage loan becomes subject to adjustment based on the Six-Month LIBOR Index as described in the preceding paragraph.

          The earliest date of origination, earliest stated maturity date and latest stated maturity date of any mortgage loan in the mortgage pool are set forth in the following table:

Earliest Date of Origination	Earliest Stated Maturity Date	Latest Stated Maturity Date
October 22, 2004	March 1, 2035	May 1, 2036

          Approximately 19.28% of the mortgage loans are jumbo mortgage loans which have principal balances at origination that exceed the then applicable limitations for purchase by Fannie Mae and Freddie Mac. Substantially all the mortgage loans were underwritten pursuant to the seller’s “Super Expanded Underwriting Guidelines,” which guidelines generally allow for FICO scores, loan-to-value ratios and debt-to-income ratios that are less restrictive than the seller’s standard full/alternative documentation loan programs. Accordingly, some of the mortgage loans may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than mortgage loans underwritten in accordance with seller’s standard full/alternative documentation loan programs. In addition, the borrowers under such mortgage loans may have lower FICO scores than borrowers under mortgage loans that were underwritten in accordance with seller’s standard full/alternative documentation loan programs. Many of the mortgage loans underwritten in accordance with the seller’s Super Expanded Underwriting Guidelines are not eligible for sale to Fannie Mae or Freddie Mac for reasons other than their principal balance. See “Risk Factors — The mortgage loans have been underwritten under less restrictive guidelines which may result in losses on the mortgage loans,” in this prospectus supplement and “Loan Program — Underwriting Standards — General Standards for First-Lien Mortgage Loans” and “— Guide Standards” in the prospectus.

          The following table sets forth the number of mortgage loans, the aggregate Stated Principal Balance of those mortgage loans and the percentage of the mortgage pool, by Stated Principal Balance of the mortgage loans in the mortgage pool, that have been contractually delinquent for 30 days at least once in the last twelve months as of the cut-off date.

          As of the cut-off date, no mortgage loan was delinquent more than 30 days at any time during the twelve month period immediately preceding the cut-off date.

          Substantially all the mortgage loans will not be subject to buydown agreements. No mortgage loan provides for deferred interest or negative amortization.

          Approximately 86.05% of the mortgage loans are interest-only loans which provide for payment of interest at the related mortgage rate, but no payment of principal, for a period of ten years following the origination of the mortgage loan.

          No mortgage loan has a loan-to-value ratio at origination of more than 95%. Generally, each mortgage loan with a loan-to-value ratio at origination of greater than 80% is covered by a primary mortgage guaranty insurance policy issued by a mortgage insurance company acceptable to Fannie Mae or Freddie Mac. The primary mortgage guaranty insurance policy provides coverage in an amount equal to a specified percentage times the sum of the Stated Principal Balance of the related mortgage loan, the accrued interest on the related mortgage loan and the related foreclosure expenses. The specified percentage is generally 12% for loan-to-value ratios between 80.01% and 85.00%, 25% for loan-to-value ratios between 85.01% and 90.00%, and 30% for loan-to-value ratios between 90.01% and 95.00%.

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          No primary mortgage guaranty insurance policy will be required with respect to any mortgage loan

• after the date on which the related loan-to-value ratio is 80% or less or, based on a new appraisal, the Stated Principal Balance of the mortgage loan represents 80% or less of the new appraised value, or

• if maintaining the primary mortgage guaranty insurance policy is prohibited by applicable law.

          The loan-to-value ratio of a mortgage loan at any given time is a fraction, expressed as a percentage, the numerator of which is the Stated Principal Balance of the related mortgage loan at the date of determination and the denominator of which is

• in the case of a purchase, the lesser of the selling price of the mortgaged property or its appraised value at the time of sale, or

• in the case of a refinancing, the appraised value of the mortgaged property at the time of refinancing, except in the case of a mortgage loan underwritten pursuant to First Horizon’s Streamlined Documentation Program as described in the prospectus under “Loan Program — Underwriting Standards.”

For mortgage loans originated pursuant to First Horizon’s Streamlined Documentation Program

• if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was 90% or less, the loan-to-value ratio will be the ratio of the principal amount of the mortgage loan outstanding at the date of determination divided by the appraised value of the related mortgaged property at the time of the origination of the mortgage loan being refinanced, or

• if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was greater than 90%, then the loan-to-value ratio will be the ratio of the principal amount of the mortgage loan outstanding at the date of determination divided by the appraised value as determined by a limited appraisal report at the time of the origination of the mortgage loan.

          See “—Underwriting Criteria for the Mortgage Loans,” “Loan Program — Underwriting Standards — General Standards for First-Lien Mortgage Loans” and “— Guide Standards” in the prospectus.

          No assurance can be given that the value of any mortgaged property has remained or will remain at the level that existed on the appraisal or sales date. If residential real estate values generally or in a particular geographic area decline, the loan-to-value ratios might not be a reliable indicator of the rates of delinquencies, foreclosures and losses that could occur with respect to the affected mortgage loans.

          Annex I attached hereto, set forth in tabular format certain information, as of the cut-off date, as to the mortgage loans in the aggregate. Other than with respect to rates of interest, percentages (approximate) are reported by aggregate Stated Principal Balance of the related mortgage loans as of the cut-off date and have been rounded in order to total 100%.

Underwriting Criteria for the Mortgage Loans

          All of the mortgage loans have been originated generally in accordance with the following underwriting guidelines (hereafter referred to as the “First Horizon Underwriting Guidelines”). This summary does not purport to be a complete description of the First Horizon Underwriting Guidelines. For additional information regarding the First Horizon Underwriting Guidelines, see “Loan Program — Underwriting Standards — General Standards for First-Lien Mortgage Loans” and “— Guide Standards” in the prospectus.

          The First Horizon Underwriting Guidelines 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 First Horizon Underwriting Guidelines are permitted where compensating factors are present.

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          Generally, each mortgagor will have been required to complete an application designed to provide to First Horizon 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 First Horizon 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.

          Loan-to-Value Requirements. With respect to purchase money or rate/term refinance loans secured by single family residences, loan-to-value ratios at origination of up to 95% for mortgage loans secured by single family, primary residences with original principal balances of up to $400,000, up to 85% for mortgage loans secured by single family, primary residences with original principal balances of up to $650,000 are generally allowed. Mortgage loans with principal balances up to $1,000,000 (“super jumbos”) are allowed if the loan is secured by the borrower’s primary residence. The loan-to-value ratio for super jumbos generally may not exceed 75%. 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 related mortgage loan.

          Generally, each mortgage loan originated by First Horizon with a loan-to-value ratio at origination exceeding 80% has a primary mortgage insurance policy insuring a portion of the balance of the mortgage 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 related mortgage loan plus accrued interest thereon. All of the insurers that have issued primary mortgage insurance policies with respect to the mortgage loans originated by First Horizon meet Fannie Mae’s or Freddie Mac’s standard or are acceptable to the Rating Agencies. No such primary mortgage insurance policy will be required with respect to any such mortgage loan if

• after the date on which the related loan-to-value ratio decreases to 80% or less, or, based upon a new appraisal, the principal balance of such mortgage loan represents 80% or less of the new appraised value, or

• maintaining the primary mortgage guaranty insurance policy is prohibited by applicable law.

          In the case of a refinancing of a mortgage loan originated pursuant to a limited documentation program such as First Horizon’s Streamlined Documentation Program,

• if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was 90% or less, the loan-to-value ratio will be the ratio of the principal amount of the mortgage loan outstanding at the date of determination divided by the appraised value of the related mortgaged property at the time of the origination of the mortgage loan being refinanced, or

• if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was greater than 90%, then the loan-to-value ratio will be the ratio of the principal amount of the mortgage loan outstanding at the date of determination divided by the appraised value as determined by a limited appraisal report at the time of the origination of the mortgage loan.

          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 obligation on the proposed mortgage loan, First Horizon 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.

          Credit Criteria. First Horizon 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, First Horizon applies the middle score of the primary wage earner. 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.

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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 summing together the attribute weights for that applicant.

          Asset, Income and Employment Documentation. The mortgage loans originated by First Horizon have been underwritten under one of the following documentation programs: the “Full/Alternative Documentation Program,” the “Stated Income Documentation Program,” the “No Ratio Documentation Program,” and the “No Income/No Asset Documentation Program.”

          Under the Full/Alternative Documentation Program, the prospective borrower’s employment, income and assets are verified through written and telephonic communications.

          Under the Stated Income Documentation 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 a verified income of the borrower. Although the borrower’s income is not verified, First Horizon obtains a telephonic verification of the borrower’s employment without reference to income. Borrower’s assets are verified.

          Under the No Ratio Documentation Program, the borrower’s income is not stated and no ratios are calculated. Although the income is not stated nor verified, First Horizon obtains a telephonic verification of the borrower’s employment without reference to income. Borrower’s assets are verified.

          Under the No Income/No Asset Documentation Program, the borrower’s income and assets are stated but not verified. The underwriting of such mortgage loans may be based entirely on the adequacy of the mortgaged property as collateral and on the credit history of the borrower.

          Appraisal Requirements. Each mortgaged property has been appraised by a qualified independent appraiser who is approved by First Horizon. 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. The requirements of 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.

Static Pool Information

          Static pool information with respect to the sponsor’s prior securitized pools involving mortgage loans similar to the mortgage loans expected to be included in the mortgage pool, presented by prior securitized pool, is available online at www.assetreporting.firsthorizon.com.

          Without charge or registration, by clicking on the link titled “Alt-A Arms” investors can view on this website the following information:

• delinquency, cumulative loss and prepayment information for the five years preceding the date of first use of this prospectus supplement regarding the sponsor’s prior securitized pools of mortgage loans similar to the mortgage loans expected to be included in the mortgage pools; and

• summary information of the original characteristics of each prior securitized pool of mortgage loans similar to the mortgage loans expected to be included in the mortgage pool, including, among other things (in each case by pool): the number of securitized loans or of originated or purchased loans; the original pool balance for each securitized pool or the total original balance of the originated or purchased loans; the

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weighted average interest rate; the weighted average original term to maturity; the weighted average remaining term to maturity; the product type(s); and the weighted average loan-to-value ratio.

          In the event any changes or updates are made to the information available on the sponsor’s website, the sponsor will provide a copy of the original information upon request to any person who writes or calls the sponsor at 4000 Horizon Way, Irving, Texas 75063; Attention: Alfred Chang, telephone number (800) 489-2111.

          The static pool information available on the sponsor’s website relating to any of the sponsor’s prior securitized pools issued prior to January 1, 2006 is not deemed part of this prospectus supplement, the prospectus or of the depositor’s registration statement.

          Static pool information regarding the sponsor’s prior securitized pools will remain available on the sponsor’s web site for at least five years following commencement of the offering contemplated by this prospectus supplement.

          Static pool performance may have been affected by various factors relating to the underlying borrower’s personal circumstances, including, but not limited to, unemployment or change in employment (or in the case of self-employed mortgagors or mortgagors relying on commission income, fluctuations in income), marital separation and the mortgagor’s equity in the related mortgaged property. In addition, static pool performance may be sensitive to adverse economic conditions, either nationally or regionally, may exhibit seasonal variations and may be influenced by the level of housing prices, the level of interest rates and changes in mortgage loan product features. In addition, changes over time in servicing practices or variations in mortgage loan underwriting guidelines or the application of such guidelines may affect the static pool data. See “The Mortgage Pool –Underwriting Criteria for the Mortgage Loans” in this prospectus supplement and “Loan Program – Underwriting Standards – General Standards for First-Lien Mortgage Loans” and “– Guide Standards” in the prospectus. Regional economic conditions (including declining real estate values) may particularly affect delinquency and cumulative loss experience on mortgage loans to the extent that mortgaged properties are concentrated in certain geographic areas. The historical pool performance information contained in the static pool reports may be attributable to factors such as those described above, although there can be no assurance as to whether this information is the result of any particular factor or a combination of factors. Due to all of these factors, the sponsor’s static pool performance data may not be indicative of the future performance of the mortgage loans expected to be included in the mortgage pool.

Additional Information

          The description in this prospectus supplement of the mortgage pool, the mortgage loans and the mortgaged properties is based upon the mortgage pool as constituted at the close of business on the cut-off date, as adjusted for scheduled payments due on or before that date. Within 15 days after the closing date, the depositor will file (or cause to be filed) a Current Report on Form 8-K with the Securities and Exchange Commission which will include as exhibits copies of the mortgage loan purchase agreement(s), pooling and servicing agreement and, if applicable, certain other transaction documents. If any mortgage loans are removed from or added to the trust fund, such removal or addition, to the extent material, will be noted in the depositor’s Current Report on Form 8-K.

          Pursuant to the Pooling and Servicing Agreement, the trustee will, based upon information received from the master servicer, prepare monthly statements to certificateholders containing the information described under “Reports to Securityholders” in the prospectus. The trustee may make available each month, to any interested party, the monthly statement to certificateholders via the trustee’s website. The trustee’s website will initially be located at www.bnyinvestorreporting.com and assistance in using the website can be obtained by calling the trustee’s customer service department at 1 (800) 254-2826. The trustee will have the right to change the way such reports are distributed in order to make such payments more convenient and/or more accessible, and the trustee will provide notification to the certificateholders regarding any such changes.

THE TRANSACTION AGREEMENTS

The Mortgage Loan Purchase Agreement

          On the closing date, the depositor will purchase all the mortgage loans from the seller pursuant to a mortgage loan purchase agreement (the “MLPA”) between First Horizon, as seller, and the depositor, as purchaser. Simultaneously with the

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depositor’s purchase of the mortgage loans, the seller will transfer the servicing rights for the mortgage loans to First Tennessee Mortgage Services, Inc. (“FTMSI”) pursuant to a servicing rights transfer and subservicing agreement (the “Servicing Rights Transfer and Subservicing Agreement”) between the seller, as transferor, and FTMSI, as transferee. FTMSI will agree to service the mortgage loans for the depositor and its assigns pursuant to a servicing agreement (the “Servicing Agreement”) between the depositor, as owner, and FTMSI, as servicer. In addition, the seller will agree to subservice the mortgage loans for FTMSI pursuant to the Servicing Rights Transfer and Subservicing Agreement. The seller will have directly originated or acquired the mortgage loans from various unaffiliated third parties. All the mortgage loans were underwritten substantially in accordance with the seller’s underwriting standards. See “Loan Program — Underwriting Standards” in the prospectus. The depositor will sell and assign the mortgage loans to the trustee for the benefit of the certificateholders pursuant to a pooling and servicing agreement among the depositor, First Horizon, as master servicer, and The Bank of New York, as trustee. First Tennessee Bank National Association (“FTBNA”), an affiliate of the depositor and the master servicer, will act as custodian of the mortgage files for the mortgage loans pursuant to the terms of a custodial agreement by and between the trustee, First Horizon, as servicer and FTBNA. See “The Transaction Agreements — The Pooling and Servicing Agreement — Custodial Agreement” in this prospectus supplement.

          Under the MLPA, the seller will make certain representations, warranties and covenants to the depositor, including, among others, the following with respect to the mortgage loans, or each mortgage loan, as the case may be:

• The information set forth on Schedule A to the MLPA, with respect to each mortgage loan is true and correct in all material respects as of the closing date.

• Each mortgage is a valid and enforceable first lien on the mortgaged property subject only to (a) the lien of non-delinquent current real property taxes and assessments and liens or interests arising under or as a result of any federal, state or local law, regulation or ordinance relating to hazardous wastes or hazardous substances and, if the related mortgaged property is a unit in a condominium project or planned unit development, any lien for common charges permitted by statute or homeowner association fees, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such mortgage, such exceptions appearing of record being generally acceptable to mortgage lending institutions in the area wherein the related mortgaged property is located or specifically reflected in the appraisal made in connection with the origination of the related mortgage loan, and (c) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such mortgage.

• Immediately prior to the assignment of the mortgage loans to the depositor, the seller had good title to, and was the sole owner of, each mortgage loan free and clear of any pledge, lien, encumbrance or security interest and had full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign the same pursuant to the MLPA.

• As of the date of origination of each mortgage loan, there was no delinquent tax or assessment lien against the related mortgaged property.

• There is no valid offset, defense or counterclaim to any mortgage note or mortgage, including the obligation of the mortgagor to pay the unpaid principal of or interest on such mortgage note.

• There are no mechanics’ liens or claims for work, labor or material affecting any mortgaged property which are or may be a lien prior to, or equal with, the lien of such mortgage, except those which are insured against by the title insurance policy referred to below.

• To the best of the seller’s knowledge, no mortgaged property has been materially damaged by water, fire, earthquake, windstorm, flood, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the seller makes no representation) so as to affect adversely the value of the related mortgaged property as security for such mortgage loan.

• Each mortgage loan at origination complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, real estate settlement procedures, truth-

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	in-lending and disclosure laws and specifically applicable predatory and abusive lending laws, or any noncompliance does not have a material adverse effect on the value of the related mortgage loan.
•	No mortgage loan is a “high cost loan” as defined by the specific applicable predatory and abusive lending laws.
•	Except as reflected in a written document contained in the related mortgage file, the seller has not modified the mortgage in any material respect; satisfied, cancelled or subordinated such mortgage in whole or in part; released the related mortgaged property in whole or in part from the lien of such mortgage; or executed any instrument of release, cancellation, modification or satisfaction with respect thereto.
•	A lender’s policy of title insurance together with a condominium endorsement and extended coverage endorsement, if applicable, in an amount at least equal to the cut-off date principal balance of each such mortgage loan or a commitment (binder) to issue the same was effective on the date of the origination of each mortgage loan, each such policy is valid and remains in full force and effect, or, in lieu thereof, an alternative title insurance product.
•	To the best of the seller’s knowledge, all of the improvements which were included for the purpose of determining the appraised value of the mortgaged property lie wholly within the boundaries and building restriction lines of such property, and no improvements on adjoining properties encroach upon the mortgaged property, unless such failure to be wholly within such boundaries and restriction lines or such encroachment, as the case may be, does not have a material effect on the value of such mortgaged property.
•	To the best of the seller’s knowledge, as of the date of origination of each mortgage loan, no improvement located on or being part of the mortgaged property is in violation of any applicable zoning law or regulation unless such violation would not have a material adverse effect on the value of the related mortgaged property. To the best of the seller’s knowledge, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the mortgaged property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities, unless the lack thereof would not have a material adverse effect on the value of such mortgaged property.
•	The mortgage note and the related mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms and under applicable law.
•	The proceeds of the mortgage loans have been fully disbursed and there is no requirement for future advances thereunder.
•	The related mortgage contains customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the mortgaged property of the benefits of the security, including, (i) in the case of a mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure.
•	With respect to each mortgage constituting a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such mortgage, and no fees or expenses are or will become payable by the holder of the mortgage to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the mortgagor.
•	As of the closing date, the improvements upon each mortgaged property are covered by a valid and existing hazard insurance policy with a generally acceptable carrier that provides for fire and extended coverage and coverage for such other hazards as are customarily required by institutional single family mortgage lenders in the area where the mortgaged property is located, and the seller has received no notice that any premiums due and payable thereon have not been paid; the mortgage obligates the mortgagor thereunder to maintain all such insurance including flood insurance at the mortgagor’s cost and expense.

