424B5 1 efc6-0522_form424b5.txt The information in this prospectus supplement and the attached prospectus is not complete and may be changed. This prospectus supplement and the attached prospectus are not an offer to sell these securities and they are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject To Completion, Dated February 12, 2006 Prospectus Supplement to Prospectus Dated November 17, 2005 $999,623,200 (Approximate)(1) Asset-Backed Certificates, Series 2006-3 GSAA Home Equity Trust 2006-3 Issuing Entity GS Mortgage Securities Corp. Depositor Goldman Sachs Mortgage Company Sponsor JPMorgan Chase Bank, National Association Master Servicer Countrywide Home Loans Servicing LP National City Mortgage Co. JPMorgan Chase Bank, National Association Servicers
Consider carefully the Risk Factors beginning on page S-20 The following securities are being offered: in this prospectus supplement and page 2 in the accompanying Approximate Initial Ratings prospectus. Initial Class Principal Pass-Through (S&P/ Class Balance(1) Rate Type Moody's) The certificates will ----------- -------------------------- ---------------- ------------------ --------------- represent interests in GSAA A-1 $ 549,219,000 Variable(2) Senior AAA/Aaa Home Equity Trust 2006-3 and A-2 $ 186,435,000 Variable(3) Senior AAA/Aaa will not represent interests A-3 $ 190,768,000 Variable(4) Senior AAA/Aaa in or obligations of the A-4 $ 21,197,000 Variable(5) Senior AAA/Aaa depositor, the underwriter, M-1 $ 16,661,000 Variable((6)) Subordinate AA+/Aa1 the master servicer, the M-2 $ 5,049,000 Variable(7) Subordinate AA/Aa2 sponsor, the securities M-3 $ 5,049,000 Variable(8) Subordinate AA-/Aa3 administrator, the servicers, M-4 $ 5,049,000 Variable(9) Subordinate A/A1 the responsible parties, the M-5 $ 5,049,000 Variable(10) Subordinate A-/A2 trustee or any of their B-1 $ 5,049,000 Variable(1(1)) Subordinate BBB+/A3 respective affiliates. B-2 $ 5,049,000 Variable(12) Subordinate BBB/Baa1 B-3 $ 5,049,000 Variable (13) Subordinate BBB-/Baa3 This prospectus supplement may R $ 100 N/A(14) Senior/Residual AAA/NR be used to offer and sell the RC $ 100 N/A(1(4)) Senior/Residual AAA/NR offered certificates only if --------------------------------------- accompanied by the prospectus. Footnotes appear on the following page.
Each class of certificates will receive monthly distributions of interest and/or principal, commencing on March 27, 2006. Assets of the Issuing Entity-- o Adjustable-rate Alt-A type mortgage loans secured by first lien mortgages or deeds of trust on residential real estate properties. Credit Enhancement-- o Subordination of the subordinate certificates to the senior certificates as described in this prospectus supplement under "Description of the Certificates--Distributions of Interest and Principal"; and o Excess interest and overcollateralization as described in this prospectus supplement under "Description of the Certificates--Overcollateralization Provisions." Interest Rate Protection-- o Interest rate swap agreement with an initial notional amount of approximately $999,721,398 as described in this prospectus supplement under "Description of the Certificates--Interest Rate Swap Agreement." Goldman, Sachs & Co., the underwriter, will offer the offered certificates from time to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale plus accrued interest, if any, from the closing date. The proceeds to GS Mortgage Securities Corp. from the sale of the offered certificates (excluding accrued interest) will be approximately [_____]% of the class principal balance of the offered certificates before deducting expenses. The underwriter's commission will be the difference between the price it pays to GS Mortgage Securities Corp. for the offered certificates and the amount it receives from the sale of the offered certificates to the public. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. GS MORTGAGE SECURITIES CORP. WILL NOT LIST THE OFFERED CERTIFICATES ON ANY SECURITIES EXCHANGE OR ON ANY AUTOMATED QUOTATION SYSTEM OF ANY SECURITIES ADMINISTRATION. Goldman, Sachs & Co. The date of this prospectus supplement is February [__], 2006. (1) Subject to variance of +/- 5%. (2) The Class A-1 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (3) The Class A-2 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (4) The Class A-3 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (5) The Class A-4 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (6) The Class M-1 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (7) The Class M-2 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (8) The Class M-3 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (9) The Class M-4 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (10) The Class M-5 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (11) The Class B-1 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (12) The Class B-2 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (13) The Class B-3 certificates will have a pass-through rate equal to the lesser of (i) one-month LIBOR plus [___]% ([___]% after the first distribution date on which the optional clean-up call is exercisable) and (ii) the WAC Cap, as described in this prospectus supplement under "Description of the Certificates--Distributions". (14) The Class R and Class RC certificates are not entitled to receive any distributions of interest. S-2 IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS We provide information to you about the certificates in two separate documents that progressively provide more detail: (a) the prospectus, which provides general information, some of which may not apply directly to your series of certificates, and (b) this prospectus supplement, which describes the specific terms of your series of certificates. We include cross-references in this prospectus supplement and the 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 prospectus provide the pages on which these captions are located. Capitalized terms used in this prospectus supplement and in the prospectus are either defined in the "Glossary of Terms" beginning on page S-159 of this prospectus supplement, or have the meanings given to them on the page indicated in the "Index" beginning on page 123 of the prospectus. In this prospectus supplement, the terms "depositor", "we", "us" and "our" refer to GS Mortgage Securities Corp. S-3 TABLE OF CONTENTS SUMMARY INFORMATION...............................S-7 RISK FACTORS.....................................S-20 THE MORTGAGE LOAN POOL...........................S-41 General.......................................S-41 The Mortgage Loans............................S-44 Prepayment Premiums...........................S-45 The Indices...................................S-45 Countrywide Underwriting Guidelines...........S-45 First National Bank of Nevada Underwriting Guidelines....................................S-52 National City Mortgage Co. Underwriting Guidelines....................................S-55 Goldman Sachs Mortgage Conduit Underwriting Guidelines....................................S-58 GreenPoint Underwriting Guidelines............S-62 Credit Scores.................................S-64 THE MASTER SERVICER..............................S-65 General.......................................S-65 THE SECURITIES ADMINISTRATOR.....................S-66 General.......................................S-66 Compensation of the Master Servicer and the Securities Administrator......................S-67 Indemnification and Third Party Claims........S-67 Limitation on Liability of the Master Servicer......................................S-68 Assignment or Delegation of Duties by the Master Servicer; Resignation..................S-69 Master Servicer Events of Default; Waiver; Termination...................................S-70 Assumption of Master Servicing by Trustee.....S-71 THE SERVICERS....................................S-71 General.......................................S-71 Countrywide Home Loans Servicing LP...........S-73 Countrywide Home Loans........................S-73 Loan Servicing................................S-75 Collection Procedures.........................S-75 Foreclosure, Delinquency and Loss Experience..S-76 JPMorgan Chase Bank, National Association.....S-77 THE SPONSOR......................................S-81 STATIC POOL INFORMATION..........................S-82 THE DEPOSITOR....................................S-83 THE ISSUING ENTITY...............................S-83 THE CUSTODIANS...................................S-83 THE TRUSTEE......................................S-84 DESCRIPTION OF THE CERTIFICATES..................S-85 Definitive Certificates.......................S-92 Assignment of the Mortgage Loans..............S-92 Delivery of Mortgage Loan Documents...........S-93 Representations and Warranties Relating to the Mortgage Loans.........................S-95 Payments on the Mortgage Loans................S-98 Administration Fees..........................S-100 Distributions................................S-100 Priority of Distributions Among Certificates.................................S-101 Distributions of Interest and Principal................................S-101 Supplemental Interest Trust..................S-108 Calculation of One-Month LIBOR...............S-109 Excess Reserve Fund Account..................S-109 Interest Rate Swap Agreement.................S-110 Overcollateralization Provisions.............S-113 Reports to Certificateholders................S-114 THE AGREEMENTS..................................S-116 General......................................S-116 Servicing Standard...........................S-116 Subservicers.................................S-117 Servicing and Trustee Fees and Other Compensation and Payment of Expenses.........S-117 P&I Advances and Servicing Advances..........S-118 Prepayment Interest Shortfalls...............S-119 Servicer Reports.............................S-119 Collection and Other Servicing Procedures....S-120 Hazard Insurance.............................S-121 Primary Mortgage Insurance...................S-122 Optional Repurchase of Delinquent Mortgage Loans........................................S-122 The Trustee, the Securities Administrator and the Custodians...........................S-123 Servicer Events of Default...................S-123 Rights upon Servicer Event of Default..................................S-124 Eligibility Requirements for Trustee; Resignation and Removal of Trustee...........S-124 S-4 Termination; Optional Clean-Up Call..........S-125 Certain Matters Regarding the Depositor and the Trustee..............................S-127 Amendment....................................S-127 Certain Matters Regarding the Servicers......S-128 PREPAYMENT AND YIELD CONSIDERATIONS.............S-129 Structuring Assumptions......................S-129 Defaults in Delinquent Payments..............S-135 Prepayment Considerations and Risks..........S-135 Overcollateralization Provisions.............S-137 Subordinated Certificates and the Class A-4 Certificates.............................S-138 Effect on Yields Due to Rapid Prepayments....S-139 Weighted Average Lives of the Offered Certificates.................................S-139 Decrement Tables.............................S-139 WAC Cap......................................S-146 Last Scheduled Distribution Date.............S-149 FEDERAL INCOME TAX CONSEQUENCES.................S-149 General......................................S-149 Taxation of Regular Interests................S-150 Status of the LIBOR Certificates.............S-151 The Basis Risk Contract Components................................S-151 Other Matters................................S-152 Residual Certificates........................S-152 STATE AND LOCAL TAXES...........................S-153 ERISA CONSIDERATIONS............................S-153 LEGAL INVESTMENT................................S-156 METHOD OF DISTRIBUTION..........................S-156 LEGAL MATTERS...................................S-157 RATINGS.........................................S-157 GLOSSARY OF TERMS...............................S-159 ANNEX I - CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS..........I-1 ANNEX II - INTEREST RATE SWAP NOTIONAL AMOUNT AMORTIZATION SCHEDULE.........II-1 SCHEDULE A - STRUCTURAL AND COLLATERAL TERM SHEET..........................A-1 S-5 European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), the underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of certificates to the public in that Relevant Member State prior to the publication of a prospectus in relation to the certificates which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of certificates to the public in that Relevant Member State at any time: (a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; (b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than (euro)43,000,000 and (3) an annual net turnover of more than (euro)50,000,000, as shown in its last annual or consolidated accounts; or (c) in any other circumstances which do not require the publication by the issuing entity of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an "offer of certificates to the public" in relation to any certificates in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the certificates to be offered so as to enable an investor to decide to purchase or subscribe the certificates, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. United Kingdom The underwriter has represented and agreed that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act (the "FSMA")) received by it in connection with the issue or sale of the certificates in circumstances in which Section 21(1) of the FSMA does not apply to the issuing entity; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the certificates in, from or otherwise involving the United Kingdom. S-6 SUMMARY INFORMATION The following summary highlights selected information from this prospectus supplement. It does not contain all of the information you need to consider in making your investment decision. To understand the terms of the offered certificates, read carefully this entire prospectus supplement and the prospectus. This summary provides an overview of certain calculations, cash flows and other information to aid your understanding. This summary is qualified by the full description of these calculations, cash flows and other information in this prospectus supplement and the prospectus. The Transaction Parties Sponsor. Goldman Sachs Mortgage Company, a New York limited partnership with its principal executive offices at 85 Broad Street, New York, New York 10004, telephone number (212) 902-1000. Depositor. GS Mortgage Securities Corp., a Delaware corporation with its principal executive offices at 85 Broad Street, New York, New York 10004, telephone number (212) 902-1000. Issuing Entity. GSAA Home Equity Trust 2006-3. Trustee. U.S. Bank National Association, a national banking association. Its corporate trust office is located at 401 South Tryon Street, 12th Floor, Charlotte, North Carolina 28202-1934, telephone number (800) 665-9359, attention: GSAA Home Equity Trust 2006-3. See "The Trustee" in this prospectus supplement. Custodians. Deutsche Bank National Trust Company, a national banking association. Its corporate trust office is located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934, telephone number (714) 247-6000, and JPMorgan Chase Bank, National Association, a national banking association. Its custodial office is located at 2220 Chemsearch Boulevard, Suite 150, Irving, Texas 75062, telephone number (972) 785-5205, attention: GSAA Home Equity 2006-3. Master Servicer. JPMorgan Chase Bank, National Association, a national banking association. Its master servicing office is located at 6525 West Campus Oval, Suite 200, New Albany, Ohio 43054, telephone number (614) 775-5595, attention: GSAA Home Equity Trust 2006-3. See "The Master Servicer" in this prospectus supplement. Servicers. Countrywide Home Loans Servicing LP, a Texas limited partnership, with its main office located at 7105 Corporate Drive, Plano, Texas 75024, telephone number (972) 526-6285, National City Mortgage Co., an Ohio corporation, with its main office located at 3232 Newmark Drive, Miamisburg, Ohio 45342, telephone number (937) 910-1200, JPMorgan Chase Bank, National Association, a national banking association, with its main office located at 6525 West Campus Oval, Suite 200, New Albany, Ohio 43054, telephone number (614) 775-5595 and three other servicers. See "The Servicers" in this prospectus supplement. Originators. Countrywide Home Loans, Inc., a California corporation, which originated or acquired 29.86% of the mortgage loans, First National Bank of Nevada, a national banking association, which originated or acquired 17.75% of the mortgage loans, National City Mortgage Co., an Ohio corporation, which originated or acquired 12.18% of the mortgage loans, GreenPoint Mortgage Funding, Inc., a New York corporation, which originated or acquired 9.94% of the mortgage loans and S-7 Goldman Sachs Mortgage Conduit, a Goldman Sachs Mortgage Company residential mortgage loan conduit program, which originated or acquired 30.27% of the mortgage loans. Pursuant to the residential mortgage loan conduit program, the sponsor purchases mortgage loans originated by the original loan sellers if the mortgage loans generally satisfy the sponsor's underwriting guidelines. See "The Mortgage Loan Pool--Underwriting Guidelines--The Originators" in this prospectus supplement. Responsible Parties. Each of Countrywide Home Loans, Inc., First National Bank of Nevada, National City Mortgage Co. and GreenPoint Mortgage Funding, Inc. (each, together with Goldman Sachs Mortgage Company, a "responsible party") has made certain representations and warranties with respect to their respective mortgage loans. Goldman Sachs Mortgage Company will make certain representations and warranties with respect to the mortgage loans, including the mortgage loans in the Goldman Sachs Mortgage Conduit Program. [REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] S-8 The following diagram illustrates the various parties involved in the transaction and their functions:
------------------- ------------------- ------------------- ------------------- ------------------- | | | Goldman | | First | | | | GreenPoint | | Countrywide | | Sachs | | National | | National City | | Mortgage | | Home Loans, | | Mortgage | | Bank of | | Mortgage | | Funding | | Inc. | | Conduit | | Nevada | | Co. | | Inc. | | (Originator) | | (Originator) | | (Originator) | | (Originator) | | (Originator) | ------------------- ------------------- ------------------- ------------------- / ------------------- | / \ | / \ | / \ | / \ / / \ | | | | | | | | / / | Loans | $ | Loans | $ | Loans | $ | Loans | $ / Loans / $ \ / | \ / | \ / | \ / | \ / / ------------------------------------------------------------------------------------------- / | | / -------------- | Goldman Sachs Mortgage Company | / | | | (Sponsor) | / | JPMorgan | | | / /| Chase Bank, | ------------------------------------------------------------------------------------------- / | National | | / \ / | Association | | | / | (Master | | Loans | $ / | Servicer and | \ / | / | Servicer) | ------------------------------------------------------------------------------------------- / --------------- | | / | GS Mortgage Securities Corp. | / -------------- | (Depositor) | / | Countrywide | | | / /| Home Loans | ------------------------------------------------------------------------------------------- / / | Servicing LP | | / \ / / | (Servicer) | | | / / -------------- | Loans | Certificates / / \ / | / / -------------- -------------------------------------------------------------------------------------------\ / / | National City| | | / | Mortgage | | GSAA Home Equity Trust 2006-3 |\/ | Co. | | (Issuing Entity) |<----------------| (Servicer) | | |\ -------------- ------------------------------------------------------------------------------------------- \ \ -------------- \ | | \ | Three | \ | additional | \ | Servicers | \ | | \ --------------
S-9 The Offered Certificates The GSAA Home Equity Trust 2006-3 will issue the Asset-Backed Certificates, Series 2006-3. Fourteen classes of the certificates - the Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3, Class R and Class RC certificates - are being offered to you by this prospectus supplement and are sometimes referred to as the "offered certificates" in this prospectus supplement. The Class R and Class RC certificates are sometimes referred to as the "residual certificates" in this prospectus supplement. The Class A-1, Class A-2, Class A-3 and Class A-4 certificates are sometimes referred to as the "Class A certificates" in this prospectus supplement. The Other Certificates The trust will also issue three other classes of certificates - the Class B-4, Class X and Class P certificates - that are not being offered by this prospectus supplement. The Class B-4 certificates will have an initial certificate principal balance of approximately $5,216,000. The Class B-4 certificates initially evidence an interest in approximately 0.50% of the scheduled principal balance of the mortgage loans in the trust. The Class B-4 certificates, together with the offered certificates (other than the residual certificates), are sometimes referred to as the "LIBOR certificates" in this prospectus supplement. The Class X certificates will represent the right to certain excess interest payments and any overcollateralization for the LIBOR certificates. The Class X certificates initially evidence an interest of approximately 0.50% of the scheduled principal balance of the mortgage loans in the trust. The Class P certificates will not have a certificate principal balance and will not be entitled to distributions in respect of principal or interest. The Class P certificates will be entitled to all prepayment premiums or charges received in respect of the mortgage loans. The certificates will represent undivided interests in the assets of the trust, which consist primarily of the mortgage loans. Structural Overview The following chart illustrates generally the distribution priorities and the subordination features applicable to the offered certificates: | ----------------- / \ | | | Class R and | | Class C* | | ----------------- | | | | Class A-1 | | ----------------- | | | | Class A-2 | | ----------------- | | Class A-3 and | | Class A-4** | | ----------------- | | | | Class M-1 | | ----------------- | Accrued certificate | | interest, then | Class M-2 | Losses principal | ----------------- | | | | Class M-3 | | ----------------- | | | | Class M-4 | | ----------------- | | | | Class M-5 | | ----------------- | | | | Class B-1 | | ----------------- | | | | Class B-2 | | ----------------- | | | | Class B-3 | | ----------------- | | | | Non-Offered | | Certificates | \ / ----------------- | * Principal distributions to the Class R and Class RC certificates will be concurrent. **Principal distributions to the Class A-3 and Class A-4 certificates will be distributed pro rata based on their respective class certificate balances, until their respective class principal balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions will be allocated first to the Class A-3 certificates until its certificate principal balance has been reduced to zero, and then to the Class A-4 certificates until its certificate principal balance has been reduced to zero. Closing Date On or about February 24, 2006. S-10 Cut-off Date February 1, 2006. Statistical Calculation Date All statistical information regarding the mortgage loans in this prospectus supplement is based on the stated principal balances of the mortgage loans as of the statistical calculation date of January 1, 2006, unless otherwise specified in this prospectus supplement. Distribution Date Distributions on the certificates will be made on the 25th day of each month, or, if the 25th day is not a business day, on the next business day, beginning in March 2006, to the holders of record on the preceding record date. Last Scheduled Distribution Date The last scheduled distribution date is the distribution date in March 2036. See "Prepayment and Yield Considerations--Last Scheduled Distribution Date" in this prospectus supplement. Record Date The record date for the offered certificates (other than the residual certificates) for any distribution date will be the business day preceding the related distribution date, unless the certificates are issued in definitive form, in which case the record date will be the last business day of the month preceding the month in which the related distribution date occurs. The record date for the residual certificates will be the last business day of the month preceding the month in which the related distribution date occurs. Pass-Through Rates The pass-through rate for each class of LIBOR certificates will be equal to the sum of one-month LIBOR plus a fixed margin, subject to one or more caps on those pass-through rates described in this prospectus supplement under "Description of the Certificates--Distributions". The margins will increase after the first distribution date on which the optional clean-up call is exercisable, as described under "Description of the Certificates--Distributions of Interest and Principal" and "The Agreements--Termination; Optional Clean-Up Call" in this prospectus supplement. Interest will accrue on the LIBOR certificates on the basis of a 360 day year and the actual number of days elapsed in the applicable interest accrual period. Interest Accrual Period The interest accrual period for the LIBOR certificates for any distribution date will be the period from and including the preceding distribution date (or, in the case of the first distribution date, the closing date) through the day before the current distribution date. The residual certificates will not be entitled to any distributions of interest. Distribution Priorities Distributions on the certificates will be made on each distribution date from available funds (after giving effect to the payment of any fees and expenses of the master servicer, servicers, trustee and others) and will be made to the classes of certificates in the following order of priority: (i) to the holders of each class of LIBOR certificates and to the supplemental interest trust (which is described under "Interest Rate Swap Agreement" below) in the following order of priority: (a)to the supplemental interest trust, the sum of (x) all net swap payment amounts and (y) any swap termination payment owed to the swap provider other than a defaulted swap termination payment owed to the swap provider, if any; (b)from the portion of available funds allocated to interest payments on the S-11 mortgage loans, pro rata (based on the accrued and unpaid interest distributable to each class of the Class A certificates), to each of the Class A certificates, the related accrued certificate interest for that distribution date and any unpaid accrued certificate interest amount for each class of the Class A certificates from prior distribution dates; (c) from any remaining interest remittance amounts, to the Class M certificates, sequentially, in ascending numerical order, their related accrued certificate interest for that distribution date; and (d) from any remaining interest remittance amounts, to the Class B certificates sequentially, in ascending numerical order, their related accrued certificate interest for that distribution date; (ii) (A) on each distribution date (x) prior to the Stepdown Date or (y) with respect to which a Trigger Event is in effect, to the holders of the class or classes of LIBOR certificates and residual certificates then entitled to distributions of principal as set forth below, an amount equal to the portion of available funds allocated to principal payments on the mortgage loans in the following order of priority: (a) concurrently, to the Class R and Class RC certificates, pro rata, until their respective class certificate balances have been reduced to zero; (b) to the Class A certificates, in the following order of priority: (1) sequentially, to the Class A-1 and Class A-2 certificates, in that order, until their respective class certificate balances have been reduced to zero; (2) concurrently, to the Class A-3 and Class A-4 certificates, allocated pro rata among these certificates, until their respective class certificate balances have been reduced to zero, with the exception that if a Sequential Trigger Event (as defined in the "Glossary of Terms" in this prospectus supplement) is in effect, principal distributions to the Class A-3 and Class A-4 certificates will be allocated first, to the Class A-3 certificates, until its class certificate balance has been reduced to zero, and then to the Class A-4 certificates, until its class certificate balance has been reduced to zero; (c) from any remaining principal distribution amounts, to the Class M certificates, sequentially, in ascending numerical order, until their respective class certificate balances have been reduced to zero; and (d) from any remaining principal distribution amounts, to the Class B certificates, sequentially, in ascending numerical order, until their respective class certificate balances have been reduced to zero; (B) on each distribution date (x) on and after the Stepdown Date and (y) as long as a Trigger Event is not in effect, to the holders of the class or classes of LIBOR certificates then entitled to distribution of principal as set forth below, an amount equal to the portion of available funds allocated to principal payments on the mortgage loans in the following order of priority: (a) to the Class A certificates, the lesser of the portion of available funds allocated to principal payments on the mortgage loans and the principal distribution entitlement for the Class A certificates (as further described in "Description of the Certificates--Distributions of Interest and Principal"), allocated in the following order of priority: (1) sequentially, to the Class A-1 and Class A-2 certificates, in that order, until their respective class certificate balances have been reduced to zero; and S-12 (2) concurrently, to the Class A-3 and Class A-4 certificates, allocated pro rata among these certificates, until their respective class certificate balances have been reduced to zero; (b) from any remaining principal distribution amount, to the Class M certificates, sequentially, in ascending numerical order, in each case, the lesser of the remaining portion of the available funds allocable to principal payments on the mortgage loans and an amount equal to the principal distribution entitlement for that class of certificates (as further described in "Description of the Certificates--Distributions of Interest and Principal"), until their respective class certificate balances have been reduced to zero; and (c) from any remaining principal distribution amount, to the Class B certificates, sequentially, in ascending numerical order, in each case, the lesser of the remaining portion of the available funds allocable to principal payments on the mortgage loans and an amount equal to the principal distribution entitlement for that class of certificates (as further described in "Description of the Certificates-- Distributions of Interest and Principal"), until their respective class certificate balances have been reduced to zero; (iii) any available funds remaining after the distributions in clauses (i) and (ii) above is required to be distributed in the following order of priority with respect to the certificates: (A) if and to the extent that the interest remittance amounts distributed pursuant to clause (i) above were insufficient to make the full distributions in respect of interest set forth in such clause, (x) to the holders of each class of the Class A certificates, any unpaid accrued certificate interest for that distribution date and any unpaid accrued certificate interest amounts, pro rata among such classes based on their entitlement to those amounts, and then (y) to the holders of each class of the Class M and Class B certificates, any unpaid accrued certificate interest for that distribution date, in the order of priority for such classes set forth in clause (i) above; (B) to the holders of the Class M-1 certificates, any unpaid accrued certificate interest amount for that class; (C) to the holders of the Class M-2 certificates, any unpaid accrued certificate interest amount for that class; (D) to the holders of the Class M-3 certificates, any unpaid accrued certificate interest amount for that class; (E) to the holders of the Class M-4 certificates, any unpaid accrued certificate interest amount for that class; (F) to the holders of the Class M-5 certificates, any unpaid accrued certificate interest amount for that class; (G) to the holders of the Class B-1 certificates, any unpaid accrued certificate interest amount for that class; (H) to the holders of the Class B-2 certificates, any unpaid accrued certificate interest amount for that class; (I) to the holders of the Class B-3 certificates, any unpaid accrued certificate interest amount for that class; (J) to the holders of the Class B-4 certificates, any unpaid accrued certificates interest amount for that class; (K) to the excess reserve fund account, the amount of any basis risk payment (as defined in the "Glossary of Terms" in this prospectus supplement) (without regard to net swap receipt amounts) for that Distribution Date; (L) from funds on deposit in the excess reserve fund account with respect to S-13 that distribution date, an amount equal to any basis risk carry forward amount (as defined in the "Glossary of Terms" in the prospectus supplement) with respect to the LIBOR certificates for that distribution date in the same order and priority in which accrued certificate interest is allocated among those classes of certificates, with the allocation to the Class A certificates being allocated pro rata based on their certificate principal balances; (M) to the supplemental interest trust, the amount of any defaulted swap termination payment owed to the Swap Provider; (N) to the Class X certificates, those amounts as set forth in the master servicing and trust agreement; and (O) to the holders of the Class R and Class RC certificates, any remaining amount as set forth in the master servicing and trust agreement. On each distribution date, the securities administrator will be required to distribute to the holders of the Class P certificates all amounts representing prepayment premiums in respect of the mortgage loans received by the servicer during the related prepayment period and remitted to the securities administrator. "Stepdown Date" is defined in the "Glossary of Terms" included in this prospectus supplement and generally means the earlier to occur of (a) the date on which the aggregate class certificate balances of the Class A certificates have been reduced to zero and (b) the later to occur of (i) the distribution date in March 2009 and (ii) the first distribution date on which the subordination below the Class A certificates is greater than or equal to 12.30% of the aggregate stated principal balance of the mortgage loans for that distribution date. "Trigger Event" is defined in the "Glossary of Terms" included in this prospectus supplement and generally means with respect to any Distribution Date, the circumstances in which (i) the rolling three month average of the aggregate unpaid principal balance of the mortgage loans that are 60 days delinquent or more or (ii) the aggregate amount of realized losses incurred since the cut-off date, in each case, exceeds the applicable percentages described in the definition of "Trigger Event" included in the "Glossary of Terms." Credit Enhancement The credit enhancement provided for the benefit of the holders of the LIBOR certificates consists solely of: o amounts available from the mortgage loans after all payments of interest and principal on the LIBOR certificates have been made, and all amounts required to be paid to the swap provider have been made, o an initial overcollateralization amount of approximately 0.50% of the scheduled principal balance of the mortgage loans as of the cut-off date, o the use of excess interest, after taking into account certain payments received or paid by the trust under the interest rate swap agreement described below, to cover losses on the mortgage loans and as a distribution of principal to maintain overcollateralization, o the subordination of distributions on the more subordinate classes of certificates to the required distributions on the more senior classes of certificates, and o the allocation of losses on the mortgage loans to the most subordinate classes of certificates then outstanding. Interest Rate Swap Agreement On the closing date, the supplemental interest trust, which is a separate trust that S-14 is part of the asset pool under the master trust and servicing agreement, will enter into an interest rate swap agreement with a swap provider that has a counterparty rating of "Aaa" from Moody's Investors Service, Inc. and a credit rating of "AA+" from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. (or has a guarantor that has such ratings). Under the interest rate swap agreement, with respect to the first 57 distribution dates the supplemental interest trust will pay to the swap provider a fixed payment at a rate of [5.0500]% (on a 30/360 basis) per annum and the swap provider will pay to the supplemental interest trust a floating payment at a rate of one-month LIBOR (on an actual/360 basis) (as determined pursuant to the interest rate swap agreement), in each case calculated on a notional amount equal to the lesser of a scheduled notional amount or the outstanding principal balance of the LIBOR certificates. To the extent that the fixed payment exceeds the floating payment payable with respect to any of the first 57 distribution dates, amounts otherwise available for payments on the certificates will be applied on that distribution date to make a net payment to the swap provider, and to the extent that the floating payment exceeds the fixed payment payable with respect to any of the first 57 distribution dates, the swap provider will owe a net payment to the supplemental interest trust on the business day preceding that distribution date. Any net amounts received by or paid out from the supplemental interest trust under the interest rate swap agreement will either increase or reduce the amount available to make payments on the certificates, as described under "Description of the Certificates--Supplemental Interest Trust" in this prospectus supplement. The interest rate swap agreement is scheduled to terminate following the distribution date in November 2010. For further information regarding the interest rate swap agreement, see "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. The Mortgage Loans The mortgage loans to be included in the trust will be Alt-A type, adjustable-rate mortgage loans secured by first lien mortgages or deeds of trust on residential real properties. All of the mortgage loans were purchased by the sponsor from Countrywide Home Loans, Inc., First National Bank of Nevada, National City Mortgage Co., GreenPoint Mortgage Funding, Inc. and various other mortgage loan sellers through the Goldman Sachs Mortgage Conduit Program. On the closing date, the sponsor will transfer the mortgage loans to the depositor and the trust will acquire the mortgage loans from the depositor. The aggregate scheduled principal balance of the mortgage loans as of the statistical calculation date was approximately $1,015,029,367. The mortgage loans have original terms to maturity of not greater than 360 months, have a weighted average remaining term to scheduled maturity of 358 months as of the statistical calculation date, and have the following approximate characteristics: S-15 Selected Mortgage Loan Pool Data(1) Scheduled Principal Balance: $1,015,029,367 Number of Mortgage Loans: 3,910 Average Scheduled Principal Balance: $259,598 Interest Only Loans: 90.46% Weighted Average Gross Interest Rate: 6.40% Weighted Average Net Interest Rate(2): 6.14% Non-Zero Weighted Average FICO Score: 706 Weighted Average Original LTV Ratio: 76.09% Weighted Average Combined Original LTV Ratio: 85.78% Weighted Average Stated Remaining Term (months): 358 Weighted Average Seasoning (months): 2 Weighted Average Months to Roll: 51 Weighted Average Gross Margin: 2.66% Weighted Average Initial Rate Cap: 4.87% Weighted Average Periodic Rate Cap: 1.60% Weighted Average Gross Maximum Lifetime Rate: 11.97% % of Silent Seconds: 55.58% Non-Zero Weighted Average DTI: 38.32% % of Loans with MI: 4.09% ------------------- (1) All weighted averages calculated in this table are percentages of scheduled principal balances as of the statistical calculation date. (2) The weighted average net interest rate is equal to the weighted average gross interest rate less the Expense Fee Rate. After an initial fixed rate period, the interest rate on each mortgage loan will adjust semi-annually or annually on each adjustment date to equal the sum of six-month LIBOR, one-year LIBOR, or one-year CMT, as applicable, and the gross margin for that mortgage loan, in each case, subject to periodic and lifetime limitations. See "The Mortgage Loan Pool--The Indices" in this prospectus supplement. The first adjustment date generally will occur only after an initial period of approximately six months to ten years after origination. For additional information regarding the mortgage loans, see "The Mortgage Loan Pool" in this prospectus supplement. Servicing of the Mortgage Loans The mortgage loans will be serviced or sub-serviced by Countrywide Home Loans Servicing LP, National City Mortgage Co., JPMorgan Chase Bank, National Association and three additional servicers. Countrywide Home Loans Servicing LP will service or subservice approximately 57.45% of the mortgage loans, First National Bank of Nevada, as of the statistical calculation date, will service approximately 17.75% of the mortgage loans and beginning March 1, 2006, JPMorgan Chase Bank, National Association will service such mortgage loans, National City Mortgage Co. will service approximately 12.18% of the mortgage loans and two other servicers will service approximately 12.62% of the mortgage loans. Each servicer will be obligated to service and administer the applicable mortgage loans on behalf of the trust, for the benefit of the certificateholders. See "The Servicers" in this prospectus supplement. JPMorgan Chase Bank, National Association will function as the master servicer and will be required to monitor the performance of the servicers pursuant to the master servicing and trust agreement. See "The Master Servicer" in this prospectus supplement. JPMorgan Chase Bank, National Association, acting as the securities administrator, may perform certain functions and services of the trustee, which are described in this prospectus supplement. See "The Agreements" in this prospectus supplement. The depositor, or an affiliate of the depositor, will retain certain rights relating to the servicing of certain of the mortgage loans, including the right to terminate certain of the servicers at any time, without cause. See "The Servicers--General". S-16 Optional Termination of the Trust The depositor, at its option, may request the master servicer solicit no fewer than three bids for the sale of all of the mortgage loans and REO properties on any distribution date when the aggregate stated principal balance of all of the mortgage loans is equal to or less than 10% of the aggregate stated principal balance of all of the mortgage loans as of the cut-off date. The master servicer will accommodate such request at its sole discretion. The proceeds of the resulting sale of the trust property will be distributable to each outstanding class of the LIBOR certificates in retirement thereof, up to an amount equal to the aggregate outstanding class principal balance thereof plus accrued interest. Advances Each servicer will be required to make cash advances with respect to delinquent payments of principal and interest on the mortgage loans and cash advances to preserve and protect the mortgaged property (such as for taxes and insurance) serviced by it, unless the servicer reasonably believes that the cash advances cannot be repaid from future payments or other collections on the applicable mortgage loans. The master servicer, acting as backup servicer, will advance its own funds to make advances if the servicer fails to do so (unless the master servicer deems the advances to be nonrecoverable) as required under the master servicing and trust agreement. These cash advances are only intended to maintain a regular flow of scheduled interest and principal payments on the certificates or to preserve and protect the mortgaged property and are not intended to guarantee scheduled interest and principal payments or insure against losses. No servicer (or master servicer, trustee (as successor master servicer) or any other successor master servicer, as applicable)) will be obligated to make any advances of principal on any real estate owned property. Denominations The offered certificates will be issued in minimum denominations of $50,000 initial principal amount and integral multiples of $1 in excess of $50,000, except that one certificate of each class may be issued in an amount less than $50,000. Master Servicing, Servicing and Trustee Fees The master servicer is entitled with respect to each mortgage loan to a monthly master servicing fee which will be remitted to the master servicer by the securities administrator from amounts on deposit in the distribution account. The master servicing fee will be an amount equal to the investment income earned on stated principal balance amounts on deposit in the distribution account during the master servicer float period and paid to the Master Servicer as compensation for its activities under the master servicing and trust agreement. Each servicer is entitled with respect to each mortgage loan serviced by it to a monthly servicing fee, which will be retained by such servicer from such mortgage loan or payable monthly from amounts on deposit in the collection account. The servicing fee will be an amount equal to interest at one-twelfth of a rate equal to 0.25% or one-twelfth of a rate equal to 0.375%, as applicable, on the stated principal balance of each mortgage loan. The trustee is entitled to a trustee fee, which will be remitted to the trustee by JPMorgan from compensation received in its capacity as Master Servicer and Securities Administrator. S-17 Optional Repurchase of Delinquent Mortgage Loans The depositor has the option, but is not obligated, to purchase from the trust any mortgage loan that is 90 days or more delinquent as described in this prospectus supplement under "The Agreements--Optional Repurchase of Delinquent Mortgage Loans." Required Repurchases or Substitutions of Mortgage Loans If, with respect to any mortgage loan any of the representations and warranties made by any responsible party are breached in any material respect as of the date made, or there exists any uncured material document defect, such responsible party will be obligated to repurchase, or, substitute for, as applicable, the mortgage loan as further described in this prospectus supplement under "Description of the Certificates--Delivery of Mortgage Loan Documents" and "--Representations and Warranties Relating to Mortgage Loans." ERISA Considerations Subject to the conditions described under "ERISA Considerations" in this prospectus supplement, the offered certificates (other than the residual certificates) may be purchased by an employee benefit plan or other retirement arrangement subject to Title I of ERISA or Section 4975 of the Internal Revenue Code. Sales of the Class R and Class RC certificates to such plans or retirement arrangements are prohibited. In making a decision regarding investing in any class of LIBOR certificates, fiduciaries of such plans or arrangements should consider the additional requirements resulting from the interest rate swap agreement as discussed under "ERISA Considerations" in this prospectus supplement. Federal Tax Aspects Sidley Austin LLP acted as tax counsel to GS Mortgage Securities Corp. and is of the opinion that: o portions of the trust will be treated as one or more real estate mortgage investment conduits, or REMICs, for federal income tax purposes; o the LIBOR certificates and the Class X certificates will represent regular interests in a REMIC, which will be treated as debt instruments of a REMIC; o the Class RC certificates will represent the beneficial ownership of the residual interest in one or more lower-tier REMICs; o the Class R certificates will represent the beneficial ownership of the residual interest in the upper-tier REMIC formed pursuant to the master servicing and trust agreement; and o the rights of the LIBOR certificates to receive payments of basis risk carry forward amounts will represent, for federal income tax purposes, separate contractual rights coupled with REMIC regular interests within the meaning of Treasury regulation ss.1.860G-2(i). Legal Investment The Offered Certificates will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended - commonly known as SMMEA. See "Risk Factors--Your Investment May Not Be Liquid" in this prospectus supplement and "Legal Investment" in this prospectus supplement and in the prospectus. S-18 Ratings In order to be issued, the offered certificates must be assigned ratings not lower than the following by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc.: S&P Moody's Class A-1..................... AAA Aaa A-2..................... AAA Aaa A-3..................... AAA Aaa A-4..................... AAA Aaa M-1..................... AA+ Aa1 M-2..................... AA Aa2 M-3..................... AA- Aa3 M-4..................... A A1 M-5..................... A- A2 B-1..................... BBB+ A3 B-2..................... BBB Baa1 B-3..................... BBB- Baa3 R....................... AAA NR RC...................... AAA NR A security rating is not a recommendation to buy, sell or hold securities. These ratings may be lowered or withdrawn at any time by any of the rating agencies. S-19 RISK FACTORS THE OFFERED CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN PARTICULAR, YOU SHOULD NOT PURCHASE ANY CLASS OF OFFERED CERTIFICATES UNLESS YOU UNDERSTAND AND ARE ABLE TO BEAR THE PREPAYMENT, CREDIT, LIQUIDITY AND MARKET RISKS ASSOCIATED WITH THAT CLASS DISCUSSED BELOW AND UNDER THE HEADING "RISK FACTORS" IN THE PROSPECTUS. THE OFFERED CERTIFICATES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT YOU POSSESS, EITHER ALONE OR TOGETHER WITH AN INVESTMENT ADVISOR, THE EXPERTISE NECESSARY TO EVALUATE THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN THE CONTEXT OF YOUR FINANCIAL SITUATION. ALL PERCENTAGES OF MORTGAGE LOANS IN THIS "RISK FACTORS" SECTION ARE PERCENTAGES OF THE SCHEDULED PRINCIPAL BALANCES OF THE MORTGAGE LOANS AS OF THE STATISTICAL CALCULATION DATE OF JANUARY 1, 2006. Less Stringent Underwriting The mortgage loans were made, in part, Standard and the Resultant to mortgagors who, for one reason or Potential for Delinquencies on another, are not able, or do not wish, the Mortgage Loans Could to obtain financing from traditional Lead to Losses on Your sources. These mortgage loans may be Certificates considered to be of a riskier nature than mortgage loans made by traditional sources of financing, so that the certificateholders may be deemed to be at greater risk of loss than if the mortgage loans were made to other types of mortgagors. The underwriting standards used in the origination of the mortgage loans held by the trust are generally less stringent than those of Fannie Mae or Freddie Mac. As a result of this less stringent approach to underwriting, the mortgage loans purchased by the trust may experience higher rates of delinquencies, defaults and foreclosures than mortgage loans underwritten in a manner which is more similar to the Fannie Mae and Freddie Mac guidelines. Geographic Concentration of Different geographic regions of the the Mortgage Loans in United States from time to time will Particular Jurisdictions May experience weaker regional economic Result in Greater Losses If conditions and housing markets, and, Those Jurisdictions consequently, may experience higher Experience Economics rates of loss and delinquency on Downturn mortgage loans generally. Any concentration of the mortgage loans in a region may present risk considerations in addition to those generally present for similar mortgage-backed securities without that concentration. This may subject the mortgage loans held by the trust to the risk that a downturn in the economy in this region of the country would more greatly affect the pool than if the pool were more diversified. S-20 In particular, the following approximate percentages of mortgage loans were secured by mortgaged properties located in the following states: The Mortgage Loans California Florida ---------- ------- 35.19% 11.52% Arizona Virginia ------- -------- 6.11% 5.84% Nevada ------ 5.78% Because of the relative geographic concentration of the mortgaged properties within the certain states, losses on the mortgage loans may be higher than would be the case if the mortgaged properties were more geographically diversified. For example, some of the mortgaged properties may be more susceptible to certain types of special hazards, such as earthquakes, hurricanes, wildfires, floods, and other natural disasters and major civil disturbances, than residential properties located in other parts of the country. Approximately 35.19% of the mortgage loans are secured by mortgaged properties that are located in California. Property in California may be more susceptible than homes located in other parts of the country to certain types of uninsurable hazards, such as earthquakes, floods, mudslides and other natural disasters. In addition, the economies of the states with high concentrations of mortgaged properties may be adversely affected to a greater degree than the economies of other areas of the country by certain regional developments. If the residential real estate markets in an area of concentration experience an overall decline in property values after the dates of origination of the respective mortgage loans, then the rates of delinquencies, foreclosures and losses on the mortgage loans may increase and the increase may be substantial. The concentration of mortgage loans with specific characteristics relating to the types of properties, property characteristics, and geographic location are likely to change over time. Principal payments may affect the concentration levels. Principal payments could include voluntary prepayments and prepayments resulting from casualty or condemnation, defaults and liquidations and from repurchases due to breaches of representations and warranties. Because principal payments on the mortgage loans are payable to the subordinated certificates at a slower rate than principal payments are made to the Class A certificates, the subordinated certificates are more likely to be S-21 exposed to any risks associated with changes in concentrations of mortgage loan or property characteristics. Effect on Yields Caused by Mortgagors may prepay their mortgage Prepayments, Defaults and loans in whole or in part at any time. Losses Principal payments also result from repurchases due to conversions of adjustable rate loans to fixed rate loans, breaches of representations and warranties or the exercise of an optional termination right. A prepayment of a mortgage loan generally will result in a prepayment on the certificates. We cannot predict the rate at which mortgagors will repay their mortgage loans. We cannot assure you that the actual prepayment rates of the mortgage loans included in the trust will conform to any historical prepayment rates or any forecasts of prepayment rates described or reflected in any reports or studies relating to pools of mortgage loans similar to the types of mortgage loans included in the trust. 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. The rate of prepayments on the mortgage loans will be sensitive to prevailing interest rates. Generally, if prevailing interest rates decline significantly below the interest rates on the mortgage loans, the mortgage loans are more likely to prepay than if prevailing rates remain above the interest rates on the mortgage loans. Conversely, if prevailing interest rates rise significantly, prepayments on the mortgage loans may decrease. The mortgage loans may also suffer an increase in defaults and liquidations following upward adjustments of their interest rates, especially following their initial adjustments. As of the statistical calculation date, approximately 38.41% of the mortgage loans require the mortgagor to pay a prepayment premium in certain instances if the mortgagor prepays the mortgage loan during a stated period, which may be from six months to five years after the mortgage loan was originated. A prepayment premium may or may not discourage a mortgagor from prepaying the related mortgage loan during the applicable period. The responsible parties (Countrywide Home Loans, Inc., First National Bank of Nevada, National City Mortgage Co., Goldman Sachs Mortgage Company and GreenPoint Mortgage Funding, Inc.) may be required to repurchase mortgage loans from the trust in the event certain breaches of their respective representations and warranties occur or certain material S-22 document defects occur, which in each case, and have not been cured. These purchases will have the same effect on the holders of the LIBOR certificates as a prepayment of those mortgage loans. The depositor, at its option, may request the master servicer solicit bids for the sale of the mortgage loans and REO properties when the aggregate stated principal balance of all of the mortgage loans as of the last day of the related due period is equal to or less than 10% of the aggregate stated principal balance of all of the mortgage loans as of the cut-off date. The master servicer will accommodate such request at its sole discretion. If the rate of default or the amount of losses on the mortgage loans is higher than you expect, then your yield may be lower than you expect. As a result of the absorption of realized losses on the mortgage loans by excess interest and overcollateralization as described in this prospectus supplement, liquidations of defaulted mortgage loans, whether or not realized losses are incurred upon the liquidations, will result in an earlier return of principal to the LIBOR Certificates and will influence the yield on the LIBOR Certificates in a manner similar to the manner in which principal prepayments on the mortgage loans will influence the yield on the LIBOR Certificates. The overcollateralization provisions are intended to result in an accelerated rate of principal distributions to holders of the LIBOR Certificates then entitled to principal distributions at any time that the overcollateralization provided by the mortgage loan pool falls below the required overcollateralization level. An earlier return of principal to the holders of the LIBOR Certificates as a result of the overcollateralization provisions will influence the yield on the LIBOR certificates in a manner similar to the manner in which principal prepayments on the mortgage loans will influence the yield on the LIBOR Certificates. The multiple class structure of the LIBOR Certificates causes the yield of certain classes of the LIBOR Certificates to be particularly sensitive to changes in the rates of prepayments of mortgage loans. Because distributions of principal will be made to the classes of LIBOR Certificates according to the priorities described in this prospectus supplement, the yield to maturity on those classes of LIBOR Certificates will be sensitive to the rates of prepayment on the mortgage loans experienced both before and after the commencement of principal distributions on those classes. In particular, the subordinated certificates (the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates) do not receive S-23 any portion of the amount of principal payable to the LIBOR certificates prior to the distribution date in March 2009 (unless the aggregate certificate principal balance of the Class A certificates has been reduced to zero). Thereafter, subject to the loss and delinquency performance of the mortgage loan pool, the subordinated certificates may continue to receive no portion of the amount of principal then payable to the LIBOR certificates (unless the aggregate certificate principal balance of the Class A certificates has been reduced to zero). The weighted average lives of the subordinated certificates will therefore be longer than would otherwise be the case. The effect on the market value of the subordinated certificates of changes in market interest rates or market yields for similar securities may be greater than for the Class A certificates. The value of your certificates may be reduced if the rate of default or the amount of losses is higher than expected. If the performance of the mortgage loans is substantially worse than assumed by the rating agencies, the ratings of any class of certificates may be lowered in the future. This would probably reduce the value of those certificates. No one will be required to supplement any credit enhancement or to take any other action to maintain any rating of the certificates. Newly originated mortgage loans may be more likely to default, which may cause losses on the offered certificates. Defaults on mortgage loans tend to occur at higher rates during the early years of the mortgage loans. Substantially all of the loans have been originated within one year prior to their sale to the trust. As a result, the trust may experience higher rates of default than if the mortgage loans had been outstanding for a longer period of time. The credit enhancement features may be inadequate to provide protection for the offered certificates. The credit enhancement features described in this prospectus supplement are intended to enhance the likelihood that holders of the Class A certificates, and to a limited extent, the holders of the Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5, and, to a lesser degree, the holders of the Class B-1, Class B-2, Class B-3 and Class B-4 certificates, will receive regular payments of interest and principal. However, we cannot assure you that the applicable credit enhancement will adequately cover any shortfalls in cash available to pay your certificates as a result of delinquencies or defaults on the mortgage loans. If delinquencies or defaults occur on the mortgage loans, none of the master servicer, each servicer or any other entity will advance scheduled monthly payments of interest and principal S-24 on delinquent or defaulted mortgage loans if the advances are not likely to be recovered. If substantial losses occur as a result of defaults and delinquent payments on the mortgage loans, you may suffer losses. Prepayments on the Mortgage When a voluntary principal prepayment Loans Could Lead to is made by the mortgagor on a mortgage Shortfalls in the Distribution loan (excluding any payments made upon of Interest on Your Certificates liquidation of any mortgage loan), the mortgagor is charged interest on the amount of prepaid principal only up to the date of the prepayment, instead of for a full month. However, principal prepayments will only be passed through to the certificateholders once a month on the distribution date that follows the prepayment period in which the prepayment was received by the applicable servicer. In the event the timing of any voluntary prepayments in full or in part would cause there to be less than one full month's interest, at the applicable net mortgage interest rates, available to be distributed to certificateholders with respect to the prepaid mortgage loans, the applicable servicer is obligated to pay an amount, without any right of reimbursement, for those shortfalls in interest collections payable on the certificates that are attributable to the difference between the interest paid by a mortgagor in connection with those voluntary principal prepayments in full or in part and thirty (30) days' interest on the prepaid mortgage loan, but in the case of certain servicers, only to the extent of the applicable monthly servicing fee for the related distribution date or one-half of such servicing fee. If any servicer fails to make required compensating interest payments or the shortfall exceeds the limitation based on the monthly servicing fee for the related distribution date, there will be fewer funds available for the distribution of interest on the certificates. In addition, no compensating interest payments will be available to cover prepayment interest shortfalls resulting from types of voluntary prepayments specified herein for which the applicable servicer is not required to make a compensating interest payment or involuntary payments. See "The Agreements--Prepayment Interest Shortfalls." Such shortfalls of interest, if they result in the inability of the trust to pay the full amount of the current interest on the certificates, will result in a reduction of the yield on your certificates. Risks Relating to the The Class A-4 certificates are Subordination of the Class A-4 entitled to receive distributions of Certificates and the Class A-3 interest and principal concurrently Certificates with the Class A-3 certificates on a pro rata basis. In addition, the Class A-3 and Class A-4 certificates are supported by the subordination of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates. However, the Class A-4 certificates will not receive any principal distributions until the S-25 certificate principal balance of the Class A-3 certificates has been reduced to zero, in the following applicable circumstances: o if, on any distribution date before the 37th distribution date: o the 60 Day+ Rolling Average equals or exceeds 40% of the prior period's Senior Enhancement Percentage for the Class A certificates; o the aggregate amount of realized losses incurred since the cut-off date through the last day of the related prepayment period divided by the aggregate scheduled principal balance of the mortgage loans as of the cut-off date exceeds 0.55%; or o if, on any Distribution Date on or after the 37th Distribution Date, a Trigger Event is in effect. The allocations described above will increase the risk that shortfalls in principal on the mortgage loans will be borne by the Class A-4. If such shortfalls are borne by the Class A-4 certificates, as applicable, the yield to investors on those certificates will be adversely affected. Daily in Receipt of Liquidation Substantial delays could be Proceeds; Liquidation encountered in connection with the Proceeds May Be Less than liquidation of the delinquent mortgage the Mortgage Loan Balance loans in the trust. Further, reimbursement of advances made on a mortgage loan, liquidation expenses such as legal fees, real estate taxes, hazard insurance and maintenance and preservation expenses may reduce the portion of liquidation proceeds payable on the certificates. If a mortgaged property fails to provide adequate security for the mortgage loan, you will incur a loss on your investment if the credit enhancements are insufficient to cover the loss. Interest Generated by the The weighted average of the interest Mortgage Loans May Be rates on the mortgage loans is Insufficient to Maintain the expected to be higher than the Required Level of pass-through rates on the LIBOR Overcollateralization certificates. Interest on the mortgage loans, after taking into account certain payments received or paid by the trust pursuant to the interest rate swap agreement, is expected to generate more interest than is needed to pay interest owed on the LIBOR certificates (other than the residual certificates) and to pay certain fees and expenses of the trust. Any remaining interest generated by the mortgage loans will then be used to absorb losses that occur on the mortgage loans. After these financial obligations of the trust are covered, the available excess interest generated by the mortgage loans will be used to maintain the overcollateralization at the required level determined as described in this prospectus supplement. We cannot assure you, however, that enough excess interest will be generated to absorb losses or to maintain the required level of S-26 overcollateralization. The factors described below, as well as the factors described in the next Risk Factor, will affect the amount of excess interest that the mortgage loans will generate. Every time a mortgage loan is prepaid in full, excess interest may be reduced because the mortgage loan will no longer be outstanding and generating interest. In the event of a partial prepayment, the mortgage loan will be generating less interest. Every time a mortgage loan is liquidated or written off, excess interest may be reduced because those mortgage loans will no longer be outstanding and generating interest. If the rates of delinquencies, defaults or losses on the mortgage loans turn out to be higher than expected, excess interest will be reduced by the amount necessary to compensate for any shortfalls in cash available to make required distributions on the LIBOR certificates. The weighted average of the pass-through rates for the LIBOR certificates may increase as a result of changes in the one-month LIBOR index on which the pass-through rate of each of the LIBOR certificates is determined, or as a result of increases in the pass-through rates for the LIBOR certificates after the first distribution date on which the optional clean-up call is exercisable. Any increase in the amount of interest required to be applied to pay interest on the LIBOR certificates will reduce the amount of excess interest available to absorb losses or to maintain the required level of overcollateralization. All of the mortgage loans have interest rates that adjust based on an index that is different from the index used to determine the pass-through rates on the LIBOR certificates. In addition, the first adjustment of the interest rates for approximately 0.68% of the mortgage loans will not occur until six months after the date of origination. The first adjustment of the interest rates for approximately 6.68% of the mortgage loans will not occur until two years after the date of origination. The first adjustment of the interest rates for approximately 24.10% of the mortgage loans will not occur until three years after the date of origination. The first adjustment of the interest rates for approximately 62.49% of the mortgage loans will not occur until five years after the date of origination. The first adjustment of the interest rates for approximately 5.87% of the mortgage loans will not occur until seven years after the date of origination. The first adjustment of the interest rates for approximately 0.19% of the mortgage loans will not occur for ten years after the date of origination. As a result, the pass-through rates on the LIBOR certificates may increase relative to the weighted average of the interest rates on the mortgage loans, or the pass-through rates on the LIBOR certificates may remain constant as the weighted average of the S-27 interest rates on the mortgage loans declines. In either case, this would require that more of the interest generated by the mortgage loans be applied to cover interest on the LIBOR certificates. The pass-through rates on the LIBOR certificates cannot exceed the weighted average interest rate of the mortgage loan pool, adjusted for payments to or from the swap provider. If prepayments, defaults and liquidations occur more rapidly on the mortgage loans with relatively higher interest rates than on the mortgage loans with relatively lower interest rates, the amount of excess interest generated by the mortgage loans will be less than would otherwise be the case. Investors in the offered certificates, and particularly the Class B-1, Class B-2 and Class B-3 certificates, should consider the risk that the overcollateralization may not be sufficient to protect your certificates from losses. Effect of Interest Rates and The LIBOR certificates accrue interest Other Factors on the at pass-through rates based on the on Pass-Through Rates of the the one-month LIBOR index plus LIBOR Certificates specified margins, but are subject to certain of the limitations. Those limitations on the pass-through rates are based, in part, on the weighted average of the net interest rates on the mortgage loans adjusted for net payments to or from the swap provider. A variety of factors, in addition to those described in the previous Risk Factor, could limit the pass-through rates and adversely affect the yield to maturity on the LIBOR certificates. Some of these factors are described below. The interest rates on the mortgage loans are based on a six-month LIBOR index with respect to approximately 57.34% of the mortgage loans, a one-year LIBOR index with respect to approximately 42.30% of the mortgage loans, or a one-year CMT index with respect to approximately 0.36% of the mortgage loans. The mortgage loans have periodic and maximum limitations on adjustments to their interest rates, and all of the mortgage loans will have the first adjustment to their interest rates from six months to ten years after the origination of those mortgage loans. As a result of the limit on the pass-through rates for the LIBOR certificates, the LIBOR certificates may accrue less interest than they would accrue if their pass-through rates were based solely on the one-month LIBOR index. The six-month LIBOR, one-year LIBOR, and one-year CMT indices may change at different times and in different amounts than one-month LIBOR. As a result, it is possible that interest rates on certain of the mortgage loans may decline while the pass-through rates on the LIBOR certificates are stable or rising. It is also possible that the interest rates on the mortgage loans S-28 and the pass-through rates for the LIBOR certificates may decline or increase during the same period, but that the pass-through rates on the LIBOR certificates may decline more slowly or increase more rapidly. The pass-through rates for the LIBOR certificates adjust monthly and are subject to maximum interest rate caps based on the weighted average net interest rate of the mortgage loans while the interest rates on the majority of mortgage loans adjust less frequently. Consequently, the limit on the pass-through rates for the LIBOR certificates may limit increases in the pass-through rates for those classes for extended periods in a rising interest rate environment. If prepayments, defaults and liquidations occur more rapidly on the mortgage loans with relatively higher interest rates than on the mortgage loans with relatively lower interest rates, the pass-through rates on the LIBOR certificates are more likely to be limited. If the pass-through rates on the LIBOR certificates are limited for any distribution date due to a cap based on the weighted average net interest rates of all or a portion of the mortgage loans (adjusted for net payments to or from the swap provider), the resulting interest shortfalls may be recovered by the holders of these certificates on the same distribution date or on future distribution dates on a subordinated basis to the extent that on that distribution date or future distribution dates there are available funds remaining after certain other distributions on the LIBOR certificates and the payment of certain fees and expenses of the trust. However, we cannot assure you that these funds will be sufficient to fully cover these shortfalls. See "Description of the Certificates--Distributions of Interest and Principal," "--Supplemental Interest Trust" and "--Interest Rate Swap Agreement" in this prospectus supplement. High Loan-to-Value Ratios Mortgage loans with higher original Increase Risk of Loss loan-to-value ratios may present a greater risk of loss than mortgage loans with original loan-to-value ratios of 80% or below. Approximately 4.09% of the mortgage loans had loan-to-value ratios in excess of 80%. Although all of the mortgage loans with loan-to-value ratios of in excess of 80% have primary mortgage insurance, we cannot assure you that the primary mortgage insurance coverage will be adequate to cover any losses that might be experienced by those mortgage loans. Additionally, the determination of the value of a mortgaged property used in the calculation of the loan-to-value ratios of the mortgage loans may differ from the appraised value of such mortgaged properties if current appraisals were obtained. S-29 Your Yield Will be Affected by Approximately 0.15%, 5.39%, 40.77%, the Interest-Only Feature of 1.93% and 42.22% of he mortgage loans Some of the Mortgage Loans have the an initial interest-only period of 2, 3, 5, 7 and 10 years. During this period, the payment made by the related mortgagor will be less than it would be if the principal of the mortgage loan was required to amortize. In addition, the mortgage loan principal balance will not be reduced because there will be no scheduled monthly payments of principal during this period. As a result, no principal payments will be made on the LIBOR certificates with respect to these mortgage loans during their interest-only period unless there is a principal prepayment. After the initial interest-only period, the scheduled monthly payment on these mortgage loans will increase, which may result in increased delinquencies by the related mortgagors, particularly if interest rates have increased and the mortgagor is unable to refinance. In addition, losses may be greater on these mortgage loans as a result of there being no principal amortization during the early years of these mortgage loans. Although the amount of principal included in each scheduled monthly payment for a traditional mortgage loan is relatively small during the first few years after the origination of a mortgage loan, in the aggregate the amount can be significant. Any resulting delinquencies and losses, to the extent not covered by the applicable credit enhancement described in this prospectus supplement, will be allocated to the LIBOR certificates in reverse order of seniority. The use of mortgage loans with an initial interest-only period have increased in popularity in the mortgage marketplace, but historical performance data for interest-only mortgage loans is limited as compared to performance data for mortgage loans that amortize from origination. The performance of these mortgage loans may be significantly different from mortgage loans that amortize from origination. In particular, there may be a higher expectation by these mortgagors of refinancing their mortgage loans with a new mortgage loan, in particular, one with an initial interest-only period, which may result in higher or lower prepayment speeds than would otherwise be the case. In addition, the failure by the related mortgagor to build equity in the mortgaged property may affect the delinquency, loss and prepayment experience with respect to these mortgage loans. S-30 Violation of Various Federal, There has been an increased focus by State and Local Laws May state and federal banking regulatory Result in Losses on the agencies, state attorneys general Mortgage Loans offices, the Federal Trade Commission, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development and state and local governmental authorities on certain lending practices by some companies in the subprime industry, sometimes referred to as "predatory lending" practices. Sanctions have been imposed by state, local and federal governmental agencies for practices including, but not limited to, charging mortgagors excessive fees, imposing higher interest rates than the mortgagor's credit risk warrants and failing to adequately disclose the material terms of loans to the mortgagors. Applicable state and local laws generally regulate interest rates and other charges, require certain disclosure, impact closing practices, and require licensing of originators. In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of the mortgage loans. The mortgage loans are also subject to federal laws, including: o the Federal Truth in Lending Act and Regulation Z promulgated under that Act, which require certain disclosures to the mortgagors regarding the terms of the mortgage loans; o the Equal Credit Opportunity Act and Regulation B promulgated under that Act, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; and o the Fair Credit Reporting Act, which regulates the use and reporting of information related to the mortgagor's credit experience. Violations of certain provisions of these federal, state and local laws may limit the ability of the servicers to collect all or part of the principal of, or interest on, the mortgage loans and in addition could subject the trust to damages and administrative enforcement (including disgorgement of prior interest and fees paid). In particular, an originator's failure to comply with certain requirements of federal and state laws could subject the trust (and other assignees of the mortgage loans) to monetary penalties, and result in the obligors' rescinding the mortgage loans against either the trust or subsequent holders of the mortgage loans. S-31 Each of the responsible parties has represented that each mortgage loan originated or acquired by it is in compliance with applicable federal, state and local laws and regulations. In addition, each of the responsible parties has also represented to the effect that none of the mortgage loans is considered (a) a "high cost" mortgage loan under the Home Ownership and Equity Protection Act of 1994, or (b) a "high cost home," "threshold," "predatory" or "covered" loan (excluding "covered home loans" as defined under clause (1) of the definition of "covered home loans" in the New Jersey Home Ownership Security Act of 2002) under applicable state, federal or local laws. In the event of a breach of any of such representations, the applicable responsible party will be obligated to cure such breach or repurchase or replace the affected mortgage loan and the trust will be reimbursed for any and all costs, losses and damages associated with any violation of applicable state, federal or local anti-predatory or anti-abusive laws and regulations in the manner and to the extent described in this prospectus supplement. The Responsible Parties May Each of the responsible parties has Not Be Able to Repurchase made various representations and to Defective Mortgage Loans warranties related to the mortgage loans. Those representations are summarized in "Description of the Certificates--Representations and Warranties Relating to the Mortgage Loans" in this prospectus supplement. If a responsible party fails to cure a material breach of its representations and warranties with respect to any mortgage loan in a timely manner, then such responsible party would be required to repurchase the defective mortgage loan. It is possible that the responsible parties may not be capable of repurchasing any defective mortgage loans, for financial or other reasons. The inability of any responsible party to repurchase defective mortgage loans would likely cause the mortgage loans to experience higher rates of delinquencies, defaults and losses. As a result, shortfalls in the distributions due on the certificates could occur. An Interest Rate Swap The certificates represent an interest Agreement is Subject to in a supplemental interest trust which Counterparty Risk contains an interest rate swap agreement that will require the swap provider to make certain payments for the benefit of the holders of the LIBOR certificates. To the extent that payments on the LIBOR certificates depend in part on payments to be received under the interest rate swap agreement, the receipt of those payments on such certificates will be subject to the credit risk of the swap provider. See "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. S-32 The Credit Rating of the Swap The swap provider under the interest Provider Could Affect the rate swap agreement will have, as of Rating of the Offered the of the closing date, a Certificates counterparty rating of "Aaa" from Moody's Investors Service, Inc. and a credit rating of "AA+" from Standard & Poor's Ratings Services, a division of The McGraw Hill-Companies, Inc. (or has a guarantor that has such ratings). The ratings on the offered certificates are dependent in part upon the credit ratings of the swap provider. If a credit rating of the swap provider is qualified, reduced or withdrawn and a substitute counterparty is not obtained in accordance with the terms of the interest rate swap agreement, the ratings of the offered certificates may be qualified, reduced or withdrawn. As a result, the value and marketability of the offered certificates may be adversely affected. See "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. Effect on Yields Due to Rapid Any payment payable to the swap Prepayments; No Assurance provider under the terms of the of Amounts Received Under interest rate swap agreement will the Interest Rate Swap reduce amounts available for Agreement distribution to certificateholders, and may reduce the pass-through rates on the LIBOR certificates. In addition, certain swap termination payments arising under the interest rate swap agreement are payable to the swap provider on a senior basis and such payments may reduce amounts available for distribution to certificateholders. Under the terms of the interest rate swap agreement, the supplemental interest trust may owe a termination payment to the swap provider even if the supplemental interest trust is not the defaulting party. Any amounts received under the interest rate swap agreement will be applied as described in this prospectus supplement to pay interest shortfalls, maintain overcollateralization and cover losses. However, no swap related payments will remain in the supplemental interest trust unless the floating payment owed by the swap provider for a distribution date exceeds the fixed payment owed to the swap provider for that distribution date. This will not occur except in a period where one-month LIBOR (as determined pursuant to the interest rate swap agreement) exceeds [5.0500]%. We cannot assure you that any amounts will be received under the interest rate swap agreement, or that any such amounts that are received will be sufficient to cover interest shortfalls or losses on the mortgage loans, or to maintain required overcollateralization. The Transfer of Servicing May As of the statistical calculation Result in Higher date, First National Bank of Nevada Delinquencies and Defaults will be servicing 17.75% of the Which May Adversely Affect mortgage loans on an interim basis. We the Yield on Your Certificates expect that JPMorgan Chase Bank, National Association will become the servicer of such mortgage loans by March 1, 2006. Although the transfer of servicing with respect to the mortgage loans to JPMorgan Chase Bank, National Association is expected to be completed in March 2006, all transfers of servicing involve the risk of disruption in collections S-33 due to data input errors, misapplied or misdirected payments, system incompatibilities, the requirement to notify the mortgagors about the servicing transfer, delays caused by the transfer of the related servicing mortgage files and records to the new servicer and other reasons. As a result of this servicing transfer or any delays associated with the transfer, the rate of delinquencies and defaults could increase at least for a period of time. We cannot assure you that there will be no disruptions associated with the transfer of servicing or that, if there are disruptions, that they will not adversely affect the yield on your certificates. External Events May Increase In response to previously executed and the Risk of Loss on the threatened terrorist attacks in the Mortgage Loans United States and foreign countries, the United States has initiated military operations and has placed a substantial number of armed forces reservists and members of the National Guard on active duty status. It is possible that the number of reservists and members of the National Guard placed on active duty status in the near future may increase. To the extent that a member of the military, or a member of the armed forces reserves or National Guard who are called to active duty, is a mortgagor of a mortgage loan in the trust, the interest rate limitation of the Servicemembers Civil Relief Act and any comparable state law, will apply. Substantially all of the mortgage loans have mortgage interest rates which exceed such limitation, if applicable. This may result in interest shortfalls on the mortgage loans, which, in turn will be allocated ratably in reduction of accrued interest on all classes of LIBOR certificates, irrespective of the availability of excess cash flow or other credit enhancement. None of the depositor, the underwriter, any responsible party, the master servicer, any servicer, the trustee, the securities administrator or any other party has taken any action to determine whether any of the mortgage loans would be affected by such interest rate limitation. See "Legal Aspects of the Mortgage Loans--Servicemembers Civil Relief Act and the California Military and Veterans Code" in the prospectus. Recent Hurricanes May Pose As of the statistical calculation Special Risks date, approximately 1.80% of the mortgage loans are secured by mortgaged properties that are located in areas in Alabama, Florida, Louisiana, Mississippi and Texas designated for individual assistance by the Federal Emergency Management Agency, or FEMA, due to Hurricane Katrina, Hurricane Rita and Hurricane Wilma. The depositor has not been able to determine whether, and the extent to which, any of the mortgaged properties securing these loans have been affected by Hurricane Katrina, Hurricane Rita and Hurricane Wilma. In selecting mortgage loans for inclusion in the trust, the depositor did not include mortgage loans secured by properties in certain of the areas designated by FEMA for individual assistance. S-34 GSMC will represent and warrant, to its knowledge, as of the closing date that each mortgaged property was not damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the mortgaged property as security for the mortgage loan or the use for which the premises were intended. In the event of a material breach of this representation and warranty, determined without regard to whether GSMC had knowledge of any such damage, GSMC will be required to cure, substitute for or repurchase the affected mortgage loan in the manner and to the extent described in this prospectus supplement. Any such repurchase will have the same effect as a prepayment of a mortgage loan, as further described in this prospectus supplement. Any damage to a property that secures a mortgage loan in the trust occurring after the closing date will not be a breach of this representation and warranty. The Certificates Are The certificates will not represent an Obligations of the Trust Only interest in or obligation of the depositor, the sponsor, the underwriter, the servicers, the master servicer, the trustee, the responsible parties, the securities administrator or any of their respective affiliates. Neither the certificates nor the underlying mortgage loans will be guaranteed or insured by any governmental agency or instrumentality or by the depositor, the underwriter, the master servicer, the securities administrator, the servicers, the trustee or any of their respective affiliates. Proceeds of the assets included in the trust will be the sole source of payments on the certificates, and there will be no recourse to the depositor, the underwriter, Goldman Sachs Mortgage Company, the servicers, the trustee, the responsible parties or any other entity in the event that such proceeds are insufficient or otherwise unavailable to make all payments provided for under the certificates. Your Investment May Not Be The underwriter intends to make a Liquid secondary market in the offered certificates, but it will have no obligation to do so. We cannot assure you that such a secondary market will develop or, if it develops, that it will continue. Consequently, you may not be able to sell your certificates readily or at prices that will enable you to realize your desired yield. The market values of the certificates are likely to fluctuate; these fluctuations may be significant and could result in significant losses to you. The secondary markets for asset-backed securities have experienced periods of illiquidity and can be expected to do so in the future. Illiquidity can have a severely adverse effect on the prices of securities that are especially sensitive to prepayment, credit, or interest rate risk, or that have been structured to meet the investment requirements of limited categories of investors. The offered certificates will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market S-35 Enhancement Act of 1984, as amended. Accordingly, many institutions that lack the legal authority to invest in securities that do not constitute "mortgage related securities" will not be able to invest in the offered certificates, thereby limiting the market for those certificates. