Filed Pursuant to Rule 433
File No.: 333-130524-04
ABFC 2006-OPT3 TRUST
FREE WRITING PROSPECTUS
STATEMENT REGARDING THIS FREE WRITING PROSPECTUS
The depositor has filed a registration statement (including a prospectus) with
the SEC for the offering to which this communication relates. Before you invest,
you should read the prospectus in that registration statement and other
documents the depositor has filed with the SEC for more complete information
about the depositor and this offering. You may get these documents for free by
visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the depositor,
the underwriter or any dealer participating in the offering will arrange to send
you the prospectus if you request it by calling toll-free 1-800-294-1322 or by
e-mailing a request to dg.prospectus_distribution@bofasecurities.com.
IMPORTANT NOTICE REGARDING THE CONDITIONS
FOR THIS OFFERING OF ASSET-BACKED CERTIFICATES
Because the asset-backed securities are being offered on a "when, as and if
issued" basis, any contract of sale will terminate, by its terms, without any
further obligation or liability between us, if the securities themselves, or the
particular class to which the contract relates, are not issued. Because the
asset-backed securities are subject to modification or revision, any such
contract also is conditioned upon the understanding that no material change will
occur with respect to the relevant class of securities prior to the closing
date. If a material change does occur with respect to such class, our contract
will terminate, by its terms, without any further obligation or liability
between us (the "Automatic Termination"). If an Automatic Termination occurs, we
will provide you with revised offering materials reflecting the material change
and give you an opportunity to purchase such class. To indicate your interest in
purchasing the class, you must communicate to us your desire to do so within
such timeframe as may be designated in connection with your receipt of the
revised offering materials.
This free writing prospectus is being delivered to you solely to provide you
with information about the offering of the securities referred to in this free
writing prospectus and to solicit an offer to purchase the securities, when, as
and if issued. Any such offer to purchase made by you will not be accepted and
will not constitute a contractual commitment by you to purchase any of the
securities until we have accepted your offer to purchase securities. You may
withdraw your offer to purchase securities at any time prior to our acceptance
of your offer.
The information in this free writing prospectus supersedes information contained
in any prior similar free writing prospectus relating to these securities prior
to the time of your commitment to purchase.
This free writing prospectus is not an offer to sell or solicitation of an offer
to buy these securities in any state where such offer, solicitation or sale is
not permitted.
The depositor's most recent base prospectus referred to in this free writing
prospectus is the base prospectus (the "prospectus") dated October 3, 2006,
attached to the prospectus supplement dated October 10, 2006 relating to the
depositor's Asset-Backed Certificates, Series 2006-OPT2 and is incorporated in
this free writing prospectus by reference and may be accessed by clicking on the
following hyperlink:
http://www.sec.gov/Archives/edgar/data/1054340/000137468306000009/
abfc_2006-opt2prossupp.txt.
IMPORTANT NOTICE RELATING TO
AUTOMATICALLY GENERATED EMAIL DISCLAIMERS
ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW THIS DOCUMENT ARE NOT
APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR
OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION
BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.
Free Writing Prospectus
(To prospectus dated October 3, 2006)
$803,217,000
(Approximate)
Asset Backed Funding Corporation
Depositor
ABFC 2006-OPT3 Trust
Issuing Entity
Bank of America, National Association
Sponsor
Option One Mortgage Corporation
Servicer
Asset Backed Funding Corporation Asset-Backed Certificates, Series 2006-OPT3
Principal and interest payable monthly, commencing in November 2006
---------------------------------------------
- --------------------------------------------------------------------------------
Carefully consider the "Risk Factors" beginning on page 23 of this free writing
prospectus and on page 7 in the prospectus.
Neither the offered certificates nor the underlying mortgage loans are insured
or guaranteed by any governmental agency or instrumentality.
The offered certificates represent interests in the issuing entity only and will
not be obligations of or represent interests in the depositor, the sponsor or
any other entity.
- --------------------------------------------------------------------------------
The Issuing Entity Will Issue -
o Five classes of senior certificates.
o Nine classes of subordinated Class M Certificates all of which are
subordinate to, and provide credit enhancement for, the senior
certificates. Each class of Class M Certificates is also subordinated to
and provides credit enhancement for each class of Class M Certificates, if
any, with a lower number.
o One class of subordinated Class B Certificates which are subordinate to,
and provide credit enhancement for, the senior certificates and the Class M
Certificates.
o The Class CE, Class P, Class R and Class R-X Certificates.
The classes of offered certificates are listed and their sizes and basic payment
characteristics are described under the heading "Offered Certificates" in the
table beginning on page 7.
The Assets of the Issuing Entity Will Include -
o Three loan groups of first lien residential mortgage loans. The mortgage
loans will consist of fixed-rate and adjustable-rate sub-prime mortgage
loans.
Credit Enhancement Will Consist of -
o Excess Interest - Certain excess interest received from the mortgage loans
will be used to cover losses.
o Overcollateralization - As of the cut off date, the assets of the trust
will exceed the aggregate principal balance of the certificates, resulting
in overcollateralization. Certain excess interest received from the
mortgage loans will also be applied as payments of principal on the
certificates to maintain a required level of overcollateralization.
o Subordination - Each class of subordinated certificates is subordinate to
the senior certificates and to those classes of subordinated certificates
higher in order of payment priority.
o Cross-Collateralization - Under certain circumstances, payments on the
mortgage loans in one loan group may be used to make certain distributions
to holders of senior certificates relating to the other loan groups.