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• If at the time of origination of each mortgage loan, the related mortgaged property was in an area then identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy in a form meeting the then-current requirements of the Flood Insurance Administration is in effect with respect to such mortgaged property with a generally acceptable carrier.

• To the best of the seller’s knowledge, there is no proceeding pending or threatened for the total or partial condemnation of any mortgaged property, nor is such a proceeding currently occurring.

• To best of the seller’s knowledge, there is no material event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material non-monetary default, breach, violation or event of acceleration under the mortgage or the related mortgage note; and the seller has not waived any material non-monetary default, breach, violation or event of acceleration.

• Any leasehold estate securing a mortgage loan has a stated term at least as long as the term of the related mortgage loan.

• Each mortgage loan was selected from among the outstanding adjustable-rate one- to four-family mortgage loans in the seller’s portfolio at the closing date as to which the representations and warranties made with respect to the mortgage loans set forth in the MLPA can be made. No such selection was made in a manner intended to adversely affect the interests of the certificateholders.

• The mortgage loans provide for the full amortization of the amount financed over a series of monthly payments.

• Each mortgage loan constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code.

          Subject to the limitations described under “— The Pooling and Servicing Agreement — Delivery Requirements,” the seller will be obligated to repurchase or substitute a similar mortgage loan for any mortgage loan as to which there exists deficient documentation or as to which there has been an uncured breach of any representation or warranty relating to the characteristics of the mortgage loans that materially and adversely affects the interests of the certificateholders in the mortgage loan. Under the pooling and servicing agreement, the depositor will assign all its interest in the seller’s representations, warranties and covenants under the MLPA, including the seller’s repurchase obligation, to the trustee for the benefit of the certificateholders. The depositor will make no representations or warranties with respect to the mortgage loans and will have no obligation to repurchase or substitute for mortgage loans with deficient documentation or which are otherwise defective. The seller is selling the mortgage loans to the depositor without recourse and the depositor is selling the mortgage loans to the trustee for the benefit of the certificateholders without recourse. Neither the depositor nor the seller will have any obligation with respect to the certificates in its capacity as a mortgage loan seller other than the repurchase and substitution obligations described above. The obligations of the master servicer with respect to the certificates are limited to the master servicer’s contractual servicing obligations under the pooling and servicing agreement. The obligations of FTBNA with respect to the mortgage loans are limited to FTBNA’s contractual obligations as custodian of the related mortgage files under the custodial agreement.

The Servicing Rights Transfer and Subservicing Agreement

          Pursuant to the Servicing Rights Transfer and Subservicing Agreement, First Horizon will transfer the servicing rights for the mortgage loans to FTMSI on the closing date and will agree to subservice the mortgage loans for FTMSI. Pursuant to the Servicing Agreement between the depositor, or its assigns, and FTMSI, FTMSI will service the mortgage loans. In addition, pursuant to the Servicing Rights Transfer and Subservicing Agreement, First Horizon will agree to subservice the mortgage loans for FTMSI in accordance with the terms set forth in the pooling and servicing agreement. In the event of a conflict between the terms of the Servicing Rights Transfer and Subservicing Agreement and the pooling and servicing agreement, the pooling and servicing agreement provisions will prevail. See “The Agreements” in the prospectus. The master servicer may perform any of its obligations under the pooling and servicing agreement through one or more subservicers. Notwithstanding any subservicing arrangement, the master servicer will remain liable for its servicing duties and obligations under the pooling and servicing agreement as if the master servicer alone were servicing the mortgage loans.

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The Pooling and Servicing Agreement

          General. Pursuant to the pooling and servicing agreement and on the closing date, the depositor will sell, without recourse, all of its right, title and interest in the mortgage loans and the other assets included in the trust fund, including all principal and interest due and received on the mortgage loans after the cut-off date, to the trustee in trust for the benefit of the certificateholders.

          Delivery Requirements. In connection with the sale, the depositor will deliver or cause to be delivered to FTBNA, as a custodian for the trustee, the mortgage file for each mortgage loan, which contains, among other things,

• the original mortgage note, including any modifications or amendments, endorsed in blank without recourse, except that the depositor may deliver or cause to be delivered a lost note affidavit in lieu of any original mortgage note that has been lost,

• the original mortgage creating a first lien on the related mortgaged property with evidence of recording,

• an assignment in recordable form of the mortgage,

• the title policy with respect to the related mortgaged property, if available, provided that the title policy will be delivered as soon as it becomes available, and if the title policy is not available, and to the extent required in connection with the rating of the certificates, a written commitment or interim binder or preliminary report of the title issued by the title insurance or escrow company with respect to the mortgaged property, or in lieu of a title policy, provided the applicable mortgage loan meets required criteria, an alternative title insurance product (“alternative title product”), and

• if applicable, all recorded intervening assignments of the mortgage and any riders or modifications to the mortgage note and mortgage,

except for any documents not returned from the public recording office or an original or certified copy of the applicable title policy, to the extent unavailable, unless an alternative title product is used, each of which will be delivered to the custodian as soon as the same is available to the depositor.

          With respect to up to 25% of the mortgage loans, the depositor may deliver all or a portion of each related mortgage file to the custodian not later than thirty days after the closing date. Assignments of the mortgage loans to the trustee or its nominee will be recorded in the appropriate public office for real property records in each state where recording is required in order to protect the trustee’s interests in the mortgage loan against the claim of any subsequent transferee or any successor to or creditor of the depositor or the seller.

          The custodian will review each mortgage file within 90 days of the closing date, or promptly after the custodian’s receipt of any document permitted to be delivered after the closing date, and if any document in a mortgage file is found to be missing or materially defective and the seller does not cure the defect within 90 days after receiving notice of the defect from the custodian, or within such longer period not to exceed 720 days after the closing date as provided in the pooling and servicing agreement (in the case of missing documents not returned from the public recording office or in the case of the original or certified copy of the applicable title policy, unless an alternative title product is used), the seller will be obligated to repurchase the affected mortgage loan from the trust fund. Rather than repurchase the mortgage loan as provided above, the seller may, at its option, remove the affected mortgage loan (referred to as a deleted mortgage loan) from the mortgage pool and substitute in its place another mortgage loan (referred to as a replacement mortgage loan); however, a substitution will only be permitted within two years of the closing date and may not be made unless an opinion of counsel is provided to the trustee to the effect that the substitution will not disqualify any REMIC or result in a prohibited transaction tax under the Code.

          On the date of substitution, any replacement mortgage loan will

• have a principal balance, after deduction of all scheduled payments due in the month of substitution, not in excess of, and not more than 10% less than, the principal balance of the deleted mortgage loan, provided

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	that the seller will deposit a Substitution Adjustment Amount into the Certificate Account for distribution to the certificateholders on the related distribution date,
•	have a Net Mortgage Rate not lower than the Net Mortgage Rate of the deleted mortgage loan; provided that the master servicing fee for the replacement mortgage loan shall be the same as that of the deleted mortgage loan,
•	have a maximum mortgage rate not more than one percentage point per annum higher or lower than the maximum mortgage rate of the deleted mortgage loan,
•	have a minimum mortgage rate specified in its related mortgage note not more than one percentage point per annum higher or lower than the minimum mortgage rate of the deleted mortgage loan,
•	have the same Mortgage Index, reset period and periodic rate cap as the deleted mortgage loan and a gross margin not more than one percentage point per annum higher or lower than that of the deleted mortgage loan,
•	have a mortgage rate not lower than, and not more than one percentage point per annum higher than, that of the deleted mortgage loan,
•	have a loan-to-value ratio not higher than that of the deleted mortgage loan,
•	have a remaining term to maturity not greater than, and not more than one year less than, the remaining term to maturity of the deleted mortgage loan, and
•	comply with all the representations and warranties set forth in the MLPA as of the date of substitution.

This cure, repurchase or substitution obligation of the seller constitutes the sole remedy available to certificateholders or the trustee for omission of, or a material defect in, a mortgage loan document.

          Notwithstanding the foregoing, in lieu of delivering a duly executed assignment of the mortgage to the custodian and the original recorded assignment or assignments of the mortgage together with all interim recorded assignments of such mortgage, above, the depositor may at its discretion provide the custodian with evidence that the related mortgage is held through the MERS® System. In addition, the mortgage for some or all the mortgage loans in the trust fund that are not already held through the MERS® System may, at the discretion of the master servicer, in the future be held through the MERS® System. For any mortgage held through the MERS® System, the mortgage is recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, as nominee for the owner of the mortgage loan, and subsequent assignments of the mortgage were, or in the future may be, at the discretion of the master servicer, registered electronically through the MERS® System. For each of these mortgage loans, MERS serves as mortgagee of record on the mortgage solely as a nominee in an administrative capacity on behalf of the trustee, and does not have any interest in the mortgage loan.

          Servicing and Administrative Responsibilities. First Horizon will act as master servicer and will service all of the mortgage loans. See “The Transaction Agreements — The Pooling and Servicing Agreement — The Master Servicer” in this prospectus supplement. The Bank of New York will be the trustee under the pooling and servicing agreement. See “Transaction Overview — The Trustee” in this prospectus supplement. First Tennessee Bank National Association will be the custodian under the pooling and servicing agreement. See “Transaction Overview— The Custodian” in this prospectus supplement.

          The master servicer, trustee and custodian will have the following responsibilities under the pooling and servicing agreement and the custodial agreement (in the case of the custodian) with respect to the trust fund:

Party	Responsibilities
Master Servicer	Performing the master servicing functions in accordance with the pooling and

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	servicing agreement, including but not limited to:
		•	establishing and maintaining a Certificate Account in accordance with the pooling and servicing agreement;
		•	collecting monthly remittances of principal and interest on the mortgage loans from the related borrowers, depositing such amounts in the Certificate Account and delivering all amounts on deposit in the Certificate Account to the trustee for deposit in the Distribution Account on the business day immediately preceding the related distribution date;
		•	advancing or causing to be advanced such funds as necessary for the purpose of effecting the payment of taxes and assessments on the mortgaged properties;
		•	making Advances with respect to delinquent payments of principal and interest on the mortgage loans;
		•	providing monthly loan-level reports to the trustee;
		•	maintaining certain insurance policies relating to the mortgage loans;
		•	arranging for the subservicing of any mortgage loan and monitoring such subservicer’s performance, and enforcing each subservicer’s obligations under the pooling and servicing agreement; and
		•	enforcing foreclosure proceedings with respect to the mortgaged properties.
Trustee	Performing the trustee functions in accordance with the provisions of the pooling and servicing agreement, including but not limited to:
		•	establishing and maintaining the Distribution Account;
		•	receiving monthly remittances from the master servicer for deposit in the Distribution Account and distributing all amounts on deposit in the Distribution Account to the certificateholders in accordance with the priorities set forth under “Description of the Certificates — Distributions on the Certificates” in this prospectus supplement;
		•	maintaining a certificate register for the trust fund in which the trustee provides for the registration of the Certificates and of transfers and exchanges of the Certificates;
		•	examining all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the trustee that are specifically required to be furnished pursuant to any provision of the pooling and servicing agreement to determine whether they are in the form required

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			by the pooling and servicing agreement;
		•	executing and delivering to DTC (as defined below) the Issuer Letter of Representations dated as of the closing date on behalf of the trust created by the pooling and servicing agreement;
		•	filing on behalf of the depositor all periodic reports required under the Securities Exchange Act of 1934 relating to the Certificates;
		•	exercising and enforcing its remedies upon an Event of Default by the master servicer under the pooling and servicing agreement; and
		•	in the event that the master servicer shall for any reason no longer be the master servicer and another successor master servicer has not been appointed, assuming all the rights and obligations of the master servicer under the pooling and servicing agreement until such time as another successor master servicer is appointed.
Custodian	Performing the custodial functions in accordance with the provisions of the pooling and servicing agreement and the custodial agreement, including but not limited to:
		•	holding and maintaining the mortgage loan documents related to the mortgage loans in accordance with customary standards on behalf of the trustee;
		•	acting exclusively as the bailee for hire and agent of, and custodian for the trustee; and
		•	executing and delivering an initial certification, a delay delivery certification and subsequent certificate.

          Accounts. All amounts in respect of principal and interest received from the borrowers or other recoveries in respect of the mortgage loans will, at all times before distribution thereof to the certificateholders, be in either the Certificate Account or the Distribution Account, which are accounts established in the name of the trustee. The Certificate Account will be created and maintained by the master servicer, while the Distribution Account will be created and maintained by the trustee. Funds on deposit in the Certificate Account may be invested by the party responsible for such account in certain eligible investments described in the pooling and servicing agreement. All income and gain net of any losses realized from such investment of funds on deposit in the Certificate Account will be for the benefit of the master servicer as servicing compensation and will not be available for distributions to the certificateholders. The amount of any losses incurred with respect to any such investment will be deposited into the Certificate Account by the master servicer. Funds on deposit in the Certificate Account may be invested by the party responsible for such account in certain eligible investments described in the pooling and servicing agreement.

          Collection Procedures; Waiver or Modification of Mortgage Loan Terms. The master servicer will be prohibited from making any material modification to the terms of a mortgage loan unless the mortgage loan is in default. For a description of the collection procedures the master servicer may use with respect to the mortgage loans, see “Transaction Overview — The Transaction parties —The Sponsor and Master Servicer — Collection Default Procedures” in this prospectus supplement.

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          Fees and Expenses. The following summarizes the related fees and expenses to be paid from the assets of the issuing entity and the source of payments for the fees and expenses:

Type/Receipt (1)	Amount	General Purpose	Source (2)	Frequency
Fees
Master Servicing Fee/ Master Servicer	The product of (i) the Master Servicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of the Due Period preceding the payment date (or as of the close of business on the cut-off date for the first payment date). (3)(4)	Compensation	Interest collected with respect to each mortgage loan, any related liquidation proceeds allocable to accrued and unpaid interest.	Monthly
Additional Servicing Compensation / Master Servicer	All late payment fees and other similar charges.	Compensation	Payments made by obligors with respect to the mortgage loans.	From time to time
	All investment income earned on amounts on deposit in the collection account.	Compensation	Investment income related to the collection account.	Monthly
Trustee Fee	The product of (i) the Trustee Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of the Due Period preceding the payment date (or as of the close of business on the cut-off date for the first payment date). (5)	Compensation	The master servicer pays the Trustee Fee to the trustee out of the Master Servicer Fee.	Monthly
Liquidation Expenses/ Master Servicer	Out-of-pocket expenses incurred by the master servicer in connection with the liquidation of any mortgage loan and not recovered under any insurance policy.	Reimbursement of Expenses	Interest Collections.
Expenses	The amount of any optional servicing advances.	Reimbursement of Expenses	First from liquidation proceeds and second from the distribution account after allocation of payments to the notes.	Time to time
Reimbursement/ Master Servicer	Reasonable legal expenses and costs of the master servicer in connection with any action with respect to the pooling and servicing agreement and the interests of the certificates.	Reimbursement of Expenses	From the distribution account after allocation of payments to the notes.	From time to time

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Indemnification expenses / Master Servicer Any loss, liability, or expense incurred in connection with any legal action relating to the pooling and servicing agreement or the certificates. Indemnification From funds available from the mortgage pool. From time to time

(1)	If the trustee succeeds to the position of master servicer, it will be entitled to receive the same fees and expenses of the master servicer described in this prospectus supplement and to compensation with respect to its expenses in connection with conversion of certain information, documents, and record keeping in connection with the transfer of the master servicing.
(2)	Unless otherwise specified, the fees and expenses shown in this table are paid (or retained by the master servicer in the case of amounts owed to the master servicer) prior to payments on the notes.
(3)	The “Master Servicing Fee Rate” for each mortgage loan will equal 0.375% per annum.
(4)	The “Servicing Fee Rate” for each mortgage loan will equal approximately 0.369% per annum.
(5)	The “Trustee Fee Rate” for each mortgage loan will equal 0.006% per annum.

          The custodian will not receive any compensation from the trust fund with respect to its duties on behalf of the trust fund. None of the fees set forth in the table above may be increased without an amendment of the pooling and servicing agreement as described under “The Agreements – Amendment” in the prospectus.

          Adjustment to Master Servicing Fee in Connection with Principal Prepayments. When a borrower prepays a mortgage loan between due dates, the borrower is required to pay interest on the amount prepaid only to the date of prepayment and not thereafter. Except for the month of the cut-off date, principal prepayments by borrowers received by the master servicer from the first day through the fifteenth day of a calendar month will be distributed to certificateholders on the distribution date in the same month in which the prepayments are received and, accordingly, no shortfall in the amount of interest to be distributed to certificateholders with respect to the prepaid mortgage loans results. Conversely, principal prepayments by borrowers received by the master servicer from the sixteenth day or, in the case of the first distribution date, from the cut-off date through the last day of a calendar month, will be distributed to certificateholders on the distribution date in the month after the month of receipt and, accordingly, a shortfall in the amount of interest to be distributed to certificateholders with respect to the prepaid mortgage loans would result. Pursuant to the pooling and servicing agreement, the master servicing fee for any month will be reduced, but not by more than 0.0083% of the Pool Principal Balance as of the related determination date, by an amount sufficient to pass through to certificateholders the full amount of interest to which they would be entitled in respect of each mortgage loan prepaid on the related distribution date. If shortfalls in interest as a result of prepayments during the period from the sixteenth day of the month prior to a distribution date through the last day of such month exceed an amount equal to 0.0083% of the Pool Principal Balance as of the related determination date, the amount of interest available to be distributed to certificateholders will be reduced by the amount of the excess. See “Description of the Certificates — Distributions on the Certificates — Interest” in this prospectus supplement.