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the offered certificates. You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership, and sale of those certificates. See "Legal Investment" in this prospectus supplement and in the prospectus. Increased Use of New In recent years, borrowers have Mortgage Loan Products by increasingly financed their homes with Borrowers May Result in a new in a mortgage loan products, which Decline in Real Estate Values in many cases have allowed them to Generally purchase homes that they might otherwise have been unable to afford. Many of these new products feature low monthly payments during the initial years of the loan that can increase (in some cases, significantly) over the loan term. There is little historical data with respect to these new mortgage loan products. Consequently, as borrowers face potentially higher monthly payments for the remaining terms of their loans, it is possible that, combined with other economic conditions such as increasing interest rates and deterioration of home values, borrower delinquencies and defaults could exceed anticipated levels. In that event, the certificates, and your investment in the securities, may not perform as you anticipate. The Ratings on Your Each rating agency rating the offered Certificates Could Be certificates may change or withdraw Reduced or Withdrawn its initial ratings at any time in the future if, in its judgment, circumstances warrant a change. No person or entity is obligated to maintain the ratings at their initial levels. If a rating agency reduces or withdraws its rating on one or more classes of the offered certificates, the liquidity and market value of the affected certificates is likely to be reduced. Value of Collateral Securing Certain of the mortgage loans may be Cooperative Loans May cooperative loans. The cooperative (1) Diminish in Value owns all the real property that comprises the project, including the land and the apartment building comprised of separate dwelling units and common areas or (2) leases the land generally by a long term ground lease and owns the apartment building. The cooperative is directly responsible for project management and, in most cases, payment of real estate taxes and hazard and liability insurance. If there is a blanket mortgage on the property and/or underlying land, as is generally the case, the cooperative, as project mortgagor, is also responsible for meeting these mortgage obligations. Ordinarily, the cooperative incurs a blanket mortgage in connection with the construction or purchase of the cooperative's apartment building. The interest of the occupants under proprietary leases or occupancy agreements to which the cooperative is a party are S-36 generally subordinate to the interest of the holder of the blanket mortgage in that building. If the cooperative is unable to meet the payment obligations arising under its blanket mortgage, the mortgagee holding the blanket mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements. In addition, the blanket mortgage on a cooperative may provide financing in the form of a mortgage that does not fully amortize with a significant portion of principal being due in one lump sum at final maturity. The inability of the cooperative to refinance this mortgage and its consequent inability to make such final payment could lead to foreclosure by the mortgagee providing the financing. A foreclosure in either event by the holder of the blanket mortgage could eliminate or significantly diminish the value of any collateral held by the lender who financed the purchase by an individual tenant stockholder of cooperative shares or, in the case of a trust fund including cooperative loans, the collateral securing the cooperative loans. See "Legal Aspects of the Mortgage Loans - General - Cooperative Loans" in the prospectus. Bankruptcy of the Depositor The depositor and the sponsor may be or the Sponsor may Delay or eligible to become a debtor under the Reduce Collections on the United States Bankruptcy Code. If the Loans depositor or the sponsor were to become a debtor under the United States Bankruptcy Code, the bankruptcy court could be asked to determine whether the mortgage assets that support the certificates constitute property of the debtor, or whether they constitute property of the issuing entity. If the bankruptcy court were to determine that the mortgage assets constitute property of the estate of the debtor, there could be delays in payments to the certificateholders of collections on the mortgage assets and/or reductions in the amount of the payments paid to certificateholders. The mortgage assets would not constitute property of the estate of the depositor or of the sponsor if the transfer of the mortgage assets from the sponsor to the depositor and from the depositor to the related issuing entity (the "Transfers") are treated as true sales, rather than pledges, of the mortgage assets. The transactions contemplated by this prospectus supplement and the prospectus will be structured so that, if there were to be a bankruptcy proceeding with respect to the sponsor or the depositor, the Transfers should be treated as true sales, and not as pledges. The mortgage assets should accordingly be treated as property of the related issuing entity and not as part of the bankruptcy estate of the depositor or the sponsor. In addition, the depositor is operated in a manner that should make it unlikely that it would become the subject of a bankruptcy filing. However, there can be no assurance that a bankruptcy court would not recharacterize the Transfers as borrowings of the depositor or sponsor secured by pledges of the mortgage assets. S-37 Any request by the debtor (or any of its creditors) for such a recharacterization of the Transfers, if successful, could result in delays in payments of collections on the mortgage assets and/or reductions in the amount of the payments paid to certificateholders, which could result in losses on the certificates. Even if a request to recharacterize the Transfers were to be denied, delays in payments on the mortgage assets and resulting delays or losses on the certificates could result. Any request by the debtor (or any of its creditors) for such a recharacterization of the Transfers, if successful, could result in delays in payments of collections on the mortgage assets and/or reductions in the amount of the payments paid to certificateholders, which could result in losses on the certificates. Even if a request to recharacterize the Transfers were to be denied, delays in payments on the mortgage assets and resulting delays or losses on the certificates could result. Servicing Fee May be Because the fee payable to the master Insufficient to Engage servicer and each servicer may be Replacement Master Servicers based on a fee rate that is a or Servicers percentage of the outstanding mortgage loan balances, no assurance can be made that such fee rate in the future will be sufficient to attract a replacement master servicer or replacement servicers to accept a successor appointment. The Offered Certificates May The offered certificates are not Not Be Suitable Investments suitable investments for any investor that requires a regular or predictable schedule of monthly payments or payment on any specific date. The offered certificates are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment and the interaction of these factors. Risks Related to the Class R The holders of the residual and Class RC Certificates certificates must include the taxable income or loss of the related REMIC in determining their federal taxable income. Prospective investors are cautioned that the residual certificateholders' REMIC taxable income and the tax liability associated with the residual certificates may be substantial during certain periods, in which event the holders of the residual certificates must have sufficient sources of funds to pay such tax liability. Other than an initial distribution on the first distribution date, it is not anticipated that the residual certificateholders will receive distributions from the trust. Furthermore, it is anticipated that all or a substantial portion of the taxable income of the related REMIC includible by the holders of the residual certificates will be treated as "excess inclusion" income, resulting in (i) the inability of those holders to use net operating losses to offset such income, (ii) the treatment of such income as "unrelated business taxable income" to certain holders who are otherwise tax exempt and (iii) the treatment of such income as subject to 30% withholding tax to certain non-U.S. investors, with no exemption or treaty reduction. Under the provisions of the Internal Revenue Code of 1986 relating to REMICs, it is likely that the Class R certificates will be considered to be "non-economic residual interests," with the result that transfers of them would be disregarded for federal income tax purposes if any significant purpose of the transferor S-38 was to impede the assessment or collection of tax. Nevertheless, the transferee affidavit used for transfers of both classes of residual certificates will require the transferee to affirm that it (i) historically has paid its debts as they come due and intends to do so in the future, (ii) understands that it may incur tax liabilities with respect to the residual certificates in excess of cash flows generated by them, (iii) intends to pay taxes associated with holding the residual certificates as such taxes become due, (iv) will not cause the income from the residual certificates to be attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of the transferee or any other U.S. person and (v) will not transfer the residual certificates to any person or entity that does not provide a similar affidavit. The transferor must certify in writing to the securities administrator that, as of the date of transfer, it had no knowledge or reason to know that the affirmations made by the transferee pursuant to the preceding sentence were false. In addition, Treasury regulations provide alternatives for either paying the transferee of the residual certificates a formula specified minimum price or transferring the residual certificates to an eligible corporation under certain conditions in order to meet the safe harbor against the possible disregard of such transfer. Finally, residual certificates generally may not be transferred to a person who is not a U.S. person unless the income on those residual certificates is effectively connected with the conduct of a U.S. trade or business and the transferee furnishes the transferor and the securities administrator with an effective Internal Revenue Service Form W-8ECI. See "Federal Income Tax Consequences--Tax Treatment of REMIC Residual Interests--Non-Recognition of Certain Transfers for Federal Income Tax Purposes" in the prospectus. An individual, trust or estate that holds residual certificates (whether the residual certificates are held directly or indirectly through certain pass-through entities) also may have additional gross income with respect to such residual certificates but may be subject to limitations or disallowance of deductions for servicing fees on the loans and other administrative expenses properly allocable to such residual certificates in computing such holder's regular tax liability, and may not be able to deduct such fees or expenses to any extent in computing such holder's alternative minimum tax liability. The master servicing and trust agreement will require that any such gross income and such fees and expenses will be allocable to holders of the residual certificates in proportion to their respective ownership interests. See "Federal Income Tax Consequences--Tax Treatment of REMIC Residual Interests" and "--Special Considerations for Certain Types of Investors--Individuals and Pass-Through Entities" in the prospectus. In addition, some portion of the purchaser's basis, if any, in residual certificates may not be S-39 recovered until termination of the trust fund. Furthermore, Treasury regulations have been issued concerning the federal income tax consequences of any consideration paid to a transferee on a transfer of residual certificates. Any transferee of residual certificates receiving such consideration should consult its tax advisors regarding these regulations. See "Federal Income Tax Consequences--Special Considerations for Certain Types of Investors--Disposition of Residual Certificates" in the prospectus. Due to the special tax treatment of residual interests, the effective after-tax return of the residual certificates may be significantly lower than would be the case if the residual certificates were taxed as debt instruments and could be negative. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] S-40 THE MORTGAGE LOAN POOL The statistical information presented in this prospectus supplement concerning the mortgage loans is based on the scheduled principal balances of the mortgage loans as of the statistical calculation date, which is January 1, 2006, unless otherwise specified in this prospectus supplement. The mortgage loan principal balances that are transferred to the trust will be the scheduled principal balances as of a cut-off date of February 1, 2006. With respect to the mortgage loan pool, some scheduled principal amortization will occur, and some unscheduled principal amortization may occur from the statistical calculation date to the cut-off date and from the cut-off date to the closing date. Moreover, certain mortgage loans included in the mortgage loan pool as of the statistical calculation date may not be included in the final mortgage loan pool because they may prepay in full prior to the cut-off date, or they may be determined not to meet the eligibility requirements for the final mortgage loan pool. In addition, certain other mortgage loans may be included in the final mortgage loan pool. As a result of the foregoing, the statistical distribution of characteristics as of the cut-off date and as of the closing date for the final mortgage loan pool may vary somewhat from the statistical distribution of such characteristics as of the statistical calculation date as presented in this prospectus supplement, although such variance should not be material. In addition, the final mortgage loan pool may vary plus or minus 5.00% from the statistical calculation pool of mortgage loans described in this prospectus supplement. General The trust will primarily consist of approximately 3,910 conventional, Alt-A type, adjustable-rate, first lien residential mortgage loans with original terms to maturity from their first scheduled payment due date of not more than 30 years, having an aggregate scheduled principal balance of approximately $1,015,029,367 as of the statistical calculation date. Approximately 29.86% of the mortgage loans (the "Countrywide Mortgage Loans") were acquired by the sponsor, Goldman Sachs Mortgage Company ("GSMC"), an affiliate of the depositor, from Countrywide Home Loans, Inc. ("Countrywide"), approximately 17.75% of the mortgage loans (the "FNBN Mortgage Loans") were acquired by GSMC from First National Bank of Nevada ("FNBN"), approximately 12.18% of the mortgage loans (the "NatCity Mortgage Loans") were acquired by GSMC from National City Mortgage Co. ("NatCity"), approximately 30.27% of the mortgage loans (the "Conduit Mortgage Loans") were acquired by GSMC from various other mortgage loan sellers under the Goldman Sachs Mortgage Conduit Program (the "Conduit Program") and approximately 9.94% of the mortgage loans (the "GreenPoint Mortgage Loans") were acquired by GSMC from GreenPoint Mortgage Funding, Inc. ("GreenPoint"). GSMC purchases mortgage loans from pre-approved counterparties on a periodic basis. If practicable, GSMC will select mortgage loans originated by a single originator for inclusion in a particular transaction. GSMC bid on a pool of mortgage loans from Countrywide, FNBN, the Conduit Program, NatCity and GreenPoint on January 9, 2006, December 16, 2005, various other dates as set forth in their respective mortgage loan purchase agreements, December 8, 2005 and January 6, 2006, respectively, and on February 10, 2006, January 20, 2006, various dates as set forth in their respective mortgage loan purchase agreements, January 24, 2006 and January 19, 2006, respectively, purchased a sub-set of such pools after conducting due diligence on the mortgage loan portfolios offered. GSMC selected all of the mortgage loans that were purchased from such originators in December 2005 and January 2006 that had not been paid-off since such mortgage loans had been purchased for inclusion in the Trust. S-41 The mortgage loans were originated or acquired generally in accordance with the underwriting guidelines described in this prospectus supplement. See "--Goldman Sachs Mortgage Conduit Program", "--FNBN Underwriting Guidelines", "--Countrywide Underwriting Guidelines", "--GreenPoint Underwriting Guidelines" and "--NatCity Underwriting Guidelines" below. In general, because such underwriting guidelines do not conform to Fannie Mae or Freddie Mac guidelines, the mortgage loans are likely to experience higher rates of delinquency, foreclosure and bankruptcy than if they had been underwritten in accordance with Fannie Mae or Freddie Mac guidelines. All of the mortgage loans in the trust are adjustable-rate mortgage loans. All of the mortgage loans have scheduled monthly payment due dates on the first day of the month. Interest on the mortgage loans accrues on the basis of a 360-day year consisting of twelve 30-day months. Generally, the mortgage loans accrue interest at a fixed rate during an initial period from their respective dates of origination and thereafter provide for adjustment of their interest rate on a semi-annual or annual interest rate adjustment date (the "Adjustment Date") based on an index. The interest rates on the mortgage loans are based on a Six-Month LIBOR Loan Index, One-Year CMT Loan Index or One-Year LIBOR Loan Index (each, an "Index"). See "--The Indices" below. The first adjustment for approximately 0.68% of the mortgage loans will occur after an initial period of approximately six months following origination; in the case of approximately 6.68% of the mortgage loans approximately two years following origination; in the case of approximately 24.10% of the mortgage loans approximately three years following origination; in the case of approximately 62.49% of the mortgage loans approximately five years following origination; in the case of approximately 5.87% of the mortgage loans approximately seven years following origination; and in the case of approximately 0.19% of the mortgage loans approximately ten years following origination. On each Adjustment Date for a mortgage loan, the interest rate will be adjusted to equal the sum, rounded generally to the nearest multiple of 1/8% of the applicable Index and a fixed percentage amount (the "Gross Margin"). However, the interest rate on each such mortgage loan will not increase or decrease by more than a fixed percentage as specified in the related mortgage note (the "Periodic Cap") on any related Adjustment Date, except in the case of the first Adjustment Date, and will not exceed a specified maximum interest rate over the life of the mortgage loan (the "Maximum Rate") or be less than a specified minimum interest rate over the life of the mortgage loan (the "Minimum Rate"). The Periodic Caps for the adjustable-rate mortgage loans are: o 1.000% for approximately 38.49% of the mortgage loans; o 1.500% for approximately 2.53% of the mortgage loans; o 2.000% for approximately 58.94% of the mortgage loans; and o 3.000% for approximately 0.04% of the mortgage loans. The interest rate generally will not increase or decrease on the first Adjustment Date by more than a fixed percentage specified in the related mortgage note (the "Initial Cap"), which range from 1.00% to 6.00% for all of the mortgage loans. Effective with the first monthly payment due on each mortgage loan after each related Adjustment Date, the monthly payment amount will be adjusted to an amount that will amortize fully the outstanding principal balance of the related mortgage loan over its remaining term, and pay interest at the interest rate as so adjusted. Due to the application of the Initial Caps, Periodic Caps and Maximum Rates, the S-42 interest rate on each such mortgage loan, as adjusted on any related Adjustment Date, may be less than the sum of the applicable Index and the related Gross Margin, rounded as described in this prospectus supplement. See "--The Indices" below. The mortgage loans generally do not permit the related borrowers to convert their adjustable interest rate to a fixed interest rate. Each mortgage loan contains a "due-on-sale" clause which the applicable servicer will exercise unless prohibited from doing so by applicable law or unless such exercise would impair or threaten to impair any recovery under the related PMI policy (as defined below), if any. All of the mortgage loans are secured by first mortgages, deeds of trust or similar security instruments creating first liens on residential properties primarily consisting of one- to four-family dwelling units, individual condominium units, cooperatives or individual units in planned unit developments. Pursuant to its terms, each mortgage loan, other than a loan secured by a cooperative or a condominium unit, is required to be covered by a standard hazard insurance policy in an amount equal to the lower of the unpaid principal amount of that mortgage loan or the replacement value of the improvements on the related mortgaged property. Generally, a cooperative or a condominium association is responsible for maintaining hazard insurance covering the entire building. Approximately 4.09% of the mortgage loans had loan-to-value ratios in excess of 80%. The "loan-to-value ratio" or "LTV" of a mortgage loan at any time is generally, unless otherwise provided in the applicable underwriting guidelines, the ratio of the principal balance of such mortgage loan at the date of determination to (a) in the case of a purchase, the least of the sale price of the mortgaged property, its appraised value or its review appraisal value (as determined pursuant to the underwriting guidelines) at the time of sale or (b) in the case of a refinancing or modification of a mortgage loan, the appraised value of the mortgaged property at the time of the refinancing or modification. All of the mortgage loans with loan-to-value ratios in excess of 80% are covered by loan-level, primary mortgage insurance. Primary mortgage insurance will provide limited protection against losses on defaulted mortgage loans as it provides effective coverage down to a loan-to-value ratio of 80%. Of the mortgage loans that have primary mortgage insurance policies (sometimes referred to as "PMI"), the mortgage insurance policies are provided by PMI Mortgage Insurance Company (approximately 1.19%), GEMICO (approximately 0.15%), Mortgage Guaranty Insurance Co. (approximately 0.40%), CMAC (approximately 0.22%), Radian (approximately 0.30%), Republic Mortgage Insurance Co. (approximately 0.97%), Triad (approximately 0.27%) and UGIC (approximately 0.59%). Each servicer is required to maintain or cause the borrower to maintain coverage under each primary mortgage insurance policy and pay all related premiums, at its own expense, until such time as the insurance expires. All of the mortgage loans are fully amortizing. Approximately 90.46% of the mortgage loans provide for payments of interest-only ranging from two to ten years following origination. S-43 The Mortgage Loans The pool of mortgage loans had the following approximate aggregate characteristics as of the statistical calculation date(1):
Scheduled Principal Balance: $1,015,029,367 Number of Mortgage Loans: 3,910 Average Scheduled Principal Balance: $259,598 Percentage of Interest-Only Mortgage Loans: 90.46% Weighted Average Gross Interest Rate: 6.40% Weighted Average Net Interest Rate(2): 6.14% Non-Zero Weighted Average FICO Score: 706 Weighted Average Original LTV Ratio: 76.09% Weighted Average Combined Original LTV Ratio: 85.78% Weighted Average Stated Remaining Term (months): 358 Weighted Average Seasoning (months): 2 Weighted Average Months to Roll: 51 Weighted Average Gross Margin: 2.66% Weighted Average Initial Rate Cap: 4.87% Weighted Average Periodic Rate Cap: 1.60% Weighted Average Gross Maximum Lifetime Rate: 11.97% % of Silent Seconds: 55.58% Non-Zero Weighted Average DTI: 38.32% % of Loans with MI: 4.09%
------------------- (1) All weighted averages calculated in this table are based on scheduled principal balances unless otherwise noted. (2) The weighted average net interest rate is equal to the weighted average gross interest rate less the Expense Fee Rate. The scheduled principal balances of the mortgage loans range from approximately $39,874 to approximately $1,248,000. The mortgage loans had an average scheduled principal balance of approximately $259,598. The weighted average loan-to-value ratio at origination of the mortgage loans is approximately 76.09% and approximately 4.09% of the mortgage loans have loan-to-value ratios at origination exceeding 80.00%. All of the mortgage loans are secured by first liens. No more than approximately 0.62% of the mortgage loans are secured by mortgaged properties located in any one zip code area. As of the statistical calculation date, four (4) of the mortgage loans were 30 to 59 days delinquent. These mortgage loans had an aggregate scheduled principal balance of approximately $1,340,336, and represent approximately 0.13% of the mortgage loan pool as of the statistical calculation date. As of the statistical calculation date, none of the mortgage loans were 60 days or more delinquent. A mortgage loan will be considered past due if the payment due on the related contractual payment date is not received by the immediately succeeding contractual payment date. The tables on Schedule A set forth certain statistical information with respect to the aggregate mortgage loan pool. Due to rounding, the percentages shown may not precisely total 100.00%. S-44 Prepayment Premiums Under the terms of the related mortgage notes, as of the statistical calculation date, approximately 38.41% of the mortgage loans by aggregate unpaid principal balance, provide for payment by the mortgagor of a prepayment premium (each, a "Prepayment Premium") in connection with certain full or partial prepayments of principal. Generally, each such mortgage loan provides for payment of a Prepayment Premium in connection with certain voluntary, full or partial prepayments made within the period of time specified in the related mortgage note, ranging from six months to 5 years from the date of origination of such mortgage loan, or the penalty period, as described in this prospectus supplement. The amount of the applicable Prepayment Premium, to the extent permitted under applicable federal or state law, is as provided in the related mortgage note. No mortgage loan imposes a Prepayment Premium for a term in excess of five years. Prepayment Premiums collected from mortgagors will be paid to the holders of the Class P certificates and will not be available for payment to the LIBOR certificates. The servicers may waive, modify or vary any term of any applicable mortgage loan, including any Prepayment Premium, if, in the applicable servicer's determination, that waiver or modification is not materially adverse to the trust, and in certain cases, subject to the consent of the trust or prior to such mortgage loan becoming subject to a reconstitution agreement. The Master Servicer may not waive, modify or vary any term of any mortgage loan. The Indices Each mortgage loan has an interest rate that adjusts based on an Index. The One-Year LIBOR Loan Index will be calculated using the arithmetic mean of the London Interbank Offered Rate quotations for one year U.S. Dollar-denominated deposits as of the date that is twenty-five or forty-five days before the applicable Adjustment Date (the "One-Year LIBOR Loan Index"). The Six Month LIBOR Loan Index will be calculated using the arithmetic mean of the London Interbank Offered Rate quotations for six month U.S. Dollar-denominated deposits as of the date that is twenty-five or forty-five days before the applicable Adjustment Date (the "Six-Month LIBOR Loan Index"). The One-Year CMT Loan Index is the weekly average yield on actively traded U.S. Treasury securities adjusted to a constant maturity of one year (the "One-Year CMT Loan Index"). The One-Year CMT Loan Index will be generally determined forty-five days before the applicable Adjustment Date. In the event an Index is no longer available, the servicer will select a substitute Index in accordance with the applicable mortgage loan. Countrywide Underwriting Guidelines Information relating to the underwriting guidelines of Countrywide from whom GSMC acquired certain of the mortgage loans, is summarized below. The information set forth below has been provided by Countrywide, and none of the depositor, the sponsor, the master servicer, the securities administrator, the underwriter, the trustee or any person other than Countrywide makes any representation as to the accuracy or completeness of such information. The "Loan-to-Value Ratio" as used in "Countrywide Underwriting Guidelines" above means the ratio of a mortgage loan at any given time is a fraction, expressed as a percentage, the numerator of which is the principal balance of the related mortgage loan at the date of determination and the denominator of which is: S-45 o 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 o in the case of a refinance, the appraised value of the mortgaged property at the time of the refinance, except in the case of a mortgage loan underwritten pursuant to Countrywide's Streamlined Documentation Program as described under "The Mortgage Loan Pool--Countrywide Underwriting Guidelines--Underwriting Process--General" in this prospectus supplement. With respect to mortgage loans originated pursuant to Countrywide's Streamlined Documentation Program, o if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was 80% or less and the loan amount of the new loan being originated is $650,000 or less, then the "Loan-to-Value Ratio" will be the ratio of the principal amount of the new mortgage loan being originated divided by the appraised value of the related mortgaged property at the time of the origination of the Mortgage Loan being refinanced, as reconfirmed by Countrywide using an automated property valuation system; or o if the loan-to-value ratio at the time of the origination of the mortgage loan being refinanced was greater than 80% or the loan amount of the new loan being originated is greater than $650,000, then the "Loan-to-Value Ratio" will be the ratio of the principal amount of the new mortgage loan being originated divided by the appraised value of the related mortgaged property as determined by an appraisal obtained by Countrywide at the time of the origination of the new mortgage loan. See "The Mortgage Loan Pool--Countrywide Underwriting Guidelines--Underwriting Process--General" in this prospectus supplement. 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 mortgage loans. Underwriting Process General Countrywide Home Loans, Inc., a New York corporation ("Countrywide"), has been originating mortgage loans since 1969. Countrywide's underwriting standards are applied in accordance with applicable federal and state laws and regulations. As part of its evaluation of potential borrowers, Countrywide generally requires a description of income. If required by its underwriting guidelines, Countrywide obtains employment verification providing current and historical income information and/or a telephonic employment confirmation. Such employment verification may be obtained, either through analysis of the prospective borrower's recent pay stub and/or W-2 forms for the most recent two years, relevant portions of the most recent two years' tax returns, or from the prospective borrower's employer, wherein the employer reports the length of employment and current salary with that organization. Self-employed prospective borrowers generally are required to submit relevant portions of their federal tax returns for the past two years. S-46 In assessing a prospective borrower's creditworthiness, Countrywide may use FICO Credit Scores. "FICO Credit Scores" are statistical credit scores designed to assess a borrower's creditworthiness and likelihood to default on a consumer obligation over a two-year period based on a borrower's credit history. FICO Credit Scores were not developed to predict the likelihood of default on mortgage loans and, accordingly, may not be indicative of the ability of a borrower to repay its mortgage loan. FICO Credit Scores range from approximately 250 to approximately 900, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. Under Countrywide' underwriting guidelines, borrowers possessing higher FICO Credit Scores, which indicate a more favorable credit history and who give Countrywide the right to obtain the tax returns they filed for the preceding two years, may be eligible for Countrywide's processing program (the "Preferred Processing Program"). Periodically the data used by Countrywide to complete the underwriting analysis may be obtained by a third party, particularly for mortgage loans originated through a loan correspondent or mortgage broker. In those instances, the initial determination as to whether a mortgage loan complies with Countrywide's underwriting guidelines may be made by an independent company hired to perform underwriting services on behalf of Countrywide, the loan correspondent or mortgage broker. In addition, Countrywide may acquire mortgage loans from approved correspondent lenders under a program pursuant to which Countrywide delegates to the correspondent the obligation to underwrite the mortgage loans to Countrywide's standards. Under these circumstances, the underwriting of a mortgage loan may not have been reviewed by Countrywide before acquisition of the mortgage loan and the correspondent represents that Countrywide's underwriting standards have been met. After purchasing mortgage loans under those circumstances, Countrywide conducts a quality control review of a sample of the mortgage loans. The number of loans reviewed in the quality control process varies based on a variety of factors, including Countrywide's prior experience with the correspondent lender and the results of the quality control review process itself. Countrywide's underwriting standards are applied by or on behalf of Countrywide to evaluate the prospective borrower's credit standing and repayment ability and the value and adequacy of the mortgaged property as collateral. Under those standards, a prospective borrower must generally demonstrate that the ratio of the borrower's monthly housing expenses (including principal and interest on the proposed mortgage loan and, as applicable, the related monthly portion of property taxes, hazard insurance and mortgage insurance) to the borrower's monthly gross income and the ratio of total monthly debt to the monthly gross income (the "debt-to-income" ratios) are within acceptable limits. If the prospective borrower has applied for an interest-only Six-Month LIBOR loan, the interest component of the monthly mortgage expense is calculated based upon the initial interest rate plus 2%. If the prospective borrower has applied for a 3/1 Mortgage Loan or 3/27 Mortgage Loan and the Loan-to-Value Ratio is less than or equal to 75%, the interest component of the monthly mortgage expense is calculated based on the initial loan interest rate; if the Loan-to-Value Ratio exceeds 75%, the interest component of the monthly mortgage expense calculation is based on the initial loan interest rate plus 2%. If the prospective borrower has applied for a 5/1 Mortgage Loan, a 5/25 Mortgage Loan, a 7/1 Mortgage Loan, a 7/23 Mortgage Loan, a 10/1 Mortgage Loan or a 10/20 Mortgage Loan, the interest component of the monthly mortgage expense is calculated based on the initial loan interest rate. If the prospective borrower has applied for a Negative Amortization Loan, the interest component of the monthly housing expense calculation is based upon the greater of 4.25% and the fully indexed mortgage note rate at the time of loan application. The maximum acceptable debt-to-income ratio, which is determined on a loan-by-loan basis varies depending on a number of underwriting criteria, including the Loan-to-Value Ratio, loan purpose, loan S-47 amount and credit history of the borrower. In addition to meeting the debt-to-income ratio guidelines, each prospective borrower is required to have sufficient cash resources to pay the down payment and closing costs. Exceptions to Countrywide's underwriting guidelines may be made if compensating factors are demonstrated by a prospective borrower. Additionally, Countrywide does permit its adjustable rate mortgage loans, hybrid adjustable rate mortgage loans and negative amortization mortgage loans to be assumed by a purchaser of the related mortgaged property, so long as the mortgage loan is in its adjustable rate period (except for a 3/1 Mortgage Loan, which may be assumed during the fixed rate period) and the related purchaser meets Countrywide's underwriting standards that are then in effect. Countrywide may provide secondary financing to a borrower contemporaneously with the origination of a mortgage loan, subject to the following limitations: the Loan-to-Value Ratio of the senior (i.e., first) lien may not exceed 80% and the combined Loan-to-Value Ratio may not exceed 100%. Countrywide's underwriting guidelines do not prohibit or otherwise restrict a borrower from obtaining secondary financing from lenders other than Countrywide, whether at origination of the mortgage loan or thereafter. The nature of the information that a borrower is required to disclose and whether the information is verified depends, in part, on the documentation program used in the origination process. In general under the Full Documentation Loan Program (the "Full Documentation Program"), each prospective borrower is required to complete an application which includes information with respect to the applicant's assets, liabilities, income, credit history, employment history and other personal information. Self-employed individuals are generally required to submit their two most recent federal income tax returns. Under the Full Documentation Program, the underwriter verifies the information contained in the application relating to employment, income, assets and mortgages. A prospective borrower may be eligible for a loan approval process that limits or eliminates Countrywide's standard disclosure or verification requirements or both. Countrywide offers the following documentation programs as alternatives to its Full Documentation Program: an Alternative Documentation Loan Program (the "Alternative Documentation Program"), a Reduced Documentation Loan Program (the "Reduced Documentation Program"), a CLUES Plus Documentation Loan Program (the "CLUES Plus Documentation Program"), a No Income/No Asset Documentation Loan Program (the "No Income/No Asset Documentation Program"), a Stated Income/Stated Asset Documentation Loan Program (the "Stated Income/Stated Asset Documentation Program") and a Streamlined Documentation Loan Program (the "Streamlined Documentation Program"). For all mortgage loans originated or acquired by Countrywide, Countrywide obtains a credit report relating to the applicant from a credit reporting company. The credit report typically contains information relating to such matters as credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcy, dispossession, suits or judgments. All adverse information in the credit report is required to be explained by the prospective borrower to the satisfaction of the lending officer. Except with respect to the mortgage loans originated pursuant to its Streamlined Documentation Program, whose values were confirmed with a Fannie Mae proprietary automated valuation model, Countrywide obtains appraisals from independent appraisers or appraisal services for properties that are to secure mortgage loans. The appraisers inspect and appraise the proposed mortgaged property and verify that the property is in acceptable condition. Following each appraisal, the appraiser prepares a report which includes a market S-48 data analysis based on recent sales of comparable homes in the area and, when deemed appropriate, a replacement cost analysis based on the current cost of constructing a similar home. All appraisals are required to conform to Fannie Mae or Freddie Mac appraisal standards then in effect. Countrywide requires title insurance on all of its mortgage loans secured by first liens on real property. Countrywide also requires that fire and extended coverage casualty insurance be maintained on the mortgaged property in an amount at least equal to the principal balance of the related single-family mortgage loan or the replacement cost of the mortgaged property, whichever is less. In addition to Countrywide's standard underwriting guidelines (the "Standard Underwriting Guidelines"), which are consistent in many respects with the guidelines applied to mortgage loans purchased by Fannie Mae and Freddie Mac, Countrywide uses underwriting guidelines featuring expanded criteria (the "Expanded Underwriting Guidelines"). The Standard Underwriting Guidelines and the Expanded Underwriting Guidelines are described further under the next two headings. Standard Underwriting Guidelines Countrywide's Standard Underwriting Guidelines for mortgage loans with non-conforming original principal balances generally allow Loan-to-Value Ratios at origination of up to 95% for purchase money or rate and term refinance mortgage loans with original principal balances of up to $400,000, up to 90% for mortgage loans with original principal balances of up to $650,000, up to 75% for mortgage loans with original principal balances of up to $1,000,000, up to 65% for mortgage loans with original principal balances of up to $1,500,000, and up to 60% for mortgage loans with original principal balances of up to $2,000,000. For cash-out refinance mortgage loans, Countrywide's Standard Underwriting Guidelines for mortgage loans with non-conforming original principal balances generally allow Loan-to-Value Ratios at origination of up to 75% and original principal balances ranging up to $650,000. The maximum "cash-out" amount permitted is $200,000 and is based in part on the original Loan-to-Value Ratio of the related mortgage loan. As used in this prospectus supplement, a refinance mortgage loan is classified as a cash-out refinance mortgage loan by Countrywide if the borrower retains an amount greater than the lesser of 2% of the entire amount of the proceeds from the refinancing of the existing loan or $2,000. Countrywide's Standard Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination on owner occupied properties of up to 95% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii) and 2 unit properties with principal balances up to $533,850 ($800,775 in Alaska and Hawaii) and up to 80% on 3 unit properties with principal balances of up to $645,300 ($967,950 in Alaska and Hawaii) and 4 unit properties with principal balances of up to $801,950 ($1,202,925 in Alaska and Hawaii). On second homes, Countrywide's Standard Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination of up to 95% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii). Countrywide's Standard Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination on investment properties of up to 90% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii) and 2 unit properties with principal balances up to $533,850 ($800,775 in Alaska and Hawaii) and up to 75% on 3 unit properties with principal balances of up to $645,300 ($967,950 in Alaska and S-49 Hawaii) and 4 unit properties with principal balances of up to $801,950 ($1,202,925 in Alaska and Hawaii). Under its Standard Underwriting Guidelines, Countrywide generally permits a debt-to-income ratio based on the borrower's monthly housing expenses of up to 33% and a debt-to-income ratio based on the borrower's total monthly debt of up to 38%. In connection with the Standard Underwriting Guidelines, Countrywide originates or acquires mortgage loans under the Full Documentation Program, the Alternative Documentation Program, the Reduced Documentation Program, the CLUES Plus Documentation Program or the Streamlined Documentation Program. The Alternative Documentation Program permits a borrower to provide W-2 forms instead of tax returns covering the most recent two years, permits bank statements in lieu of verification of deposits and permits alternative methods of employment verification. Under the Reduced Documentation Program, some underwriting documentation concerning income, employment and asset verification is waived. Countrywide obtains from a prospective borrower either a verification of deposit or bank statements for the two-month period immediately before the date of the mortgage loan application or verbal verification of employment. Since information relating to a prospective borrower's income and employment is not verified, the borrower's debt-to-income ratios are calculated based on the information provided by the borrower in the mortgage loan application. The maximum Loan-to-Value Ratio, including secondary financing, ranges up to 75%. The CLUES Plus Documentation Program permits the verification of employment by alternative means, if necessary, including verbal verification of employment or reviewing paycheck stubs covering the pay period immediately prior to the date of the mortgage loan application. To verify the borrower's assets and the sufficiency of the borrower's funds for closing, Countrywide obtains deposit or bank account statements from each prospective borrower for the month immediately prior to the date of the mortgage loan application. Under the CLUES Plus Documentation Program, the maximum Loan-to-Value Ratio is 75% and property values may be based on appraisals comprising only interior and exterior inspections. Cash-out refinances and investor properties are not permitted under the CLUES Plus Documentation Program. The Streamlined Documentation Program is available for borrowers who are refinancing an existing mortgage loan that was originated or acquired by Countrywide provided that, among other things, the mortgage loan has not been more than 30 days delinquent in payment during the previous twelve-month period. Under the Streamlined Documentation Program, appraisals are obtained only if the loan amount of the loan being refinanced had a Loan-to-Value Ratio at the time of origination in excess of 80% or if the loan amount of the new loan being originated is greater than $650,000. In addition, under the Streamlined Documentation Program, a credit report is obtained but only a limited credit review is conducted, no income or asset verification is required, and telephonic verification of employment is permitted. The maximum Loan-to-Value Ratio under the Streamlined Documentation Program ranges up to 95%. Expanded Underwriting Guidelines Mortgage loans which are underwritten pursuant to the Expanded Underwriting Guidelines may have higher Loan-to-Value Ratios, higher loan amounts and different documentation S-50 requirements than those associated with the Standard Underwriting Guidelines. The Expanded Underwriting Guidelines also permit higher debt-to-income ratios than mortgage loans underwritten pursuant to the Standard Underwriting Guidelines. Countrywide's Expanded Underwriting Guidelines for mortgage loans with non-conforming original principal balances generally allow Loan-to-Value Ratios at origination of up to 95% for purchase money or rate and term refinance mortgage loans with original principal balances of up to $400,000, up to 90% for mortgage loans with original principal balances of up to $650,000, up to 80% for mortgage loans with original principal balances of up to $1,000,000, up to 75% for mortgage loans with original principal balances of up to $1,500,000 and up to 70% for mortgage loans with original principal balances of up to $3,000,000. Under certain circumstances, however, Countrywide's Expanded Underwriting Guidelines allow for Loan-to-Value Ratios of up to 100% for purchase money mortgage loans with original principal balances of up to $375,000. For cash-out refinance mortgage loans, Countrywide's Expanded Underwriting Guidelines for mortgage loans with non-conforming original principal balances generally allow Loan-to-Value Ratios at origination of up to 90% and original principal balances ranging up to $1,500,000. The maximum "cash-out" amount permitted is $400,000 and is based in part on the original Loan-to-Value Ratio of the related mortgage loan. Countrywide's Expanded Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination on owner occupied properties of up to 100% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii) and 2 unit properties with principal balances up to $533,850 ($800,775 in Alaska and Hawaii) and up to 85% on 3 unit properties with principal balances of up to $645,300 ($967,950 in Alaska and Hawaii) and 4 unit properties with principal balances of up to $801,950 ($1,202,925 in Alaska and Hawaii). On second homes, Countrywide's Expanded Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination of up to 95% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii). Countrywide's Expanded Underwriting Guidelines for conforming balance mortgage loans generally allow Loan-to-Value Ratios at origination on investment properties of up to 90% on 1 unit properties with principal balances up to $417,000 ($625,500 in Alaska and Hawaii) and 2 unit properties with principal balances up to $533,850 ($800,775 in Alaska and Hawaii) and up to 85% on 3 unit properties with principal balances of up to $645,300 ($967,950 in Alaska and Hawaii) and 4 unit properties with principal balances of up to $801,950 ($1,202,925 in Alaska and Hawaii). Under its Expanded Underwriting Guidelines, Countrywide generally permits a debt-to-income ratio based on the borrower's monthly housing expenses of up to 36% and a debt-to-income ratio based on the borrower's total monthly debt of up to 40%; provided, however, that if the Loan-to-Value Ratio exceeds 80%, the maximum permitted debt-to-income ratios are 33% and 38%, respectively. In connection with the Expanded Underwriting Guidelines, Countrywide originates or acquires mortgage loans under the Full Documentation Program, the Alternative Documentation Program, the Reduced Documentation Loan Program, the No Income/No Asset Documentation Program and the Stated Income/Stated Asset Documentation Program. Neither the No Income/No Asset Documentation Program nor the Stated Income/Stated Asset Documentation Program is available under the Standard Underwriting Guidelines. S-51 The same documentation and verification requirements apply to mortgage loans documented under the Alternative Documentation Program regardless of whether the loan has been underwritten under the Expanded Underwriting Guidelines or the Standard Underwriting Guidelines. However, under the Alternative Documentation Program, mortgage loans that have been underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan balances and Loan-to-Value Ratios than those permitted under the Standard Underwriting Guidelines. Similarly, the same documentation and verification requirements apply to mortgage loans documented under the Reduced Documentation Program regardless of whether the loan has been underwritten under the Expanded Underwriting Guidelines or the Standard Underwriting Guidelines. However, under the Reduced Documentation Program, higher loan balances and Loan-to-Value Ratios are permitted for mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines than those permitted under the Standard Underwriting Guidelines. The maximum Loan-to-Value Ratio, including secondary financing, ranges up to 90%. The borrower is not required to disclose any income information for some mortgage loans originated under the Reduced Documentation Program, and accordingly debt-to-income ratios are not calculated or included in the underwriting analysis. The maximum Loan-to-Value Ratio, including secondary financing, for those mortgage loans ranges up to 85%. Under the No Income/No Asset Documentation Program, no documentation relating to a prospective borrower's income, employment or assets is required and therefore debt-to-income ratios are not calculated or included in the underwriting analysis, or if the documentation or calculations are included in a mortgage loan file, they are not taken into account for purposes of the underwriting analysis. This program is limited to borrowers with excellent credit histories. Under the No Income/No Asset Documentation Program, the maximum Loan-to-Value Ratio, including secondary financing, ranges up to 95%. Mortgage loans originated under the No Income/No Asset Documentation Program are generally eligible for sale to Fannie Mae or Freddie Mac. Under the Stated Income/Stated Asset Documentation Program, the mortgage loan application is reviewed to determine that the stated income is reasonable for the borrower's employment and that the stated assets are consistent with the borrower's income. The Stated Income/Stated Asset Documentation Program permits maximum Loan-to-Value Ratios up to 90%. Mortgage loans originated under the Stated Income/Stated Asset Documentation Program are generally eligible for sale to Fannie Mae or Freddie Mac. First National Bank of Nevada Underwriting Guidelines General The information below has been provided by FNBN. FNBN is a national banking association and a wholly owned subsidiary of First National Bank Holding Company ("FNBHC"). FNBHC is a financial holding company and is also the parent of First National Bank of Arizona. The principal executive office of FNBN's mortgage division is located at 17600 North Perimeter Drive, Scottsdale, Arizona 85255. FNBN has been originating mortgage loans since 1998. A large majority of the mortgage loans originated or acquired by FNBN were secured primarily by one- to four-unit family residences and were originated generally in accordance with FNBN's "alternative" underwriting S-52 guidelines or acquired through retail, wholesale and correspondent channels. In addition, FNBN also originates mortgage loans through joint ventures with various correspondents by which such correspondents identify an applicant and provide the initial loan application. Thereafter, FNBN processes, underwrites and closes the loan. FNBN originates and acquires mortgage loans for purpose of sale into the secondary markets and does not maintain a significant portfolio of mortgage loans. Accordingly, FNBN limits its servicing functions to providing interim servicing of its mortgage loans prior to and immediately after the sale of a pool of mortgage loans. Underwriting Guidelines - General All of the mortgage loans have been originated either under FNBN's "full" or "alternative" underwriting guidelines (i.e., the underwriting guidelines applicable to the mortgage loans typically are less stringent than the underwriting guidelines established by Fannie Mae or Freddie Mac primarily with respect to the income and/or asset documentation which borrower is required to provide). To the extent the programs reflect underwriting guidelines different from those of Fannie Mae and Freddie Mac, the performance of the mortgage loans thereunder may reflect relatively higher delinquency rates and/or credit losses. In addition, FNBN may make certain exceptions to the underwriting guidelines described herein if, in FNBN's discretion, compensating factors are demonstrated by a prospective borrower. In addition to its originations, FNBN also acquires mortgage loans from approved correspondent lenders under a program pursuant to which the correspondent agrees to originate the mortgage loans in accordance with the underwriting guidelines of FNBN. Under these circumstances, the underwriting of a mortgage loan may not have been reviewed (or may have been partially reviewed) by FNBN prior acquisition of the mortgage loan. In that case, FNBN relies on the representation of the correspondent lender that it has underwritten the mortgage loan in compliance with the underwriting guidelines of FNBN. FNBN generally conducts a quality control review of a sample of these mortgage loans within 45 after the origination or purchase of such mortgage loan. The number of loans reviewed in the quality control process varies based on a variety of factors, including FNBN's prior experience with the correspondent lender and the results of the quality control review process itself. FNBN's underwriting guidelines are primarily intended to evaluate the prospective borrower's credit standing and ability to repay the loan, as well as the value and adequacy of the proposed mortgaged property as collateral. A prospective borrower applying for a mortgage loan is required to complete an application, which elicits pertinent information about the prospective borrower including, depending upon the loan program, the prospective borrower's financial condition (assets, liabilities, income and expenses), the property being financed and the type of loan desired. FNBN employs or contracts with underwriters to scrutinize the prospective borrower's credit profile. If required by the underwriting guidelines, employment verification is obtained either from the prospective borrower's employer or through analysis of copies of borrower's federal withholding (IRS W-2) forms and/or current payroll earnings statements. With respect to every prospective borrower, a credit report summarizing the prospective borrower's credit history or non-traditional credit history (in the case of foreign national applicants) is obtained. 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 borrower from other sources, if applicable. With respect to mortgaged property consisting of vacation or second homes, no income derived from the property generally will have been considered for underwriting purposes. S-53 Based on the data provided in the application and certain verifications (if required), a determination will have been made that the borrower's monthly income (if required to be stated or verified) should be sufficient to enable the borrower to meet its monthly obligations on the mortgage loan and other expenses related to the mortgaged property (such as property taxes, standard hazard insurance and other fixed obligations other than housing expenses). Generally, scheduled payments on a mortgage loan during the first year of its term plus taxes and insurance and other fixed obligations equal no more than a specified percentage of the prospective borrower's gross income. The percentage applied varies on a case by case basis depending on a number of underwriting criteria including, but not limited to, the loan-to-value ratio of the mortgage loan or the amount of liquid assets available to the borrower after origination. The adequacy of the mortgaged property as security for repayment of the related mortgage loan will generally have been determined by an appraisal in accordance with pre-established appraisal procedure guidelines for appraisals established by or acceptable to the originator. All appraisals conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation and must be on forms acceptable to Fannie Mae and/or Freddie Mac. Appraisers may be staff appraisers employed by the originator or independent appraisers selected in accordance with pre-established appraisal procedure guidelines established by or acceptable to the originator. The appraisal procedure guidelines generally will have required the appraiser or an agent on its behalf to personally inspect the property and to verify whether the property was in good condition and that construction, if new, had been substantially completed. The appraisal generally will have been based upon a market data analysis of recent sales of comparable properties and, when deemed applicable, 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. FNBN's underwriting guidelines are applied in a standard procedure that is intended to comply with applicable federal and state laws and regulations. However, the application of FNBN's underwriting guidelines does not imply that each specific criterion was satisfied individually. FNBN will have considered a mortgage loan to be originated in accordance with a given set of underwriting guidelines if, based on an overall qualitative evaluation, in FNBN's discretion such mortgage loan is in substantial compliance with such underwriting guidelines or if the borrower can document compensating factors. A mortgage loan may be considered to comply with a set of underwriting guidelines, even if one or more specific criteria included in such underwriting guidelines were not satisfied, if other factors compensated for the criteria that were not satisfied or the mortgage loan is considered to be in substantial compliance with the underwriting guidelines. In addition to the "full/alternate" underwriting guidelines, FNBN also originates or purchases loans that have been originated under certain limited documentation programs designed to streamline the loan underwriting process. These "stated income," "no ratio," "no income/no assets," "stated income/stated assets," "no documentation with assets," "no documentation" and "lite documentation" programs may not require income, employment or asset verifications. Generally, in order to be eligible for a limited or no documentation program, the mortgaged property must have a loan-to-value ratio that supports the amount of the mortgage loan and the prospective borrower must have a credit history that demonstrates an established ability to repay indebtedness in a timely fashion. Under the full/alternate documentation program, the prospective borrower's employment, income and assets are verified through written or telephonic communication. Alternative methods of employment and income verification generally include using copies of federal S-54 withholding forms (IRS W-2) or pay stubs. Alternative methods of asset verification generally include using copies of the borrower's recent bank statements. All loans may be submitted under the full/alternate documentation program. Under the stated income documentation and the no ratio programs, more emphasis is placed on a prospective borrower's credit score and on the value and adequacy of the mortgaged property as collateral and other assets of the prospective borrower rather than on income underwriting. The stated income documentation program requires prospective borrowers to provide information regarding their assets and income. Information regarding assets is verified through written communications or bank statements. Information regarding income is not verified. The no ratio program requires prospective borrowers to provide information regarding their assets, which is then verified through written communications or bank statements. The no ratio program does not require prospective borrowers to provide information regarding their income. In both the stated income and no ratio programs, the employment history is verified through written or telephonic communication. Under the no income/no assets program, emphasis is placed on the credit score of the prospective borrower and on the value and adequacy of the mortgaged property as collateral. Income and assets are not stated on the prospective borrower's application. Disclosure of employment is required and verified through written or telephonic communication. Under the stated income/stated assets program, emphasis is placed on the credit score of the prospective borrower and on the value and adequacy of the mortgaged property as collateral. Income is stated on the prospective borrower's application but is not verified. Assets are also stated on the application but are not verified. Employment is verified through written or telephonic communication. Under the no documentation with assets and no documentation programs, emphasis is placed on the credit score of the prospective borrower and on the value and adequacy of the mortgaged property as collateral. Under the no documentation with assets program, a prospective borrower's assets are stated and verified through written communication or bank statements. A prospective borrower is not required to provide information regarding income or employment. Under the no documentation with assets program, a prospective borrower's income and employment are not stated or verified but assets are verified. Under the no documentation program, a prospective borrower's income, assets and employment are not stated or verified. The lite documentation programs are loan programs for prospective borrowers to obtain mortgage loans that FNBN has determined to be of sub-prime quality. Under these programs, prospective borrowers are generally qualified based on verification of adequate cash flows by means of personal or business bank statements for the previous twelve or twenty-four months. National City Mortgage Co. Underwriting Guidelines General NatCity is a division of National City Bank of Indiana which is a wholly owned subsidiary of National City Corporation (NCC). NatCity is a leading originator of residential mortgages throughout the U.S. headquartered in Miamisburg, Ohio, a southern suburb of Dayton, Ohio. NatCity is comprised of approximately 7,000 employees and operates 330 lending offices in 37 States from coast to coast. S-55 National City Mortgage has over 50 years of experience in originating residential mortgage loans. The predecessor of National City Mortgage, North Central Mortgage Corporation, was founded in 1955. Since then, the company has been owned by Society Corporation and Shawmut Bank before being purchased by National City Corporation in 1989. In 1989 the name was changed to National City Mortgage Co. Since the acquisition by National City Corporation, National City Mortgage has grown through the acquisitions of Gem Mortgage Corporation, Merchants National Bank, Integra Mortgage Company, Commonwealth United Mortgage, FNMC-The Mortgage Company, Eastern Mortgage Services, First of America, AccuBanc Mortgage, and Muirfield Mortgage. National City Mortgage originates residential mortgage loans through retail branch offices located throughout the United States, a wholesale network of brokers, and correspondent lending. National City Mortgage has the financial strength and stability that makes us one of the top 10 largest mortgage originators in the nation. As of December 31, 2005, National City Mortgage Co. serviced more than 1.1 million mortgage loans totaling approximately $169.0 billion. National City Mortgage Co.'s portfolio is composed of approximately $145.3 billion in conventional loans and $23.7 billion in FHA/VA loans. See following table:
December 2003 December 2004 December 2005 Count ($) Count ($) Count ($) ----- --- ----- --- ----- --- Count / Balance 1,111,388 $155,274,844 1,135,033 $164,020,079 1,111,277 $168,946,723 Percentage Change From Prior Year 15.2% 27.0% 2.1% 5.6% -2.1% 3.0% Percent Government 23% 19% 22% 17% 18% 14%
Underwriting Standards The originator's underwriting standards are applied to evaluate the prospective borrower's credit standing and repayment ability and the value and adequacy of the mortgaged property as collateral. These standards are applied in accordance with the applicable federal and state laws and regulations. Exceptions to the underwriting standards are permitted where compensating factors are present. Generally, each mortgagor will have been required to complete an application designed to provide to the lender pertinent credit information concerning the mortgagor. The mortgagor will have given information with respect to its assets, liabilities, income (except as described below), credit history, employment history and personal information, and will have furnished the lender with authorization to obtain a credit report which summarizes the mortgagor's credit history. In the case of investment properties and two-to four-unit dwellings, income derived from the mortgaged property may have been considered for underwriting purposes, in addition to the income of the mortgagor from other sources. With respect to second homes or vacation properties, no income derived from the property will have been considered for underwriting purposes. With respect to conforming purchase money or rate/term refinance loans, all loan-to-value and loan amount limits shall comply with Fannie Mae or Freddie Mac requirements. With respect to fully documented, non-conforming S-56 purchase money or rate/term refinance loans secured by single-family and two-family residences, loan- to-value ratios at origination of up to 95% for mortgage loans with original principal balances of up to $400,000 are generally allowed. Mortgage loans with principal balances exceeding $1,000,000 ("super jumbos") are allowed if the loan is secured by the borrower's primary residence or second home. 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 loan-to-value of the related mortgage loan and FICO score. Typically, the maximum cash-out permitted is the greater of $200,000 or 50% of the new loan amount for LTVs above 50%. Less than fully-documented loans generally have lower loan-to-value and/or loan amount limits. For each mortgage loan with a loan-to-value ratio at origination exceeding 80%, 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 and related foreclosure expenses is generally required. No such primary mortgage insurance policy will be required with respect to any such mortgage loan after the date on which the related loan-to-value ratio decreases to 80% or less or, based upon new appraisal, the principal balance of such mortgage loan represents 80% or less of the new appraised value. All of the insurers that have issued primary mortgage insurance policies with respect to the Mortgage Loans meet Fannie Mae's or Freddie Mac's standard or are acceptable to the Rating Agencies. In determining whether a prospective borrower has sufficient monthly income available (i) to meet the borrower's monthly obligation on their proposed mortgage loan and (ii) to meet the monthly housing expenses and other financial obligation on the proposed mortgage loan, the originator 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. The originator also examines a prospective borrower's credit report. Generally, each credit report provides a credit score for the borrower. Credit scores generally range from 350 to 840 and are available from three major credit bureaus: Experian (formerly TRW Information Systems and Services), Equifax and Trans Union. If three credit scores are obtained, the originator applies the lower middle score of all borrowers. Credit scores are empirically derived from historical credit bureau data and represent a numerical weighing of a borrower's credit characteristics over a two-year period. A credit score is generated through the statistical analysis of a number of credit-related characteristics or variables. Common characteristics include 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. Full/Alternative Documentation Under full/alternative documentation, the prospective borrower's employment, income and assets are verified through written and telephonic communications, covering a 2-year period for S-57 employment/income and a 2-month period for assets. Eligible loans may have been processed through Loan Prospector or Desktop Underwriter which afford the following documentation variations: o Verbal verification of employment; o Less that 12 months employment verified; o 12-23 months employment verified; o 24 months or more employment verified; and o 1 or 2 months bank statements. Stated Documentation Under a 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 income is not verified, the originators obtain a telephonic verification of the borrower's employment without reference to income. Borrower's assets may or may not be verified. Goldman Sachs Mortgage Conduit Program General The information set forth below has been provided by GSMC. GSMC acquires its mortgage loans through two primary channels: (i) its conduit program, pursuant to which it acquires mortgage loans from various banks, savings and loan associations, mortgage bankers and other mortgage loan originators and purchasers of mortgage loans in the secondary market and (ii) bulk acquisitions in the secondary market. GSMC will acquire mortgage loans secured by first or second liens on the related mortgaged properties. Substantially all of the mortgage loans acquired by GSMC through its conduit program were acquired generally in accordance with the underwriting criteria described in this section. In certain instances, compensating factors demonstrated to the mortgage loan originator by a prospective borrower may warrant GSMC to make certain exceptions to these guidelines. In such instances GSMC would purchase a mortgage loan that did not completely conform to the guidelines set out below. Goldman Sachs Mortgage Conduit Underwriting Guidelines The underwriting guidelines used to originate certain of the mortgage loans acquired by GSMC are different from and, in some cases, less stringent than the underwriting standards established by Fannie Mae or Freddie Mac. The differences primarily relate to loan characteristics such as original principal balances, loan-to-value ratios, borrower income, required documentation, interest rates, borrower occupancy of the mortgaged property and/or property types. Mortgage loans originated pursuant to underwriting standards different from those of Fannie Mae or Freddie Mac may experience higher rates of delinquency and/or credit losses than mortgage loans originated by Fannie Mae or Freddie Mac. In addition, compensating factors demonstrated by a prospective borrower may warrant certain exceptions to the underwriting standards described in this section. S-58 Generally, each borrower applying for a mortgage loan must complete a credit application. The credit application is designed to provide the originating lender with relevant credit information about the prospective borrower such as information with respect to the borrower's assets, liabilities, income (except as described below), credit history, employment history and personal information. In addition, prospective borrowers generally must provide an authorization to apply for a credit report. A credit report summarizes the borrower's past credit experience with lenders and other debtors, including any record of bankruptcy. Sometimes, the borrower is required to authorize the originating lender to verify deposits at financial institutions identified by the borrower as institutions at which the borrower maintains demand or savings accounts. The originating lender may also consider certain non-wage income of the borrower in the underwriting process, including income derived from mortgaged properties that are investment properties or two- to four-unit dwellings. Generally, the originating lender will not consider income derived from vacation or second homes in the underwriting process. Certain borrowers with acceptable payment histories are not required to state their income on their loan application and, as a result, the originating lender does not verify their income. Based on the data referred to above (and verification of that data, to the extent required), the originating lender makes a determination about whether the borrower's monthly income (if required to be stated) will be sufficient to enable the borrower to meet its monthly obligations on the mortgage loan and other expenses related to the property, including property taxes, utility costs, standard hazard insurance and other fixed and revolving obligations other than housing expenses. Generally, scheduled payments on a mortgage loan during the first twelve months of its term plus taxes and insurance and all scheduled payments on obligations that extend beyond ten months may equal no more than a specified percentage of the prospective borrower's gross income. The permitted percentage is determined on the basis of various underwriting criteria, including the loan-to-value ratio of the mortgage loan and, in certain instances, the amount of liquid assets available to the borrower after origination. In addition to its "full" documentation program, loans acquired by GSMC through its conduit program may also be originated under the following limited documentation programs: "alt doc," "stated income," "stated income/stated assets," "no ratio" or "no doc." These limited documentation programs are designed to streamline the underwriting process. The "alt doc," "stated income," "stated income/stated asset," "no ratio" and "no doc" programs generally require less documentation and verification than do "full" documentation programs. Generally, the "full" documentation program requires information with respect to the borrower's income and assets (i.e., standard Fannie Mae/Freddie Mac approved forms for verification of income/employment, assets and certain payment histories). However, alternative forms of standard verifications may also be used for income (i.e., W-2 forms, tax returns and/or pay stubs) and assets (i.e., bank statements). Generally, under "full" documentation programs at least two years of income documentation is provided. Assets and employment history must also be verified by the originating lender. Generally, the "alt doc" documentation program requires similar information with respect to the borrower's income as a "full" documentation program. However, under "alt doc" documentation programs a minimum of 24 months of income documentation must be provided. Employment history must also be verified by the originating lender and assets must be verified through documentation. S-59 Generally, under the "stated income" program, the borrower's income is stated on the credit application but not verified by the originator. However, employment history must be verified by the originating lender and assets must be verified through documentation. Generally, under the "stated income/stated assets" program, both income and assets are stated on the loan application, but the originator verifies neither; although the stated income must be reasonable relative to the borrower's stated employment. However, employment history must be verified by the originating lender. Generally, under the "no ratio" program, the borrower's income is neither stated on the credit application nor verified by the originator. However, employment history must be verified by the originating lender and assets must be verified through documentation. Generally, under the "no doc" program, the borrower's income and assets are neither stated on the credit application nor verified by the originator. The underwriting for mortgage loans originated under a "no doc" program may be based primarily or entirely on the appraised value of the mortgaged property and the loan-to-value ratio at origination as well as on the payment history and credit score of the related borrower. Employment history is neither stated nor verified by the originating lender. The following chart summarizes GSMC's maximum loan-to-value ratio requirements under its various documentation programs:
Full Documentation ------------------ --------------------------------- -------------------------------- -------------------------------- Owner Occupied 2nd Home Non-Owner Occupied ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- Minimum Maximum Maximum FICO Score Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) Maximum CLTV(1) LTV(1) CLTV(1) ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 700 97% 100% 95% 100% 90% 90% ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 680 97 100 95 100 90 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 640 95 100 90 100 90 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 620 90 100 80 100 80 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 600 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 580 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 560 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 540 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
(1) The maximum permitted loan-to-value ratio and combined loan-to-value ratio may be reduced for: cash out refinances and debt consolidations, certain property types, and loan amount. S-60
Alternative Documentation ------------------ --------------------------------- -------------------------------- -------------------------------- Owner Occupied 2nd Home Non-Owner Occupied ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- Minimum FICO Maximum Score Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) CLTV(1) ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 700 97% 100% 95% 100% 90% 90% ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 680 97 100 95 100 90 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 640 95 100 90 100 90 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 620 90 100 80 100 80 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 600 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 580 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 560 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 540 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
(1) The maximum permitted loan-to-value ratio and combined loan-to-value ratio may be reduced for: cash out refinances and debt consolidations, certain property types, and loan amount.
Stated Income / Stated Income Stated Asset Documentation ------------------ --------------------------------- -------------------------------- -------------------------------- Owner Occupied 2nd Home Non-Owner Occupied ------------------ --------------------------------- -------------------------------- -------------------------------- Minimum FICO Maximum Score Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) CLTV(1) ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 700 95% 100% 90% 90% 85% 90% ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 680 95 100 90 90 85 90 ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 640 90 100 90 90 N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 620 90 100 N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 600 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 580 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 560 N/A N/A N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
(1) The maximum permitted loan-to-value ratio and combined loan-to-value ratio may be reduced for: cash out refinances and debt consolidations, certain property types, and loan amount.