Interest Rate Support Will Consist of -
o Interest Rate Swap Agreement - Net swap payments received by the trust
pursuant to an interest rate swap agreement with Bank of America, National
Association, as swap provider, will be available to make distributions on
the related certificates.
This free writing prospectus is not required to contain all information that is
required to be included in the prospectus and the prospectus supplement. The
information in this free writing prospectus is preliminary and is subject to
completion or change. The information in this free writing prospectus supersedes
information contained in any prior free writing prospectus relating to these
securities. This free writing prospectus is not an offer to sell or a
solicitation of an offer to buy these securities in any state where such offer,
solicitation or sale is not permitted.
The underwriter will purchase the offered certificates from the depositor and
will offer the offered certificates to investors at varying prices to be
determined at the time of sale. The depositor expects that the offered
certificates will be available for delivery to investors in book-entry form
through The Depository Trust Company, Clearstream or Euroclear on or about
November 14, 2006.
Banc of America Securities LLC
The date of this free writing prospectus is November 3, 2006
TABLE OF CONTENTS
Page
SUMMARY OF FREE WRITING PROSPECTUS.............................................9
RISK FACTORS..................................................................23
There are risks involving unpredictability of prepayments and
the effect of prepayments on yields.....................................23
Adjustable rate mortgage loan borrowers may be more likely to
prepay..................................................................24
There is a risk that interest payments on the mortgage loans
may be insufficient to maintain overcollateralization...................24
Effects of mortgage interest rates and other factors on the
certificate interest rates of the offered certificates..................25
There are risks relating to alternatives to foreclosure....................26
Nature of sub-prime mortgage loans may increase risk of loss...............26
High loan-to-value ratios increase risk of loss............................26
The interest rate swap agreement is subject to counterparty
risk....................................................................26
There is no assurance that amounts will be received under the
interest rate swap agreement............................................26
The credit rating of the swap provider could affect the
rating of the offered certificates......................................27
Payments due to swap provider may result in losses on
certificates............................................................27
Some of the mortgage loans have an initial interest only
period, which may result in increased delinquencies and
losses or rates of prepayment...........................................27
The rate of default on mortgage loans that are secured by
investor properties may be higher than on other mortgage
loans...................................................................28
Balloon mortgage loans increase the risk of loss...........................28
There are risks relating to simultaneous second mortgage loans.............28
There are risks relating to geographic concentration of the
mortgage loans..........................................................29
Residential real estate values may fluctuate and adversely
affect your investment..................................................29
Credit scores may not accurately predict the likelihood of
default.................................................................29
The recording of the mortgages in the name of MERS may affect
the yield on your certificates..........................................30
There are risks in holding subordinated certificates.......................30
Decrement tables are based upon assumptions and models.....................31
The rights of the NIMS Insurer could adversely affect the
offered certificates....................................................31
United States military operations may increase risk of
shortfalls in interest..................................................32
THE MORTGAGE POOL.............................................................32
General....................................................................33
The Index..................................................................36
Terms of the Mortgage Loans................................................36
OPTION ONE MORTGAGE CORPORATION...............................................36
General....................................................................36
UNDERWRITING STANDARDS........................................................37
THE SERVICER..................................................................40
Servicing Background and Portfolio.........................................40
Option One Loan Servicing Portfolio-Advances...............................40
Business Strategy and Organizational Structure.............................40
Default Management.........................................................41
Training, Internal Controls and Compliance.................................43
Litigation Concerning Option One Mortgage Corporation......................44
THE SPONSOR...................................................................45
STATIC POOL INFORMATION.......................................................45
THE DEPOSITOR.................................................................45
THE ISSUING ENTITY............................................................45
THE TRUSTEE...................................................................46
THE CREDIT RISK MANAGER.......................................................47
3
THE POOLING AND SERVICING AGREEMENT...........................................48
General....................................................................48
Assignment of the Mortgage Loans...........................................48
Payments on Mortgage Loans; Deposits to Collection Account
and Distribution Account................................................50
Advances...................................................................51
Compensation and Payment of Expenses of the Servicer, the
Trustee and the Credit Risk Manager.....................................52
Optional Termination.......................................................53
Optional Purchase of Defaulted Mortgage Loans..............................54
Events of Servicing Termination............................................54
Rights upon Event of Servicing Termination.................................54
Voting Rights..............................................................54
Amendment..................................................................55
Rights of the NIMS Insurer under the Pooling and Servicing
Agreement...............................................................55
DESCRIPTION OF THE CERTIFICATES...............................................56
General....................................................................56
Allocation of Available Funds..............................................56
Interest Distributions.....................................................56
Principal Distributions....................................................60
Allocation of Losses.......................................................69
Application of Monthly Excess Cashflow Amounts.............................70
Certificate Interest Rates.................................................74
Interest Rate Swap Agreement, the Swap Provider and the Swap
Account.................................................................77
The Interest Rate Swap Agreement........................................77
The Swap Provider.......................................................79
The Swap Account........................................................80
Calculation of One-Month LIBOR.............................................81
Restrictions on Transfer of the Subordinate Certificates...................82
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS.................................82
Weighted Average Lives.....................................................84
FEDERAL INCOME TAX CONSEQUENCES...............................................86
General....................................................................86
Taxation of Regular Interests..............................................86
Taxation of the Basis Risk Arrangements....................................87
REMIC Taxes and Reporting..................................................88
ERISA CONSIDERATIONS..........................................................89
LEGAL INVESTMENT..............................................................91
REPORTS TO CERTIFICATEHOLDERS.................................................91
LEGAL MATTERS.................................................................92
RATINGS.......................................................................92
INDEX OF DEFINED TERMS........................................................93
APPENDIX A: MORTGAGE LOAN DATA...............................................A-1
APPENDIX B: DECREMENT TABLES.................................................B-1
APPENDIX C: ASSUMED MORTGAGE LOAN CHARACTERISTICS............................C-1
APPENDIX D: INTEREST RATE SWAP AGREEMENT NOTIONAL AMOUNT SCHEDULE............D-1
4
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
FREE WRITING PROSPECTUS AND THE PROSPECTUS
The depositor describes the certificates in two separate documents that
progressively provide more detail:
o the prospectus, which provides general information, some of which may not
apply to your certificates, and
o this free writing prospectus, which incorporates and includes the
appendices, and describes the specific terms of your certificates.