          Advances. Subject to the following limitations, the master servicer will be required to advance before each distribution date, from its own funds or funds in the Certificate Account that do not constitute Available Funds for the distribution date, an amount equal to the aggregate of payments of principal and interest on the mortgage loans (net of the master servicing fee with respect to the related mortgage loans) which were due on the related due date and which were delinquent on the related determination date, together with an amount equivalent to interest on each mortgage loan as to which the related mortgaged property has been acquired by the trust fund through foreclosure or deed-in-lieu of foreclosure. The determination date will be the third business day after the 15th day of each month; provided that the determination date in each month will always be at least two business days before the related distribution date.

          Advances are intended to maintain a regular flow of scheduled interest and principal payments on the certificates rather than to guarantee or insure against losses. The master servicer is obligated to make advances with respect to delinquent payments of principal of or interest on each mortgage loan to the extent that advances are, in its reasonable judgment, recoverable from future payments and collections or insurance payments or proceeds of liquidation of the related mortgage loan. If the master servicer determines on any determination date to make an advance, the advance will be included with the distribution to certificateholders on the related distribution date. Any failure by the master servicer to make a deposit in the Certificate Account as required under the pooling and servicing agreement, including any failure to make an

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advance on the related distribution date, will constitute an Event of Default under the pooling and servicing agreement. If the master servicer is terminated as a result of the occurrence of an Event of Default, the trustee or a successor master servicer appointed by the trustee will be obligated to make advances in accordance with the terms of the pooling and servicing agreement.

          Unanticipated Recoveries of Losses on the Mortgage Loans. Holders of certificates that had previously been allocated a Realized Loss in respect of a mortgage loan (which holders may, in the event of a transfer of any such certificate, be different from the holders at the time the Realized Loss was allocated) may receive distributions if the servicer subsequently makes an Unanticipated Recovery in respect of such mortgage loan as a result of events such as an unanticipated insurance settlement, tax refund or mortgagor bankruptcy distribution. In such event, the class certificate balance of each class of certificates to which the Realized Losses were allocated shall be increased, sequentially in the order of payment priority, by the amount of Unanticipated Recoveries, but not by more than the amount of losses previously allocated to reduce such class certificate balances. Holders of any class of certificates for which the class certificate balance has been increased by the amount of any Unanticipated Recoveries will not be entitled to any payment in respect of interest on the amount of any such increase for any interest accrual period preceding the distribution date on which such increase occurs. Unanticipated Recoveries, if any, will be distributed on each distribution date pursuant to the Available Funds Allocation. This distribution will be made on the distribution date in the calendar month following receipt of the Unanticipated Recovery. No certificateholder will be entitled to receive any share of an Unanticipated Recovery following the distribution date on which the principal balance of its certificates has been reduced to zero, including following the termination of the trust.

          Events of Default and Termination. The “events of default” under the pooling and servicing agreement are described under “Events of Default; Rights upon Event of Default” in the prospectus. If any of the events of default described in the pooling and servicing agreement shall occur with respect to the master servicer, other than the failure of the master servicer to remit any advance required to be remitted by the master servicer pursuant to the pooling and servicing agreement, then, and in each and every such case, so long as such event of default shall not have been remedied, the trustee may, or at the direction of the holders of Certificates evidencing not less than 66 2/3% of the voting rights evidenced by the Certificates the trustee shall, by notice in writing to the master servicer (with a copy to each rating agency), terminate all of the rights and obligations of the master servicer under the pooling and servicing agreement and in and to the mortgage loans and the proceeds thereof, other than its rights as a certificateholder under the pooling and servicing agreement. If the master servicer fails to remit any advance required to be remitted by the master servicer pursuant to the pooling and servicing agreement the trustee shall immediately, by notice in writing to the master servicer (with a copy to each rating agency), terminate all of the rights and obligations of the master servicer under the pooling and servicing agreement and in and to the mortgage loans and proceeds thereof, other than its rights as a certificateholder under the pooling and servicing agreement. On and after the receipt by the master servicer of such written notice, all authority and power of the master servicer under the pooling and servicing agreement, whether with respect to the mortgage loans or otherwise, shall terminate.

          Successor Master Servicers. If all of the rights and obligations of the master servicer under the pooling and servicing agreement are terminated as described above and another successor master servicer has not been appointed, the trustee will succeed to all of the responsibilities, duties and liabilities of the master servicer under the pooling and servicing agreement. In the event that the trustee is unwilling or unable so to act, it may appoint, or petition a court of competent jurisdiction for the appointment of, a mortgage loan servicing institution with a net worth of at least $10,000,000 to act as successor to the master servicer under the agreement. See “The Agreements — Events of Default; Rights Upon Default” in the prospectus. In connection with such appointment, the trustee may make such arrangements for the compensation of such successor out of payments on mortgage loans as it and such successor shall agree; provided, however, that no such compensation shall be in excess of the master servicing fee permitted the master servicer in accordance with the pooling and servicing agreement. The trustee and such successor to the master servicer shall take such action, consistent with the pooling and servicing agreement, as shall be necessary to effectuate any such succession. Any successor to the master servicer as master servicer shall give notice to the mortgagors of such change of servicer and shall, during the term of its service as master servicer maintain in force the policy or policies that the master servicer is required to maintain pursuant to the pooling and servicing agreement.

          Limitation on Liabilities and Indemnification of the Master Servicer. The liability of the master servicer under the pooling and servicing agreement is limited to the extent described under “The Agreements – Certain Matters Regarding the Master Servicer and the Depositor” in the prospectus. In addition, the master servicer will be entitled to indemnification

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from the trust fund to the extent described under “The Agreements – Certain Matters Regarding the Master Servicer and the Depositor” in the prospectus.

          Resignation or Removal of the Master Servicer. The circumstances under which First Horizon may resign or be removed as master servicer under the pooling and servicing agreement are described under “The Agreements – Certain Matters Regarding the Master Servicer and the Depositor” in the prospectus.

          Duties of the Trustee. The trustee will be required to perform only those duties specifically required of it under the pooling and servicing agreement. As described under “—Servicing and Administrative Responsibilities” above, the trustee will perform certain administrative functions required under the pooling and servicing agreement.

          Upon receipt of the various certificates, statements and opinions required to be furnished to it, the trustee will be required to examine them to determine whether they are in the form required by the pooling and servicing agreement; however, the trustee will not be responsible for the accuracy or content of any certificates, statements or opinions furnished to it by the depositor, the master servicer or any other party and, in the absence of bad faith on its part, may conclusively rely on such certificates, statements and opinions.

          The trustee may be held liable for its own negligent action or failure to act, or for its own willful misconduct; provided, however, that the trustee will not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the certificateholders in an event of default under the pooling and servicing agreement, and the trustee will not be deemed to have notice of any such event of default unless a responsible officer of the trustee has actual knowledge of the event of default or written notice of an event of default is received by the trustee at its corporate trust office. See “The Agreements — Events of Default; Rights Upon Events of Default” in the prospectus. The trustee is not required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the pooling and servicing agreement, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of those funds or adequate indemnity against risk or liability is not reasonably assured to it.

          Expenses and Indemnities of the Trustee. The trustee will be entitled to reimbursement of all reasonable expenses incurred by it and any disbursements or advances made by it in accordance with the pooling and servicing agreement, except for expenses incurred or any disbursements and advances made by it in the routine administration of its duties under the pooling and servicing agreement and except for any expenses arising from its negligence, bad faith or willful misconduct. The trustee will also be entitled to indemnification from the trust fund for any claim, loss, liability or expense incurred by it in connection with the administration of the trust fund and the performance of its duties under the pooling and servicing agreement or any other document or agreement to which the trustee is a party.

          The trustee will be entitled to reimbursement for its expenses and indemnification amounts as described above from amounts allocable to interest and principal on the mortgage loans, prior to payment of any amounts to certificateholders.

          Resignation or Removal of Trustee. The trustee may, upon not less than 60 days’ advance written notice to the depositor, the master servicer and each rating agency, resign at any time, in which event the depositor will appoint a successor trustee that satisfies the eligibility requirements provided in the pooling and servicing agreement and mail notice of such successor to certificateholders. The trustee may also be removed at any time by the depositor if (a) the trustee ceases to be eligible to continue to act as trustee under the pooling and servicing agreement; (b) the trustee is adjudged bankrupt or insolvent; (c) a receiver or other public officer takes charge of the trustee or its property; or (d) the trustee otherwise becomes incapable of acting. If the trustee is removed the depositor will promptly appoint a successor trustee. If a successor trustee does not take office within 30 days after the retiring trustee resigns or is removed, the retiring trustee may petition any court of competent jurisdiction for appointment of a successor trustee.

          Any resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee, whereupon the successor trustee, if the depositor fails to do so, will mail notice of its succession to all certificateholders. The predecessor trustee will be required to transfer all property held by it as trustee to the successor trustee.

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          Any fees and expenses owed to the retiring trustee in connection with such resignation or removal will be paid as described above under “—Expenses and Indemnities of the Trustee.”

The Custodial Agreement

          First Tennessee Bank National Association (“FTBNA”), an affiliate of the depositor and the master servicer, will act as custodian of the mortgage files for the mortgage loans pursuant to the terms of a custodial agreement by and among the trustee, First Horizon, as servicer and FTBNA. Under the terms of the custodial agreement, FTBNA shall maintain continuous custody of all items constituting the mortgage files in secure facilities in accordance with customary standards for such custody and shall reflect in its records the interest of the trustee therein. Each mortgage file which comes into the possession of FTBNA shall be maintained in fire-resistant facilities. With respect to the documents constituting each mortgage file, FTBNA shall (i) act exclusively as the bailee for hire and agent of, and custodian for the trustee, (ii) hold all documents constituting such mortgage file received by it for the exclusive use and benefit of the trustee, and (iii) make disposition thereof only in accordance with the terms of the custodial agreement or with written instructions furnished by the trustee, provided, however, that in the event of a conflict between the terms of the custodial agreement and the written instructions of the trustee, the trustee’s written instructions shall control.

          See “– The Pooling and Servicing Agreement – Delivery Requirements” in this prospectus supplement for more information about the custodian and its obligations and rights under the custodial agreement.

          Expenses and Indemnities of the Custodian. The custodian is not entitled to reimbursement of its expenses or indemnification from the trust fund under the terms of the custodial agreement.

          Resignation or Removal of the Custodian. After the expiration of the 180-day period commencing on the closing date, the custodian may resign and terminate its obligations under the custodial agreement upon at least 60 days’ prior written notice to the trustee and the master servicer. Promptly after receipt of notice of the custodian’s resignation, the trustee will either take custody of the mortgage files itself or promptly appoint a successor custodian. In addition, the trustee, upon at least 60 days’ prior written notice to the custodian and the master servicer, may with or without cause, remove and discharge the custodian from the performance of its duties under the custodial agreement. Promptly after the giving of notice of such removal, the trustee will appoint, or petition a court of competent jurisdiction to appoint, a successor custodian.

DESCRIPTION OF THE CERTIFICATES

General

          The certificates will be issued pursuant to the pooling and servicing agreement and will have the respective initial class certificate balances, subject to a variance of ±5%, and initial pass-through rates set forth on page S-5.

          As of any distribution date, the class certificate balance of any class of certificates is equal to the initial class certificate balance of that class as reduced by all amounts previously distributed to certificateholders of that class as payments of principal, and the amount of Realized Losses, including Excess Losses, allocated to that class.

          In addition, the class certificate balance of the class of subordinated certificates then outstanding with the highest numerical class designation will be reduced if and to the extent that the aggregate of the class certificate balances of all classes of the certificates, following all distributions and the allocation of Realized Losses on a distribution date, exceeds the Pool Principal Balance as of the due date occurring in the month of the distribution date. Such a reduction is referred to in this prospectus supplement as the “Subordinated Certificate Writedown Amount.”

          The senior certificates will have an initial aggregate class certificate balance of approximately $377,637,100 and will evidence in the aggregate an initial beneficial ownership interest of approximately 94.40% in the trust fund. The Class B-l, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will each evidence in the aggregate an initial beneficial ownership interest of approximately 2.75%, 0.95%, 0.70%, 0.50%, 0.40% and 0.30%, respectively, in the trust fund.

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          The Class A-R Certificates will be issued in fully registered certificated form. All the other classes of offered certificates will be book-entry certificates. The book-entry certificates will be issuable in book-entry form only. The Class A-R Certificates will be issued as two certificates in denominations of $99.99 and $0.01.

Separate REMIC Structure

          For federal income tax purposes, the trust fund will comprise multiple real estate mortgage investment conduits; one or more underlying REMICs (if any) and the master REMIC. The assets of the lowest underlying REMIC in this tiered structure (or the master REMIC if there are no underlying REMICs) will consist of the mortgage loans and any other assets designated in the pooling and servicing agreement. The master REMIC will issue several classes of certificates, which, other than the Class A-R Certificates, will represent the regular interests in the master REMIC. The Class A-R Certificates will represent ownership of both the residual interest in the master REMIC and the residual interests in any underlying REMICs.

Book-Entry Certificates

          Each class of book-entry certificates will be issued in one or more certificates which equal the aggregate initial class certificate balance of the class of certificates and which will be held by a depository, initially a nominee of The Depository Trust Company in the United States (“DTC”) or Euroclear Bank S.A./N.V. (“Euroclear”) in Europe. Euroclear will hold omnibus positions on behalf of their participants through customers’ securities accounts in Euroclear’s name on the books of their respective depositaries, which in turn will hold positions in customers’ securities accounts in the depositaries’ names on the books of DTC.

          Beneficial interests in the book-entry certificates will be held indirectly by investors through the book-entry facilities of the applicable depository, as described in the prospectus under “Description of the Securities — Book-entry Registration of Securities.” Investors may hold beneficial interests in the book-entry certificates in the minimum denominations set forth in the table on page S-5 and integral multiples of $1,000 in excess thereof. If necessary in order to aggregate the initial principal balance of a class of certificates, one certificate of such class will be issued in an incremental denomination of less than that listed in the table on page S-5. One investor of each class of book-entry certificates may hold a beneficial interest in a book entry certificate that is not an integral multiple of $1,000. The depositor has been informed by DTC that its nominee will be CEDE & Co. Accordingly, CEDE & Co. is expected to be the holder of record of the book-entry certificates. Except as described in the prospectus under “Description of the Securities — Book-entry Registration of Securities,” no beneficial owner of a book-entry certificate will be entitled to receive a physical certificate.

          Unless and until definitive certificates are issued, it is anticipated that the only certificateholder of the book-entry certificates will be CEDE & Co., as nominee of DTC. Beneficial owners of the book-entry certificates will not be certificateholders, as that term is used in the pooling and servicing agreement. Beneficial owners are only permitted to exercise the rights of certificateholders indirectly through financial intermediaries and DTC. Monthly and annual reports on the trust fund provided to CEDE & Co., as nominee of DTC, may be made available to beneficial owners upon request, in accordance with the rules, regulations and procedures creating and affecting DTC, and to the financial intermediaries to whose depository accounts the book-entry certificates of the beneficial owners are credited.

          For a description of the procedures generally applicable to the book-entry certificates, see “Description of the Securities — Book-entry Registration of Securities” in the prospectus.

Payments on Mortgage Loans; Accounts

          On or before the closing date, the master servicer will establish a Certificate Account, which will be maintained in trust for the benefit of the certificateholders. Funds credited to the Certificate Account may be invested for the benefit and at the risk of the master servicer in Permitted Investments, as defined in the pooling and servicing agreement, that are scheduled to mature on or before the business day preceding the next distribution date. On or before the business day before each distribution date, the master servicer will withdraw from the Certificate Account the amount of Available Funds from the mortgage pool and will deposit the Available Funds into the Distribution Account. The trustee will be entitled to withdraw its fee from the amounts on deposit in the Distribution Account each month immediately prior to making the distributions on the certificates.

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Distributions on the Certificates

Allocation of Available Funds

          Interest and principal on the certificates will be distributed monthly on the 25th day of each month or, if such 25th day is not a business day, on the succeeding business day, commencing in June 2006. These distributions will be made to the certificates in an aggregate amount equal to the Available Funds for the mortgage pool for the related distribution date. Distributions will be made to holders of record on the close of business on the last business day of the month prior to the month in which the related distribution date occurs.

          The rights of the subordinated certificates to receive distributions with respect to the mortgage loans will be based on interest and principal received or advanced with respect to the mortgage loans, and will be subordinated to the rights of the holders of the senior certificates to the extent described in this prospectus supplement.

          On each distribution date, the Available Funds for the mortgage pool will be distributed among the classes of certificates in the following order of priority:

          first, to the classes of senior certificates, the Accrued Certificate Interest on each such class for such distribution date;

          second, to the classes of senior certificates, any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates, to the extent of remaining Available Funds from the mortgage pool;

          third, to the classes of senior certificates entitled to distributions of principal, to the extent of remaining Available Funds from the mortgage pool, the Senior Optimal Principal Amount for that distribution date, in the order of priority set forth after priority seventh below, until their respective class principal balances have each been reduced to zero;

          fourth, to the Class B-l Certificates, to the extent of remaining Available Funds for the mortgage pool, in the following order: (1) the Accrued Certificate Interest thereon for such distribution date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates and (3) such class’ Allocable Share for that distribution date;

          fifth, to the Class B-2 Certificates, to the extent of remaining Available Funds for the mortgage pool, in the following order: (1) the Accrued Certificate Interest thereon for such distribution date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates and (3) such class’ Allocable Share for that distribution date;

          sixth, to the Class B-3 Certificates, to the extent of remaining Available Funds for the mortgage pool, in the following order: (1) the Accrued Certificate Interest thereon for such distribution date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates and (3) such class’ Allocable Share for that distribution date; and

          seventh, sequentially, to the Class B-4, Class B-5 and Class B-6 Certificates, in that order, to the extent of remaining Available Funds for the mortgage pool, in the following order: (1) the Accrued Certificate Interest thereon for such distribution date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous distribution dates and (3) each such class’ Allocable Share for that distribution date.

          Amounts allocated to the senior certificates pursuant to priority third above will be distributed sequentially in the following order of priority:

(i)	to the Class A-R Certificates,until the class certificate balance thereof has been reduced to zero; and
(ii)	concurrently, to the Class A-1 and Class A-2 Certificates, pro rata, until the respective class certificate balances thereof have each been reduced to zero.