No Documentation ------------------ --------------------------------- -------------------------------- -------------------------------- Owner Occupied 2nd Home Non-Owner Occupied ------------------ --------------------------------- -------------------------------- -------------------------------- Minimum FICO Maximum Score Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) Maximum CLTV(1) Maximum LTV(1) CLTV(1) ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 700 90% 90% 70% 80% 60% 80% ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 680 80 80 N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- --------------- 660 80 80 N/A N/A N/A N/A ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
(1) The maximum permitted loan-to-value ratio and combined loan-to-value ratio may be reduced for: cash out refinances and debt consolidations, certain property types, and loan amount. An appraisal is generally conducted on each mortgaged property by the originating lender. The appraisal must be conducted in accordance with established appraisal procedure guidelines acceptable to the originator in order to determine the adequacy of the mortgaged property as security for repayment of the related mortgage loan. All appraisals must be on forms acceptable to Fannie Mae and/or Freddie Mac and conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. Appraisers may be staff licensed appraisers employed by the originator or S-61 independent licensed appraisers selected in accordance with established appraisal procedure guidelines acceptable to the originator. Generally, the appraisal procedure guidelines require the appraiser or an agent on its behalf to inspect the property personally and verify whether the property is in good condition and that, if new, construction has been substantially completed. The appraisal generally will be based upon a market data analysis of recent sales of comparable properties and, when deemed applicable, 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. GreenPoint Mortgage Funding, Inc. General The information below has been provided by GreenPoint. GreenPoint Mortgage Funding, Inc., a New York corporation ("GreenPoint"), is an indirect, wholly-owned subsidiary of North Fork Bancorporation, Inc., a Delaware corporation and bank holding company ("North Fork"). North Fork's other subsidiaries include North Fork Bank, a New York commercial bank. North Fork is listed on the New York Stock Exchange under the symbol "NFB". GreenPoint was formerly a wholly-owned subsidiary of GreenPoint Financial Corp., a Delaware corporation ("GPF"). GPF was acquired by North Fork in October 2004. GreenPoint is engaged in the mortgage banking business, which consists of the origination, acquisition, sale and servicing of residential mortgage loans secured primarily by one- to four-family residences, and the purchase and sale of mortgage servicing rights. GreenPoint originates loans primarily through its wholesale division, which works with a nationwide network of independent mortgage brokers, each of which must be approved by GreenPoint. GreenPoint also originates loans through its retail and correspondent lending divisions. GreenPoint's executive offices are located at 100 Wood Hollow Drive, Novato, California, 94945. GreenPoint was formed through the transfer to GreenPoint, effective October 1, 1999, of the assets and liabilities of Headlands Mortgage Company, a California corporation. GreenPoint has originated residential mortgage loans of substantially the same type as the Mortgage Loans since October of 1999. GreenPoint Underwriting Guidelines Generally, the GreenPoint 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. Exceptions to the guidelines are permitted where compensating factors are present. The Green Point underwriting guidelines are generally not as strict as Fannie Mae or Freddie Mac guidelines. GreenPoint's underwriting guidelines are applied in accordance with applicable federal and state laws and regulations. In assessing a prospective borrower's creditworthiness, GreenPoint may use FICO(R) credit scores. FICO credit scores are statistical credit scores designed to assess a borrower's creditworthiness and likelihood to default on a consumer obligation over a two-year period based on a borrower's credit history. FICO Credit Scores were not developed to predict the likelihood of default on mortgage loans and, accordingly, may not be indicative of the ability of a borrower to repay its mortgage loan. FICO Credit Scores range from approximately 300 to approximately 850, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. S-62 In determining whether a prospective borrower has sufficient monthly income available to meet the borrower's monthly obligation on the proposed mortgage loan and monthly housing expenses and other financial obligations, GreenPoint generally considers the ratio of those amounts to the proposed borrower's monthly gross income. These ratios vary depending on a number of underwriting criteria, including loan-to-value ratios ("LTV"), and are determined on a loan-by-loan basis. The ratios generally are limited to 40% but may be extended to 50% with adequate compensating factors, such as disposable income, reserves, higher FICO score, or lower LTV's. Each mortgage loan has a required amount of reserves, with the minimum being three months of Principal, Interest, Taxes and Insurance for full documentation loans. Depending on the LTV and occupancy types, these reserve requirements may be increased to compensate for the additional risk. As part of its evaluation of potential borrowers, GreenPoint generally requires a description of the borrower's income. If required by its underwriting guidelines, GreenPoint obtains employment verification providing current and historical income information and/or a telephonic employment confirmation. Employment verification may be obtained through analysis of the prospective borrower's recent pay stubs and/or W-2 forms for the most recent two years or relevant portions of the borrower's most recent two years' tax returns, or from the prospective borrower's employer, wherein the employer reports the borrower's length of employment and current salary with that organization. Self-employed prospective borrowers generally are required to submit relevant portions of their federal tax returns for the past two years. GreenPoint acquires or originates many mortgage loans under "limited documentation" or "no documentation" programs. Under limited documentation programs, 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 verified income of the borrower. Mortgage loans underwritten under this type of program are generally limited to borrowers with credit histories that demonstrate an established ability to repay indebtedness in a timely fashion, and certain credit underwriting documentation concerning income or income verification and/or employment verification is waived. Mortgage loans originated and acquired with limited documentation programs include cash-out refinance loans, super-jumbo mortgage loans and mortgage loans secured by investor-owned properties. Permitted maximum loan-to-value ratios (including secondary financing) under limited documentation programs are generally more restrictive than mortgage loans originated with full documentation requirements. Under no documentation programs, income ratios for the prospective borrower are not calculated. Emphasis is placed on the value and adequacy of the mortgaged property as collateral and the credit history of the prospective borrower, rather than on verified income and assets of the borrower. Documentation concerning income, employment verification and asset verification is not required and income ratios are not calculated. Mortgage loans underwritten under no documentation programs are generally limited to borrowers with favorable credit histories and who satisfy other standards for limited documentation programs. Periodically, the data used by GreenPoint to underwrite mortgage loans may be obtained by An approved loan correspondent. In those instances, the initial determination as to whether a mortgage loan complies with GreenPoint's underwriting guidelines may be made by such loan correspondent. In addition, GreenPoint may acquire mortgage loans from approved correspondent lenders under a program pursuant to which GreenPoint delegates to the correspondent the obligation to underwrite the mortgage loans to GreenPoint's standards. Under these circumstances, the underwriting of a mortgage loan may not have been reviewed by GreenPoint before acquisition of the mortgage loan, and the correspondent represents to GreenPoint that its underwriting standards have been met. After purchasing mortgage loans S-63 under those circumstances, GreenPoint conducts a quality control review of a sample of the mortgage loans. The number of loans reviewed in the quality control process varies based on a variety of factors, including GreenPoint's prior experience with the correspondent lender and the results of the quality control review process itself. In determining the adequacy of the property as collateral, an independent appraisal is generally made of each property considered for financing. All appraisals are required to conform 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 is in a good condition and verify that construction, if new, has 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 by the property or a replacement cost analysis based on the current cost of constructing or purchasing a similar property may be used. GreenPoint's Underwriting Guidelines require that the underwriters be satisfied that the value of the property being financed supports, and will continue to support, the outstanding loan balance, and provides sufficient value to mitigate the effects of adverse shifts in real estate values. GreenPoint may provide secondary financing to a borrower contemporaneously with the origination of a mortgage loan, subject to the limitation that the combined Loan-to-Value Ratio may not exceed 100%. GreenPoint's underwriting guidelines do not prohibit or otherwise restrict a borrower from obtaining secondary financing from lenders other than GreenPoint, whether at origination of the mortgage loan or thereafter. Generally, each mortgage with an LTV at origination of greater than 80% is covered by a primary mortgage insurance policy issued by a mortgage insurance company acceptable to Fannie Mae or Freddie Mac. The policy provides coverage in the amount equal to a specified percentage multiplied by the sum of the remaining principal balance of the related mortgage loan, the accrued interest on it and the related foreclosure expenses. The specified coverage percentage is, generally, 12% for LTV's between 80.01% and 85.00%, 25% for LTV's between 85.01% and 90% and 30% for LTV's between 90.01% and 95%. However, under certain circumstances, the specified coverage levels for these mortgage loans may vary from the foregoing. No primary mortgage insurance policy will be required with respect to any mortgage loan if maintaining the policy is prohibited by applicable law, after the date on which the related LTV is 80% or less, or where, based on a new appraisal, the principal balance of the mortgage loan represents 80% or less of the new appraised value. GreenPoint requires title insurance on all of its mortgage loans secured by first liens on real property. In addition, GreenPoint requires that fire and extended coverage casualty insurance be maintained on the mortgaged property in an amount at least equal to the principal balance of the related single-family mortgage loan or the replacement cost of the mortgaged property, whichever is less. GreenPoint also requires flood insurance to be maintained on the mortgaged property if and to the extent such insurance is required by applicable law or regulation. Credit Scores Credit scores are obtained by many lenders in connection with mortgage loan applications to help them assess a mortgagor's creditworthiness (the "Credit Scores"). Credit Scores are generated by models developed by a third party which analyzed data on consumers in order to S-64 establish patterns which are believed to be indicative of the mortgagor's probability of default. The Credit Score is based on a mortgagor's historical credit data, including, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience. Credit Scores range from approximately 250 to approximately 900, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. However, a Credit Score purports only to be a measurement of the relative degree of risk a mortgagor represents to a lender, i.e., a mortgagor with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. Lenders have varying ways of analyzing Credit Scores and, as a result, the analysis of Credit Scores across the industry is not consistent. In addition, it should be noted that Credit Scores were developed to indicate a level of default probability over a two year period, which does not correspond to the life of a mortgage loan. Furthermore, Credit Scores were not developed specifically for use in connection with mortgage loans, but for consumer loans in general, and assess only the mortgagor's past credit history. Therefore, a Credit Score does not take into consideration the effect of mortgage loan characteristics (which may differ from consumer loan characteristics) on the probability of repayment by the mortgagor. There can be no assurance that the Credit Scores of the mortgagors will be an accurate predictor of the likelihood of repayment of the related mortgage loans. The tables on Schedule A to this prospectus supplement set forth certain information as to the Credit Scores of the related mortgagors for the mortgage loans obtained in connection with the origination of each mortgage loan. THE MASTER SERVICER General The information below has been provided by JPMorgan. The Master Servicer is JPMorgan Chase Bank, National Association, a national banking association organized under the laws of the United States and a wholly owned subsidiary of J.P. Morgan Chase & Co., a holding company with assets in excess of $1.2 trillion and operations in more than 50 countries. The operations include investment banking, financial services for consumers and businesses, financial transaction processing, asset and wealth management and private equity. JPMorgan acts as Master Servicer through its Worldwide Securities Services division of the Treasury & Securities Services line of business. JPMorgan's master servicing office is located at 6525 West Campus Oval, New Albany, Ohio 43054. Fitch Ratings has rated JPMorgan Chase Bank, National Association, in its capacity as master servicer, with a RMS1 rating as of 2005. JPMorgan commenced its master servicing operations through its affiliates in the early 1990s. The master servicing portfolio includes: fixed rate loans, various adjustable-rate mortgage products and jumbo hybrid adjustable-rate mortgage products, conventional, Government, 1st and 2nd liens, non-performing, reperforming, subprime and interest only loans. The following table describes size, composition and growth of JPMorgan's total master servicing portfolio as of the dates indicated: S-65
December 31, 2003 2004 2005 Total Portfolio Total Portfolio Total Portfolio --------------- --------------- --------------- Loan Type Number of Loans Number of Loans Number of Loans --------- ------ -------- ------ -------- ------ -------- MBS loans 50,383 $12,105,091,429 95,777 $16,919,858,275 161,518 $26,571,026,888 Non-MBS loans 3,882 $633,861,097 2,717 $358,630,660 2,251 $299,188,610
There are no material changes to the Master Servicer's policies and procedures in the servicing function it will perform for this transaction for assets of the same type included in this transaction for the past three years. JPMorgan will act as the Master Servicer for the mortgage loans pursuant to the terms of the master servicing and trust agreement. The servicers will directly service the Mortgage Loans under the supervision and oversight of the Master Servicer. The Master Servicer, however, will not be ultimately responsible for the servicing of the Mortgage Loans except to the extent described herein and as provided in the master servicing and trust agreement. In no event, however, will the Master Servicer be responsible for supervising, monitoring, or overseeing the administration and servicing by any Servicer of any defaulted Mortgage Loans and any related REO properties. For information, with respect to the master servicer's liability under the master servicing and trust agreement and any indemnification that the master servicer will be entitled to from the trust, see "The Master Servicer" in this prospectus supplement. THE SECURITIES ADMINISTRATOR General The information below has been provided by JPMorgan. The Securities Administrator is JPMorgan Chase Bank, National Association, a national banking association organized under the laws of the United States and a wholly owned subsidiary of J.P. Morgan Chase & Co., a holding company with assets in excess of $1.2 trillion and operations in more than 50 countries. The operations include investment banking, financial services for consumers and businesses, financial transaction processing, asset and wealth management and private equity. JPMorgan acts as Securities Administrator through its Worldwide Securities Services division of the Treasury & Securities Services line of business. JPMorgan Worldwide Securities Services offers a full range of trust and administrative services for prime and sub-prime asset-backed transactions from its office at 4 New York Plaza, 6th Floor, New York, New York 10004 and other offices worldwide. Asset classes for which JPMorgan Worldwide Securities Services has been responsible for calculating or making distributions include residential and commercial mortgages, credit cards, auto loans, equipment loans and leases, home equity loans, trade receivables, commercial leases, franchise loans, and student loans. Since 1990, JPMorgan Chase Bank, National Association or its predecessors have been responsible for calculating or making distributions to holders of asset-backed securities. As of December 31, 2005, JPMorgan Worldwide Securities Services performed such functions for S-66 approximately 809 asset-backed transactions, including about 418 residential mortgage receivables transactions. Under the terms of the master servicing and trust agreement, JPMorgan, in its capacity as Securities Administrator, is responsible for securities administration, which includes pool performance calculations, distribution calculations, the preparation of monthly distribution reports, and the preparation and filing of tax returns on behalf of the trust REMICs, monthly reports on Form 10-D (based on information included in the monthly distribution date statements and other information provided by other transaction parties) and annual reports on Form 10-K that are required to be filed with the Securities and Exchange Commission on behalf of the issuing entity. JPMorgan will also act as paying agent and certificate registrar for the certificates. Compensation of the Master Servicer and the Securities Administrator As compensation for its services as Master Servicer, the Master Servicer will be entitled to receive the interest or investment income earned by it on amounts deposited in, or credited to, the master servicing account. In the event the Master Servicer assumes the duties of a servicer under any servicing agreement, it shall be entitled to receive as compensation, the servicing fees, if any, and other compensation that would have been payable to the servicer under the related servicing agreement. Under the terms of the master servicing and trust agreement, the Securities Administrator may withdraw from the distribution account, (i) any investment income payable to the Master Servicer; (ii) amounts necessary to reimburse itself, the Master Servicer or any servicer for any previously unreimbursed advances and any advance that the Master Servicer deems to be nonrecoverable from the applicable mortgage loan proceeds, (iii) an aggregate annual amount to indemnify the Master Servicer and itself for amounts due under the terms of the master servicing and trust agreement; (iv) amounts in respect of reimbursements to which the Master Servicer or any servicer is entitled in accordance with the terms of the master servicing and trust agreement or the servicing agreements, subject to the limit on such amounts described below under "--Indemnification and Third Party Claims," and (v) any other amounts permitted to be withdrawn under the terms of the master servicing and trust agreement. The Master Servicer will be required to pay all ordinary expenses incurred by it in connection with its activities as Master Servicer without reimbursement. The Master Servicer will be required to pay the costs associated with monitoring the servicers without any right of reimbursement, except as set forth in the related servicing agreement or master servicing and trust agreement. The Master Servicer will also be required to pay the costs of terminating any servicer, appointing a successor servicer or the costs of transferring servicing to the Master Servicer and will be entitled to be reimbursed for those costs by the successor servicer and/or the terminated servicer pursuant to the terms of the master servicing and trust agreement. To the extent such servicing transfer costs are not paid by the terminated servicer or the successor servicer, the Master Servicer shall be reimbursed by the trust for out-of-pocket costs associated with the transfer of servicing of any of the mortgage loans from a servicer to the Master Servicer or to any other successor servicer. Indemnification and Third Party Claims The Master Servicer will be required to indemnify the depositor, the Securities Administrator, the trustee and the trust and hold each of them harmless against any loss, S-67 damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a material breach of the Master Servicer's representations and warranties set forth in the master servicing and trust agreement. The enforcement of the obligation of the Master Servicer to indemnify the depositor, the Securities Administrator, the trustee and the trust constitutes the sole remedy of the depositor, the Securities Administrator and the trustee in the event of a breach of the Master Servicer's representations and warranties. Such indemnification shall survive termination of the Master Servicer under the master servicing and trust agreement or the termination of the master servicing and trust agreement. Any cause of action against the Master Servicer relating to or arising out of the breach of any representations and warranties made by the Master Servicer in the master servicing and trust agreement shall accrue upon discovery of such breach by any of the depositor, the Master Servicer, the Securities Administrator or the trustee or notice of such breach by any one of such parties to the other parties. The Master Servicer will be required to indemnify the depositor, the Securities Administrator, the trustee and the trust, and hold each of them harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, liability, fees and expenses that they may sustain as a result of the Master Servicer's willful misfeasance, bad faith or negligence in the performance of its duties or by reason of its reckless disregard for its obligations and duties under the master servicing and trust agreement. The depositor, the Securities Administrator and the trustee will be required to immediately notify the Master Servicer if a claim is made by a third party under the master servicing and trust agreement or any of the mortgage loans which entitles the depositor, the Securities Administrator, the trustee or the trust to indemnification by the Master Servicer under the master servicing and trust agreement. The Master Servicer will be obligated to assume the defense of any such claim and pay all expenses in connection with the claim, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it or them in respect of such claim. The trust will be obligated to indemnify the Master Servicer and hold it harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, liabilities, fees and expenses that the Master Servicer may incur or sustain in connection with, arising out of or related to the master servicing and trust agreement, the mortgage loan purchase agreements assigned to the trust, any agreement assigning any of the sale and servicing agreements to the trust or the certificates, except to the extent that any such loss, liability or expense is related to (i) a material breach of the Master Servicer's representations and warranties in the master servicing and trust agreement or (ii) the Master Servicer's willful misfeasance, bad faith or negligence or by reason of its reckless disregard of its duties and obligations under any such agreement. The Master Servicer shall be entitled to reimbursement for any such indemnified amount from funds on deposit in the distribution account. Amounts available to pay indemnified cost and expenses may also be applied to reimburse the Master Servicer for servicing transfer costs to the extent such costs are not reimbursed out of amounts allocated therefore or from other sources described in "--Compensation of the Master Servicer" above. Limitation on Liability of the Master Servicer Neither the Master Servicer nor any of its directors, officers, employees or agents will be under any liability to the trustee, the trust, the depositor, the Securities Administrator, the servicers or the certificateholders for any action taken, or for refraining from the taking of any action in good faith, or for errors in judgment. However, the Master Servicer shall remain liable S-68 for its willful misfeasance, bad faith, negligence or reckless disregard in the performance of its duties under the master servicing and trust agreement. The Master Servicer will be under no obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to master service the mortgage loans in accordance with the master servicing and trust agreement and that, in the opinion of the Master Servicer, may involve it in any expenses or liability. However, the Master Servicer may in its sole discretion undertake any such action that it may deem necessary or desirable in respect of the master servicing and trust agreement and the rights and duties of the parties to that agreement and the interests of the certificateholders under that agreement. In the event of any litigation regarding the Master Servicer's duties, the legal expenses and costs of such action and any liability resulting from such action shall be borne by the trust. The Master Servicer will not be liable for any acts or omissions of any servicer except to the extent that damages or expenses are incurred as a result of such acts or omissions and such damages and expenses would not have been incurred but for the negligence, willful misfeasance, bad faith or recklessness of the Master Servicer in supervising, monitoring and overseeing the obligations of such servicer. Assignment or Delegation of Duties by the Master Servicer; Resignation The Master Servicer will not be permitted to assign or transfer any of its rights, benefits or privileges under the master servicing and trust agreement to any other entity, or delegate to or subcontract with, or authorize or appoint any other entity to perform any of the duties, covenants or obligations to be performed by the Master Servicer. However, the Master Servicer will have the right to sell and assign its rights and delegate to any qualified entity its duties and obligations to be performed and carried out as the Master Servicer with the prior written consent of the depositor (which consent shall not be unreasonably withheld) and upon delivery to the trustee and the depositor of a letter from each rating agency to the effect that such action shall not result in a downgrade, qualification or withdrawal of the ratings assigned to any of the certificates, and in compliance with the other requirements set forth in the master servicing and trust agreement. If the duties of the Master Servicer are transferred to a successor master servicer, the fees and other compensation payable to the Master Servicer under the master servicing and trust agreement shall thereafter be payable to such successor master servicer, but in no event shall exceed the compensation payable to the predecessor Master Servicer. Any entity into which the Master Servicer may be merged or consolidated, or any entity resulting from any merger, conversion, other change in form to which the Master Servicer shall be a party, or any entity which succeeds to the business of the Master Servicer, will become the successor to the Master Servicer, without the execution or filing of any paper or any further act on the part of any of the parties hereto. However, the successor to the Master Servicer must be an entity (or have an affiliate) that is qualified and approved to service mortgage loans by Fannie Mae and Freddie Mac and shall have a net worth of not less than $25,000,000. The Master Servicer will not be permitted to resign unless the Master Servicer's duties under the master servicing and trust agreement are no longer permissible under applicable law or are in material conflict under applicable law with other activities carried on by it and such conflict cannot be cured. Any resignation of the Master Servicer shall be evidenced by an opinion of counsel prepared by counsel to the Master Servicer and delivered to the trustee. No such resignation will become effective until the trustee assumes, or a successor master servicer reasonably satisfactory to the trustee and the depositor assumes, the Master Servicer's responsibilities and obligations under the master servicing and trust agreement. S-69 Master Servicer Events of Default; Waiver; Termination Under the terms of the master servicing and trust agreement, each of the following shall constitute a "Master Servicer Event of Default" by the Master Servicer: (a) the failure by the Master Servicer to cause to be deposited in the distribution account any amounts received by it from any servicer or required to be made by it under the terms of the master servicing and trust agreement, which failure continues unremedied for a period of two (2) business days after the date upon which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer; (b) the failure by the Master Servicer to duly observe or perform, in any material respect, any other covenants, obligations or agreements of the Master Servicer set forth in the master servicing and trust agreement, which failure continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the trustee or to the Master Servicer and trustee by holders of certificates evidencing at least 25% of the voting rights; (c) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer and such decree or order shall have remained in force, undischarged or unstayed for a period of sixty (60) days; (d) the Master Servicer consents to the appointment of a conservator or receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Master Servicer or relating to all or substantially all of its property; (e) the Master Servicer admits in writing of its inability to pay its debts as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations for three (3) business days; (f) except as otherwise set forth in the master servicing and trust agreement, the Master Servicer attempts to assign its responsibilities under the master servicing and trust agreement or to delegate all or any portion of its duties under that agreement without the consent of the trustee, the Securities Administrator and the depositor; or (g) the indictment of the Master Servicer for the taking of any action by the Master Servicer, any of its affiliates, directors or employees that constitutes fraud or criminal activity in the performance of its obligations under the master servicing and trust agreement, in each case, where such action materially and adversely affects the ability of the Master Servicer to perform its obligations under the master servicing and trust agreement (subject to the condition that such indictment is not dismissed within ninety (90) days). By written notice, the trustee may, with the consent of a majority of certificateholders, waive any default by the Master Servicer in the performance of its obligations under the master servicing and trust agreement and its consequences. Upon any waiver of a past default, such default shall cease to exist and any Master Servicer Event of Default arising from that default shall be deemed to have been remedied for every purpose under the master servicing and trust agreement. S-70 So long as a Master Servicer Event of Default remains uncured, the trustee may, and upon the request of the holders of certificates representing at least 51% of the voting rights shall, by notice in writing to the Master Servicer terminate the Master Servicer for cause. Upon the termination of the Master Servicer, the Master Servicer shall prepare, execute and deliver to any successor entity designated by the trustee any and all documents and other instruments related to the performance of its duties under the master servicing and trust agreement and any mortgage files related to any pool of mortgage loans with respect to which it acts as a successor servicer, in each case, at the Master Servicer's expense. The Master Servicer shall cooperate with the trustee and such successor master servicer to effectively transfer its duties under the master servicing and trust agreement. Assumption of Master Servicing by Trustee In the event the Master Servicer can no longer function in that capacity under the master servicing and trust agreement, and no successor master servicer has accepted appointment as provided for in the master servicing and trust agreement, the trustee shall assume all of the rights and obligations of the Master Servicer under the master servicing and trust agreement and under each servicing agreement under which the Master Servicer is acting as servicer. The trustee, its designee or any successor master servicer appointed by the trustee, shall be deemed to have assumed all of the Master Servicer's rights, duties and obligations under the master servicing and trust agreement pursuant to which the Master Servicer has assumed the duties of the servicer, to the same extent as if such agreements had been assigned to the trustee, its designee or any successor master servicer, except that the Master Servicer shall not thereby be relieved of any liability or obligation under the master servicing and trust agreement or any servicing agreement accruing prior to its replacement as Master Servicer, and the Master Servicer will be required to indemnify and hold harmless the trustee from and against all costs, damages, expenses and liabilities (including reasonable attorneys' fees) incurred by the trustee as a result of such liability or obligations of the Master Servicer and in connection with the trustee's assumption (but not its performance, except to the extent that costs or liability of the trustee are created or increased as a result of negligent or wrongful acts or omissions of the Master Servicer prior to its replacement as Master Servicer) of the Master Servicer's obligations, duties or responsibilities under any such agreement. If the Master Servicer has resigned or been terminated, upon the request of the trustee (but at the expense of the Master Servicer), the Master Servicer will be required to deliver to any successor master servicer all documents and records relating to each servicing agreement and the related mortgage loans and an accounting of amounts collected and held by it and otherwise use its best efforts to effect the orderly and efficient transfer of each servicing agreement to any successor party. THE SERVICERS General Countrywide Home Loans Servicing LP ("Countrywide Servicing") will act as servicer for approximately 57.45% of the mortgage loans. FNBN, as of the statistical calculation date, will act as interim servicer for approximately 17.75% of the mortgage loans and beginning on March 1, 2006, JPMorgan Chase Bank, National Association will service such mortgage loans. NatCity will act as servicer for approximately 12.18% of the mortgage loans. Two additional servicers will service 12.62% of the mortgage loans. No servicer will have any custodial responsibility for the trust assets. S-71 Although the depositor is selling the Mortgage Loans to the trust on the Closing Date, with respect to certain of the Mortgage Loans, the depositor or an affiliate of the depositor has retained the right to terminate certain of the servicers of those Mortgage Loans without cause and transfer the servicing to a third party. The Mortgage Loans affected by this right will be serviced as of the Closing Date by Countrywide Servicing and represent approximately 26.71% of the aggregate principal balance of the Mortgage Loans as of the statistical calculation date. Should the depositor choose to do so, the transfer must meet certain conditions set forth in the master servicing and trust agreement, including that the depositor must provide thirty (30) days' notice, the terminated servicer must be reimbursed for any unreimbursed monthly advances, servicing fees and any related expenses, and the replacement servicer must be qualified to service mortgage loans for Fannie Mae or Freddie Mac. Any such successor must be reasonably acceptable to the Master Servicer, and requires the receipt of confirmation from the rating agencies that the transfer of the servicing of these mortgage loans will not result in a downgrade, qualification or withdrawal of the then current ratings of the offered certificates. The terminated servicer, subject to certain provisions in the master servicing and trust agreement, will be obligated to pay all of its own out-of-pocket costs and expenses at its own expense to transfer the servicing files to a successor servicer and it will be obligated to pay certain reasonable out-of-pocket costs and expenses of a servicing transfer incurred by parties other than the terminated servicer but it will not be entitled to reimbursement from the trust fund. In the event the terminated servicer defaults in its obligations to pay such costs, the successor servicer will be obligated to pay such costs but will be entitled to reimbursement for such costs from the trust fund or the securities administrator will pay such costs from the trust fund. The information contained in this prospectus supplement with regard to Countrywide Servicing, FNBN, NatCity, JPMorgan, Chase and GreenPoint has been provided by them. None of the depositor, the sponsor, the Master Servicer, the Securities Administrator, the underwriter or the trustee or any of their respective affiliates has made any independent investigation of such information or has made or will make any representation as to the accuracy or completeness of such information. The servicers will be required to service the mortgage loans in accordance with the applicable servicing agreement, each of which will be assigned to the trust pursuant to an assignment, assumption and recognition agreement. See "The Agreements" in this prospectus supplement. We cannot assure you that the delinquency, foreclosure and loan loss experience on the mortgage loans will correspond to the delinquency, foreclosure and loan loss experience set forth in the tables below for each of the servicers, if any. The statistics shown in the tables below represent the delinquency and foreclosure experience for specified mortgage loan servicing portfolios only for the periods presented, whereas the aggregate delinquency and foreclosure experience on the mortgage loans included in the mortgage loan pool will depend on the results obtained over the life of the mortgage loan pool. In particular, the investors should note that newly originated loans will not be added to the mortgage loan pool, and the mortgage loan pool will therefore consist of a static pool of mortgage loans, whereas new mortgage loans are continually being originated and added to the pool for which the statistics in the tables below are compiled. Accordingly, the actual delinquency, foreclosure and loss percentages with respect to the mortgage loan pool may be substantially higher than those indicated in the tables below. It should be noted that if the residential real estate market should experience an overall decline in property values, the actual rates of delinquencies and foreclosures could be higher than those previously experienced by the servicers. In addition, adverse economic conditions may affect the timely payment by mortgagors of scheduled payments of principal and interest on the mortgage loans and, accordingly, the actual rates of S-72 delinquencies and foreclosures with respect to the mortgage loan pool. Therefore, we cannot predict to what degree the actual delinquency, foreclosure and loan loss experience on the mortgage loans will correspond to the statistical information set forth below. Countrywide Home Loans Servicing LP General The information below has been provided by Countrywide Servicing. The principal executive offices of Countrywide Home Loans Servicing LP ("Countrywide Servicing") are located at 7105 Corporate Drive, Plano, Texas 75024. Countrywide Servicing is a Texas limited partnership directly owned by Countrywide GP, Inc. and Countrywide LP, Inc., each a Nevada corporation and a direct wholly owned subsidiary of Countrywide. Countrywide GP, Inc. owns a 0.1% interest in Countrywide Servicing and is the general partner. Countrywide LP, Inc. owns a 99.9% interest in Countrywide Servicing and is a limited partner. Countrywide established Countrywide Servicing in February 2000 to service mortgage loans originated by Countrywide that would otherwise have been serviced by Countrywide. In January and February, 2001, Countrywide transferred to Countrywide Servicing all of its rights and obligations relating to mortgage loans serviced on behalf of Freddie Mac and Fannie Mae, respectively. In October 2001, Countrywide transferred to Countrywide Servicing all of its rights and obligations relating to the bulk of its non-agency loan servicing portfolio (other than the servicing of home equity lines of credit), including with respect to those mortgage loans (other than home equity lines of credit) formerly serviced by Countrywide and securitized by certain of its affiliates. While Countrywide expects to continue to directly service a portion of its loan portfolio, it is expected that the servicing rights for most newly originated Countrywide mortgage loans will be transferred to Countrywide Servicing upon sale or securitization of the related mortgage loans. Countrywide Servicing is engaged in the business of servicing mortgage loans and will not originate or acquire loans, an activity that will continue to be performed by Countrywide. In addition to acquiring mortgage servicing rights from Countrywide, it is expected that Countrywide Servicing will service mortgage loans for non-Countrywide affiliated parties as well as subservice mortgage loans on behalf of other master servicers. In connection with the establishment of Countrywide Servicing, certain employees of Countrywide became employees of Countrywide Servicing. Countrywide Servicing has engaged Countrywide as a subservicer to perform certain loan servicing activities on its behalf. Countrywide Servicing is an approved mortgage loan servicer for Fannie Mae, Freddie Mac, Ginnie Mae, HUD and VA and is licensed to service mortgage loans in each state where a license is required. Its loan servicing activities are guaranteed by Countrywide Financial and/or Countrywide when required by the owner of the mortgage loans. Countrywide Home Loans Countrywide is a New York corporation and a direct wholly owned subsidiary of Countrywide Financial Corporation, a Delaware corporation ("Countrywide Financial"). The principal executive offices of Countrywide are located at 4500 Park Granada, Calabasas, California 91302. Countrywide is engaged primarily in the mortgage banking business, and as part of that business, originates, purchases, sells and services mortgage loans. Countrywide originates mortgage loans through a retail branch system and through mortgage loan brokers S-73 and correspondents nationwide. Mortgage loans originated by Countrywide are principally first-lien, fixed or adjustable rate mortgage loans secured by single-family residences. Except as otherwise indicated, reference in the remainder of this section to "Countrywide" should be read to include Countrywide and its consolidated subsidiaries, including Countrywide Servicing. Countrywide services substantially all of the mortgage loans it originates or acquires. In addition, Countrywide has purchased in bulk the rights to service mortgage loans originated by other lenders. Countrywide has in the past and may in the future sell to mortgage bankers and other institutions a portion of its portfolio of loan servicing rights. As of September 30, 2005, December 31, 2004, December 31, 2003 and December 31, 2002, Countrywide provided servicing for mortgage loans with an aggregate principal balance of approximately $1,047.623 billion, $838.322 billion, $644.855 billion and $452.405 billion, respectively, substantially all of which were being serviced for unaffiliated persons. Mortgage Loan Production The following table sets forth, by number and dollar amount of mortgage loans, Countrywide's residential mortgage loan production for the periods indicated.
Consolidated Mortgage Loan Production ------------------------------------- Ten Months Years Ended Nine Months Year Ended Ended December 31, Ended February 28, December 31, --------------------------------------- September 30, 2001 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- (Dollars in millions, except average loan amount) Conventional Conforming Loans Number of Loans 240,608 504,975 999,448 1,517,743 846,395 591,059 Volume of Loans $ 34,434 $ 76,432 $ 150,110 $ 235,868 $ 138,845 $ 122,780 Percent of Total Dollar Volume 50.0% 61.7% 59.6% 54.2% 38.2% 34.3% Conventional Non-conforming Loans Number of Loans 86,600 137,593 277,626 554,571 509,711 612,768 Volume of Loans $ 11,394 $ 22,209 $ 61,627 $ 136,664 $ 140,580 $ 163,199 Percent of Total Dollar Volume 16.5% 17.9% 24.5% 31.4% 38.7% 45.6% FHA/VA Loans Number of Loans 118,673 118,734 157,626 196,063 105,562 60,545 Volume of Loans $ 13,075 $ 14,109 $ 19,093 $ 24,402 $ 13,247 $ 7,978 Percent of Total Dollar Volume 18.9% 11.4% 7.6% 5.6% 3.6% 2.2% Prime Home Equity Loans Number of Loans 119,045 164,503 316,049 453,817 587,046 511,253 Volume of Loans $ 4,660 $ 5,639 $ 11,650 $ 18,103 $ 30,893 $ 31,403 Percent of Total Dollar Volume 6.8% 4.5% 4.6% 4.2% 8.5% 8.8% Nonprime Mortgage Loans Number of Loans 51,706 43,359 63,195 124,205 250,030 202,768 Volume of Loans $ 5,360 $ 5,580 $ 9,421 $ 19,827 $ 39,441 $ 32,457 Percent of Total Dollar Volume 7.8% 4.5% 3.7% 4.6% 11.0% 9.1% Total Loans Number of Loans 616,632 969,164 1,813,944 2,846,399 2,298,744 1,978,393 Volume of Loans $ 68,923 $ 123,969 $ 251,901 $ 434,864 $ 363,006 $ 357,817 Average Loan Amount $ 112,000 $ 128,000 $ 139,000 $ 153,000 $ 158,000 $ 181,000 Non-Purchase Transactions(1) 33% 63% 66% 72% 51% 52% Adjustable-Rate Loans(1) 14% 12% 14% 21% 52% 53% ----------
(1) Percentage of total loan production based on dollar volume. S-74 Loan Servicing Countrywide Servicing has established standard policies for the servicing and collection of mortgages. Servicing includes, but is not limited to: (a) collecting, aggregating and remitting mortgage loan payments; (b) accounting for principal and interest; (c) holding escrow (impound) funds for payment of taxes and insurance; (d) making inspections as required of the mortgaged properties; (e) preparation of tax related information in connection with the mortgage loans; (f) supervision of delinquent mortgage loans; (g) loss mitigation efforts; (h) foreclosure proceedings and, if applicable, the disposition of mortgaged properties; and (i) generally administering the mortgage loans, for which it receives servicing fees. Billing statements with respect to mortgage loans are mailed monthly by Countrywide Servicing. The statement details all debits and credits and specifies the payment due. Notice of changes in the applicable loan rate are provided by Countrywide Servicing to the mortgagor with these statements. Collection Procedures When a mortgagor fails to make a payment on a mortgage loan, Countrywide Servicing attempts to cause the deficiency to be cured by corresponding with the mortgagor. In most cases, deficiencies are cured promptly. Pursuant to Countrywide Servicing's servicing procedures, Countrywide Servicing generally mails to the mortgagor a notice of intent to foreclose after the loan becomes 61 days past due (three payments due but not received) and, generally within 59 days thereafter, if the loan remains delinquent, 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 may be restructured in accordance with law and with a view to maximizing recovery of the loans, including any deficiencies. Once foreclosure is initiated by Countrywide Servicing, 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 proceeding, Countrywide Servicing determines the amount of the foreclosure bid and whether to liquidate the mortgage loan. If foreclosed, the mortgaged property is sold at a public or private sale and may be purchased by Countrywide Servicing. After foreclosure, Countrywide Servicing may liquidate the mortgaged property and charge-off the loan balance which was not recovered through liquidation proceeds. S-75 Servicing and charge-off policies and collection practices with respect to mortgage loans may change over time in accordance with, among other things, Countrywide Servicing's business judgment, changes in the servicing portfolio and applicable laws and regulations. Foreclosure, Delinquency and Loss Experience Historically, a variety of factors, including the appreciation of real estate values, have limited Countrywide's loss and delinquency experience on its portfolio of serviced mortgage loans. There can be no assurance that factors beyond the control of Countrywide, such as national or local economic conditions or downturns in the real estate markets of its lending areas, 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, Countrywide may experience an increase in delinquencies on the loans it services and higher net losses on liquidated loans. The following table summarizes the delinquency, foreclosure and loss experience, respectively, on the dates indicated, of the mortgage loans originated or acquired by Countrywide, serviced or master serviced by Countrywide and securitized by certain affiliates of Countrywide in transactions that were registered with the Securities and Exchange Commission. The delinquency, foreclosure and loss percentages may be affected by the size and relative lack of seasoning in the servicing portfolio. 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 following table will be indicative of the actual experience on the mortgage loans (totals may not add due to rounding): S-76
At At December 31, At February 28, -------------------------------------------------------- September 30, 2001 2001 2002 2003 2004 2005 ------------ ------------ -------------- ------------ ------------ ------------- (Dollar Amounts in Thousands, Except Losses on Liquidated Mortgage Loans) Volume of Loans(1)....... $21,250,550 $25,658,250 $33,455,108 $47,663,628 $76,170,541 $129,221,061 Delinquent Mortgage Loans and Pending Foreclosures at Period End: 30 - 59 days.......... 1.61% 1.89% 2.11% 1.80% 1.51% 1.54% 60 - 89 days.......... 0.28% 0.39% 0.53% 0.43% 0.28% 0.26% 90 days or more (excluding pending foreclosures). 0.14% 0.23% 0.35% 0.31% 0.26% 0.21% Total of delinquencies... 2.03% 2.50% 2.99% 2.53% 2.05% 2.01% Foreclosure pending...... 0.27% 0.31% 0.31% 0.31% 0.20% 0.17% Total delinquencies and Foreclosures pending.. 2.30% 2.82% 3.31% 2.84% 2.25% 2.18% Net Gains/(Losses) on liquidated loans(2) $(2,988,604) $(5,677,141) $(10,788,657) $(16,159,208) $(24,758,566) $(5,165,253)
------------- (1) "Volume of loans" reflects both performing and delinquent mortgage loans in the servicing portfolio on the dates indicated. (2) "Net Gains/(Losses) on liquidated loans" reflect the losses accumulated during (i) the year ended on February 28, 2001, (ii) the 10-month period ending on December 31, 2001, (iii) the years ended on December 31, 2002, December 31, 2003, and December 31, 2004 and (iv) the 9-month period ended on September 30, 2005, respectively. JPMorgan Chase Bank, National Association The information below has been provided by JPMorgan Chase Bank, National Association, in its capacity as servicer (in such capacity, "Chase"). There can be no assurance that the delinquency, foreclosure and/or loan loss experience on the mortgage loans serviced by Chase in this transaction will correspond to the delinquency, foreclosure and loan loss experience of Chase set forth in the tables below. There may be substantial differences between the portfolio of mortgage loans reflected in these tables and the mortgage loans to be included in the Trust related to this offering. Therefore, neither we nor Chase can predict to what degree the actual delinquency, foreclosure and/or loan loss experience on the mortgage loans serviced by Chase in this transaction will correspond to the statistical information set forth below in those tables. Consequently, the delinquency, foreclosure and/or loan loss experience set forth in the tables below may not necessarily be material to a prospective investor's decision to invest in the Offered Certificates. General JPMorgan Chase Bank, National Association (in its capacity as servicer, "Chase"), a national banking association, is a wholly-owned bank subsidiary of JPMorgan Chase & Co., a Delaware corporation whose principal office is located in New York, New York. Chase is a commercial bank offering a wide range of banking services to its customers both domestically and internationally. Chase is chartered, and its business is subject to examination and regulation, by the Office of the Comptroller of the Currency. Chase's main office is located in Columbus, Ohio. It is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation. Chase is rated "RPS1", "Strong" and "SQ1", by Fitch, S&P and Moody's, respectively. Chase does not believe that its financial condition will S-77 have any adverse effect on its ability to service the mortgage loans in accordance with the terms set forth in the servicing agreement. Prior to January 1, 2005, Chase formed Chase Home Finance LLC ("CHF"), a wholly-owned, limited liability company. Prior to January 1, 2005, Chase Manhattan Mortgage Corporation ("CMMC"), was engaged in the mortgage origination and servicing businesses. On January 1, 2005, CMMC merged with and into CHF with CHF as the surviving entity. In its capacity as servicer, Chase will be responsible for servicing the mortgage loans in accordance with the terms set forth in the servicing agreement. Chase may perform any or all of its obligations under the servicing agreement through one or more subservicers. Chase has engaged CHF as its subservicer to perform loan servicing activities for the mortgage loans on its behalf. Chase will remain liable for its servicing duties and obligations under the servicing agreement as if Chase alone were servicing the mortgage loans. As a result Chase is providing disclosure regarding CHF. CHF (or its predecessors in interest) has serviced mortgage loans (including mortgage loans similar to the mortgage loans) for over fifteen years. Chase is the product of numerous mergers and acquisitions. Since the creation of the founding entities, mortgage products and loan servicing have been a part of the bank's operations. As Chase's mortgage servicing activities have evolved over the past several decades and in the modern era, its portfolio has included prime loans (conforming, jumbo, Alt-A, community development programs and rural housing), manufactured housing loans, home equity loans and lines of credit, and subprime mortgage loan products. Servicing operations, for "subprime" quality mortgage loans are audited internally by Chase's General Audit and Risk groups and subject to external audits by various investors, master servicers and the Office of the Comptroller of the Currency. Chase utilizes committees assembled on a quarterly basis to analyze compliance to Fair Debit Collections and Fair Lending legislation. Chase employs a dual control process to review accounts for fee waivers and loss mitigation rejections in order to monitor compliance with internal procedures. As of December 31, 2003, December 31, 2004 and September 30, 2005, Chase's portfolio of closed-end subprime mortgage loans serviced by CHF (including mortgage loans serviced by CHF in a sub-servicer capacity) equaled approximately $27.5 billion, $45.4 billion and $58.5 billion, respectively. Neither Chase nor CHF is in default or has been terminated for cause under any servicing agreement with respect to closed-end subprime mortgage loans to which it is a party. Chase, through its subsidiary CHF, employs a collections strategy that is based on risk scoring and dialer strategy to make appropriate contact with delinquent customers. Outbound calling is made five days a week from 8:00 a.m. Eastern time to 9:00 p.m. Pacific time, and under reduced operational hours on Saturday and Sunday. There are special service teams to address the specific needs of Spanish-speaking customers and those impacted by natural disasters. Attempts to assist mortgagors to re-perform under their mortgage commitments are made prior to referring loans to foreclosure. Loss mitigation efforts are run concurrently with the migration of a loan to foreclosure and continue until the foreclosure sale is executed. Loss mitigation solicitation efforts include outbound calling strategies, inbound dedicated loss mitigation analysis teams and targeted assistance letters. In addition to the Chase internet site S-78 delivering applications and program overviews, High Risk Property Managers review options during site inspections and local housing association referrals. CHF has created a legal network where home product loans are referred for bankruptcy, foreclosure, real estate owned (REO) and loss mitigation legal actions. Attorneys are monitored for performance to action initiation requirements, adherence to the timeline set forth by the state or federal jurisdictions and within the boundaries of the mortgage insurer or investor. Status is monitored between operational teams for managing bankruptcy case filings, loss mitigation programs and transfers to REO status. Performance to these timelines is periodically monitored to increase loss mitigation opportunities, billing accurately, managing data securely, and effectively managing any initiated legal action. Under the terms of the servicing agreement or the assignment agreement, as applicable, Chase may agree to modification upon the request of the mortgagor provided the modification is in lieu of a refinancing and Chase purchases the related mortgage loan for a price equal to the outstanding principal balance of the mortgage loan plus accrued interest. Chase is required to make advances of delinquent monthly payments of interest and principal to the extent described in this prospectus supplement. See "The Agreements--P&I Advances and Servicing Advances" in this prospectus supplement. Chase has not failed to make a required advance in connection with any mortgage-backed securitization. Chase Home Finance LLC. Because Chase does not itself perform the servicing function on mortgage loans as to which it is the named servicer, Chase does not have meaningful historical servicing data with respect to delinquencies, foreclosure or losses. Due to Chase's engagement of CHF as its subservicer, CHF is providing below historical delinquency, foreclosure and loan loss data for its portfolio of fixed rate and adjustable rate subprime mortgage loans which were originated or purchased by CHF and subsequently securitized in asset-backed transactions (the "CHF Subprime Securitized Servicing Portfolio"). The CHF Subprime Securitized Servicing Portfolio represents only a portion of the total servicing portfolio of CHF. There can be no assurance that the delinquency, foreclosure and loan loss experience on the mortgage loans subserviced by CHF for Chase in this transaction will correspond to the delinquency, foreclosure and loan loss experience shown in the tables below, and the actual delinquency, foreclosure and loan loss experience on the mortgage loans subserviced by CHF for Chase in this transaction could be significantly worse. Moreover, any mortgage loans subserviced by CHF for Chase in this transaction were acquired by the sponsor from various originators and were not originated by CHF and as a result, the actual delinquency, loss and foreclosure experience on such mortgage loans could be significantly worse than the delinquency, foreclosure and loan loss experience shown in the tables below. CHF Subprime Securitized Servicing Portfolio. The following tables contain information relating to the delinquency, loan loss and foreclosure experience with respect to the CHF Subprime Securitized Servicing Portfolio: S-79
Delinquency and Foreclosure Experience of the CHF Subprime Securitized Servicing Portfolio (Dollars in Thousands) As of December As of September 30, 31, ------------------ ----------------------------------------------------------------- 2005 2004 2003 2002 ------------------ -------------------- --------------------- ---------------------- Number Number Number Number Period of of Dollar of Dollar of Dollar of Dollar Delinquency Loans Amount Loans Amount Loans Amount Loans Amount ------- ---------- ------- ---------- --------- ----------- ---------- ---------- Portfolio........ 54,153 $6,440,312 75,898 $9,388,238 90,370 $11,146,244 73,597 $8,326,818 Delinquency: 30 to 59 days.......... 2.78% 2.28% 2.41% 1.83% 2.40% 1.83% 2.69% 2.28% 60 to 89 days.......... 0.87% 0.71% 0.70% 0.54% 0.84% 0.66% 0.86% 0.72% 90 days or more.......... 1.94% 1.40% 1.75% 1.31% 1.43% 1.15% 1.41% 1.21% ------- ---------- ------- ---------- --------- ----------- ---------- ---------- Total............ 5.59% 4.39% 4.86% 3.68% 4.67% 3.64% 4.96% 4.21% ======= ========== ======= ========== ========= =========== ========== ========== Foreclosure rate............. 2.75% 2.34% 2.72% 2.20% 2.47% 2.06% 2.65% 2.48% REO properties....... 407 N/A 504 N/A 532 N/A 480 N/A
The delinquency statistics set forth above were calculated using the Office of Thrift Supervision (OTS) methodology. Under the OTS methodology, a mortgage loan is not considered delinquent until any payment is contractually past due thirty (30) days or more, assuming 30-day months. For example, a mortgage loan due on the first day of a month is not considered delinquent until the first day of the next month. The delinquency statistics for the period exclude mortgage loans in foreclosure. The portfolio statistics set forth above exclude REO properties. The foreclosure rate reflects the number of mortgage loans in foreclosure as a percentage of the total number of mortgage loans or the dollar amount of mortgage loans in foreclosure as a percentage of the total dollar amount of mortgage loans, as the case may be, as of the date indicated. REO properties are real estate owned properties which relate to foreclosed mortgages or properties for which deeds in lieu of foreclosure have been accepted, and held by CHF pending disposition.
Loan Loss Experience of the CHF Subprime Securitized Servicing Portfolio (Dollars in Thousands) Nine Months Ending September 30, Year Ending December 31, ---------------- --------------------------------------------------- 2005 2004 2003 2002 ---------------- --------------------------------------------------- Average amount outstanding........... $7,688,139 $10,443,888 $9,642,035 $7,902,732 Net losses........................... $ 47,426 $ 73,858 $ 73,504 $ 43,458 Net losses as a percentage of average amount outstanding................ 0.62% 0.71% 0.76% 0.55%
The average amount outstanding during the period is the arithmetic average of the principal balances of the mortgage loans outstanding on the last business day of each month during the period. Net losses are amounts relating to mortgage loans which have been determined by S-80 CHF to be uncollectible, less amounts received by CHF as recoveries from liquidation proceeds and deficiency judgments. There can be no assurance that the delinquency, foreclosures and loss experience on the mortgage loans will correspond to the delinquency, foreclosure and loss experience set forth in the foregoing tables. Moreover, the mortgage loans subserviced by CHF for Chase in this transaction were acquired by the sponsor from various originators and not from CHF. In general, during periods in which the residential real estate market is experiencing an overall decline in property values such that the principal balances of the mortgage loans and any secondary financing on the related mortgaged properties become equal to or greater than the value of the related mortgaged properties, rates of delinquencies, foreclosure and losses could be significantly higher than might otherwise be the case. In addition, adverse economic conditions (which may affect real property values) may affect the timely payment by mortgagors of monthly payments, and accordingly, the actual rates of delinquencies, foreclosures and losses with respect to the mortgage loans in the related trust fund. Collection Procedures. CHF employs a variety of collection techniques during the various stages of delinquency. The primary purpose of all collection efforts performed by CHF is to bring a delinquent mortgage loan current in as short a time as possible. Phone calls are used as the principal form of contacting a mortgagor. CHF utilizes a combination of predictive and preview dealer strategies to maximize the results of collection calling activity. Prior to initiating foreclosure proceedings, CHF makes every reasonable effort to determine the reason for the default, whether the delinquency is a temporary or permanent condition, and the mortgagor's attitude toward the obligation. CHF will take action to foreclose a mortgage only once every reasonable effort to cure the default has been made and a projection of the ultimate gain or loss on REO sale is determined. In accordance with accepted servicing practices, foreclosures are processed within individual state guidelines and in accordance with the provisions of the mortgage and applicable state law. THE SPONSOR The sponsor is GSMC, a New York limited partnership. GSMC is the parent of the depositor and an affiliate of the underwriter and the Swap Provider. GSMC was formed in 1984. Its general partner is Goldman Sachs Real Estate Funding Corp. and its limited partner is The Goldman Sachs Group, Inc. (NYSE:GS). GSMC's executive offices are located at 85 Broad Street, New York, New York 10004, telephone number (212) 902-1000. GSMC purchases closed, independently funded, first- and subordinate-lien residential mortgage loans for its own investment, securitization, or resale. In addition, GSMC provides warehouse and repurchase financing to mortgage lenders. GSMC does not service loans. Instead GSMC contracts with another entity to service the loans on its behalf. GSMC also may engage in the secondary market activities noted above for non-real estate-secured loans in certain jurisdictions and other activities, but its principal business activity involves real estate-secured assets. GSMC has been active as a sponsor in the securitization market since 2001. As a sponsor, GSMC acquires residential mortgage loans in the secondary mortgage market and initiates the securitization of the loans it acquires by transferring the mortgage loans to the depositor, which loans will ultimately be transferred to the issuing entity for the related securitization. S-81 As of December 31, 2005, GSMC has sponsored the securitization of approximately $100.9 of residential mortgage loans, which include prime, subprime, Alt-A, FHA/VA/RHS, "scratch and dent" and re-performing loans, among others. GSMC has been the sponsor of securitizations backed by subprime mortgage loans since 2002. The following table describes the approximate volume of subprime mortgage loan securitizations sponsored by GSMC since 2002. Year Approximate Volume 2002 $4.6 billion 2003 $2.4 billion 2004 $3.8 billion 2005 $10.4 billion GSMC acquires residential mortgage loans in two contexts: (1) through bulk purchases, generally consisting of mortgage loan pools greater than $50 million; and (2) through conduit purchases. Prior to acquiring any mortgage loans, GSMC will conduct a review of the related mortgage loan seller. GSMC's review process consists of reviewing select financial information for credit and risk assessment and underwriting guideline review, senior level management discussion and background checks. The scope of the loan due diligence will depend on the credit quality of the mortgage loans. The underwriting guideline review considers mortgage loan origination processes and systems. In addition, such review considers corporate policy and procedures relating to HOEPA and state and federal predatory lending, origination practices by jurisdiction, historical loan level loss experience, quality control practices, significant litigation and material investors. Servicers are assessed based upon review of systems and reporting capabilities (as compared against industry standard), review of collection procedures and confirmation of servicers' ability to provide loan-level data. In addition, GSMC conducts background checks, meets with senior management to determine whether the servicer complies with industry standards and otherwise monitors the servicer on an ongoing basis. STATIC POOL INFORMATION Information concerning the sponsor's prior residential mortgage loan securitizations involving fixed- and adjustable-rate Alt-A mortgage loans secured by first or second lien mortgages or deeds of trust in residential real properties issued by the depositor is available on the internet at http://www.gs.com/staticpoolinfo. On this website, you can view for each of these securitizations, summary pool information as of the applicable securitization cut-off date and delinquency, cumulative loss, and prepayment information as of each distribution date by securitization for the past five years or, since the applicable securitization closing date if the applicable securitization closing date occurred less than five years from the date of this prospectus supplement. Each of these mortgage loan securitizations is unique, and the characteristics of each securitized mortgage loan pool varies from each other as well as from the mortgage loans to be included in the trust that will issue the certificates offered by this S-82 prospectus supplement. In addition, the performance information relating to the prior securitizations described above may have been influenced by factors beyond the sponsor's control, such as housing prices and market interest rates. Therefore, the performance of these prior mortgage loan securitizations is likely not to be indicative of the future performance of the mortgage loans to be included in the trust related to this offering. In the event any changes or updates are made to the information available on the website, the depositor will provide to any person a copy of the information as it existed as of the date of this prospectus supplement upon request who writes or calls the depositor at 85 Broad Street, New York, New York 10004, Attention: Jennifer Cohen, telephone number (212) 357-2280. In addition, the information available on the website relating to any mortgage loan securitizations issued prior to January 1, 2006 is not deemed to be part of this prospectus supplement, the accompanying prospectus or the depositor's registration statement. Countrywide Home Loans Certain static pool data with respect to the delinquency, cumulative loss and prepayment data for Countrywide Home Loans is available online at http://www.countrywidedealsdata.com?CWDD=01200602. An investor seeking to review data only on prime fixed rate mortgage loans, such as the Mortgage Loans, may chose the "Arm" option under "Payment Type Filter", the "No" option under "NegAm Flag Filter" and the "No" option under the "AltDeal Flag Filter." THE DEPOSITOR The depositor is GS Mortgage Securities Corp., a Delaware corporation. The depositor is a wholly-owned subsidiary of the sponsor, and is an affiliate of the underwriter. The depositor will not have any business operations other than securitizing mortgage assets and related activities. THE ISSUING ENTITY In connection with the issuance of the certificates, GSAA Home Equity Trust 2006-3, the issuing entity, will be formed by the depositor on the closing date pursuant to the master servicing and trust agreement. The issuing entity will be a New York common law trust and the U.S. Bank National Association ("U.S. Bank") will serve as trustee of the issuing entity and act on behalf of the issuing entity as the issuing entity will not have any directors, officers or employees and no continuing duties other than to hold and service the mortgage loans and related assets and issue the certificates. The fiscal year end for the issuing entity will be December 31, commencing with December 31, 2006. Since the issuing entity is a common law trust, it may not be eligible for relief under the federal bankruptcy laws, unless it can be characterized as a "business trust" for purposes of the federal bankruptcy laws. Bankruptcy courts look at various considerations in making this determination, so it is not possible to predict with any certainty whether or not the issuing entity would be characterized as a "business trust." THE CUSTODIANS Deutsche Bank National Trust Company, a national banking association ("Deutsche Bank"), and JPMorgan will each act as a custodian for the mortgage loans under the master servicing and trust agreement. S-83 The principal executive office of Deutsche Bank in its capacity as custodian is located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934, telephone number (714) 247-6000. The principal office of JPMorgan in its capacity as custodian is located at 2220 Chemsearch Boulevard, Suite 150, Irving, Texas 75062, telephone number (972) 785-5205. Each of the above custodians will act as a custodian of the mortgage loan files pursuant to the master servicing and trust agreement. Each custodian will be responsible to hold and safeguard the mortgage notes and other contents of the mortgage files on behalf of the certificateholders. Deutsche Bank shall segregate and maintain continuous custody of all mortgage documents constituting the Custodial File in secure and fire resistant facilities in accordance with customary standards for such custody. Deutsche Bank will not physically segregate the mortgage files from other mortgage files in Deutsche Bank's custody but they will be kept in shared facilities. However, Deutsche Bank's proprietary document tracking system will show the location within Deutsche Bank's facilities of each mortgage file and will show that the mortgage loan documents are held on behalf of the trust. JPMorgan segregates files for which it acts as custodian by group on its automated data system (as directed by the trustee) and maintains continuous custody of all the mortgage files received by it in secure and fire resistant facilities in accordance with customary standards for such custody. For further information regarding the activities of the custodians, see "Description of the Certificates--Delivery of Mortgage Loan Documents" in this prospectus supplement. THE TRUSTEE U.S. Bank National Association ("U.S. Bank") will act as the trustee under the terms of the master servicing and trust agreement. U.S. Bank has one of the largest corporate trust businesses in the country with offices in 31 U.S. cities. The master servicing and trust agreement will be administered from U.S. Bank's corporate trust office located at One Penn Plaza, Suite 2700, New York, New York 10019. U.S. Bank has provided corporate trust services since 1924. As of December 31, 2005, U.S. Bank was acting as trustee with respect to over 63,500 issuances of securities with an aggregate outstanding principal balance of approximately $1.3 trillion. This portfolio includes corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations. On December 30, 2005, U.S. Bank purchased the corporate trust and structured finance trust services businesses of Wachovia Corporation. Following the closing of the acquisition, the Wachovia affiliate named as fiduciary or agent, as applicable, under each client agreement will continue in that role until U.S. Bank succeeds to that role in accordance with the terms of the governing instrument or agreement and applicable law. The trustee will perform administrative functions on behalf of the trust and for the benefit of the certificateholders pursuant to the terms of the master servicing and trust agreement. The trustee's duties are limited solely to its express obligations under the master servicing and trust agreement which generally include: (i) reviewing resolutions, certificates, statements, opinions, reports, documents, orders or other instruments; (ii) executing any interest rate swap agreement; (iii) paying expenses, disbursements, or advances incurred or made by the applicable parties as set forth in the master servicing and trust agreement; (iv) appointing any co-trustee or separate trustee; (v) paying taxes as required under the master servicing and trust S-84 agreement; (vi) executing and delivering to the applicable servicer any request for reconveyance, deed of reconveyance or release or satisfaction of mortgage or such instrument releasing the lien of the mortgage (as furnished by such servicer); (vii) terminating any custodian; (viii) providing any notifications of default; (ix) waiving any permitted defaults; and (x) all other administrative functions as set forth under the master servicing and trust agreement. See "The Agreements" in this prospectus supplement. DESCRIPTION OF THE CERTIFICATES On the closing date, the trust will be created and the depositor will cause the trust to issue the certificates. The certificates will be issued in seventeen classes, the Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3, Class B-4, Class X, Class P, Class R and Class RC certificates. Only the Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3, Class R and Class RC certificates (collectively, the "Offered Certificates") will be offered under this prospectus supplement. The Class R and Class RC certificates are referred to as the "Residual Certificates" in this prospectus supplement. The Offered Certificates (other than the Residual Certificates), together with the Class B-4 certificates, are sometimes referred to as the "LIBOR Certificates" in this prospectus supplement. The certificates will collectively represent the entire undivided ownership interest in the trust fund created and held under the master servicing and trust agreement, subject to the limits and priority of distribution provided for in that agreement. The trust fund will consist of: o the mortgage loans, together with the related mortgage files and all related collections and proceeds due and collected after the Cut-off Date; o such assets as from time to time are identified as REO property and related collections and proceeds; o assets that are deposited in the accounts, and invested in accordance with the master servicing and trust agreement; and o an interest rate swap agreement. The Class R and Class RC certificates each will be issued as a single certificate in a principal amount of $100. The LIBOR Certificates will be issued and available only in book-entry form, in minimum denominations of $50,000 initial principal amount and integral multiples of $1 in excess of $50,000, except that one certificate of each class may be issued in an amount less than $50,000. For information regarding the issuance of certificates in book-entry form, see "Description of the Certificates--Book-Entry Registration" in this prospectus supplement. Voting rights will be allocated among holders of the LIBOR Certificates in proportion to the Class Certificate Balances of their respective certificates on such date, except that the Class X and Class P certificates will each be allocated 1% of the voting rights. The Class X and Class P certificates will initially be held by Goldman, Sachs & Co. S-85 The following chart illustrates generally the distribution priorities and subordination features applicable to the Offered Certificates: | ----------------- / \ | | | Class R and | | Class RC* | | ----------------- | | | | Class A-1 | | ----------------- | | | | Class A-2 | | ----------------- | | | | Class A-3 and | | Class A-4** | | ----------------- | | | | Class M-1 | | ----------------- | Accrued certificate | | interest, then | Class M-2 | Losses principal | ----------------- | | | | Class M-3 | | ----------------- | | | | Class M-4 | | ----------------- | | | | Class M-5 | | ----------------- | | | | Class B-1 | | ----------------- | | | | Class B-2 | | ----------------- | | | | Class B-3 | | ----------------- | | | | Non-Offered | | Certificates | \ / ----------------- | * Principal distributions to the Class R and Class RC certificates will be concurrent. **Principal distributions to the Class A-3 and Class A-4 certificates will be distributed pro rata based on their respective class certificate balances, until their respective class principal balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions will be allocated first to the Class A-3 certificates until its certificate principal balance has been reduced to zero, and then to the Class A-4 certificates until its certificate principal balance has been reduced to zero. Book-Entry Registration The LIBOR Certificates and the Residual Certificates are sometimes referred to in this prospectus supplement as "book-entry certificates." Persons acquiring beneficial ownership interests in the book-entry securities may elect to hold their securities through The Depository Trust Company ("DTC"), in the United States, Clearstream Banking, societe anonyme ("Clearstream") or the Euroclear Bank ("Euroclear"), as operator of the Euroclear System, in Europe. Transfers within DTC, Clearstream or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Clearstream or Euroclear, on the other, will be effected in DTC through the relevant depositories of Clearstream or Euroclear, respectively, and each a participating member of DTC. The interests of the beneficial owners of interests in the securities will be represented by book entries on the records of DTC and its participating members. All references in this prospectus supplement to the certificates reflect the rights of beneficial owners only as such rights may be exercised through DTC and its participating organizations for so long as such securities are held by DTC. S-86 DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC also facilitates the post-trade settlement among DTC participants ("Direct Participants") of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities. Direct Participants include both U.S. and non-U.S. securities brokers, dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participant"). The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org. The book-entry certificates (other than the Residual Certificates) will be issued in one or more certificates or notes, as the case may be, that equal the aggregate principal balance or notional amount of the applicable class or classes of securities, equal to an amount up to $500 million per certificate. If any class exceeds the principal amount or notional amount of $500 million, one certificate will be issued with respect to each $500 million principal amount or notional amount, and an additional certificate will be issued with respect to any remaining principal amount or notional amount of such issue. Each entry will initially be registered in the name of DTC's partnership nominee, Cede & Co., or any other name as may be requested by an authorized representative of DTC or one of the relevant depositories. Clearstream and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositories that in turn will hold such positions in customers' securities accounts in the depositories' names on the books of DTC. DTC has no knowledge of the actual Beneficial Owners (as defined below) of the certificates. Except as described below, no person acquiring a book-entry certificate will be entitled to receive a physical certificate or note representing such certificate. Unless and until physical certificates are issued, it is anticipated that the only "Certificateholder" will be Cede & Co., as nominee of DTC. Beneficial owners are only permitted to exercise their rights indirectly through Direct Participants and DTC. An owner's ownership of a book-entry certificate will be recorded on the records of the brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary"), that maintains the beneficial owner's account for such purpose. In turn, the Financial Intermediary's ownership of such book-entry certificate will be recorded on the records of DTC or on the records of a participating firm that acts as agent for the Financial Intermediary, if the Beneficial Owner's Financial Intermediary is not a DTC Participant, whose interest will in turn be recorded on the records of DTC, and on the records of Clearstream or Euroclear, as appropriate. Purchases of securities under the DTC system must be made by or through DTC Participants, which will receive a credit for the securities on DTC's records. The ownership S-87 interest of each actual purchaser of each certificate ("Beneficial Owner") is in turn to be recorded on the DTC Participant's records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the certificates are to be accomplished by entries made on the books of a Direct Participant or Indirect Participant acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the certificates, except in the event that use of book-entry system for the certificates is discontinued. Beneficial Owners that are not Direct Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, book-entry certificates may do so only through Direct Participants and Indirect Participants. In addition, beneficial owners will receive all distributions of principal and interest from the Securities Administrator, Trustee, or a paying agent on behalf of the Trustee, through DTC Direct Participants. DTC will forward such distributions to its Direct Participants, which thereafter will forward them to Indirect Participants or Beneficial Owners. Beneficial Owners will not be recognized by the Securities Administrator, Trustee or any paying agent as holders of the certificates, and Beneficial Owners will be permitted to exercise the rights of the holders of the certificates only indirectly through DTC and its Direct Participants. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the certificates within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the certificates unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Beneficial Owners will receive all distributions allocable to principal and interest with respect to the book-entry certificates from the Securities Administrator through DTC and DTC Direct Participants. While the book-entry certificates are outstanding (except under the circumstances described below), under the rules, regulations and procedures creating, governing and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the certificates. DTC is required to receive and transmit distributions allocable to principal and interest with respect to the certificates. Direct Participants and Indirect Participants with whom Beneficial Owners have accounts with respect to the certificates are similarly required to make book-entry transfers and receive and transmit such distributions on behalf of their respective beneficial owners. Accordingly, although Beneficial Owners will not possess physical certificates or notes, the Rules provide a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their beneficial ownership interests in the certificates. S-88 Beneficial Owners will not receive or be entitled to receive physical certificates for the certificates referred to as "Definitive Securities" (the "Definitive Securities"), except under the limited circumstances described below. Unless and until Definitive Securities are issued, beneficial owners who are not Direct Participants may transfer ownership of the certificates only through Direct Participants and Indirect Participants by instructing such Direct Participants and Indirect Participants to transfer beneficial ownership interests in the securities by book-entry transfer through DTC for the account of the purchasers of such certificates, which account is maintained with their respective Direct Participants or Indirect Participants. Under the Rules and in accordance with DTC's normal procedures, transfers of ownership of securities will be executed through DTC and the accounts of the respective Direct Participants at DTC will be debited and credited. Similarly, the Direct Participants and Indirect Participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing beneficial owners. Because of time zone differences, it is possible that credits of securities received in Clearstream or Euroclear as a result of a transaction with a Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in such securities settled during such processing will be reported to the relevant Euroclear or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream Participant or Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but, due to time zone differences, may be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC. Transfers between Participants will occur in accordance with DTC rules. Transfers between Clearstream Participants and Euroclear Participants will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with the Rules on behalf of the relevant European international clearing system by the relevant depository, each of which is a participating member of DTC; provided, however, that such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the relevant depository to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to the relevant depositories for Clearstream or Euroclear. Clearstream has advised that it is incorporated under the laws of the Grand Duchy of Luxembourg as a professional depository. Clearstream holds securities for its Participants. Clearstream facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in account of Clearstream Participants, eliminating the need for physical movement of securities. Transactions may be settled through Clearstream in many currencies, including United States dollars. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As S-89 a professional depository, Clearstream is subject to regulation by the Commission de Surveillance du Secteur Financier in Luxembourg. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly. Distributions, to the extent received by the relevant depository for Clearstream, with respect to the securities held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and procedures. Euroclear was created to hold securities for its Participants and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for movement of physical securities and any risk from lack of simultaneous transfers of securities and cash. The Euroclear System is owned by Euroclear plc and operated through a license agreement by Euroclear Bank S.A./N.V., a bank incorporated under the laws of the Kingdom of Belgium (the "Euroclear Operator"). The Euroclear Operator holds securities and book-entry interests in securities for participating organizations and facilitates the clearance and settlement of securities transactions between Euroclear Participants, and between Euroclear Participants and participants of certain other securities intermediaries through electronic book entry changes in accounts of such participants or other securities intermediaries. Non-participants of Euroclear may hold and transfer book entry interests in securities through accounts with a direct participant of Euroclear or any other securities intermediary that holds book-entry interests in the related securities through one or more Securities Intermediaries standing between such other securities intermediary and the Euroclear Operator. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear (the "Terms and Conditions") and the related Operating Procedures of the Euroclear System and applicable Belgian law. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. Euroclear Bank Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. The Securities Administrator is responsible to make payments and distributions on the book entry securities to Cede & Co. DTC will be responsible for crediting the amount of such distributions to the accounts of the applicable Direct Participants in accordance with DTC's normal procedures. Each Direct Participant will be responsible for disbursing such distributions to the Beneficial Owners that it represents and to each Indirect Participant for which it acts as agent. Each such Indirect Participant will be responsible for disbursing funds to the Beneficial Owners that it represents. Distributions and payments on the securities will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participant's accounts upon DTC's receipt of funds and corresponding detail information from the Securities Administrator or its agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and S-90 will be the responsibility of such Participant and not of DTC, Issuer or Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Under a book-entry format, Beneficial Owners of the book-entry securities may experience some delay in their receipt of distributions, since such distributions will be forwarded by the Securities Administrator to Cede & Co., as nominee of DTC. Distributions with respect to securities held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by the relevant depositary. Such distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Because DTC can only act on behalf of financial intermediaries, the ability of a Beneficial Owner to pledge book entry securities to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such book entry securities, may be limited due to the lack of physical securities for such book entry securities. In addition, issuance of the book-entry certificates in book-entry form may reduce the liquidity of such certificates in the secondary market since certain potential investors may be unwilling to purchase securities for which they cannot obtain physical certificates or notes. Monthly and annual reports on the applicable trust fund will be provided to Cede & Co., as nominee of DTC, and Cede & Co. may make such reports available to beneficial owners upon request, in accordance with the Rules, and to the DTC Participants to whose DTC accounts the book entry securities of such Beneficial Owners are credited directly or are credited indirectly through Indirect Participants. Clearstream or Euroclear, as the case may be, will take any other action permitted to be taken by a holder under the master servicing and trust agreement on behalf of a Clearstream Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to the ability of the relevant depository to effect such actions on its behalf through DTC. Physical certificates representing a security will be issued to Beneficial Owners only upon the events specified in the related Agreement. Such events may include the following: o we (or DTC) advise the Trustee and the Securities Administrator in writing that DTC is no longer willing or able to properly discharge its responsibilities as depository with respect to the securities, and that we are or the Securities Administrator is unable to locate a qualified successor, or o we notify the Trustee, the Securities Administrator and DTC of our intent to terminate the book-entry system through DTC and, upon receipt of such intent from DTC, the participants holding beneficial interests in the certificates agree to initiate such termination. Upon the occurrence of any of the events specified in the related agreement, the Securities Administrator will be required to notify all Participants of the availability through DTC of physical certificates. Upon delivery of the certificates or notes representing the certificates, the Securities Administrator will issue the securities in the form of physical certificates, and thereafter the Securities Administrator will recognize the holders of such physical certificates as certificateholders. Thereafter, distributions of principal of and interest on the certificates will be made by the Securities Administrator or a paying agent on behalf of the Securities Administrator directly to certificateholders in accordance with the procedures listed in this prospectus supplement and in the master servicing and trust agreement. The final distribution of any security (whether physical certificates or certificates registered in the name of Cede & Co.), S-91 however, will be made only upon presentation and surrender of such certificates on the final distribution date at such office or agency as is specified in the notice of final payment to certificateholders. Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures to facilitate transfers of securities among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. The Master Servicer, the Securities Administrator, the trust and the Trustee will not have any responsibility for any aspect of the records relating to or distributions made on account of beneficial ownership interests of the book-entry certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. See also the attached Annex I for certain information regarding U.S. federal income tax documentation requirements for investors holding certificates through Clearstream or Euroclear (or through DTC if the holder has an address outside the United States). Definitive Certificates The LIBOR Certificates, which will be issued initially as book-entry certificates, will be converted to definitive certificates and reissued to beneficial owners or their nominees, rather than to DTC or its nominee, only if (a) DTC or the depositor advises the Securities Administrator in writing that DTC is no longer willing or able to properly discharge its responsibilities as depository with respect to the book-entry certificates and the Securities Administrator or the depositor is unable to locate a qualified successor or (b) the depositor notifies DTC of its intent to terminate the book-entry system through DTC and, upon receipt of notice of such intent from DTC, the participants holding beneficial interests in the certificates agree to initiate such termination. Upon the occurrence of any event described in the immediately preceding paragraph, the Securities Administrator will be required to notify all participants of the availability through DTC of definitive certificates. Upon delivery of definitive certificates, the Securities Administrator will reissue the book-entry certificates as definitive certificates to beneficial owners. Distributions of principal of, and interest on, the book-entry certificates will thereafter be made by the Securities Administrator directly to holders of definitive certificates in accordance with the procedures set forth in the master servicing and trust agreement. Definitive certificates will be transferable and exchangeable at the offices of the Securities Administrator, its agent or the certificate registrar designated from time to time for those purposes. As of the closing date, the Securities Administrator designates the offices of its agent located in Columbus, Ohio for those purposes. No service charge will be imposed for any registration of transfer or exchange, but the Securities Administrator may require distribution of a sum sufficient to cover any tax or other governmental charge imposed in connection with the transfer or exchange. Assignment of the Mortgage Loans Pursuant to certain agreements described below, each of Countrywide, FNBN, NatCity and GreenPoint sold their respective mortgage loans, without recourse, to GSMC. In addition, GSMC acquired certain of the mortgage loans from various other mortgage loan sellers through the Goldman Sachs Mortgage Conduit Program. GSMC will sell, transfer, assign, set over and S-92 otherwise convey the mortgage loans, including all principal outstanding as of, and interest due and accruing on or after, the close of business on the cut-off date, without recourse, to the depositor on the closing date. Pursuant to the master servicing and trust agreement, the depositor will sell, without recourse, to the trust, all right, title and interest in and to each mortgage loan, including all principal outstanding as of, and interest due on or after, the close of business on the cut-off date. Each such transfer will convey all right, title and interest in and to (a) principal outstanding as of the close of business on the cut-off date (after giving effect to payments of principal due on that date, whether or not received) and (b) interest due and accrued on each such mortgage loan after the cut-off date. However, GSMC will not convey to the depositor, and will retain all of its right, title and interest in and to (x) principal due on each mortgage loan on or prior to the cut-off date and principal prepayments in full and curtailments (i.e., partial prepayments), received on each such mortgage loan on or prior to the cut-off date and (y) interest due and accrued on each mortgage loan on or prior to the Cut-off Date. GSMC will also convey to the depositor: o certain rights of GSMC with respect to the Countrywide Mortgage Loans under the mortgage loan purchase agreement between Countrywide and GSMC and certain rights of GSMC under the servicing agreement between Countrywide and GSMC, pursuant to an assignment, assumption and recognition agreement; o certain rights of GSMC with respect to the FNBN Mortgage Loans under the master mortgage loan purchase and interim servicing agreement between FNBN and GSMC, pursuant to an assignment, assumption and recognition agreement; o certain rights of GSMC with respect to the NatCity Mortgage Loans under the amended and restated flow seller's warranties and servicing agreement between NatCity and GSMC, pursuant to an assignment, assumption and recognition agreement; o certain rights of GSMC with respect to the Conduit Mortgage Loans under the related master loan purchase agreements, in each case between the related mortgage loan seller and GSMC, pursuant to an assignment, assumption and recognition agreement; and o certain rights of GSMC with respect to the GreenPoint Mortgage Loans under the amended and restated master mortgage loan purchase agreement, between the GreenPoint and GSMC, pursuant to an assignment, assumption and recognition agreement. Delivery of Mortgage Loan Documents In connection with the sale, transfer, assignment or pledge of the mortgage loans to the trust, the depositor will cause to be delivered to the custodians, on or before the closing date, certain documents listed below with respect to each mortgage loan. Such documents will constitute the mortgage file with respect to each mortgage loan and will include, but are not limited to: (a) the original mortgage note, endorsed without recourse in blank by the last endorsee, including all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee; S-93 (b) except with respect to any Conduit Mortgage Loan, the original of any guaranty executed in connection with the mortgage note (if any); (c) the related original mortgage and evidence of its recording or, in certain limited circumstances, a certified copy of the mortgage; (d) except with respect to each MERS Designated Mortgage Loan, the intervening mortgage assignment(s), or copies of them certified by the applicable originator, escrow company, title company, or closing attorney, if any, showing a complete chain of assignment from the originator of the related mortgage loan to the last endorsee; (e) except with respect to each MERS Designated Mortgage Loan, a mortgage assignment in recordable form, which, if acceptable for recording in the relevant jurisdiction, may be included in a blanket assignment or assignments, of each mortgage from the last endorsee in blank; and (f) originals or certified copies of all assumption, modification, consolidation and extension agreements, if provided, in those instances where the terms or provisions of a mortgage or mortgage note have been modified or such mortgage or mortgage note has been assumed. Pursuant to the master servicing and trust agreement, each custodian will agree to execute and deliver on or prior to the closing date an acknowledgment of receipt of the original mortgage note (item (a) above) with respect to each of the applicable mortgage loans, with any exceptions noted. Each custodian will agree, for the benefit of the holders of the certificates, to review, or cause to be reviewed, each applicable mortgage file within ninety (90) days after the closing date and to deliver a certification generally to the effect that, as to each mortgage loan listed in the applicable schedule of mortgage loans: o all documents required to be reviewed by it pursuant to the master servicing and trust agreement are in its possession; o each such document has been reviewed by it and appears regular on its face and relates to such mortgage loan; o based on its examination and only as to the foregoing documents, certain information set forth on the schedule of mortgage loans accurately reflects the information set forth in the mortgage file delivered on such date; and o each mortgage note has been endorsed as provided in the master servicing and trust agreement. If a custodian, during the process of reviewing the mortgage files, finds any document constituting a part of a mortgage file which is not executed, has not been received or is unrelated to the mortgage loans, or that any mortgage loan does not conform to the requirements above or to the description of the requirements as set forth in the applicable schedule of mortgage loans, such custodian is required to promptly notify the applicable servicer and the depositor in writing. The depositor will be required to use reasonable efforts to cause to be remedied a material defect in a document constituting part of a mortgage file of which it is so notified by the applicable custodian. If, however, within the time period specified in the related agreement between GSMC and the applicable responsible party after the earlier of either discovery by or notice to the depositor of such defect, the applicable responsible party has not caused the defect to be remedied, the applicable responsible party will be required to S-94 repurchase such mortgage loan at a price equal to the Stated Principal Balance of the mortgage loans, plus all related accrued and unpaid interest through the last day of the month in which the repurchase occurs, less amounts received or advanced in respect of the repurchased mortgage loan being held in the collection account for distribution in the month of repurchase, plus any costs or damages incurred by the trust in connection with any violation of any predatory or abusive lending law. The obligations of the responsible party to cure such breach or repurchase any mortgage loan and to indemnify for such breach constitute the sole remedies against such responsible parties respecting a material breach of any such representation or warranty available to the holders of the certificates, the depositor, the servicers, the Master Servicer, the Securities Administrator and the trustee. Representations and Warranties Relating to the Mortgage Loans Pursuant to the applicable mortgage loan purchase agreement or seller's warranties and servicing agreement, each of the responsible parties made certain representations and warranties to GSMC as of the Original Sale Date regarding the mortgage loans transferred by it, which are summarized below. Pursuant to the applicable assignment agreement, GSMC will represent and warrant that nothing has occurred or failed to occur between the applicable Original Sale Date and the closing date that would cause those representations and warranties to be incorrect in any material respect. In addition, GSMC will make certain representations and warranties regarding the mortgage loans, including the Conduit Mortgage Loans, directly to the trust, as of the closing date. The representations and warranties relating to the mortgage loans include, but are not limited to: (1) None of the mortgage loans are thirty (30) days or more delinquent as of the cut-off date related to the date the mortgage loan was sold to GSMC; (2) To the best of the responsible party's knowledge, there are no delinquent taxes, governmental assessments, insurance premiums, water, sewer and municipal charges affecting the mortgaged property; (3) The terms of the mortgage note and mortgage have not been impaired, waived, altered or modified in any respect, except by a written instrument which has been or will be recorded, if necessary to protect the interests of the purchaser. No mortgagor has been released, in whole or in part; (4) The mortgage loan is not subject to any right of rescission, counterclaim or defense, nor will the operation of any of the terms of the mortgage note or the mortgage, or the exercise of any right under the mortgage note or the mortgage, render either the mortgage note or the mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect to the mortgage loan; (5) Pursuant to the terms of the mortgage, all buildings upon the mortgaged property are insured by a generally acceptable insurer against loss by fire and hazards of extended coverage; (6) Any requirements of any federal, state or local law applicable to the mortgage loan have been complied with; (7) The mortgage has not been satisfied, cancelled, subordinated or rescinded, in whole or in part, and the mortgaged property has not been released from the lien of the mortgage, in S-95 whole or in part, nor has any instrument been executed that would effect any such release, cancellation or rescission; (8) The mortgage is a valid, subsisting and enforceable first lien on the mortgaged property, including all buildings on the mortgaged property and all improvements on the mortgaged property and replacements made at any time with respect to the mortgaged property. The lien of the mortgage is subject only to: (A) the lien of current real property taxes and assessments not yet due and payable; (B) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to mortgage lending institutions generally and specifically referred to in documents delivered to the originator of the 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 the mortgage or the use, enjoyment, value or marketability of the related mortgaged property. (9) The mortgage note and the mortgage executed and delivered by a mortgagor in connection with a mortgage loan are genuine, and each is the legal, valid and binding obligation of its maker enforceable in accordance with its terms; (10) Except where such policies are not generally available in the jurisdiction where the mortgaged property is located, the mortgage loan is covered by an American Land Title Association lender's title insurance policy, or other generally acceptable form of policy or insurance, and each such title insurance policy is issued by a title insurer qualified to do business in the jurisdiction where the mortgaged property is located, insuring the responsible party, as to the first priority lien with respect to mortgage loans, of the mortgage in the original principal amount of the mortgage loan, subject only to the exceptions contained in clause (A), (B) or (C) of paragraph (8) above; (11) Except as identified, there is no default, breach or event which would permit acceleration existing under the mortgage or the mortgage note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event which would permit acceleration, and the applicable responsible party has not waived any default, breach or event which would permit acceleration; (12) The mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder of the mortgage adequate for the realization against the mortgaged property of the benefits of the security provided by the mortgaged property, including, (i) in the case of a mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is no homestead or other exemption available to a mortgagor which would interfere with the right to sell the mortgaged property or the right to foreclose the mortgage; (13) To the best of the responsible party's knowledge, the mortgaged property is lawfully occupied under applicable law and 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 have been made or obtained from the appropriate authorities; S-96 (14) The mortgage note is not and has not been secured by any collateral except the lien of the corresponding mortgage and the security interest of any applicable security agreement or chattel mortgage; (15) To the best of the responsible party's knowledge, there is no proceeding pending for the total or partial condemnation of the mortgaged property. As of the date of origination, the mortgaged property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the mortgaged property as security for the mortgage loan or the use for which the premises were intended; (16) The mortgage file contains an appraisal of the related mortgaged property by an appraiser, who had no interest, direct or indirect in the mortgaged property or in any loan made on the security of the mortgaged property, and whose compensation is not affected by the approval or disapproval of the mortgage loan (unless, with respect to the Countrywide Mortgage Loans, the mortgage loan was underwritten pursuant to one of Countrywide's streamline documentation programs); (17) None of the mortgage loans is considered (a) a "high cost" mortgage loan under the Home Ownership and Equity Protection Act of 1994, or (b) a "high cost home," "threshold," "predatory" or "covered" loan (excluding "covered home loans" as defined under clause (1) of the definition of "covered home loans" in the New Jersey Home Ownership Security Act of 2002) under applicable state, federal or local laws; (18) Either no mortgagor was required to purchase any credit insurance product as a condition of obtaining the extension of credit or no proceeds from the mortgage loan were used to purchase any such credit insurance; and (19) The origination and collection practices used by the applicable responsible party with respect to the mortgage loans have been in all respects in accordance with accepted servicing practices. Upon the discovery by a servicer, the depositor or the trustee that any of the representations and warranties contained in the applicable mortgage loan purchase agreement, seller's warranties and servicing agreement or any representation and warranties contained in the representations and warranties agreement, have been breached in any material respect as of the date made, with the result that value of, or the interests of the trust in the related mortgage loan were materially and adversely affected, the party discovering such breach will be required to give prompt written notice to the other parties. Subject to certain provisions of those agreements, within no more than ninety (90) days (sixty (60) days in the case of certain responsible parties, as specified in the applicable mortgage loan purchase agreement) of the earlier to occur of the applicable responsible party's discovery of or its receipt of notice of any such breach with respect to a mortgage loan transferred by it, the responsible party will be required to: o use its best efforts promptly to cure such breach in all material respects; o purchase such mortgage loan at a repurchase price at least equal to the Stated Principal Balance of the mortgage loans, plus all related accrued and unpaid interest through the last day of the month in which the repurchase occurs, less amounts received or advanced in respect of the repurchased mortgage loan being held in the collection account for distribution in the month of repurchase, plus any costs or damages incurred by the trust in connection with any violation of any predatory or abusive lending law; or S-97 o with respect to certain responsible parties, substitute a qualified mortgage loan or loans for a mortgage loan as to which a breach has occurred. In the case of the FNBN Mortgage Loans, substitution is only permitted in connection with the breach of certain representations contained in the amended and restated mortgage loan flow purchase, sale and servicing agreement. With respect to all of the mortgage loans, GSMC has the option to, but is not obligated to, substitute a qualified mortgage loan or loans for a mortgage loan as to which a breach has occurred. The master servicing and trust agreement requires each Responsible Party to repurchase any mortgage loan where the mortgagor fails to make its first payment after the date that mortgage loan was purchased by GSMC. It is possible that a mortgagor with respect to a mortgage loan transferred to the trust might have failed to make its first payment after the date GSMC purchased that mortgage loan from such Responsible Party. In that circumstance, the trust, at its option, may direct such Responsible Party to repurchase that mortgage loan from the trust at the repurchase price described above. The repurchase price with respect to such mortgage loan will be required to be deposited into the collection account after deducting any amounts received in respect of such repurchased mortgage loan or mortgage loans and being held in the collection account for future distribution to the extent such amounts have not yet been applied to principal or interest on such mortgage loan. In addition, each of the responsible parties is obligated to indemnify the depositor, the Master Servicer, the Securities Administrator, the related servicer and the trustee for any third party claims arising out of a breach by such applicable responsible party of representations or warranties regarding the mortgage loans. The obligations of such responsible parties to cure such breach or to substitute or repurchase any mortgage loan and to indemnify for such breach constitute the sole remedies against such responsible parties respecting a material breach of any such representation or warranty to the holders of the certificates, the depositor, the applicable servicer, the Master Servicer, the Securities Administrator and the trustee. In the event of a material breach of any of the representations and warranties of GSMC, GSMC will be required to cure or repurchase the affected mortgage loan in the same manner described above for a material breach of a representation or warranty of a responsible party. The obligations of GSMC to cure such breach or repurchase any mortgage loan constitute the sole remedies against GSMC respecting a material breach of any such representations or warranties to the holders of the certificates, the servicers, the Master Servicer, the Securities Administrator and the trustee. Payments on the Mortgage Loans Each servicing agreement provides that the servicer is required to establish and maintain a separate collection account which is to be maintained at a federally insured depository institution. The servicing agreements may permit the related servicer to direct any depository institution maintaining the applicable collection account to invest the funds in the collection account in one or more eligible investments that mature, unless payable on demand, no later than the business day preceding the Servicer Remittance Date, as described below. Each servicer is obligated to deposit or cause to be deposited in the applicable collection account within no more than two (2) business days after receipt, amounts representing the payments and other collections received by it on or with respect to the mortgage loans serviced by it after the cut-off date, other than in respect of monthly payments on such mortgage loans S-98 due and accrued on each such mortgage loan up to and including any due date occurring prior to the cut-off date. Such amounts include, but are not limited to: o all payments on account of principal, including prepayments of principal on the related mortgage loans; o all payments on account of interest, net of the servicing fee, on the related mortgage loans; o all Insurance Proceeds to the extent such Insurance Proceeds are not to be applied to the restoration of the related mortgaged property or released to the related borrower in accordance with the express requirements of law or in accordance with prudent and customary servicing practices, and all Condemnation Proceeds and Liquidation Proceeds; and o all other amounts required to be deposited in the collection account pursuant to the applicable servicing agreement. No servicer will be permitted to commingle funds in the collection account with any other funds or assets. Pursuant to the master servicing and trust agreement, the Master Servicer will be obligated to establish a distribution account in the name of the Securities Administrator as paying agent for the benefit of the certificateholders. The Master Servicer will be required to deposit or cause to be deposited the funds required to be remitted by each servicer on the Servicer Remittance Date. The funds required to be remitted by each servicer on each Servicer Remittance Date will be equal to the sum, without duplication, of: o all collections of scheduled principal and interest on the mortgage loans received by the servicer on or prior to the related Determination Date; o all principal prepayments, Insurance Proceeds, Condemnation Proceeds and Liquidation Proceeds, if any, collected by the servicer during the related Prepayment Period; o all P&I Advances made by the servicer with respect to payments due to be received on the mortgage loans on the related due date but not received by the related Determination Date; and o any other amounts required to be placed in the collection account by the servicer pursuant to the applicable servicing agreement, but excluding the following: (1) for any mortgage loan with respect to which the applicable servicer has previously made an unreimbursed P&I Advance, amounts received on such mortgage loan which represent late payments of principal and interest, Insurance Proceeds, Condemnation Proceeds or Liquidation Proceeds, to the extent of such unreimbursed P&I Advance; (2) amounts received on a particular mortgage loan with respect to which the applicable servicer has previously made an unreimbursed servicing advance, to the extent of such unreimbursed servicing advance; S-99 (3) for such Servicer Remittance Date, the aggregate servicing fee; (4) all net income from eligible investments that are held in the collection account for the account of the applicable servicer; (5) all amounts actually recovered by the applicable servicer in respect of late fees, assumption fees and similar fees; (6) for all mortgage loans for which P&I Advances or servicing advances are determined to be non-recoverable, all amounts equal to unreimbursed P&I Advances and servicing advances for such mortgage loans; (7) certain other amounts which are reimbursable to the servicers, as provided in the servicing agreements; and (8) all collections of principal and interest not required to be remitted on each Servicer Remittance Date. The amounts described in clauses (1) through (8) above may be withdrawn by the applicable servicer from the collection accounts on or prior to each Servicer Remittance Date. Administration Fees As described under the definition of "Available Funds" included in the "Glossary of Terms" in this prospectus supplement, funds collected on the mortgage loans that are available for distribution to certificateholders will be net of the master servicing fee, servicing fee and trustee fee payable on each mortgage loan. On each Distribution Date, the master servicer, the servicers, the custodians, the trustee, and any others receiving payment of fees or expenses, will be entitled to their fee and expenses prior to the certificateholders receiving any distributions. The master servicing fee, servicing fee and trustee fee for any Distribution Date for any mortgage loan will be an amount equal to the master servicing fee rate, the servicing fee rates or the trustee fee rate, as applicable, on the Stated Principal Balance of such mortgage loan. The following table identifies the per annum fee rate applicable in calculating the master servicing fee, the servicing fee and the trustee fee as of the cut-off date: Fee Per Annum Fee Rate --------------------- -------------------------------- Master Servicing Fee The investment income earned on amounts on deposit in the Distribution Account during the Master Servicer Float Period Servicing Fee 0.250% and 0.375% Trustee Fee An amount remitted to the trustee by JPMorgan from compensation received in its capacity as Master Servicer and Securities Administrator Distributions Distributions on the certificates will be required to be made by the Securities Administrator on the 25th day of each month, or, if that day is not a business day, on the first business day S-100 thereafter, commencing in March 2006 (each, a "Distribution Date"), to the persons in whose names the certificates are registered on the related Record Date. Distributions on each Distribution Date will be made by wire transfer by authorized personnel in immediately available funds to the account of the certificateholder at a bank or other depository institution having appropriate wire transfer facilities as directed by that certificateholder in its written wire instructions provided to the Securities Administrator or if no wire instructions are provided then by check mailed to the address of the person entitled to the distribution as it appears on the applicable certificate register. However, the final distribution in retirement of the certificates will be made only upon presentment and surrender of those certificates at the office of the Securities Administrator designated from time to time for those purposes. Initially, the Securities Administrator designates its offices located at 2001 Bryan Street, 9th Floor, Dallas, Texas 75201; Attention: Worldwide Securities Services, GSAA 2006-3 for these purposes. Priority of Distributions Among Certificates As more fully described in this prospectus supplement, distributions on the certificates will be made on each Distribution Date from Available Funds and will be made to the classes of certificates in the following order of priority: (1) to the Supplemental Interest Trust, Net Swap Payment Amounts and any Swap Termination Payments owed to the swap provider other than a Defaulted Swap Termination Payment; (2) to interest on each class of LIBOR Certificates, in the order and subject to the priorities set forth below under "--Distributions of Interest and Principal"; (3) to principal on the classes of LIBOR Certificates and Residual Certificates then entitled to receive distributions of principal, in the order and subject to the priorities set forth below under "--Distributions of Interest and Principal"; (4) to unpaid interest on the classes of LIBOR Certificates in the order and subject to the priorities set forth below under "--Distributions of Interest and Principal"; (5) to deposit into the Excess Reserve Fund Account to cover any Basis Risk Carry Forward Amount; (6) any Defaulted Swap Termination Payment to the Supplemental Interest Trust; (7) certain amounts of interest and principal to the Class X certificates; and (8) any remaining amounts to the Residual Certificates; in each case, subject to certain limitations set forth below under "--Distributions of Interest and Principal." Distributions of Interest and Principal For any Distribution Date, the "Pass-Through Rate" for each class of LIBOR Certificates will be a per annum rate as set forth below: S-101 (a) for the Class A-1 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (b) for the Class A-2 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (c) for the Class A-3 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (d) for the Class A-4 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (e) for the Class M-1 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (f) for the Class M-2 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (g) for the Class M-3 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (h) for the Class M-4 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (i) for the Class M-5 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (j) for the Class B-1 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (k) for the Class B-2 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; (l) for the Class B-3 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap; and (m) for the Class B-4 certificates equal to the lesser of (i) One-Month LIBOR plus [___]% ([___]% after the first Distribution Date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. S-102 The "WAC Cap" for any Distribution Date will be a per annum rate equal to the product of (i) 30 divided by the actual number of days in the Interest Accrual Period and (ii) the sum of (A) the weighted average of the interest rates on the mortgage loans (in each case, less the Expense Fee Rate if necessary) in effect at the beginning of the related Due Period on the mortgage loans, and (B) Net Swap Receipt Amounts, if any, less Net Swap Payment Amounts if any, divided by the Stated Principal Balance of the mortgage loans at the beginning of the related Due Period multiplied by 12 (calculated on an actual/360 basis). On each Distribution Date, distributions in reduction of the Class Certificate Balance of the certificates entitled to receive distributions of principal will be made in an amount equal to the Principal Distribution Amount. The "Principal Distribution Amount" for each Distribution Date will equal the sum of (i) the Basic Principal Distribution Amount for that Distribution Date and (ii) the Extra Principal Distribution Amount for that Distribution Date. On each Distribution Date, the Securities Administrator will be required to make the disbursements and transfers from the Available Funds then on deposit in the distribution account specified below in the following order of priority: (i) to the holders of each class of LIBOR Certificates and to the Supplemental Interest Trust in the following order of priority: (a) to the Supplemental Interest Trust, the sum of (x) all Net Swap Payment Amounts and (y) any Swap Termination Payment owed to the Swap Provider other than a Defaulted Swap Termination Payment owed to the Swap Provider, if any; (b) from the Interest Remittance Amounts, pro rata (based on the accrued and unpaid interest distributable to each class of the Class A certificates), to each of the Class A certificates, the related Accrued Certificate Interest and any Unpaid Interest Amount for each class of the Class A certificates from prior Distribution Dates; (c) from any remaining Interest Remittance Amounts to the Class M certificates, sequentially, in ascending numerical order, their Accrued Certificate Interest; and (d) from any remaining Interest Remittance Amounts to the Class B certificates sequentially, in ascending numerical order, their Accrued Certificate Interest. (ii) (A) on each Distribution Date (x) prior to the Stepdown Date or (y) with respect to which a Trigger Event is in effect, to the holders of the class or classes of LIBOR Certificates and Residual Certificates then entitled to distributions of principal as set forth below, an amount equal to the Principal Distribution Amount in the following order of priority: (a) concurrently, to the Class R and Class RC certificates, pro rata, until their respective Class Certificate Balances have been reduced to zero; (b) to the Class A certificates, in the following order of priority: (1) sequentially, to the Class A-1 and Class A-2 Certificates, in that order, until their respective Class Certificate Balances have been reduced to zero; S-103 (2) concurrently, to the Class A-3 and Class A-4 Certificates, allocated pro rata among these certificates, until their respective Class Certificate Balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions to the Class A-3 and Class A-4 Certificates will be allocated first, to the Class A-3 Certificates, until its Class Certificate Balance has been reduced to zero, and then to the Class A-4 Certificates, until its Class Certificate Balance has been reduced to zero; and (3) sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates, in that order, until their respective Class Certificate Balances have been reduced to zero; (B) on each Distribution Date (x) on and after the Stepdown Date and (y) as long as a Trigger Event is not in effect, to the holders of the class or classes of LIBOR Certificates then entitled to distribution of principal as set forth below, an amount equal to the Principal Distribution Amount in the following order of priority: (a) to the Class A certificates, the lesser of (x) the Principal Distribution Amount and (y) the Class A Principal Distribution Amount, allocated in the following order of priority: (1) sequentially, to the Class A-1 and Class A-2 Certificates, in that order, until their respective Class Certificate Balances have been reduced to zero; and (2) concurrently, to the Class A-3 and Class A-4 Certificates, allocated pro rata among these certificates, until their respective Class Certificate Balances have been reduced to zero; (b) to the Class M-1 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above and (y) the Class M-1 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (c) to the Class M-2 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above and to the Class M-1 certificates in clause (ii)(B)(b) above and (y) the Class M-2 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (d) to the Class M-3 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above and to the Class M-2 certificates in clause (ii)(B)(c) above and (y) the Class M-3 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (e) to the Class M-4 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above and to the Class M-3 certificates in clause (ii)(B)(d) above and (y) the Class M-4 Principal S-104 Distribution Amount, until their Class Certificate Balance has been reduced to zero; (f) to the Class M-5 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above, to the Class M-3 certificates in clause (ii)(B)(d) above, to the Class M-4 certificates in clause (ii)(B)(e) above and (y) the Class M-5 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (g) to the Class B-1 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above, to the Class M-3 certificates in clause (ii)(B)(d) above, to the Class M-4 certificates in clause (ii)(B)(e) above, to the Class M-5 certificates in clause (ii)(B)(f) above and (y) the Class B-1 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (h) to the Class B-2 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above, to the Class M-3 certificates in clause (ii)(B)(d) above, to the Class M-4 certificates in clause (ii)(B)(e) above, to the Class M-5 certificates in clause (ii)(B)(f) above, to the Class B-1 certificates in clause (ii)(B)(g) above and (y) the Class B-2 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; (i) to the Class B-3 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above, to the Class M-3 certificates in clause (ii)(B)(d) above, to the Class M-4 certificates in clause (ii)(B)(e) above, to the Class M-5 certificates in clause (ii)(B)(f) above, to the Class B-1 certificates in clause (ii)(B)(g) above, to the Class B-2 certificates in clause (ii)(B)(h) above and (y) the Class B-3 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; and (j) to the Class B-4 certificates, the lesser of (x) the excess of (i) the Principal Distribution Amount over (ii) the amount distributed to the Class A certificates in clause (ii)(B)(a) above, to the Class M-1 certificates in clause (ii)(B)(b) above, to the Class M-2 certificates in clause (ii)(B)(c) above, to the Class M-3 certificates in clause (ii)(B)(d) above, to the Class M-4 certificates in clause (ii)(B)(e) above, to the Class M-5 certificates in clause (ii)(B)(f) above, to the Class B-1 certificates in clause (ii)(B)(g) above, to the Class B-2 certificates in clause (ii)(B)(h) above, to the Class B-3 certificates in clause (ii)(B)(i) above and (y) the Class B-4 Principal Distribution Amount, until their Class Certificate Balance has been reduced to zero; S-105 (iii) any amount remaining after the distributions in clauses (i) and (ii) above is required to be distributed in the following order of priority with respect to the certificates: (A) if and to the extent that the Interest Remittance Amounts distributed pursuant to clause (i) above were insufficient to make the full distributions in respect of interest set forth in such clause, (x) to the holders of each class of the Class A certificates, any unpaid Accrued Certificate Interest and any Unpaid Interest Amounts, pro rata among such classes based on their entitlement to those amounts, and then (y) to the holders of each class of the Class M and Class B certificates, any unpaid Accrued Certificate Interest, in the order of priority for such classes set forth in clause (i) above; (B) to the holders of the Class M-1 certificates, any Unpaid Interest Amount for that class; (C) to the holders of the Class M-2 certificates, any Unpaid Interest Amount for that class; (D) to the holders of the Class M-3 certificates, any Unpaid Interest Amount for that class; (E) to the holders of the Class M-4 certificates, any Unpaid Interest Amount for that class; (F) to the holders of the Class M-5 certificates, any Unpaid Interest Amount for that class; (G) to the holders of the Class B-1 certificates, any Unpaid Interest Amount for that class; (H) to the holders of the Class B-2 certificates, any Unpaid Interest Amount for that class; (I) to the holders of the Class B-3 certificates, any Unpaid Interest Amount for that class; (J) to the holders of the Class B-4 certificates, any Unpaid Interest Amount for that class; (K) to the Excess Reserve Fund Account, the amount of any Basis Risk Payment (without regard to Net Swap Receipt Amounts) for that Distribution Date; (L) from funds on deposit in the Excess Reserve Fund Account with respect to that Distribution Date, an amount equal to any Basis Risk Carry Forward Amount with respect to the LIBOR Certificates for that Distribution Date in the same order and priority in which Accrued Certificate Interest is allocated among those classes of certificates, with the allocation to the Class A certificates being allocated pro rata based on their certificate principal balances; provided that, if for any Distribution Date, after the allocation of the remaining unpaid Basis Risk Carry Forward Amounts to the Class A Certificates, the remaining unpaid Basis Risk Carry Forward Amount for any of the Class A Certificates is reduced to zero, any amount of remaining S-106 unpaid Basis Risk Carry Forward Amount that would have been allocated to that Class A Certificate for that Distribution Date will instead be allocated, pro rata, based on their respective remaining unpaid Basis Risk Carry Forward Amounts, to the other Class A Certificates to the extent the other Class A Certificates have any remaining unpaid Basis Risk Carry Forward Amounts; (M) to the Supplemental Interest Trust, the amount of any Defaulted Swap Termination Payment owed to the Swap Provider; (N) to the Class X certificates, those amounts as set forth in the master servicing and trust agreement; and (O) to the holders of the Class R and Class RC certificates, any remaining amount as set forth in the master servicing and trust agreement. On each Distribution Date, the Securities Administrator will be required to distribute to the holders of the Class P certificates all amounts representing Prepayment Premiums in respect of the mortgage loans received by the servicer during the related Prepayment Period and remitted to the Securities Administrator. Notwithstanding the foregoing, in the event that the Class Certificate Balances of the Subordinated Certificates and the principal balance of the Class X certificates have been reduced to zero, any principal distributions allocated to the Class A certificates are required to be allocated pro rata to the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates, until their respective Class Certificate Balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions to the Class A-3 and Class A-4 Certificates will be allocated first to the Class A-3 Certificates, until its Class Certificate Balance has been reduced to zero, and then to the Class A-4 Certificates, until its Class Certificate Balance has been reduced to zero. If on any Distribution Date, after giving effect to all distributions of principal as described above and allocations of payments from the Supplemental Interest Trust to pay principal as described under "--Supplemental Interest Trust" below, the aggregate Class Certificate Balance of the LIBOR Certificates exceeds the sum of the aggregate Stated Principal Balance of the mortgage loans for that Distribution Date, the Class Certificate Balance of the applicable Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates will be reduced, in inverse order of seniority (beginning with the Class B-4 certificates) by an amount equal to that excess, until that Class Certificate Balance is reduced to zero. That reduction is referred to as an "Applied Realized Loss Amount." In the event Applied Realized Loss Amounts are allocated to any of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 or Class B-4 certificates, their Class Certificate Balance will be reduced by the amount so allocated, and no funds will be distributable with respect to the written down amounts or with respect to interest or Basis Risk Carry Forward Amounts on the written down amounts on that Distribution Date or any future Distribution Dates, even if funds are otherwise available for distribution. Notwithstanding the foregoing, if after an Applied Realized Loss Amount is allocated to reduce the Class Certificate Balance of any class of certificates, amounts are received with respect to any mortgage loan or related mortgaged property that had previously been liquidated or otherwise disposed of (any such amount being referred to as a "Subsequent Recovery"), the Class Certificate Balance of each class of certificates that has been previously reduced by Applied Realized Loss Amounts will be increased, in order of seniority, by the amount of the Subsequent Recoveries (but not in excess of the Applied Realized Loss Amount allocated to the applicable class of certificates). S-107 Any Subsequent Recovery that is received during a Prepayment Period will be treated as Liquidation Proceeds and included as part of the Principal Remittance Amount for the related Distribution Date. On any Distribution Date, any shortfalls resulting from the application of the Servicemembers Civil Relief Act or other similar state statute and any prepayment interest shortfalls not covered by Compensating Interest (as further described in "The Agreements --Prepayment Interest Shortfalls" in this prospectus supplement) will be allocated as a reduction to the Accrued Certificate Interest for the LIBOR Certificates on a pro rata basis based on the respective amounts of interest accrued on those certificates for that Distribution Date. The holders of the LIBOR Certificates will not be entitled to reimbursement for the allocation of any of those shortfalls described in the preceding sentence. Supplemental Interest Trust On any Distribution Date, Swap Termination Payments, Net Swap Payment Amounts owed to the Swap Provider and Net Swap Receipt Amounts for that Distribution Date will be deposited into a trust account established by the Securities Administrator on behalf of the trustee and held by a separate trust (the "Supplemental Interest Trust") as part of the asset pool held under the master servicing and trust agreement. Funds in the Supplemental Interest Trust will be distributed in the following order of priority: (A) to the Swap Provider, the sum of (x) all Net Swap Payment Amounts and (y) any Swap Termination Payment, other than a Defaulted Swap Termination Payment, to the Swap Provider, if any, owed for that Distribution Date; (B) to the certificateholders, to pay Accrued Certificate Interest and, if applicable, any Unpaid Interest Amounts as described in clause (i) of "--Distributions of Interest and Principal" above, to the extent unpaid from other Available Funds; (C) to the certificateholders, to pay principal as described in clause (ii)(A) and clause (ii)(B) of "--Distributions of Interest and Principal" above, but only to the extent necessary to maintain the Overcollateralized Amount at the Specified Overcollateralized Amount, after giving effect to payments and distributions from other Available Funds; (D) to the certificateholders, to pay Unpaid Interest Amounts and Basis Risk Carry Forward Amounts as described in clauses (iii)(A) through (L) above, to the extent unpaid from other Available Funds (including funds on deposit in the Excess Reserve Fund Account); (E) to the Swap Provider, any Defaulted Swap Termination Payment owed to the Swap Provider for that Distribution Date; and (F) to the holders of the Class X certificates, any remaining amounts. The Supplemental Interest Trust will not be an asset of any trust REMIC. S-108 Calculation of One-Month LIBOR On each LIBOR Determination Date, the Securities Administrator will be required to determine One-Month LIBOR for the next Interest Accrual Period for the LIBOR Certificates. The establishment of One-Month LIBOR on each such date by the Securities Administrator and its calculation of the interest rate applicable to each class of LIBOR Certificates for the related Interest Accrual Period will (in the absence of manifest error) be final and binding. Excess Reserve Fund Account The "Basis Risk Payment" for any Distribution Date will be the aggregate of the Basis Risk Carry Forward Amounts for that date. However, with respect to any Distribution Date, the payment cannot exceed the amount otherwise distributable on the Class X certificates or payable from the Supplemental Interest Trust. If, on any Distribution Date, the Pass-Through Rate for any class of LIBOR Certificates is based upon the WAC Cap, the sum of (x) the excess of (i) the amount of interest that class of certificates would have been entitled to receive on that Distribution Date had the Pass-Through Rate not been subject to the applicable cap, over (ii) the amount of interest that class of certificates received on that Distribution Date based on its capped Pass-Through Rate and (y) the unpaid portion of any such excess described in clause (x) from prior Distribution Dates (and related accrued interest at the then applicable Pass-Through Rate on that class of certificates, without giving effect to those caps) is the "Basis Risk Carry Forward Amount" for those classes of certificates. Any Basis Risk Carry Forward Amount on any class of certificates will be paid on that Distribution Date or future Distribution Dates from and to the extent of funds available for distribution to that class of certificates in the Excess Reserve Fund Account and the Supplemental Interest Account, with respect to such Distribution Date (each as described in this prospectus supplement). In the event any class of certificates is no longer outstanding, the applicable certificateholders will not be entitled to receive Basis Risk Carry Forward Amounts for that class of certificates. In the event the Class Certificate Balance of any class of LIBOR Certificates is reduced because of Applied Realized Loss Amounts (and is not subsequently increased as a result of any Subsequent Recoveries), the applicable certificateholders will not be entitled to receive Basis Risk Carry Forward Amounts on the written down amounts on that Distribution Date or any future Distribution Dates, even if funds are otherwise available for distribution, except to the extent that the Class Certificate Balance is increased as a result of any Subsequent Recovery. The ratings on the Offered Certificates do not address the likelihood of the payment of any Basis Risk Carry Forward Amount. Pursuant to the master servicing and trust agreement, an account (referred to as the "Excess Reserve Fund Account") will be established, to be held in trust as part of the trust fund, by the Securities Administrator. The Excess Reserve Fund Account will not be an asset of any trust REMIC. Funds in the Excess Reserve Fund Account will be held in trust for the regular certificateholders for the uses and purposes set forth in the master servicing and trust agreement. Holders of the LIBOR Certificates will be entitled to receive payments, to the extent described in this prospectus supplement, from the Excess Reserve Fund Account pursuant to the master servicing and trust agreement in an amount equal to any Basis Risk Carry Forward Amount for that class of certificates. Amounts on deposit in the Excess Reserve Fund Account will not be invested. The Excess Reserve Fund Account is required to be funded from amounts S-109 that would otherwise be paid to the Class X certificates. Any distribution by the Securities Administrator from amounts in the Excess Reserve Fund Account is required to be made on the applicable Distribution Date. Any Basis Risk Carry Forward Amounts remaining after amounts in the Excess Reserve Fund Account are used are payable from the Supplemental Trust in the priority specified in "--Supplemental Interest Trust" above. Interest Rate Swap Agreement On the closing date, the Supplemental Interest Trust will enter into an interest rate swap agreement with [__________________________] (the "Swap Provider"). The Swap Provider is a [_________] limited partnership and its business is primarily in derivative instruments. The Swap Provider has a counterparty rating of "Aaa" from Moody's and a credit rating of "AA+" from S&P (or has a guarantor that has such ratings). The Significance Percentage of the interest rate swap agreement will be less than 10% as of the Closing Date (as defined below). The Significance Percentage is calculated by reference to the "Significance Estimate" of the interest rate swap agreement which is determined based on a reasonable good faith estimate of maximum probable exposure represented by the interest rate swap agreement made in substantially the same manner as that used in the sponsor's internal risk management process in respect of similar instruments. The "Significance Percentage" is the percentage that the amount of the significance estimate represents of the aggregate principal balance of the Mortgage Loans. Under the interest rate swap agreement, with respect to the first 57 Distribution Dates, the Supplemental Interest Trust will pay to the Swap Provider fixed payments at a rate of [5.0500]% (on a 30/360 basis) per annum, and the Swap Provider will pay to the Supplemental Interest Trust, floating payments at a rate of One-Month LIBOR (on an actual/360 basis) (as determined pursuant to the interest rate swap agreement), in each case calculated on a notional amount equal to the lesser of a scheduled notional amount set forth on Annex II to this prospectus supplement and the outstanding principal balance of the LIBOR Certificates. To the extent that a fixed payment exceeds the floating payment payable with respect to any of the first 57 Distribution Dates, amounts otherwise available to certificateholders will be applied on such Distribution Date to make a net payment to the Swap Provider (each, a "Net Swap Payment Amount") thus reducing the amount available to make payments on the certificates, and to the extent that the floating payment exceeds the fixed payment payable with respect to any of the first 57 Distribution Dates, the Swap Provider will owe a net payment to the Supplemental Interest Trust on the business day preceding such Distribution Date (each, a "Net Swap Receipt Amount") and the amount received by the Supplemental Interest Trust under the interest rate swap agreement will increase the amount available to make payments on the certificates. All net payments due to the Swap Provider under the interest rate swap agreement will be paid by the Supplemental Interest Trust, which will receive distributions from Available Funds on each applicable Distribution Date in accordance with the priority of payments described under "--Distributions of Interest and Principal" above. Any Swap Termination Payment (as defined below) other than a Defaulted Swap Termination Payment (as defined below) due to the Swap Provider shall be paid on a senior basis on each applicable Distribution Date in accordance with the priority of payments, and any Defaulted Swap Termination Payment owed by the Supplemental Interest Trust to the Swap Provider will be paid by the Supplemental Interest Trust from distributions received from the trustee on a subordinated basis. However, to the extent any payments are received by the Supplemental Interest Trust as a result of entering into replacement transaction(s) following a Downgrade Terminating Event (as defined below), the Swap Provider that is being replaced shall have first priority to those payments over S-110 certificateholders, the Master Servicer and the trustee of the Supplemental Interest Trust, and the Supplemental Interest Trust will pay to the Swap Provider the lesser of (x) the amount so received and (y) any Swap Termination Payment owed to the Swap Provider (to the extent not already paid by the Supplemental Interest Trust) that is being replaced immediately upon receipt. See "--Distributions of Interest and Principal" above. A "Swap Termination Payment" is a termination payment required to be made by either the Supplemental Interest Trust or the Swap Provider pursuant to the interest rate swap agreement as a result of an early termination of the interest rate swap agreement. The interest rate swap agreement can be terminated upon an event of default under that agreement or an early termination event under that agreement. Events of default under the interest rate swap agreement include, among other things, the following: o failure to pay; o bankruptcy and insolvency events; and o a merger by the Swap Provider without an assumption of its obligations under the interest rate swap agreement. Early termination events under the interest rate swap agreement include, among other things: o illegality (which generally relates to changes in law causing it to become unlawful for either party (or its guarantor, if applicable) to perform its obligations under the interest rate swap agreement or guaranty, as applicable); o a tax event (which generally relates to the Swap Provider to the interest rate swap agreement receiving a payment under the interest rate swap agreement from which an amount has been deducted or withheld for or on account of taxes or paying an additional amount on account of an indemnifiable tax); o a tax event upon merger (which generally relates to the Swap Provider receiving a payment under the interest rate swap agreement from which an amount has been deducted or withheld for or on account of taxes or paying an additional amount on account of an indemnifiable tax, in each case, resulting from a merger); and o upon the exercise of the Optional Clean-up Call. "Defaulted Swap Termination Payment" means any termination payment required to be made by the Supplemental Interest Trust to the Swap Provider pursuant to the interest rate swap agreement as a result of an event of default under the interest rate swap agreement with respect to which the Swap Provider is the defaulting party or a termination event under that agreement (other than illegality, a tax event or a tax event upon merger of the Swap Provider) with respect to which the Swap Provider is the sole affected party or with respect to a termination resulting from a Substitution Event (as described below). In addition to the termination events specified above, it shall be an additional termination event under the interest rate swap agreement (such event, a "Downgrade Terminating Event") if (x) either of the rating agencies downgrades the Swap Provider (or its guarantor) below the Required Swap Counterparty Rating (but the Swap Provider (or its guarantor) has a rating of at least "BBB-" or "A-3", if applicable, by S&P or, S&P or Moody's withdraws its ratings of the Swap S-111 Provider and (y) at least one of the following events has not occurred (except to the extent otherwise approved by the rating agencies): (i) within the time period specified in the interest rate swap agreement with respect to such downgrade, the Swap Provider shall transfer the interest rate swap agreement, in whole, but not in part, to a counterparty that satisfies the Required Swap Counterparty Rating, subject to the satisfaction of the Rating Agency Condition; (ii) within the time period specified in the interest rate swap agreement with respect to such downgrade, the Swap Provider shall collateralize its exposure to the trust pursuant to an ISDA Credit Support Annex, subject to the satisfaction of the Rating Agency Condition; provided that such ISDA Credit Support Annex shall be made a credit support document for the Swap Provider pursuant to an amendment to the interest rate swap agreement; (iii) within the time period specified in the interest rate swap agreement with respect to such downgrade, the obligations of such Swap Provider under the interest rate swap agreement shall be guaranteed by a person or entity that satisfies the Required Swap Counterparty Rating, subject to the satisfaction of the Rating Agency Condition; or (iv) within the time period specified in the interest rate swap agreement with respect to such downgrade, such Swap Provider shall take such other steps, if any, to enable the trust to satisfy the Rating Agency Condition. It shall also be an additional termination event under the interest rate swap agreement if the Swap Provider (or its guarantor) has a rating of less than "BBB-" or "A-3", if applicable, by S&P and within the time period specified in the interest rate swap agreement, such Swap Provider, while collateralizing its exposure to the trust, fails to transfer the interest rate swap agreement at its sole cost and expense, in whole, but not in part, to a counterparty that satisfies the Required Swap Counterparty Rating, subject to satisfaction of the Rating Agency Condition (a "Substitution Event"). Finally, it shall also be an additional termination event under the interest rate swap agreement if the Depositor determines at any time that it is required for purpose of compliance with Item 1115(b)(1) or (b)(2) of the Asset Backed Securities Regulation, 17 C.F.R. ss.ss.229.1100-229.1123 ("Regulation AB"), to provide any financial data relating to the Swap Provider. The Swap Provider is an affiliate of the depositor, GSMC and Goldman, Sachs & Co., the underwriter, which arrangement may create certain conflicts of interest. If the Supplemental Interest Trust is unable to or, if applicable, chooses not to obtain a substitute interest rate swap agreement in the event that the interest rate swap agreement is terminated, interest distributable on the certificates will be paid from amounts received on the mortgage loans without the benefit of an interest rate swap agreement or a substitute interest rate swap agreement. On or after the closing date and so long as the Rating Agency Condition has been satisfied, (i) the Supplemental Interest Trust may, with the consent of the Swap Provider, assign or transfer all or a portion of the interest rate swap agreement, (ii) the Swap Provider may assign its obligations under the interest rate swap agreement to any institution, (iii) the interest rate swap agreement may be amended and/or (iv) the interest rate swap agreement may be terminated or replaced. S-112 The interest rate swap agreement is scheduled to terminate by its terms following the distribution date in November 2010 and upon termination of the interest rate swap agreement no further amounts will be paid to the Swap Provider by the Supplemental Interest Trust and no further amounts will be paid to the Supplemental Interest Trust by the Swap Provider. Overcollateralization Provisions The Total Monthly Excess Spread, if any, on any Distribution Date may be applied as an accelerated payment of principal of the LIBOR Certificates, to the limited extent described below. Any such application of Total Monthly Excess Spread to the payment of Extra Principal Distribution Amount to the class or classes of certificates then entitled to distributions of principal would have the effect of accelerating the amortization of those certificates relative to the amortization of the related mortgage loans. The portion, if any, of the Available Funds not required to be distributed to holders of the LIBOR Certificates as described above on any Distribution Date or paid to the Supplemental Interest Trust as described above on any Distribution Date will be paid as set forth in the master servicing and trust agreement and will not be available on any future Distribution Date to cover Extra Principal Distribution Amounts, Unpaid Interest Amounts or Basis Risk Carry Forward Amounts. With respect to any Distribution Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the mortgage loans for that Distribution Date over (b) the aggregate Class Certificate Balance of the LIBOR Certificates as of that date (after taking into account the distribution of the Principal Remittance Amount on those certificates on that Distribution Date) is the "Overcollateralized Amount" as of that Distribution Date. The master servicing and trust agreement requires that the Total Monthly Excess Spread be applied as an accelerated payment of principal on the certificates then entitled to receive distributions of principal to the extent that the Specified Overcollateralized Amount exceeds the Overcollateralized Amount as of that Distribution Date (the excess is referred to as an "Overcollateralization Deficiency"). Any amount of Total Monthly Excess Spread actually applied as an accelerated payment of principal is an "Extra Principal Distribution Amount." The required level of the Overcollateralized Amount with respect to a Distribution Date is the "Specified Overcollateralized Amount" and is set forth in the definition of Specified Overcollateralized Amount in the "Glossary of Terms" in this prospectus supplement. As described above, the Specified Overcollateralized Amount may, over time, decrease, subject to certain floors and triggers. If a Trigger Event occurs, the Specified Overcollateralized Amount may not "step down." Total Monthly Excess Spread will then be applied to the payment in reduction of principal of the class or classes of certificates then entitled to distributions of principal during the period that a Trigger Event is in effect (to the extent necessary to maintain the Overcollateralized Amount at the Specified Overcollateralized Amount). In the event that a Specified Overcollateralized Amount is permitted to decrease or "step down" on a Distribution Date in the future, or in the event that an Excess Overcollateralized Amount otherwise exists, the master servicing and trust agreement provides that some or all of the principal which would otherwise be distributed to the holders of the LIBOR Certificates on that Distribution Date will be distributed to the holders of the Class X certificates on that Distribution Date (to the extent not required to pay Unpaid Interest Amounts or Basis Risk Carry Forward Amounts to the LIBOR Certificates) until the Excess Overcollateralized Amount is reduced to zero. This has the effect of decelerating the amortization of the LIBOR Certificates relative to the amortization of the mortgage loans, and of reducing the related Overcollateralized Amount. With respect to any Distribution Date, the excess, if any, of (a) the Overcollateralized Amount on that Distribution Date over (b) the Specified Overcollateralized Amount is the "Excess Overcollateralized Amount" with respect to that Distribution Date. If, on any S-113 Distribution Date, the Excess Overcollateralized Amount is, or, after taking into account all other distributions to be made on that Distribution Date, would be, greater than zero (i.e., the related Overcollateralized Amount is or would be greater than the related Specified Overcollateralized Amount), then any amounts relating to principal which would otherwise be distributed to the holders of the LIBOR Certificates on that Distribution Date will instead be distributed to the holders of the Class X certificates (to the extent not required to pay Unpaid Interest Amounts or Basis Risk Carry Forward Amounts to the LIBOR Certificates) in an amount equal to the lesser of (x) the Excess Overcollateralized Amount and (y) the Net Monthly Excess Cash Flow (referred to as the "Overcollateralization Reduction Amount" for that Distribution Date). The "Net Monthly Excess Cash Flow" is the amount of Available Funds remaining after the amount necessary to make all payments of interest and principal to the LIBOR Certificates and all net amounts required to be paid to the Swap Provider on that Distribution Date. Reports to Certificateholders On each Distribution Date the Securities Administrator will be required to make available to the depositor and each holder of a Principal Certificate a distribution report, based on information provided to the Securities Administrator by the Master Servicer and the servicers, containing the following information: o the amount of the distribution allocable to principal, separately identifying the aggregate amount of any principal prepayments and Liquidation Proceeds included in that distribution; o the amount of the distribution allocable to interest, any Unpaid Interest Amounts included in such distribution and any remaining Unpaid Interest Amounts after giving effect to such distribution, any Basis Risk Carry Forward Amount for such Distribution Date and the amount of all Basis Risk Carry Forward Amounts covered by withdrawals from the Excess Reserve Fund Account and the Supplemental Interest Trust on such Distribution Date; o if the distribution to the holders of such class of certificates is less than the full amount that would be distributable to such holders if there were sufficient funds available therefor, the amount of the shortfall and the allocation of the shortfall as between principal and interest, including any Basis Risk Carry Forward Amount not covered by amounts in the Excess Reserve Fund Account and the Supplemental Interest Trust; o the Class Certificate Balance of each class of certificates and the notional amount of the Class P certificates after giving effect to the distribution of principal on such Distribution Date; o the aggregate Stated Principal Balance of the mortgage loans for the following Distribution Date; o the amount of the expenses and fees paid to or retained by the servicer and paid to or retained by the trustee with respect to such Distribution Date, in each case, identifying the general purpose of such fees; o the amount of the expenses and fees paid to the Master Servicer or Securities Administrator with respect to such Distribution Date; o the Pass-Through Rate for each such class of certificates with respect to such Distribution Date; S-114 o the amount of advances included in the distribution on such Distribution Date and the aggregate amount of advances reported by the servicers (and the master servicer, the trustee as successor master servicer and any other successor master servicer, if applicable) as outstanding as of the close of business on the Determination Date immediately preceding such Distribution Date; o the number and aggregate outstanding principal balances of mortgage loans (1) as to which the scheduled payment is delinquent 31 to 60 days, 61 to 90 days and 91 or more days, (2) that have become REO property, (3) that are in foreclosure and (4) that are in bankruptcy, in each case as of the close of business on the last business day of the immediately preceding month; o for each of the preceding 12 calendar months, or all calendar months since the related cut-off date, whichever is less, the aggregate dollar amount of the scheduled payments (A) due on all outstanding mortgage loans on each of the due dates in each such month and (B) delinquent 60 days or more on each of the due dates in each such month; o with respect to all mortgage loans that became REO properties during the preceding calendar month, the aggregate number of such mortgage loans and the aggregate Stated Principal Balance of such mortgage loans as of the close of business on the Determination Date preceding such Distribution Date and the date of acquisition of the REO properties; o the total number and principal balance of any REO properties (and market value, if available) as of the close of business on the Determination Date preceding such Distribution Date; o whether a Trigger Event has occurred and is continuing (including the calculation demonstrating the existence of the Trigger Event and the aggregate outstanding balance of all mortgage loans 60 or more days delinquent); o the amount on deposit in the Excess Reserve Fund Account (after giving effect to distributions on such Distribution Date); o in the aggregate and for each class of certificates, the aggregate amount of Applied Realized Loss Amounts incurred during the preceding calendar month and aggregate Applied Realized Loss Amounts through such Distribution Date; o the amount of any Net Monthly Excess Cash Flow on such Distribution Date and the allocation of it to the certificateholders with respect to Unpaid Interest Amounts; o the Overcollateralized Amount and Specified Overcollateralized Amount; o Prepayment Premiums collected by or paid by the servicers; o the percentage equal to the aggregate realized losses divided by the aggregate Stated Principal Balance of the mortgage loans as of the cut-off date; o the amount distributed on the Class X and Class P certificates; o the amount of any Subsequent Recoveries for such Distribution Date; o the Record Date for such Distribution Date; S-115 o updated mortgage loan information, such as weighted average interest rate, and weighted average remaining term; o material breaches of mortgage loan representations of warranties of which the trustee, Master Servicer or any servicer has knowledge or received written notice; and o material breaches of any covenants under the master servicing and trust agreement of which the trustee, Master Servicer or any servicer has received written notice. The Securities Administrator will provide the monthly distribution report via the Securities Administrator's internet website (assistance in using the website can be obtained by calling the Securities Administrator's customer service desk at 1-877-722-1095). The Securities Administrator will also make available on its website any reports on Forms 10-D, 10-K and 8-K that have been filed with respect to the trust through the EDGAR system. Parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and requesting a copy. As a condition to accessing the Securities Administrator's internet website, the Securities Administrator may require registration and the acceptance of a disclaimer. The Securities Administrator will not be liable for the dissemination of information in accordance with the master servicing and trust agreement. Any materials filed with the Securities and Exchange Commission in conjunction with this issuance may be read and copied at the Securities and Exchange Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Issuing Entity's annual reports, monthly reports, current reports and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d) may also be obtained at the Securities and Exchange Commission's internet site located at http://www.sec.gov. Such filings will be made under the name of GS Mortgage Securities Corp. and under the Securities and Exchange Commission file number 333-127620. The Securities Administrator will also be entitled to rely on but will not be responsible for the content or accuracy of any information provided by third parties for purposes of preparing the monthly distribution report and may affix to that report any disclaimer it deems appropriate in its reasonable discretion (without suggesting liability on the part of any other party). THE AGREEMENTS General This section summarizes certain provisions of the servicing agreements and the master servicing and trust agreement. In addition, a description of the responsibilities and rights of the Master Servicer can be found under the heading "The Master Servicer" in this prospectus supplement. Servicing Standard Countrywide Servicing, NatCity, Chase and GreenPoint will act as the primary servicers of the mortgage loans under the servicing agreements. FNBN will act as the interim servicer of the mortgage loans under the applicable servicing agreement. See "The Servicers" in this prospectus supplement. S-116 In servicing the mortgage loans, the servicers will be required to use the same care as they customarily employ in servicing and administering similar mortgage loans for their own account, in accordance with customary mortgage servicing practices of mortgage lenders and loan servicers administering similar mortgage loans and in accordance with the terms of the master servicing and trust agreement. Subservicers Each servicer may enter into subservicing agreements with subservicers for the servicing and administration of the related mortgage loans. The terms of any subservicing agreement may not be inconsistent with any of the provisions of the master servicing and trust agreement. Any subservicing agreement will include the provision that such agreement may be immediately terminated by the depositor or the trustee without fee, in accordance with the terms of the master servicing and trust agreement, in the event that such servicer, for any reason, is no longer the servicer (including termination due to a servicer event of default). Each servicer will remain obligated and primarily liable to the trustee for the servicing and administering of the related mortgage loans in accordance with the provisions of the master servicing and trust agreement without diminution of such obligation or liability by virtue of the subservicing agreements or arrangements or by virtue of indemnification from the subservicer and to the same extent and under the same terms and conditions as if such servicer alone were servicing and administering the mortgage loans. Each servicer will be solely liable for all fees owed by it to any subservicer, regardless of whether such servicer's compensation is sufficient to pay the subservicer fees. Servicing and Trustee Fees and Other Compensation and Payment of Expenses As compensation for its activities as a servicer under the related servicing agreement, each servicer is entitled to receive a servicing fee with respect to each mortgage loan serviced by it, which fee will be retained by such servicer or payable monthly from amounts on deposit in the applicable collection account. The servicing fee is required to be an amount equal to one-twelfth of the servicing fee rate for the applicable mortgage loan on the outstanding principal balance of such mortgage loan. As of the statistical calculation date, the servicing fee will be equal to 0.25% per annum with respect to approximately 99.32% of the mortgage loans and 0.375% per annum with respect to approximately 0.68% of the mortgage loans. See "Administration Fees" in this prospectus supplement. In addition, each servicer may be entitled to receive, as additional servicing compensation, to the extent permitted by applicable law and the related mortgage notes, any late payment charges, assumption fees or similar items (other than Prepayment Premiums). Each servicer may also be entitled to withdraw from the applicable collection account or any related escrow account any net interest or other income earned on deposits in the applicable collection account or escrow account as the case may be. Each servicer is required to pay all expenses incurred by it in connection with its servicing activities under the applicable servicing agreement and is not entitled to reimbursement for such expenses, except as specifically provided in that agreement. As compensation for its activities as trustee under the master servicing and trust agreement, the trustee will be entitled to the trustee fee which will be remitted to the trustee by the Securities Administrator in the manner and amount as set forth under the master servicing and trust agreement. The trustee fee will be an amount which will be remitted to the trustee by JPMorgan from compensation received in its capacity as Master Servicer and Securities Administrator. See "Administration Fees" in this prospectus supplement. S-117 P&I Advances and Servicing Advances Each servicer is required to make P&I Advances on the related Servicer Remittance Date with respect to each mortgage loan it services, subject to the servicer's determination in its good faith business judgment that such advance would be recoverable. Such P&I Advances by a servicer are reimbursable to that servicer subject to certain conditions and restrictions, and are intended to provide both sufficient funds for the payment of principal and interest to the holders of the certificates. Notwithstanding a servicer's determination in its good faith business judgment that a P&I Advance was recoverable when made, if a P&I Advance becomes a nonrecoverable advance, that servicer will be entitled to reimbursement for that advance from any amounts in the applicable collection account. The Master Servicer (including the trustee as successor master servicer and any other successor master servicer, if applicable), acting as backup servicer, will advance its own funds to make P&I Advances if any of the servicers fails to do so, subject to its own recoverability determination and as required under the master servicing and trust agreement. Each servicer (and the master servicer, the trustee as successor master servicer and any other successor master servicer, if applicable) will not be obligated to make any advances of principal on any REO property. See "Description of the Certificates--Payments on the Mortgage Loans" in this prospectus supplement. Each servicer is required to advance amounts with respect to the mortgage loans serviced by it, subject to such servicer's determination that such advance would be recoverable and constitutes reasonable "out-of-pocket" costs and expenses relating to: o the maintenance, preservation, restoration, inspection and protection of the mortgaged property, o enforcement or judicial proceedings, including foreclosures, o the execution and recording of instruments of satisfaction, deeds of reconveyance or assignments of mortgage to the extent not recoverable from the related mortgagor, and o certain other customary amounts described in the servicing agreements. These servicing advances by the servicers (and the Master Servicer and any successor master servicer (including the trustee), if applicable) are reimbursable to the applicable party subject to certain conditions and restrictions set forth in the servicing agreements or the master servicing and trust agreement. In the event that, notwithstanding the applicable advancing party's good faith determination at the time the servicing advance was made that it would be recoverable, the servicing advance becomes a nonrecoverable advance, the advancing party will be entitled to reimbursement for that advance from any amounts in the applicable collection account. Each servicer (and the Master Servicer and any successor master servicer (including the trustee), if applicable) may recover P&I Advances and servicing advances to the extent permitted by the master servicing and trust agreement or the servicing agreements. This reimbursement may come from late collections on the related mortgage loan, including Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds and such other amounts as may be collected by the servicers from the mortgagor or otherwise relating to the mortgage loan. In the event a P&I Advance or a servicing advance becomes a nonrecoverable advance, each servicer (and the Master Servicer and any successor master servicer (including the trustee), if applicable) may be reimbursed for such advance from any amounts in the applicable collection account. S-118 The servicers (and the Master Servicer and any successor master servicer (including the trustee), if applicable) would not be required to make any P&I Advance or servicing advance which would be a nonrecoverable P&I Advance or nonrecoverable servicing advance. A P&I Advance or servicing advance is "nonrecoverable" if, in the reasonable good faith business judgment of the servicer (or the Master Servicer or any successor master servicer (including the trustee), if applicable) (as stated in an officer's certificate delivered to the trustee), such P&I Advance or servicing advance would not ultimately be recoverable from collections on or proceeds of the related mortgage loan. Prepayment Interest Shortfalls In the event of any voluntary principal prepayment in full or in part on any mortgage loan (excluding any payments made upon liquidation of any mortgage loan) during any Prepayment Period, the related servicer will be obligated to remit from its own funds, to the Master Servicer, who will deposit in the distribution account, compensating interest, without any right of reimbursement, for those shortfalls in interest collections resulting from such voluntary principal prepayments. The amount of compensating interest payable by each servicer ("Compensating Interest") will be equal to the lesser of (A) the difference between the interest paid by the applicable mortgagors for that Prepayment Period in connection with the prepayments and thirty (30) days' interest on the related mortgage loans and (B) (x) in the case of certain servicers, one-half the applicable monthly servicing fee received for the related Distribution Date and (x) in the case of other servicers, to the extent of its full monthly servicing fee for the related Distribution Date. Servicer Reports As set forth in the related servicing agreement, assignment assumption and recognition agreement and master servicing and trust agreement, as applicable, on a date preceding the applicable Distribution Date, each servicer and the master servicer are required to deliver to the securities administrator and the trustee a servicer remittance report setting forth the information necessary for the securities administrator to make the distributions set forth under "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement and containing the information to be included in the distribution report for that Distribution Date delivered by the securities administrator. In addition, each servicer and the master servicer will be required to deliver to the securities administrator, the trustee and the depositor an annual report relating to the mortgage loans and the mortgaged properties as well as an officer's certificate stating that (i) a review of that party's servicing activities during the preceding calendar year and of performance under the related servicing agreement and the master servicing and trust agreement has been made under the supervision of the officer, and (ii) to the best of the officer's knowledge, based on the review, such party has fulfilled all its obligations under the related servicing agreement, assignment assumption and recognition agreement or master servicing and trust agreement, as applicable, throughout the year, or, if there has been a default in the fulfillment of any obligation, specifying the default known to the officer and the nature and status of the default. The securities administrator will provide these reports to certificateholders, at the expense of the requesting certificateholder, who make written requests to receive such information. On or prior to March 15th of each year, commencing with March 15, 2007, each servicer and the master servicer (and to the extent applicable, the securities administrator and custodians) that participates in the servicing and administration of more than 5% of the mortgage loans and other assets comprising the trust will be required to deliver to the depositor a report (an "Assessment of Compliance") that assesses compliance by that party with the S-119 servicing criteria set forth in item 1122(d) of Regulation AB (17 CFR 229.112) that contains the following: (a) a statement of the party's responsibility for assessing compliance with the servicing criteria applicable to it; (b) a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria; (c) the party's assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar month, setting forth any material instance of noncompliance identified by the party; and (d) a statement that a registered public accounting firm has issued an attestation report on the party's assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar month, provided, however the securities administrator and custodians will deliver such Assessment of Compliance until a Form 15 under the Exchange Act has been filed. Each party that is required to deliver an Assessment of Compliance will also be required to simultaneously deliver a report (an "Attestation Report") of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board, that expresses an opinion, or states that an opinion cannot be expressed, concerning the party's assessment of compliance with the applicable servicing criteria. You may obtain copies of these statements and reports without charge upon written request to the depositor at the address provided in this prospectus supplement. Collection and Other Servicing Procedures Each servicer will be responsible for making reasonable efforts to collect all payments called for under the mortgage loans and will, consistent with the applicable servicing agreement, follow such collection procedures as it follows with respect to loans held for its own account which are comparable to the mortgage loans. If permitted under the applicable servicing agreement, a servicer may be permitted to waive any assumption fees or late payment charges; provided, however, if in such servicer's reasonable and prudent determination such waiver is not materially adverse to the trust. Each servicer will be required to proceed diligently to collect payments due on any mortgage loan serviced by it in the event any payment is delinquent beyond the applicable grace period. Each servicer will be required to act with respect to mortgage loans serviced by it that are in default, or as to which default is reasonably foreseeable, in accordance with procedures set forth in the applicable servicing agreement. These procedures may, among other things, result in (i) foreclosing on the mortgage loan, (ii) accepting the deed to the related mortgaged property in lieu of foreclosure, (iii) granting the mortgagor under the mortgage loan a modification or forbearance, which may consist of waiving, modifying or varying any term of such mortgage loan (including modifications that would change the mortgage interest rate, forgive the payment of principal or interest, or extend the final maturity date of such mortgage loan) or (iv) accepting payment from the borrower of an amount less than the principal balance of the mortgage loan in final satisfaction of the mortgage loan. These procedures are intended to maximize recoveries on a net present value basis on these mortgage loans. S-120 Each servicer will be required to accurately and fully report its borrower payment histories to three national credit repositories in a timely manner with respect to each mortgage loan serviced by it. If a mortgaged property has been or is about to be conveyed by the mortgagor, the applicable servicer will be obligated to, or in the case of Chase, use its "best efforts" to, accelerate the maturity of the mortgage loan unless it is unable to enforce that mortgage loan's "due-on-sale" clause under applicable requirements. If a servicer reasonably believes it may be restricted for any reason from enforcing such a "due-on-sale" clause, such servicer may enter into an assumption and modification agreement with the person to whom such property has been or is about to be conveyed, pursuant to which such person becomes liable under the mortgage note. Any fee collected by a servicer for entering into an assumption or modification agreement will be retained by that servicer as additional servicing compensation. Hazard Insurance Each servicer is required to cause to be maintained for each mortgaged property a hazard insurance policy which contains a standard mortgagee's clause with coverage in a minimum amount as set forth in the applicable servicing agreement. As set forth above, all amounts collected by a servicer under any hazard policy, except for amounts to be applied to the restoration or repair of the mortgaged property or released to the borrower in accordance with such servicer's normal servicing procedures, to the extent they constitute net Liquidation Proceeds, Condemnation Proceeds or Insurance Proceeds, will ultimately be deposited in the collection account. The ability of a servicer to assure that hazard insurance proceeds are appropriately applied may be dependent on its being named as an additional insured under any hazard insurance policy, or upon the extent to which information in this regard is furnished to such servicer by a borrower. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements on the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy. Although the policies relating to the mortgage loans will be underwritten by different insurers under different state laws in accordance with different applicable state forms and therefore will not contain identical terms and conditions, the terms of the policies are dictated by respective state laws, and most such policies typically do not cover any physical damage resulting from the following: war, revolution, governmental actions, floods and other weather related causes, earth movement, including earthquakes, landslides and mudflows, nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain cases, vandalism. The foregoing list is merely indicative of certain kinds of uninsured risks and is not intended to be all inclusive. The hazard insurance policies covering the mortgaged properties typically contain a co-insurance clause which in effect requires the insured at all times to carry insurance of a specified percentage, generally 80% to 90%, of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, such clause generally provides that the insurer's liability in the event of partial loss does not exceed the greater of (x) the replacement cost of the improvements less physical depreciation or (y) such proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of such improvements. S-121 Since residential properties, generally, have historically appreciated in value over time, if the amount of hazard insurance maintained on the improvements securing the mortgage loans were to decline as the principal balances owing on the improvements decreased, hazard insurance proceeds could be insufficient to restore fully the damaged property in the event of a partial loss. Primary Mortgage Insurance With respect to the mortgage loans that are covered by a primary mortgage insurance policy on the closing date, each servicer is required to maintain in full force and effect a primary mortgage insurance policy. Each servicer is required to pay or cause the mortgagor to pay the premium on such policy on a timely basis. No servicer is permitted to take any action which would result in noncoverage under any applicable primary mortgage insurance policy of any loss which, but for the actions of such servicer would have been covered by the policy. In connection with any assumption or substitution agreement entered into or to be entered into pursuant to the servicing agreements, the applicable servicer is required to promptly notify the insurer under the related primary mortgage insurance policy, if any, of such assumption or substitution of liability in accordance with the terms of such primary mortgage insurance policy and will take all actions which may be required by the insurer as a condition to the continuation of coverage under the primary mortgage insurance policy. If a primary mortgage insurance policy is terminated as a result of such assumption or substitution of liability, the applicable servicer is required to obtain a replacement primary mortgage insurance policy. In connection with its activities as servicer, each servicer is required to prepare and present claims to the insurer under any primary mortgage insurance policy in a timely fashion in accordance with the terms of that primary mortgage insurance policy and, in this regard, to take such action as would be necessary to permit recovery under any primary mortgage insurance policy respecting a defaulted mortgage loan. Any amounts collected by a servicer under any primary mortgage insurance policy are required to be deposited in the applicable collection account, subject to withdrawal pursuant to the related servicing agreement. With respect to the Conduit Mortgage Loans, Countrywide shall cause to be maintained on each mortgaged property such other or additional insurance as may be required pursuant to such applicable laws and regulations as shall at any time be in force, or pursuant to the requirements of any private mortgage guaranty insurer, or as may be required to conform with accepted servicing practices. Optional Repurchase of Delinquent Mortgage Loans Certain of the servicers, in accordance with the applicable servicing agreement, will be required to foreclose upon, or otherwise reasonably convert to ownership, mortgaged properties securing such of the mortgage loans as come into default when, in the opinion of the servicer, no satisfactory arrangements can be made for the collection of delinquent payments. In connection with such foreclosure or other conversion, such servicers will follow such practices as it deems necessary or advisable and as are in keeping with such servicer's general loan servicing activities and in accordance with the applicable servicing agreement. However, such servicer will not expend its own funds in connection with such foreclosure or other conversion or restoration of any property unless such servicer believes such foreclosure or restoration will increase net Liquidation Proceeds and that such expenses will be recoverable by such servicer. The depositor has the option, but is not obligated, to purchase from the trust any mortgage loan that is ninety days or more delinquent subject to certain terms and conditions set forth in S-122 the master servicing and trust agreement. The purchase price will be 100% of the unpaid principal balance of the mortgage loan, plus all related accrued and unpaid interest, and the amount of any unreimbursed servicing advances made by the applicable servicer related to the mortgage loan. The Trustee, the Securities Administrator and the Custodians The Securities Administrator will act as certificate registrar of the certificates. The depositor and the servicers and their respective affiliates may maintain other banking relationships in the ordinary course of business with the trustee. Certificates may be surrendered and a copy of the master servicing and trust agreement may be inspected at the corporate trust office of the Securities Administrator located at 2001 Bryan Street, 9th Floor, Dallas, Texas 75201; Attention: Worldwide Securities Services, GSAA 2006-3, or at such other addresses as the Securities Administrator may designate from time to time by notice to the certificateholders, the depositor, the Master Servicer and the servicers. The master servicing and trust agreement provides that the trustee, the Securities Administrator and the custodians and any officer, employee or agent of the trustee, the Securities Administrator and the custodians will be indemnified by the trust and will be held harmless against any loss, liability or expense incurred by the trustee, the Securities Administrator and the custodians arising out of their obligations under the master servicing and trust agreement, other than incurred by reason of willful misfeasance or negligence in the performance of its respective duties under the master servicing and trust agreement. Servicer Events of Default An event of default ("Servicer Event of Default") under a servicing agreement will occur if: (1) the related servicer fails to remit any required payments under the applicable servicing agreement, which failure continues unremedied for the period of time specified in the applicable servicing agreement after the trustee, the Securities Administrator or the Master Servicer notifies such servicer of such failure; (2) the related servicer fails to observe or perform in any material respect any covenant or agreement in the applicable servicing agreement, which failure continues unremedied for a period of thirty (30) days (except in the case of FNBN, where such failure is the failure to pay any premium for any insurance policy required to be maintained under the applicable servicing agreement and continues unremedied for a period of fifteen (15) days) after the trustee, the Master Servicer or the Securities Administrator notifies the servicer of such failure; (3) the related servicer fails to maintain its license to do business in any jurisdiction where any mortgaged property is located and such license is required (and in the case of Countrywide Servicing and GreenPoint, such failure continues unremedied for a period of thirty (30) days); (4) certain events occur relating to the insolvency, readjustment of debt or similar proceedings involving the related servicer which are not discharged or stayed within thirty (30) days (sixty (60) days in the case of Countrywide Servicing (sub-servicing the Conduit Mortgage Loans), Chase and FNBN) or the related servicer takes certain actions indicating its insolvency; (5)the related servicer admits in writing its inability to pay its obligations as they become due; S-123 (6) the related servicer attempts to assign the applicable servicing agreement or its rights to servicing compensation or its servicing responsibilities except as permitted in such servicing agreement; (7) with respect to FNBN, the servicer ceases to be approved by either Fannie Mae or Freddie Mac as a mortgage loan servicer for more than thirty days; (8) with respect to certain servicers under the applicable servicing agreements, such servicer ceases to have a minimum net worth of $25,000,000 as determined in accordance with the Financial Accounting Standards Board's generally accepted accounting principles; (9) with respect to Chase, any failure to deliver the annual statement of compliance, the annual independent public accountants' servicing attestation or the annual assessment of servicing compliance as required under the applicable servicing agreement; and (10) with respect to Chase, if the residential primary servicer rating the servicing subprime loans issued by any rating agency is reduced by more than one level. Rights upon Servicer Event of Default So long as a Servicer Event of Default under a servicing agreement remains unremedied, the Master Servicer may, and, at the direction of holders of certificates evidencing not less than a majority of the voting rights of the certificates shall, terminate all of the rights and obligations of the applicable servicer, in its capacity as servicer, under the applicable servicing agreement. In the event a servicer is terminated and the Master Servicer has not appointed a successor servicer, the Master Servicer will become the successor servicer and succeed to all the authority, power, responsibilities and duties of such servicer under such servicing agreement (other than any obligation to repurchase any mortgage loan) and will be entitled to similar compensation arrangements. In the event the Master Servicer is unable to appoint a successor servicer, the Master Servicer may petition a court of competent jurisdiction for the appointment of a mortgage loan servicing institution, acceptable to the rating agencies, having a net worth of at least $25 million and that is a Fannie Mae/Freddie Mac-approved servicer in good standing, to act as successor to such servicer under the related servicing agreement. Any successor servicer will be entitled to the same servicing compensation as the predecessor servicer. In addition, certificateholders evidencing at least 66% of the voting rights of the certificates affected by a Servicer Event of Default may waive such Servicer Event of Default. However, a Servicer Event of Default with respect to a servicer's obligation to make P&I Advances or any other Servicer Event of Default that would materially adversely affect any non-consenting certificateholder may be waived only by all certificateholders affected by such Servicer Event of Default. Any successor to any servicer as servicer will be required to give notice to the borrowers of such change of servicer, in accordance with applicable federal and state law, and will be required during the term of its service as servicer, to maintain in force the insurance policy or policies that such servicer is required to maintain. Eligibility Requirements for Trustee; Resignation and Removal of Trustee The trustee must be a corporation, banking association or other association organized and doing business under the laws of a state or the United States of America, authorized under such laws to exercise corporate trust powers. The trustee must have a combined capital and surplus of at least $50,000,000, be subject to supervision or examination by federal or state authority and have a credit rating that would not cause any of the rating agencies to reduce their S-124 respective then current ratings of the certificates. In case at any time the trustee ceases to be eligible, the trustee will resign immediately in the manner and with the effect as specified below. The trustee may at any time resign as trustee by giving written notice of resignation to the depositor, the master servicer, the securities administrator and each rating agency not less than sixty (60) days before the date specified in such notice, when such resignation is to take effect, and acceptance by a successor trustee meeting the trustee eligibility requirements. If no successor trustee meeting the eligibility requirements has been so appointed and has accepted appointment within thirty (30) days after the giving of such notice or resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time the trustee ceases to meet the eligibility requirements and fails to resign after written request by the depositor, or if at any time the trustee becomes incapable of acting, or is adjudged as bankrupt or insolvent, or a receiver of the trustee or of its property is appointed, or any public officer takes charge or control of the trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or a tax is imposed with respect to the trust by any state in which the trustee or the trust is located and the imposition of such tax would be avoided by the appointment of a different trustee, then the depositor may remove the trustee and appoint a successor trustee. The holders of certificates entitled to a majority of the voting rights and the depositor may at any time remove the trustee and appoint a successor trustee by written instrument or instruments, signed by such holders or their attorneys-in-fact duly authorized. Any resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of appointment by the successor trustee. Termination; Optional Clean-Up Call On any Distribution Date when the aggregate Stated Principal Balance of the mortgage loans, as of the last day of the related Due Period, is equal to or less than 10% of the aggregate Stated Principal Balance of the mortgage loans as of the cut-off date, the depositor may request the Master Servicer to solicit bids in a commercially reasonable manner for the purchase of the mortgage loans and all other property of the trust on a non-recourse basis with no representations or warranties of any nature whatsoever (such event, the "Auction Call"). The Master Servicer will accommodate such request at its sole discretion. To effectuate such sale, the Master Servicer or its designee shall make reasonable efforts to sell all of the property of the trust fund for its fair market value in a commercially reasonable manner and on commercially reasonable terms, which will include the good faith solicitation of competitive bids to prospective purchasers that are recognized broker/dealers for assets of this type. The trustee will sell all of the property of the trust fund to the entity with the highest bid received by the trustee from the closed bids solicited by the Master Servicer or its designee; provided, that, (i) the sale price will not be less than the par value as certified by the depositor, (ii) the Master Servicer must receive bids from no fewer than three prospective purchasers (which may include the majority Class X certificateholder) and (iii) such sale price will be deposited with the trustee prior to the Distribution Date following the month in which such value is determined. The proceeds of such sale of the trust property (other than an amount equal to the excess, if any, of the proceeds of the sale over the par value (such excess, the "Fair Market Value Excess") will be distributed to the holders of the LIBOR Certificates in accordance with the order of priorities set forth under "Distribution of the Certificates--Distributions" in this prospectus supplement. Any Fair Market S-125 Value Excess received in connection with the purchase of the mortgage loans and REO properties will be distributed as provided in the master servicing and trust agreement. The Master Servicer will be reimbursed for its costs, including expenses associated with engaging an agent, from the trust fund if the auction is not successful and from the proceeds of the sale before the proceeds are distributed to certificateholders. Except to the extent provided above with regard to allocating any Fair Market Value Excess, the proceeds of such a sale will be treated as a prepayment of the mortgage loans for purposes of distributions to certificateholders. Accordingly, the sale of the mortgage loans and REO properties as a result of the exercise by the depositor of its option to request the Master Servicer to solicit bids therefor will result in the final distribution on the certificates on the related Distribution Date. The trust also is required to terminate upon either the later of: (i) the distribution to certificateholders of the final payment or collection with respect to the last mortgage loan (or P&I Advances of same by the applicable servicer), or (ii) the disposition of all funds with respect to the last mortgage loan and the remittance of all funds due under the master servicing and trust agreement; provided, however, that in no event will the trust established by the master servicing and trust agreement terminate later than twenty-one years after the death of the last surviving lineal descendant of the person named in the master servicing and trust agreement. The master servicing and trust agreement requires the Securities Administrator to send a notice of final distribution to the applicable certificateholders in the event that there are no outstanding mortgage loans and no other funds or assets in the trust other than the funds in the collection account. The Securities Administrator will be required to promptly send the notice of final distribution by letter to certificateholders mailed not later than the 15th day of the month of such final distribution. Any such notice of final distribution will be required to specify (a) the distribution date upon which final distribution on the certificates will be made upon presentation and surrender of certificates at the office designated in the notice, (b) the amount of such final distribution, (c) the location of the office or agency at which such presentation and surrender must be made, and (d) that the record date otherwise applicable to such distribution date is not applicable, distributions being made only upon presentation and surrender of the certificates at the office specified in the notice. Upon final deposit with respect to the trust and the receipt by the Securities Administrator and the custodians of a request for release of the mortgage loan files, the Master Servicer will be required to direct the custodians to promptly release the applicable mortgage loan files. Upon presentation and surrender of the certificates, the Securities Administrator will be required to cause to be distributed to the certificateholders of each class (after reimbursement of all amounts due to the master servicer, the securities administrator and the trustee pursuant to the master servicing and trust agreement) (i) its class certificate balance plus accrued interest in the case of an interest bearing certificate and all other amounts to which such classes are entitled and (ii) as to the Residual Certificates, the amount, if any, which remains on deposit in the distribution account (other than the amounts retained to meet claims) after application pursuant to clause (i) above. In the event that any affected certificateholder does not surrender certificates for cancellation within six (6) months after the date specified in the notice of final distribution, the Securities Administrator will be required to give a second written notice to the remaining certificateholders to surrender their certificates for cancellation and receive the final distribution. If within six (6) months after the second notice all the applicable certificates have not been S-126 surrendered for cancellation, the Securities Administrator may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining certificateholders concerning surrender of their certificates, and the related costs will be paid out of the funds and other assets which remain a part of the trust. If within one year after the second notice all certificates have not been surrendered for cancellation, the Class RC certificateholders will be entitled to all unclaimed funds and other assets of the trust. Certain Matters Regarding the Depositor and the Trustee The master servicing and trust agreement will provide that none of the depositor, the trustee or any of their directors, officers, employees or agents will be under any liability to the certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to the master servicing and trust agreement, or for errors in judgment, except that neither the depositor nor the trustee will be protected against liability arising from any breach of representations or warranties made by it, or from any liability which may be imposed by reason of the depositor's or the trustee's, as the case may be, willful misfeasance, bad faith or negligence (or gross negligence in the case of the depositor) in the performance of its duties or by reason of its reckless disregard of obligations and duties under the master servicing and trust agreement. The depositor, the trustee and any director, officer, employee or agent of the depositor or the trustee will be indemnified by the trust and held harmless against any loss, liability or expense incurred in connection with any audit, controversy or judicial proceeding relating to a governmental taxing authority or any legal action relating to the master servicing and trust agreement or the certificates, or any other unanticipated or extraordinary expenses, other than any loss, liability or expense incurred by reason of the depositor's or the trustee's, as the case may be, willful misfeasance, bad faith or negligence (or gross negligence in the case of the depositor) in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the master servicing and trust agreement. Neither the depositor nor the trustee is obligated under the master servicing and trust agreement to appear in, prosecute or defend any legal action that is not incidental to its respective duties which in its opinion may involve it in any expense or liability. However, in accordance with the provisions of the master servicing and trust agreement, each of the depositor and the trustee, may undertake any action it deems necessary or desirable in respect of (i) the rights and duties of the parties to the master servicing and trust agreement and (ii) with respect to actions taken by the depositor, the interests of the trustee and the certificateholders. In the event the depositor or the trustee undertakes any such action, the legal expenses and costs of such action and any resulting liability will be expenses, costs and liabilities of the trust, and the depositor and the trustee will be entitled to be reimbursed for such expenses, costs and liabilities out of the trust. Amendment The master servicing and trust agreement may be amended from time to time by the parties to the agreement by written agreement, without notice to, or consent of, the holders of the certificates, to cure any ambiguity or mistake, to correct any defective provision or supplement any provision in the master servicing and trust agreement or in any servicing agreement, which may be inconsistent with any other provision, or to add to the duties of the parties to the master servicing and trust agreement. The master servicing and trust agreement may also be amended to add or modify any other provisions with respect to matters or questions arising under the master servicing and trust agreement or to modify, alter, amend, add to or rescind any S-127 of the terms or provisions contained in the master servicing and trust agreement; provided, that such action will not adversely affect in any material respect the interest of any certificateholder, as evidenced by (i) an opinion of counsel delivered to, but not obtained at the expense of, the trustee, confirming that the amendment will not adversely affect in any material respect the interests of any holder of the certificates or (ii) a letter from each rating agency confirming that such amendment will not cause the reduction, qualification or withdrawal of the then current ratings of the certificates. The master servicing and trust agreement may be amended from time to time by the parties to the agreement and holders of certificates evidencing percentage interests aggregating not less than 66?% of each class of certificates affected by the amendment for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the master servicing and trust agreement or of modifying in any manner the rights of the holders of the certificates; provided, however, that no such amendment will (i) reduce in any manner the amount of, or delay the timing of, payments required to be distributed on any class of certificates without the consent of the holders of that class, (ii) adversely affect in any material respect the interests of the holders of any class of certificates in a manner other than as described in clause (i) above without the consent of the holders of certificates of that class evidencing percentage interests aggregating not less than 66?% of that class, or (iii) reduce the percentage of the certificates whose holders are required to consent to any such amendment without the consent of the holders of 100% of the certificates then outstanding. Certain Matters Regarding the Servicers Except as set forth herein regarding the transfer of servicing from FNBN to Chase or as provided in the servicing agreements, no servicer may assign its servicing agreement or the servicing under such servicing agreement, or delegate all or any portion of its rights or duties under such servicing agreement, or sell or otherwise dispose of all of its property or assets. No servicer may resign from its obligations and duties under any servicing agreement except by mutual consent of such servicer and the Master Servicer (as provided in the master servicing and trust agreement) or upon the determination that its duties are no longer permitted under applicable law and such incapacity cannot be cured by such servicer. Any such determination permitting the resignation of a servicer must be evidenced by an opinion of counsel delivered to the trustee, the Securities Administrator and the Master Servicer and in form and substance acceptable to the trustee, the Securities Administrator and the Master Servicer. No such resignation shall become effective until a successor has assumed such servicer's responsibilities and obligations in the manner provided in the related servicing agreement. With respect to the Countrywide Mortgage Loans, the related servicing agreements provide that any company into which a servicer is merged or consolidated will succeed automatically to the duties of that servicer, so long as that such entity is a Fannie Mae/Freddie Mac approved servicer. Without in any way limiting the generality of the foregoing and, except in the case of certain mergers, if a servicer either assigns its rights under the applicable servicing agreement or the servicing responsibilities under that servicing agreement or delegates all or any portion of its duties under that servicing agreement or sells or otherwise disposes of all or substantially all of its property or assets, then the Master Servicer will have the right to terminate that servicing agreement upon notice to the related servicer. S-128 Except as described herein under "The Servicer--General", the Master Servicer is prohibited from terminating the Servicer without cause. Each servicing agreement provides that neither the applicable servicer nor any of its directors, officers, employees or agents will have any liability to the trust for any action taken or for refraining from taking any action in good faith pursuant to such servicing agreement, or for errors in judgment. However, this provision will not protect a servicer or any such person against any breach of warranties or representations made in the related servicing agreement, or failure to perform its obligations in compliance with any standard of care set forth in such agreement or any other liability which would otherwise be imposed under such agreement. No servicer is under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the mortgage loans in accordance with the related servicing agreement and which in its opinion may involve it in any expense or liability. However, a servicer may, with the consent of the Master Servicer, undertake any such action which it may deem necessary or desirable in respect of the applicable servicing agreement and the rights and duties of the parties to it. In such event, that servicer will be entitled to reimbursement from the trust of the reasonable legal expenses and costs of such action. Additionally, the trust will be required to indemnify each servicer for certain liabilities, costs and expenses incurred by such servicer as set forth in the applicable servicing agreement. PREPAYMENT AND YIELD CONSIDERATIONS Structuring Assumptions The prepayment model used in this prospectus supplement represents an assumed rate of prepayment ("Prepayment Assumption") each month relative to the then outstanding principal balance of a pool of mortgage loans for the life of those mortgage loans. The Prepayment Assumption 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, including the related mortgage loans. With respect to the mortgage loans, the 100% Prepayment Assumption assumes a constant prepayment rate ("CPR") of approximately 30% per annum. Since the tables were prepared on the basis of the assumptions in the following paragraph, there are discrepancies between the characteristics of the actual mortgage loans and the characteristics of the mortgage loans assumed in preparing the tables. Any discrepancy may have an effect upon the percentages of the Class Certificate Balances outstanding and weighted average lives of the Offered Certificates set forth in the tables. In addition, since the actual mortgage loans in the trust fund have characteristics which differ from those assumed in preparing the tables set forth below, the distributions of principal on the Offered Certificates may be made earlier or later than as indicated in the tables. Unless otherwise specified, the information in the tables in this prospectus supplement has been prepared on the basis of the following assumed characteristics of the mortgage loans and the following additional assumptions, which collectively are the structuring assumptions (the "Structuring Assumptions"): o the closing date for the certificates occurs on February 24, 2006; o distributions on the certificates are made on the 25th day of each month, commencing in March 2006, regardless if such day is a business day, in accordance with the priorities described in this prospectus supplement; S-129 o the mortgage loan prepayment rates with respect to the assumed mortgage loans are a multiple of the applicable Prepayment Assumption as stated in the table under the heading "Prepayment Scenarios" under "--Decrement Tables" below; o prepayments include thirty (30) days' interest on the related mortgage loan; o the optional termination is not exercised (except with respect to the weighted average life to call where a 10% optional clean-up call is assumed); o the Specified Overcollateralized Amount is as specified in this prospectus supplement; o (a) the interest rate for each mortgage loan is adjusted on its next rate Adjustment Date (and on subsequent Adjustment Dates, if necessary) to a rate equal to the Gross Margin plus the related Index (subject to the applicable periodic cap and applicable maximum rate), (b) the Six-Month LIBOR Loan Index remains constant at [____]%, the One-Year LIBOR Loan Index remains constant at [____]%, and the One-Year CMT Loan Index remains constant at [____]% and (c) the scheduled monthly payment on the mortgage loans is adjusted in the month immediately following the next rate Adjustment Date to equal a fully amortizing payment (in some cases, following the interest-only period); o One-Month LIBOR remains constant at [____]%; o no Swap Termination Payments are paid or received by the trust; o the Expense Fee Rate on the mortgage loans is as specified in this prospectus supplement; o no delinquencies or defaults in the payment by mortgagors of principal of and interest on the mortgage loans are experienced; o 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 prior to giving effect to prepayments received on the last day of the prior month; o prepayments represent prepayments in full of individual mortgage loans and are received on the last day of each month, commencing in the calendar month in which the closing date occurs; o the initial Class Certificate Balance of each class of offered certificates is as set forth on the cover page of this prospectus supplement (or, in the case of the Class B-4 Certificates, as set forth under "Summary Information" in this prospectus supplement); o interest accrues on each class of certificates at the applicable Pass-Through Rate set forth or described in this prospectus supplement; and o the assumed mortgage loans have the approximate characteristics described below: S-130
On and Cut-off After 1st Date Cut-off Reset Gross Date Net Date Net Remaining Remaining Original Mortgage Mortgage Mortgage Term to Amortization Original Prepayment Principal Rate Rate Rate Maturity Term IO Period Loan Age Term Balance ($) (%)(2) (%)(2) (%)(2) (Months)(2) (Months)(1)(2) (Months)(2) (Months)(2) (Months)(2) Index ----------- ------ ------ ------ ----------- -------------- ----------- ----------- ----------- ----- Gross Lifetime Gross Initial Rate Gross First Maximum Floor Periodic Periodic Adjustment Principal Margin Reset Rate Rate Cap Cap Frequency Balance ($) (%)(2) (Months)(2) (%)(2) (%)(2) (%)(2) (%)(2) (Months)(2) ----------- ------ ----------- ------ ------ ------ ------ -----------
S-131
On and Cut-off After 1st Date Cut-off Reset Gross Date Net Date Net Remaining Remaining Original Mortgage Mortgage Mortgage Term to Amortization Original Prepayment Principal Rate Rate Rate Maturity Term IO Period Loan Age Term Balance ($) (%)(2) (%)(2) (%)(2) (Months)(2) (Months)(1)(2) (Months)(2) (Months)(2) (Months)(2) Index ----------- ------ ------ ------ ----------- -------------- ----------- ----------- ----------- ----- Gross Lifetime Gross Initial Rate Gross First Maximum Floor Periodic Periodic Adjustment Principal Margin Reset Rate Rate Cap Cap Frequency Balance ($) (%)(2) (Months)(2) (%)(2) (%)(2) (%)(2) (%)(2) (Months)(2) ----------- ------ ----------- ------ ------ ------ ------ -----------
S-132
On and Cut-off After 1st Date Cut-off Reset Gross Date Net Date Net Remaining Remaining Original Mortgage Mortgage Mortgage Term to Amortization Original Prepayment Principal Rate Rate Rate Maturity Term IO Period Loan Age Term Balance ($) (%)(2) (%)(2) (%)(2) (Months)(2) (Months)(1)(2) (Months)(2) (Months)(2) (Months)(2) Index ----------- ------ ------ ------ ----------- -------------- ----------- ----------- ----------- ----- Gross Lifetime Gross Initial Rate Gross First Maximum Floor Periodic Periodic Adjustment Principal Margin Reset Rate Rate Cap Cap Frequency Balance ($) (%)(2) (Months)(2) (%)(2) (%)(2) (%)(2) (%)(2) (Months)(2) ----------- ------ ----------- ------ ------ ------ ------ -----------
S-133
On and Cut-off After 1st Date Cut-off Reset Gross Date Net Date Net Remaining Remaining Original Mortgage Mortgage Mortgage Term to Amortization Original Prepayment Principal Rate Rate Rate Maturity Term IO Period Loan Age Term Balance ($) (%)(2) (%)(2) (%)(2) (Months)(2) (Months)(1)(2) (Months)(2) (Months)(2) (Months)(2) Index ----------- ------ ------ ------ ----------- -------------- ----------- ----------- ----------- ----- Gross Lifetime Gross Initial Rate Gross First Maximum Floor Periodic Periodic Adjustment Principal Margin Reset Rate Rate Cap Cap Frequency Balance ($) (%)(2) (Months)(2) (%)(2) (%)(2) (%)(2) (%)(2) (Months)(2) ----------- ------ ----------- ------ ------ ------ ------ -----------
------------- (1) With respect to the assumed mortgage loans with an interest-only period the remaining amortization period will not commence until the interest-only period has ended. (2) Weighted average. S-134 Defaults in Delinquent Payments The yield to maturity of the Offered Certificates, and particularly the Subordinated Certificates, will be sensitive to defaults on the mortgage loans. If a purchaser of an Offered Certificate calculates its anticipated yield based on an assumed rate of default and amount of losses that is lower than the default rate and amount of losses actually incurred, its actual yield to maturity will be lower than that so calculated. Except to the extent of any Subsequent Recoveries, holders of the Offered Certificates will not receive reimbursement for Applied Realized Loss Amounts applied to their certificates. In general, the earlier a loss occurs, the greater is the effect on an investor's yield to maturity. There can be no assurance as to the delinquency, foreclosure or loss experience with respect to the mortgage loans. Because the mortgage loans were underwritten in accordance with standards less stringent than those generally acceptable to Fannie Mae and Freddie Mac with regard to a borrower's credit standing and repayment ability, the risk of delinquencies with respect to, and losses on, the mortgage loans will be greater than that of mortgage loans underwritten in accordance with Fannie Mae and Freddie Mac standards. Prepayment Considerations and Risks The rate of principal payments on the Offered Certificates, the aggregate amount of distributions on the Offered Certificates and the yields to maturity of the Offered Certificates will be related to the rate and timing of payments of principal on the mortgage loans. The rate of principal payments on the mortgage loans will in turn be affected by the amortization schedules of 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 or condemnations and repurchases by a selling party or purchases pursuant to the optional clean-up call, as described in this prospectus supplement. Because certain of the mortgage loans contain Prepayment Premiums, the rate of principal payments may be less than the rate of principal payments for mortgage loans which did not have Prepayment Premiums. The mortgage loans are subject to the "due-on-sale" provisions included in the mortgage loans. See "The Mortgage Loan Pool" in this prospectus supplement. Prepayments, liquidations and purchases of the mortgage loans (including any optional repurchase of the remaining mortgage loans in the trust fund in connection with the termination of the trust fund, in each case as described in this prospectus supplement) will result in distributions on the Offered Certificates of principal amounts which would otherwise be distributed over the remaining terms of the mortgage loans. Since the rate of payment of principal on the mortgage loans will depend on future events and a variety of other factors, no assurance can be given as to that rate 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 that Offered Certificate is purchased at a discount or premium, and the degree to which the timing of payments on that Offered Certificate is sensitive to prepayments, liquidations and purchases of the mortgage loans. Further, an investor should consider the risk that, in the case of any Offered Certificate purchased at a discount, a slower than anticipated rate of principal payments (including prepayments) on the mortgage loans could result in an actual yield to that investor that is lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, a faster than anticipated rate of principal payments on the mortgage loans could result in an actual yield to that investor 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 S-135 and other factors, including changes in mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity in the mortgaged properties and servicing decisions. 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. Adjustable-rate mortgage loans, or ARMs, may be subject to a greater rate of principal prepayments in a low interest rate environment. For example, if prevailing interest rates were to fall, mortgagors with ARMs may be inclined to refinance their ARMs with a fixed rate loan to "lock in" a lower interest rate. The existence of the applicable Periodic Cap and Maximum Rate also may affect the likelihood of prepayments resulting from refinancings. In addition, ARMs may be subject to delinquency and loss experience because the amount of the monthly payments on the ARMs are subject to adjustment on each Adjustment Date. ARMs may be subject to greater rates of prepayments as they approach their initial Adjustment Dates as borrowers seek to avoid changes in their monthly payments. In addition, a substantial majority of the ARMs will not have their initial Adjustment Date until three to five years after their origination. The prepayment experience of these adjustable mortgage loans may differ from that of the other ARMs. Such adjustable mortgage loans may be subject to greater rates of prepayments as they approach their initial Adjustment Dates even if market interest rates are only slightly higher or lower than the interest rates on the adjustable mortgage loans with their initial Adjustment Date three to five years after their origination (as the case may be) as borrowers seek to avoid changes in their monthly payments. 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 certificates may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. When a mortgagor prepays a mortgage loan in whole or in part prior to the due date in the related Prepayment Period for the mortgage loan, the mortgagor pays interest on the amount prepaid only to the date of prepayment instead of for the entire month. Absent sufficient Compensating Interest (to the extent available as described in this prospectus supplement to cover prepayment interest shortfalls resulting from voluntary principal prepayments in full or in part), a shortfall will occur in the amount due to certificateholders since the certificateholders are generally entitled to receive a full month of interest. Also, when a mortgagor prepays a mortgage loan in part together with the scheduled payment for a month on or after the related due date, the principal balance of the mortgage loan is reduced by the amount in excess of the scheduled payment as of that due date, but the principal is not distributed to certificateholders until the Distribution Date in the next month; therefore, up to one month of interest shortfall accrues on the amount of such excess. To the extent that the amount of Compensating Interest is insufficient to cover the deficiency in interest payable as a result of the timing of a prepayment, the remaining deficiency S-136 will be allocated to the LIBOR Certificates, pro rata, according to the amount of interest to which each class of LIBOR Certificates would otherwise be entitled, in reduction of that amount. The Pass-Through Rate for each class of LIBOR Certificates may be calculated by reference to the net interest rates of the mortgage loans. If the mortgage loans bearing higher interest rates, either through higher margins or an increase in the applicable Index (and consequently, higher net interest rates), were to prepay, the weighted average net interest rate would be lower than otherwise would be the case. Changes in One-Month LIBOR may not correlate with changes in the Six-Month LIBOR Loan Index, the One-Year LIBOR Loan Index, or the One-Year CMT Loan Index. It is possible that a decrease in the Six-Month LIBOR Loan Index, the One-Year LIBOR Loan Index or the One-Year CMT Loan Index, which would be expected to result in faster prepayments, could occur simultaneously with an increased level of One-Month LIBOR. If the sum of One-Month LIBOR plus the applicable pass-through margin for a class or classes of LIBOR Certificates were to be higher than the WAC Cap, the Pass-Through Rates on the related LIBOR Certificates would be lower than otherwise would be the case. Although holders of the LIBOR Certificates are entitled to receive any Basis Risk Carry Forward Amount from and to the extent of funds available in the Excess Reserve Fund Account, there is no assurance that those funds will be available or sufficient for those purposes. The ratings of the LIBOR Certificates do not address the likelihood of the payment of any Basis Risk Carry Forward Amount. Although holders of the LIBOR Certificates are entitled to receive any Basis Risk Carry Forward Amount from and to the extent of funds available in the Excess Reserve Fund Account and to the extent available for payment from the Supplemental Interest Trust, there is no assurance that those funds will be available or sufficient for those purposes. The ratings of the Offered Certificates do not address the likelihood of the payment of any Basis Risk Carry Forward Amount. Overcollateralization Provisions The operation of the overcollateralization provisions of the master servicing and trust agreement will affect the weighted average lives of the LIBOR Certificates and consequently the yields to maturity of those certificates. If at any time the Overcollateralized Amount is less than the Specified Overcollateralized Amount, Total Monthly Excess Spread will be applied as distributions of principal of the class or classes of certificates then entitled to distributions of principal until the Overcollateralized Amount equals the Specified Overcollateralized Amount. This would reduce the weighted average lives of those certificates. The actual Overcollateralized Amount may change from Distribution Date to Distribution Date producing uneven distributions of Total Monthly Excess Spread. There can be no assurance that the Overcollateralized Amount will never be less than the Specified Overcollateralized Amount. Total Monthly Excess Spread generally is a function of the excess of interest collected or advanced on the mortgage loans over the interest required to pay interest on the LIBOR Certificates and expenses at the Expense Fee Rate, as well as Net Swap Payment Amounts and Net Swap Receipt Amounts. Mortgage loans with higher net mortgage rates will contribute more interest to the Total Monthly Excess Spread. Mortgage loans with higher net mortgage rates may prepay faster than mortgage loans with relatively lower net interest rates in response to a given change in market interest rates. Any disproportionate prepayments of mortgage loans with higher net mortgage rates may adversely affect the amount of Total Monthly Excess Spread available to make accelerated payments of principal of the LIBOR Certificates. S-137 As a result of the interaction of the foregoing factors, the effect of the overcollateralization provisions on the weighted average lives of the LIBOR Certificates may vary significantly over time and from class to class. Subordinated Certificates and the Class A-4 Certificates The Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates provide credit enhancement for the certificates that have a higher payment priority, and the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates may absorb losses on the mortgage loans. The weighted average lives of, and the yields to maturity on, the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates, will be progressively more sensitive, in that order, to the rate and timing of mortgagor defaults and the severity of ensuing losses on the mortgage loans. If the actual rate and severity of losses on the mortgage loans are higher than those assumed by a holder of a related Subordinated Certificate, the actual yield to maturity on such holder's certificate may be lower than the yield expected by such holder based on that assumption. Realized losses on the mortgage loans will reduce the Class Certificate Balance of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 certificates then outstanding with the lowest relative payment priority if and to the extent that the aggregate Class Certificate Balances of all classes of certificates, following all distributions on a Distribution Date, exceed the aggregate Stated Principal Balances of the mortgage loans. As a result of such a reduction of the Class Certificate Balance of a class of Subordinated Certificates, less interest will accrue on those classes of certificates than would otherwise be the case. The Principal Distribution Amount to be made to the holders of the LIBOR Certificates includes the net proceeds in respect of principal received upon the liquidation of a related mortgage loan. If such net proceeds are less than the unpaid principal balance of the liquidated mortgage loan, the aggregate Stated Principal Balances of the mortgage loans will decline more than the aggregate Class Certificate Balances of the LIBOR Certificates, thus reducing the amount of the overcollateralization. If such difference is not covered by the amount of the overcollateralization or excess interest, the class of Subordinated Certificates then outstanding with the lowest relative payment priority will bear such loss. In addition, the Subordinated Certificates will not be entitled to any principal distributions prior to the related Stepdown Date or during the continuation of a Trigger Event (unless all of the certificates with a higher relative payment priority have been paid in full). Because a Trigger Event may be based on the delinquency, as opposed to the loss, experience on the mortgage loans, a holder of a Subordinated Certificate may not receive distributions of principal for an extended period of time, even if the rate, timing and severity of realized losses on the applicable mortgage loans is consistent with such holder's expectations. Because of the disproportionate distribution of principal to the senior certificates, depending on the timing of realized losses, the Subordinated Certificates may bear a disproportionate percentage of the realized losses on the mortgage loans. For all purposes, the Class B-4 certificates will have the lowest payment priority of any class of Subordinated Certificates. If a Sequential Trigger Event is in effect, the Class A-4 Certificates will not receive any principal distributions until the Class Certificate Balance of the Class A-3 Certificates has been reduced to zero. Thus, the Class A-4 Certificates may bear a disproportionate percentage of the shortfalls in principal on the mortgage loans. S-138 Effect on Yields Due to Rapid Prepayments Any Net Swap Payment Amount payable to the Swap Provider under the terms of the interest rate swap agreement will reduce amounts available for distribution to certificateholders, and may reduce the Pass-Through Rates on the LIBOR Certificates. This could adversely affect the yield to maturity on your certificates. Weighted Average Lives of the Offered Certificates The weighted average life of an Offered Certificate is determined by (a) multiplying the amount of the 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 that Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the 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 "--Prepayment Considerations and Risks" above and "Yield and Prepayment Considerations" in the prospectus. In general, the weighted average lives of the Offered Certificates will be shortened if the level of prepayments of principal of the mortgage loans increases. However, the weighted average lives of the Offered Certificates will depend upon a variety of other factors, including the timing of changes in the rate of principal payments and the priority sequence of distributions of principal of the classes of certificates. See "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. 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 that 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 those 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 the Prepayment Assumption, see "--Decrement Tables" below. Decrement Tables The following tables indicate the percentages of the initial Class Certificate Balances of the classes of LIBOR Certificates (other than the Class B-4 Certificates) that would be outstanding after each of the Distribution Dates shown at various constant percentages of the applicable Prepayment Assumption and the corresponding weighted average lives of those classes. The tables have been prepared on the basis of the Structuring Assumptions. It is not likely that (i) all of the mortgage loans will have the characteristics assumed, (ii) all of the mortgage loans will prepay at the constant percentages of the applicable Prepayment Assumption specified in the tables or at any other constant rate or (iii) all of the mortgage loans will prepay at the same rate. Moreover, the diverse remaining terms to maturity and interest rates of the mortgage loans could produce slower or faster principal distributions than indicated in the tables at the specified constant percentages of the applicable Prepayment Assumption, even if the weighted average remaining term to maturity and weighted average interest rates of the mortgage loans are S-139 consistent with the remaining terms to maturity and interest rates of the mortgage loans specified in the Structuring Assumptions. Prepayment Scenarios
SCENARIO I SCENARIO II SCENARIO III SCENARIO IV SCENARIO V ---------- ----------- ------------ ----------- ---------- Percentage of Prepayment Assumption..................... 0% 75% 100% 125% 150%
Percent of Initial Class Certificate Balance Outstanding(1)
Class A-1 Class A-2 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-140 Percent of Initial Class Certificate Balance Outstanding(1)
Class A-3 Class A-4 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-141 Percent of Initial Class Certificate Balance Outstanding(1)
Class M-1 Class M-2 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-142 Percent of Initial Class Certificate Balance Outstanding(1)
Class M-3 Class M-4 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-143 Percent of Initial Class Certificate Balance Outstanding(1)
Class M-5 Class B-1 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-144 Percent of Initial Class Certificate Balance Outstanding(1)
Class B-2 Class B-3 PREPAYMENT SCENARIO PREPAYMENT SCENARIO ------------------------------------ --------------------------------------- DISTRIBUTION DATE I II III IV V I II III IV V ---- ----- ----- ----- ----- ------ ----- ----- ----- ------ Initial Percentage................ 100 100 100 100 100 100 100 100 100 100 March 2007........................ March 2008........................ March 2009........................ March 2010........................ March 2011........................ March 2012........................ March 2013........................ March 2014........................ March 2015........................ March 2016........................ March 2017........................ March 2018........................ March 2019........................ March 2020........................ March 2021........................ March 2022........................ March 2023........................ March 2024........................ March 2025........................ March 2026........................ March 2027........................ March 2028........................ March 2029........................ March 2030........................ March 2031........................ March 2032........................ March 2033........................ March 2034........................ March 2035........................ March 2036........................ Weighted Average Life to Maturity (years)(2)............... Weighted Average Life to Call (years)(2)(3)................
--------------- (1) Rounded to the nearest whole percentage. (2) The weighted average life of any class of certificates is determined by (i) multiplying the net reduction, if any, of the Class Certificate Balance by the number of years from the date of issuance of the certificates to the related Distribution Date, (ii) adding the results, and (iii) dividing them by the aggregate of the net reductions of the Class Certificate Balance described in clause (i). (3) Calculation assumes the exercise of the optional clean-up call on the earliest possible date. * Indicates an outstanding principal balance greater than 0.00% and less than 0.50% of the original principal balance. S-145 WAC Cap The information in the following table has been prepared in accordance with the Structuring Assumptions except for the following: o One-Month LIBOR Loan Index, Six-Month LIBOR Loan Index, One-Year LIBOR Loan Index, and One-Year CMT Loan Index remain constant at 20.00%; and o prepayments on the mortgage loans occur at 100% of the Prepayment Assumption (i.e., Scenario III). It is highly unlikely, however, that prepayments on the mortgage loans will occur at a constant rate of 100% of the Prepayment Assumption or at any other constant percentage. There is no assurance, therefore, of whether or to what extent the actual interest rates on the mortgage loans or the WAC Cap on any Distribution Date will conform to the corresponding rate set forth for that Distribution Date in the following table. The following table is based on initial marketing structure and spreads. [REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] S-146
Distribution Distribution Date WAC Cap (%) Date WAC Cap (%) ------------------------ ----------------- --------------------- ---------------------- March 2006 20.80690 January 2010 12.04914 April 2006 20.97517 February 2010 11.96343 May 2006 20.91007 March 2010 12.56737 June 2006 20.57694 April 2010 11.79958 July 2006 20.32957 May 2010 11.93410 August 2006 19.99754 June 2010 11.64062 September 2006 19.71482 July 2010 11.78078 October 2006 19.49045 August 2010 11.48784 November 2006 19.16586 September 2010 11.41502 December 2006 18.96205 October 2010 11.57852 January 2007 18.64408 November 2010 12.02267 February 2007 18.38790 December 2010 9.48618 March 2007 18.35239 January 2011 10.11210 April 2007 17.89039 February 2011 10.90619 May 2007 17.72121 March 2011 12.07660 June 2007 17.41591 April 2011 10.90796 July 2007 17.26469 May 2011 11.28003 August 2007 16.95926 June 2011 10.93363 September 2007 16.74012 July 2011 11.30517 October 2007 16.69024 August 2011 10.94055 November 2007 16.41159 September 2011 10.94062 December 2007 15.68807 October 2011 11.30692 January 2008 15.45833 November 2011 10.94779 February 2008 15.27458 December 2011 11.31753 March 2008 15.31854 January 2012 10.97592 April 2008 14.97809 February 2012 10.97597 May 2008 14.93198 March 2012 11.73298 June 2008 14.65629 April 2012 10.97605 July 2008 14.63193 May 2012 11.34769 August 2008 14.35905 June 2012 10.98168 September 2008 14.20007 July 2012 11.34778 October 2008 14.31743 August 2012 10.98177 November 2008 14.26346 September 2012 10.98181 December 2008 13.00222 October 2012 11.34792 January 2009 12.86228 November 2012 10.98559 February 2009 12.75408 December 2012 11.35182 March 2009 13.25765 January 2013 11.29130 April 2009 12.61659 February 2013 11.29142 May 2009 12.72251 March 2013 12.50134 June 2009 12.52983 April 2013 11.29166 July 2009 12.66032 May 2013 11.66817 August 2009 12.36398 June 2013 11.29190 September 2009 12.27267 July 2013 11.66842 October 2009 12.41895 August 2013 11.29215 November 2009 12.20026 September 2013 11.29227 December 2009 12.34552
S-147 Distribution Date WAC Cap (%) -------------------------- -------------------- October 2013 11.66881 November 2013 11.29253 December 2013 11.66908 January 2014 11.29279 February 2014 11.29292 March 2014 12.50302 April 2014 11.29319 May 2014 11.66977 June 2014 11.29346 July 2014 11.67005 August 2014 11.29374 September 2014 11.29388 October 2014 11.67049 November 2014 11.29416 December 2014 11.67079 January 2015 11.29445 February 2015 11.29460 March 2015 12.50490 April 2015 11.29490 May 2015 11.67155 June 2015 11.29520 July 2015 11.67187 August 2015 11.29551 September 2015 11.29567 October 2015 11.67236 November 2015 11.29599 December 2015 11.67268 January 2016 11.30030 February 2016 11.30560 S-148 Last Scheduled Distribution Date The last scheduled Distribution Date is the Distribution Date in March 2036. The last scheduled Distribution Date for each class of Offered Certificates is the date on which the initial Class Certificate Balance set forth on the cover page of this prospectus supplement for that class would be reduced to zero. The last scheduled Distribution Dates for all classes have been calculated as the Distribution Date occurring in the month following the latest maturity date of any mortgage loan. Since 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 each class could be reduced to zero significantly earlier or later than the last scheduled Distribution Date. The rate of payments on the mortgage loans will depend on their particular characteristics, as well as on prevailing interest rates from time to time and other economic factors, and no assurance can be given as to the actual payment experience of the mortgage loans. See "--Prepayment Considerations and Risks" and "--Weighted Average Lives of the Offered Certificates" above and "Yield and Prepayment Considerations" in the prospectus. FEDERAL INCOME TAX CONSEQUENCES The discussion in this section and in the section "Federal Income Tax Consequences" in the prospectus is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. The discussion below and in the prospectus does not purport to deal with all federal tax consequences applicable to all categories of investors, some of which may be subject to special rules. Investors may wish to consult their own tax advisors in determining the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of the Offered Certificates. References in this section and in the "ERISA Considerations" section of this prospectus supplement to the "Code" and "Sections" are to the Internal Revenue Code of 1986, as amended. General The master servicing and trust agreement provides that certain segregated asset pools within the trust (exclusive, among other things, of the assets held in the Excess Reserve Fund Account, the Supplemental Interest Trust and certain other accounts specified in the master servicing and trust agreement and each servicing agreement and the right of each class of LIBOR Certificates to receive Basis Risk Carry Forward Amounts will comprise one or more REMICs (the "Trust REMICs") organized in a tiered REMIC structure. Each class of LIBOR Certificates and the Class X certificates represent (exclusive of the right to receive Basis Risk Carry Forward Amounts) a regular interest (a "Regular Interest") in a Trust REMIC. The Class R certificates will represent ownership of the sole class of residual interest in the Upper-Tier REMIC and the Class RC certificates will represent ownership of the sole class of residual interest in each lower-tier REMIC. In addition, each class of the LIBOR Certificates will represent a beneficial interest in the right to receive payments from the Excess Reserve Fund Account and the Supplemental Interest Trust. Elections will be made to treat each of the Trust REMICs as a REMIC for federal income tax purposes. Upon the issuance of the LIBOR Certificates, Sidley Austin LLP will deliver its opinion to the effect that, assuming compliance with the master servicing and trust agreement and each servicing agreement, for federal income tax purposes, the Trust REMICs will each qualify as a REMIC within the meaning of Section 860D of the Code. S-149 Taxation of Regular Interests A holder of a class of LIBOR Certificates will be treated for federal income tax purposes as owning an interest in the corresponding class of Regular Interests in the related Trust REMIC. In addition, the master servicing and trust agreement provides that each holder of a LIBOR Certificate will be treated as owning an interest in a limited recourse interest rate cap contract (the "Basis Risk Contracts") representing the right to receive Basis Risk Carry Forward Amounts from the Excess Reserve Fund Account and the Supplemental Interest Trust. The Regular Interest component of a LIBOR Certificate will be entitled to receive interest and principal payments at the times and in the amounts equal to those made on the LIBOR Certificate to which it corresponds, except that (i) the maximum interest rate of that Regular Interest component will equal the WAC Cap computed for this purpose without regard to any Net Swap Receipt Amounts, (ii) Basis Risk Carry Forward Amounts will be deemed to include the excess, if any, of the WAC Cap over the maximum interest rate specified in clause (i), and (iii) any Swap Termination Payment will be treated as being payable first from Net Monthly Excess Cashflow and second from amounts distributed on the Regular Interests. As a result of the foregoing, the amount of distributions on the Regular Interest component of a LIBOR Certificate may exceed the actual amount of distributions on the LIBOR Certificate. A holder of a LIBOR Certificate must allocate its purchase price for the LIBOR Certificate between its components--the Regular Interest component and the Basis Risk Contract component. To the extent the Basis Risk Contract component has significant value, the Regular Interest component will, in the case of the LIBOR Certificates, be viewed as having been issued with lesser premium or an additional amount of original issue discount ("OID") (which could cause the total amount of OID to exceed a statutorily defined de minimis amount). See "Federal Income Tax Consequences--Treatment by the REMIC of OID, Market Discount, and Amortizable Premium" in the prospectus. Upon the sale, exchange, or other disposition of a LIBOR Certificate, the holder must allocate the amount realized between the components of the LIBOR Certificate based on the relative fair market values of those components at the time of sale. Assuming that a LIBOR Certificate is held as a "capital asset" within the meaning of Section 1221 of the Code, gain or loss on the disposition of an interest in the Basis Risk Contract component should be capital gain or loss and gain or loss on the Regular Interest component will be treated as described in the prospectus under "Federal Income Tax Consequences--Gain or Loss on Disposition". Interest on the Regular Interest component of a LIBOR Certificate must be included in income by a holder under the accrual method of accounting, regardless of the holder's regular method of accounting. In addition, the Regular Interest components of the LIBOR Certificates could be considered to have been issued with OID. See "Federal Income Tax Consequences--Treatment by the REMIC of OID, Market Discount, and Amortizable Premium" in the prospectus. The prepayment assumption that will be used in determining the accrual of any OID and market discount, or the amortization of bond premium, if any, will be a rate equal to 100% of the related Prepayment Assumption, as set forth under "Prepayment and Yield Considerations--Structuring Assumptions" in this prospectus supplement. No representation is made that the mortgage loans will prepay at such a rate or at any other rate. OID must be included in income as it accrues on a constant yield method, regardless of whether the holder receives currently the cash attributable to such OID. S-150 Status of the LIBOR Certificates The Regular Interest components of the LIBOR Certificates will be treated as assets described in Section 7701(a)(19)(C) of the Code for a "domestic building and loan association," and as "real estate assets" under Section 856(c)(5)(B) of the Code for a "real estate investment trust" ("REIT"), generally, in the same proportion that the assets of the trust, exclusive of the Excess Reserve Fund Account and the Supplemental Interest Trust, would be so treated. In addition, to the extent the Regular Interest component of a LIBOR Certificate represents real estate assets under Section 856(c)(5)(B) of the Code, the interest derived from that component would be interest on obligations secured by interests in real property for purposes of Section 856(c)(3)(B) of the Code for a REIT. The Basis Risk Contract components of the LIBOR Certificates will not, however, qualify as assets described in Section 7701(a)(19)(C) of the Code or as real estate assets under Section 856(c)(5)(B) of the Code. The Basis Risk Contract Components The following discussion assumes that the rights of the holders of the LIBOR Certificates under the Basis Risk Contract will be treated as rights under a notional principal contract rather than as a partnership for federal income tax purposes. If these rights were treated as representing the beneficial interests in an entity taxable as a partnership for federal income tax purposes, then there could be different tax timing consequences to all such certificateholders and different withholding tax consequences on payments of Basis Risk Carry Forward Amounts to holders of the LIBOR Certificates who are non-U.S. Persons. Prospective investors in the LIBOR Certificates should consult their tax advisors regarding their appropriate tax treatment. As indicated above, a portion of the purchase price paid by a holder to acquire a LIBOR Certificate will be attributable to the Basis Risk Contract component of such certificate. As of the closing date, the Basis Risk Contract components are expected to have an insubstantial value relative to the Regular Interest components. The portion of the overall purchase price attributable to the Basis Risk Contract component must be amortized over the life of such certificate, taking into account the declining balance of the related regular interest component. Treasury regulations concerning notional principal contracts provide alternative methods for amortizing the purchase price of an interest rate cap contract. Under one method - the level yield or constant interest method - the price paid for an interest rate cap is amortized over the life of the cap as though it were the principal amount of a loan bearing interest at a reasonable rate. Holders are urged to consult their tax advisors concerning the methods that can be employed to amortize the portion of the purchase price paid for the Basis Risk Contract component of a LIBOR Certificate. Any Basis Risk Carry Forward Amounts paid to a holder from the Excess Reserve Fund Account or the Supplemental Interest Trust will be treated as periodic payments on an interest rate cap contract. To the extent the sum of such periodic payments for any year exceeds that year's amortized cost of the related Basis Risk Contract component, such excess is ordinary income. Conversely, to the extent that the amount of that year's amortized cost exceeds the sum of the periodic payments, such excess shall represent a net deduction for that year. In addition, any amounts payable on a Regular Interest component in excess of the amount of payments on the LIBOR Certificates to which it relates as a result of certain Swap Termination Payments will be treated as having been received by the beneficial owners of such LIBOR Certificates and then paid by such owners to the Supplemental Interest Trust pursuant to the Basis Risk Contract. Such excess may be treated as a payment on a notional principal contract that is made by the beneficial owner during the applicable taxable year and that is taken into account in determining the beneficial owner's net income or net deduction with respect to the S-151 Basis Risk Contract for such taxable year. Although not clear, net income or a net deduction with respect to the Basis Risk Contract should be treated as ordinary income or as an ordinary deduction. Alternatively, such payments by beneficial owners of the LIBOR Certificates may be treated as a guarantee of the obligation of the holder of the Class X certificates to make payments under the interest rate swap agreement. A beneficial owner's ability to recognize a net deduction with respect to the Basis Risk Contract component of a LIBOR Certificate or any such guarantee payment may be limited under Sections 67 and/or 68 of the Code in the case of (1) estates and trusts and (2) individuals owning an interest in such component directly or through a "pass-through entity" (other than in connection with such individual's trade or business). Pass-through entities include partnerships, S corporations, grantor trusts and non-publicly offered regulated investment companies, but do not include estates, nongrantor trusts, cooperatives, real estate investment trusts and publicly offered regulated investment companies. Further, a beneficial owner will not be able to recognize a net deduction with respect to the Basis Risk Contract component or any such guarantee payment in computing the beneficial owner's alternative minimum tax liability. Because a beneficial owner of a LIBOR Certificate will be required to include in income the amount deemed to have been paid by such owner pursuant to the Basis Risk Contract or such guarantee but may not be able to deduct that amount from income, a beneficial owner of a LIBOR Certificate may have income that exceeds cash distributions on the LIBOR Certificate, in any period over the term of the LIBOR Certificate. As a result, the LIBOR Certificates may not be a suitable investment for any taxpayer whose net deduction with respect to the Basis Risk Contract or guarantee would be subject to the limitations described above. Subject to the foregoing, if for any year the amount of that year's amortized cost exceeds the sum of the periodic payments, such excess is allowable as an ordinary deduction. Other Matters For a discussion of information reporting, backup withholding and taxation of foreign investors in the certificates, see "Federal Income Tax Consequences--Backup Withholding" and "--Taxation of Certain Foreign Holders of Debt Instruments" in the prospectus. Residual Certificates The holders of the Residual Certificates must include the taxable income of the related REMIC in their federal taxable income. The Residual Certificates will remain outstanding for federal income tax purposes until there are no certificates of any other class outstanding. Prospective investors are cautioned that the Residual Certificates' REMIC taxable income and the tax liability thereon may exceed, and may substantially exceed, cash distributions to such holder during certain periods, in which event, the holder thereof must have sufficient alternative sources of funds to pay such tax liability. Furthermore, it is anticipated that all or a substantial portion of the taxable income of the related REMIC includible by the holders of the Residual Certificates will be treated as "excess inclusion" income, resulting in (i) the inability of such holder to use net operating losses to offset such income from the related REMIC, (ii) the treatment of such income as "unrelated business taxable income" to certain holders who are otherwise tax exempt and (iii) the treatment of such income as subject to 30% withholding tax to certain non-U.S. investors, with no exemption or treaty reduction. The Class R Certificates will be considered to represent "noneconomic residual interests," with the result that transfers would be disregarded for federal income tax purposes if any significant purpose of the transferor was to impede the assessment or collection of tax. Nevertheless, both classes of Residual Certificates are subject to certain restrictions on transfer. S-152 See "Federal Income Tax Consequences--Tax Treatment of REMIC Regular Interests and Other Debt Instruments," and "--Tax Treatment of REMIC Residual Interests" in the prospectus. An individual, trust or estate that holds a Residual Certificate (whether such certificate is held directly or indirectly through certain pass-through entities) also may have additional gross income with respect to, but may be subject to limitations on the deductibility of, servicing fees on the mortgage loans and other administrative expenses of the related REMIC in computing such holder's regular tax liability, and may be not be able to deduct such fees or expenses to any extent in computing such holder's alternative minimum tax liability. Unless required otherwise by applicable authority, it is anticipated that such expenses will be allocated to the holder of the Class RC certificates in respect of the residual interest in the Lower Tier REMIC. In addition, some portion of a purchaser's basis, if any, in a Residual Certificate may not be recovered until termination of the related REMIC. Furthermore, regulations have been issued concerning the federal income tax consequences of any consideration paid to a transferee on a transfer of the Residual Certificates, including any "safe harbor" payment described in the prospectus. See "Federal Income Tax Consequences--Tax Treatment of REMIC Residual Interests--Non-Recognition of Certain Transfers for Federal Income Tax Purposes," and "--Tax Treatment of REMIC Residual Interests" in the prospectus. Any transferee receiving consideration with respect to a Residual Certificate should consult its tax advisors. Due to the special tax treatment of residual interests, the effective after tax return of the Residual Certificates may be significantly lower than would be the case if the Residual Certificates were taxed as debt instruments, or may be negative. Prospective purchasers of the residual interests should consider the effective after tax consequences of an investment in Residual Certificates discussed in the prospectus and should consult their own tax advisors with respect to those consequences. See "Federal Income Tax Consequences--Tax Treatment of REMIC Residual Interests" in the prospectus. STATE AND LOCAL TAXES The depositor makes no representations regarding the tax consequences of purchase, ownership or disposition of the Offered Certificates under the tax laws of any state, local or other jurisdiction. Investors considering an investment in the Offered Certificates may wish to consult their own tax advisors regarding these tax consequences. ERISA CONSIDERATIONS The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code impose requirements on employee benefit plans subject to Title I of ERISA, and on certain other retirement plans and arrangements, including individual retirement accounts and annuities and Keogh plans, as well as on collective investment funds, separate accounts and other entities in which such plans, accounts or arrangements are invested (collectively, "Plans") and on persons who bear certain relationships to such Plans. See "ERISA Considerations" in the prospectus. The U.S. Department of Labor (the "DOL") has granted to Goldman, Sachs & Co., the underwriter, an administrative exemption (the "Exemption") from certain of the prohibited transaction rules of ERISA with respect to the initial purchase, the holding and the subsequent resale by Plans of certificates representing interests in asset backed pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of the Exemption. The receivables covered by the Exemption include secured residential, commercial, and home equity loans such as the mortgage loans in the trust fund. The Exemption was amended by Prohibited Transaction Exemption ("PTE") 2000-58, S-153 Exemption Application No. D-10829, 65 Fed. Reg. 67765 (2000) and PTE 2002-41, Exemption Application No. D-11077, 67 Fed. Reg. 54487 (2002) to extend exemptive relief to certificates, including subordinated certificates, rated in the four highest generic rating categories in certain designated transactions, provided the conditions of the Exemption are met. The Exemption will apply to the acquisition, holding and resale of the Offered Certificates, other than the Residual Certificates (such certificates, the "ERISA Eligible Certificates") by a Plan (subject to the discussion below concerning the interest rate swap agreement), provided that specific conditions (certain of which are described below) are met. Among the conditions which must be satisfied for the Exemption, as amended, to apply to the ERISA Eligible Certificates are the following: (1) The acquisition of the ERISA Eligible Certificates by a Plan is on terms (including the price for the ERISA Eligible Certificates) that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated party; (2) The ERISA Eligible Certificates acquired by the Plan have received a rating at the time of such acquisition that is one of the four highest generic rating categories from Moody's or S&P; (3) The trustee is not an affiliate of any other member of the Restricted Group (as defined below) other than an underwriter; (4) The sum of all payments made to and retained by the underwriter in connection with the distribution of the ERISA Eligible Certificates represents not more than reasonable compensation for underwriting the ERISA Eligible Certificates. The sum of all payments made to and retained by the depositor pursuant to the sale of the ERISA Eligible Certificates to the trust fund represents not more than the fair market value of such mortgage loans. The sum of all payments made to and retained by any servicer represents not more than reasonable compensation for the servicer's services under the master servicing and trust agreement, and reimbursement of the servicer's reasonable expenses in connection with its services; and (5) The Plan investing in the ERISA Eligible Certificates is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933, as amended. Moreover, the Exemption would provide relief from certain self dealing/conflict of interest prohibited transactions that may arise when a Plan fiduciary causes a Plan to acquire certificates in a trust containing receivables on which the fiduciary (or its affiliate) is an obligor only if, among other requirements, (i) in the case of the acquisition of ERISA Eligible Certificates in connection with the initial issuance, at least 50% of each class of ERISA Eligible Certificates in which Plans have invested and at least 50% of the aggregate interests in the trust fund are acquired by persons independent of the Restricted Group (as defined below), (ii) the Plan's investment in ERISA Eligible Certificates does not exceed 25% of each class of ERISA Eligible Certificates outstanding at the time of the acquisition, (iii) immediately after the acquisition, no more than 25% of the assets of any Plan for which the fiduciary has discretionary authority or renders investment advice are invested in certificates representing an interest in one or more trusts containing assets sold or serviced by the same entity, and (iv) the fiduciary or its affiliate is an obligor with respect to obligations representing no more than 5% of the fair market value of the obligations in the trust. This relief is not available to Plans sponsored by the depositor, the underwriter, the trustee, any of the servicers, the Swap Provider, any obligor with respect to mortgage loans included in the trust fund constituting more than 5% of the aggregate S-154 unamortized principal balance of the assets in the trust fund, or any affiliate of such parties (the "Restricted Group"). Except as provided below with respect to the interest rate swap agreement, the depositor believes that the Exemption will apply to the acquisition and holding by Plans of the ERISA Eligible Certificates sold by the underwriter and that all conditions of the Exemption other than those within the control of the investors have been met. In addition, as of the date of this prospectus supplement, there is no obligor with respect to mortgage loans included in the trust fund constituting more than 5% of the aggregate unamortized principal balance of the assets of the trust fund. Each purchaser that is a Plan or that is investing on behalf of or with plan assets of a Plan in reliance on the Exemption will be deemed to represent that it qualifies as an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Securities Act. The rating of a certificate may change. If a class of certificates no longer has a rating of at least "BBB-" or its equivalent from at least one rating agency, then certificates of that class will no longer be eligible for relief under the Exemption, and consequently may not be purchased by or sold to a Plan (although a Plan that had purchased the certificates when it had a permitted rating would not be required by the Exemption to dispose of it). The interest rate swap agreement does not meet all of the requirements for an "eligible swap" under the Exemption and has not been included in the trust, and consequently an interest in the interest rate swap agreement is not eligible for the exemptive relief available under the Exemption. For ERISA purposes, an interest in a class of ERISA Eligible Certificates should represent beneficial interest in two assets, (i) the right to receive payments with respect to the applicable class without taking into account payments made or received with respect to the interest rate swap agreement and (ii) the rights and obligations under the interest rate swap agreement. A Plan's purchase and holding of an ERISA Eligible Certificate could constitute or otherwise result in a prohibited transaction under ERISA and Section 4975 of the Code between the Plan and the Swap Provider unless an exemption is available. Accordingly, as long as the interest rate swap agreement and the Supplemental Interest Trust are in effect, no Plan or other person using plan assets may acquire or hold any interest in an ERISA Eligible Certificate unless, in addition to satisfying the requirements of the Exemption, such acquisition or holding is eligible for the exemptive relief available under Department of Labor Prohibited Transaction Class Exemption ("PTCE") 84-14 (for transactions by independent "qualified professional asset managers"), PTCE 91-38 (for transactions by bank collective investment funds), PTCE 90-1 (for transactions by insurance company pooled separate accounts), PTCE 95-60 (for transactions by insurance company general accounts) or PTCE 96-23 (for transactions effected by "in-house asset managers") or a similar exemption (collectively, the "Investor-Based Exemptions"). It should be noted, however, that even if the conditions specified in one or more of the Investor-Based Exemptions are met, the scope of relief provided by the Investor-Based Exemptions may not necessarily cover all acts that might be construed as prohibited transactions. Plan fiduciaries should consult their legal counsel concerning these issues. As long as the interest rate swap agreement and the Supplemental Interest Trust are in effect, each beneficial owner of an ERISA Eligible Certificate, or any interest in an ERISA Eligible Certificate, will be deemed to have represented that either (i) it is not a Plan or person using Plan assets or (ii) the acquisition and holding of the ERISA Eligible Certificate are eligible for the exemptive relief available under at least one of the Investor-Based Exemptions. Employee benefit plans that are governmental plans (as defined in section 3(32) of ERISA) and certain church plans (as defined in section 3(33) of ERISA) are not subject to ERISA S-155 requirements. However, such plans may be subject to applicable provisions of other federal and state laws materially similar to the provisions of ERISA or Section 4975 of the Code. Any Plan fiduciary who proposes to cause a Plan to purchase ERISA Eligible Certificates should consult with its own counsel with respect to the potential consequences under ERISA and the Code of the Plan's acquisition and ownership of ERISA Eligible Certificates. Assets of a Plan or individual retirement account should not be invested in the ERISA Eligible Certificates unless it is clear that the assets of the trust fund will not be plan assets or unless it is clear that the Exemption and, as long as the interest rate swap agreement and Supplemental Interest Trust are in effect, one or more of the Investor-Based Exemptions will apply and exempt all potential prohibited transactions. The Residual Certificates may not be purchased by or transferred to a Plan or any other person investing "plan assets" of any Plan. Each person that acquires an interest in a Residual Certificate will be required to represent that it is not investing on behalf of or with plan assets of a Plan. Accordingly, the preceding discussion does not purport to discuss any considerations under ERISA or the Code with respect to the purchase, acquisition or resale of the Residual Certificates. LEGAL INVESTMENT The Offered Certificates will not constitute "mortgage related securities" under the Secondary Mortgage Market Enhancement Act of 1984, as amended and, as a result the appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Offered Certificates, is subject to significant interpretive uncertainties. No representations are made as to the proper characterization of the Offered Certificates for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase the Offered Certificates under applicable legal investment restrictions. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult their own legal advisors in determining whether, and to what extent, the Offered Certificates will constitute legal investments for them or are subject to investment, capital or other restrictions. See "Legal Investment" in the prospectus. METHOD OF DISTRIBUTION The depositor has agreed to sell to the underwriter, and the underwriter has agreed to purchase, all of the Offered Certificates. An underwriting agreement between the depositor and the underwriter governs the sale of the Offered Certificates. The aggregate proceeds (excluding accrued interest) to the depositor from the sale of the Offered Certificates, before deducting expenses estimated to be approximately $[_____] million will be approximately [____]% of the initial aggregate principal balance of the Offered Certificates. Under the underwriting agreement, the underwriter has agreed to take and pay for all of the Offered Certificates. The underwriter will distribute the Offered Certificates from time to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. The difference between the purchase price for the Offered Certificates paid to the depositor and the proceeds from the sale of the Offered Certificates realized by the underwriter will constitute underwriting discounts and commissions. S-156 The Offered Certificates are a new issue of securities with no established trading market. The depositor has been advised by the underwriter that the underwriter intends to make a market in the Offered Certificates but is not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Offered Certificates. The depositor has agreed to indemnify the underwriter against certain civil liabilities, including liabilities under the Securities Act of 1933. The underwriter is an affiliate of GSMC, the depositor and the Swap Provider. LEGAL MATTERS The validity of the certificates and certain federal income tax matters will be passed upon for the depositor and the underwriter by Sidley Austin LLP, New York, New York. RATINGS In order to be issued, the Offered Certificates must be assigned ratings not lower than the following by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and Moody's Investors Service, Inc. ("Moody's"): Class S&P Moody's -------------------------- ------------------------ ------------------ A-1.................. AAA Aaa A-2.................. AAA Aaa A-3.................. AAA Aaa A-4.................. AAA Aaa M-1.................. AA+ Aa1 M-2.................. AA Aa2 M-3.................. AA- Aa3 M-4.................. A A1 M-5.................. A- A2 B-1.................. BBB+ A3 B-2.................. BBB Baa1 B-3.................. BBB- Baa3 R.................... AAA NR RC................... AAA NR A securities rating addresses the likelihood of the receipt by a certificateholder of distributions on the mortgage loans. The rating takes into consideration the characteristics of the mortgage loans and the structural, legal and tax aspects associated with the certificates. The ratings on the Offered Certificates do not, however, constitute statements regarding the likelihood or frequency of prepayments on the mortgage loans, the payment of the Basis Risk Carry Forward Amount or the possibility that a holder of an Offered Certificate might realize a lower than anticipated yield. Explanations of the significance of such ratings may be obtained from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041 and Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each security rating should be evaluated independently of any other security rating. S&P and Moody's will monitor the ratings assigned to the Offered Certificates while the Offered Certificates remain S-158 outstanding. In the event that the ratings initially assigned to any of the Offered Certificates by S&P or Moody's are subsequently lowered for any reason, no person or entity is obligated to provide any additional support or credit enhancement with respect to such Offered Certificates. [REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] S-159 GLOSSARY OF TERMS The following terms have the meanings given below when used in this prospectus supplement. "Accrued Certificate Interest" means, for each class of LIBOR Certificates on any Distribution Date, the amount of interest accrued during the related Interest Accrual Period on the related Class Certificate Balance immediately prior to such Distribution Date at the related Pass-Through Rate, as reduced by that class's share of net prepayment interest shortfalls and any shortfalls resulting from the application of the Servicemembers Civil Relief Act or any similar state statutes, as described in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "Adjustment Date" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Applied Realized Loss Amount" has the meaning set forth in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "ARM" means an adjustable-rate mortgage loan. "Available Funds" means, with respect to any Distribution Date, the sum of the following amounts, to the extent received by the Securities Administrator on behalf of the trustee, with respect to the mortgage loans, net of amounts payable or reimbursable to the depositor, the Master Servicer, the servicers, the Securities Administrator, the custodians and the trustee, if any, payable with respect to that Distribution Date: (i) the aggregate amount of monthly payments on the mortgage loans due on the due date in the related Due Period and received by the servicers on or prior to the related Determination Date, after deduction of the related servicing fees in respect of prior Distribution Dates and the other components of the Expense Fee Rate for that Distribution Date, together with any related P&I Advances for that Distribution Date, (ii) certain unscheduled payments in respect of the mortgage loans received by the servicers during the related Prepayment Period, including prepayments, Insurance Proceeds, Condemnation Proceeds and net Liquidation Proceeds, excluding Prepayment Premiums, (iii) Compensating Interest payments in respect of prepayment interest shortfalls for that Distribution Date, (iv) the proceeds from repurchases of mortgage loans received and any Substitution Adjustment Amounts received in connection with the substitution of a mortgage loan with respect to that Distribution Date, (v) any Net Swap Receipt Amounts for such Distribution Date and (vi) all proceeds received with respect to any Optional Clean-Up Call. The holders of the Class P certificates will be entitled to all Prepayment Premiums received by the trust in respect of the mortgage loans and such amounts will not be part of Available Funds or available for distribution to the holders of the LIBOR Certificates. "Basic Principal Distribution Amount" means, with respect to any Distribution Date, the excess of (i) the aggregate Principal Remittance Amount for that Distribution Date over (ii) the Excess Overcollateralized Amount, if any, for that Distribution Date. "Basis Risk Carry Forward Amount" has the meaning set forth in "Description of the Certificates--Excess Reserve Fund Account" in this prospectus supplement. "Basis Risk Contracts" has the meaning set forth in "Federal Income Tax Consequences--Taxation of Regular Interests" in this prospectus supplement. S-159 "Basis Risk Payment" has the meaning set forth in "Description of the Certificates--Excess Reserve Fund Account" in this prospectus supplement. "Class A Certificate" means the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates, collectively. "Class A Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the aggregate Certificate Principal Balance of the Class A Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 87.70% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class B" means the Class B-1, Class B-2, Class B-3 and Class B-4 Certificates, collectively. "Class B-1 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date) and (G) the Certificate Principal Balance of the Class B-1 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 96.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class B-2 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the Certificate Principal Balance of the Class B-1 Certificates (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Distribution Date), and (H) the Certificate Principal Balance of the Class B-2 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 97.00% and (ii) the aggregate scheduled principal balance S-160 of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class B-3 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the Certificate Principal Balance of the Class B-1 Certificates (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Distribution Date), (H) the Certificate Principal Balance of the Class B-2 Certificates (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Distribution Date), and (I) the Certificate Principal Balance of the Class B-3 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 98.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class B-4 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the Certificate Principal Balance of the Class B-1 Certificates (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Distribution Date), (H) the Certificate Principal Balance of the Class B-2 Certificates (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Distribution Date), (I) the Certificate Principal Balance of the Class B-3 Certificates (after taking into account the payment of the Class B-3 Principal Distribution Amount on such Distribution Date) and (J) the Certificate Principal Balance of the Class B-4 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 99.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. S-161 "Class Certificate Balance" means, with respect to any class of LIBOR Certificates as of any Distribution Date, the initial Class Certificate Balance of that class reduced by the sum of: o all amounts previously distributed to holders of certificates of that class as payments of principal; and o in the case of any class of Subordinated Certificates, the amount of any Applied Realized Loss Amounts previously allocated to that class of certificates; provided, however, that immediately following the Distribution Date on which a Subsequent Recovery is distributed, the Class Certificate Balances of any class or classes of Certificates that have been previously reduced by Applied Realized Loss Amounts will be increased, in order of seniority, by the amount of the Subsequent Recovery distributed on such Distribution Date (up to the amount of Applied Realized Loss Amounts allocated to such class or classes). "Class M" means the Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 certificates, collectively. "Class M-1 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date) and (B) the Certificate Principal Balance of the Class M-1 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 91.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class M-2 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), and (C) the Certificate Principal Balance of the Class M-2 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 92.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class M-3 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), and (D) the Certificate Principal Balance of the Class M-3 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 93.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class M-4 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the S-162 Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), and (E) the Certificate Principal Balance of the Class M-4 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 94.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class M-5 Principal Distribution Amount" means, as of any Distribution Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), and (F) the Certificate Principal Balance of the Class M-5 Certificates immediately prior to such Distribution Date, over (y) the lesser of: (A) the product of (i) 95.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over the Overcollateralization Floor. "Class R" means the Class R and Class RC certificates, collectively. "Code" has the meaning set forth in "Federal Income Tax Consequences" in this prospectus supplement. "Compensating Interest" has the meaning set forth in "The Agreements --Prepayment Interest Shortfalls" in this prospectus supplement. "Condemnation Proceeds" means all awards or settlements in respect of a mortgaged property, whether permanent or temporary, partial or entire, by exercise of the power of eminent domain or condemnation. "Conduit Mortgage Loans" means the mortgage loans in the trust that were acquired by GSMC through the GSMC mortgage conduit program. "Countrywide" means Countrywide Home Loans, Inc., a New York corporation, and its successors. "Countrywide Mortgage Loans" means the mortgage loans in the trust that were acquired by GSMC from Countrywide. "Countrywide Servicing" means Countrywide Home Loans Servicing LP, a Texas limited partnership, and its successors. S-163 "Credit Enhancement Percentage" means, for any Distribution Date, the percentage obtained by dividing (x) the aggregate certificate principal balance of the Subordinate Certificates (including any overcollateralization and taking into account the distributions of the Principal Distribution Amount for such Distribution Date) by (y) the aggregate scheduled principal balance of the mortgage loans as of the last day of the related Due Period. "Credit Scores" has the meaning set forth in "The Mortgage Loan Pool--Credit Scores" in this prospectus supplement. "Defaulted Swap Termination Payment" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Determination Date" means, with respect to each Distribution Date, the Business Day immediately preceding the related Servicer Remittance Date. "Distribution Date" means the 25th of each month or, if that day is not a business day, the immediately succeeding business day. "DOL" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "Downgrade Terminating Event" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Due Period" means, with respect to any Distribution Date, the period commencing on the second day of the calendar month preceding the month in which that Distribution Date occurs and ending on the first day in the calendar month in which that Distribution Date occurs. "ERISA" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "Excess Overcollateralized Amount" is described in "Description of the Certificates--Overcollateralization Provisions" in this prospectus supplement. "Excess Reserve Fund Account" has the meaning set forth in "Description of the Certificates--Excess Reserve Fund Account" in this prospectus supplement. "Exemption" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "Expense Fee Rate" means, with respect to any mortgage loan, a per annum rate equal to the sum of the applicable servicing fee rate and any lender-paid mortgage insurance. "Extra Principal Distribution Amount" means, as of any Distribution Date, the lesser of (x) the related Total Monthly Excess Spread for that Distribution Date and (y) the related Overcollateralization Deficiency for that Distribution Date. "Fair Market Value Excess" has the meaning set forth in "The Agreements--Termination; Optional Clean-Up Call" in this prospectus supplement. "FNBN" means First National Bank of Nevada, a national banking association, and its successors. "FNBN Mortgage Loans" means the mortgage loans in the trust that were acquired by GSMC from FNBN. S-164 "GreenPoint" means GreenPoint Mortgage Funding, Inc., a New York corporation, and its successors. "GreenPoint Mortgage Loans" means the mortgage loans in the trust that were acquired by GSMC from GreenPoint. "Gross Margin" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "GSMC" means Goldman Sachs Mortgage Company, a New York limited partnership, and its successors. "Index" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Initial Cap" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Insurance Proceeds" means, with respect to each mortgage loan, proceeds of insurance policies insuring the related mortgaged property. "Interest Accrual Period" means, for any Distribution Date, with respect to the LIBOR Certificates, the period commencing on the immediately preceding Distribution Date (or, for the initial Distribution Date, the closing date) and ending on the day immediately preceding the current Distribution Date. "Interest Remittance Amount" means, with respect to any Distribution Date and the mortgage loans, that portion of Available Funds attributable to interest relating to such mortgage loans and any Net Swap Receipt Amounts attributable for that Distribution Date, net of any Net Swap Payment Amounts made from the mortgage loans with respect to that Distribution Date. "LIBOR Certificates" has the meaning set forth in "Description of the Certificates" in this prospectus supplement. "LIBOR Determination Date" means, with respect to any Interest Accrual Period, the second London business day preceding the commencement of that Interest Accrual Period. For purposes of determining One-Month LIBOR, a "London business day" is any day on which dealings in deposits of United States dollars are transacted in the London interbank market. "Lifetime Cap" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Liquidation Proceeds" means any cash received in connection with the liquidation of a defaulted mortgage loan, whether through a trustee's sale, foreclosure sale or otherwise, including any Subsequent Recoveries. "Master Servicer" has the meaning set forth in "Summary Information" in this prospectus supplement. "MERS Designated Mortgage Loan" means any mortgage loan for which (1) Mortgage Electronic Registration Systems, Inc., its successors and assigns has been designated the mortgagee of record and (2) the trustee is designated the investor pursuant to the procedures manual of MERSCORP, Inc. S-165 "Moody's" has the meaning set forth in "Ratings" in this prospectus supplement. "NatCity" means National City Mortgage Co., an Ohio corporation, and its successors. "NatCity Mortgage Loans" means the mortgage loans in the trust that were acquired by GSMC from NatCity. "Net Monthly Excess Cash Flow" has the meaning set forth in "Description of the Certificates--Overcollateralization Provisions" in this prospectus supplement. "Net Swap Payment Amount" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Net Swap Receipt Amount" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Offered Certificates" has the meaning set forth in "Description of the Certificates" in this prospectus supplement. "One-Month LIBOR" means, with respect to any LIBOR Determination Date, the London interbank offered rate for one-month United States dollar deposits which appears in the Telerate Page 3750 as of 11:00 a.m., London time, on that date. If the rate does not appear on Telerate Page 3750, the rate for that day will be determined on the basis of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m. (London time), on that day to prime banks in the London interbank market. The Securities Administrator will be required to request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two quotations are provided, the rate for that day will be the arithmetic mean of the quotations (rounded upwards if necessary to the nearest whole multiple of 1/16%). If fewer than two quotations are provided as requested, the rate for that day will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Securities Administrator (after consultation with the depositor), at approximately 11:00 a.m. (New York City time) on that day for loans in United States dollars to leading European banks. "One-Month LIBOR Loan Index" has the meaning set forth in "The Mortgage Loan Pool--The Indices" in this prospectus supplement. "One-Year CMT Loan Index" has the meaning set forth in "The Mortgage Loan Pool--The Indices" in this prospectus supplement. "One-Year LIBOR Loan Index" has the meaning set forth in "The Mortgage Loan Pool--The Indices" in this prospectus supplement. "Optional Clean-Up Call" has the meaning set forth in "The Agreements--Termination; Optional Clean-Up Call" in this prospectus supplement. "Original Sale Date" means February 10, 2006 with respect to the Countrywide Mortgage Loans, January 20, 2006 with respect to the FNBN Mortgage Loans, January 24, 2006 with respect to the NatCity Mortgage Loans, January 9, 2006 and January 19, 2006 with respect to the GreenPoint Mortgage Loans and the date specified in the applicable mortgage loan purchase agreements with respect to the other mortgage loan sellers. "Overcollateralized Amount" has the meaning set forth in "Description of the Certificates--Overcollateralization Provisions" in this prospectus supplement. S-166 "Overcollateralization Deficiency" has the meaning set forth in "Description of the Certificates--Overcollateralization Provisions" in this prospectus supplement. "Overcollateralization Floor" means 0.50% of the aggregate Stated Principal Balance of the mortgage loans as of the cut-off date. "Overcollateralization Reduction Amount" has the meaning set forth in "Description of the Certificates--Overcollateralization Provisions" in this prospectus supplement. "P&I Advances" means advances made by the servicer or the Master Servicer (including the trustee as successor master servicer and any other successor master servicer) acting as back-up servicer on each Distribution Date with respect to delinquent payments of interest and principal on the mortgage loans, less the servicing fee or the master servicing fee, as applicable. "Par Value" means an amount equal to the greater of (a) the sum of (1) 100% of the unpaid principal balance of the mortgage loans (other than mortgage loans related to REO properties), (2) interest accrued and unpaid on the mortgage loans, (3) any unreimbursed P&I Advances, fees and expenses of the Master Servicer, the Securities Administrator and the Trustee, (4) any Swap Termination Payment other than a Defaulted Swap Termination Payment owed to the Swap Provider and (5) with respect to any REO Property, the lesser of (x) the appraised value of each REO property, as determined by the higher of two appraisals completed by two independent appraisers selected by the Master Servicer or its designee, and (y) the unpaid principal balance of each mortgage loan related to any REO property, and (b) the sum of (1) the aggregate unpaid Class Certificate Balance of each class of certificates then outstanding, (2) interest accrued and unpaid on the certificates, (3) any unreimbursed P&I Advances, fees and expenses of the Master Servicer, the Securities Administrator and the Trustee and (4) any Swap Termination Payment other than a Defaulted Swap Termination Payment owed to the Swap Provider. "Pass-Through Rate" has the meaning set forth in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "Periodic Cap" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Plans" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "PMI" has the meaning set forth in "The Mortgage Loan Pool--General" in this prospectus supplement. "Prepayment Assumption" has the meaning set forth in "Prepayment and Yield Considerations--Structuring Assumptions" in this prospectus supplement. "Prepayment Period" means, with respect to any Distribution Date, the calendar month preceding the month in which that Distribution Date occurs. "Prepayment Premium" has the meaning set forth in "The Mortgage Loan Pool--Prepayment Premiums" in this prospectus supplement. "Principal Distribution Amount" has the meaning set forth in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "Principal Remittance Amount" means, with respect to any Distribution Date, to the extent of funds available for distribution as described in this prospectus supplement, the amount equal S-167 to the sum of the following amounts (without duplication) with respect to the related Due Period: (i) each scheduled payment of principal on a mortgage loan due during the related Due Period and received by the applicable servicer on or prior to the related Determination Date or advanced by the applicable servicer for the related Servicer Remittance Date; (ii) all full and partial principal prepayments received on the mortgage loans during the related Prepayment Period; (iii) all net Liquidation Proceeds, Condemnation Proceeds and Insurance Proceeds on the mortgage loans allocable to principal and received during the related Prepayment Period; (iv) the portion of the repurchase price allocable to principal with respect to each mortgage loan that was repurchased with respect to that Distribution Date; (v) the portion of Substitution Adjustment Amounts allocable to principal received in connection with the substitution of any mortgage loan as of that Distribution Date; and (vi) the portion of the proceeds received with respect to the Optional Clean-Up Call (to the extent they relate to principal). "PTCE" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "PTE" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "Rate Adjustment Cap" has the meaning set forth in the "The Mortgage Loan Pool--General" in this prospectus supplement. "Rating Agency Condition" means, with respect to any action to which a Rating Agency Condition applies, that each rating agency shall have been given ten days (or such shorter period as is acceptable to each rating agency) prior notice of that action and that each of the rating agencies shall have notified the trustee, the Master Servicer, the depositor and the trust in writing that such action will not result in a reduction, qualification or withdrawal of the then current rating of the certificates that it maintains. "Rating Agencies" Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. "Record Date" means the last business day of the applicable Interest Accrual Period, unless the certificates are issued in definitive form, in which case the Record Date will be the last business day of the month immediately preceding the month in which that Distribution Date occurs. "Reference Banks" means leading banks selected by the Securities Administrator (after consultation with the depositor) and engaged in transactions in Eurodollar deposits in the international Eurocurrency market. "REIT" has the meaning set forth in "Federal Income Tax Consequences--Status of the LIBOR Certificates" in this prospectus supplement. "Required Swap Counterparty Rating" means, with respect to a counterparty or entity guaranteeing the obligations of such counterparty, (x) either (i) if such counterparty or entity has only a long-term rating by Moody's, a long-term senior, unsecured debt obligation rating, financial program rating or other similar rating (as the case may be, the "Long-Term Rating") of at least "Aa3" by Moody's and if rated "Aa3" by Moody's is not on negative credit watch by Moody's or (ii) if such counterparty or entity has a Long-Term Rating and a short-term rating by Moody's, a Long-Term Rating of at least "A1" by Moody's and a short-term rating of "P-1" by Moody's and, in each case, such rating is not on negative credit watch by Moody's and (y) (i) a short-term rating of at least "A-1" by S&P or (ii) if such counterparty or entity does not have a short-term rating by S&P, a Long-Term Rating of at least "A+" by S&P. S-168 "Residual Certificates" means the Class R and Class RC certificates. "Responsible Parties" Countrywide Home Loans, Inc., a New York corporation, First National Bank of Nevada, a national banking association, National City Mortgage Co., an Ohio corporation, GreenPoint Mortgage Funding, Inc., a New York corporation and Goldman Sachs Mortgage Company, a New York limited partnership. "Restricted Group" has the meaning set forth in "ERISA Considerations" in this prospectus supplement. "S&P" has the meaning set forth in "Ratings" in this prospectus supplement. "Senior Enhancement Percentage" means, with respect to any Distribution Date, the percentage obtained by dividing (x) the sum of (i) the aggregate Class Certificate Balances of the Subordinated Certificates and (ii) the Overcollateralized Amount (in each case after taking into account the distributions of the related Principal Distribution Amount for that Distribution Date) by (y) the aggregate Stated Principal Balance of the mortgage loans for that Distribution Date. "Senior Specified Enhancement Percentage" on any date of determination is approximately 12.30%. "Sequential Trigger Event" means, if (x) on any Distribution Date before the 37th Distribution Date (i) on that Distribution Date the 60 Day+ Rolling Average equals or exceeds 40% of the prior period's Credit Enhancement Percentage for the Class A Certificates or (ii) the aggregate amount of Realized Losses incurred since the cut-off date through the last day of the related Prepayment Period divided by the aggregate scheduled principal balance of the Mortgage Loans as of the cut-off date exceeds 0.550%, or (y) on or after the 37th Distribution Date, a Trigger Event is in effect "Servicer Remittance Date" means, with respect to any Distribution Date, the 18th day of the month or if the 18th is not a business day the immediately preceding business day, except with regard to Chase when such date will be the 23rd day of the month or if the 23rd day is not a business day, the immediately preceding business day. "Significance Estimate" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Significance Percentage" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Six-Month LIBOR Loan Index" has the meaning set forth in "The Mortgage Loan Pool--The Indices" in this prospectus supplement. "Specified Overcollateralized Amount" means, prior to the Stepdown Date, an amount equal to 0.50% of the aggregate Stated Principal Balance of the mortgage loans as of the cut-off date; on and after the Stepdown Date, an amount equal to 1.00% of the aggregate Stated Principal Balance of the mortgage loans for that Distribution Date, subject, until the Class Certificate Balance of each class of LIBOR Certificates has been reduced to zero, to a minimum amount equal to the Overcollateralization Floor; provided, however, that if, on any Distribution Date, a Trigger Event has occurred, the Specified Overcollateralized Amount will not be reduced to the applicable percentage of the then Stated Principal Balance of the mortgage loans but instead will remain the same as the prior period's Specified Overcollateralized Amount until the Distribution Date on which a Trigger Event is no longer occurring. When the Class Certificate S-169 Balance of each class of LIBOR Certificates has been reduced to zero, the Specified Overcollateralized Amount will thereafter equal zero. "Stated Principal Balance" means, as to any mortgage loan and as of any date of determination, (i) the principal balance of the mortgage loan at the cut-off date after giving effect to payments of principal due on or before such date (whether or not received), minus (ii) all amounts previously remitted to the Securities Administrator with respect to the related mortgage loan representing payments or recoveries of principal, including advances in respect of scheduled payments of principal. For purposes of any Distribution Date, the Stated Principal Balance of any mortgage loan will give effect to any scheduled payments of principal received by the applicable servicer on or advanced prior to the related Determination Date or advanced by the applicable servicer for the related Servicer Remittance Date and any unscheduled principal payments and other unscheduled principal collections received during the related Prepayment Period, and the Stated Principal Balance of any mortgage loan that has prepaid in full or has been liquidated during the related Prepayment Period will be zero. "Stepdown Date" means the earlier to occur of (a) the date on which the aggregate Class Certificate Balance of the Class A certificates has been reduced to zero and (b) the later to occur of (i) the Distribution Date in March 2009 and (ii) the first Distribution Date on which the Credit Enhancement Percentage for the Class A certificates is greater than or equal to the Senior Specified Enhancement Percentage. "Structuring Assumptions" has the meaning set forth in "Prepayment and Yield Considerations--Structuring Assumptions" in this prospectus supplement. "Subordinated Certificates" means any of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 or Class B-4 certificates. "Subsequent Recovery" has the meaning set forth in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "Substitute Mortgage Loan" means a mortgage loan substituted by the responsible party for a mortgage loan that is in breach of the responsible party's representations and warranties regarding the mortgage loans, which must, on the date of such substitution: (i) have an outstanding principal balance, after deduction of all scheduled payments due in the month of substitution (or in the case of a substitution of more than one mortgage loan for a deleted mortgage loan, an aggregate principal balance), not in excess of the Stated Principal Balance of the deleted mortgage loan; (ii) be accruing interest at a rate no lower than and not more than 1% per annum higher than, that of the mortgage loan in breach; (iii) have a remaining term to maturity not greater than and not more than one year less than that of the deleted mortgage loan; (iv) be of the same type as the deleted mortgage loan (i.e., adjustable rate with the same periodic cap, lifetime rate cap, and index); and (v) comply with each representation and warranty made by the applicable responsible party. "Substitution Adjustment Amount" means with respect to any mortgage loan, the amount remitted by a servicer on the applicable Distribution Date which is the difference between the outstanding principal balance of a substituted mortgage loan as of the date of the substitution and the outstanding principal balance of the replaced mortgage loan as of the date of the substitution. "Substitution Event" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. S-170 "Supplemental Interest Trust" has the meaning set forth in "Description of the Certificates--Supplemental Interest Trust" in this prospectus supplement. "Swap Provider" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Swap Termination Payments" has the meaning set forth in "Description of the Certificates--Interest Rate Swap Agreement" in this prospectus supplement. "Telerate Page 3750" means the display page currently so designated on the Bridge Telerate Service (or any other page as may replace that page on that service for the purpose of displaying comparable rates or prices). "Total Monthly Excess Spread" means, with respect to any Distribution Date, the excess, if any, of (x) the interest collected on the mortgage loans by a servicer on or prior to the related Determination Date or advanced by such servicer for the related Servicer Remittance Date, net of expenses used to determine the Expense Fee Rate and plus Net Swap Receipt Amounts and less Net Swap Payment Amounts for such Distribution Date, over (y) the amounts paid to the classes of certificates pursuant to clause (i) of the sixth full paragraph of "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. "Trigger Event" means with respect to any Distribution Date, means the circumstances in which (i) the quotient (expressed as a percentage) of (x) the rolling three month average of the aggregate unpaid principal balance of the mortgage loans that are sixty days delinquent or more, including mortgage loans in foreclosure, all REO properties and mortgage loans where the mortgagor has filed for bankruptcy, and (y) the aggregate unpaid principal balance of the mortgage loans, as of the last day of the related Due Period, equals or exceeds 40.00% of the Senior Enhancement Percentage as of the last day of the prior Due Period or (ii) the aggregate amount of realized losses incurred since the cut-off date through the last day of the related Prepayment Period divided by the aggregate Stated Principal Balance of the mortgage loans as of the cut-off date exceeds the applicable percentages described below with respect to such Distribution Date:
Distribution Date Occurring in Cumulative Realized Loss Percentage ------------------------------ ----------------------------------- March 2008 - February 2009 0.250% for the first month, plus an additional 1/12th of 0.300% for each month thereafter (e.g., approximately 0.275% in April 2008) March 2009 - February 2010 0.550% for the first month, plus an additional 1/12th of 0.300% for each month thereafter (e.g., approximately 0.575% in April 2009) March 2010 - February 2011 0.850% for the first month, plus an additional 1/12th of 0.250% for each month thereafter (e.g., approximately 0.871% in April 2010) March 2011 - February 2012 1.100% for the first month, plus an additional 1/12th of 0.150% for each month thereafter (e.g., approximately 1.113% in April 2011) March 2012 and thereafter 1.250%
S-171 "Trust REMIC" has the meaning set forth in "Federal Income Tax Consequences--General" in this prospectus supplement. "Underwriting Guidelines" has the meaning set forth in "The Mortgage Loan Pool--Underwriting Guidelines" in this prospectus supplement. "Unpaid Interest Amount" for any class of certificates and any Distribution Date will equal the sum of (a) the portion of Accrued Certificate Interest from Distribution Dates prior to the current Distribution Date remaining unpaid immediately prior to the current Distribution Date, and (b) interest on the amount in clause (a) at the applicable Pass-Through Rate (to the extent permitted by applicable law). "WAC Cap" has the meaning set forth in "Description of the Certificates--Distributions of Interest and Principal" in this prospectus supplement. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] S-172 ANNEX I CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of book-entry certificates holding securities through Clearstream Banking, societe anonyme or Euroclear Bank, as operator of the Euroclear System, in Europe (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless, under currently applicable laws, (i) each clearing system, bank or other financial institution that holds customers securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for non-U.S. Persons (Form W-8BEN). Beneficial owners of book-entry certificates that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). Non-U.S. Persons that are beneficial owners of book-entry certificates residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form W-8BEN. If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of such change. Exemption for non-U.S. Persons with effectively connected income (Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a book-entry certificate files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed. The term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States, any State of the United States or the District of Columbia, or (iii) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as U.S. Persons). This summary does not deal with all aspects of U.S. federal income tax withholding that may be relevant to foreign beneficial owners of book-entry certificates. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of book-entry certificates. Further, the U.S. Treasury Department has issued regulations that revise certain aspects of the system for withholding on amounts paid to foreign persons. Under these regulations, interest or "original issue discount" paid to a nonresident alien is exempt from U.S. withholding taxes (including backup withholding) provided that the holder complies with the revised certification procedures. I-11 ANNEX II INTEREST RATE SWAP NOTIONAL AMOUNT AMORTIZATION SCHEDULE Distribution Period Interest Rate Swap Notional (months) Distribution Date Amount ($) --------------------- ------------------------ ----------------------------- 1 March 2006 999,721,397.67 2 April 2006 988,237,879.97 3 May 2006 939,951,929.85 4 June 2006 894,016,157.77 5 July 2006 850,316,194.06 6 August 2006 808,743,234.01 7 September 2006 769,193,767.05 8 October 2006 731,569,319.24 9 November 2006 695,776,208.18 10 December 2006 661,725,309.96 11 January 2007 629,331,837.29 12 February 2007 598,515,128.61 13 March 2007 569,198,447.27 14 April 2007 541,308,790.64 15 May 2007 514,776,708.42 16 June 2007 489,536,129.77 17 July 2007 465,524,198.93 18 August 2007 442,681,118.78 19 September 2007 420,950,002.02 20 October 2007 400,276,194.90 21 November 2007 380,609,274.79 22 December 2007 339,554,402.20 23 January 2008 323,023,435.62 24 February 2008 307,297,117.43 25 March 2008 292,336,287.69 26 April 2008 278,103,692.06 27 May 2008 264,563,888.88 28 June 2008 251,683,161.20 29 July 2008 239,429,432.70 30 August 2008 227,772,115.61 31 September 2008 216,681,937.11 32 October 2008 206,131,629.69 33 November 2008 196,095,178.76 34 December 2008 139,711,953.70 35 January 2009 132,910,671.82 36 February 2009 126,440,422.56 37 March 2009 120,285,096.42 38 April 2009 114,429,367.75 39 May 2009 108,858,656.63 40 June 2009 103,559,092.53 41 July 2009 98,517,479.88 42 August 2009 93,721,265.19 43 September 2009 89,158,505.79 44 October 2009 84,817,840.13 45 November 2009 80,688,459.52 46 December 2009 76,760,081.22 II-11 Distribution Period Interest Rate Swap Notional (months) Distribution Date Amount ($) --------------------- ------------------------ ----------------------------- (months) 47 January 2010 73,022,922.86 48 February 2010 69,467,678.08 49 March 2010 66,085,493.36 50 April 2010 62,867,946.06 51 May 2010 59,807,023.31 52 June 2010 56,895,102.24 53 July 2010 54,124,930.92 54 August 2010 51,489,610.26 55 September 2010 48,982,576.97 56 October 2010 46,597,587.12 57 November 2010 44,328,471.62 December 2010 and 58 thereafter 0.00 II-22 SCHEDULE A - STRUCTURAL AND COLLATERAL TERM SHEET GSAA HOME EQUITY TRUST 2006-3 TERM SHEET ---------------------------------------- IMPORTANT NOTICE REGARDING THE CONDITIONS FOR THIS OFFERING OF ASSET-BACKED SECURITIES The asset-backed securities referred to in these materials are being offered when, as and if issued. In particular, you are advised that asset-backed securities, and the asset pools backing them, are subject to modification or revision (including, among other things, the possibility that one or more classes of securities may be split, combined or eliminated), at any time prior to issuance or availability of a final prospectus. As a result, you may commit to purchase securities that have characteristics that may change, and you are advised that all or a portion of the securities may not be issued that have the characteristics described in these materials. Our obligation to sell securities to you is conditioned on the securities having the characteristics described in these materials. If we determine that condition is not satisfied in any material respect, we will notify you, and neither the issuer nor the underwriter will have any obligation to you to deliver all or any portion of the securities which you have committed to purchase, and there will be no liability between us as a consequence of the non-delivery. STATEMENT REGARDING THIS FREE WRITING PROSPECTUS The Depositor has filed a registration statement (including the prospectus (the "Prospectus")) with the SEC for the offering to which this communication relates. Before you invest, you should read the Prospectus in the registration statement and other documents the Depositor has filed with the SEC for more complete information about the Depositor, the issuing trust and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Depositor or Goldman, Sachs & Co., the underwriter for this offering, will arrange to send the Prospectus to you if you request it by calling toll-free 1-866-471-2526. IMPORTANT NOTICE RELATING TO AUTOMATICALLY GENERATED E-MAIL DISCLAIMERS ANY LEGENDS, DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR AT THE BOTTOM OF THE E-MAIL COMMUNICATION TO WHICH THIS FREE WRITING PROSPECTUS IS ATTACHED RELATING TO (1) THESE MATERIALS NOT CONSTITUTING AN OFFER (OR A SOLICITATION OF AN OFFER), (2) NO REPRESENTATION THAT THESE MATERIALS ARE ACCURATE OR COMPLETE AND MAY NOT BE UPDATED OR (3) THESE MATERIALS POSSIBLY BEING CONFIDENTIAL ARE NOT APPLICABLE TO THESE MATERIALS AND SHOULD BE DISREGARDED. SUCH LEGENDS, DISCLAIMERS OR OTHER NOTICES HAVE BEEN AUTOMATICALLY GENERATED AS A RESULT OF THESE MATERIALS HAVING BEEN SENT VIA BLOOMBERG OR ANOTHER SYSTEM.
$999,623,000 (Approximate) GSAA Home Equity Trust 2006-3 GS Mortgage Securities Corp., Depositor Asset-Backed Certificates Overview of the Offered Certificates ------------------------------------ --------------------------------------------------------------------------------------------------------------------- Expected Estimated Approximate Certificate Credit Initial Pass- Avg. Life Certificates Principal Balance(1) Type Support(2) Through Rate(3) (yrs)(4) --------------------------------------------------------------------------------------------------------------------- A-1 $549,219,000 Sr 6.15% LIBOR + [ ]% 1.00 A-2 $186,435,000 Sr 6.15% LIBOR + [ ]% 3.00 A-3 $190,768,000 Sr 15.54% LIBOR + [ ]% 5.64 A-4 $21,197,000 Sr 6.15% LIBOR + [ ]% 5.64 M-1 $16,661,000 Sub 4.50% LIBOR + [ ]% 4.43 M-2 $5,049,000 Sub 4.00% LIBOR + [ ]% 4.42 M-3 $5,049,000 Sub 3.50% LIBOR + [ ]% 4.42 M-4 $5,049,000 Sub 3.00% LIBOR + [ ]% 4.42 M-5 $5,049,000 Sub 2.50% LIBOR + [ ]% 4.39 B-1 $5,049,000 Sub 2.00% LIBOR + [ ]% 4.34 B-2 $5,049,000 Sub 1.50% LIBOR + [ ]% 4.16 B-3 $5,049,000 Sub 1.00% LIBOR + [ ]% 3.83 --------------------------------------------------------------------------------------------------------------------- TOTAL $999,623,000 --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------ S&P /Moody's Principal Payment Expected Certificates Window(4) (5) Ratings ------------------------------------------------------------------ A-1 03/06 - 05/08 AAA/Aaa A-2 05/08 - 02/10 AAA/Aaa A-3 02/10 - 07/12 AAA/Aaa A-4 02/10 - 07/12 AAA/Aaa M-1 04/09 - 07/12 AA+/Aa1 M-2 04/09 - 07/12 AA/Aa2 M-3 04/09 - 07/12 AA-/Aa3 M-4 04/09 - 07/12 A/A1 M-5 03/09 - 07/12 A-/A2 B-1 03/09 - 07/12 BBB+/A3 B-2 03/09 - 12/11 BBB/Baa1 B-3 03/09 - 03/11 BBB-/Baa3 ------------------------------------------------------------------ TOTAL ------------------------------------------------------------------
Overview of the Non-Offered Certificates ---------------------------------------- ------------------------------------------------------------------------------- B-4 $5,049,000 Sub 0.50% LIBOR + [ ]% N/A N/A N/A ------------------------------------------------------------------------------- (1) The initial aggregate principal balance of the Principal Certificates will be subject to an upward or downward variance of no more than approximately 5%. The principal balances of the Principal Certificates are calculated using the scheduled principal balances of the Mortgage Loans as of the Statistical Calculation Date rolled one month at 6% CPR. (2) Fully funded overcollateralization of approximately 0.50%. (3) See the "Structure of the Certificates" section of this Term Sheet for more information on the Pass-Through Rates of the Principal Certificates. (4) Assuming payment based on the pricing speeds outlined in "Key Terms - Pricing Prepayment Assumption" and to a 10% Optional Clean-up Call on all certificates. (5) The stated final maturity date for the certificates is the Distribution Date in March 2036. Selected Mortgage Pool Data(6) -------------------------------- ------------------------------------------------------------------------------- Aggregate ------------------------------------------------------------------------------- Scheduled Principal Balance: $1,015,029,367 Number of Mortgage Loans: 3,910 Average Scheduled Principal Balance: $259,598 Interest Only Loans: 90.46% Weighted Average Gross Coupon: 6.40% Weighted Average Net Coupon(7): 6.14% Non-Zero Weighted Average FICO Score: 706 Weighted Average Original LTV Ratio: 76.09% Weighted Average Combined Original LTV Ratio: 85.78% Weighted Average Stated Remaining Term (months): 358 Weighted Average Seasoning (months): 2 Weighted Average Months to Roll: 51 Weighted Average Gross Margin: 2.66% Weighted Average Initial Rate Cap: 4.87% Weighted Average Periodic Rate Cap: 1.60% Weighted Average Gross Maximum Lifetime Rate: 11.97% % of Silent Seconds: 55.58% Non-Zero Weighted Average DTI: 38.32% % of Loans with MI: 4.09% ------------------------------------------------------------------------------- (6) All percentages calculated herein are percentages of scheduled principal balance unless otherwise noted as of the Statistical Calculation Date. (7) The Weighted Average Net Coupon is equivalent to the Weighted Average Gross Coupon less the Expense Fee Rate. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-2 Features of the Transaction --------------------------- |X| The mortgage loans in the transaction consist of Alt-A type, adjustable rate, first lien residential mortgage loans (the "Mortgage Loans") originated or acquired by Countrywide Home Loans, Inc. ("Countrywide") (29.86%), the GS Mortgage Conduit ("Conduit") (30.27%), First National Bank of Nevada ("FNBN") (17.75%), National City ("NatCity") (12.18%) and GreenPoint Mortgage Funding ("GreenPoint") (9.94%). |X| The Mortgage Loans will be serviced or sub-serviced by Countrywide Home Loans Servicing LP ("Countrywide Servicing") (57.45%), JPMorgan Chase Bank, National Association ("JPMorgan Chase") (17.75%), NatCity (12.18%) and others (12.62%). |X| Credit support for the certificates will be provided through a senior/subordinate structure, upfront fully funded overcollateralization of approximately 0.50%, excess spread and mortgage insurance. |X| None of the Mortgage Loans are classified as (a) "high cost" loans under the Home Ownership and Equity Protection Act of 1994, as amended or (b) "high cost" loans under any other applicable state, federal or local law. |X| None of the Mortgage Loans secured by a property in the state of Georgia were originated between October 1, 2002 and March 7, 2003. |X| The transaction will be modeled on INTEX as GSAA0603 and on Bloomberg as GSAA 06-3. |X| This transaction will contain a swap agreement with an initial swap notional amount of approximately $999,721,398. The swap notional amount will amortize in accordance with the swap schedule. Under the swap agreement, on each Distribution Date prior to the termination of the swap agreement, the trust will be obligated to pay an amount equal to a per annum rate of 5.0500% (on a 30/360 basis) on the lesser of the swap notional amount and the aggregate class certificate balance of the LIBOR Certificates to the swap provider and the trust will be entitled to receive an amount equal to a per annum rate of one-month LIBOR (on an actual/360 basis), on the lesser of the swap notional amount and the aggregate class certificate balance of the LIBOR Certificates from the swap provider. See page 24 for swap agreement details. |X| The Offered Certificates will be registered under a registration statement filed with the Securities and Exchange Commission.
Time Table ---------- Expected Closing Date: February 24, 2006 Cut-Off Date: February 1, 2006 Statistical Calculation Date: January 1, 2006 Expected Pricing Date: On or before February 15, 2006 First Distribution Date: March 27, 2006 Key Terms --------- Offered Certificates: Class A, Class M, Class B-1, Class B-2 and Class B-3 Certificates Non-Offered Certificates: Class B-4, Class X and Class R Certificates LIBOR Certificates: Class A, Class M and Class B Certificates Principal Certificates: Class A, Class M and Class B Certificates Class A Certificates: Class A-1, Class A-2, Class A-3 and Class A-4 Certificates Class M Certificates: Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates Class B Certificates: Class B-1, Class B-2, Class B-3 and Class B-4 Certificates Class R Certificates: Class R and Class RC Certificates. The Class R Certificates are not being offered hereby. Depositor: GS Mortgage Securities Corp.
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-3
Sponsor: Goldman Sachs Mortgage Company Subordinate Certificates: Class M and Class B Certificates Underwriter: Goldman, Sachs & Co. Servicers: Countrywide Servicing, JP Morgan Chase, NatCity and others Trustee: U.S. Bank National Association Securities Administrator: JP Morgan Chase Bank, NA Master Servicer: JP Morgan Chase Bank, NA Custodians: Deutsche Bank National Trust Company and JP Morgan Chase Bank, NA Swap Provider: TBD Servicing Fee Rates: 25.0 bps (99.32%) 37.5 bps (0.68%) Expense Fee Rate: The Servicing Fee Rate and any lender-paid mortgage insurance Distribution Date: 25th day of the month or the next Business Day Record Date: For any Distribution Date, the last Business Day of the Interest Accrual Period Delay Days: 0 day delay on the Principal Certificates Day Count: Actual/360 basis for the Principal Certificates Prepayment Period: The calendar month prior to the Distribution Date Due Period: The period commencing on the second day of the calendar month preceding the month in which the Distribution Date occurs and ending on the first day of the calendar month in which the Distribution Date occurs. Interest Accrual Period: For the Principal Certificates, from the prior Distribution Date to the day prior to the current Distribution Date except for the initial accrual period for which interest will accrue from the Closing Date. Pricing Prepayment 30% CPR Assumption:
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-4
Excess Spread: The initial weighted average net coupon of the mortgage pool will be greater than the interest payments on the Principal Certificates, resulting in excess cash flow calculated in the following manner based on the collateral as of the Statistical Calculation Date rolled one month at 6% CPR: Initial Gross WAC(1): 6.3962% Less Fees & Expenses(2): 0.2581% ------------------------------------------------------ Net WAC(1): 6.1381% Less Initial Principal Certificate Coupon (Approx.)(1)(3): 4.7724% Less Initial Swap Outflow:(3) 0.4436% ------------------------------------------------------ Initial Excess Spread(1): 0.9221% (1) This amount will vary on each Distribution Date based on changes to the weighted average interest rate on the Mortgage Loans as well as any changes in day count. (2) Includes the Expense Fee Rate. (3) Assumes one-month LIBOR equal to 4.6020%, initial marketing spreads and a 30-day month. This amount will vary on each distribution date based on changes to the weighted average Pass-Through Rates on the Principal Certificates as well as any changes in day count. Servicer Advancing: Yes, as to principal and interest, subject to recoverability. Compensating Interest: Each Servicer shall provide Compensating Interest equal to the lesser of (A) the aggregate of the prepayment interest shortfalls on the Mortgage Loans for the related Distribution Date resulting from voluntary principal prepayments on the Mortgage Loans during the related Prepayment Period and (B) one-half of the applicable monthly Servicing Fee received for the related Distribution Date, but, in the case of Countrywide (sub-servicing the Conduit Mortgage Loans) and JP Morgan Chase only to the extent of its Servicing Fee for the related Distribution Date. Optional Clean-up Call: The transaction has a 10% optional clean-up call. Rating Agencies: Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc. Minimum Denomination: $50,000 with regard to each of the Offered Certificates Legal Investment: The Offered and Non-Offered Certificates will not be SMMEA eligible. ERISA Eligible: The Underwriter's exemption is expected to apply to the Offered Certificates. However, in addition, for so long as the Swap Agreement is in effect, prospective plan purchasers must be eligible under one or more investor-based exemptions. Prospective purchasers should consult their own counsel. Tax Treatment: All Principal Certificates represent REMIC regular interests subject to certain rights and obligations in respect to the swap agreement; the trustee will treat the rights and obligations in respect of the swap agreement as a position in a notional principal contract. The Class R and Class RC Certificates each represent the residual interest in a REMIC. Prospectus: The Offered Certificates will be offered pursuant to a prospectus supplemented by a prospectus supplement (together, the "Prospectus"). Complete information with respect to the Offered Certificates and the collateral securing them will be contained in the Prospectus. The information herein is qualified in its entirety by the information appearing in the Prospectus. To the extent that the information herein is inconsistent with the Prospectus, the Prospectus shall govern in all respects. Sales of the Offered Certificates may not be consummated unless the purchaser has received the Prospectus. PLEASE SEE "RISK FACTORS" IN THE PROSPECTUS FOR A DESCRIPTION OF INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE OFFERED CERTIFICATES.
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-5 Structure of the Certificates ----------------------------- Description of Principal and Interest Distributions Principal will be paid as described under the definition "Principal Distributions on the Principal Certificates". Prior to the Step-Down Date or so long as a Trigger Event is in effect, all principal collected or advanced on the Mortgage Loans will be paid to the Offered Certificates and the Non-Offered Certificates as described herein. On or after the Step-Down Date, so long as no Trigger Event is in effect, the Offered Certificates and the Non-Offered Certificates will be paid, in order of seniority, principal only to the extent necessary to maintain their credit enhancement target. Excess interest will be available to maintain the overcollateralization target (which is one component of the credit support available to the Certificateholders). Interest will be paid monthly, on all of the LIBOR Certificates, at a rate of one-month LIBOR plus a margin that will step up after the Optional Clean-up Call date, subject to the WAC Cap. The interest paid to each class will be reduced by their allocable share of prepayment interest shortfalls not covered by compensating interest and shortfalls resulting from the application of the Servicemembers Civil Relief Act (or any similar state statute) allocated to such class. Any reductions in the Pass-Through Rate attributable to the WAC Cap will be carried forward with interest at the applicable Pass-Through Rate as described below and will be payable after payment of all required principal payments on such future Distribution Dates. Such carry forward amount will not be paid back after the certificate principal balance of the applicable class has been reduced to zero. Definitions Credit Enhancement. The Principal Certificates are credit enhanced by (1) the Net Monthly Excess Cash Flow from the Mortgage Loans, (2) 0.50% overcollateralization (fully funded upfront) (after the Step-Down Date, so long as a Trigger Event is not in effect, the required overcollateralization will equal 1.00% of the aggregate scheduled principal balance of the Mortgage Loans as of the last day of the related Due Period, subject to a floor equal to 0.50% of the aggregate initial balance of the Mortgage Loans as of the Cut-off Date), and (3) subordination of distributions on the more subordinate classes of certificates to the required distributions on the more senior classes of certificates. Mortgage Insurance. As of the Statistical Calculation Date, all of the Mortgage Loans with original LTVs greater than 80% are covered by borrower and/or lender paid mortgage insurance. Credit Enhancement Percentage. For any Distribution Date, the percentage obtained by dividing (x) the aggregate certificate principal balance of the Subordinate Certificates (including any overcollateralization and taking into account the distributions of the Principal Distribution Amount for such Distribution Date) by (y) the aggregate scheduled principal balance of the Mortgage Loans as of the last day of the related Due Period. Step-Down Date. The earlier of (i) the date on which the principal balance of the Class A Certificates has been reduced to zero and (ii) the later to occur of: (A) the Distribution Date occurring in March 2009; and (B) the first Distribution Date on which the Credit Enhancement Percentage for the Class A Certificates is greater than or equal to 12.30%. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-6
---------------------------------------------------------------------------------------------------- Class Initial Subordination Percentage Step-Down Date Percentage ---------------------------------------------------------------------------------------------------- A 6.15% 12.30% ---------------------------------------------------------------------------------------------------- M-1 4.50% 9.00% ---------------------------------------------------------------------------------------------------- M-2 4.00% 8.00% ---------------------------------------------------------------------------------------------------- M-3 3.50% 7.00% ---------------------------------------------------------------------------------------------------- M-4 3.00% 6.00% ---------------------------------------------------------------------------------------------------- M-5 2.50% 5.00% ---------------------------------------------------------------------------------------------------- B-1 2.00% 4.00% ---------------------------------------------------------------------------------------------------- B-2 1.50% 3.00% ---------------------------------------------------------------------------------------------------- B-3 1.00% 2.00% ---------------------------------------------------------------------------------------------------- B-4 0.50% 1.00% ----------------------------------------------------------------------------------------------------
Trigger Event. A Trigger Event is in effect on any Distribution Date if (i) on that Distribution Date the 60 Day+ Rolling Average equals or exceeds 40% of the prior period's Credit Enhancement Percentage for the Class A Certificates to be specified in the Prospectus (the 60 Day+ Rolling Average will equal the rolling 3 month average percentage of Mortgage Loans that are 60 or more days delinquent, including loans in foreclosure, all REO Property and Mortgage Loans where the mortgagor has filed for bankruptcy) or (ii) during such period, the aggregate amount of realized losses incurred since the Cut-off Date through the last day of the related prepayment period divided by the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date (the "Cumulative Realized Loss Percentage") exceeds the amounts set forth below:
------------------------------------------------------------------------------------------------------------------- Distribution Date Cumulative Realized Loss Percentage: ------------------------------------------------------------------------------------------------------------------- March 2008 - February 2009 0.250% for the first month, plus an additional 1/12th of 0.300% for each month thereafter (e.g., approximately 0.275% in April 2008) ------------------------------------------------------------------------------------------------------------------- March 2009 - February 2010 0.550% for the first month, plus an additional 1/12th of 0.300% for each month thereafter (e.g., approximately 0.575% in April 2009) ------------------------------------------------------------------------------------------------------------------- March 2010 - February 2011 0.850% for the first month, plus an additional 1/12th of 0.250% for each month thereafter (e.g., approximately 0.871% in April 2010) ------------------------------------------------------------------------------------------------------------------- March 2011 - February 2012 1.100% for the first month, plus an additional 1/12th of 0.150% for each month thereafter (e.g., approximately 1.113% in April 2011) ------------------------------------------------------------------------------------------------------------------- March 2012 and thereafter 1.250% -------------------------------------------------------------------------------------------------------------------
Sequential Trigger Event. A Sequential Trigger Event is in effect on any Distribution Date if, before the 37th Distribution Date, (i) on that Distribution Date the 60 Day+ Rolling Average equals or exceeds 40% of the prior period's Credit Enhancement Percentage for the Class A Certificates (the 60 Day+ Rolling Average will equal the rolling 3 month average percentage of Mortgage Loans that are 60 or more days delinquent, including loans in foreclosure, all REO Property and Mortgage Loans where the mortgagor has filed for bankruptcy), (ii), the aggregate amount of Realized Losses incurred since the Cut-Off Date through the last day of the related Prepayment Period divided by the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-Off Date exceeds 0.550%, or (iii) if, on or after the 37th Distribution Date, a Trigger Event is in effect. Step-Up Coupons. For all Principal Certificates the coupon will increase after the first distribution date on which the Optional Clean-up Call is first exercisable, should the call not be exercised. The margin for the Class A Certificates will increase to 2 times the margin at issuance and the margin for the Class M and Class B Certificates will increase to 1.5 times the margin at issuance. Class A-1 Pass-Through Rate. The Class A-1 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class A-2 Pass-Through Rate. The Class A-2 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-7 Class A-3 Pass-Through Rate. The Class A-3 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class A-4 Pass-Through Rate. The Class A-4 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class M-1 Pass-Through Rate. The Class M-1 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class M-2 Pass-Through Rate. The Class M-2 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class M-3 Pass-Through Rate. The Class M-3 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class M-4 Pass-Through Rate. The Class M-4 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class M-5 Pass-Through Rate. The Class M-5 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class B-1 Pass-Through Rate. The Class B-1 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class B-2 Pass-Through Rate. The Class B-2 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class B-3 Pass-Through Rate. The Class B-3 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. Class B-4 Pass-Through Rate. The Class B-4 Certificates will accrue interest at a variable rate equal to the lesser of (i) one-month LIBOR plus [ ]% ([ ]% after the first distribution date on which the Optional Clean-up Call is exercisable) and (ii) the WAC Cap. WAC Cap. As to any Distribution Date, a per annum rate equal to the product of (i) 30 divided by the actual number of days in the Interest Accrual Period and (ii) the sum of (A) the weighted average gross coupon of the Mortgage Loans in effect on the beginning of the related Due Period less the Expense Fee Rate, if necessary and (B) the swap receivable into the trust, if any, less swap payments out of the trust, if any, divided by the Mortgage Loan balance at the beginning of the related Due Period multiplied by 12 (calculated on an actual/360 basis with respect to the Principal Certificates). Basis Risk Carry Forward Amount. As to any Distribution Date, and any class of LIBOR Certificates, a supplemental interest amount for each class will equal the sum of (i) the excess, if any, of interest that would otherwise be due on such class of certificates at such certificates' applicable pass-through rate (without regard to the WAC Cap) over interest due on such class of certificates at a rate equal to the WAC Cap, (ii) any Basis Risk Carry Forward Amount for such class remaining unpaid for such certificate from prior Distribution Dates, and (iii) interest on the amount in clause (ii) at the certificates' applicable pass-through rate (without regard to the WAC Cap). In the event any class of certificates is no longer outstanding, the applicable certificateholders will not be entitled to receive Basis Risk Carry Forward Amounts for that class of certificates. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-8 Accrued Certificate Interest. For each class of LIBOR Certificates on any Distribution Date, the amount of interest accrued during the related Interest Accrual Period on the related class certificate balance immediately prior to such Distribution Date (or from the Closing Date in the case of the first Distribution Date) at the related pass-through rate as reduced by that class' share of net prepayment interest shortfalls and any shortfalls resulting from the application of the Servicemembers Civil Relief Act or any similar state statutes. Interest Remittance Amount on the Offered Certificates. For any Distribution Date, the portion of funds available for distribution on such Distribution Date attributable to any swap receipts and to interest received or advanced on the Mortgage Loans less the Expense Fee Rate, swap payments and certain swap termination payments owed to the swap provider. Realized Losses. With respect to any defaulted Mortgage Loan that is liquidated, the amount of loss realized equal to the portion of the principal balance remaining unpaid after application of all liquidation proceeds, insurance proceeds and condemnation awards, net of amounts reimbursable to the Servicer for the related advances and the applicable servicing fees in respect of such Mortgage Loan. Interest Distributions on the Principal Certificates. On each Distribution Date, interest distributions from the Interest Remittance Amount will be allocated as follows: (i) to the Supplemental Interest Trust, swap payments and certain swap termination payments owed to the swap provider, if any; (ii) from the Interest Remittance Amount, pro rata (based on the accrued and unpaid interest distributable to each class of the Class A Certificates), to each class of the Class A Certificates, the related accrued certificate interest and any unpaid accrued certificate interest amount for each class of the Class A Certificates from prior Distribution Dates; (iii) from any remaining Interest Remittance Amounts to the Class M Certificates, sequentially, in ascending numerical order, their Accrued Certificate Interest; and (iv) from any remaining Interest Remittance Amounts to the Class B Certificates, sequentially, in ascending numerical order, their Accrued Certificate Interest. Principal Distributions on the Principal Certificates. On each Distribution Date (a) prior to the Step-Down Date or (b) on which a Trigger Event is in effect, the Principal Distribution Amount will be allocated in the following order of priority: (i) concurrently, to the Class R and Class RC Certificates, the Principal Distribution Amount, until their respective certificate principal balances have been reduced to zero; (ii) to the Class A Certificates, the Principal Distribution Amount, in the following order of priority: (A) sequentially, to the Class A-1 and Class A-2 Certificates, in that order, until their respective certificate principal balances have been reduced to zero; and (B) concurrently, to the Class A-3 and Class A-4 Certificates, allocated pro rata among these certificates, until their respective certificate principal balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions to the Class A-3 and Class A-4 Certificates will be allocated first, to the Class A-3 Certificates, until its certificate principal balance has been reduced to zero and, then, to the Class A-4 Certificates, until its certificate principal balance has been reduced to zero; provided, that if after making distributions pursuant to paragraph (ii) above on any Distribution Date (without giving effect to this proviso) the certificate principal balance of any class of Class A Certificates is reduced to zero (considering the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates as one class for the purposes of this proviso only), then the remaining amount of principal distributable pursuant to this subsection to the Class A Certificates on that Distribution Date, and the amount of principal distributable to the Class A Certificates on all subsequent Distribution Dates pursuant to this subsection, will be required to be distributed to the other Class A Certificates remaining outstanding (in accordance with the paragraph (ii) above, as applicable), until their respective certificate principal balances have been reduced to zero; ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-9 (iii) the portion of the available Principal Distribution Amount remaining after making the distributions described above in paragraphs (i) and (ii) will be distributed in the following order of priority: (A) from any remaining Principal Distribution Amount, to the Class M Certificates, sequentially, in ascending numerical order, until the certificate principal balances thereof have been reduced to zero; and (B) from any remaining Principal Distribution Amount, to the Class B Certificates, sequentially, in ascending numerical order, until the certificate principal balances thereof have been reduced to zero. On each Distribution Date (a) on or after the Step-Down Date and (b) on which a Trigger Event is not in effect, the principal distributions from the Principal Distribution Amount will be allocated in the following order of priority: (i) to the Class A Certificates, the lesser of the Principal Distribution Amount and the Class A Principal Distribution Amount, determined in accordance with the Class A Principal Allocation Percentage for these classes, allocated in the following order of priority: (A) sequentially, to the Class A-1 and Class A-2 Certificates, in that order, until their respective certificate principal balances have been reduced to zero; and (B) concurrently, to the Class A-3 and Class A-4 Certificates, allocated pro rata among these certificates, until their respective certificate principal balances have been reduced to zero; provided, that if after making distributions pursuant to paragraph (i) above on any Distribution Date (without giving effect to this proviso) the certificate principal balance of any class of Class A certificates is reduced to zero (considering the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates as one class for the purposes of this proviso only), then the remaining amount of principal distributable pursuant to this subsection to the Class A certificates on that Distribution Date, and the amount of principal distributable to the Class A certificates on all subsequent Distribution Dates pursuant to this subsection will be required to be distributed to the other Class A certificates remaining outstanding (in accordance with the paragraphs (A) and (B) above, as applicable), until their respective certificate principal balances have been reduced to zero; (ii) the portion of the available Principal Distribution Amount remaining after making the distributions described above in paragraph (i) will be distributed sequentially in the following order of priority: (A) sequentially, in ascending numerical order, to the Class M Certificates, the lesser of the remaining Principal Distribution Amount and the Principal Distribution Amount for each class, until their certificate principal balances have been reduced to zero; and (B) sequentially, in ascending numerical order, to the Class B Certificates, the lesser of the remaining Principal Distribution Amount and the Principal Distribution Amount for each class, until their certificate principal balances have been reduced to zero. Notwithstanding the allocation of principal to the Class A Certificates described above, from and after the Distribution Date on which the aggregate certificate principal balances of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2 and Class B-3 Certificates and the certificate principal balance of the Class X Certificates have been reduced to zero, any principal distributions allocated to the Class A Certificates are required to be allocated pro rata among the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates, until their respective certificate principal balances have been reduced to zero, with the exception that if a Sequential Trigger Event is in effect, principal distributions to the Class A-3 and Class A-4 Certificates will be allocated first to the Class A-3 Certificates, until its certificate principal balance has been reduced to zero, and then to the Class A-4 Certificates, until its certificate principal balance has been reduced to zero. Allocation of Net Monthly Excess Cashflow. For any Distribution Date, any Net Monthly Excess Cashflow shall be paid as follows: ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-10 (i) if and to the extent that the Interest Remittance Amount is insufficient to make the full distributions in respect of interest set forth under the "Interest Distributions on the Principal Certificates" section above, (x) to the holders of each class of the Class A Certificates, any unpaid Accrued Certificate Interest and any unpaid interest shortfall amounts, pro rata among such classes based on their entitlement to those amounts, and then (y) to the holders of each class of the Class M and Class B certificates, any unpaid Accrued Certificate Interest, in the order of priority for such classes set forth in such section; (ii) sequentially, in ascending numerical order, to the Class M Certificates, their unpaid interest shortfall amount; (iii) sequentially, in ascending numerical order, to the Class B Certificates, their unpaid interest shortfall amount; (iv) concurrently, any Class A-1 Basis Risk Carry Forward Amount to the Class A-1 Certificates, any Class A-2 Basis Risk Carry Forward Amount to the Class A-2 Certificates, any Class A-3 Basis Risk Carry Forward Amount to the Class A-3 Certificates and any Class A-4 Basis Risk Carry Forward Amount to the Class A-4 Certificates, pro rata based on their respective certificate principal balances provided that if for any Distribution Date, after the allocation of the remaining unpaid Basis Risk Carry Forward Amounts to the Class A Certificates, the remaining unpaid Basis Risk Carry Forward Amount for any of the Class A Certificates is reduced to zero, any amount of remaining unpaid Basis Risk Carry Forward Amount that would have been allocated to that Class A Certificate for that Distribution Date will instead be allocated, pro-rata, based on their respective remaining unpaid Basis Risk Carry Forward Amounts, to the other Class A Certificates to the extent the other Class A Certificates have any remaining unpaid Basis Risk Carry Forward Amounts; (v) sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class B-1, Class B-2, Class B-3 and Class B-4 Certificates, any Basis Risk Carry Forward Amounts for such classes; and (vi) to the holders of the Class X certificates, any remaining amounts. Supplemental Interest Trust. Funds deposited into the Supplemental Interest Trust on a Distribution Date will include the swap payments owed to the Swap Provider for such Distribution Date and swap receipts from the Swap Provider for such Distribution Date. Funds in the Supplemental Interest Trust will be distributed on each Distribution Date in the following order of priority: (i) to the swap provider, any swap payments and certain swap termination payments (other than termination payments where the swap provider is the defaulting party or the sole affected party) owed for such Distribution Date; (ii) to the certificateholders, to pay interest according to sections (ii), (iii) and (iv) of the "Interest Distributions on the Principal Certificates" section, to the extent unpaid from other available funds; (iii) to the certificateholders, to pay principal according to the section "Principal Distributions on the Principal Certificates", but only to the extent necessary to cause the overcollateralization to be maintained at the required overcollateralization amount (prior to distribution of any amounts due), to the extent unpaid from other available funds; (iv) to the certificateholders, to pay unpaid interest shortfall and Basis Risk Carry Forward Amounts according to the section "Allocation of Net Monthly Excess Cashflow", to the extent unpaid from other available funds; (v) to the swap provider, any termination payments where the swap provider is the defaulting party or the sole affected party owed for such Distribution Date; and (vi) to the holders of the Class X certificates, any remaining amounts. Net Monthly Excess Cashflow. For any Distribution Date, the amount of available funds for such Distribution Date remaining after making all payments of interest and principal to the certificates. Allocation of Realized Losses. All Realized Losses on the Mortgage Loans will be allocated sequentially on each Distribution Date in the following order of priority, (i) to the excess cash flow; (ii) in reduction of the overcollateralization amount; and (iii) sequentially, to the Class B-4, Class B-3, Class B-2, Class B-1, Class M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, in that order. An allocation of any Realized Losses to a Subordinate Certificate on any ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-11 Distribution Date will be made by reducing its certificate principal balance, after taking into account all distributions made on such Distribution Date. Once realized losses are allocated sequentially to the Class B-4, Class B-3, Class B-2, Class B-1, Class M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, their certificate principal balances will be permanently reduced by the amount so allocated, and no amounts will be distributable with respect to such written down amounts on that Distribution Date or any future Distribution Date. Realized Losses will not be allocated to reduce the certificate principal balance of any class of the Class A Certificates. Class A Principal Allocation Percentage. For any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the portion of the Principal Remittance Amount for such Distribution Date that is attributable to principal received or advanced on the Mortgage Loans and the denominator of which is the Principal Remittance Amount for such Distribution Date. Interest Remittance Amount on the Principal Certificates. For any Distribution Date, the portion of funds available for distribution on such Distribution Date attributable to interest received or advanced on the Mortgage Loans less the Servicing Fee and any lender-paid mortgage insurance. Basic Principal Distribution Amount. On any Distribution Date, the excess of (i) the aggregate Principal Remittance Amount over (ii) the Excess Subordinated Amount, if any. Principal Distribution Amount on the Principal Certificates. On any Distribution Date, the sum of (i) the Basic Principal Distribution Amount and (ii) the Extra Principal Distribution Amount. Principal Remittance Amount. On any Distribution Date, the sum of: (i) all scheduled payments of principal due during the related Due Period and received by the Servicer on or prior to the related determination date or advanced by the Servicer for the related servicer remittance date; (ii) the principal portion of all partial and full prepayments received during the related prepayment period; (iii) the principal portion of all net liquidation proceeds, net condemnation proceeds and net insurance proceeds received during the month prior to the month during which such Distribution Date occurs; (iv) the principal portion of the repurchase price for any repurchase price for any repurchased Mortgage Loans, that were repurchased during the period from the servicer remittance date prior to the prior Distribution Date (or from the Closing Date in the case of the first Distribution Date) through the servicer remittance date prior to the current Distribution Date; (v) the principal portion of substitution adjustments received in connection with the substitution of a Mortgage Loan as of such Distribution Date; and (vi) the principal portion of the termination price if the Optional Clean-up Call is exercised. Extra Principal Distribution Amount. For any Distribution Date, the lesser of (i) the excess of (x) interest collected or advanced on the Mortgage Loans for each Distribution Date (less the Expense Fee Rate and plus swap receipts, if any, and less swap payments, if any) and available for distribution on such Distribution Date, over (y) the sum of interest payable on the Principal Certificates on such Distribution Date and (ii) the overcollateralization deficiency amount for such Distribution Date. Excess Subordinated Amount. For any Distribution Date, means the excess, if any of (i) the actual overcollateralization, and (ii) the required overcollateralization for such Distribution Date. Class A Principal Distribution Amount. An amount equal to the excess of: (x) the aggregate certificate principal balance of the Class A Certificates immediately prior to such Distribution Date over (y) the lesser of (A) the product of (i) 87.70% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-12 Class M-1 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date) and (B) the certificate principal balance of the Class M-1 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 91.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class M-2 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), and (C) the certificate principal balance of the Class M-2 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 92.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class M-3 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), and (D) the certificate principal balance of the Class M-3 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 93.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class M-4 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), and (E) the certificate principal balance of the Class M-4 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 94.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class M-5 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the certificate principal balance of the Class M-4 Certificates (after taking into account any payment of the Class M-4 Principal Distribution Amount on such Distribution Date), and (F) the certificate principal balance of the Class M-5 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 95.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class B-1 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-13 Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the certificate principal balance of the Class M-4 Certificates (after taking into account any payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the certificate principal balance of the Class M-5 Certificates (after taking into account any payment of the Class M-5 Principal Distribution Amount on such Distribution Date), and (G) the certificate principal balance of the Class B-1 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 96.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class B-2 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the certificate principal balance of the Class M-4 Certificates (after taking into account any payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the certificate principal balance of the Class M-5 Certificates (after taking into account any payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the certificate principal balance of the Class B-1 Certificates (after taking into account any payment of the Class B-1 Principal Distribution Amount on such Distribution Date), and (H) the certificate principal balance of the Class B-2 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 97.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class B-3 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the certificate principal balance of the Class M-4 Certificates (after taking into account any payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the certificate principal balance of the Class M-5 Certificates (after taking into account any payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the certificate principal balance of the Class B-1 Certificates (after taking into account any payment of the Class B-1 Principal Distribution Amount on such Distribution Date), (H) the certificate principal balance of the Class B-2 Certificates (after taking into account any payment of the Class B-2 Principal Distribution Amount on such Distribution Date), and (I) the certificate principal balance of the Class B-3 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 98.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. Class B-4 Principal Distribution Amount. An amount equal to the excess of: (x) the sum of (A) the aggregate certificate principal balance of the Class A Certificates (after taking into account any payment of the Class A Principal Distribution Amount on such Distribution Date), (B) the certificate principal balance of the Class M-1 Certificates (after taking into account any payment of the Class M-1 Principal Distribution Amount on such Distribution Date), (C) the certificate principal balance of the Class M-2 Certificates (after taking into account any payment of the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the certificate principal balance of the Class M-3 Certificates (after taking into account any payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the certificate principal balance of the Class M-4 Certificates (after taking into account any payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (F) the certificate principal balance of the Class M-5 Certificates (after taking into account any payment of the Class M-5 Principal Distribution Amount on such Distribution Date), (G) the certificate principal balance of the Class B-1 Certificates (after taking into account any payment of the Class B-1 Principal Distribution Amount on such Distribution Date), (H) the certificate principal balance of the Class B-2 Certificates (after taking into account any payment of the Class B-2 Principal Distribution Amount on such Distribution Date), (I) the certificate principal balance of the Class B-3 Certificates (after taking into account any payment of the Class B-3 Principal Distribution Amount on such Distribution Date) and (J) the certificate ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-14 principal balance of the Class B-4 Certificates immediately prior to such Distribution Date, over (y) the lesser of (A) the product of (i) 99.00% and (ii) the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date, and (B) the excess, if any, of the aggregate scheduled principal balance of the Mortgage Loans for such Distribution Date over 0.50% of the aggregate scheduled principal balance of the Mortgage Loans as of the Cut-off Date. A-15
Remaining Prepayment Penalty Term by Product Type(1) (2) -------------------------------------------------------- Product No Penalty 1-12 Months 13-24 Months 25-36 Months 37-48 Months --------------- -------------------- ------------------- -------------------- ------------------- -------------------- 10 Year ARM $823,800.00 $0.00 $0.00 $1,066,400.00 $0.00 2 Year ARM $43,739,589 $4,739,613 $14,997,451 $4,322,812 $0 3 Year ARM $187,051,782 $7,470,861 $2,424,881 $47,468,488 $88,000 5 Year ARM $345,276,253 $129,510,712 $13,433,007 $91,844,552 $154,050 6 Month ARM $4,220,848 $490,417 $0 $2,151,600 $0 7 Year ARM $43,993,684 $6,299,617 $3,153,266 $4,817,593 $0 --------------- -------------------- ------------------- -------------------- ------------------- -------------------- TOTAL(3) $625,105,955 $148,511,220 $34,008,606 $151,671,446 $242,050 =============== ==================== =================== ==================== =================== ==================== Product 49-60 Months Total --------------- ------------------- -------------------- 10 Year ARM $0.00 $1,890,200.00 2 Year ARM $0 $67,799,465 3 Year ARM $120,000 $244,624,012 5 Year ARM $54,088,044 $634,306,619 6 Month ARM $0 $6,862,865 7 Year ARM $1,282,047 $59,546,207 --------------- ------------------- -------------------- TOTAL(3) $55,490,091 $1,015,029,367 =============== =================== ====================
Product No Penalty 1-12 Months 13-24 Months 25-36 Months --------------------- --------------------- -------------------- ----------------------- --------------------- 10 Year ARM 0.08% 0.00% 0.00% 0.11% 2 Year ARM 4.31% 0.47% 1.48% 0.43% 3 Year ARM 18.43% 0.74% 0.24% 4.68% 5 Year ARM 34.02% 12.76% 1.32% 9.05% 6 Month ARM 0.42% 0.05% 0.00% 0.21% 7 Year ARM 4.33% 0.62% 0.31% 0.47% --------------------- --------------------- -------------------- ----------------------- --------------------- TOTAL(3) 61.59% 14.63% 3.35% 14.94% ===================== ===================== ==================== ======================= ===================== Product 37-48 Months 49-60 Months Total --------------------- ---------------------- ---------------------- --------------------- 10 Year ARM 0.00% 0.00% 0.19% 2 Year ARM 0.00% 0.00% 6.68% 3 Year ARM 0.01% 0.01% 24.10% 5 Year ARM 0.02% 5.33% 62.49% 6 Month ARM 0.00% 0.00% 0.68% 7 Year ARM 0.00% 0.13% 5.87% --------------------- ---------------------- ---------------------- --------------------- TOTAL(3) 0.02% 5.47% 100.00% ===================== ====================== ====================== =====================
(1) All percentages calculated herein are percentages of scheduled principal balance as of the Statistical Calculation Date unless otherwise noted. (2) None of the Mortgage Loans has a prepayment penalty term in excess of 60 months. (3) Columns may not add up due to rounding. ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-16 Breakeven CDR Table for the Subordinate Certificates ---------------------------------------------------- The assumptions for the breakeven CDR table below are as follows: |X| The Pricing Prepayment Assumption (as defined on page 4 above) is applied. |X| 1-month, 6-month, 1-Year Forward LIBOR curves and 1-Year Forward CMT curve (as of close on February 7, 2006) are used. |X| 33% loss severity and 100% advancing of principal and interest. |X| There is a 6-month lag in recoveries. |X| Priced to call with collateral losses calculated through the life of the applicable bond. |X| All Offered Certificates are priced at par except for the Class B-3 Certificate, which is priced at 98.81598%. |X| All payments are assumed to be made on the 25th of the month regardless of business days. |X| Based on the collateral as of the Statistical Calculation Date rolled one month at 6% CPR and initial marketing structure and spreads.