Cross-references are included in this free writing prospectus and the
prospectus to captions in these materials where you can find further related
discussions. The foregoing table of contents and the table of contents included
in the prospectus provide the location of these captions.
You can find a listing of the pages where capitalized terms used in this
free writing prospectus and the prospectus are defined under the caption "Index
of Free Writing Prospectus Definitions" beginning on page 92 in this document
and under the caption "Index of Prospectus Definitions" beginning on page 132 in
the prospectus. Any capitalized terms used but not defined in this free writing
prospectus have the meanings assigned in the prospectus.
---------------------------------------------------
This free writing prospectus and the prospectus contain forward-looking
statements relating to future economic performance or projections and other
financial items. Such forward-looking statements, together with related
qualifying language and assumptions, are found in the material, including each
of the tables, set forth under "Risk Factors" and "Yield, Prepayment and
Maturity Considerations" and in the appendices. Forward-looking statements are
also found elsewhere in this free writing prospectus and the prospectus, and may
be identified by, among other things, the use of forward-looking words such as
"expects," "intends," "anticipates," "estimates," "believes," "may" or other
comparable words. These statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results or
performance to differ materially from such forward-looking statements. Those
risks, uncertainties and other factors include, among others, general economic
and business conditions, competition, changes in political, social and economic
conditions, regulatory initiatives and compliance with government regulations,
customer preference and various other matters, many of which are beyond the
depositor's control. These forward-looking statements speak only as of the date
of this free writing prospectus. The depositor expressly disclaims any
obligation or undertaking to update or revise forward-looking statements to
reflect any change in the depositor's expectations or any change in events,
conditions or circumstances on which any forward-looking statement is based.
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:
(1) 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;
(2) 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
5
(3) in any other circumstances which do not require the publication by
the issuer of a prospectus pursuant to Article 3 of the Prospectus
Directive.
For the purposes of this provision, the expression an "offer of
certificates to the public" in relation to any offered certificates in any
Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the 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:
(1) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
Financial Services and Markets Act 2000 (the "FSMA")) received by it in
connection with the issue or sale of the offered certificates in
circumstances in which Section 21(1) of the FSMA does not apply to the
trust; and
(2) it has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to the offered
certificates in, from or otherwise involving the United Kingdom.
Notice to United Kingdom Investors
The distribution of this free writing prospectus and the prospectus, if
made by a person who is not an authorized person under the FSMA, is being made
only to, or directed only at persons who (1) are outside the United Kingdom, or
(2) have professional experience in matters relating to investments, or (3) are
persons falling within Articles 49(2)(a) through (d) ("high net worth companies,
unincorporated associations, etc.") or 19 (Investment Professionals) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all
such persons together being referred to as the "Relevant Persons"). This free
writing prospectus and the prospectus must not be acted on or relied on by
persons who are not Relevant Persons. Any investment or investment activity to
which this free writing prospectus and the prospectus relates, including the
offered certificates, is available only to Relevant Persons and will be engaged
in only with Relevant Persons.
Potential investors in the United Kingdom are advised that all, or most,
of the protections afforded by the United Kingdom regulatory system will not
apply to an investment in the offered certificates and that compensation will
not be available under the United Kingdom Financial Services Compensation
Scheme.