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          On each distribution date after the Cross-over Date, distributions of principal on the outstanding senior certificates and entitled to principal distributions will be made, pro rata, among all such senior certificates, regardless of the allocation, or sequential nature, of principal payments described above.

Interest

          Interest will accrue on the class certificate balances of each class of certificates at an annual pass-through rate equal to the weighted average of the Net Mortgage Rates of the mortgage loans for such distribution date. The annual pass-through rate for each class of certificates for the first distribution date is set forth in the table on page S-5. See “Risk Factors – Changes to the weighted average net mortgage rate on the mortgage loans may reduce the yield with respect to the certificates” in this prospectus supplement.

          With respect to each distribution date for each class of certificates, the interest accrual period will be the calendar month preceding the month of the distribution date. Interest will be calculated on the basis of a 360-day year consisting of twelve 30 day months.

          As to any distribution date and any mortgage loan with respect to which a prepayment in full has occurred during the period from the sixteenth day of the month preceding the distribution date through the last day of such month, the resulting “Interest Shortfall” generally will equal the difference between (a) one month’s interest at the Net Mortgage Rate on the Stated Principal Balance of such mortgage loan, and (b) the amount of interest at the Net Mortgage Rate actually received with respect to such mortgage loan during such period. In the case of a partial prepayment, the resulting “Interest Shortfall” will equal the amount, if any, by which one month’s interest at the related Net Mortgage Rate on such prepayment exceeds the amount of interest actually paid in connection with such prepayment.

          The interest entitlement described in this prospectus supplement for each class of certificates for any distribution date will be reduced by the amount of Net Interest Shortfalls experienced by the mortgage loans in the mortgage pool. Any Net Interest Shortfall will, on each distribution date, be allocated among all the outstanding classes of certificates entitled to distributions of interest proportionally based on the Accrued Certificate Interest that would have been allocated thereto otherwise in the absence of such shortfalls and losses. See “Servicing of the Mortgage Loans — Adjustment to Master Servicing Fee in Connection with Prepaid Mortgage Loans” in this prospectus supplement.

          The interest portion of any Realized Losses (other than Excess Losses) occurring prior to the Cross-over Date will not be allocated among any certificates, but will reduce the amount of Available Funds on the related distribution date. As a result of the subordination of the subordinated certificates in right of distribution, such losses will be borne first by the outstanding subordinated certificates in inverse order of priority.

Principal

          Distributions in reduction of the class certificate balance of each class of certificates entitled to principal distributions will be made on each distribution date from the mortgage pool.

          All payments and other amounts received in respect of principal of the mortgage loans will be allocated first to the senior certificates entitled to principal distributions and then to the subordinated certificates as described under “— Allocation of Available Funds” above.

Distributions in reduction of the class certificate balance of each class of senior certificates will be made on each distribution date as described under “— Allocation of Available Funds” above. In accordance with priority third of the Available Funds Allocation, the Available Funds for the mortgage pool remaining after the distribution of interest to the senior certificates will be allocated to such senior certificates in an aggregate amount not to exceed the Senior Optimal Principal Amount. Distributions in reduction of the class certificate balances of the Class B-l, Class B-2 and Class B-3 Certificates will be made pursuant to priorities fourth, fifth and sixth, respectively, of the Available Funds Allocation. In accordance with each such priority, the Available Funds for the mortgage pool, if any, remaining after distributions of principal and interest on the senior certificates will be allocated to each class of the Class B Certificates in an amount equal to each such class’ Allocable Share for such distribution date, provided that no distribution of principal will be made on any

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such class until any class ranking prior thereto has received distributions of interest and principal, and such class has received distributions of interest, on such distribution date.

          If, on any distribution date, the class certificate balance of any class of Class B Certificates (other than the subordinated class with the highest priority of distribution, to which it is not applicable) for which the related Class Prepayment Distribution Trigger was satisfied on such distribution date is reduced to zero, any amounts distributable to such class or classes under clauses (2), (3) and (5) of the definition of Subordinated Optimal Principal Amount, to the extent of that class’ remaining Allocable Share, will be distributed to the remaining classes of subordinated certificates in reduction of their respective class certificate balances in order of the priority of payments described in this prospectus supplement. If the Class Prepayment Distribution Trigger is not satisfied for any class of Class B Certificates (other than the subordinated class with the highest priority of distribution, to which it is not applicable) on any distribution date, this may have the effect of accelerating the amortization of more senior ranking classes of subordinated certificates because the amount otherwise distributable to such class or classes under clauses (2), (3) and (5) of the definition of Subordinated Optimal Principal Amount will be distributable, pro rata, among the outstanding classes of the Class B Certificates as to which the related Class Prepayment Distribution Trigger has been satisfied subject to the priority of payments described in this prospectus supplement.

Losses Allocable to the Certificates

          Prior to the Cross-over Date (and on that date under certain circumstances), the principal portion of any Non-Excess Loss will be allocated among the outstanding classes of subordinated certificates, in inverse order of priority, until the class certificate balance of each such class has been reduced to zero (i.e., Non-Excess Losses will be allocated first to the Class B-6 Certificates while those certificates are outstanding, second to the Class B-5 Certificates, and so on). The principal portion of any Fraud Losses, Special Hazard Losses and Deficient Valuations occurring prior to the reduction of the Fraud Loss Coverage Amount, the Special Hazard Loss Coverage Amount and the Bankruptcy Loss Coverage Amount, respectively, to zero will also be allocated to the subordinated certificates in the manner described in the preceding sentence.

          From and after the Cross-over Date, the principal portion of any Realized Loss will be allocated among the outstanding classes of senior certificates entitled to principal distributions (other than the Class A-1 Certificates, as long as the Class A-2 Certificate, are outstanding) pro rata based upon their class certificate balances.

          From and after the Cross-over Date, the principal portion of Realized Losses (other than Excess Losses) on the mortgage loans allocable to the Class A-1 Certificates will instead be borne first by the Class A-2 Certificates until the related class certificate balance is reduced to zero (in addition to other Realized Losses allocable to the Class A-2 Certificates), and not by the Class A-1 Certificates, for so long as the class certificate balance of the Class A-2 Certificates is greater than zero.

          Fraud Losses, Special Hazard Losses and Deficient Valuations occurring after the Fraud Loss Coverage Amount, Special Hazard Loss Coverage Amount and the Bankruptcy Loss Coverage Amount, respectively, have been reduced to zero will be Excess Losses. The principal portion of any Excess Loss on a mortgage loan for any distribution date (whether occurring before, on or after the Cross-over Date) will be allocated pro rata among all outstanding classes of the related senior certificates and the subordinated certificates, on the basis of their certificate principal balances.

          Upon the initial issuance of the certificates, the Fraud Loss Coverage Amount will equal approximately $8,000,799 (approximately 2.0% of the aggregate Stated Principal Balances of the mortgage loans as of the cut-off date). As of any distribution date from the first anniversary of the cut-off date and prior to the fifth anniversary of the cut-off date, the Fraud Loss Coverage Amount will equal approximately $4,000,400 minus the aggregate amount of Fraud Losses that would have been allocated to the subordinated certificates in the absence of the Loss Allocation Limitation since the cut-off date. As of any distribution date on or after the earlier of the Cross-over Date or the fifth anniversary of the cut-off date, the Fraud Loss Coverage Amount shall be zero.

          Upon the initial issuance of the certificates, the Special Hazard Loss Coverage Amount will equal approximately $4,000,400 (representing approximately 1.0% of the outstanding principal balance of all the mortgage loans as of the cut-off date). As of any distribution date, the Special Hazard Loss Coverage Amount will equal the greater of

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• 1.00% (or if greater than 1.00%, the highest percentage of mortgage loans by principal balance secured by mortgaged properties in any single California zip code) of the outstanding principal balance of all the mortgage loans as of the related Determination Date, and

• twice the outstanding principal balance of the mortgage loan which has the largest outstanding principal balance as of the related Determination Date,

less, in each case, the aggregate amount of Special Hazard Losses that would have been previously allocated to the subordinated certificates in the absence of the Loss Allocation Limitation.

          As of any distribution date on or after the Cross-over Date, the Special Hazard Loss Coverage Amount will be zero.

          On each distribution date, the Bankruptcy Loss Coverage Amount will equal approximately $150,000, subject to reduction as described in the pooling and servicing agreement, minus the aggregate amount of previous Deficient Valuations and Debt Service Reductions. As of any distribution date on or after the Cross-over Date, the Bankruptcy Loss Coverage Amount will be zero. The Bankruptcy Loss Coverage Amount and the manner of reduction thereof described in the pooling and servicing agreement may be reduced or modified upon written confirmation from each of the Rating Agencies that such reduction or modification will not adversely affect the then current ratings of the senior certificates. Any reduction may adversely affect the coverage provided by subordination with respect to Bankruptcy Losses.

Method of Allocating Realized Losses

          All allocations of Realized Losses to a class of certificates will be accomplished on a distribution date by reducing their class certificate balance by the appropriate share of any such losses occurring during the month preceding the month of that distribution date and, accordingly, will be taken into account in determining the distributions of principal and interest on those certificates commencing on the following distribution date.

          The interest portion of all Realized Losses will be allocated among the outstanding classes of certificates entitled to distributions of interest to the extent described under “— Distributions on the Certificates — Interest” above.

          No reduction of the class certificate balance of any class of certificates will be made on any distribution date on account of any Realized Loss to the extent that that reduction would have the effect of reducing the aggregate class certificate balances of all classes of certificates as of that distribution date to an amount less than the Pool Principal Balance as of the first day of the month of such distribution date, less any Deficient Valuations occurring before the Bankruptcy Loss Coverage Amount has been reduced to zero (that limitation being the “Loss Allocation Limitation”).

          Debt Service Reductions are not treated as Realized Losses, and the related principal portion will not be allocated in reduction of the class certificate balance of any class of certificates. However, after the Bankruptcy Loss Coverage Amount has been reduced to zero, the amounts distributable under clause (1) of the definitions of Senior Optimal Principal Amount and Subordinated Optimal Principal Amount will be reduced by the amount of the principal portion of any Debt Service Reductions. Regardless of when they occur, Debt Service Reductions may reduce the amount of Available Funds otherwise available for distribution on a distribution date. As a result of the subordination of the subordinated certificates in right of distribution, the reduction in Available Funds resulting from any Debt Service Reductions before the Bankruptcy Loss Coverage Amount has been reduced to zero will be borne by the subordinated certificates (to the extent then outstanding) in inverse order of priority.

Voting Rights

          There are actions specified in the prospectus that may be taken by holders of certificates evidencing a specified percentage of all undivided interests in the trust and may be taken by holders of certificates entitled in the aggregate to that percentage of the voting rights. 99.0% of all voting rights will be allocated among all holders of the certificates, other than the Class A-R Certificates, based on their respective class certificate balances. In addition, 1.0% of all voting rights will be allocated among the holders of the Class A-R Certificates. The pooling and servicing agreement may be amended without the consent of the certificateholders in specified circumstances. See “The Agreements – Amendment” in the prospectus.

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Additional Rights of the Residual Certificateholders

          In addition to distributions of principal and interest the holders of the Residual Certificates will be entitled to receive:

          (a) the amount, if any, of Available Funds remaining in the related REMIC on any distribution date after distributions of interest and principal are made on the certificates on such date; and

          (b) the proceeds, if any, of the assets of the trust remaining in the related REMIC after the class certificate balances of all classes of the certificates have each been reduced to zero.

          It is not anticipated that any material assets will be remaining for these distributions on the Residual Certificates at any time. See “Material Federal Income Tax Consequences” in this prospectus supplement.

Subordination

Priority of Senior Certificates

          As of the date of the initial issuance of the certificates, the aggregate class certificate balance of the classes of subordinated certificates will equal approximately 5.60% of the aggregate class certificate balance of all the classes of certificates. The rights of the holders of the subordinated certificates to receive distributions with respect to the mortgage loans of the mortgage pool will be subordinate to the rights of the holders of the senior certificates, to the extent described above. The subordination of the subordinated certificates is intended:

          (a) to enhance the likelihood of timely receipt by the holders of the senior certificates (to the extent of the subordination of the subordinated certificates) of the full amount of the scheduled monthly distributions of principal and interest allocable to the senior certificates; and

          (b) to afford the holders of the senior certificates (to the extent of the subordination of the subordinated certificates) protection against Realized Losses, to the extent described above.

          If Realized Losses for the mortgage pool exceed the credit support provided to the senior certificates through subordination, or if Excess Losses occur, all or a portion of those losses will be borne by the senior certificates. However, from and after the Cross-over Date, the principal portion of any Realized Losses (other than Excess Losses) allocable to the Class A-1 Certificates will instead be allocated in reduction of the class certificate balance of the Class A-2 Certificates as long as the Class A-2 Certificates are outstanding.

          The protection afforded to the holders of senior certificates by means of the subordination feature will be accomplished by:

          (1) the preferential right of those holders to receive, prior to any distribution being made on a distribution date in respect of the subordinated certificates, in accordance with the paydown rules specified above under “— Distributions on the Certificates —Allocation of Available Funds,” the amounts due to the senior certificateholders on each distribution date out of the Available Funds for that date and, if necessary, by the right of those holders to receive future distributions on the related mortgage loans that would otherwise have been payable to the holders of the subordinated certificates; and

          (2) the allocation to the subordinated certificates of the principal portion of any Non-Excess Loss to the extent set forth in this prospectus supplement.

          The allocation of the principal portion of Realized Losses for the mortgage pool (as set forth herein) to the subordinated certificates on any distribution date will decrease the protection provided to the senior certificates then outstanding on future distribution dates by reducing the aggregate class certificate balance of the classes of subordinated certificates then outstanding.

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          In addition, in order to extend the period during which the subordinated certificates remain available as credit enhancement for the senior certificates, if the Two Times Test is not satisfied, the entire amount of any prepayment or other unscheduled recovery of principal with respect to a mortgage loan will be allocated to the outstanding senior certificates as a group during the first seven years after the date of initial issuance of the certificates, with such allocation being subject to reduction thereafter as described in this prospectus supplement, except that those amounts will be allocated pro rata among all the outstanding senior certificates entitled to principal distributions on each distribution date after the Cross-over Date. This allocation has the effect of accelerating the amortization of the outstanding senior certificates as a group while, in the absence of losses in respect of the mortgage loans, increasing the percentage interest in the principal balance of the mortgage loans evidenced by the subordinated certificates.

          After the payment of amounts distributable in respect of the senior certificates on each distribution date, the subordinated certificates will be entitled on such date to the remaining portion, if any, of the Available Funds in an aggregate amount equal to the Accrued Certificate Interest on the subordinated certificates for such date, any remaining undistributed Accrued Certificate Interest on the subordinated certificates from previous distribution dates and the sum of the Allocable Shares of the classes of subordinated certificates. Amounts so distributed to subordinated certificateholders will not be available to cover any delinquencies or any Realized Losses in respect of subsequent distribution dates.

Priority Among Subordinated Certificates

As of the date of the initial issuance of the certificates, the aggregate class certificate balance of the Class B-4, Class B-5 and Class B-6 Certificates, all of which are subordinate in right of distribution to the subordinated certificates offered by this prospectus supplement, will equal approximately 1.20% of the initial aggregate class certificate balance of all the classes of certificates and approximately 21.43% of the initial aggregate class certificate balance of all the classes of subordinated certificates. On each distribution date, the holders of any particular class of subordinated certificates, other than the Class B-6 Certificates, will have a preferential right to receive the amounts due them on that distribution date out of Available Funds, prior to any distribution being made on that date on each class of certificates ranking subordinate to such class. In addition, except as described in this prospectus supplement, the principal portion of any Non-Excess Loss with respect to a mortgage loan will be allocated, to the extent set forth in this prospectus supplement, in reduction of the class certificate balances of the subordinated certificates in inverse order of priority of those certificates. See “¾ Losses Allocable to the Certificates” in this prospectus supplement. The effect of the allocation of such Realized Losses to a class of subordinated certificates will be to reduce future distributions allocable to that class and increase the relative portion of distributions allocable to more senior classes of certificates.

          In order to maintain the relative levels of subordination among the subordinated certificates, prepayments and certain other unscheduled recoveries of principal in respect of the mortgage loans (which will not be distributable to the subordinated certificates for at least the first seven years after the date of initial issuance of the certificates, except as otherwise described in this prospectus supplement on or following a Senior Final Distribution Date) will not be distributable to the holders of the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates on any distribution date for which the related Class Prepayment Distribution Trigger is not satisfied, except as described above. See “¾ Distributions on the Certificates ¾ Principal” in this prospectus supplement. If the applicable Class Prepayment Distribution Trigger is not satisfied with respect to any such class of Class B Certificates, the amortization of more senior ranking classes of subordinated certificates may occur more rapidly than would otherwise have been the case and, in the absence of losses in respect of the mortgage loans, the percentage interest in the principal balance of the mortgage loans evidenced by those Class B Certificates may increase.

          As a result of the subordination of any class of certificates, that class of certificates will be more sensitive than more senior ranking classes of certificates to the rate of delinquencies and defaults on the related mortgage loans, and under certain circumstances investors in those certificates may not recover their initial investment.