------------------------------------------------------------------------------------------------------------------------------ First Dollar of Loss LIBOR Flat 0% Return ------------------------------------------------------------------------------------------------------------------------------ Class M-1 CDR (%) 9.20 9.25 9.91 Yield (%) 5.3086 4.9794 0.0593 WAL (years) 5.17 5.17 5.09 Modified Duration 4.47 4.47 4.47 Principal Window Apr11 - Apr11 Apr11 - Apr11 Mar11 - Mar11 Principal Writedown 29,511.85 (0.18%) 348,498.53 (2.09%) 4,339,695.14 (26.05%) Total Collateral Loss 62,934,802.58 (6.23%) 63,238,019.66 (6.26%) 66,862,767.65 (6.62%) ------------------------------------------------------------------------------------------------------------------------------ Class M-2 CDR (%) 8.40 8.41 8.60 Yield (%) 5.2069 4.9886 0.2215 WAL (years) 5.25 5.25 5.25 Modified Duration 4.53 4.53 4.58 Principal Window May11 - May11 May11 - May11 May11 - May11 Principal Writedown 46,146.65 (0.91%) 111,439.40 (2.21%) 1,349,253.26 (26.72%) Total Collateral Loss 58,329,344.14 (5.78%) 58,391,490.62 (5.78%) 59,569,206.72 (5.90%) ------------------------------------------------------------------------------------------------------------------------------ Class M-3 CDR (%) 7.62 7.62 7.82 Yield (%) 5.1653 5.1653 0.1034 WAL (years) 5.34 5.34 5.34 Modified Duration 4.59 4.59 4.64 Principal Window Jun11 - Jun11 Jun11 - Jun11 Jun11 - Jun11 Principal Writedown 66,220.30 (1.31%) 66,220.30 (1.31%) 1,397,565.32 (27.68%) Total Collateral Loss 53,703,333.72 (5.32%) 53,703,333.72 (5.32%) 54,973,062.60 (5.44%) ------------------------------------------------------------------------------------------------------------------------------ Class M-4 CDR (%) 6.84 6.86 7.06 Yield (%) 5.4924 5.0596 0.1905 WAL (years) 5.50 5.50 5.42 Modified Duration 4.69 4.69 4.68 Principal Window Aug11 - Aug11 Aug11 - Aug11 Jul11 - Jul11 Principal Writedown 17,128.39 (0.34%) 153,826.48 (3.05%) 1,432,029.79 (28.36%) Total Collateral Loss 49,166,384.99 (4.87%) 49,297,233.28 (4.88%) 50,361,506.37 (4.99%) ------------------------------------------------------------------------------------------------------------------------------ Class M-5 CDR (%) 6.10 6.12 6.32 Yield (%) 5.5408 5.1085 0.0606 WAL (years) 5.59 5.59 5.50 Modified Duration 4.74 4.74 4.73 Principal Window Sep11 - Sep11 Sep11 - Sep11 Aug11 - Aug11 Principal Writedown 28,609.43 (0.57%) 167,132.56 (3.31%) 1,492,327.13 (29.56%) Total Collateral Loss 44,484,938.39 (4.41%) 44,618,911.91 (4.42%) 45,739,344.50 (4.53%) ------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-17
------------------------------------------------------------------------------------------------------------------------------ First Dollar of Loss LIBOR Flat 0% Return ------------------------------------------------------------------------------------------------------------------------------ Class B-1 CDR (%) 5.38 5.42 5.60 Yield (%) 5.9804 5.0830 0.2297 WAL (years) 5.67 5.67 5.59 Modified Duration 4.72 4.73 4.71 Principal Window Oct11 - Oct11 Oct11 - Oct11 Sep11 - Sep11 Principal Writedown 62,149.91 (1.23%) 345,395.49 (6.84%) 1,591,260.99 (31.52%) Total Collateral Loss 39,798,071.15 (3.94%) 40,072,285.74 (3.97%) 41,111,614.15 (4.07%) ------------------------------------------------------------------------------------------------------------------------------ Class B-2 CDR (%) 4.67 4.71 4.89 Yield (%) 6.1162 5.1901 0.1557 WAL (years) 5.75 5.75 5.75 Modified Duration 4.77 4.78 4.82 Principal Window Nov11 - Nov11 Nov11 - Nov11 Nov11 - Nov11 Principal Writedown 50,480.57 (1.00%) 340,117.17 (6.74%) 1,638,834.24 (32.46%) Total Collateral Loss 35,040,917.78 (3.47%) 35,321,639.26 (3.50%) 36,580,987.50 (3.62%) ------------------------------------------------------------------------------------------------------------------------------ Class B-3 CDR (%) 3.94 4.01 4.18 Yield (%) 6.7534 5.1515 0.3146 WAL (years) 5.84 5.84 5.84 Modified Duration 4.78 4.80 4.85 Principal Window Dec11 - Dec11 Dec11 - Dec11 Dec11 - Dec11 Principal Writedown 8,351.02 (0.17%) 500,993.30 (9.92%) 1,691,371.70 (33.50%) Total Collateral Loss 29,998,353.05 (2.97%) 30,501,511.02 (3.02%) 31,719,302.21 (3.14%) ------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-18 Sensitivity Table for the Certificates - To Maturity ---------------------------------------------------- The assumptions for the sensitivity table below are as follows: |X| The Pricing Prepayment Assumptions (as defined on page 4 above) are applied. |X| 1-month, 6-month, 1-year LIBOR and 1-year CMT remain static. |X| 10% Clean-up Call is not exercised. |X| Based upon initial marketing structure and spreads.
------------------------------------------------------------------------------------------- 50 PPA 75 PPA 100 PPA 125 PPA 150 PPA 175 PPA ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 2.13 1.38 1.00 0.77 0.62 0.50 A-1 Principal Window Begin 1 1 1 1 1 1 Principal Window End 59 38 27 20 16 13 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 6.57 4.26 3.00 2.21 1.75 1.41 A-2 Principal Window Begin 59 38 27 20 16 13 Principal Window End 103 67 48 34 27 21 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 13.53 9.13 6.64 5.04 3.84 2.91 A-3 Principal Window Begin 103 67 48 34 27 21 Principal Window End 309 231 173 134 106 85 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 13.53 9.13 6.64 5.04 3.84 2.91 A-4 Principal Window Begin 103 67 48 34 27 21 Principal Window End 309 231 173 134 106 85 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 9.40 6.23 4.73 4.03 3.77 3.86 M-1 Principal Window Begin 51 37 38 39 41 44 Principal Window End 213 146 107 82 65 52 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 9.28 6.15 4.65 3.94 3.65 3.64 M-2 Principal Window Begin 51 37 38 39 40 43 Principal Window End 196 133 97 74 58 47 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 9.21 6.09 4.61 3.90 3.58 3.54 M-3 Principal Window Begin 51 37 38 39 40 42 Principal Window End 189 128 93 71 56 45 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 9.10 6.02 4.55 3.83 3.52 3.45 M-4 Principal Window Begin 51 37 38 38 39 41 Principal Window End 181 122 88 68 53 43 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.96 5.91 4.45 3.75 3.44 3.36 M-5 Principal Window Begin 51 37 37 38 39 40 Principal Window End 171 115 83 64 50 41 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.75 5.76 4.34 3.67 3.34 3.28 B-1 Principal Window Begin 51 37 37 38 38 39 Principal Window End 160 107 77 59 47 40 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.41 5.51 4.16 3.51 3.21 3.21 B-2 Principal Window Begin 51 37 37 37 38 38 Principal Window End 146 97 70 53 42 39 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 7.76 5.07 3.83 3.24 3.12 3.15 B-3 Principal Window Begin 51 37 37 37 37 37 Principal Window End 128 84 61 46 38 38 ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-19 Sensitivity Table for the Certificates - To Call ------------------------------------------------ The assumptions for the sensitivity table below are as follows: |X| The Pricing Prepayment Assumptions (as defined on page 4 above) are applied. |X| 1-month, 6-month, 1-year LIBOR and 1-year CMT remain static. |X| 10% Clean-up Call is exercised on the first possible date. |X| Based upon initial marketing structure and spreads.
------------------------------------------------------------------------------------------ 50 PPA 75 PPA 100 PPA 125 PPA 150 PPA 175 PPA ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 2.13 1.38 1.00 0.77 0.62 0.50 A-1 Principal Window Begin 1 1 1 1 1 1 Principal Window End 59 38 27 20 16 13 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 6.57 4.26 3.00 2.21 1.75 1.41 A-2 Principal Window Begin 59 38 27 20 16 13 Principal Window End 103 67 48 34 27 21 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 11.79 7.82 5.64 4.27 3.24 2.51 A-3 Principal Window Begin 103 67 48 34 27 21 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 11.79 7.82 5.64 4.27 3.24 2.51 A-4 Principal Window Begin 103 67 48 34 27 21 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.87 5.85 4.43 3.80 3.60 3.17 M-1 Principal Window Begin 51 37 38 39 41 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.87 5.85 4.42 3.76 3.52 3.17 M-2 Principal Window Begin 51 37 38 39 40 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.87 5.85 4.42 3.76 3.47 3.17 M-3 Principal Window Begin 51 37 38 39 40 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.87 5.85 4.42 3.73 3.45 3.17 M-4 Principal Window Begin 51 37 38 38 39 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.87 5.85 4.39 3.72 3.41 3.17 M-5 Principal Window Begin 51 37 37 38 39 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.75 5.76 4.34 3.67 3.34 3.17 B-1 Principal Window Begin 51 37 37 38 38 38 Principal Window End 160 107 77 59 47 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 8.41 5.51 4.16 3.51 3.21 3.17 B-2 Principal Window Begin 51 37 37 37 38 38 Principal Window End 146 97 70 53 42 38 ------------------------------------------------------------------------------------------------------------------------------------ WAL (years) 7.76 5.07 3.83 3.24 3.12 3.15 B-3 Principal Window Begin 51 37 37 37 37 37 Principal Window End 128 84 61 46 38 38 ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-20 WAC Cap. The information in the following table has been prepared in accordance with the following assumptions: (i) one and six-month LIBOR, 1-year LIBOR and 1-year CMT remain constant at 20.00%; (ii) day count convention of actual/360 is applied; and (iii) prepayments on the mortgage loans occur at the Pricing Prepayment Assumption. It is highly unlikely, however, that prepayments on the mortgage loans will occur at the Pricing Prepayment Assumption or at any other constant percentage. There is no assurance, therefore, of whether or to what extent the actual mortgage rates on the mortgage loans on any Distribution Date will conform to the corresponding rate set forth for that Distribution Date in the following table. This table is based on initial marketing structure and spreads. WAC Cap Period Distribution Date (%) ------------- ------------------------ --------------- 1 3/25/2006 20.80690 2 4/25/2006 20.97517 3 5/25/2006 20.91007 4 6/25/2006 20.57694 5 7/25/2006 20.32957 6 8/25/2006 19.99754 7 9/25/2006 19.71482 8 10/25/2006 19.49045 9 11/25/2006 19.16586 10 12/25/2006 18.96205 11 1/25/2007 18.64408 12 2/25/2007 18.38790 13 3/25/2007 18.35239 14 4/25/2007 17.89039 15 5/25/2007 17.72121 16 6/25/2007 17.41591 17 7/25/2007 17.26469 18 8/25/2007 16.95926 19 9/25/2007 16.74012 20 10/25/2007 16.69024 21 11/25/2007 16.41159 22 12/25/2007 15.68807 23 1/25/2008 15.45833 24 2/25/2008 15.27458 25 3/25/2008 15.31854 26 4/25/2008 14.97809 27 5/25/2008 14.93198 28 6/25/2008 14.65629 29 7/25/2008 14.63193 30 8/25/2008 14.35905 31 9/25/2008 14.20007 32 10/25/2008 14.31743 33 11/25/2008 14.26346 34 12/25/2008 13.00222 35 1/25/2009 12.86228 36 2/25/2009 12.75408 37 3/25/2009 13.25765 38 4/25/2009 12.61659 39 5/25/2009 12.72251 40 6/25/2009 12.52983 41 7/25/2009 12.66032 42 8/25/2009 12.36398 43 9/25/2009 12.27267 44 10/25/2009 12.41895 45 11/25/2009 12.20026 46 12/25/2009 12.34552 47 1/25/2010 12.04914 ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-21 WAC Cap Period Distribution Date (%) ------------- ------------------------ --------------- 48 2/25/2010 11.96343 49 3/25/2010 12.56737 50 4/25/2010 11.79958 51 5/25/2010 11.93410 52 6/25/2010 11.64062 53 7/25/2010 11.78078 54 8/25/2010 11.48784 55 9/25/2010 11.41502 56 10/25/2010 11.57852 57 11/25/2010 12.02267 58 12/25/2010 9.48618 59 1/25/2011 10.11210 60 2/25/2011 10.90619 61 3/25/2011 12.07660 62 4/25/2011 10.90796 63 5/25/2011 11.28003 64 6/25/2011 10.93363 65 7/25/2011 11.30517 66 8/25/2011 10.94055 67 9/25/2011 10.94062 68 10/25/2011 11.30692 69 11/25/2011 10.94779 70 12/25/2011 11.31753 71 1/25/2012 10.97592 72 2/25/2012 10.97597 73 3/25/2012 11.73298 74 4/25/2012 10.97605 75 5/25/2012 11.34769 76 6/25/2012 10.98168 77 7/25/2012 11.34778 78 8/25/2012 10.98177 79 9/25/2012 10.98181 80 10/25/2012 11.34792 81 11/25/2012 10.98559 82 12/25/2012 11.35182 83 1/25/2013 11.29130 84 2/25/2013 11.29142 85 3/25/2013 12.50134 86 4/25/2013 11.29166 87 5/25/2013 11.66817 88 6/25/2013 11.29190 89 7/25/2013 11.66842 90 8/25/2013 11.29215 91 9/25/2013 11.29227 92 10/25/2013 11.66881 93 11/25/2013 11.29253 94 12/25/2013 11.66908 95 1/25/2014 11.29279 96 2/25/2014 11.29292 97 3/25/2014 12.50302 98 4/25/2014 11.29319 99 5/25/2014 11.66977 100 6/25/2014 11.29346 ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-22 WAC Cap Period Distribution Date (%) ------------- ------------------------ --------------- 101 7/25/2014 11.67005 102 8/25/2014 11.29374 103 9/25/2014 11.29388 104 10/25/2014 11.67049 105 11/25/2014 11.29416 106 12/25/2014 11.67079 107 1/25/2015 11.29445 108 2/25/2015 11.29460 109 3/25/2015 12.50490 110 4/25/2015 11.29490 111 5/25/2015 11.67155 112 6/25/2015 11.29520 113 7/25/2015 11.67187 114 8/25/2015 11.29551 115 9/25/2015 11.29567 116 10/25/2015 11.67236 117 11/25/2015 11.29599 118 12/25/2015 11.67268 119 1/25/2016 11.30030 120 2/25/2016 11.30560 ------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-23 Swap Agreement. On the Closing Date, the Trustee will enter into a swap agreement with an initial swap notional amount of $999,721,398. Under the swap agreement, on each Distribution Date prior to the termination of the swap agreement, the trust shall be obligated to pay an amount equal to a per annum rate of 5.0500% (on a 30/360 basis) on the lesser of the swap notional amount and the aggregate class certificate balance of the LIBOR Certificates to the swap provider and the trust will be entitled to receive an amount equal to a per annum rate of one-month LIBOR (on an actual/360 basis) on the lesser of the swap notional amount and the aggregate class certificate balance of the LIBOR Certificates from the swap provider.
Swap Schedule Sap Notional Distribution Swap Notional Period Distribution Date Amount ($) Period Date Amount ($) ----------------- ------------------------ ----------------------- ----------------- -------------- ------------------------ 1 3/25/2006 999,721,397.67 36 2/25/2009 126,440,422.56 2 4/25/2006 988,237,879.97 37 3/25/2009 120,285,096.42 3 5/25/2006 939,951,929.85 38 4/25/2009 114,429,367.75 4 6/25/2006 894,016,157.77 39 5/25/2009 108,858,656.63 5 7/25/2006 850,316,194.06 40 6/25/2009 103,559,092.53 6 8/25/2006 808,743,234.01 41 7/25/2009 98,517,479.88 7 9/25/2006 769,193,767.05 42 8/25/2009 93,721,265.19 8 10/25/2006 731,569,319.24 43 9/25/2009 89,158,505.79 9 11/25/2006 695,776,208.18 44 10/25/2009 84,817,840.13 10 12/25/2006 661,725,309.96 45 11/25/2009 80,688,459.52 11 1/25/2007 629,331,837.29 46 12/25/2009 76,760,081.22 12 2/25/2007 598,515,128.61 47 1/25/2010 73,022,922.86 13 3/25/2007 569,198,447.27 48 2/25/2010 69,467,678.08 14 4/25/2007 541,308,790.64 49 3/25/2010 66,085,493.36 15 5/25/2007 514,776,708.42 50 4/25/2010 62,867,946.06 16 6/25/2007 489,536,129.77 51 5/25/2010 59,807,023.31 17 7/25/2007 465,524,198.93 52 6/25/2010 56,895,102.24 18 8/25/2007 442,681,118.78 53 7/25/2010 54,124,930.92 19 9/25/2007 420,950,002.02 54 8/25/2010 51,489,610.26 20 10/25/2007 400,276,194.90 55 9/25/2010 48,982,576.97 21 11/25/2007 380,609,274.79 56 10/25/2010 46,597,587.12 22 12/25/2007 339,554,402.20 57 11/25/2010 44,328,471.62 23 1/25/2008 323,023,435.62 12/25/2010 and 0.00 24 2/25/2008 307,297,117.43 58 thereafter 25 3/25/2008 292,336,287.69 26 4/25/2008 278,103,692.06 27 5/25/2008 264,563,888.88 28 6/25/2008 251,683,161.20 29 7/25/2008 239,429,432.70 30 8/25/2008 227,772,115.61 31 9/25/2008 216,681,937.11 32 10/25/2008 206,131,629.69 33 11/25/2008 196,095,178.76 34 12/25/2008 139,711,953.70 35 1/25/2009 132,910,671.82
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-24 The Mortgage Loans - All Collateral(1) Scheduled Principal Balance: $1,015,029,367 Number of Mortgage Loans: 3,910 Average Scheduled Principal Balance: $259,598 Interest Only Loans: 90.46% Weighted Average Gross Coupon: 6.40% Weighted Average Net Coupon(2): 6.14% Non Zero Weighted Average FICO Score: 706 Weighted Average Original LTV Ratio: 76.09% Weighted Average Combined Original LTV Ratio: 85.78% Weighted Average Stated Remaining Term (months): 358 Weighted Average Seasoning (months): 2 Weighted Average Months to Roll: 51 Weighted Average Gross Margin: 2.66% Weighted Average Initial Rate Cap: 4.87% Weighted Average Periodic Rate Cap: 1.60% Weighted Average Gross Maximum Lifetime Rate: 11.97% % of Silent Seconds: 55.58% Non-Zero Weighted Average DTI: 38.32% % of Loans with MI: 4.09% (1) All percentages calculated herein are percentages of scheduled principal balance unless otherwise noted as of the Statistical Calculation Date. (2) The Weighted Average Net Coupon is equivalent to the Weighted Average Gross Coupon less the Servicing Fee and any lender-paid mortgage insurance.
Distribution by Current Principal Balance Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Current Principal Of Principal Principal Gross Current Principal Original Balance Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ $50,000 & Below 11 $495,015 0.05% 7.798% 693 $45,001 76.12% $50,001 - $75,000 60 3,870,826 0.38 6.946 713 64,514 68.21 $75,001 - $100,000 148 13,415,372 1.32 6.627 708 90,644 73.19 $100,001 - $125,000 240 27,298,408 2.69 6.656 706 113,743 76.16 $125,001 - $150,000 348 48,219,351 4.75 6.433 705 138,561 75.06 $150,001 - $200,000 685 120,870,205 11.91 6.374 706 176,453 75.55 $200,001 - $250,000 631 141,631,577 13.95 6.382 703 224,456 76.50 $250,001 - $300,000 537 147,840,659 14.57 6.345 707 275,308 76.06 $300,001 - $350,000 448 145,374,282 14.32 6.313 704 324,496 77.17 $350,001 - $400,000 393 147,844,870 14.57 6.224 703 376,196 75.52 $400,001 - $450,000 123 52,189,170 5.14 6.550 713 424,302 78.06 $450,001 - $500,000 92 43,983,552 4.33 6.557 716 478,082 77.35 $500,001 - $550,000 59 30,962,159 3.05 6.525 713 524,782 76.93 $550,001 - $600,000 46 26,419,832 2.60 6.559 717 574,344 75.85 $600,001 - $650,000 42 26,684,301 2.63 6.519 713 635,340 77.50 $650,001 - $700,000 9 6,058,282 0.60 6.696 712 673,142 73.44 $700,001 - $750,000 15 10,951,003 1.08 6.702 696 730,067 73.99 $750,001 - $800,000 6 4,647,950 0.46 7.111 721 774,658 78.34 $800,001 - $850,000 2 1,649,000 0.16 6.687 692 824,500 77.50 $850,001 - $900,000 4 3,505,269 0.35 6.403 730 876,317 66.64 $900,001 - $950,000 3 2,770,000 0.27 6.251 727 923,333 69.32 $950,001 - $1,000,000 6 5,900,285 0.58 6.016 686 983,381 64.57 $1,000,001 - $1,500,000 2 2,448,000 0.24 7.248 656 1,224,000 69.90 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Current Principal Combined Full Owner Balance LTV Doc Occupied ---------------------------- ----------- ---------- ------------- $50,000 & Below 76.13% 8.08% 8.08% $50,001 - $75,000 70.79 23.35 38.77 $75,001 - $100,000 80.46 37.08 55.85 $100,001 - $125,000 85.38 41.27 66.21 $125,001 - $150,000 84.22 36.97 73.15 $150,001 - $200,000 84.92 36.71 74.64 $200,001 - $250,000 85.36 32.12 82.04 $250,001 - $300,000 84.91 29.27 82.46 $300,001 - $350,000 87.27 21.74 87.30 $350,001 - $400,000 85.23 21.93 91.40 $400,001 - $450,000 88.27 12.30 88.05 $450,001 - $500,000 88.70 7.38 89.99 $500,001 - $550,000 88.85 10.09 94.81 $550,001 - $600,000 87.28 17.27 91.24 $600,001 - $650,000 90.77 14.30 95.30 $650,001 - $700,000 79.06 0.00 88.50 $700,001 - $750,000 88.76 13.13 100.00 $750,001 - $800,000 89.44 16.27 83.56 $800,001 - $850,000 93.49 0.00 100.00 $850,001 - $900,000 81.32 0.00 100.00 $900,001 - $950,000 74.36 32.67 67.33 $950,001 - $1,000,000 70.79 16.16 83.81 $1,000,001 - $1,500,000 69.90 49.02 100.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-25
Distribution by Current Rate Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Current Rate Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 4.50% & Below 13 $3,135,954 0.31% 4.236% 731 $241,227 74.48% 4.51 - 5.00% 53 13,726,779 1.35 4.865 701 258,996 72.46 5.01 - 5.50% 340 87,084,973 8.58 5.388 717 256,132 69.57 5.51 - 6.00% 946 243,675,998 24.01 5.850 707 257,586 74.81 6.01 - 6.50% 1,012 274,531,151 27.05 6.342 708 271,276 76.19 6.51 - 7.00% 957 254,946,526 25.12 6.804 705 266,402 78.03 7.01 - 7.50% 351 88,989,127 8.77 7.285 697 253,530 78.38 7.51 - 8.00% 134 28,987,866 2.86 7.793 702 216,327 79.79 8.01 - 8.50% 80 14,772,955 1.46 8.279 694 184,662 80.14 8.51 - 9.00% 20 4,363,590 0.43 8.745 694 218,179 83.65 9.01% & Above 4 814,450 0.08 9.163 684 203,613 83.31 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Combined Full Pct. Owner Current Rate LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 4.50% & Below 81.30% 47.99% 95.59% 4.51 - 5.00% 83.58 47.80 100.00 5.01 - 5.50% 76.96 35.91 87.84 5.51 - 6.00% 84.03 47.95 89.59 6.01 - 6.50% 86.28 20.82 87.27 6.51 - 7.00% 89.60 12.37 83.69 7.01 - 7.50% 88.05 9.54 72.35 7.51 - 8.00% 85.01 11.22 44.78 8.01 - 8.50% 82.07 13.43 38.04 8.51 - 9.00% 83.66 0.00 89.53 9.01% & Above 92.18 0.00 51.09 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by FICO Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original FICO Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 820 - 839 1 $594,800 0.06% 6.625% 824 $594,800 54.09% 800 - 819 81 18,550,894 1.83 6.069 807 229,023 68.90 780 - 799 193 50,146,966 4.94 6.230 789 259,829 73.07 760 - 779 332 84,863,051 8.36 6.282 769 255,612 74.68 740 - 759 410 108,382,161 10.68 6.307 749 264,347 76.49 720 - 739 447 119,275,180 11.75 6.355 729 266,835 77.04 700 - 719 540 144,042,154 14.19 6.476 709 266,745 76.91 680 - 699 515 140,105,018 13.80 6.526 690 272,049 77.30 660 - 679 786 197,844,649 19.49 6.450 670 251,711 76.43 640 - 659 391 102,216,827 10.07 6.412 649 261,424 75.47 620 - 639 195 44,210,434 4.36 6.298 630 226,720 76.15 600 - 619 9 2,081,185 0.21 6.563 612 231,243 69.65 580 - 599 3 1,236,000 0.12 6.178 598 412,000 63.86 NA 7 1,480,047 0.15 7.007 0 211,435 71.89 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner FICO LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 820 - 839 54.09% 0.00% 100.00% 800 - 819 75.10 19.14 79.29 780 - 799 81.87 19.36 76.54 760 - 779 84.05 18.92 72.60 740 - 759 86.69 15.80 81.26 720 - 739 88.84 14.86 83.67 700 - 719 87.98 13.29 82.92 680 - 699 87.90 19.14 83.49 660 - 679 86.36 35.93 87.49 640 - 659 81.90 46.53 91.53 620 - 639 81.98 63.33 95.75 600 - 619 72.47 51.28 81.14 580 - 599 63.86 30.18 100.00 NA 74.89 25.36 20.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Original LTV Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Original LTV Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 30.00% & Below 32 $4,386,905 0.43% 5.747% 752 $137,091 24.31% 30.01 - 40.00% 47 9,733,158 0.96 5.814 726 207,088 36.00 40.01 - 50.00% 100 24,422,109 2.41 5.880 717 244,221 46.15 50.01 - 60.00% 178 47,215,737 4.65 5.938 716 265,257 56.25 60.01 - 70.00% 287 81,009,842 7.98 6.257 701 282,264 66.14 70.01 - 80.00% 3,094 806,726,921 79.48 6.448 706 260,739 79.23 80.01 - 85.00% 33 8,429,936 0.83 6.420 690 255,453 84.41 85.01 - 90.00% 102 24,456,990 2.41 6.792 701 239,774 89.44 90.01 - 95.00% 36 8,489,822 0.84 6.675 695 235,828 94.33 95.01 - 100.00% 1 157,948 0.02 5.375 723 157,948 100.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner Original LTV LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 30.00% & Below 24.44% 10.32% 73.76% 30.01 - 40.00% 37.30 14.23 79.65 40.01 - 50.00% 47.26 14.69 82.94 50.01 - 60.00% 59.94 19.05 82.51 60.01 - 70.00% 70.29 17.92 76.42 70.01 - 80.00% 90.74 26.76 85.08 80.01 - 85.00% 84.41 36.17 85.53 85.01 - 90.00% 89.44 32.46 73.67 90.01 - 95.00% 94.33 30.65 93.48 95.01 - 100.00% 100.00 100.00 100.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-26
Distribution by Document Type Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Document Type Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Full/Alt 1,141 $258,595,850 25.48% 6.060% 688 $226,640 77.53% Nina/No Doc/No Ratio 556 141,460,673 13.94 6.473 722 254,426 67.79 Stated Income Stated Assets 678 182,222,014 17.95 6.617 701 268,764 75.61 Stated Income Verified Assets 1,535 432,750,831 42.63 6.479 714 281,922 78.14 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Combined Full Pct. Owner Document Type LTV Doc Occupied ---------------------------- ----------- ---------- ------------- Full/Alt 87.53% 100.00% 84.01% Nina/No Doc/No Ratio 71.53 0.00 85.31 Stated Income Stated Assets 81.99 0.00 83.08 Stated Income Verified Assets 90.98 0.00 83.76 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Loan Purpose Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Loan Purpose Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Cashout Refinance 741 $199,551,431 19.66% 6.286% 694 $269,300 68.14% Purchase 2,775 710,552,490 70.00 6.450 711 256,055 78.82 Rate/Term Refinance 394 104,925,446 10.34 6.243 696 266,308 72.69 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner Loan Purpose LTV Doc Occupied ---------------------------- ----------- ---------- ------------- Cashout Refinance 70.59% 31.55% 87.79% Purchase 90.97 23.35 82.45 Rate/Term Refinance 79.50 28.31 86.48 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Occupancy Status Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Occupancy Of Principal Principal Gross Current Principal Original Status Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Non Owner 540 $102,565,249 10.10% 6.897% 720 $189,936 75.03% Owner Occupied 3,108 851,791,153 83.92 6.332 704 274,064 76.26 Second Home 262 60,672,965 5.98 6.455 721 231,576 75.47 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Occupancy Combined Full Owner Status LTV Doc Occupied ---------------------------- ----------- ---------- ------------- Non Owner 77.62% 32.24% 0.00% Owner Occupied 87.18 25.50 100.00 Second Home 79.86 13.66 0.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Property Type Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Property Of Principal Principal Gross Current Principal Original Type Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 2-4 Family 143 $42,318,231 4.17% 6.724% 705 $295,932 74.97% Condo 611 139,594,018 13.75 6.331 716 228,468 77.68 Co-op 2 174,880 0.02 6.250 649 87,440 73.19 Pud 1,078 287,145,136 28.29 6.397 705 266,368 77.49 Single Family 2,073 545,341,858 53.73 6.386 705 263,069 75.03 Townhouse 3 455,244 0.04 7.277 708 151,748 80.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Property Combined Full Pct. Owner Type LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 2-4 Family 82.80% 24.13% 75.37% Condo 88.35 24.39 74.37 Co-op 73.19 42.82 42.82 Pud 88.13 29.32 84.33 Single Family 84.11 23.82 86.86 Townhouse 80.00 34.44 43.94 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-27
Distribution by State Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original State Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ CA - Southern 579 $194,445,316 19.16% 6.273% 703 $335,830 75.46% CA - Northern 466 162,781,365 16.04 6.226 716 349,316 72.85 FL 528 116,957,342 11.52 6.689 707 221,510 77.06 AZ 268 62,007,950 6.11 6.511 706 231,373 75.30 VA 206 59,325,180 5.84 6.359 708 287,986 76.49 NV 227 58,670,162 5.78 6.356 705 258,459 77.78 MD 168 47,169,143 4.65 6.294 710 280,769 78.18 IL 152 35,857,092 3.53 6.514 708 235,902 75.94 WA 121 27,181,533 2.68 6.291 701 224,641 77.31 CO 106 22,527,433 2.22 6.288 693 212,523 77.12 Other 1,089 228,106,851 22.47 6.487 703 209,465 77.46 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Combined Full Pct. Owner State LTV Doc Occupied ---------------------------- ----------- ---------- ------------- CA - Southern 86.23% 15.33% 94.37% CA - Northern 83.29 17.70 90.56 FL 84.53 14.51 66.08 AZ 82.57 33.31 76.95 VA 86.52 36.02 84.68 NV 87.77 26.22 80.73 MD 88.87 40.40 85.93 IL 85.43 24.00 76.23 WA 88.94 42.71 86.49 CO 89.07 44.95 92.36 Other 86.68 33.41 81.59 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Zip Code Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Zip Code Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 92610 20 $6,244,000 0.62% 5.418% 706 $312,200 80.00% 92563 14 5,438,504 0.54 6.175 707 388,465 79.60 91915 11 5,193,930 0.51 6.083 714 472,175 78.18 85249 16 5,163,996 0.51 6.236 721 322,750 72.23 60611 13 4,387,220 0.43 6.827 723 337,478 79.29 89123 14 3,557,617 0.35 6.383 681 254,115 80.29 89015 10 3,246,693 0.32 6.981 676 324,669 78.53 89131 10 3,161,720 0.31 5.914 728 316,172 78.67 94531 6 2,911,550 0.29 6.566 701 485,258 79.25 89436 10 2,897,603 0.29 5.974 703 289,760 72.43 Other 3,786 972,826,535 95.84 6.405 706 256,954 76.01 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner Zip Code LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 92610 95.89% 21.14% 100.00% 92563 97.26 20.93 100.00 91915 92.13 7.38 100.00 85249 81.26 29.79 95.28 60611 90.40 6.68 23.04 89123 86.19 22.36 84.93 89015 88.56 4.06 88.97 89131 91.44 20.49 74.04 94531 92.05 0.00 100.00 89436 80.94 47.82 91.03 Other 85.58 25.80 83.80 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Remaining Months to Maturity Pct. Of Pool Weighted Weighted Weighted Remaining Number By Avg. Avg. Avg. Avg. Months To Of Principal Principal Gross Current Principal Original Maturity Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 301 - 360 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Remaining Avg. Pct. Pct. Months To Combined Full Owner Maturity LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 301 - 360 85.78% 25.48% 83.92% ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Amortization Type Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Amortization Of Principal Principal Gross Current Principal Original Type Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 10 Year ARM 6 $1,890,200 0.19% 7.074% 705 $315,033 78.88% 2 Year ARM 271 67,799,465 6.68 6.810 704 250,183 77.82 3 Year ARM 895 244,624,012 24.10 6.409 720 273,323 77.50 5 Year ARM 2,525 634,306,619 62.49 6.326 700 251,211 75.35 6 Month ARM 18 6,862,865 0.68 5.890 718 381,270 76.51 7 Year ARM 195 59,546,207 5.87 6.654 720 305,365 76.07 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Amortization Combined Full Owner Type LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 10 Year ARM 88.18% 0.00% 100.00% 2 Year ARM 85.38 13.70 72.20 3 Year ARM 88.64 23.00 80.71 5 Year ARM 84.64 28.37 87.47 6 Month ARM 91.58 4.02 92.26 7 Year ARM 85.77 21.50 71.11 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-28
Distribution by Prepayment Term (Months) Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Prepayment Term (Months) Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 0 2,358 $625,105,955 61.59% 6.310% 709 $265,100 75.32% 6 29 8,483,851 0.84 6.414 693 292,547 68.50 12 485 140,027,369 13.80 6.389 706 288,716 77.67 24 138 34,008,606 3.35 6.673 693 246,439 78.46 36 641 151,671,446 14.94 6.621 701 236,617 76.98 42 2 242,050 0.02 6.682 736 121,025 79.99 60 257 55,490,091 5.47 6.605 706 215,915 77.99 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner Prepayment Term (Months) LTV Doc Occupied ---------------------------- ------------ ---------- ------------- 0 84.98% 30.52% 84.25% 6 74.43 25.06 96.67 12 88.44 17.62 90.87 24 88.24 14.45 81.94 36 85.99 17.82 79.91 42 99.98 0.00 100.00 60 87.53 16.31 72.74 ---------------------------- ------------ ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ ============ ========== =============
Distribution by Periodic Cap Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Periodic Of Principal Principal Gross Current Principal Original Cap Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 1.00 - 1.49% 1,391 $390,701,395 38.49% 6.610% 713 $280,878 77.88% 1.50 - 1.99% 80 25,683,549 2.53 6.531 676 321,044 77.56 2.00 - 2.49% 2,438 598,252,423 58.94 6.251 703 245,387 74.86 3.00 - 3.49% 1 392,000 0.04 5.875 683 392,000 80.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Periodic Combined Full Pct. Owner Cap LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 1.00 - 1.49% 90.33% 16.45% 88.02% 1.50 - 1.99% 82.20 10.67 100.00 2.00 - 2.49% 82.96 32.02 80.54 3.00 - 3.49% 80.00 0.00 100.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Months to Rate Reset Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Months To Of Principal Principal Gross Current Principal Original Rate Reset Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 10 & Below 17 $6,647,310 0.65% 5.895% 719 $391,018 76.40% 11 - 20 102 23,136,689 2.28 6.675 692 226,830 76.92 21 - 30 310 78,801,598 7.76 6.412 714 254,199 77.60 31 - 40 756 210,998,723 20.79 6.507 720 279,099 77.64 41 - 50 8 2,197,638 0.22 5.596 694 274,705 69.15 51 - 60 2,487 624,740,036 61.55 6.328 700 251,202 75.38 61 - 70 29 7,070,966 0.70 6.457 692 243,826 74.32 81 - 90 195 59,546,207 5.87 6.654 720 305,365 76.07 111 - 120 6 1,890,200 0.19 7.074 705 315,033 78.88 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Months To Combined Full Owner Rate Reset LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 10 & Below 91.79% 4.15% 92.01% 11 - 20 84.89 15.11 70.79 21 - 30 86.96 23.33 76.96 31 - 40 88.62 20.78 80.51 41 - 50 70.37 77.35 86.35 51 - 60 84.72 28.06 87.68 61 - 70 82.73 39.59 69.23 81 - 90 85.77 21.50 71.11 111 - 120 88.18 0.00 100.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-29
Distribution by Maximum Lifetime Rate Pct. Of Pool Weighted Weighted Number By Avg. Avg. Avg. Maximum Of Principal Principal Gross Current Principal Lifetime Rate Loans Balance Balance Coupon FICO Balance ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ 9.49% & Below 8 $2,023,910 0.20% 4.133% 721 $252,989 9.50 - 9.99% 32 8,682,351 0.86 4.726 707 271,323 10.00 - 10.49% 82 21,422,044 2.11 5.222 706 261,244 10.50 - 10.99% 426 110,752,422 10.91 5.741 707 259,982 11.00 - 11.49% 636 163,110,553 16.07 6.002 706 256,463 11.50 - 11.99% 855 216,388,064 21.32 6.249 706 253,085 12.00 - 12.49% 643 169,098,093 16.66 6.502 706 262,983 12.50 - 12.99% 673 184,388,946 18.17 6.725 713 273,981 13.00 - 13.49% 253 74,020,342 7.29 7.047 702 292,571 13.50 - 13.99% 195 43,309,993 4.27 7.550 694 222,103 14.00 - 14.49% 90 17,973,931 1.77 8.031 693 199,710 14.50 - 14.99% 15 3,460,368 0.34 8.131 685 230,691 15.00 - 15.49% 2 398,350 0.04 9.204 683 199,175 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 ============================ ============== ================ ============ =========== ========== ============ Weighted Avg. Pct. Maximum Combined Full Pct. Owner Lifetime Rate LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 9.49% & Below 78.60% 48.42% 100.00% 9.50 - 9.99% 85.05 49.46 98.41 10.00 - 10.49% 84.42 47.76 93.56 10.50 - 10.99% 82.13 48.67 90.19 11.00 - 11.49% 82.48 31.81 84.63 11.50 - 11.99% 85.32 29.29 86.93 12.00 - 12.49% 87.39 22.04 83.56 12.50 - 12.99% 90.14 13.85 86.26 13.00 - 13.49% 87.77 6.58 79.26 13.50 - 13.99% 83.70 7.46 60.99 14.00 - 14.49% 83.24 16.69 41.69 14.50 - 14.99% 83.80 0.00 64.79 15.00 - 15.49% 98.10 0.00 0.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Minimum Lifetime Rate Pct. Of Pool Weighted Weighted Weighted Minimum Number By Avg. Avg. Avg. Avg. Lifetime Of Principal Principal Gross Current Principal Original Rate Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 2.00 - 2.49% 2,166 $575,938,407 56.74% 6.228% 703 $265,900 74.83% 2.50 - 2.99% 1,103 292,514,701 28.82 6.581 714 265,199 77.56 3.00 - 3.49% 172 44,236,126 4.36 6.357 722 257,187 78.23 3.50 - 3.99% 12 2,873,165 0.28 6.351 722 239,430 75.37 4.00 - 4.49% 10 2,475,100 0.24 5.723 711 247,510 75.29 4.50 - 4.99% 25 7,859,743 0.77 6.201 696 314,390 77.62 5.00 - 5.49% 308 59,517,822 5.86 7.041 699 193,240 78.46 5.50 - 5.99% 27 7,753,827 0.76 6.253 692 287,179 76.77 6.00 - 6.49% 23 7,850,495 0.77 6.240 689 341,326 76.26 6.50 - 6.99% 26 5,730,370 0.56 6.724 705 220,399 79.41 7.00 - 7.49% 21 4,393,019 0.43 7.217 691 209,191 77.70 7.50 - 7.99% 10 1,733,391 0.17 7.686 686 173,339 81.43 8.00 - 8.49% 6 1,902,802 0.19 8.160 689 317,134 79.90 8.50 - 8.99% 1 250,400 0.02 9.250 697 250,400 80.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Minimum Avg. Pct. Pct. Lifetime Combined Full Owner Rate LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 2.00 - 2.49% 84.55% 27.13% 89.29% 2.50 - 2.99% 88.93 23.21 82.12 3.00 - 3.49% 86.55 38.20 78.81 3.50 - 3.99% 87.45 12.81 79.33 4.00 - 4.49% 87.21 20.73 82.10 4.50 - 4.99% 79.56 5.17 93.24 5.00 - 5.49% 79.32 17.05 44.51 5.50 - 5.99% 85.70 41.27 90.50 6.00 - 6.49% 90.54 4.37 92.51 6.50 - 6.99% 97.97 28.73 76.65 7.00 - 7.49% 93.25 21.38 81.85 7.50 - 7.99% 95.18 0.00 68.59 8.00 - 8.49% 94.62 0.00 45.31 8.50 - 8.99% 100.00 0.00 0.00 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Margin Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Of Principal Principal Gross Current Principal Original Margin Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 2.00 - 2.49% 2,231 $592,054,464 58.33% 6.231% 703 $265,376 74.87% 2.50 - 2.99% 1,105 293,134,322 28.88 6.578 714 265,280 77.59 3.00 - 3.49% 165 42,331,974 4.17 6.373 723 256,557 78.15 3.50 - 3.99% 9 3,055,857 0.30 7.146 713 339,540 80.16 4.00 - 4.49% 5 1,096,639 0.11 5.883 674 219,328 73.33 4.50 - 4.99% 32 11,591,874 1.14 6.206 689 362,246 76.44 5.00 - 5.49% 340 66,256,483 6.53 7.028 699 194,872 78.70 5.50 - 5.99% 12 3,412,723 0.34 7.147 644 284,394 78.04 6.00 - 6.49% 6 1,028,091 0.10 6.985 656 171,348 79.39 6.50 - 6.99% 3 496,539 0.05 6.912 667 165,513 67.03 7.50 - 7.99% 2 570,400 0.06 8.110 695 285,200 80.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Combined Full Owner Margin LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 2.00 - 2.49% 84.71% 26.84% 89.14% 2.50 - 2.99% 88.99 23.27 82.06 3.00 - 3.49% 86.03 39.37 77.55 3.50 - 3.99% 97.02 10.09 73.88 4.00 - 4.49% 81.75 68.35 80.42 4.50 - 4.99% 82.19 3.50 98.75 5.00 - 5.49% 81.11 17.35 46.63 5.50 - 5.99% 84.33 41.46 100.00 6.00 - 6.49% 90.86 24.07 100.00 6.50 - 6.99% 75.88 44.26 100.00 7.50 - 7.99% 94.67 0.00 46.70 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-30
Distribution by First Adjustment Cap Pct. Of Pool Weighted Weighted First Number By Avg. Avg. Avg. Adjustment Of Principal Principal Gross Current Principal Cap Loans Balance Balance Coupon FICO Balance ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ 1.00% & Below 15 $5,573,310 0.55% 5.754% 719 $371,554 1.01 - 1.50% 79 25,417,149 2.50 6.516 676 321,736 1.51 - 2.00% 335 68,723,421 6.77 6.727 708 205,145 2.51 - 3.00% 292 74,730,785 7.36 6.318 721 255,927 4.51 - 5.00% 1,896 505,456,775 49.80 6.363 704 266,591 5.01 - 5.50% 2 316,753 0.03 5.644 702 158,377 5.51 - 6.00% 1,291 334,811,173 32.99 6.398 709 259,343 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 ============================ ============== ================ ============ =========== ========== ============ Weighted First Avg. Pct. Pct. Adjustment Combined Full Owner Cap LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 1.00% & Below 92.60% 4.95% 100.00% 1.01 - 1.50% 82.01 10.78 100.00 1.51 - 2.00% 81.40 28.69 50.48 2.51 - 3.00% 88.51 31.08 81.29 4.51 - 5.00% 86.69 26.42 86.58 5.01 - 5.50% 86.87 0.00 100.00 5.51 - 6.00% 84.85 23.63 85.85 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Periodic Lifetime Cap Pct. Of Pool Weighted Weighted Weighted Periodic Number By Avg. Avg. Avg. Avg. Lifetime Of Principal Principal Gross Current Principal Original Cap Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 4.51 - 5.00% 1,795 $457,711,100 45.09% 6.305% 702 $254,992 76.47% 5.01 - 5.50% 1 113,553 0.01 6.125 727 113,553 63.37 5.51 - 6.00% 2,031 530,234,924 52.24 6.468 712 261,071 75.69 6.01 - 6.50% 1 212,240 0.02 6.250 712 212,240 80.00 6.51 - 7.00% 80 25,683,549 2.53 6.531 676 321,044 77.56 7.51 - 8.00% 2 1,074,000 0.11 6.624 723 537,000 75.00 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Periodic Avg. Pct. Pct. Lifetime Combined Full Owner Cap LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 4.51 - 5.00% 85.29% 30.04% 84.91% 5.01 - 5.50% 63.37 0.00 100.00 5.51 - 6.00% 86.37 22.28 82.38 6.01 - 6.50% 80.00 100.00 0.00 6.51 - 7.00% 82.20 10.67 100.00 7.51 - 8.00% 87.64 0.00 50.56 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Interest Only Loans Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Interest Of Principal Principal Gross Current Principal Original Only Loans Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ N 465 $96,857,399 9.54% 6.542% 717 $208,295 74.93% Y 3,445 918,171,968 90.46 6.381 705 266,523 76.21 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Interest Combined Full Owner Only Loans LTV Doc Occupied ---------------------------- ----------- ---------- ------------- N 82.67% 20.16% 74.40% Y 86.10 26.04 84.92 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
Distribution by Interest Only Term Pct. Of Pool Weighted Weighted Weighted Number By Avg. Avg. Avg. Avg. Interest Of Principal Principal Gross Current Principal Original Only Term Loans Balance Balance Coupon FICO Balance LTV ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ 0 465 $96,857,399 9.54% 6.542% 717 $208,295 74.93% 24 3 1,478,447 0.15 5.794 663 492,816 58.87 36 202 54,746,893 5.39 6.074 729 271,024 76.82 60 1,651 413,806,909 40.77 6.392 696 250,640 76.68 84 72 19,549,152 1.93 6.531 727 271,516 75.14 120 1,517 428,590,567 42.22 6.405 710 282,525 75.79 ---------------------------- -------------- ---------------- ------------ ----------- ---------- ------------ ------------ Total: 3,910 $1,015,029,367 100.00% 6.396% 706 $259,598 76.09% ============================ ============== ================ ============ =========== ========== ============ ============ Weighted Avg. Pct. Pct. Interest Combined Full Owner Only Term LTV Doc Occupied ---------------------------- ----------- ---------- ------------- 0 82.67% 20.16% 74.40% 24 63.19 0.00 100.00 36 87.24 34.16 77.15 60 84.63 27.81 82.37 84 82.26 33.09 49.12 120 87.63 23.06 89.96 ---------------------------- ----------- ---------- ------------- Total: 85.78% 25.48% 83.92% ============================ =========== ========== =============
------------------------------------------------------------------------------ This material is for your information. This material is not to be construed as an offer to sell or the solicitation of any offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The information contained in this material may not pertain to any securities that will actually be sold. The information contained in this material may be based on assumptions regarding market conditions and other matters as reflected in this material. We make no representations regarding the reasonableness of such assumptions or the likelihood that any of such assumptions will coincide with actual market conditions or events, and this material should not be relied upon for such purposes. We and our affiliates, officers, directors, partners and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities mentioned in this material or derivatives of those securities (including options). Information contained in this material is current as of the date appearing on this material only and supersedes all prior information regarding the securities and assets referred to in this material. Goldman, Sachs & Co. does not provide accounting, tax or legal advice. In addition, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Goldman, Sachs & Co. imposing any limitation of any kind. A-31 PROSPECTUS Mortgage-Backed Certificates Mortgage-Backed Notes (Issuable in Series) GS MORTGAGE SECURITIES CORP. Seller GS Mortgage Securities Corp. may, through one or more trusts, offer to sell certificates and notes in one or more series with one or more classes. The certificates of a series will evidence the beneficial ownership of one or more such trusts and the notes will evidence the debt obligations of a trust fund. Each trust or trust fund will consist primarily of the following mortgage related assets: o mortgage loans or participations in mortgage loans secured by one- to four-family residential properties, o mortgage loans or participations in mortgage loans secured by multifamily residential properties, o loans or participations in loans secured by security interests on shares in cooperative housing corporations, o conditional sales contracts and installment sales or loan agreements or participations in such contracts or agreements secured by manufactured housing, o closed-end and revolving credit line mortgage loans or participations in revolving credit line mortgage loans (or certain revolving credit line mortgage loan balances); and o mortgage pass-through securities issued or guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or other government agencies or government-sponsored agencies or privately issued mortgage-backed securities. The certificates or notes of any series may be called "mortgage-backed certificates", "mortgage pass-through certificates", "mortgage-backed notes", "asset-backed certificates", or "asset-backed notes". AN INVESTMENT IN THE CERTIFICATES OR NOTES OF ANY SERIES INVOLVES SIGNIFICANT RISKS. YOU SHOULD REVIEW THE INFORMATION UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 2 IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO MAKE AN INVESTMENT. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prior to issuance there will have been no market for the certificates or notes of any series. We cannot assure you that a secondary market for the certificates or notes will develop. Offers of the certificates or notes, as applicable, may be made through one or more different methods, including offerings through underwriters. Underwritten notes and underwritten certificates will be distributed, or sold by underwriters managed by: Goldman, Sachs & Co. The date of this Prospectus is November 17, 2005. [THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS PROSPECTUS SUPPLEMENT.............................................................................................1 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................................................1 RISK FACTORS......................................................................................................2 You May Have Difficulty Selling The Securities...............................................................2 Book-Entry Securities May Delay Receipt of Payment and Reports...............................................2 Your Return on an Investment in The Securities Is Uncertain..................................................2 Prepayments on the Mortgage Assets Could Lead to Shortfalls in the Distribution of Interest on Your Securities...............................................................................................3 Delay in Receipt of Liquidation Proceeds; Liquidation Proceeds May Be Less Than the Mortgage Loan Balance..................................................................................................3 High Loan-to-Value Ratios Increase Risk of Loss..............................................................4 Some of the Mortgage Loans May Have an Initial Interest-Only Period, Which May Result in Increased Delinquencies and Losses.................................................................................4 Interest Only and Principal Only Securities Involve Additional Risk..........................................4 Subordinated Securities Involve More Risks and May Incur Losses..............................................5 Trust or Trust Fund Assets Are the Only Source of Payments on the Securities.................................5 The Securities Are Obligations of the Trust Only.............................................................5 Delays and Expenses Inherent in Foreclosure Procedures Could Delay Distributions to You or Result in Losses................................................................................................5 The Concentration of Mortgage Assets in Specific Geographic Areas May Increase the Risk of Loss..............6 Financial Instruments May Not Avoid Losses...................................................................6 Environmental Conditions Affecting Mortgaged Properties May Result in Losses.................................7 Security Interests in Manufactured Homes May Be Lost.........................................................7 Residential Real Estate Values May Fluctuate and Adversely Affect Your Investment in the Securities..........7 The Trust May Contain Mortgage Assets Secured by Subordinated Liens; These Mortgage Assets Are More Likely Than Mortgage Assets Secured by Senior Liens to Experience Losses.................................8 Violation of Various Federal, State and Local Laws May Result in Losses on the Mortgage Loans................8 If Consumer Protection Laws are Violated in the Origination or Servicing of the Loans, Losses on Your Investment Could Result.............................................................................9 Assets of the Trust or Trust Fund May Include Mortgage Loans Originated Under Less Stringent Underwriting Standards..................................................................................10 Assets of the Trust or Trust Fund May Include Delinquent and Sub-Performing Residential Mortgage Loans...................................................................................................10 Bankruptcy of the Seller or a Sponsor May Delay or Reduce Collections on Loans..............................10 The Securities Are Not Suitable Investments for All Investors...............................................11 Your Investment May Not Be Liquid...........................................................................11 The Ratings on Your Certificates Could Be Reduced or Withdrawn..............................................11 Conflicts of Interest between the Master Servicer and the Trust.............................................11 You May Have Income for Tax Purposes Prior to Your Receipt of Cash..........................................12 THE TRUSTS OR TRUST FUNDS........................................................................................13 The Mortgage Loans - General................................................................................14 Single Family and Cooperative Loans.........................................................................16 Multifamily Loans...........................................................................................17 Manufactured Housing Contracts..............................................................................17 Revolving Credit Line Mortgage Loans........................................................................18 Agency Securities...........................................................................................18 Private Mortgage-Backed Securities..........................................................................23 U.S. Government Securities..................................................................................25 Substitution of Mortgage Assets.............................................................................25 -i-
Pre-Funding and Capitalized Interest Accounts...............................................................25 USE OF PROCEEDS..................................................................................................26 THE SELLER.......................................................................................................26 THE MORTGAGE LOANS...............................................................................................26 General.....................................................................................................26 Representations and Warranties; Repurchases.................................................................27 Optional Purchase of Defaulted Loans........................................................................28 DESCRIPTION OF THE SECURITIES....................................................................................28 General.....................................................................................................28 Distributions on Securities.................................................................................30 Advances....................................................................................................32 Reports to Securityholders..................................................................................33 Exchangeable Securities.....................................................................................33 Book-Entry Registration.....................................................................................35 CREDIT ENHANCEMENT...............................................................................................40 General.....................................................................................................40 Subordination...............................................................................................40 Pool Insurance Policies.....................................................................................41 Special Hazard Insurance Policies...........................................................................41 Bankruptcy Bonds............................................................................................42 FHA Insurance; VA Guarantees; RHS Guarantees................................................................43 FHA Loans...............................................................................................43 VA Loans................................................................................................45 RHS Loans...............................................................................................46 FHA Insurance on Multifamily Loans..........................................................................47 Reserve and Other Accounts..................................................................................48 Other Insurance, Guarantees and Similar Instruments or Agreements...........................................48 Cross Support...............................................................................................48 YIELD AND PREPAYMENT CONSIDERATIONS..............................................................................49 ADMINISTRATION...................................................................................................50 Assignment of Mortgage Assets...............................................................................51 Payments on Mortgage Loans; Deposits to Accounts............................................................53 Sub-Servicing...............................................................................................54 Collection Procedures.......................................................................................56 Hazard Insurance............................................................................................57 Realization Upon Defaulted Mortgage Loans...................................................................58 Servicing and Other Compensation and Payment of Expenses....................................................60 Evidence as to Compliance...................................................................................60 Certain Matters Regarding the Master Servicer and Us........................................................60 Events of Default; Rights Upon Event of Default.............................................................61 The Trustee.................................................................................................64 Duties of the Trustee.......................................................................................64 Resignation and Removal of Trustee..........................................................................64 Amendment...................................................................................................65 Termination; Optional Termination...........................................................................66 LEGAL ASPECTS OF THE MORTGAGE LOANS..............................................................................66 General.....................................................................................................66 Foreclosure/Repossession....................................................................................70 General.................................................................................................70 Rights Of Redemption........................................................................................73 General.................................................................................................73 Anti-Deficiency Legislation And Other Limitations On Lenders................................................73 Due-On-Sale Clauses.........................................................................................75 Prepayment Charges..........................................................................................75 Subordinate Financing.......................................................................................76 Applicability of Usury Laws.................................................................................76 -ii-
Servicemembers Civil Relief Act and the California Military and Veterans Code...............................77 Product Liability and Related Litigation....................................................................77 Environmental Considerations................................................................................78 Forfeiture for Drug, RICO and Money Laundering Violations...................................................79 Other Legal Considerations..................................................................................79 FEDERAL INCOME TAX CONSEQUENCES..................................................................................80 General.....................................................................................................80 Miscellaneous Itemized Deductions...........................................................................81 Tax Treatment of REMIC Regular Interests and Other Debt Instruments.........................................81 OID 82 Market Discount.............................................................................................86 Amortizable Premium.........................................................................................87 Consequences of Realized Losses.............................................................................87 Gain or Loss on Disposition.................................................................................87 Tax Treatment of Exchangeable Securities....................................................................88 Taxation of Certain Foreign Holders of Debt Instruments.....................................................91 Backup Withholding..........................................................................................91 Reporting and Tax Administration............................................................................92 Tax Treatment of REMIC Residual Interests...................................................................92 Special Considerations for Certain Types of Investors.......................................................96 Treatment by the REMIC of OID, Market Discount, and Amortizable Premium.....................................98 REMIC-Level Taxes...........................................................................................98 REMIC Qualification.........................................................................................98 Grantor Trusts..............................................................................................99 Tax Treatment of the Grantor Trust Security.................................................................99 Treatment of Pass-Through Securities.......................................................................100 Treatment of Strip Securities..............................................................................100 Determination of Income with Respect to Strip Securities...................................................101 Purchase of Complementary Classes of Strip Securities......................................................102 Possible Alternative Characterizations of Strip Securities.................................................102 Limitations on Deductions With Respect to Strip Securities.................................................103 Sale of a Grantor Trust Security...........................................................................103 Taxation of Certain Foreign Holders of Grantor Trust Securities............................................103 Backup Withholding of Grantor Trust Securities.............................................................104 Reporting and Tax Administration of Grantor Trust Securities...............................................104 Taxation of Owners of Owner Trust Securities...............................................................104 Partnership Taxation.......................................................................................104 Discount and Premium of Mortgage Loans.....................................................................105 Section 708 Termination....................................................................................105 Gain or Loss on Disposition of Partnership Securities......................................................106 Allocations Between Transferors and Transferees............................................................106 Section 731 Distributions..................................................................................106 Section 754 Election.......................................................................................107 Administrative Matters.....................................................................................107 Tax Consequences to Foreign Securityholders of a Partnership Trust.........................................108 Backup Withholding on Partnership Securities...............................................................108 Reportable Transactions....................................................................................108 STATE, FOREIGN AND LOCAL TAX CONSEQUENCES.......................................................................109 ERISA CONSIDERATIONS............................................................................................109 General....................................................................................................109 ERISA Considerations Relating to Certificates..............................................................109 Underwriter Exemption......................................................................................111 ERISA Considerations Relating to Notes.....................................................................117 LEGAL INVESTMENT................................................................................................118 METHOD OF DISTRIBUTION..........................................................................................120 LEGAL MATTERS...................................................................................................121 -iii-
FINANCIAL INFORMATION...........................................................................................121 Ratings....................................................................................................121 WHERE YOU CAN FIND MORE INFORMATION.............................................................................122 INDEX...........................................................................................................123 ANNEX I CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS..............................................A-1 -iv-
PROSPECTUS SUPPLEMENT We provide information to you about the certificates and notes in two separate documents that provide progressively more detail: o this prospectus, which provides general information, some of which may not apply to your series of certificates or notes; and o the accompanying prospectus supplement, which describes the specific terms of your series of certificates or notes. You should rely primarily on the description of your certificates or notes in the accompanying prospectus supplement. This prospectus may not be used to consummate sales of any certificates or any notes unless it is accompanied by a prospectus supplement relating to the certificates or notes being sold. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Securities and Exchange Commission allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and the information that we file later with the Securities and Exchange Commission will automatically update and supersede this information. All documents filed by us with respect to a trust fund referred to in the accompanying prospectus supplement and the related series of securities after the date of this prospectus and before the end of the related offering pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, are incorporated by reference in this prospectus and are a part of this prospectus from the date of their filing. Any statement contained in a document incorporated by reference in this prospectus is modified or superseded for all purposes of this prospectus to the extent that a statement contained in this prospectus (or in the accompanying prospectus supplement) or in any other subsequently filed document that also is incorporated by reference differs from that statement. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this prospectus. If so specified in any such document, such document shall also be deemed to be incorporated by reference in the registration statement of which this prospectus forms a part. You may request a copy of these filings, at no cost, by writing or telephoning us at our principal executive offices at the following address: GS Mortgage Securities Corp. 85 Broad Street New York, New York 10004 Telephone: (212) 902-1000 You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. Do not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of these documents. RISK FACTORS An investment in the certificates or notes of any series involves significant risks. Before making an investment decision, you should carefully review the following information and the information under the caption "risk factors" in the applicable prospectus supplement. You May Have Difficulty Selling The Securities There will be no market for the certificates or notes of any series before their issuance. We cannot assure you that a secondary market will develop or, if a secondary market does develop, that it will provide liquidity of investment or will continue for the life of the certificates or notes. The market value of the certificates or notes will fluctuate with changes in prevailing rates of interest. Consequently, the sale of the certificates or notes in any market that may develop may be at a discount from the certificates' or notes' par value or purchase price. You generally have no right to request redemption of the certificates or notes. The certificates and notes are redeemable only under the limited circumstances, if any, described in the related prospectus supplement. We do not intend to list any class of certificates or notes on any securities exchange or to quote the certificates or notes in the automated quotation system of a regulated securities association. However, if we intend such listing or such quotation with respect to some or all of the certificates in a series of certificates or some or all of the notes in a series of notes, we will include information relevant to such listing in the related prospectus supplement. If the certificates or notes are not listed or quoted, you may experience more difficulty selling certificates or notes. The prospectus supplement for a series may indicate that a specified underwriter intends to establish a secondary market in some or all of the classes of a series. However, no underwriter will be obligated to do so. Book-Entry Securities May Delay Receipt of Payment and Reports If the trust fund issues certificates or notes in book-entry form, you may experience delays in receipt of your payments and/or reports, since payments and reports will initially be made to the book-entry depository or its nominee. In addition, the issuance of certificates or notes in book-entry form may reduce the liquidity of certificates and notes so issued in the secondary trading market, since some investors may be unwilling to purchase certificates and notes for which they cannot receive physical certificates. Your Return on an Investment in The Securities Is Uncertain Your pre-tax return on any investment in certificates or notes of any series will depend on (1) the price that you pay for those certificates or notes, (2) the rate at which interest accrues on the certificates or notes and (3) the rate at which you receive a return of the principal and, consequently, the length of time that your certificates or notes are outstanding and accruing interest. o The Rate of Return of Principal is Uncertain. The amount of distributions of principal of the certificates or notes of any series and when you will receive those distributions depends on the amount and the times at which borrowers make principal payments on the mortgage assets. Those principal payments may be regularly scheduled payments or unscheduled payments resulting from prepayments of, or defaults on, the mortgage assets. In general, borrowers may prepay their mortgage loans in whole or in part at any time. Principal payments also result from repurchases due to conversions of adjustable rate loans to fixed rate loans, breaches of representations and warranties or the exercise of an optional termination right. A prepayment of a mortgage loan generally will result in a prepayment on the securities. If you purchase your securities at a discount and principal is repaid slower than you anticipate, then your yield may be lower than you anticipate. If you purchase your securities at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. In addition, a series of certificates or notes may have (1) certain classes that are paid principal after other classes or (2) certain types of certificates or notes that are more sensitive to prepayments. If you own either of these types of certificates or notes, changes in timing and the amount of principal payments by borrowers may adversely affect you. A variety of economic, social, competitive and other factors, including changes in interest rates, may influence the rate of prepayments on the mortgage loans. We cannot predict the amount and timing of payments that will be received and paid to holders of certificates or holders of notes in any month or over the period of time that such certificates or notes remain outstanding. o Optional Termination May Adversely Affect Yield. A trust fund may be subject to optional termination. Any such optional termination may adversely affect the yield to maturity on the related series of certificates or notes. If the mortgage assets include properties which the related trust or trust fund acquired through foreclosure or deed-in-lieu of foreclosure, the purchase price paid to exercise the optional termination may be less than the outstanding principal balances of the related series of certificates or notes. In such event, the holders of one or more classes of certificates or notes may incur a loss. o Credit Enhancement Will Not Cover All Losses. An investment in the certificates or notes involves a risk that you may lose all or part of your investment. Although a trust fund may include some form of credit enhancement, that credit enhancement may not cover every class of note or every class of certificate issued by such trust fund. In addition, every form of credit enhancement will have certain limitations on, and exclusions from, coverage. In most cases, credit enhancements will be subject to periodic reduction in accordance with a schedule or formula. The trustee may be permitted to reduce, terminate or substitute all or a portion of the credit enhancement for any series, if the applicable rating agencies indicate that the reduction, termination or substitution will not adversely affect the then-current rating of such series. Prepayments on the Mortgage Assets Could Lead to Shortfalls in the Distribution of Interest on Your Securities When a voluntary principal prepayment is made by the borrower on a mortgage loan (excluding any payments made upon liquidation of any mortgage loan), the borrower is charged interest on the amount of prepaid principal only up to the date of the prepayment, instead of for a full month. However, principal prepayments will only be passed through to the holders of the securities once a month on the distribution date that follows the prepayment period in which the prepayment was received by the applicable servicer. The applicable series of securities may contain provisions requiring the applicable servicer to pay an amount without any right of reimbursement, for those shortfalls in interest collections payable on the securities that are attributable to the difference between the interest paid by a borrower in connection with certain voluntary principal prepayments and thirty days' interest on the prepaid mortgage loan, which may be limited by all or a portion of the monthly servicing fee for the related distribution date. If the servicer fails to make required compensating interest payments or the shortfall exceeds the limitation based on the monthly servicing fee for the related distribution date, there will be fewer funds available for the distribution of interest on the securities. In addition, no compensating interest payments will be available to cover prepayment interest shortfalls resulting from types of voluntary prepayments specified in the related prospectus supplement for which the applicable servicer is not required to make a compensating interest payment or involuntary prepayments (such as liquidation of a defaulted mortgage loan). Such shortfalls of interest, if they result in the inability of the trust to pay the full amount of the current interest on the securities, will result in a reduction of the yield on your securities. Delay in Receipt of Liquidation Proceeds; Liquidation Proceeds May Be Less Than the Mortgage Loan Balance Substantial delays could be encountered in connection with the liquidation of delinquent mortgage loans in the related trust. Further, reimbursement of advances made on a mortgage loan, liquidation expenses such as legal fees, real estate taxes, hazard insurance and maintenance and preservation expenses may reduce the portion of liquidation proceeds payable on the securities. If a mortgaged property fails to provide adequate security for the mortgage loan, you will incur a loss on your investment if the credit enhancements are insufficient to cover the loss. -3- High Loan-to-Value Ratios Increase Risk of Loss A trust or trust fund may include mortgage loans with combined original loan-to-value ratios of 80% or higher. Mortgage loans with higher combined original loan-to-value ratios may present a greater risk of loss than mortgage loans with original loan-to-value ratios of 80% or below. Additionally, the determination of the value of a mortgaged property used in the calculation of the loan-to-value ratios of the mortgage loans may differ from the appraised value of such mortgaged properties if current appraisals were obtained. Some of the Mortgage Loans May Have an Initial Interest-Only Period, Which May Result in Increased Delinquencies and Losses A trust or trust fund may include mortgage loans that have an initial interest-only period. During this period, the payment made by the related borrower will be less than it would be if principal of the mortgage loan was required to amortize and if the interest rate adjusts to a rate higher than the initial fixed rate. In addition, the mortgage loan principal balance will not be reduced because there will be no scheduled monthly payments of principal during this period. As a result, no principal payments will be made on the securities with respect to these mortgage loans during their interest-only period unless there is a principal prepayment. After the initial interest-only period, the scheduled monthly payment on these mortgage loans will increase, which may result in increased delinquencies by the related borrowers, particularly if interest rates have increased and the borrower is unable to refinance. In addition, losses may be greater on these mortgage loans as a result of the mortgage loan not amortizing during the early years of these mortgage loans. Although the amount of principal included in each scheduled monthly payment for a traditional mortgage loan is relatively small during the first few years after the origination of a mortgage loan, in the aggregate the amount can be significant. Any resulting delinquencies and losses, to the extent not covered by credit enhancement, will be allocated to the securities. The performance of these mortgage loans may be significantly different from mortgage loans that amortize from origination and from mortgage loans whose interest rate adjusted from inception. In particular, there may be a higher expectation by these mortgagors of refinancing their mortgage loans with a new mortgage loan, in particular, one with an initial interest-only period, which may result in higher or lower prepayment speeds than would otherwise be the case. In addition, the failure by the related mortgagor to build equity in the property may affect the delinquency, loss and prepayment experience with respect to these mortgage loans. Interest Only and Principal Only Securities Involve Additional Risk Certain securities, called "interest only securities" or "principal only securities," involve greater uncertainty regarding the return on investment. An interest only security is not entitled to any principal payments. If the mortgage assets in a pool prepay at rapid rates, it will reduce the amount of interest available to pay a related interest only security and may cause an investor in that interest only security to fail to recover the investor's initial investment. A principal only security is not entitled to any interest payments, and is usually sold at a price that is less than the face amount of the security. If an investor in a principal only security receives payments on the security at a slow rate, the return on the investment will be low (because, in part, there are no interest payments to compensate the investor for the use of the investor's money). The prices offered by potential purchasers for interest only securities and principal only securities vary significantly from time to time, and there may be times when no potential purchaser is willing to buy an interest only security or principal only security. As a result, an investment in such securities involves a high degree of risk. -4- Subordinated Securities Involve More Risks and May Incur Losses A series of certificates or notes may provide that one or more classes of such certificates or notes are subordinated in right of payment to one or more other classes of that series or to one or more tranches of certificates or notes within a class of a series. Certificates or notes that are subordinated to other certificates or notes have a greater risk of loss because the subordinated certificates or notes will not receive principal, interest, or both until the more senior certificates or notes receive the payments to which they are entitled. Losses are generally allocated first to subordinated securities. If the amount available for payments to holders of certificates and notes is less than the amount required, including as a result of losses on the mortgage assets, the holders of the subordinated certificates or notes will not receive the payments that they would have if there had not been a shortfall in the amount available. Trust or Trust Fund Assets Are the Only Source of Payments on the Securities Any trust or trust fund will not have any significant assets or sources of funds other than the mortgage assets and the credit enhancement identified in the related prospectus supplement. The trust or trust fund will be the only person obligated to make payments on the certificates or notes issued by that trust or trust fund. In general, investors will not have recourse against us, the trustee, the master servicer, or any of our or their affiliates. Proceeds of the assets included in the related trust funds (including the mortgage assets and any form of credit enhancement) will be the sole source of payments on the securities, and there will be no recourse to the seller, a master servicer or any other entity in the event that such proceeds are insufficient or otherwise unavailable to make all payments provided for under the securities. As a result, you must depend on payments on the mortgage assets and any related credit enhancement for the required payments on your certificates or notes. Any credit enhancement will not cover all contingencies, and losses in excess of the coverage the credit enhancement provides will be borne directly by the affected securityholders. The Securities Are Obligations of the Trust Only The securities will not represent an interest in or obligation of the seller, any underwriter, the sponsor, any servicer, any seller, any responsible party, the trustee or any of their respective affiliates. Unless otherwise specified in the related prospectus supplement, neither the securities nor the underlying mortgage loans will be guaranteed or insured by any governmental agency or instrumentality or by the seller, any underwriter, the sponsor, any servicer, any responsible party, the trustee or any of their respective affiliates. Proceeds of the assets included in the trust will be the sole source of payments on the securities, and there will be no recourse to the seller, any underwriter, the sponsor, any servicer, any responsible party, the trustee or any other person in the event that such proceeds are insufficient or otherwise unavailable to make all payments provided for under the securities. Delays and Expenses Inherent in Foreclosure Procedures Could Delay Distributions to You or Result in Losses Substantial delays may occur before mortgage assets are liquidated and the proceeds forwarded to the trust or trust fund. Property foreclosure actions are regulated by state statutes and rules and, like many lawsuits, are characterized by significant delays and expenses if defenses or counterclaims are made. As a result, foreclosure actions can sometimes take several years to complete and mortgaged property proceeds may not cover the defaulted mortgage loan amount. Expenses incurred in the course of liquidating defaulted mortgage loans will be applied to reduce the foreclosure proceeds available to the trust or trust fund. Liquidation expenses with respect to defaulted mortgage assets do not vary directly with the outstanding principal balances of the mortgage assets at the time of default. Therefore, assuming that a master servicer, servicer or sub-servicer took the same steps in realizing on a defaulted mortgage asset having a small remaining principal balance as it would in the case of a defaulted mortgage asset having a large remaining principal balance, the amount realized after expenses of liquidation would be smaller as a percentage of the outstanding principal of the small mortgage assets than would be the case with the larger defaulted mortgage assets having a large remaining principal balance. Also, some states prohibit a lender from obtaining a judgment against the mortgagor for -5- amounts not covered by property proceeds if the mortgaged property is sold outside of a judicial proceeding. As a result, you may experience delays in receipt of moneys or reductions in amounts payable to you. There is no assurance that the value of the mortgaged assets for any series of certificates or notes at any time will equal or exceed the principal amount of the outstanding certificates or notes of the series. If trust assets have to be sold because of an event of default or otherwise, providers of services to the trust (including the trustee, the master servicer, and the credit enhancement providers, if any) generally will be entitled to receive the proceeds of the sale to the extent of their unpaid fees and other amounts due them before any proceeds are paid to the trust or the trust fund. As a result, you may not receive the full amount of interest and principal due on your certificates or notes. Your investment may be adversely affected by declines in property values. If the outstanding balance of a mortgage loan or contract and any secondary financing on the underlying property is greater than the value of the property, there is an increased risk of delinquency, foreclosure and loss. A decline in property values could extinguish the value of a junior mortgagee's interest in a property and, thus, reduce proceeds payable to the securityholders. The Concentration of Mortgage Assets in Specific Geographic Areas May Increase the Risk of Loss The mortgage assets underlying a series of certificates or notes may be concentrated in certain geographic regions of the United States. In such a case, losses on the mortgage assets may be higher than would be the case if the mortgaged