6
THE ABFC 2006-OPT3 TRUST ASSET-BACKED CERTIFICATES
Initial
Certificate Certificate Minimum Incremental
Class Balance(1) Interest Rate Principal Types(2) Interest Types(2) Denomination Denomination
- ---------------- ---------------- ------------- ----------------------- ------------------ ----------------- -----------------
Offered
Certificates
Class A-1 $114,273,000 (5) Senior, Pass-Through Floating Rate $25,000 $1
Class A-2 $114,343,000 (5) Senior, Pass-Through Floating Rate $25,000 $1
Class A-3A $236,422,000 (5) Senior, Sequential Floating Rate $25,000 $1
Pay/Pass-Through(6)
Class A-3B $165,145,000 (5) Senior, Sequential Floating Rate $25,000 $1
Pay/Pass-Through(6)
Class A-3C $5,469,000 (5) Senior, Sequential Floating Rate $25,000 $1
Pay/Pass-Through(6)
Class M-1 $35,032,000 (5) Subordinated, Floating Rate $25,000 $1
Sequential Pay
Class M-2 $32,078,000 (5) Subordinated, Floating Rate $25,000 $1
Sequential Pay
Class M-3 $18,572,000 (5) Subordinated, Floating Rate $25,000 $1
Sequential Pay
Class M-4 $16,039,000 (5) Subordinated Floating Rate $25,000 $1
Class M-5 $15,617,000 (5) Subordinated Floating Rate $25,000 $1
Class M-6 $13,928,000 (5) Subordinated Floating Rate $25,000 $1
Class M-7 $13,507,000 (5) Subordinated Floating Rate $25,000 $1
Class M-8 $12,240,000 (5) Subordinated Floating Rate $25,000 $1
Class M-9 $10,552,000 (5) Subordinated Floating Rate $25,000 $1
Non Offered
Certificates
Class B $10,130,000 (5) Subordinated Floating Rate $25,000 $1
Class CE N/A (7) Subordinated N/A N/A N/A
Class P N/A (7) N/A N/A N/A N/A
Class R N/A (7) Subordinated N/A N/A N/A
Class R-X N/A (7) Subordinated N/A N/A N/A
Initial Rating of
Certificates(4)
Final Scheduled -------------------
Class Certificate Form Distribution Date(3) Fitch Moody's
- ---------------- ----------------- ------------------------ ---------- -------
Offered
Certificates
Class A-1 Book-Entry November 25, 2036 AAA Aaa
Class A-2 Book-Entry November 25, 2036 AAA Aaa
Class A-3A Book-Entry November 25, 2036 AAA Aaa
Class A-3B Book-Entry November 25, 2036 AAA Aaa
Class A-3C Book-Entry November 25, 2036 AAA Aaa
Class M-1 Book-Entry November 25, 2036 AA+ Aa1
Class M-2 Book-Entry November 25, 2036 AA Aa2
Class M-3 Book-Entry November 25, 2036 AA- Aa3
Class M-4 Book-Entry November 25, 2036 A+ A1
Class M-5 Book-Entry November 25, 2036 A A2
Class M-6 Book-Entry November 25, 2036 A- A3
Class M-7 Book-Entry November 25, 2036 BBB+ Baa1
Class M-8 Book-Entry November 25, 2036 BBB Baa2
Class M-9 Book-Entry November 25, 2036 BBB- Baa3
Non Offered
Certificates
Class B Book-Entry November 25, 2036 BB+ Ba1
Class CE Definitive N/A None None
Class P Definitive N/A None None
Class R Definitive N/A None None
Class R-X Definitive N/A None None
- ----------
(1) Approximate. The initial certificate balances of the offered certificates
may vary by a total of plus or minus 5%.
(2) See "Description of the Certificates-Categories of Classes of Securities"
in the prospectus for a description of these principal and interest types and
see "Description of the Certificates-Interest Distributions," "-Principal
Distributions" and "-Allocation of Losses" in this free writing prospectus
for a description of the effects of subordination.
(3) The final scheduled distribution date represents the distribution date in
the month following the latest maturity date of any mortgage loan in the
mortgage pool. The actual final payment on your certificates could occur
earlier or later than the final scheduled distribution date.
7
(4) The offered certificates will not be issued unless they receive at least
the ratings set forth in this table. See "Ratings" in this free writing
prospectus.
(5) Interest will accrue on these certificates during each interest accrual
period at a per annum rate equal to the least of (i) the sum of one-month
LIBOR plus the margin set forth in the table below, (ii) the applicable
maximum rate cap and (iii) the applicable group cap or the pool cap as
described under "Description of the Certificates--Certificate Interest Rates"
in this free writing prospectus. During each interest accrual period relating
to the distribution dates after the optional termination date, the margins
will increase to margins set forth in the table below if the optional
termination right is not exercised. Interest will be calculated based on the
methodology in the table below. One-month LIBOR for the initial interest
accrual period will be [______]%.
Margin after the
Optional Termination Interest
Class Margin Date Calculations
- ---------------------- ---------- ------------------------- ----------------
Offered Certificates
Class A-1 [______]% [______]% Actual/360
Class A-2 [______]% [______]% Actual/360
Class A-3A [______]% [______]% Actual/360
Class A-3B [______]% [______]% Actual/360
Class A-3C [______]% [______]% Actual/360
Class M-1 [______]% [______]% Actual/360
Class M-2 [______]% [______]% Actual/360
Class M-3 [______]% [______]% Actual/360
Class M-4 [______]% [______]% Actual/360
Class M-5 [______]% [______]% Actual/360
Class M-6 [______]% [______]% Actual/360
Class M-7 [______]% [______]% Actual/360
Class M-8 [______]% [______]% Actual/360
Class M-9 [______]% [______]% Actual/360
Non-Offered
Certificates
Class B [______]% [______]% Actual/360
(6) These certificates have the characteristics of a sequential pay security;
provided, however on any distribution date on or after the subordination
depletion date, these certificates have the characteristics of a pass-through
security.
(7) The Class CE, Class P, Class R and Class R-X Certificates are entitled to
certain distributions as specified in the pooling and servicing agreement.
8
SUMMARY OF FREE WRITING PROSPECTUS
Because this is a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus and this free
writing prospectus carefully before you decide to purchase a certificate. If
capitalized terms are not defined in this free writing prospectus, they are
defined in the prospectus.
Issuing Entity
ABFC 2006-OPT3 Trust, a New York common law trust.
Title of Series
Asset Backed Funding Corporation Asset-Backed Certificates, Series 2006-OPT3
Sponsor
Bank of America, National Association
Depositor
Asset Backed Funding Corporation
Servicer
Option One Mortgage Corporation
Originator
Option One Mortgage Corporation originated or acquired all of the mortgage
loans.
Trustee
Wells Fargo Bank, N.A.