Structuring Assumptions

          Unless otherwise specified, the information in the tables in this prospectus supplement has been prepared on the basis of the following Structuring Assumptions:

• The mortgage pool consists of two mortgage loans with the following characteristics:

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Principal Balance	Current Mortgage Rate (%)	Remaining Term to Maturity (Months)	Original Term to Maturity (Months)	Expense Fee Rate (%)	Initial Periodic Rate Cap (%)	Subsequent Periodic Rate Cap (%)
$55,790,863.94	6.9839504873	359	360	0.3750000000	6.0000000000	2.0000000000

Principal Balance	Gross Margin (%)	Maximum Mortgage Rate (%)	Minimum Mortgage Rate (%)	Months to Next Rate Adjustment	Months between Rate Adjustments	Mortgage Index
$55,790,863.94	2.2500000000	12.9839504873	2.2500000000	59	6	Six-Month LIBOR

• Interest-only mortgage loan:

Principal Balance	Current Mortgage Rate (%)	Remaining Term to Maturity (Months)	Original Term to Maturity (Months)	Expense Fee Rate (%)	Initial Periodic Rate Cap (%)	Subsequent Periodic Rate Cap (%)
$344,249,099.13	6.7850559786	359	360	0.3750000000	6.0000000000	2.0000000000

Principal Balance	Gross Margin (%)	Maximum Mortgage Rate (%)	Minimum Mortgage Rate (%)	Months to Next Rate Adjustment	Months between Rate Adjustments	Interest-Only Remaining Term (Months)	Mortgage Index
$344,249,099.13	2.2500000000	12.7850559786	2.2500000000	59	6	119	Six-Month LIBOR

• the mortgage loans prepay at the related specified constant percentages of CPR,

• no defaults in the payment by mortgagors of principal of and interest on the mortgage loans are experienced,

• scheduled payments on the mortgage loans are received on the first day of each month commencing in the calendar month following the closing date and are computed before giving effect to prepayments received on the last day of the prior month,

• prepayments are allocated without giving effect to loss and delinquency tests,

• there are no Net Interest Shortfalls and prepayments represent prepayments in full of individual mortgage loans and are received on the last day of each month, commencing in the calendar month of the closing date,

• the scheduled monthly payment for each mortgage loan (other than the interest-only mortgage loans during such period) has been calculated so that each mortgage loan will amortize in amounts sufficient to repay the current balance of the mortgage loan by its respective remaining term to maturity,

• the mortgage rate is calculated as described in this prospectus supplement,

• the initial class certificate balance of each class of certificates is as set forth on page S-5,

• the approximate initial class certificate balances of the Class B-4, Class B-5 and Class B-6 Certificates are $2,000,000, $1,600,000 and $1,200,863, respectively,

• distributions in respect of the certificates are received in cash on the 25th day of each month commencing in the calendar month following the month of the closing date,

• any interest-only mortgage loan with a remaining interest-only term greater than zero does not amortize during the remaining interest-only term. At the end of the remaining interest-only term, any such mortgage

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	loan will amortize in amounts sufficient to repay the current balance of the mortgage loan over the remaining term to maturity calculated at the expiration of the remaining interest-only term,
•	the closing date of the sale of the certificates is May 30, 2006,
•	the seller is not required to repurchase or substitute for any mortgage loan,
•	the master servicer does not exercise the option to repurchase the mortgage loans described under “— Optional Purchase of Defaulted Loans” and “— Optional Termination” in this prospectus supplement,
•	the level of the Six-Month LIBOR Index remains constant at 5.3088% per annum,
•	the mortgage rate on each mortgage loan will be adjusted on each Adjustment Date (as necessary) to a rate equal to the Mortgage Index plus the Gross Margin, subject to Maximum Mortgage Rates, Minimum Mortgage Rates and Periodic Rate Caps (as applicable), and
•	scheduled monthly payments on each mortgage loan (other than the interest-only mortgage loans during such period) will be adjusted in the month immediately following the Adjustment Date (as necessary) for such mortgage loan to equal the fully amortizing payment described above.

          While it is assumed that each of the mortgage loans prepays at the specified constant percentages of CPR, this is not likely to be the case. Moreover, discrepancies may exist between the characteristics of the actual mortgage loans which will be delivered to the trustee and characteristics of the mortgage loans used in preparing the tables in this prospectus supplement.

          Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model. The prepayment model used in this prospectus supplement is CPR, which represents an assumed rate of principal prepayment each year relative to the then-outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans. A prepayment assumption of 10% CPR assumes constant prepayment rates of 10% per annum of the then-outstanding principal balance of such mortgage loans. 0% CPR assumes prepayment rates equal to 0% of CPR, i.e., no prepayments. Correspondingly, 25% CPR assumes prepayment rates equal to 25% of CPR, and so forth. CPR does not purport to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans.

Optional Purchase of Defaulted Loans

          The master servicer may, at its option and with the consent of the trustee, purchase from the trust fund any mortgage loan which is delinquent in payment by 91 days or more. Any purchase shall be at a price equal to 100% of the Stated Principal Balance of the mortgage loan plus accrued interest at the applicable mortgage rate from the date through which interest was last paid by the related mortgagor or advanced, and not reimbursed, to the first day of the month in which the amount is to be distributed.

Optional Termination

          The master servicer will have the right to repurchase all remaining mortgage loans in the mortgage pool and thereby effect early retirement of the certificates, subject to the aggregate Stated Principal Balance of the mortgage loans at the time of repurchase being less than 10% of the Pool Principal Balance as of the cut-off date. In the event the master servicer exercises its repurchase option, the purchase price distributed with respect to each class of certificates will be 100% of its then outstanding class certificate balance, and, in the case of an interest bearing certificate, any unpaid accrued interest at the applicable pass-through rate, in each case subject to reduction as provided in the pooling and servicing agreement if the purchase price is based in part on the appraised value of any foreclosed or otherwise repossessed properties in the mortgage pool and the appraised value is less than the Stated Principal Balance of the related mortgage loans. Distributions on the certificates with respect to any optional termination will first be paid to the senior certificates, then to the subordinated certificates in the order of priority specified in “— Distributions on the Certificates — Allocation of Available Funds” in this prospectus supplement. The proceeds from any distribution may not be sufficient to distribute the full amount to which each

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class of certificates is entitled if the purchase price is based in part on the appraised value of any foreclosed or otherwise repossessed property and the appraised value is less than the Stated Principal Balance of the related mortgage loan.

          Under the pooling and servicing agreement, the trustee is required to give notice of any optional termination of the trust fund, specifying the distribution date on which certificateholders may surrender their certificates for payment of the final distribution and cancellation, promptly to the certificateholders by letter mailed not earlier than the 10^th day and no later than the 15^th day of the month preceding the month of the final distribution. Offered certificates may be surrendered at the Corporate Trust Office of the trustee located at 101 Barclay Street, 8W, New York, New York 10286, Attention: Corporate Trust Administration — First Horizon 2006-AA3 or at any other address the trustee designates.

          No holder of any certificates will be entitled to any Unanticipated Recoveries received with respect to any mortgage loan after the termination of the trust. See “Servicing of the Mortgage Loans — Unanticipated Recoveries of Losses on the Mortgage Loans” in this prospectus supplement.

Restrictions on Transfer of the Residual Certificates

          The Residual Certificates will be subject to the restrictions on transfer described in the prospectus under “Material Federal Income Tax Consequences — Taxation of Holders of Residual Interest Securities — Restrictions on Ownership and Transfer of Residual Securities” and “— Tax Treatment of Foreign Investors,” and an “electing large partnership” and a Non-U.S. Person, each as described in those sections of the prospectus, will be subject to the same restrictions on transfer and ownership of a Residual Certificate described in those sections as a Disqualified Organization, unless, in the case of a Non-U.S. Person, the person provides the trustee with a duly completed IRS Form W-8ECI. The pooling and servicing agreement provides that the Residual Certificates, in addition to certain other ERISA restricted classes of certificates, may not be acquired by an ERISA Plan. See “ERISA Considerations” in this prospectus supplement and the prospectus. Each Residual Certificate will contain a legend describing these restrictions.

YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS

General

          The effective yield to the holders of each class of certificates will be lower than the yield otherwise produced by the applicable pass-through rate and the purchase price of the certificates because monthly distributions will not be payable to the holders until the 25th day (or, if that day is not a business day, the following business day) of the month after the applicable interest accrual period without any additional distribution of interest or earnings to compensate for the delay.

          Delinquencies on the mortgage loans which are not advanced by or on behalf of the master servicer because such amounts, if advanced, would not be recoverable, will adversely affect the yield on the related certificates. Because of the priority of distributions, shortfalls resulting from delinquencies not so advanced will be borne first by the subordinated certificates, in the reverse order of their numerical class designations, and then by the senior certificates. If, as a result of shortfalls, the aggregate of the class certificate balances of all classes of the certificates exceeds the Pool Principal Balance, the class certificate balance of the class of subordinated certificates then outstanding with the highest numerical class designation will be reduced by the amount of the excess.

          Net Interest Shortfalls for the mortgage pool will adversely affect the yields on the classes of senior certificates and the subordinated certificates. In addition, although all losses (other than Excess Losses) for the mortgage pool initially will be borne by the subordinated certificates in the reverse order of their numerical class designations, Excess Losses for the mortgage pool for any distribution date will be borne by the related senior certificates and the subordinated certificates, pro rata. As a result, the yields on the certificates will depend on the rate and timing of Realized Losses, including Excess Losses. Excess Losses could occur at a time when one or more classes of subordinated certificates are still outstanding and otherwise available to absorb other types of Realized Losses.

General Prepayment Considerations and Risks

          The rate of principal payments, the aggregate amount of distributions and the yield to maturity of the certificates will be related to the rate and timing of payments of principal on the

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mortgage loans. The rate of principal payments on the mortgage loans will in turn be affected by the amortization schedules of the mortgage loans and by the rate of principal prepayments, including for this purpose, prepayments resulting from refinancing, liquidations of the mortgage loans due to defaults, casualties, condemnations and repurchases by the seller or master servicer. The mortgage loans may be prepaid by the mortgagors at any time without a prepayment penalty. The mortgage loans may also be subject to “due-on-sale” provisions. See “The Mortgage Pool” in this prospectus supplement.

          Prepayments, liquidations and purchases of the mortgage loans will result in distributions to the related certificates of principal amounts which would otherwise be distributed over the remaining terms of the mortgage loans. Because the rate of payment of principal of the mortgage loans will depend on future events and a variety of factors, no assurance can be given as to the rate of payment of principal on the mortgage loans or the rate of principal prepayments. The extent to which the yield to maturity of a class of offered certificates may vary from the anticipated yield will depend upon the degree to which the class of offered certificates is purchased at a discount or premium, and the degree to which the timing of payments on the offered certificates is sensitive to prepayments, liquidations and purchases of the mortgage loans in the mortgage pool.

          You should consider the risk that,

• if you purchase a certificate at a discount, a slower than anticipated rate of principal payments (including prepayments) on the mortgage loans could result in an actual yield on your certificates that is lower than the anticipated yield; and

• if you purchase a certificate at a premium, a faster than anticipated rate of principal payments (including prepayments) on the mortgage loans could result in an actual yield on your certificates that is lower than the anticipated yield.

          The rate of principal payments, including prepayments, on pools of mortgage loans may vary significantly over time and may be influenced by a variety of economic, geographic, social and other factors, including changes in mortgagors’ housing needs, job transfers, unemployment, mortgagors’ net equity in the mortgaged properties, servicing decisions, as well as the characteristics of the mortgage loans included in the mortgage pool as described under “The Mortgage Pool — General” in this prospectus supplement. In addition, refinancing programs, including First Horizon’s Streamlined Documentation Program, may affect the rate of prepayments on the mortgage loans. In general, if prevailing interest rates were to fall significantly below the mortgage rates on the mortgage loans, the mortgage loans could be subject to higher prepayment rates than if prevailing interest rates were to remain at or above the mortgage rates on the mortgage loans. Conversely, if prevailing interest rates were to rise significantly, the rate of prepayments on the mortgage loans would generally be expected to decrease. No assurances can be given as to the rate of prepayments on the mortgage loans in stable or changing interest rate environments. Furthermore, with respect to up to 25% of the mortgage loans, the depositor may deliver all or a portion of each related mortgage file to the trustee not later than thirty days after the closing date, a delayed delivery. If the seller fails to deliver all or a portion of any mortgage file to the depositor or other designee of the depositor or, at the depositor’s direction, to the trustee within the 30-day period, the seller will be required to use its best efforts to deliver a substitute mortgage loan for the related delayed delivery mortgage loan or repurchase the related delayed delivery mortgage loan. Any repurchases pursuant to this provision would also have the effect of accelerating the rate of prepayments on the mortgage loans.

          The mortgage loans will consist of adjustable rate mortgage loans subject to an initial fixed rate period of five years. Adjustable rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment. For example, if prevailing interest rates fall significantly, adjustable rate mortgage loans could be subject to higher prepayment rates than if prevailing interest rates remain constant because the availability of fixed rate mortgage loans at lower interest rates may encourage mortgagors to refinance their adjustable rate mortgage loans to a lower fixed interest rate. Prepayments on the 5/6 Mortgage Loans may differ as they approach their first Adjustment Dates. No assurance can be given as to the level of prepayment that the mortgage loans will experience.

          As described in this prospectus supplement, approximately 86.05% of the mortgage loans do not provide for monthly payments of principal for the first ten years following origination. Instead, only monthly payments of interest are due during each period. Other considerations aside, due to such characteristics, borrowers may be disinclined to prepay such loans during such ten-year periods. In addition, because no principal is due on such loans for their initial ten-year period, the related certificates will amortize at a slower rate during such period than would otherwise be the case. Thereafter, when the

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monthly payments on such loans are recalculated on the basis of a twenty- year level payment amortization schedule, principal payments on such certificates are expected to increased correspondingly, and, in any case, at a faster rate than if payments on the underlying mortgage loans were calculated on the basis of a thirty year amortization schedule. Notwithstanding the foregoing, no assurance can be given as to any prepayment rate on the mortgage loans.

          The mortgage rate applicable to all the mortgage loans and any Adjustment Date will be based on the Mortgage Index value most recently announced as of a date generally 45 days prior to such Adjustment Date. Thus, if the Mortgage Index value rises, the lag in time before the corresponding Mortgage Rate increases will, all other things being equal, slow the upward adjustment of the pass-through rate on the related certificates. In addition, the mortgage loans will have mortgage rates which will not adjust for a substantial period of time after origination although certain mortgage rates will begin adjusting earlier due to the length of time that has passed since origination. See “The Mortgage Pool” in this prospectus supplement.

          The weighted average net mortgage rate on the mortgage loans in the mortgage pool may decrease, and may decrease significantly, after the mortgage rates on the mortgage loans begin to adjust as a result of, among other facts, the dates of adjustment, the gross margins and changes in the Mortgage Index. If as a result of such interest rate adjustments, the weighted average net mortgage rate on the mortgage loans is reduced, investors in the certificates will experience a lower yield. In addition, if, despite increases in the index, the mortgage rate on any mortgage loan cannot increase due to a maximum mortgage interest limitation or a periodic cap, the yield on the certificates could be adversely affected. Finally because the pass-through rate on each certificate will be based on the weighted average net mortgage rate on all the mortgage loans, disproportionate principal payments on the mortgage loans having net mortgage rates higher or lower than the then-current pass-through rate on such certificate will affect the pass-through rate for such certificate for future periods and the yield on such certificate.

           Voluntary prepayments in full of principal on the mortgage loans received by the master servicer from the first day through the fifteenth day of each month (other than the month of the cut-off date) are passed through to the certificateholders in the month of receipt or payment. Voluntary prepayments of principal in full received from the sixteenth day (or, in the case of the month of the cut-off date, from the cut-off date) through the last day of each month, and all voluntary partial prepayments of principal on the mortgage loans are passed through to the certificateholders in the month following the month of receipt or payment. Any prepayment of a mortgage loan or liquidation of a mortgage loan (by foreclosure proceedings or by virtue of the purchase of a mortgage loan in advance of its stated maturity as required or permitted by the pooling and servicing agreement) will generally have the effect of passing through to the certificateholders principal amounts which would otherwise be passed through (or reduced) in amortized increments over the remaining term of such mortgage loan.

          The timing of changes in the rate of prepayments on the mortgage loans may significantly affect an investor’s actual yield to maturity, even if the average rate of principal payments is consistent with an investor’s expectation. In general, the earlier a prepayment of principal on the mortgage loans, the greater the effect on an investor’s yield to maturity. The effect on an investor’s yield as a result 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 may not be offset by a subsequent like decrease or increase in the rate of principal payments.

Prepayment Considerations and Risks for the Class B Certificates

          The rate of payment of principal, the aggregate amount of distributions and the yield to maturity of the Class B Certificates will be affected by the rate of prepayments on the mortgage loans, as well as the rate of mortgagor defaults resulting in Realized Losses, by the severity of those losses and by the timing thereof. See “Description of the Certificates — Losses Allocable to the Certificates” in this prospectus supplement for a description of the manner in which such losses are borne by the holders of the certificates. If the purchaser of a Class B Certificate calculates its anticipated yield based on an assumed rate of default and amount of Realized Losses that is lower than the default rate and the amount of losses actually incurred, its actual yield to maturity may be lower than that so calculated and could be negative. The timing of defaults and losses will also affect an investor’s actual yield to maturity, even if the average rate of defaults and severity of losses are consistent with an investor’s expectations. In general, the earlier a loss occurs, the greater the effect on an investor’s yield to maturity.

S-55

          The yields to maturity on the classes of Class B Certificates with higher numerical designations will be more sensitive to losses due to liquidations of defaulted mortgage loans than will the yields on such classes with lower numerical designations, and the yields to maturity on all the Class B Certificates will be more sensitive to such losses than will the yields on the other classes of certificates. The Class B Certificates will be more sensitive to losses due to liquidations of defaulted mortgage loans because the entire amount of such losses will be allocable to such certificates in inverse order of priority, except as provided in this prospectus supplement. To the extent not covered by the master servicer’s advances of delinquent monthly payments of principal and interest, delinquencies on the mortgage loans may also have a relatively greater effect:

          (1) on the yields to investors in the Class B Certificates with higher numerical designations than on the yields to investors in those Class B Certificates with lower numerical designations; and

          (2) on the yields to investors in the Class B Certificates than on the yields to investors in the senior certificates.

          As described above under “Description of the Certificates — Distributions on the Certificates — Interest” and “— Principal,” “— Losses Allocable to the Certificates” and “— Subordination,” amounts otherwise distributable to holders of any class of Class B Certificates will be made available to protect the holders of the more senior ranking classes of the certificates against interruptions in distributions due to certain mortgagor delinquencies. Such delinquencies, even if subsequently cured, may affect the timing of the receipt of distributions by the holders of the Class B Certificates.

          To the extent that the Class B Certificates are being purchased at discounts from their initial class certificate balances, if the purchaser of such a certificate calculates its yield to maturity based on an assumed rate of payment of principal faster than that actually received on such certificate, its actual yield to maturity may be lower than that so calculated.

Yield Sensitivity of the Class A-2 Certificates

          After the Cross-over Date, the yield to maturity on the Class A-2 Certificates will be more sensitive to losses due to liquidations of the mortgage loans (and the timing thereof) than that of any other class of senior certificates receiving principal because the principal portion of Realized Losses on the mortgage loans, other than Excess Losses, allocable to the Class A-1 Certificates will be borne first by the Class A-2 Certificates (in addition to other Realized Losses allocated to the Class A-2 Certificates) and not by the Class A-1 Certificates for so long as the class certificate balance of the Class A-2 Certificates are greater than zero.