properties were more geographically diversified. For example, some of the mortgaged properties may be more susceptible to certain types of special hazards, such as earthquakes, hurricanes, floods, fires and other natural disasters and major civil disturbances, than residential properties located in other parts of the country. In addition, the economies of the states with high concentrations of mortgaged properties may be adversely affected to a greater degree than the economies of other areas of the country by certain regional developments. If the residential real estate markets in an area of concentration experience an overall decline in property values after the dates of origination of the respective mortgage assets, then the rates of delinquencies, foreclosures and losses on the mortgage assets may increase and the increase may be substantial. The concentration of mortgage assets with specific characteristics relating to the types of properties, property characteristics, and geographic location are likely to change over time. Principal payments may affect the concentration levels. Principal payments could include voluntary prepayments and prepayments resulting from casualty or condemnation, defaults and liquidations and from repurchases due to breaches of representations and warranties. Because principal payments on the mortgage assets are payable to the subordinated securities at a slower rate than principal payments are made to the senior securities, the subordinated securities are more likely to be exposed to any risks associated with changes in concentrations of mortgage loan or property characteristics. Financial Instruments May Not Avoid Losses A trust or trust fund may include one or more financial instruments, such as interest rate or other swap agreements and interest rate cap, collar or floor agreements, to provide protection against certain types of risks or to provide certain cash flow characteristics for one or more classes of a series. The protection or benefit any such financial instrument provides will be dependent on the performance of the provider of such financial instrument. If such provider were unable or unwilling to perform its obligations under the related financial instrument, the related class or classes of certificates or notes could be adversely affected. Any withdrawal or reduction in a credit rating assigned to such provider may reduce the market price of the applicable certificates or notes and may affect a holder's ability to sell them. If a financial instrument is intended to provide an approximate or partial hedge for certain risks or cash flow characteristics, holders of the applicable class or classes will bear the risk that such an imperfect hedge -6- may result in a material adverse effect on the yield to maturity, the market price and the liquidity of such class or classes. Environmental Conditions Affecting Mortgaged Properties May Result in Losses Environmental conditions may diminish the value of the mortgage assets and give rise to liability of various parties. There are many federal and state environmental laws concerning hazardous wastes, hazardous substances, petroleum substances (including heating oil and gasoline), radon and other materials which may affect the property securing the mortgage assets. For example, under the Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended, and possibly under state law in certain states, a secured party which takes a deed-in-lieu of foreclosure or purchases a mortgaged property at a foreclosure sale may become liable in certain circumstances for the costs of a remedial action if hazardous wastes or hazardous substances have been released or disposed of on the property. Such costs may be substantial. It is possible that costs for remedial action could become a liability of a trust fund. Such costs would reduce the amounts otherwise distributable to holders of certificates or notes if a mortgaged property securing a mortgage loan became the property of a trust fund and if such trust fund incurred such costs. Moreover, certain states by statute impose a priority lien for any such costs incurred by such state on the property. In such states, liens for the cost of any remedial action have priority even over prior recorded liens. In these states, the security interest of the trustee in a property that is subject to such a lien could be adversely affected. Security Interests in Manufactured Homes May Be Lost The method of perfecting a security interest in a manufactured home depends on the laws of the state in which the manufactured home is located and, in some cases, the facts and circumstances surrounding the location of the manufactured home (for example, whether the manufactured home has become permanently affixed to its site). If a manufactured home is moved from one state to another, the master servicer, or the sub-servicer must take steps to re-perfect the security interest under the laws of the new state. Generally, the master servicer or the sub-servicer would become aware of the need to take such steps following notice due to the notation of the lender's lien on the applicable certificate of title. However, if through fraud or administrative error the master servicer, the servicer or the sub-servicer did not take such steps in a timely manner, the perfected status of the lien on the related manufactured home could be lost. Similarly, if a manufactured home were to become or be deemed to be permanently affixed to its site, the master servicer, or sub-servicer may have to take additional steps to maintain the priority and/or perfection of the security interest granted by the related manufactured housing contract. Although the borrower will have agreed not to permit the manufactured home to become or to be deemed to be permanently affixed to the site, we cannot assure you that the borrower will comply with this agreement. If the borrower does not comply, the applicable servicer would be unlikely to discover such noncompliance, which would hinder the servicer's ability to take additional steps, if any, required under applicable law to maintain the priority and/or perfection of the lien on the manufactured home. Residential Real Estate Values May Fluctuate and Adversely Affect Your Investment in the Securities We cannot assure you that values of the mortgaged properties have remained or will remain at their levels on the dates of origination of the related mortgage loans. If the residential real estate market experiences an overall decline in property values such that the outstanding principal balances of the mortgage loans, and any secondary financing on the mortgaged properties, in a particular mortgage pool become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry. In recent years, borrowers have increasingly financed their homes with new mortgage loan products, which in many cases have allowed them to purchase homes that they might otherwise have been unable to afford. Many of these new products feature low monthly payments during the initial years of the loan that can increase (in some cases, significantly) over the loan term. There is little historical data -7- with respect to these new mortgage loan products. Consequently, as borrowers face potentially higher monthly payments for the remaining terms of their loans, it is possible that, combined with other economic conditions such as increasing interest rates and deterioration of home values, borrower delinquencies and defaults could exceed anticipated levels. In that event, the securities, and your investment in the securities, may not perform as you anticipate. In addition, adverse economic conditions and other factors (which may or may not affect real property values) may affect the mortgagors' timely payment of scheduled payments of principal and interest on the mortgage loans and, accordingly, the actual rates of delinquencies, foreclosures and losses with respect to any mortgage pool. For example, in the case of multifamily loans, such other factors could include excessive building resulting in an oversupply of rental housing stock or a decrease in employment reducing the demand for rental units in an area; federal, state or local regulations and controls affecting rents; prices of goods and energy; environmental restrictions; increasing labor and material costs; and the relative attractiveness to tenants of the mortgaged properties. To the extent that credit enhancements do not cover such losses, such losses will be borne, at least in part, by the holders of the securities of the related series. The Trust May Contain Mortgage Assets Secured by Subordinated Liens; These Mortgage Assets Are More Likely Than Mortgage Assets Secured by Senior Liens to Experience Losses The trust may contain mortgage assets that are in a subordinate lien position. Mortgages or deeds of trust securing subordinate mortgage assets will be satisfied after the claims of the senior mortgage holders and the foreclosure costs are satisfied. In addition, a subordinate lender may only foreclose in a manner that is consistent with the rights of the senior lender. As a result, the subordinate lender generally must either pay the related senior lender in full at or before the foreclosure sale or agree to make the regular payments on the senior mortgage asset. Since the trust will not have any source of funds to satisfy any senior mortgage or to continue making payments on that mortgage, the trust's ability as a practical matter to foreclose on any subordinate mortgage will be limited. In addition, since foreclosure proceeds first retire any senior liens, the foreclosure proceeds may not be sufficient to pay all amounts owed to you. An overall decline in the residential real estate markets could adversely affect the values of the mortgaged properties and cause the outstanding principal balances of the second lien mortgage loans, together with the senior mortgage loans secured by the same mortgaged properties, to equal or exceed the value of the mortgaged properties. This type of a decline would adversely affect the position of a subordinate mortgagee before having the same effect on the related first mortgagee. A rise in interest rates over a period of time and the general condition of a mortgaged property as well as other factors may have the effect of reducing the value of the mortgaged property from the appraised value at the time the mortgage loan was originated. If there is a reduction in value of the mortgaged property, the ratio of the amount of the mortgage loan to the value of the mortgaged property may increase over what it was at the time the mortgage loan was originated. This type of increase may reduce the likelihood of liquidation or other proceeds being sufficient to satisfy the second lien mortgage loan after satisfaction of any senior liens. In circumstances where the applicable servicer determines that it would be uneconomical to foreclose on the related mortgaged property, the servicer may write off the entire outstanding principal balance of the related subordinate lien mortgage loan as bad debt. Violation of Various Federal, State and Local Laws May Result in Losses on the Mortgage Loans There has been an increased focus by state and federal banking regulatory agencies, state attorneys general offices, the Federal Trade Commission, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development and state and local governmental authorities on certain lending practices by some companies in the subprime industry, sometimes referred to as "predatory lending" practices. Sanctions have been imposed by state, local and federal governmental agencies for practices including, but not limited to, charging borrowers excessive fees, imposing higher interest rates than the borrower's credit risk warrants and failing to adequately disclose the material terms of loans to the borrowers. -8- Applicable state and local laws generally regulate interest rates and other charges, require certain disclosure, impact closing practices, and require licensing of originators. In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, ownership, servicing and collection of the mortgage loans. The mortgage loans are also subject to federal laws, including: o the Federal Truth in Lending Act and Regulation Z promulgated under that Act, which require certain disclosures to the mortgagors regarding the terms of the mortgage loans; o the Equal Credit Opportunity Act and Regulation B promulgated under that Act, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; and o the Fair Credit Reporting Act, which regulates the use and reporting of information related to the mortgagor's credit experience. Violations of certain provisions of these federal, state and local laws may limit the ability of the applicable servicer to collect all or part of the principal of, or interest on, the mortgage loans and in addition could subject the related trust to damages and administrative enforcement (including disgorgement of prior interest and fees paid). In particular, an originator's failure to comply with certain requirements of federal and state laws could subject the trust (and other assignees of the mortgage loans) to monetary penalties, and result in the obligors' rescinding the mortgage loans against either the trust or subsequent holders of the mortgage loans. If Consumer Protection Laws are Violated in the Origination or Servicing of the Loans, Losses on Your Investment Could Result In addition to federal laws, most states and some local governments have laws and public policies for the protection of consumers that prohibit unfair and deceptive practices in the origination, servicing and collection of loans, regulate interest rates and other loan changes and require licensing of loan originators and servicers. Violations of these laws may limit the ability of the master servicer or the sub-servicer to collect interest or principal on the mortgage assets and may entitle the borrowers to a refund of amounts previously paid. Any limit on the master servicer's or the sub-servicer's ability to collect interest or principal on a mortgage loan may result in a loss to you. The mortgage loans may also be governed by federal laws relating to the origination and underwriting of mortgage loans. These laws: o require specified disclosures to the borrowers regarding the terms of the mortgage loans; o prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the consumer credit protection act in the extension of credit; o regulate the use and reporting of information related to the borrower's credit experience; o require additional application disclosures, limit changes that may be made to the loan documents without the borrower's consent and restrict a lender's ability to declare a default or to suspend or reduce a borrower's credit limit to enumerated events; o permit a homeowner to withhold payment if defective craftsmanship or incomplete work do not meet the quality and durability standards agreed to by the homeowner and the contractor; and -9- o limit the ability of the master servicer or the sub-servicer to collect full amounts of interest on some mortgage assets and interfere with the ability of the master servicer or the sub-servicer to foreclose on some mortgaged properties. If particular provisions of these federal laws are violated, the master servicer or the sub-servicer may be unable to collect all or part of the principal or interest on the mortgage assets. The trust also could be exposed to damages and administrative enforcement. In either event, losses on your investment could result. Assets of the Trust or Trust Fund May Include Mortgage Loans Originated Under Less Stringent Underwriting Standards The assets of the trust or trust fund may include residential mortgage loans that were made, in part, to borrowers who, for one reason or another, are not able, or do not wish, to obtain financing from traditional sources. These mortgage loans may be considered to be of a riskier nature than mortgage loans made by traditional sources of financing, so that the holders of the securities may be deemed to be at greater risk of loss than if the mortgage loans were made to other types of borrowers. The underwriting standards used in the origination of these mortgage loans are generally less stringent than those of Fannie Mae or Freddie Mac with respect to a borrower's credit history and in certain other respects. Borrowers on these mortgage loans may have an impaired or unsubstantiated credit history. As a result of this less stringent approach to underwriting, the mortgage loans purchased by the trust may experience higher rates of delinquencies, defaults and foreclosures than mortgage loans underwritten in a manner which is more similar to the Fannie Mae and Freddie Mac guidelines. Assets of the Trust or Trust Fund May Include Delinquent and Sub-Performing Residential Mortgage Loans The assets of the trust or trust fund may include residential mortgage loans that are delinquent or sub-performing. The credit enhancement provided with respect to your series of securities may not cover all losses related to these delinquent or sub-performing residential loans. You should consider the risk that including these residential loans in the trust fund could increase the risk that you will suffer losses because: o the rate of defaults and prepayments on the residential mortgage loans to increase; and o in turn, losses may exceed the available credit enhancement for the series and affect the yield on your securities. Bankruptcy of the Seller or a Sponsor May Delay or Reduce Collections on Loans The seller and the sponsor for each series of securities may be eligible to become a debtor under the United States Bankruptcy Code. If the seller or a sponsor for any series of securities were to become a debtor under the United States Bankruptcy Code, the bankruptcy court could be asked to determine whether the mortgage assets that support your series of securities constitute property of the debtor, or whether they constitute property of the related issuing entity. If the bankruptcy court were to determine that the mortgage assets constitute property of the estate of the debtor, there could be delays in payments to certificateholders of collections on the mortgage assets and/or reductions in the amount of the payments paid to certificateholders. The mortgage assets would not constitute property of the estate of the seller or of the sponsor if the transfer of the mortgage assets from the sponsor to the seller and from the seller to the related issuing entity are treated as true sales, rather than pledges, of the mortgage assets. The transactions contemplated by this prospectus and the related prospectus supplements will be structured so that, if there were to be a bankruptcy proceeding with respect to the sponsor or the seller, the mortgage asset transfers described above should be treated as true sales, and not as pledges. The mortgage assets should accordingly be treated as property of the related issuing entity and not as part of -10- the bankruptcy estate of the seller or sponsor. In addition, the seller is operated in a manner that should make it unlikely that it would become the subject of a bankruptcy filing. However, there can be no assurance that a bankruptcy court would not recharacterize the mortgage asset transfers described above as borrowings of the seller or sponsor secured by pledges of the mortgage assets. Any request by the debtor (or any of its creditors) for such a recharacterization of these transfers, if successful, could result in delays in payments of collections on the mortgage assets and/or reductions in the amount of the payments paid to certificateholders, which could result in losses on the related series of securities. Even if a request to recharacterize these transfers were to be denied, delays in payments on the mortgage assets and resulting delays or losses on the related series of securities could result. The Securities Are Not Suitable Investments for All Investors The certificates and the notes are complex investments that are not appropriate for all investors. The interaction of the factors described in this prospectus and the related prospectus supplement is difficult to analyze and may change from time to time while the certificates or notes of a series are outstanding. It is impossible to predict with any certainty the amount or timing of distributions on the certificates or notes of a series or the likely return on an investment in any such securities. As a result, only sophisticated investors with the resources to analyze the potential risks and rewards of an investment in the certificates or notes should consider such an investment. Your Investment May Not Be Liquid The underwriter intends to make a secondary market in the securities, but it will have no obligation to do so. We cannot assure you that such a secondary market will develop or, if it develops, that it will continue. Consequently, you may not be able to sell your securities readily or at prices that will enable you to realize your desired yield. The market values of the securities are likely to fluctuate; these fluctuations may be significant and could result in significant losses to you. The secondary markets for asset backed securities have experienced periods of illiquidity and can be expected to do so in the future. Illiquidity can have a severely adverse effect on the prices of securities that are especially sensitive to prepayment, credit, or interest rate risk, or that have been structured to meet the investment requirements of limited categories of investors. The related prospectus supplement may specify that the securities are not "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. In that case, many institutions that lack the legal authority to invest in securities that do not constitute "mortgage related securities" will not be able to invest in those securities, thereby limiting the market for those securities. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the securities. You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership, and sale of those securities. See "Legal Investment" in this prospectus and in the related prospectus supplement. The Ratings on Your Certificates Could Be Reduced or Withdrawn Each rating agency rating the securities may change or withdraw its initial ratings at any time in the future if, in its judgment, circumstances warrant a change. No person is obligated to maintain the ratings at their initial levels. If a rating agency reduces or withdraws its rating on one or more classes of the securities, the liquidity and market value of the affected securities is likely to be reduced. Conflicts of Interest between the Master Servicer and the Trust The master servicer or an affiliate of the master servicer may initially own all or a portion of certain classes of the securities. The timing of mortgage loan foreclosures and sales of the related mortgaged properties, which will be under the control of the master servicer, may affect the weighted average lives -11- and yields of the securities. Although the servicing standard in the related servicing agreement will obligate the master servicer to service the mortgage loans without regard to the ownership or non ownership of any securities by the master servicer or any of its affiliates, you should consider the possibility that the timing of such foreclosures or sales may not be in the best interests of all securityholders. You should also consider that, other than the general servicing standard described above, no specific guidelines will be set forth in the related servicing agreement to resolve or minimize potential conflicts of interest of this sort. You May Have Income for Tax Purposes Prior to Your Receipt of Cash Securities purchased at a discount and securities purchased at a premium that are deemed to have original issue discount may incur tax liabilities prior to a holder's receiving the related cash payments. In addition, holders of REMIC residual certificates will be required to report on their federal income tax returns as ordinary income their pro rata share of the taxable income of the REMIC, regardless of the amount or timing of their receipt of cash payments, as described in "Federal Income Tax Consequences" in this prospectus. Accordingly, holders of offered securities that constitute REMIC residual certificates may have taxable income and tax liabilities arising from their investment during a taxable year in excess of the cash received during that year. The requirement that holders of REMIC residual certificates report their pro rata share of the taxable income and net loss will continue until the outstanding balances of all classes of securities of the series have been reduced to zero, even though holders of REMIC residual certificates have received full payment of their stated interest and principal. The holder's share of the REMIC taxable income may be treated as excess inclusion income to the holder, which: o generally, will not be subject to offset by losses from other activities, o for a tax-exempt holder, will be treated as unrelated business taxable income, and o for a foreign holder, will not qualify for exemption from withholding tax. Individual holders of REMIC residual certificates may be limited in their ability to deduct servicing fees and other expenses of the REMIC. In addition, REMIC residual certificates are subject to certain restrictions on transfer. Because of the special tax treatment of REMIC residual certificates, the taxable income arising in a given year on a REMIC residual certificate will not be equal to the taxable income associated with investment in a corporate bond or stripped instrument having similar cash flow characteristics and pre-tax yield. Therefore, the after-tax yield on the REMIC residual certificate may be significantly less than that of a corporate bond or stripped instrument having similar cash flow characteristics. See "Federal Income Tax Consequences" in this prospectus. -12- THE TRUSTS OR TRUST FUNDS A trust or trust fund for a series of securities will consist primarily of mortgage assets consisting of: 1. a mortgage pool* comprised of: o Single family loans. "Single family loans" consist of mortgage loans or participations in mortgage loans secured by one- to four-family residential properties (which may have mixed residential and commercial uses), o Multifamily loans. "Multifamily loans" consist of mortgage loans or participations in mortgage loans secured by multifamily residential properties (which may have mixed residential and commercial uses), o Cooperative loans. "Cooperative loans" consist of loans or participations in loans secured by security interests or similar liens on shares in cooperative housing corporations and the related proprietary leases or occupancy agreements, o Manufactured housing contracts. "Manufactured housing contracts" consist of conditional sales contracts and installment sales or loan agreements or participations in conditional sales contracts, installment sales or loan agreements secured by manufactured housing, and or o Revolving Credit Line Mortgage Loans. "Revolving credit line mortgage loans" consist of mortgage loans or participations in mortgage loans (or certain revolving credit line mortgage loan balances) secured by one- to four-family or multifamily residential properties (which may have mixed residential and commercial uses), the unpaid principal balances of which may vary during a specified period of time as the related line of credit is repaid or drawn down by the borrower from time to time; 2. mortgage pass-through securities issued or guaranteed by the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or other government agencies or government-sponsored agencies, which are referred to in this prospectus as "agency securities"; and/or 3. mortgage-backed securities issued by entities other than government agencies or government-sponsored agencies, which are referred to in this prospectus as "privately issued mortgage-backed securities," in each case, as specified in the related prospectus supplement, together with payments in respect of such mortgage assets and certain other accounts, obligations or agreements, such as U.S. Government Securities, in each case as specified in the related prospectus supplement. The single and multifamily loans, the cooperative loans, the manufactured housing contracts and the revolving credit line mortgage loans are sometimes referred to in this prospectus as the "mortgage loans." If the related prospectus supplement so specifies, certain certificates in a series of certificates or certain notes in a series of notes will evidence the entire beneficial ownership interest in, or the debt obligations of, a trust fund, and, in turn the assets of such trust fund will consist of a beneficial ownership interest in another trust fund which will contain the underlying trust assets. The certificates and notes are sometimes referred to in this prospectus as the securities. --------- * Whenever the terms "mortgage pool" and "securities" are used in this prospectus, such terms will be deemed to apply, unless the context indicates otherwise, to one specific mortgage pool and the securities representing certain undivided interests in, or the debt obligations of, a single trust fund consisting primarily of the mortgage loans in such mortgage pool. Similarly, the term "interest rate" will refer to the interest rate borne by the securities of one specific series and the term "trust fund" will refer to one specific trust fund or the trust which owns the assets of such trust fund. -13- We will acquire the mortgage assets, either directly or through affiliates, from originators or other entities, who are referred to as "lenders," or in the market and we will convey the mortgage assets to the related trust fund. As used in this prospectus, "Agreement" means, (1) with respect to the certificates of a series, the pooling and servicing agreement or the trust agreement and (2) with respect to the notes of a series, the indenture or the master servicing agreement, as the context requires. The following is a brief description of the assets expected to be included in a trust or a trust fund. If specific information respecting assets is not known at the time that the related securities of a series are initially offered, more general information of the nature described below will be provided in the related prospectus supplement. Specific information will be listed in a report on Form 8-K to be filed with the Securities and Exchange Commission within fifteen days after the initial issuance of such securities. A copy of the pooling and servicing agreement or the trust agreement and/or the indenture, as applicable, with respect to each series will be attached to a report on Form 8-K. You will be able to inspect such agreements at the corporate trust office of the trustee specified in the related prospectus supplement. A schedule of the mortgage assets relating to such series will be attached to the Agreement delivered to the trustee upon delivery of the securities. The Mortgage Loans - General The real property and manufactured homes, as the case may be, which secure repayment of the mortgage loans, which this prospectus refers to as the mortgaged properties, may be located in any one of the fifty states or the District of Columbia, Guam, Puerto Rico or any other territory of the United States. Certain mortgage loans may be conventional loans (i.e., loans that are not insured or guaranteed by any governmental agency), insured by the Federal Housing Authority - also referred to as the "FHA" -or partially guaranteed by the Veterans Administration - also referred to as the "VA" or the Rural Housing Service of the United State Department of Agriculture - also referred to as "RHS" - as specified in the related prospectus supplement and described below. Primary mortgage guaranty insurance policies (each a "primary insurance policy") may wholly or partially cover mortgage loans with certain Loan-to-Value Ratios or certain principal balances. The related prospectus supplement will describe the existence, extent and duration of any such coverage. Mortgage loans in a mortgage pool will provide that borrowers make payments monthly or bi-weekly or as specified in the related prospectus supplement. Unless otherwise specified in the related prospectus supplement, payments will be due on the first day of each month for all of the monthly-pay mortgage loans in a mortgage pool. The related prospectus supplement will describe the payment terms of the mortgage loans included in a trust fund. Such payment terms may include any of the following features, a combination of such features or other features the related prospectus supplement may describe: o Borrowers may pay interest at a fixed rate, a rate adjustable from time to time in relation to an index, a rate that is fixed for period of time or under certain circumstances and is followed by an adjustable rate, a rate that otherwise varies from time to time, or a rate that is convertible from an adjustable rate to a fixed rate. Periodic adjustment limitations, maximum rates, minimum rates or a combination of such limitations may apply to changes to an adjustable rate. Accrued interest may be deferred and added to the principal of a mortgage loan for such periods and under such circumstances as the related prospectus supplement may specify. Mortgage loans may provide for the payment of interest at a rate lower than the specified interest rate on the mortgage loan for a period of time or for the life of the mortgage loan, and the amount of any difference may be contributed from funds supplied by the seller of the mortgaged property or another source or may be treated as accrued interest added to the principal of the mortgage loan; o Principal may be payable on a level debt service basis to amortize the mortgage loan fully over its term. Principal may be calculated on the basis of an assumed amortization schedule that is significantly longer than the original term to maturity or on an interest rate that is different from the -14- interest rate on the mortgage loan or may not be amortized during all or a portion of the original term. A mortgage loan as to which substantial payment of principal is due on the maturity date is referred to as a balloon loan, and the final payment is referred to as a balloon payment. Payment of all or a substantial portion of the principal may be due on maturity. Principal may include deferred interest that has been added to the principal balance of the mortgage loan; o Monthly payments of principal and interest (also referred to as scheduled payments) may be fixed for the life of the mortgage loan or may increase over a specified period of time or may change from period to period. Mortgage loans may include limits on periodic increases or decreases in the amount of monthly payments and may include maximum or minimum monthly payments. Certain mortgage loans, sometimes called graduated payment mortgage loans, may (1) require the monthly payments of principal and interest to increase for a specified period or (2) provide for deferred payment of a portion of the interest due monthly during such period, and add such interest to the principal balance of the mortgage loan. This procedure is referred to as negative amortization. In a negatively amortizing loan, the difference between the scheduled payment of interest and the amount of interest actually accrued is added monthly to the outstanding principal balance. Other mortgage loans, sometimes referred to as growing equity mortgage loans, may provide for periodic scheduled payment increases for a specified period with the full amount of such increases being applied to principal. Other mortgage loans, sometimes referred to as reverse mortgages, may provide for monthly payments to the borrowers with interest and principal payable when the borrowers move or die. Reverse mortgages typically are made to older persons who have substantial equity in their homes; and o A prepayment fee may apply to prepayments of principal. Such prepayment fee may be fixed for the life of the mortgage loan or may decline over time. Certain mortgage loans may permit prepayments after expiration of a lockout period and may require the payment of a prepayment fee in connection with any subsequent prepayment. Other mortgage loans may permit prepayments without payment of a fee unless the prepayment occurs during specified time periods. The mortgage loans may include due-on-sale clauses which permit the mortgagee to demand payment of the entire mortgage loan in connection with the sale by the mortgagor or certain transfers of the related mortgaged property. Other mortgage loans may be assumable by persons meeting the then applicable underwriting standards of the lender. Each prospectus supplement will contain information, as of a date specified in such prospectus supplement and to the extent then specifically known to us, about the mortgage loans contained in the related mortgage pool, including: o the aggregate principal balance and the average principal balance of the mortgage loans as of the date specified in the related prospectus supplement, o the type of property securing the mortgage loans (e.g., one- to four-family houses, vacation and second homes, manufactured homes, multifamily apartments, leasehold interests, investment properties, condotels-which generally are condominium units at properties which may include features similar to those commonly found at hotels, such as maid service, a front desk or resident manager, rental pools and commercial space, or such other amenities as may be described in the related prospectus supplement-or other real property), o the original terms to maturity of the mortgage loans, o the aggregate principal balance of mortgage loans having Loan-to-Value Ratios at origination exceeding 80%, o the specified interest rate or accrual percentage rates or range of specified interest rates or accrual percentage rates borne by the mortgage loans, and o the geographical distribution of the mortgage loans on a state-by-state basis. -15- The "Loan-to-Value Ratio" of a mortgage loan at any time is the fraction, expressed as a percentage, the numerator of which is the outstanding principal balance of the mortgage loan and the denominator of which is the collateral value of the related mortgaged property. The collateral value of a mortgaged property, other than with respect to manufactured housing contracts and certain mortgage loans the proceeds of which were used to refinance an existing mortgage loan (each, a "Refinance Loan"), is the lesser of (a) the appraised value determined in an appraisal obtained by the originator at origination of such mortgage loan and (b) the sales price for such property. In the case of Refinance Loans, the collateral value of the related mortgaged property generally is the appraised value of the mortgaged property determined in an appraisal obtained at the time of refinancing. For purposes of calculating the Loan-to-Value Ratio of a manufactured housing contract relating to a new manufactured home, the collateral value is no greater than the sum of a fixed percentage of the list price of the unit actually billed by the manufacturer to the dealer (exclusive of freight to the dealer site) including "accessories" identified in the invoice plus the actual cost of any accessories purchased from the dealer, a delivery and set-up allowance, depending on the size of the unit, and the cost of state and local taxes, filing fees and up to three years prepaid hazard insurance premiums. The collateral value of a used manufactured home is the least of the sales price, appraised value, and National Automobile Dealer's Association book value plus prepaid taxes and hazard insurance premiums. The appraised value of a manufactured home is based upon the age and condition of the manufactured housing unit and the quality and condition of the mobile home park in which it is situated, if applicable. We will cause the mortgage loans comprising each mortgage pool to be assigned to the trustee named in the related prospectus supplement for the benefit of the holders of the certificates or notes, as applicable, of the related series. To the extent one or more servicers or master servicers are appointed for a related series (each, a "Master Servicer"), they will be named in the related prospectus supplement and will service the mortgage loans, either directly or through sub-servicers, pursuant to the pooling and servicing agreement or, if the series includes notes, pursuant to a master servicing agreement among us, the Master Servicer and the related trust or trust fund. Alternately, the trustee may also serve in the capacity of the master trustee if so specified in the related prospectus supplement or applicable Agreement. The Master Servicer or sub-servicers will receive a fee for such services. With respect to mortgage loans serviced by a Master Servicer through a sub-servicer, the Master Servicer will remain liable for its servicing obligations under the applicable agreement, as if the Master Servicer alone were servicing such mortgage loans. With respect to a series of securities, to the extent specified in the related prospectus supplement, we will obtain certain representations and warranties from the entities from whom we purchase the mortgage loans. To the extent specified in the related prospectus supplement, we will assign our rights with respect to such representations and warranties to the trustee for such series of notes or such series of certificates, as applicable. We will have obligations with respect to a series only to the extent specified in the related prospectus supplement. The obligations of each Master Servicer with respect to the mortgage loans will consist principally of its contractual servicing obligations under the related agreement and its obligation to make certain cash advances in the event of delinquencies in payments on or with respect to the mortgage loans in the amounts described under "Description of the Securities--Advances." The obligations of a Master Servicer to make advances may be subject to limitations, to the extent this prospectus and the related prospectus supplement provide. Single Family and Cooperative Loans Single family loans will consist of mortgage loans, deeds of trust or participations or other beneficial interests in mortgage loans or deeds of trust, secured by liens on one- to four-family residential or mixed residential and commercial use properties. The single family loans may include loans or participations in loans secured by mortgages or deeds of trust on condominium units in condominium buildings together with such condominium unit's appurtenant interest in the common elements of the condominium building. Cooperative loans will be secured by security interests in or similar liens on stock, shares or membership certificates issued by private, nonprofit, cooperative housing corporations, known as cooperatives, and in the related proprietary leases or occupancy agreements granting exclusive rights to occupy specific dwelling units in such cooperatives' buildings. Single family loans and cooperative loans may be -16- conventional (i.e., loans that are not insured or guaranteed by any governmental agency), insured by the FHA or partially guaranteed by the VA or the RHS, as specified in the related prospectus supplement. Single family loans and cooperative loans will have individual principal balances at origination of not less than $5,000, and original terms to stated maturity of 15 to 40 years or such other individual principal balances at origination and/or original terms to stated maturity as the related prospectus supplement specifies. The mortgaged properties relating to single family loans will consist of detached or semi-detached one-family dwelling units, two- to four-family dwelling units, townhouses, rowhouses, individual condominium units, individual units in planned unit developments, and certain other dwelling units, which may be part of a mixed use property. Such mortgaged properties may include vacation and second homes, investment properties and leasehold interests. Certain mortgage loans may be originated or acquired in connection with employee relocation programs. Multifamily Loans Multifamily loans will consist of mortgage loans, deeds of trust or participations or other beneficial interests in mortgage loans or deeds of trust, secured by liens on rental apartment buildings or projects containing five or more residential units and which may be part of a mixed use property. Such loans may be conventional loans or FHA-insured loans, as the related prospectus supplement specifies. Multifamily loans generally will have original terms to stated maturity of not more than 40 years or as otherwise specified in the related prospectus supplement. Mortgaged properties which secure multifamily loans may include high-rise, mid-rise and garden apartments. Apartment buildings that the cooperative owns may secure certain of the multifamily loans. The cooperative owns all the apartment units in the building and all common areas. Tenant-stockholders own the cooperative. Through ownership of stock, shares or membership certificates in the corporation, the tenant-stockholders receive proprietary leases or occupancy agreements which confer exclusive rights to occupy specific apartments or units. Generally, a tenant-stockholder of a cooperative must make a monthly payment to the cooperative representing such tenant-stockholder's pro rata share of the cooperative's payments for its mortgage loan, real property taxes, maintenance expenses and other capital or ordinary expenses. Those payments are in addition to any payments of principal and interest the tenant-stockholder must make on any loans to the tenant-stockholder secured by its shares in the cooperative. The cooperative will be directly responsible for building management and, in most cases, payment of real estate taxes and hazard and liability insurance. A cooperative's ability to meet debt service obligations on a multifamily loan, as well as all other operating expenses, will be dependent in large part on the receipt of maintenance payments from the tenant-stockholders, as well as any rental income from units or commercial areas the cooperative might control. In some cases, unanticipated expenditures may have to be paid by special assessments on the tenant-stockholders. Manufactured Housing Contracts The manufactured housing contracts will consist of manufactured housing conditional sales contracts and installment sales or loan agreements each secured by a manufactured home. Manufactured housing contracts may be conventional, insured by the FHA or partially guaranteed by the VA or the RHS, as specified in the related prospectus supplement. Each manufactured housing contract will be fully amortizing and will bear interest at its accrual percentage rate. Manufactured housing contracts will have individual principal balances at origination of not less than $5,000 and original terms to stated maturity of 5 to 40 years, or such other individual principal balances at origination and/or original terms to stated maturity as are specified in the related prospectus supplement. The "manufactured homes" securing the manufactured housing contracts will consist of manufactured homes within the meaning of 42 United States Code, Section 5402(6), which defines a "manufactured home" as "a structure, transportable in one or more sections, which in the traveling mode, is eight body feet or more in width or forty body feet or more in length, or, when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used -17- as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained in the home; except that such term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the Secretary of Housing and Urban Development and complies with the standards established under this chapter." In the past, manufactured homes were commonly referred to as "mobile homes." Revolving Credit Line Mortgage Loans Revolving credit line mortgage loans may consist, in whole or in part, of mortgage loans or participations or other beneficial interests in mortgage loans or certain revolving credit line mortgage loan balances. Interest on each revolving credit line mortgage loan, excluding introductory rates offered from time to time during promotional periods, may be computed and payable monthly on the average daily outstanding principal balance of such loan. From time to time prior to the expiration of the related draw period specified in a revolving credit line mortgage loan, principal amounts on such revolving credit line mortgage loan may be drawn down (up to a maximum amount as set forth in the related prospectus supplement) or repaid. If specified in the related prospectus supplement, new draws by borrowers under the revolving credit line mortgage loans will automatically become part of the trust fund described in the prospectus supplement. As a result, the aggregate balance of the revolving credit line mortgage loans will fluctuate from day to day as new draws by borrowers are added to the trust fund and principal payments are applied to such balances and such amounts will usually differ each day. The full amount of a closed-end revolving credit line mortgage loan is advanced at the inception of the revolving credit line mortgage loan and generally is repayable in equal, or substantially equal, installments of an amount sufficient to amortize fully the revolving credit line mortgage loan at its stated maturity. Except to the extent provided in the related prospectus supplement, the original terms to stated maturity of closed-end revolving credit line mortgage loans generally will not exceed 360 months. If specified in the related prospectus supplement, the terms to stated maturity of closed-end revolving credit line mortgage loans may exceed 360 months. Under certain circumstances, under a revolving credit line mortgage loan, a borrower may choose an interest-only payment option, during which the borrower is obligated to pay only the amount of interest which accrues on the loan during the billing cycle, and may also elect to pay all or a portion of the principal. An interest-only payment option may terminate at the end of a specific period, after which the borrower must begin paying at least a minimum monthly portion of the average outstanding principal balance of the revolving credit line mortgage loan. Agency Securities Government National Mortgage Association. Government National Mortgage Association, commonly known as GNMA, ("GNMA") is a wholly-owned corporate instrumentality of the United States with the United States Department of Housing and Urban Development. Section 306(g) of Title II of the National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA to guarantee the timely payment of the principal of and interest on certificates, known as GNMA certificates, which represent an interest in a pool of mortgage loans insured by FHA under the Housing Act, or Title V of the Housing Act of 1949, or partially guaranteed by the VA under the Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of Title 38, United States Code or by the RHS under Title V of the Housing Act of 1949. The mortgage loans insured by the FHA are referred to as FHA Loans ("FHA Loans"). The loans partially guaranteed by the VA are referred to as VA Loans ("VA Loans"), and loans partially guaranteed by the RHS are referred to as RHS Loans ("RHS Loans"). Section 306(g) of the Housing Act provides that "the full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee under this subsection." In order to meet its obligations under any such guarantee, GNMA may, under Section 306(d) of the Housing Act, borrow from the United States Treasury in an amount which is at any time sufficient to enable GNMA, with no limitations as to amount, to perform its obligations under its guarantee. -18- GNMA Certificates. Each GNMA certificate that a trust fund holds (which may be issued under either the GNMA I Program or the GNMA II Program) will be a "fully modified pass-through" mortgaged-backed certificate issued and serviced by a mortgage banking company or other financial concern, known as a GNMA issuer, approved by GNMA or approved by Fannie Mae as a seller-servicer of FHA Loans, VA Loans and/or RHS Loans. Each GNMA certificate which is issued under the GNMA I Program is a "GNMA I Certificate," and each GNMA certificate which is issued under the GNMA II Program is a "GNMA II Certificate." The mortgage loans underlying the GNMA certificates will consist of FHA Loans, VA Loans, RHS loans and other loans eligible for inclusion in loan pools underlying GNMA certificates. A one- to four-family residential or mixed use property or a manufactured home secures each such mortgage loan. GNMA will approve the issuance of each such GNMA certificate in accordance with a guaranty agreement between GNMA and the GNMA issuer. Pursuant to its guaranty agreement, a GNMA issuer will advance its own funds to make timely payments of all amounts due on each such GNMA certificate, even if the payments received by the GNMA issuer on the FHA Loans, VA Loans or RHS Loans underlying each such GNMA certificate are less than the amounts due on each such GNMA certificate. GNMA will guarantee the full and timely payment of principal of and interest on each GNMA certificate. GNMA's guarantee is backed by the full faith and credit of the United States. Each such GNMA certificate will have an original maturity of not more than 30 years (but may have original maturities of substantially less than 30 years). Each such GNMA certificate will be based on and backed by a pool of FHA Loans, VA Loans or RHS Loans secured by one- to four-family residential or mixed use properties or manufactured homes. Each such GNMA certificate will provide for the payment by or on behalf of the GNMA issuer to the registered holder of such GNMA certificate of scheduled monthly payments of principal and interest equal to the registered holder's proportionate interest in the aggregate amount of the monthly principal and interest payment on each FHA Loan, VA Loan or RHS Loans underlying such GNMA certificate, less the applicable servicing and guarantee fee which together equal the difference between the interest on the FHA Loan, VA Loan or RHS Loans and the pass-through rate on the GNMA certificate. In addition, each payment will include proportionate pass-through payments of any prepayments of principal on the FHA Loans, VA Loans or RHS Loans underlying such GNMA certificate and Liquidation Proceeds in the event of a foreclosure or other disposition of any such FHA Loans, VA Loans or RHS Loans. If a GNMA issuer is unable to make the payments on a GNMA certificate as it becomes due, it must promptly notify GNMA and request GNMA to make such payment. Upon notification and request, GNMA will make such payments directly to the registered holder of such GNMA certificate. In the event the GNMA issuer makes no payment and the GNMA issuer fails to notify and request GNMA to make such payment, the holder of such GNMA certificate will have recourse only against GNMA to obtain such payment. The trustee or its nominee, as registered holder of the GNMA certificates held in a trust fund, will have the right to proceed directly against GNMA under the terms of the guaranty agreements relating to such GNMA certificates for any amounts that are not paid when due. All mortgage loans underlying a particular GNMA I Certificate must have the same interest rate (except for pools of mortgage loans secured by manufactured homes) over the term of the loan. The interest rate on such GNMA I Certificate will equal the interest rate on the mortgage loans included in the pool of mortgage loans underlying such GNMA I Certificate, less one-half percentage point per annum of the unpaid principal balance of the mortgage loans. Mortgage loans underlying a particular GNMA II Certificate may have per annum interest rates that vary from each other by up to one percentage point. The interest rate on each GNMA II Certificate will be between one-half percentage point and one and one-half percentage points lower than the highest interest rate on the mortgage loans included in the pool of mortgage loans underlying such GNMA II Certificate (except for pools of mortgage loans secured by manufactured homes). Regular monthly installment payments on each GNMA certificate held in a trust fund will be comprised of interest due as specified on such GNMA certificate plus the scheduled principal payments on the FHA Loans, VA Loans or RHS Loans underlying such GNMA certificate due on the first day of the month in which the scheduled monthly installments on such GNMA certificate is due. Such regular -19- monthly installments on each such GNMA certificate are required: (i) to be paid to the trustee as registered holder by the 15th day of each month in the case of a GNMA I Certificate, and (ii) to be mailed to the trustee by the 20th day of each month in the case of a GNMA II Certificate. Any Principal Prepayments on any FHA Loans, VA Loans or RHS Loans underlying a GNMA certificate held in a trust fund or any other early recovery of principal on such loan will be passed through to the trustee as the registered holder of such GNMA certificate. GNMA certificates may be backed by graduated payment mortgage loans or by "buydown" mortgage loans for which funds will have been provided (and deposited into escrow accounts) for application to the payment of a portion of the borrowers' monthly payments during the early years of such mortgage loan. Payments due to the registered holders of GNMA certificates backed by pools containing "buydown" mortgage loans will be computed in the same manner as payments derived from other GNMA certificates and will include amounts to be collected from both the borrower and the related escrow account. The graduated payment mortgage loans will provide for graduated interest payments that, during the early years of such mortgage loans, will be less than the amount of stated interest on such mortgage loans. The interest not so paid will be added to the principal of such graduated payment mortgage loans and, together with interest thereon, will be paid in subsequent years. The obligations of GNMA and of a GNMA issuer will be the same irrespective of whether graduated payment mortgage loans or buydown loans back the GNMA certificates. No statistics comparable to the FHA's prepayment experience on level payment, non-buydown loans are available in respect of graduated payment or buydown mortgages. GNMA certificates related to a series of certificates may be held in book-entry form. If a related prospectus supplement so specifies, multifamily mortgage loans having the characteristics specified in such prospectus supplement may back the GNMA certificates. The GNMA certificates included in a trust fund, and the related underlying mortgage loans, may have characteristics and terms different from those described above. The related prospectus supplement will describe any such different characteristics and terms. Federal National Mortgage Association. The Federal National Mortgage Association, commonly referred to as Fannie Mae ("Fannie Mae"), is a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968. Fannie Mae provides funds to the mortgage market primarily by purchasing mortgage loans from lenders, thereby replenishing their funds for additional lending. Fannie Mae acquires funds to purchase mortgage loans from many capital market investors that may not ordinarily invest in mortgages, thereby expanding the total amount of funds available for housing. Operating nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus to capital-short areas. Fannie Mae Certificates. Fannie Mae certificates are guaranteed mortgage pass-through certificates representing fractional undivided interests in a pool of mortgage loans formed by Fannie Mae. Each mortgage loan must meet the applicable standards of the Fannie Mae purchase program. Mortgage loans comprising a pool are either provided by Fannie Mae from its own portfolio or purchased pursuant to the criteria of the Fannie Mae purchase program. Mortgage loans underlying Fannie Mae certificates that a trust fund holds will consist of conventional mortgage loans, FHA Loans, VA Loans or RHS Loans. Original maturities of substantially all of the conventional, level payment mortgage loans underlying a Fannie Mae certificate are expected to be between either 8 to 15 years or 20 to 40 years. The original maturities of substantially all of the fixed rate level payment FHA Loans, VA Loans or RHS Loans are expected to be 30 years. Mortgage loans underlying a Fannie Mae certificate may have annual interest rates that vary by as much as two percentage points from each other. The rate of interest payable on a Fannie Mae certificate is equal to the lowest interest rate of any mortgage loan in the related pool, less a specified minimum -20- annual percentage representing servicing compensation and Fannie Mae's guaranty fee. Under a regular servicing option (pursuant to which the mortgagee or other servicer assumes the entire risk of foreclosure losses), the annual interest rates on the mortgage loans underlying a Fannie Mae certificate will be between 50 basis points and 250 basis points greater than its annual pass-through rate and under a special servicing option (pursuant to which Fannie Mae assumes the entire risk for foreclosure losses), the annual interest rates on the mortgage loans underlying a Fannie Mae certificate will generally be between 55 basis points and 255 basis points greater than the annual Fannie Mae certificate pass-through rate. If the related prospectus supplement so specifies, adjustable rate mortgages may back the Fannie Mae certificates. Fannie Mae guarantees to each registered holder of a Fannie Mae certificate that it will distribute amounts representing such holder's proportionate share of scheduled principal and interest payments at the applicable pass-through rate provided for by such Fannie Mae certificate on the underlying mortgage loans, whether or not received. Fannie Mae also guarantees that it will distribute such holder's proportionate share of the full principal amount of any foreclosed or other finally liquidated mortgage loan, whether or not such principal amount is actually recovered. The obligations of Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by, nor entitled to, the full faith and credit of the United States. Although the Secretary of the Treasury of the United States has discretionary authority to lend Fannie Mae up to $2.25 billion outstanding at any time, the United States and its agencies are not obligated to finance Fannie Mae's operations or to assist Fannie Mae in any other manner. If Fannie Mae were unable to satisfy its obligations, distributions to holders of Fannie Mae certificates would consist solely of payments and other recoveries on the underlying mortgage loans and, accordingly, delinquent payments and defaults on such mortgage loans would affect monthly distributions to holders of Fannie Mae certificates. Fannie Mae certificates evidencing interests in pools of mortgage loans formed on or after May 1, 1985 (other than Fannie Mae certificates backed by pools containing graduated payment mortgage loans or mortgage loans secured by multifamily projects) are available in book-entry form only. Distributions of principal and interest on each Fannie Mae certificate will be made by Fannie Mae on the 25th day of each month to the persons in whose name the Fannie Mae certificate is entered in the books of the Federal Reserve Banks (or registered on the Fannie Mae certificate register in the case of fully registered Fannie Mae certificates) as of the close of business on the last day of the preceding month. With respect to Fannie Mae certificates issued in book-entry form, distributions thereon will be made by wire, and with respect to fully registered Fannie Mae certificates, distributions thereon will be made by check. The Fannie Mae certificates included in a trust fund, and the related underlying mortgage loans, may have characteristics and terms different from those discussed in this prospectus. The related prospectus supplement will describe any such different characteristics and terms. Federal Home Loan Mortgage Corporation. The Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac ("Freddie Mac"), is a publicly held United States government-sponsored enterprise created pursuant to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home Finance Act of 1970, as amended, commonly known as the FHLMC Act. Freddie Mac was established primarily to increase the availability of mortgage credit for the financing of urgently needed housing. Freddie Mac seeks to provide an enhanced degree of liquidity for residential mortgage investments by assisting in the development of secondary markets for conventional mortgages. The principal activity of Freddie Mac consists of the purchase of first lien conventional mortgage loans or participation interests in such mortgage loans. Freddie Mac then sells the mortgage loans or participations so purchased in the form of mortgage securities, primarily Freddie Mac certificates. Freddie Mac is confined to purchasing, so far as practicable, mortgage loans that it deems to be of such quality, type and class as to meet the purchase standards imposed by private institutional mortgage investors. Freddie Mac Certificates. Each Freddie Mac certificate represents an undivided interest in a pool of mortgage loans that may consist of first lien conventional loans, FHA Loans, VA Loans or RHS Loans. Such loans are commonly referred to as a Freddie Mac certificate group. Freddie Mac certificates are sold under the terms of a mortgage participation certificate agreement. A Freddie Mac certificate may be issued under either Freddie Mac's Cash Program or Guarantor Program. -21- Freddie Mac guarantees to each registered holder of a Freddie Mac certificate the timely payment of interest on the underlying mortgage loans to the extent of the applicable Freddie Mac certificate rate on the registered holder's pro rata share of the unpaid principal balance outstanding on the underlying mortgage loans in the Freddie Mac certificate group represented by such Freddie Mac certificate, whether or not received. Freddie Mac also guarantees to each registered holder of a Freddie Mac certificate collection by such holder of all principal on the underlying mortgage loans, without any offset or deduction, to the extent of such holder's pro rata share of such principal, but does not, except if and to the extent specified in the prospectus supplement for a series of Freddie Mac certificates, guarantee the timely payment of scheduled principal. Under Freddie Mac's Gold PC Program, Freddie Mac guarantees the timely payment of principal based on the difference between the pool factor, published in the month preceding the month of distribution and the pool factor published in such month of distribution. Pursuant to its guarantees, Freddie Mac indemnifies holders of Freddie Mac certificates against any diminution in principal by reason of charges for property repairs, maintenance and foreclosure. Freddie Mac may remit the amount due on account of its guarantee of collection of principal at any time after default on an underlying mortgage loan, but not later than (a) 30 days following foreclosure sale, (b) 30 days following payment of the claim by any mortgage insurer, or (c) 30 days following the expiration of any right of redemption, whichever occurs later, but in any event no later than one year after demand has been made upon the mortgagor for accelerated payment of principal. In taking actions regarding the collection of principal after default on the mortgage loans underlying Freddie Mac certificates, including the timing of demand for acceleration, Freddie Mac reserves the right to exercise its judgment with respect to the mortgage loans in the same manner as for mortgage loans which it has purchased but not sold. The length of time necessary for Freddie Mac to determine that a mortgage loan should be accelerated varies with the particular circumstances of each mortgagor, and Freddie Mac has not adopted standards which require that the demand be made within any specified period. Freddie Mac certificates are not guaranteed by the United States or by any Federal Home Loan Bank. The Freddie Mac certificates do not constitute debts or obligations of the United States or any Federal Home Loan Bank. The obligations of Freddie Mac under its guarantee are obligations solely of Freddie Mac and are not backed by, nor entitled to, the full faith and credit of the United States. If Freddie Mac was unable to satisfy such obligations, distributions to holders of Freddie Mac certificates would consist solely of payments and other recoveries on the underlying mortgage loans and, accordingly, delinquent payments and defaults on such mortgage loans would affect monthly distributions to holders of Freddie Mac certificates. Registered holders of Freddie Mac certificates are entitled to receive their monthly pro rata share of all principal payments on the underlying mortgage loans received by Freddie Mac, including any scheduled principal payments, full and partial repayments of principal and principal received by Freddie Mac by virtue of condemnation, insurance, liquidation or foreclosure, and repurchases of the mortgage loans by Freddie Mac or the seller of the mortgage loans. Freddie Mac is required to remit each registered Freddie Mac certificateholder's pro rata share of principal payments on the underlying mortgage loans, interest at the Freddie Mac pass-through rate and any other sums such as prepayment fees, within 60 days of the date on which such payments are deemed to have been received by Freddie Mac. Under Freddie Mac's cash program, there is no limitation on the amount by which interest rates on the mortgage loans underlying a Freddie Mac certificate may exceed the pass-through rate on the Freddie Mac certificate. Under such program, Freddie Mac purchases groups of whole mortgage loans from sellers at specified percentages of their unpaid principal balances, adjusted for accrued or prepaid interest, which when applied to the interest rate of the mortgage loans and participations purchased, results in the yield (expressed as a percentage) required by Freddie Mac. The required yield, which includes a minimum servicing fee retained by the servicer, is calculated using the outstanding principal balance. The range of interest rates on the mortgage loans and participations in a Freddie Mac certificate group under the Cash Program will vary since mortgage loans and participations are purchased and assigned to a Freddie Mac certificate group based upon their yield to Freddie Mac rather than on the interest rate on the underlying mortgage loans. Under Freddie Mac's Guarantor Program, the pass-through rate on a Freddie Mac certificate is established based upon the lowest interest rate on the -22- underlying mortgage loans, minus a minimum servicing fee and the amount of Freddie Mac's management and guaranty income as agreed upon between the seller and Freddie Mac. Freddie Mac certificates duly presented for registration of ownership on or before the last business day of a month are registered effective as of the first day of the month. The first remittance to a registered holder of a Freddie Mac certificate will be distributed so as to be received normally by the 15th day of the second month following the month in which the purchaser became a registered holder of the Freddie Mac certificates. Thereafter, such remittance will be distributed monthly to the registered holder so as to be received normally by the 15th day of each month. The Federal Reserve Bank of New York maintains book-entry accounts with respect to Freddie Mac certificates sold by Freddie Mac on or after January 2, 1985, and makes payments of principal and interest each month to the registered holders of such Freddie Mac certificates in accordance with such holders' instructions. Stripped Mortgage-Backed Securities. Agency securities may consist of one or more stripped mortgage-backed securities, each as described in this prospectus and in the related prospectus supplement. Each stripped mortgage-backed security will represent an undivided interest in all or part of either the principal distributions (but not the interest distributions) or the interest distributions (but not the principal distributions), or in some specified portion of the principal and interest distributions (but not all of such distributions) on certain Freddie Mac, Fannie Mae, GNMA or other government agency or government-sponsored agency certificates. The yield on and value of stripped mortgage-backed securities are extremely sensitive to the timing and amount of Principal Prepayments on the underlying securities. The underlying securities will be held under a trust agreement by Freddie Mac, Fannie Mae, GNMA or another government agency or government-sponsored agency, each as trustee, or by another trustee named in the related prospectus supplement. Freddie Mac, Fannie Mae, GNMA or another government agency or government-sponsored agency will guarantee each stripped agency security to the same extent as such entity guarantees the underlying securities backing such stripped agency security. Other Agency Securities. If the related prospectus supplement so specifies, a trust fund may include other mortgage pass-through certificates issued or guaranteed by GNMA, Fannie Mae, Freddie Mac or other government agencies or government-sponsored agencies. The related prospectus supplement will describe the characteristics of any such mortgage pass-through certificates. If so specified, a trust fund may hold a combination of different types of agency securities. Private Mortgage-Backed Securities General. Private mortgage-backed securities may consist of (a) mortgage pass-through certificates evidencing a direct or indirect undivided interest in a pool of mortgage loans, or (b) collateralized mortgage obligations secured by mortgage loans. Private mortgage-backed securities ("PMBS") will have been issued pursuant to a pooling and servicing agreement - a "PMBS pooling and servicing agreement." The private mortgage-backed securities in a trust fund may include a class or classes of securities that are callable at the option of another class or classes of securities. The seller/servicer, which this prospectus refers to as the "PMBS servicer," of the underlying mortgage loans will have entered into the PMBS pooling and servicing agreement with the trustee under the PMBS pooling and servicing agreement. The trustee under the PMBS pooling and servicing agreement is referred to as the "PMBS trustee." The PMBS trustee or its agent, or a custodian, will possess the mortgage loans underlying such private mortgage-backed security. Mortgage loans underlying a private mortgage-backed security will be serviced by the PMBS servicer directly or by one or more sub-servicers who may be subject to the supervision of the PMBS servicer. The PMBS servicer will be a Fannie Mae or Freddie Mac approved servicer and, if FHA Loans underlie the private mortgage-backed securities, approved by the Department of Housing and Urban Development as an FHA mortgagee, or such other servicer as the related prospectus supplement may specify. The Department of Housing and Urban Development is sometimes referred to as HUD. Such securities (1) either (a) will have been previously registered under the Securities Act of 1933, as amended, or (b) will at the time be eligible for sale under Rule 144(k) under such act; and (2) will be acquired in bona fide secondary market transactions not from the issuer or its affiliates. The PMBS issuer -23- generally will be a financial institution or other entity engaged generally in the business of mortgage lending or the acquisition of mortgage loans, a public agency or instrumentality of a state, local or federal government, or a limited purpose or other corporation organized for the purpose of, among other things, establishing trusts and acquiring and selling housing loans to such trusts and selling beneficial interests in such trusts. If the related prospectus supplement so specifies, the PMBS issuer may be one of our affiliates. The obligations of the PMBS issuer generally will be limited to certain representations and warranties with respect to the assets it conveyed to the related trust or its assignment of the representations and warranties of another entity from which it acquired the assets. The PMBS issuer will not generally have guaranteed any of the assets conveyed to the related trust or any of the private mortgage-backed securities issued under the PMBS pooling and servicing agreement. Additionally, although the mortgage loans underlying the private mortgage-backed securities may be guaranteed by an agency or instrumentality of the United States, the private mortgage-backed securities themselves will not be so guaranteed. Distributions of principal and interest will be made on the private mortgage-backed securities on the dates specified in the related prospectus supplement. The private mortgage-backed securities may be entitled to receive nominal or no principal distributions or nominal or no interest distributions. The PMBS trustee or the PMBS servicer will make principal and interest distributions on the private mortgage-backed securities. The PMBS issuer or the PMBS servicer may have the right to repurchase assets underlying the private mortgage-backed securities after a certain date or under other circumstances specified in the related prospectus supplement. Underlying Loans. The mortgage loans underlying the private mortgage-backed securities may consist of fixed rate, level payment, fully amortizing loans or graduated payment mortgage loans, buydown loans, adjustable rate mortgage loans, or loans having balloon or other special payment features. Such mortgage loans may be secured by a single family property, multifamily property, manufactured homes or by an assignment of the proprietary lease or occupancy agreement relating to a specific dwelling within a cooperative and the related shares issued by such cooperative. In general, the underlying loans will be similar to the mortgage loans which may be directly part of the mortgage assets. Credit Support Relating to Private Mortgage-Backed Securities. Credit support in the form of subordination of other private mortgage certificates issued under the PMBS pooling and servicing agreement, reserve funds, insurance policies, letters of credit, financial guaranty insurance policies, guarantees or other types of credit support may be provided with respect to the mortgage loans underlying the private mortgage-backed securities or with respect to the private mortgage-backed securities themselves. Additional Information. The prospectus supplement for a series for which the trust fund includes private mortgage-backed securities will specify: 1. the aggregate approximate principal amount and type of the private mortgage-backed securities to be included in the trust fund, 2. certain characteristics of the mortgage loans which comprise the underlying assets for the private mortgage-backed securities including, to the extent available: o the payment features of such mortgage loans, o the approximate aggregate principal balance, if known, of the underlying mortgage loans insured or guaranteed by a governmental entity, o the servicing fee or range of servicing fees with respect to the mortgage loans, o the minimum and maximum stated maturities of the underlying mortgage loans at origination and o delinquency experience with respect to the mortgage loans, -24- 3. the pass-through or certificate rate of the private mortgage-backed securities or the method of determining such rate, 4. the PMBS issuer, the PMBS servicer (if other than the PMBS issuer) and the PMBS trustee for such private mortgage-backed securities, 5. certain characteristics of credit support, if any, such as subordination, reserve funds, insurance policies, letters of credit or guarantees relating to the mortgage loans underlying the private mortgage-backed securities or to such private mortgage-backed securities themselves, and 6. the terms on which the underlying mortgage loans for such private mortgage-backed securities, or such private mortgage-backed securities themselves, may, or are required to, be purchased before their stated maturity or the stated maturity of the private mortgage-backed securities. U.S. Government Securities If the related prospectus supplement so specifies, United States Treasury securities and other securities issued by the U.S. Government, any of its agencies or other issuers established by federal statute (collectively, "U.S. Government Securities") may be included in the trust assets. Such securities will be backed by the full faith and credit of the United States or will represent the obligations of the U.S. Government or such agency or such other issuer or obligations payable from the proceeds of U.S. Government Securities, as specified in the related prospectus supplement. Substitution of Mortgage Assets If the related prospectus supplement so provides, substitution of mortgage assets will be permitted in the event of breaches of representations and warranties with respect to any original mortgage asset. Substitution of mortgage assets also will be permitted in the event the trustee or such other party specified in the prospectus supplement determines that the documentation with respect to any mortgage asset is incomplete. The related prospectus supplement will indicate the period during which such substitution will be permitted and any other conditions to substitution. Pre-Funding and Capitalized Interest Accounts If the related prospectus supplement so specifies, a trust fund will include one or more segregated trust accounts, known as "pre-funding accounts," established and maintained with the trustee for the related series. If so specified, on the closing date for such series, a portion of the proceeds of the sale of the securities of such series (such amount to be equal to the excess of (a) the principal amounts of securities being sold over (b) the principal balance (as of the related cut-off date) of the mortgage assets on the closing date), will be deposited in the pre-funding account and may be used to purchase additional mortgage loans during the pre-funding period specified in the related prospectus supplement. The pre-funding period will not exceed six months. The mortgage loans to be so purchased will be required to have certain characteristics specified in the related prospectus supplement. Each additional mortgage loan so purchased must conform to the representations and warranties in the applicable Agreement. Therefore, the characteristics of the mortgage assets at the end of the pre-funding period will conform in all material respects to the characteristics of the mortgage assets on the closing date. If any of the principal balance of the trust assets as of the closing date that were deposited in the pre-funding account remain on deposit at the end of the pre-funding period, such amount will be applied in the manner specified in the related prospectus supplement to prepay the securities of the applicable series. Pending the acquisition of additional assets during the pre-funding period, all amounts in the pre-funding account will be invested in Permitted Investments, as defined under "Credit Enhancement--Reserve and Other Accounts". It is expected that substantially all of the funds deposited in the pre-funding account will be used during the related pre-funding period to purchase additional assets as described above. If, however, amounts remain in the pre-funding account at the end of the pre-funding period, such amounts will be distributed to the securityholders, as described in the related prospectus supplement. -25- If a pre-funding account is established, one or more segregated trust accounts, known as "capitalized interest accounts", may be established and maintained with the trustee for the related series. On the closing date for such series, a portion of the proceeds of the sale of the securities of such series will be deposited in the capitalized interest account and used to fund the excess, if any, of (a) the sum of (1) the amount of interest accrued on the securities of such series and (2) if the related prospectus supplement so specifies, certain fees or expenses during the pre-funding period such as trustee fees and credit enhancement fees, over (b) the amount of interest available to pay interest on such securities and, if applicable, such fees and expenses from the mortgage assets or other assets in the trust fund. Any amounts on deposit in the capitalized interest account at the end of the pre-funding period that are not necessary for such purposes will be distributed to the person specified in the related prospectus supplement. USE OF PROCEEDS We intend to use the net proceeds from the sale of the