Credit Risk Manager
Clayton Fixed Income Services Inc.
Swap Provider
Bank of America, National Association
NIMS Insurer
After the closing date, a separate entity may be established to issue net
interest margin securities secured by all or a portion of the Class CE and Class
P Certificates. Those net interest margin securities may or may not have the
benefit of a financial guaranty insurance policy that guarantees payments on
those securities. The insurer that would issue any financial guaranty insurance
policy, if any, is referred to in this free writing prospectus as the "NIMS
Insurer." The references to the NIMS Insurer in this free writing prospectus are
applicable only if there is a NIMS Insurer.
Closing Date
On or about November 14, 2006
Cut-off Date
October 1, 2006
Distribution Date
The 25th day of each month (or if not a business day, the next business day)
beginning in November, 2006.
Determination Date
The 15th day of each month in which a distribution date occurs (or, if not a
business day, the immediately preceding business day).
Record Date
The business day immediately preceding a distribution date; provided, however,
that if a certificate becomes a definitive certificate, the record date for that
certificate will be the last business day of the month immediately preceding the
month in which the related distribution date occurs.
Collection Period
The period from the second day of the calendar month preceding the month in
which a distribution date occurs through the first day of the calendar month in
which the distribution date occurs.
Prepayment Period
The period commencing on the day after the determination date in the calendar
month preceding the calendar month in which a distribution date occurs (or, in
the case of the first distribution date, on the cut-off date) and ending on the
determination date in the calendar month in which that distribution date occurs.
9
The Transaction Parties
Option One Mortgage Corporation originated or acquired all of the mortgage loans
and currently services all of the mortgage loans. Prior to the closing date, the
sponsor purchased all of the mortgage loans from Option One Mortgage
Corporation. On the closing date the sponsor will sell the mortgage loans to the
depositor, who will in turn deposit them into a New York common law trust, which
is the issuing entity. The trust will be formed by a pooling and servicing
agreement, dated as of the cut-off date, among the depositor, the servicer and
the trustee. The servicer will service the mortgage loans in accordance with the
pooling and servicing agreement and provide the information to the trustee
necessary for the trustee to calculate distributions and other information
regarding the certificates.
The transfers of the mortgage loans from the sponsor to the depositor to the
issuing entity in exchange for the certificates is illustrated below:
---------------
Sponsor
--------------- Offered
/|\ | Certificates
Mortgage | | Cash
Loans | | ---------------
| \|/ /-------------->
--------------- / Underwriter
-------------/ /-------------
Depositor / ---------------
<--------------/ | /|\
--------------- Offered | |
/|\ | Cash Certificates | | Cash
Mortgage | | \|/ |
Loans | | All Certificates ---------------
| \|/
--------------- Investors
Issuing ---------------
Entity
---------------
10
The Certificates
A summary chart of the initial certificate principal balances, certificate
interest rates, principal types, interest types, denominations, certificate
forms, final scheduled distribution dates and ratings of the certificates is set
forth in the table beginning on page 7.
The certificates represent all of the beneficial ownership interest in the
trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Classifications of Classes of Certificates
- ------------------------------------------------------------------------------------------------------------------------------------
Offered Certificates: A-1, A-2, A-3A, A-3B, A-3C, M-1, M-2, M-3, M-4, M-5, M-6, M-7, M-8 and M-9
- ------------------------------------------------------- ----------------------------------------------------------------------------
Non Offered Certificates B, CE, P, R and R-X
- ------------------------------------------------------- ----------------------------------------------------------------------------
Senior Certificates or Class A Certificates: A-1, A-2, A-3A, A-3B and A-3C
- ------------------------------------------------------- ----------------------------------------------------------------------------
Subordinated Certificates: M-1, M-2, M-3, M-4, M-5, M-6, M-7, M-8, M-9, B, CE, R and R-X
- ------------------------------------------------------- ----------------------------------------------------------------------------
Class M Certificates: M-1, M-2, M-3, M-4, M-5, M-6, M-7, M-8 and M-9
- ------------------------------------------------------- ----------------------------------------------------------------------------
Class B Certificates: B
- ------------------------------------------------------- ----------------------------------------------------------------------------
Group 1 Certificates: A-1
- ------------------------------------------------------- ----------------------------------------------------------------------------
Group 2 Certificates: A-2
- ------------------------------------------------------- ----------------------------------------------------------------------------
Group 3 Certificates: A-3A, A-3B and A-3C
- ------------------------------------------------------- ----------------------------------------------------------------------------
Sequential Mezzanine Certificates: M-1, M-2 and M-3
- ------------------------------------------------------- ----------------------------------------------------------------------------
Residual Certificates: R and R-X
- ------------------------------------------------------- ----------------------------------------------------------------------------
The Mortgage Pool
On the closing date, the issuing entity will acquire a pool of fixed and
adjustable-rate first lien mortgage loans, designated herein as the "mortgage
loans." All of the mortgage loans were originally originated or acquired by
Option One Mortgage Corporation in accordance with the underwriting guidelines
described under "Underwriting Standards" in this free writing prospectus.