Additional Information

          The depositor intends to file certain additional yield tables and other computational materials with respect to one or more classes of offered certificates with the SEC. The tables and materials were prepared by Credit Suisse Securities (USA) LLC at the request of one or more prospective investors, based on assumptions provided by, and satisfying the special requirements of, the prospective investors. The tables and assumptions may be based on assumptions that differ from the Structuring Assumptions. Accordingly, the tables and other materials may not be relevant to or appropriate for investors other than those specifically requesting them.

Weighted Average Lives of the Offered Certificates

          The weighted average life of an offered certificate is determined by (a) multiplying the amount of the net reduction, if any, of the class certificate balance of the certificate on each distribution date by the number of years from the date of issuance to the distribution date, (b) summing the results and (c) dividing the sum by the aggregate amount of the net reductions in class certificate balance of the certificate referred to in clause (a).

          For a discussion of the factors which may influence the rate of payments, including prepayments, of the mortgage loans, see “— General Prepayment Considerations and Risks” in this prospectus supplement and “Yield and Prepayment Considerations” in the prospectus.

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          The interaction of the foregoing factors may have different effects on various classes of offered certificates and the effects on any class may vary at different times during the life of the class. Accordingly, no assurance can be given as to the weighted average life of any class of offered certificates. Further, to the extent the prices of the offered certificates represent discounts or premiums to their respective original class certificate balances, variability in the weighted average lives of the classes of offered certificates will result in variability in the related yields to maturity. For an example of how the weighted average lives of the classes of offered certificates may be affected at various constant percentages of CPR, see the Decrement Tables below.

Decrement Tables

          The following tables indicate the percentages of the initial class certificate balances of the classes of offered certificates that would be outstanding after each of the distribution dates shown at various constant percentages of CPR and the corresponding weighted average lives of the classes. The tables have been prepared on the basis of the Structuring Assumptions. It is not likely that the mortgage loans in the mortgage pool will have the precise characteristics described in the Structuring Assumptions or that all the mortgage loans in the mortgage pool will prepay at the constant percentages of CPR specified in the tables below or at any other constant rate. Moreover, the diverse remaining terms to maturity and mortgage rates of the mortgage loans could produce slower or faster principal distributions than indicated in the tables, which have been prepared using the specified constant percentages of CPR, even if the weighted average remaining term to maturity and weighted average mortgage rate of the mortgage loans are consistent with the remaining term to maturity and weighted average mortgage rate specified in the Structuring Assumptions.

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PERCENT OF INITIAL CLASS PRINCIPAL BALANCE OUTSTANDING
OF THE CLASS A-1 AND CLASS A-2 CERTIFICATES
AT THE FOLLOWING CONSTANT PERCENTAGES OF CPR

Distribution Date	0%	10%	20%	25%	35%	50%
Initial Percentage	100	100	100	100	100	100
May 2007	100	89	79	73	63	47
May 2008	100	80	62	53	39	22
May 2009	100	71	48	39	25	10
May 2010	99	63	38	29	16	5
May 2011	99	56	31	22	10	3
May 2012	99	50	24	16	7	1
May 2013	99	44	19	12	4	1
May 2014	99	40	16	9	3	*
May 2015	98	36	12	7	2	*
May 2016	98	32	10	5	1	*
May 2017	96	28	8	4	1	*
May 2018	93	25	6	3	*	*
May 2019	91	22	5	2	*	*
May 2020	88	19	4	1	*	*
May 2021	85	16	3	1	*	*
May 2022	82	14	2	1	*	*
May 2023	78	12	2	1	*	*
May 2024	75	11	1	*	*	*
May 2025	71	9	1	*	*	*
May 2026	66	8	1	*	*	*
May 2027	62	6	1	*	*	*
May 2028	57	5	*	*	*	*
May 2029	51	4	*	*	*	*
May 2030	45	3	*	*	*	*
May 2031	39	3	*	*	*	*
May 2032	32	2	*	*	*	*
May 2033	25	1	*	*	*	*
May 2034	17	1	*	*	*	*
May 2035	8	*	*	*	*	*
May 2036	0	0	0	0	0	0
Weighted Average Life (in years)**	22.05	8.04	4.23	3.31	2.21	1.37

PERCENT OF INITIAL CLASS PRINCIPAL BALANCE OUTSTANDING
OF THE CLASS B-1, CLASS B-2 AND CLASS B-3 CERTIFICATES
AT THE FOLLOWING CONSTANT PERCENTAGES OF CPR

Distribution Date	0%	10%	20%	25%	35%	50%
Initial Percentage	100	100	100	100	100	100
May 2007	100	100	100	100	100	100
May 2008	100	100	100	100	93	71
May 2009	100	100	100	92	75	50
May 2010	99	99	83	69	49	25
May 2011	99	99	66	51	32	13
May 2012	99	99	53	38	20	6
May 2013	99	95	42	29	13	3
May 2014	99	85	34	22	9	2
May 2015	98	76	27	16	6	1
May 2016	98	68	21	12	4	*
May 2017	96	60	17	9	2	*
May 2018	93	53	13	6	1	*
May 2019	91	46	10	5	1	*
May 2020	88	40	8	3	1	*
May 2021	85	35	6	2	*	*
May 2022	82	30	5	2	*	*
May 2023	78	26	4	1	*	*
May 2024	75	22	3	1	*	*
May 2025	71	19	2	1	*	*
May 2026	66	16	2	*	*	*
May 2027	62	14	1	*	*	*
May 2028	57	11	1	*	*	*
May 2029	51	9	1	*	*	*
May 2030	45	7	*	*	*	*
May 2031	39	6	*	*	*	*
May 2032	32	4	*	*	*	*
May 2033	25	3	*	*	*	*
May 2034	17	2	*	*	*	*
May 2035	8	1	*	*	*	*
May 2036	0	0	0	0	0	0
Weighted Average Life (in years)**	22.05	13.79	7.48	6.12	4.58	3.20

PERCENT OF INITIAL CLASS PRINCIPAL BALANCE OUTSTANDING
OF THE CLASS A-R CERTIFICATES
AT THE FOLLOWING CONSTANT PERCENTAGES OF CPR

Distribution Date	0%	10%	20%	25%	35%	50%
Initial Percentage	100	100	100	100	100	100
May 2007	0	0	0	0	0	0
May 2008	0	0	0	0	0	0
May 2009	0	0	0	0	0	0
May 2010	0	0	0	0	0	0
May 2011	0	0	0	0	0	0
May 2012	0	0	0	0	0	0
May 2013	0	0	0	0	0	0
May 2014	0	0	0	0	0	0
May 2015	0	0	0	0	0	0
May 2016	0	0	0	0	0	0
May 2017	0	0	0	0	0	0
May 2018	0	0	0	0	0	0
May 2019	0	0	0	0	0	0
May 2020	0	0	0	0	0	0
May 2021	0	0	0	0	0	0
May 2022	0	0	0	0	0	0
May 2023	0	0	0	0	0	0
May 2024	0	0	0	0	0	0
May 2025	0	0	0	0	0	0
May 2026	0	0	0	0	0	0
May 2027	0	0	0	0	0	0
May 2028	0	0	0	0	0	0
May 2029	0	0	0	0	0	0
May 2030	0	0	0	0	0	0
May 2031	0	0	0	0	0	0
May 2032	0	0	0	0	0	0
May 2033	0	0	0	0	0	0
May 2034	0	0	0	0	0	0
May 2035	0	0	0	0	0	0
May 2036	0	0	0	0	0	0
Weighted Average Life (in years)**	0.07	0.07	0.07	0.07	0.07	0.07

*	Indicates an outstanding balance greater than 0% and less than 0.5% of the original principal balance.
**	Determined as specified under “— Weighted Average Lives of the Certificates” above.

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Last Scheduled Distribution Date

          The last scheduled distribution date for each class of certificates is the distribution date in June 2036, which is the distribution date in the month following the month of the latest scheduled maturity date for any of the mortgage loans. Because the rate of distributions in reduction of the class certificate balance of each class of offered certificates will depend on the rate of payment, including prepayments, of the mortgage loans, the class certificate balance of any such class of offered certificates could be reduced to zero significantly earlier or later than the last scheduled distribution date for such class. The rate of payments on the mortgage loans will depend on their particular characteristics, as well as on prevailing interest rates from time to time and other economic factors, and no assurance can be given as to the actual payment experience of the mortgage loans of the mortgage pool. See “— Prepayment Considerations and Risks” and “— Weighted Average Lives of the Offered Certificates” in this prospectus supplement and “Yield and Prepayment Considerations” in the prospectus.

USE OF PROCEEDS

          The depositor will use the net proceeds from the sale of the certificates to purchase the mortgage loans from the Seller.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

          The following discussion is the opinion of Andrews Kurth LLP, counsel to the depositor, as to the material U.S. federal income tax aspects of the purchase, ownership and disposition of the certificates, and is based on the provisions of the Code, the Treasury Regulations thereunder, and published rulings and court decisions in effect as of the date hereof, all of which are subject to change, possibly retroactively. This discussion does not address every aspect of the U.S. federal income tax laws which may be relevant to certificateholders in light of their personal investment circumstances or to certain types of certificateholders subject to special treatment under the U.S. federal income tax laws (for example, banks and life insurance companies). Accordingly, investors should consult their tax advisors regarding U.S. federal, state, local, foreign and any other tax consequences to them of investing in the certificates.

          For federal income tax purposes, the trust fund will consist of one or more REMICs in a tiered structure. The highest REMIC will be referred to as the “Master REMIC,” and each REMIC below the Master REMIC (if any) will be referred to as an “underlying REMIC.” Each underlying REMIC (if any) will issue multiple classes of uncertificated, regular interests (the “underlying REMIC Regular Interests”) that will be held by another REMIC above it in the tiered structure. The assets of the lowest underlying REMIC (or the Master REMIC if there is no underlying REMIC) will consist of the mortgage loans and any other assets designated in the pooling and servicing agreement. The Master REMIC will issue the senior certificates and the subordinated certificates (together, excluding the Residual Certificates, the “Regular Certificates”). The Residual Certificates will represent the beneficial ownership of the residual interest in each underlying REMIC (if any) and the residual interest in the Master REMIC. The assets of the Master REMIC will consist of underlying REMIC regular interests issued by one or more underlying REMICs (if any).

          The Regular Certificates generally will be treated as debt instruments issued by the Master REMIC for federal income tax purposes. Income on the Regular Certificates must be reported under an accrual method of accounting. Under the accrual method of accounting, interest income may be required to be included in a holder’s gross income in advance of the holder’s actual receipt of that interest income.

          The discussion set out below concerning OID should be read in conjunction with the detailed discussion of OID in the prospectus under the caption “Material Federal Income Tax Consequences – Taxation of Debt Securities.”

          A debt instrument is treated as having been issued with OID to the extent its stated redemption price at maturity exceeds its issue price by more than a de minimis amount. The stated redemption price at maturity on a debt instrument includes all payments made under the debt instrument, other than payments of qualified stated interest.

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          The Regular Certificates, depending on their respective issue prices, may be treated as having been issued with OID in an amount equal to the excess of their initial respective class certificate balance (plus accrued interest from the last day preceding the issue date corresponding to a distribution date through the issue date), over their respective issue prices (including all accrued interest).

          The prepayment assumption that is to be used in determining the rate of accrual of original issue discount and whether the original issue discount is considered de minimis, and that may be used by a holder of a Regular Certificate to amortize premium, will be 25% of the CPR. No representation is made as to whether the mortgage loans will prepay at the foregoing rate or any other rate. See “Yield, Prepayment and Maturity Considerations” in this prospectus supplement and “Material Federal Income Tax Consequences” in the prospectus. Computing accruals of OID in the manner described in the prospectus and this prospectus supplement may, depending on the actual rate of prepayments during the accrual period, result in the accrual of negative amounts of OID on the certificates issued with OID in an accrual period. Holders will be entitled to offset negative accruals of OID only against future OID accrual on their certificates.

          If the holders of any Regular Certificates are treated as holding their certificates at a premium, they are encouraged to consult their tax advisors regarding the election to amortize bond premium and the method to be employed. See “Material Federal Income Tax Consequences —Taxation of Debt Securities” in the prospectus.

          The offered certificates will represent “real estate assets” under Section 856(c)(5)(B) of the Code and qualifying assets under Section 770l(a)(19)(C) in the same proportion that the assets of the trust fund would be so treated, and income on the offered certificates will represent “interest on obligations secured by mortgages on real property” in the same proportion that the income on the assets of the trust fund would be so treated. Moreover, if 95% or more of the assets of the trust fund are “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code at all times during a calendar year, then all of an offered certificate will represent “real estate assets” and all the income on the offered certificate will qualify as “interest on obligations secured by mortgages on real property” for that calendar year. Similarly, if 95% or more of the assets of the trust fund are qualifying assets under Section 7701(a)(19)(C) of the Code at all times during the calendar year, then all of an offered certificate will represent assets qualifying under Section 7701(a)(19)(C) for that calendar year.

          The Regular Certificates will represent qualifying assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed time periods of the Code.

          The holders of the Residual Certificates must include the taxable income of each REMIC in their federal taxable income. The resulting tax liability of the holders may exceed cash distributions to them during certain periods. All or a portion of the taxable income from a Residual Certificate recognized by a holder may be treated as “excess inclusion” income, which with limited exceptions, is subject to U.S. federal income tax.

          In computing alternative minimum taxable income, the special rule providing that taxable income cannot be less than the sum of the taxpayer’s excess inclusions for the year does not apply. However, a taxpayer’s alternative minimum taxable income cannot be less than the sum of the taxpayer’s excess inclusions for the year. In addition, the amount of any alternative minimum tax net operating loss is determined without regard to any excess inclusions.

          Purchasers of a Residual Certificate are encouraged to consider carefully the tax consequences of an investment in residual certificates discussed in the prospectus and consult their own tax advisors with respect to those consequences. See “Material Federal Income Tax Consequences — Taxation of Holders of Residual Interest Securities” in the prospectus. Specifically, prospective holders of a Residual Certificate should consult their tax advisors regarding whether, at the time of acquisition, a Residual Certificate will be treated as a “noneconomic” residual interest. See “Material Federal Income Tax Consequences — Taxation of Holders of Residual Interest Securities — Restrictions on Ownership and Transfer of Residual Interest Securities” and “Material Federal Income Tax Consequences — Tax Treatment of Foreign Investors” in the prospectus.

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ERISA CONSIDERATIONS

          Any fiduciary of a Plan that proposes to cause the Plan to acquire any of the offered certificates is encouraged to consult with its counsel with respect to the potential consequences of the Plan’s acquisition and ownership of the certificates under ERISA and Section 4975 of the Code. See “ERISA Considerations” in the prospectus. Section 406 of ERISA prohibits “parties in interest” with respect to an employee benefit plan subject to ERISA from engaging in various different types of transactions involving the plan and its assets unless a statutory, regulatory or administrative exemption applies to the transaction. Section 4975 of the Code imposes excise taxes on prohibited transactions involving “disqualified persons” and Plans described under that Section. ERISA authorizes the imposition of civil penalties for prohibited transactions involving Plans not subject to the requirements of Section 4975 of the Code.

          Some employee benefit plans, including governmental plans and some church plans, are not subject to ERISA’s requirements. Accordingly, assets of those plans may be invested in the offered certificates without regard to the ERISA considerations described in this prospectus supplement and in the prospectus, subject to the provisions of other applicable federal, state and local law. Any of those plans that are qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Code.

          Except as noted above, investments by Plans are subject to ERISA’s general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that a Plan’s investments be made in accordance with the documents governing the Plan. A fiduciary that decides to invest the assets of a Plan in the offered certificates should consider, among other factors, the extreme sensitivity of the investment to the rate of principal payments, including prepayments, on the mortgage loans.

          The U.S. Department of Labor has granted the underwriter an individual administrative exemption (the “Underwriting Exemption”). The Underwriting Exemption grants exceptions from some of the prohibited transaction rules of ERISA and the related excise tax provisions of Section 4975 of the Code with respect to the initial purchase, the holding and the subsequent resale by Plans of certificates in pass-through trusts that consist of specified receivables, loans and other obligations that meet the conditions and requirements of the exemption. The Underwriting Exemption applies to mortgage loans such as the mortgage loans in the trust fund.

          For a general description of the Underwriting Exemption and the conditions that must be satisfied for it to apply, see “ERISA Considerations” in the prospectus.

          On November 13, 2000, the U.S. Department of Labor published Prohibited Transaction Exemption 2000-58 (65 Fed. Reg. 67765, November 13, 2000) which amended, effective August 23, 2000, the Underwriter Exemption. Among other changes, the amended exemption generally provides that in the case of “designated transactions” a Plan would be permitted to purchase subordinate certificates rated in any of the four highest generic ratings categories of Fitch, S&P and Moody’s (provided that all other requirements are met). The designated transactions include residential mortgages. Because the ratings of a class of certificates are subject to change in the future by the rating agencies, classes of certificates eligible for purchase by Plans and pursuant to the Underwriter Exemption on the closing date may not be eligible for purchase by Plans pursuant to the Underwriter Exemption (although any Plan holding such a certificate would not be required to dispose of it solely because its rating had been lowered). However, a Plan investor which is an insurance company general account may purchase such classes of certificates in these circumstances pursuant to Sections I and III of PTCE 95-60.

          On August 22, 2002, the U.S. Department of Labor published Prohibited Transaction Exemption 2002-41 (67 Fed. Reg. 54487, August 22, 2002) which amended, effective January 1, 2001, the Underwriter Exemption to remove the requirement that a trustee not be affiliated with an underwriter in order to qualify for relief under the Underwriter Exemptions.

          It is expected that the Underwriter Exemption as amended by PTE 2000-58 will apply to the acquisition and holding by Plans of the offered certificates, excluding the Residual Certificates and that all applicable conditions of the Underwriter Exemption and PTE 2000-58 other than those within the control of the investors will be met. In

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addition, as of the date hereof, no single mortgagor is the obligor on five percent (5%) of the mortgage loans included in the trust fund by aggregate unamortized principal balance of the assets of the trust fund.

          Because the characteristics of the Residual Certificates may not meet the requirements of the Underwriter Exemption or any other issued exemption under ERISA, a Plan or an individual retirement account or other plan subject to Section 4975 of the Code may engage in a prohibited transaction or incur excise taxes or civil penalties if it purchases and holds the Residual Certificates. Consequently, transfers of the Residual Certificates will not be registered by the trustee unless the trustee receives:

• a representation from the transferee of the certificate, acceptable to and in form and substance satisfactory to the trustee, that the transferee is not an employee benefit plan subject to Section 406 of ERISA or a plan or arrangement subject to Section 4975 of the Code, nor a person acting on behalf of any plan or arrangement or using the assets of any plan or arrangement to effect the transfer, or

• an opinion of counsel satisfactory to the trustee that the purchase or holding of the certificate by a plan, or any person acting on behalf of a plan or using the plan’s assets, will not result in prohibited transactions under Section 406 of ERISA and Section 4975 of the Code and will not subject the trustee, the depositor or the master servicer to any obligation in addition to those undertaken in the pooling and servicing agreement.

          Prospective Plan investors are encouraged to consult with their legal advisors concerning the impact of ERISA and the Code, the applicability of the exemptions described above and PTE 83-1 described in the prospectus, and the potential consequences in their specific circumstances, before making an investment in any of the offered certificates. Moreover, each Plan fiduciary is encouraged to determine whether under the general fiduciary standards of investment prudence and diversification, an investment in any of the offered certificates is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan’s investment portfolio.

UNDERWRITING

          Subject to the terms and conditions set forth in the Underwriting Agreement, the depositor has agreed to sell the Underwritten Certificates to Credit Suisse Securities (USA) LLC. Distribution of the Underwritten Certificates will be made by Credit Suisse Securities (USA) LLC from time to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. In connection with the sale of the Underwritten Certificates, the underwriter may be deemed to have received compensation from the depositor in the form of underwriting discounts.

          After the initial distribution of the certificates offered hereby, Credit Suisse Securities (USA) LLC and FTN Financial Securities Corp. (an affiliate of the depositor, the seller and the master servicer) intends to make a secondary market in the Underwritten Certificates offered by it, but has no obligation to do so. FTN Financial Securities Corp. may act as principal or agent in these transactions. These transactions will be at market prices at the time of sale and not at the prices of the initial offering.

          There can be no assurance that a secondary market for the Underwritten Certificates will develop or, if it does develop, that it will continue or that it will provide certificateholders with a sufficient level of liquidity of investment.

          The depositor and the master servicer have agreed to indemnify the underwriter against, or make contributions to the underwriter with respect to, liabilities customarily indemnified against, including liabilities under the Securities Act of 1933, as amended.

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LEGAL MATTERS

          The validity of the certificates, including their material federal income tax consequences, will be passed upon for the depositor by Andrews Kurth LLP, Dallas, Texas. McKee Nelson LLP, Washington, DC, will pass upon certain legal matters on behalf of the underwriter.

RATINGS

          It is a condition to the issuance of the senior certificates (excluding the Class A-2 Certificates) that they be rated (i) “AAA” by Fitch and (ii) “Aaa” by Moody’s. It is a condition to the issuance of the Class A-2 Certificates that they be rated “AAA” by Fitch and “Aa1” by Moody’s. It is a condition to the issuance of the Class B-1, Class B-2 and Class B-3 Certificates that they be rated at least “AA,” “A” and “BBB,” respectively, by Fitch.

          The ratings assigned by Fitch and Moody’s to the mortgage pass-through certificates address the likelihood of the receipt of all distributions on the mortgage loans by the related certificateholders under the agreements pursuant to which the certificates are issued. Fitch and Moody’s’ ratings take into consideration the credit quality of the mortgage pool, including any credit support providers, structural and legal aspects associated with the certificates, and the extent to which the payment stream on the mortgage pool is adequate to make payments required by the certificates. If prepayments are faster than anticipated, investors may fail to recover their initial investment. The rating assigned by Fitch and Moody’s to the Class A-R Certificates only addresses the return of their class certificate balance and interest thereon at their pass-through rate.

          The security ratings assigned to the offered certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating agencies.

          The depositor has not requested a rating of the offered certificates by any rating agency other than Fitch and Moody’s; there can be no assurance, however, as to whether any other rating agency will rate the offered certificates or, if it does, what rating would be assigned by the other rating agency. The rating assigned by the other rating agency to the offered certificates could be lower than the respective ratings assigned by either, or both, of Fitch and Moody’s.

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GLOSSARY OF TERMS

          Accrued Certificate Interest — For any class of certificates for any distribution date will equal the interest accrued during the related interest accrual period at the applicable pass-through rate on the class certificate balance of such class of certificates immediately prior to such distribution date, less such class’ share of any Net Interest Shortfall.

          Allocable Share — With respect to any class of subordinated certificates on any distribution date, such class’ pro rata share (based on the class certificate balance of each class entitled thereto) of each of the components of the Subordinated Optimal Principal Amount described in this prospectus supplement; provided, that, except as provided in the pooling and servicing agreement, no Class B Certificates (other than the subordinated class with the highest priority of distribution) shall be entitled on any distribution date to receive distributions pursuant to clauses (2), (3) and (5) of the definition of each Subordinated Optimal Principal Amount unless the Class Prepayment Distribution Trigger for the related class is satisfied for such distribution date.

          Available Funds — With respect to any distribution date, an amount equal to the sum of:

• all scheduled installments of interest, net of total expense fees, and all scheduled installments of principal due in respect of the mortgage loans on the due date in the month in which the distribution date occurs and received before the related determination date, together with any advances in respect thereof;

• all Insurance Proceeds, Liquidation Proceeds and Unanticipated Recoveries received in respect of the mortgage loans during the calendar month before the distribution date, which in each case is the net of unreimbursed expenses incurred in connection with a liquidation or foreclosure and unreimbursed advances, if any;

• all partial or full prepayments received in respect of the mortgage loans during the related Prepayment Period, net of any Prepayment Interest Excess;

• any Compensating Interest in respect of full prepayments received in respect of the mortgage loans during the period from the sixteenth day (or, in the case of the first distribution date, from the cut-off date) of the month prior to the month of such distribution date through the last day of such month; and

• any Substitution Adjustment Amount or the purchase price for any deleted mortgage loan in the mortgage pool or a mortgage loan in the mortgage pool repurchased by the seller or the master servicer as of such distribution date, reduced by amounts in reimbursement for advances previously made and other amounts that the master servicer is entitled to be reimbursed for out of the Certificate Account pursuant to the pooling and servicing agreement.

          Available Funds Allocation — The allocation of Available Funds as described under “Distributions on the Certificates — Allocation of Available Funds” in the prospectus supplement.

          Bankruptcy Loss Coverage Amount —Approximately $150,000, subject to reduction as described in the pooling and servicing agreement, minus the aggregate amount of previous Bankruptcy Losses.

          Bankruptcy Losses — Deficient Valuations or Debt Service Reductions.

          Certificate Account — An account established and maintained by the master servicer, in the name of the trustee for the benefit of the holders of each series of certificates, for the disbursement of payments on the mortgage loans evidenced by each series of certificates.

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          Class B Certificates — The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates, collectively.

          Class Prepayment Distribution Trigger — For a class of Class B Certificates (other than the subordinated class with the highest priority of distributions) any distribution date on which a fraction (expressed as a percentage), the numerator of which is the aggregate class certificate balance of such class and each class subordinate thereto, if any, and the denominator of which is the Pool Principal Balance with respect to such distribution date, equals or exceeds such percentage calculated as of the closing date.

          Code — The Internal Revenue Code of 1986, as amended.

          Compensating Interest — As to any distribution date and any principal prepayment in respect of a mortgage loan that is received during the period from the sixteenth day of the month (or, in the case of the first distribution date, from the cut-off date) prior to the month of such distribution date through the last day of such month, an additional payment to the mortgage pool made by the master servicer, to the extent funds are available from the master servicing fee, equal to the amount of interest at the Net Mortgage Rate, for that mortgage loan from the date of the prepayment to the related due date; provided that such payment shall not exceed 0.0083% of the Pool Principal Balance of the mortgage pool as of the related determination date.

          CPR — Constant prepayment rate, a prepayment standard or model which represents an assumed constant annual rate of prepayment each month of the then outstanding principal balance of a pool of new mortgage loans.

          Cross-over Date — The distribution date on which the class certificate balances of each class of subordinated certificates have been reduced to zero.

          Debt Service Reduction — With respect to any mortgage loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the scheduled payment for such mortgage loan which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal.

          Deficient Valuation — With respect to any mortgage loan, a valuation by a court of competent jurisdiction of the related mortgaged property in an amount less than the then-outstanding indebtedness under the mortgage loan, or any reduction in the amount of principal to be paid in connection with any scheduled payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the Bankruptcy Code.

          Determination Date — As to any distribution date, the earlier of (i) the third business day after the 15th day of each month, and (ii) the second business day prior to the related distribution date.

          Distribution Account — An account established and maintained with the trustee on behalf of the certificateholders, into which the master servicer will deposit the Available Funds withdrawn from the Certificate Account.

          DTC — The Depository Trust Company.

          ERISA — The Employee Retirement Income Security Act of 1974, as amended.

          Excess Losses — Any Deficient Valuation, Fraud Loss or Special Hazard Loss (each a type of Realized Loss), or any part thereof, occurring after the Bankruptcy Loss Coverage Amount, Fraud Loss Coverage Amount or Special Hazard Loss Coverage Amount, respectively, has been reduced to zero.

          First Horizon— First Horizon Home Loan Corporation, a Kansas corporation and an indirect wholly owned subsidiary of First Horizon National Corporation, a Tennessee corporation.

          Fitch— Fitch Ratings and its successors and/or assigns.

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          Fraud Loss Coverage Amount — The aggregate amount of Realized Losses which may be allocated in connection with Fraud Losses.

          Fraud Losses — Realized Losses incurred on Liquidated Mortgage Loans as to which there was fraud, dishonesty or misrepresentation in the origination of the mortgage loans.

          Insurance Proceeds — All proceeds of any primary mortgage guaranty insurance policies and any other insurance policies with respect to the mortgage loans, to the extent the proceeds are not applied to the restoration of the related mortgaged property or released to the mortgagor in accordance with the master servicer’s normal servicing procedures.

          Liquidated Mortgage Loan — A defaulted mortgage loan as to which the master servicer has determined that all recoverable liquidation and insurance proceeds have been received.

          Liquidation Proceeds — All cash amounts, other than Insurance Proceeds and Unanticipated Recoveries, received and retained in connection with the liquidation of defaulted mortgage loans, by foreclosure or otherwise during the calendar month before the distribution date.

          Moody’s — Moody’s Investors Service, Inc. and its successors and/or assigns.

          Net Interest Shortfall — For any distribution date, the sum of:

• the amount of interest which would otherwise have been received for any mortgage loan that was the subject of (x) a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or Bankruptcy Loss, after the exhaustion of the respective amounts of coverage provided by the subordinated certificates for those types of losses; and

• any Net Prepayment Interest Shortfalls.

          Net Mortgage Rate or “NMR” — With respect to a mortgage loan, the mortgage rate thereof, less the Master Servicing Fee Rate with respect to the mortgage loan, expressed as a per annum percentage of its Stated Principal Balance.

          Net Prepayment Interest Shortfall — For any distribution date, the amount by which the aggregate of Prepayment Interest Shortfalls during the applicable prepayment period applicable to that distribution date exceeds the available Compensating Interest, if any, for that period.

          Non-Excess Loss — Any Realized Loss other than an Excess Loss.

          OID — Original issue discount.

          Original Subordinated Principal Balance — The aggregate of the class certificate balances of the subordinated certificates as of the closing date.

          Plan — An employee benefit plan or arrangement (such as an individual retirement plan or Keogh plan) that is subject to ERISA or Section 4975 of the Code.

          Pool Principal Balance — With respect to any distribution date, the aggregate of the Stated Principal Balances of the mortgage loans in the mortgage pool outstanding on the due date in the month before the distribution date.

          Prepayment Interest Excess — As to any principal prepayment in full received by the master servicer from the first day through the fifteenth day of any calendar month (other than the calendar month in which the cut-off date occurs), all amounts paid by the related mortgagor in respect of interest on such principal prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer as additional master servicing compensation.

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          Prepayment Interest Shortfall — As to any distribution date, mortgage loan and principal prepayment received (a) during the period from the sixteenth day of the month preceding the month of such distribution date (or, in the case of the first distribution date, from the cut-off date) through the last day of such month, in the case of a principal prepayment in full, or (b) during the month preceding the month of such distribution date, in the case of a partial principal prepayment, the amount, if any, by which one month’s interest at the related Net Mortgage Rate (exclusive of the trustee fee) on such principal prepayment exceeds the amount of interest actually paid by the borrower in connection with such principal prepayment.

          Prepayment Period — (a) With respect to any mortgage loan that was the subject of a voluntary prepayment in full and any distribution date, the period from the sixteenth day of the month preceding the month of such distribution date (or, in the case of the first distribution date, from the cut-off date) through the fifteenth day of the month of such distribution date, and (b) with respect to any other unscheduled prepayment of principal of any mortgage loan and any distribution date, the calendar month preceding the month of such distribution date.

          PTE — A prohibited transaction exemption issued by the U.S. Department of Labor.

          Realized Loss — (a) for a Liquidated Mortgage Loan, the unpaid principal balance thereof plus accrued and unpaid interest thereon at the Net Mortgage Rate through the last day of the month of liquidation, less the amount of any net Liquidation Proceeds, Insurance Proceeds and/or Unanticipated Recoveries received in respect of such mortgage loan and the related mortgaged property; and (b) for any mortgage loan other than a Liquidated Mortgage Loan, a Deficient Valuation.

          Regular Certificates — All classes of certificates, other than the Residual Certificates.

          Relief Act Reduction — A reduction in the amount of monthly interest payment on a mortgage loan pursuant to the Servicemembers Civil Relief Act or any similar state or local legislation or regulations.

          Residual Certificates — The Class A-R Certificates.

          S&P — Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. and its successors and/or assigns.

          Senior Final Distribution Date — For the senior certificates, the distribution date on which the class certificate balance of each class of senior certificates has been reduced to zero.

          Senior Optimal Principal Amount — With respect to each distribution date, an amount equal to the sum of:

          (1)       the Senior Percentage of all scheduled payments of principal due on each mortgage loan on the first day of the month in which the distribution date occurs, as specified in the amortization schedule at the time applicable thereto after adjustment for previous principal prepayments and the principal portion of Debt Service Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero, but before any adjustment to such amortization schedule by reason of any other bankruptcy or similar proceeding or any moratorium or similar waiver or grace period;

          (2)       the Senior Prepayment Percentage of the Stated Principal Balance of each mortgage loan which was the subject of a prepayment in full received by the master servicer during the applicable Prepayment Period;

          (3)       the Senior Prepayment Percentage of (a) all partial prepayments of principal in respect of each mortgage loan received during the applicable Prepayment Period and (b) all Unanticipated Recoveries in respect of each mortgage loan received during the calendar month preceding such distribution date;

          (4)       the lesser of:

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	(a)	the Senior Prepayment Percentage of the sum of (x) the net liquidation proceeds allocable to principal on each mortgage loan which became a Liquidated Mortgage Loan during the related Prepayment Period, other than mortgage loans described in clause (y), and (y) the principal balance of each mortgage loan that was purchased by a private mortgage insurer during the related Prepayment Period as an alternative to paying a claim under the related mortgage insurance policy; and
	(b)	(i) the Senior Percentage of the sum of (x) the Stated Principal Balance of each mortgage loan which became a Liquidated Mortgage Loan during the related Prepayment Period, other than mortgage loans described in clause (y), and (y) the Stated Principal Balance of each mortgage loan that was purchased by a private mortgage insurer during the related Prepayment Period as an alternative to paying a claim under the related mortgage insurance policy minus (ii) the Senior Percentage of the principal portion of Excess Losses (other than Debt Service Reductions) during the related Prepayment Period; and
(5)     the Senior Prepayment Percentage of the sum of (a) the Stated Principal Balance of each mortgage loan which was repurchased by the seller in connection with such distribution date and (b) the difference, if any, between the Stated Principal Balance of a mortgage loan that has been replaced by the seller with a substitute mortgage loan pursuant to the pooling and servicing agreement in connection with such distribution date and the Stated Principal Balance of such substitute mortgage loan.

          Senior Percentage — On any distribution date, the lesser of 100% and the percentage (carried to six places) obtained by dividing the aggregate class certificate balances of all classes of senior certificates immediately preceding such distribution date by the Pool Principal Balance of the mortgage pool for such distribution date.

          Senior Prepayment Percentage — On any distribution date occurring during the periods set forth below, the Senior Prepayment Percentages described below:

Period (Dates Inclusive)	Senior Prepayment Percentage
June 2006 – May 2013	100%
June 2013 – May 2014	Senior Percentage plus 70% of the Subordinated Percentage
June 2014 – May 2015	Senior Percentage plus 60% of the Subordinated Percentage
June 2015 – May 2016	Senior Percentage plus 40% of the Subordinated Percentage
June 2016 – May 2017	Senior Percentage plus 20% of the Subordinated Percentage
June 2017 and thereafter	Senior Percentage

provided, however, (i) if on any distribution date, the Senior Percentage exceeds such percentage calculated as of the closing date, then the Senior Prepayment Percentage for such distribution date will equal 100%, (ii) if on any distribution date prior to the June 2009 distribution date, the Subordinated Percentage is greater than or equal to twice such percentage calculated as of the closing date, then the Senior Prepayment Percentage for such distribution date will equal the Senior Percentage plus 50% of the Subordinated Percentage and (iii) if on or after the June 2009 distribution date, the Subordinated Percentage is greater than or equal to twice such percentage calculated as of the closing date, then the Senior Prepayment Percentage for such distribution date will equal the Senior Percentage.

          The reductions in the Senior Prepayment Percentage described above will not occur, and the Senior Prepayment Percentage for such prior period will be calculated without regard to clause (ii) or (iii) of the paragraph above, unless both of the following step-down conditions are satisfied, as of the last day of the month preceding the distribution date:

(1)     the aggregate Stated Principal Balance of mortgage loans in the mortgage pool delinquent 60 days or more (including for this purpose any mortgage loans in foreclosure or subject to bankruptcy proceedings and

S-68

mortgage loans with respect to which the related mortgaged property has been acquired by the trust) does not exceed 50% of the aggregate class certificate balances of the subordinated certificates as of that date; and
(2)     cumulative Realized Losses do not exceed:
	(a)	20% of the Original Subordinated Principal Balance if such distribution date occurs between and including June 2006 and May 2009; and
	(b)	30% of the Original Subordinated Principal Balance if such distribution date occurs on or after June 2009.