For purposes of calculating principal and interest distributions on the senior
certificates, the mortgage loans have been divided into three groups, designated
as the "group 1 mortgage loans," the "group 2 mortgage loans" and the "group 3
mortgage loans." The group 1 mortgage loans consist only of those mortgage loans
with original principal balances that conform to Fannie Mae guidelines. The
group 2 mortgage loans consist only of those mortgage loans with original
principal balances that conform to Freddie Mac guidelines. The group 3 mortgage
loans consist of all other remaining mortgage loans, which may or may not have
original principal balances conforming to Fannie Mae and/or Freddie Mac
guidelines. Other than certain cross-collateralization payments, the Group 1
Certificates generally represent interests in the group 1 mortgage loans, the
Group 2 Certificates generally represent interests in the group 2 mortgage loans
and the Group 3 Certificates generally represent interests in the group 3
mortgage loans. The remaining classes of certificates represent interests in all
of the group 1 mortgage loans, the group 2 mortgage loans and the group 3
mortgage loans.
11
Mortgage Loan Statistics
The mortgage loans will consist of fixed and adjustable-rate mortgage loans with
the following aggregate characteristics as of the cut off date (percentages are
based on the aggregate principal balance of the mortgage loans):
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Range, Total or Percentage Weighted Average
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Number of Mortgage Loans 3,398 -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Aggregate Outstanding Principal Balance $844,159,461 -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Outstanding Principal Balance $49,936 to $969,615 $248,428
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Current Interest Rate 5.750% to 12.850% 8.788%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Servicing Fee Rate 0.30% months 1 to 10, -
0.40% months 11 to 30 and 0.65%
thereafter
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Credit Risk Manager Fee Rate 0.015% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Remaining Term to Maturity 177 to 360 months 357 months
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Original Term to Maturity 180 to 360 months 360 months
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Loan Age 0 to 11 months 2 months
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Original Loan to Value Ratio 90.00% to 103.00% 98.13%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Original Debt to Income Ratio(1) 2.56% to 59.94% 43.77%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Credit Scores(2) 500 to 813 640
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Latest Maturity Date October 1, 2036 -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Fixed-Rate Mortgage Loans 8.60% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Adjustable-Rate Mortgage Loans 91.40% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Interest Only Mortgage Loans 19.76% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Second Lien Mortgage Loans 0.00% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Mortgage Loans Secured by Investor -
Properties 4.57%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Balloon Loans 38.62% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Mortgage Loans with Prepayment Charges 77.72% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Percentage of Mortgage Loans with "Simultaneous -
Seconds" 0.14%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Maximum Single Five-Digit Zip Code Concentration 92392 (0.68%) -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Geographic Concentration of Mortgaged Properties in Excess of 5.00% of the Aggregate Outstanding Principal Balance
- ------------------------------------------------------------------------------------------------------------------------------------
California 28.17% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Florida 8.14% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
New York 7.18% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Massachusetts 5.75% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
For the Adjustable-Rate Mortgage Loans Only:
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Gross Margin 3.000% to 8.500% 6.106%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Minimum Mortgage Interest Rate 5.750% to 12.850% 8.799%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Maximum Mortgage Interest Rate 9.880% to 18.850% 14.787%
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Initial Rate Adjustment Cap 3.000% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Periodic Rate Adjustment Cap 1.000% -
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
Months to First or Next Adjustment Date 13 to 177 months 24 months
- ------------------------------------------------------------- ------------------------------------ ---------------------------------
(1) Excluding the mortgage loans for which no Debt-to-Income Ratio was
calculated.
(2) Where Credit Scores were available.
12
Group 1 Mortgage Loan Statistics
The group 1 mortgage loans will consist of fixed and adjustable-rate mortgage
loans with the following characteristics as of the cut off date (percentages are
based on the aggregate principal balance of the group 1 mortgage loans):
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Range, Total or Percentage Weighted Average
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Number of Mortgage Loans 841 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Aggregate Outstanding Principal Balance $151,756,592 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Outstanding Principal Balance $68,354 to $508,000 $180,448
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Current Interest Rate 6.251% to 11.875% 8.810%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Servicing Fee Rate 0.30% months 1 to 10, -
0.40% months 11 to 30 and 0.65%
thereafter
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Risk Manager Fee Rate 0.015% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Remaining Term to Maturity 177 to 359 months 357 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Term to Maturity 180 to 360 months 360 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Loan Age 1 to 11 months 2 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Loan to Value Ratio 90.28% to 100.00% 97.68%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Debt-to-Income Ratio(1) 20.26% to 58.66% 44.09%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Scores(2) 501 to 813 634
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Latest Maturity Date September 1, 2036 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Fixed-Rate Mortgage Loans 10.17% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Adjustable-Rate Mortgage Loans 89.83% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Interest Only Mortgage Loans 9.06% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Second Lien Mortgage Loans 0.00% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans Secured by Investor -
Properties 6.16%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Balloon Loans 38.57% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with Prepayment Charges 77.62% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with "Simultaneous -
Seconds" 0.11%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Single Five-Digit Zip Code Concentration 02302 (0.68%) -
- -----------------------------------------------------------------------------------------------------------------------------------
Geographic Concentration of Mortgaged Properties in Excess of 5.00% of the Aggregate Outstanding Principal Balance
- -----------------------------------------------------------------------------------------------------------------------------------
California 12.23% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Florida 11.62% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Massachusetts 5.45% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Michigan 5.43% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
For the Adjustable-Rate Mortgage Loans Only:
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Gross Margin 4.500% to 7.500% 6.100%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Minimum Mortgage Interest Rate 6.330% to 11.525% 8.819%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Mortgage Interest Rate 10.950% to 17.525% 14.799%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Initial Rate Adjustment Cap 3.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Periodic Rate Adjustment Cap 1.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Months to First or Next Adjustment Date 13 to 59 months 24 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
(1) Excluding the mortgage loans for which no Debt-to-Income Ratio was
calculated.
(2) Where Credit Scores were available.
13
Group 2 Mortgage Loan Statistics
The group 2 mortgage loans will consist of fixed and adjustable-rate mortgage
loans with the following characteristics as of the cut off date (percentages are
based on the aggregate principal balance of the group 2 mortgage loans):
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Range, Total or Percentage Weighted Average
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Number of Mortgage Loans 640 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Aggregate Outstanding Principal Balance $151,850,026 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Outstanding Principal Balance $49,967 to $578,306 $237,266
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Current Interest Rate 5.750% to 12.400% 8.807%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Servicing Fee Rate 0.30% months 1 to 10, -
0.40% months 11 to 30 and 0.65%
thereafter
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Risk Manager Fee Rate 0.015% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Remaining Term to Maturity 237 to 359 months 357 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Term to Maturity 240 to 360 months 360 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Loan Age 1 to 9 months 2 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Loan to Value Ratio 90.14% to 100.00% 97.71%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Debt-to-Income Ratio(1) 2.56% to 59.18% 44.54%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Scores(2) 505 to 809 634
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Latest Maturity Date September 1, 2036 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Fixed-Rate Mortgage Loans 9.85% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Adjustable-Rate Mortgage Loans 90.15% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Interest Only Mortgage Loans 15.89% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Second Lien Mortgage Loans 0.00% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans Secured by Investor -
Properties 8.15%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Balloon Loans 37.56% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with Prepayment Charges 71.65% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with "Simultaneous -
Seconds" 0.24%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Single Five-Digit Zip Code Concentration 02302 (0.85%) -
- -----------------------------------------------------------------------------------------------------------------------------------
Geographic Concentration of Mortgaged Properties in Excess of 5.00% of the Aggregate Outstanding Principal Balance
- -----------------------------------------------------------------------------------------------------------------------------------
California 12.54% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Massachusetts 9.25% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Florida 7.64% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
For the Adjustable-Rate Mortgage Loans Only:
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Gross Margin 4.500% to 8.500% 6.111%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Minimum Mortgage Interest Rate 5.750% to 12.400% 8.866%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Mortgage Interest Rate 10.500% to 18.400% 14.843%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Initial Rate Adjustment Cap 3.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Periodic Rate Adjustment Cap 1.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Months to First or Next Adjustment Date 16 to 177 months 25 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
(1) Excluding the mortgage loans for which no Debt-to-Income Ratio was
calculated.
(2) Where Credit Scores were available.
14
Group 3 Mortgage Loan Statistics
The group 3 mortgage loans will consist of fixed and adjustable-rate mortgage
loans with the following characteristics as of the cut off date (percentages are
based on the aggregate principal balance of the group 3 mortgage loans):
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Range, Total or Percentage Weighted Average
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Number of Mortgage Loans 1,917 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Aggregate Outstanding Principal Balance $540,552,843 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Outstanding Principal Balance $49,936 to $969,615 $281,979
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Current Interest Rate 5.750% to 12.850% 8.776%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Servicing Fee Rate 0.30% months 1 to 10, -
0.40% months 11 to 30 and 0.65%
thereafter
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Risk Manager Fee Rate 0.015% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Remaining Term to Maturity 178 to 360 months 357 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Term to Maturity 180 to 360 months 360 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Loan Age 0 to 9 months 2 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Loan to Value Ratio 90.00% to 103.00% 98.37%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Original Debt-to-Income Ratio(1) 5.04% to 59.94% 43.46%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Credit Scores(2) 500 to 809 643
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Latest Maturity Date October 1, 2036 -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Fixed-Rate Mortgage Loans 7.80% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Adjustable-Rate Mortgage Loans 92.20% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Interest Only Mortgage Loans 23.85% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Second Lien Mortgage Loans 0.00% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans Secured by Investor -
Properties 3.11%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Balloon Loans 38.93% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with Prepayment Charges 79.46% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Percentage of Mortgage Loans with "Simultaneous -
Seconds" 0.12%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Single Five-Digit Zip Code Concentration 92392 (1.06%) -
- -----------------------------------------------------------------------------------------------------------------------------------
Geographic Concentration of Mortgaged Properties in Excess of 5.00% of the Aggregate Outstanding Principal Balance
- -----------------------------------------------------------------------------------------------------------------------------------
California 37.03% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
New York 9.05% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Florida 7.31% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Texas 5.88% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
For the Adjustable-Rate Mortgage Loans Only:
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Gross Margin 3.000% to 7.500% 6.106%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Minimum Mortgage Interest Rate 5.750% to 12.850% 8.776%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Maximum Mortgage Interest Rate 9.880% to 18.850% 14.768%
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Initial Rate Adjustment Cap 3.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Periodic Rate Adjustment Cap 1.000% -
- ------------------------------------------------------------- ------------------------------------ --------------------------------
Months to First or Next Adjustment Date 15 to 59 months 24 months
- ------------------------------------------------------------- ------------------------------------ --------------------------------
(1) Excluding the mortgage loans for which no Debt-to-Income Ratio was
calculated.
(2) Where Credit Scores were available.
The characteristics of the mortgage pool may change because:
o Before the closing date, the depositor may remove mortgage loans from the
mortgage pool. The depositor also may substitute new mortgage loans for
mortgage loans in the mortgage pool prior to the closing date.