          Special Hazard Loss Coverage Amount — The aggregate amount of Realized Losses which may be allocated in connection with Special Hazard Losses.

          Special Hazard Losses — A Realized Loss incurred, to the extent that the loss was attributable to direct physical damage to a mortgaged property other than any loss of a type covered by a hazard insurance policy or a flood insurance policy, if applicable; and any shortfall in insurance proceeds for partial damage due to the application of the co-insurance clauses contained in hazard insurance policies. The amount of the Special Hazard Loss is limited to the lesser of the cost of repair or replacement of the mortgaged property; any loss above that amount would be a defaulted mortgage loan loss or other applicable type of loss. Special Hazard Losses do not include losses occasioned by war, civil insurrection, various governmental actions, errors in design, faulty workmanship or materials, except under some circumstances, nuclear reaction, chemical contamination or waste by the mortgagor.

          Stated Principal Balance — For any mortgage loan and due date, the unpaid principal balance of the mortgage loan as of the due date, as specified in its amortization schedule at the time, before any adjustment to the amortization schedule for any moratorium or similar waiver or grace period, after giving effect to any previous partial prepayments and liquidation proceeds received and to the payment of principal due on the due date and irrespective of any delinquency in payment by the related mortgagor.

          Structuring Assumptions — The assumptions listed beginning on page S-50, including assumed characteristics of the mortgage loans used for purposes of estimating decrement tables and the weighted average lives of the related certificates.

          Subordinated Certificate Writedown Amount — As of any distribution date, the amount by which (a) the sum of the class certificate balances of all the certificates after giving effect to the distribution of principal and the allocation of Realized Losses in reduction of the class certificate balances of all the certificates on such distribution date, exceeds (b) the Pool Principal Balance on the first day of the month of such distribution date less any Deficient Valuations occurring before the Bankruptcy Loss Coverage Amount has been reduced to zero.

          Subordinated Optimal Principal Amount — With respect to each distribution date, an amount equal to the sum of the following (but in no event greater than the aggregate class certificate balances of the subordinated certificates immediately prior to such distribution date):

          (1)     the Subordinated Percentage of all scheduled payments of principal due on each outstanding mortgage loan in the mortgage pool on the first day of the month in which the distribution date occurs, as specified in the amortization schedule at the time applicable thereto, after adjustment for previous principal prepayments and the principal portion of Debt Service Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero, but before any adjustment to such amortization schedule by reason of any other bankruptcy or similar proceeding or any moratorium or similar waiver or grace period;

          (2)     the Subordinated Prepayment Percentage of the Stated Principal Balance of each mortgage loan in the mortgage pool which was the subject of a prepayment in full received by the master servicer during the related Prepayment Period;

S-69

          (3)     the Subordinated Prepayment Percentage of all partial prepayments of principal received in respect of each mortgage loan in the mortgage pool during the related Prepayment Period, plus, on the Senior Final Distribution Date, 100% of any related Senior Optimal Principal Amount remaining undistributed on such date;

          (4)     the amount, if any, by which the sum of (a) the net liquidation proceeds allocable to principal received during the related Prepayment Period in respect of each Liquidated Mortgage Loan in the mortgage pool, other than mortgage loans described in clause (b) and (b) the principal balance of each mortgage loan in the mortgage pool that was purchased by a private mortgage insurer during the related Prepayment Period as an alternative to paying a claim under the related mortgage insurance policy exceeds (c) the sum of the amounts distributable to the related senior certificateholders under clause (4) of the definition of applicable Senior Optimal Principal Amount on such distribution date; and

          (5)     the Subordinated Prepayment Percentage of the sum of (a) the Stated Principal Balance of each mortgage loan in the mortgage pool which was repurchased by the seller in connection with such distribution date and (b) the difference, if any, between the Stated Principal Balance of each mortgage loan in the mortgage pool that has been replaced by the seller with a substitute mortgage loan pursuant to the pooling and servicing agreement in connection with such distribution date and the Stated Principal Balance of each such substitute mortgage loan.

          Subordinated Percentage — For any distribution date, 100% minus the Senior Percentage.

          Subordinated Prepayment Percentage — For any distribution date, 100% minus the Senior Prepayment Percentage.

          Substitution Adjustment Amount — The amount by which the principal balance of a substituted mortgage loan exceeds the principal balance of a replacement mortgage loan.

          Two Times Test — A test that is satisfied on any distribution date if the Senior Prepayment Percentage for such distribution date is determined in accordance with clauses (ii) and (iii) of the proviso in the definition of “Senior Prepayment Percentage.”

          Unanticipated Recovery — Any amount recovered by the Master Servicer in respect of principal of a mortgage loan which had previously been allocated as a Realized Loss to one or more classes of certificates.

          Underwriter Exemptions — Administrative exemptions, granted by the U.S. Department of Labor to certain underwriters, from certain of the prohibited transaction rules of ERISA and the related excise tax provisions of Section 4975 of the Code with respect to the initial purchase, the holding and the subsequent resale by Plans of certificates in pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of such exemptions.

          Underwriting Agreement — The underwriting agreement by and among First Horizon Asset Securities Inc., First Horizon Home Loan Corporation and the underwriter.

          Underwritten Certificates — The Class A-1, Class A-2, Class A-R, Class B-1, Class B-2 and Class B-3 Certificates.

[remainder of page intentionally left blank]

S-70

ANNEX I

MORTGAGE RATES
FOR THE MORTGAGE LOANS

Current Gross Coupon (%)	Number of Mortgage Loans	Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
5.500	3	$	835,102.92		0.21	%
5.625	3		415,853.24		0.10
5.750	5		1,310,238.67		0.33
5.875	31		8,286,345.15		2.07
6.000	61		14,898,175.38		3.72
6.125	61		16,440,165.95		4.11
6.250	109		25,866,966.67		6.47
6.375	143		33,055,869.57		8.26
6.500	176		45,812,403.87		11.45
6.625	139		33,485,142.93		8.37
6.750	182		44,906,582.09		11.23
6.875	194		50,566,183.44		12.64
7.000	65		16,436,050.17		4.11
7.125	43		11,376,943.44		2.84
7.250	52		15,184,035.52		3.80
7.375	61		20,467,773.05		5.12
7.500	53		16,056,843.08		4.01
7.625	45		12,942,759.87		3.24
7.750	33		7,856,471.86		1.96
7.875	27		7,583,254.32		1.90
8.000	18		4,809,278.85		1.20
8.125	12		3,735,194.77		0.93
8.250	21		7,480,218.26		1.87
8.500	1		232,110.00		0.06
TOTAL:	1,538	$	400,039,963.07		100.00	%

          As of the cut-off date, the weighted average mortgage rate of the mortgage loans is expected to be approximately 6.813%. The mortgage interest rates on a per annum basis range between 5.500% and 8.500%.

CURRENT MORTGAGE LOAN PRINCIPAL BALANCES
FOR THE MORTGAGE LOANS

Range of Current Mortgage Loan Principal Balances ($)	Number of Mortgage Loans	Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Less than 250,001	899	$	148,681,700.01	37.17	%
250,001 - 300,000	185		50,808,618.22	12.70
300,001 - 350,000	152		49,511,381.52	12.38
350,001 - 400,000	110		41,229,115.17	10.31
400,001 - 450,000	78		32,437,989.70	8.11
450,001 - 500,000	17		8,130,015.41	2.03
500,001 - 550,000	19		9,983,150.91	2.50
550,001 - 600,000	16		9,265,741.23	2.32
600,001 - 650,000	20		12,724,134.09	3.18
650,001 - 700,000	5		3,372,876.71	0.84
700,001 - 750,000	4		2,923,466.14	0.73
750,001 - 800,000	7		5,452,850.00	1.36
800,001 - 850,000	5		4,212,584.81	1.05
850,001 - 900,000	5		4,406,743.06	1.10
900,001 - 950,000	4		3,686,000.00	0.92
950,001 - 1,000,000	9		8,890,400.00	2.22
1,000,001 - 1,100,000	1		1,064,000.00	0.27
1,200,001 - 1,300,000	1		1,259,196.53	0.31
Greater than 1,500,000	1		1,999,999.56	0.50
TOTAL:	1,538	$	400,039,963.07	100.00	%

          As of the cut-off date, the average principal balance outstanding of the mortgage loans is expected to be $260,104.01.

ORIGINAL LOAN-TO-VALUE RATIOS
FOR THE MORTGAGE LOANS

Range of Original Loan- to-Value Ratios (%)	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
50.00 and Below		89	$	23,230,849.01		5.81	%
50.01 to 55.00		24		6,041,866.78		1.51
55.01 to 60.00		65		19,883,495.83		4.97
60.01 to 65.00		156		46,715,913.20		11.68
65.01 to 70.00		160		42,831,613.70		10.71
70.01 to 75.00		127		37,190,008.53		9.30
75.01 to 80.00		870		214,425,971.33		53.60
80.01 to 85.00		6		1,145,125.00		0.29
85.01 to 90.00		34		6,494,301.62		1.62
90.01 to 95.00		7		2,080,818.07		0.52
TOTAL:		1,538	$	400,039,963.07		100.00	%

          The weighted average original loan-to-value ratio of the mortgage loans is expected to be approximately 72.68%.

GEOGRAPHIC DISTRIBUTION OF MORTGAGED
PROPERTIES FOR THE MORTGAGE LOANS

Geographic Area	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Alabama		4	$	439,900.00		0.11	%
Arizona		207		55,281,923.13		13.82
Arkansas		2		470,258.00		0.12
California		185		69,503,992.20		17.37
Colorado		43		8,963,104.56		2.24
Connecticut		7		1,833,411.84		0.46
Delaware		4		1,704,362.00		0.43
District of Columbia		3		692,200.00		0.17
Florida		122		27,563,604.38		6.89
Georgia		115		22,955,494.85		5.74
Hawaii		9		3,025,696.50		0.76
Idaho		56		11,201,848.43		2.80
Illinois		19		4,509,280.65		1.13
Indiana		22		3,377,442.78		0.84
Iowa		4		485,325.48		0.12
Kansas		2		642,752.50		0.16
Kentucky		5		968,000.00		0.24
Louisiana		2		193,922.51		0.05
Maine		10		1,962,073.74		0.49
Maryland		91		23,454,665.99		5.86
Massachusetts		56		17,665,933.40		4.42
Michigan		24		4,975,371.79		1.24
Minnesota		8		1,649,524.27		0.41
Mississippi		1		175,996.00		0.04
Missouri		8		1,432,611.45		0.36
Montana		7		1,766,863.00		0.44
Nevada		89		22,873,107.58		5.72
New Hampshire		5		1,064,865.59		0.27
New Jersey		11		3,347,724.70		0.84
New Mexico		19		3,764,908.82		0.94
New York		4		938,412.43		0.23
North Carolina		27		6,658,721.47		1.66
Ohio		16		2,872,954.10		0.72
Oregon		41		10,870,161.38		2.72
Pennsylvania		10		2,558,514.43		0.64
Rhode Island		18		4,352,628.65		1.09
South Carolina		4		1,219,727.86		0.30
Tennessee		19		2,860,400.11		0.72
Texas		25		8,590,633.00		2.15
Utah		36		8,140,965.60		2.04
Vermont		1		164,715.08		0.04
Virginia		112		33,933,873.90		8.48
Washington		70		16,097,217.21		4.02
West Virginia		4		1,059,600.00		0.26
Wisconsin		7		1,111,296.00		0.28
Wyoming		4		663,975.71		0.17
TOTAL:		1,538	$	400,039,963.07		100.00	%

          No more than approximately 0.673% of the mortgage loans are secured by mortgaged properties located in any one postal zip code area.

I-1

PURPOSE OF MORTGAGE LOANS
FOR THE MORTGAGE LOANS

Loan Purpose	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Purchase		937	$	240,661,853.01		60.16	%
Refinance (rate/term)		144		38,829,286.43		9.71
Refinance (cash out)		457		120,548,823.63		30.13
TOTAL:		1,538	$	400,039,963.07		100.00	%

TYPES OF MORTGAGED PROPERTIES
FOR THE MORTGAGE LOANS

Property Type	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Single Family*		796	$	200,899,512.54		50.22	%
Planned Unit		488		142,319,343.43		35.58
Condominium		150		29,221,288.09		7.30
High Rise Condominium		20		6,527,355.57		1.63
2 – 4 Family		84		21,072,463.44		5.27
TOTAL:		1,538	$	400,039,963.07		100.00	%

*        Includes de minimis Planned Unit Development.

OCCUPANCY TYPES
FOR THE MORTGAGE LOANS

Occupancy Types	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Primary Residence		977	$	271,490,018.51		67.87	%
Second Residence		68		20,457,555.72		5.11
Investor Property		493		108,092,388.84		27.02
TOTAL:		1,538	$	400,039,963.07		100.00	%

REMAINING TERMS TO MATURITY
FOR THE MORTGAGE LOANS

Remaining Term to Maturity (Months)	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
346		1	$	404,000.00		0.10	%
352		1		79,853.24		0.02
353		1		895,000.00		0.22
354		3		726,921.04		0.18
355		2		873,198.15		0.22
356		4		1,015,320.00		0.25
357		7		2,339,491.29		0.58
358		57		15,551,802.64		3.89
359		875		224,753,289.28		56.18
360		587		153,401,087.43		38.35
TOTAL:		1,538	$	400,039,963.07		100.00	%

          As of the cut-off date the weighted average remaining term to maturity of the mortgage loans is expected to be approximately 359 months.

FICO SCORES
FOR THE MORTGAGE LOANS

Range of FICO Scores	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
600-649		103	$	26,567,042.75		6.64	%
650-659		43		10,122,295.32		2.53
660-669		104		26,982,481.64		6.74
670-679		67		19,055,732.25		4.76
680-689		117		30,644,578.96		7.66
690-699		104		29,235,337.15		7.31
700-709		131		35,180,270.05		8.79
710-719		108		27,609,829.21		6.90
720-729		107		29,674,955.21		7.42
730-739		96		24,876,500.11		6.22
740-749		115		30,244,915.07		7.56
750-759		94		24,652,279.15		6.16
760-769		96		22,408,695.38		5.60
770-779		68		17,662,883.42		4.42
780-789		74		19,287,147.32		4.82
790-799		54		12,962,539.98		3.24
800 or greater		57		12,872,480.10		3.22
TOTAL:		1,538	$	400,039,963.07		100.00	%

LOAN PROGRAMS
FOR THE MORTGAGE LOANS

Loan Programs	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
5/6*		238	$	55,790,863.94		13.95	%
5/6 Year Interest-Only*		1,300		344,249,099.13		86.05
TOTAL:		1,538	$	400,039,963.07		100.00	%

*        Fixed mortgage rate for 60 months after origination, and subject to adjustment based on the mortgage index thereafter.

GROSS MARGIN
FOR THE MORTGAGE LOANS

Gross Margin	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
2.250%		1,538	$	400,039,963.07		100.00	%
TOTAL:		1,538	$	400,039,963.07		100.00	%

          As of the cut-off date, the weighted average gross margin of the mortgage loans is expected to be approximately 2.250%.

INITIAL PAYMENT ADJUSTMENT DATE
FOR THE MORTGAGE LOANS

Initial Payment Adjustment Date	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
April 1, 2010		1	$	404,000.00		0.10	%
October 1, 2010		1		79,853.24		0.02
November 1, 2010		1		895,000.00		0.22
December 1, 2010		3		726,921.04		0.18
January 1, 2011		2		873,198.15		0.22
February 1, 2011		4		1,015,320.00		0.25
March 1, 2011		7		2,339,491.29		0.58
April 1, 2011		57		15,551,802.64		3.89
May 1, 2011		875		224,753,289.28		56.18
June 1, 2011		587		153,401,087.43		38.35
TOTAL:		1,538	$	400,039,963.07		100.00	%

I-2

MAXIMUM MORTGAGE RATES
FOR THE MORTGAGE LOANS

Maximum Mortgage Rate (%)	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
11.500		3	$	835,102.92		0.21	%
11.625		3		415,853.24		0.10
11.750		5		1,310,238.67		0.33
11.875		31		8,286,345.15		2.07
12.000		61		14,898,175.38		3.72
12.125		61		16,440,165.95		4.11
12.250		109		25,866,966.67		6.47
12.375		143		33,055,869.57		8.26
12.500		176		45,812,403.87		11.45
12.625		139		33,485,142.93		8.37
12.750		182		44,906,582.09		11.23
12.875		194		50,566,183.44		12.64
13.000		65		16,436,050.17		4.11
13.125		43		11,376,943.44		2.84
13.250		52		15,184,035.52		3.80
13.375		61		20,467,773.05		5.12
13.500		53		16,056,843.08		4.01
13.625		45		12,942,759.87		3.24
13.750		33		7,856,471.86		1.96
13.875		27		7,583,254.32		1.90
14.000		18		4,809,278.85		1.20
14.125		12		3,735,194.77		0.93
14.250		21		7,480,218.26		1.87
14.500		1		232,110.00		0.06
TOTAL:		1,538	$	400,039,963.07		100.00	%

INITIAL PERIODIC RATE CAP
FOR THE MORTGAGE LOANS

Initial Periodic Cap	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
6.000%		1,538	$	400,039,963.07		100.00	%
TOTAL:		1,538	$	400,039,963.07		100.00	%

SUBSEQUENT PERIODIC RATE CAP
FOR THE MORTGAGE LOANS

Subsequent Periodic Rate Cap	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
2.000%		1,538	$	400,039,963.07		100.00	%
TOTAL:		1,538	$	400,039,963.07		100.00	%

MINIMUM MORTGAGE RATES
FOR THE MORTGAGE LOANS

Minimum Mortgage Rate	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
2.250%		1,538	$	400,039,963.07		100.00	%
TOTAL:		1,538	$	400,039,963.07		100.00	%

DOCUMENTATION TYPE
FOR THE MORTGAGE LOANS

Documentation	Number of Mortgage Loans		Aggregate Principal Balance Outstanding		Percentage of Mortgage Pool
Full/Alt Doc		538	$	122,944,969.73