15
o After the certificates are issued, mortgage loans may be removed from the
trust because of repurchases by the originator or the sponsor for breaches
of representations or failure to deliver required documents. Under certain
circumstances and only during the two-year period following the closing
date, the originator or the sponsor may instead make substitutions for
these mortgage loans.
See "The Pooling and Servicing Agreement-Assignment of Mortgage Loans" in this
free writing prospectus for a discussion of the circumstances under which the
originator or the sponsor is required to repurchase or substitute for mortgage
loans. These removals and/or substitutions may result in changes in the mortgage
loan characteristics shown above. These changes may affect the weighted average
lives and yields to maturity of the related offered certificates.
Additional information on the mortgage pool is set forth under "The Mortgage
Pool" and in the tables in Appendix A to this free writing prospectus and
information regarding repurchases and substitutions of the mortgage loans after
the closing date will be available on the trusts monthly distribution reports
on Form 10-D. See "Reports to Certificateholders" in this free writing
prospectus.
Fees and Expenses
The servicing fees for the mortgage loans are payable out of the interest
payments on the mortgage loans, prior to any payments to the trustee, the credit
risk manager or distributions to certificateholders. The servicing fees accrue
on the mortgage loans at the servicing fee rate or rates set forth in the tables
above. In addition to the servicing fees, the servicer will be entitled to
retain as additional servicing compensation (i) all service-related fees,
including assumption fees, modification fees, extension fees, bad check fees,
late payment charges and interest paid on principal prepayments during the
portion of a prepayment period occurring in the month of a distribution date, to
the extent collected from mortgagors, (ii) any interest or other income earned
on funds held in the collection account and any escrow accounts and (iii) any
profits from the liquidation of mortgage loans.
The credit risk manager is entitled to the credit risk manager fee payable from
the interest portion of collections described below under
"-Distributions-General." The trustee is entitled to all investment income
earned on amounts on deposit in the distribution account.
The depositor, the servicer and the trustee are entitled to indemnification and
reimbursement of certain expenses from the trust under the pooling and servicing
agreement prior to distributions to certificateholders as discussed in the
prospectus under the headings "Description of the Agreements-Material Terms of
the Pooling and Servicing Agreements and Underlying Servicing Agreements-Certain
Matters Regarding Servicers and the Master Servicer" and "-Certain Matters
Regarding the Trustee."
See "The Pooling and Servicing Agreement-Compensation and Payment of Expenses of
the Servicer, the Trustee and the Credit Risk Manager" in this free writing
prospectus for more information about fees and expenses of the servicer, the
trustee and the credit risk manager.
For any distribution date prior to and including the distribution date in
October 2011, the trust will be obligated to make a monthly payment to the swap
provider equal to the product of (x) 5.02375%, (y) the notional amount (as set
forth in Appendix D) for such distribution date and (z) a fraction, the
numerator of which is 30 (or, for the first distribution date, the number of
days elapsed from the closing date to but excluding the first distribution date
on a 30/360 basis), and the denominator of which is 360. The trust will be
entitled to receive from the swap provider for any distribution date prior to
and including the distribution date in October 2011, a floating amount equal to
the product of (x) one-month LIBOR (as determined pursuant to the interest rate
swap agreement), (y) the notional amount for such distribution date, and (z) a
fraction, the numerator of which is the actual number of days elapsed from the
previous distribution date to but excluding the current distribution date (or,
for the first distribution date, the actual number of days elapsed from the
closing date to but excluding the first distribution date), and the denominator
of which is 360. Only a net payment will be required to be made on or before
each distribution date by the applicable party. Any amounts payable by the trust
to the swap provider (other than a swap termination payment resulting from a
swap provider trigger event) will reduce the interest remittance amount for a
distribution date and, to the extent that the interest remittance amount for
such distribution date is insufficient, the principal remittance amount for such
distribution date, prior to any distribution to certificateholders.
16
Distributions-General
Interest distributions on the certificates will be made on each distribution
date from the interest portion of collections related to the related loan group,
in the case of the senior certificates, or all loan groups, in the case of the
subordinated certificates, less certain expenses (such as servicing fees,
reimbursements for advances made by the servicer, amounts payable to the swap
provider and payment of other expenses and indemnities described in this free
writing prospectus) and principal distributions on the certificates will be made
on each distribution date from the principal portion of collections (less
certain amounts payable to the swap provider) related to the related loan group,
in the case of the senior certificates, or all loan groups, in the case of the
subordinated certificates, in the following order of priority:
- --------------------------------------------------------------------------------
Interest
- --------------------------------------------------------------------------------
first, to the credit risk manager, the credit risk manager fees
relating to each loan group;
- --------------------------------------------------------------------------------
second, to the senior certificates of the related group to pay interest;
- --------------------------------------------------------------------------------
third, to the senior certificates of the related group to pay any
interest previously earned but not paid;
- --------------------------------------------------------------------------------
fourth, to the senior certificates of the other groups to pay interest
(to the extent not paid in priority second above);
- --------------------------------------------------------------------------------
fifth, to the senior certificates of the other groups to pay any interest
previously earned but not paid (to the extent not paid in priority third
above);
- --------------------------------------------------------------------------------
sixth, from the remaining interest collections for all loan groups, to pay
interest to each class of Class M Certificates in numerical order, beginning
with the Class M-1 Certificates;
- --------------------------------------------------------------------------------
seventh, from the remaining interest collections for all loan groups, to pay
interest to the Class B Certificates; and
- --------------------------------------------------------------------------------
eighth, to be distributed as part of monthly excess cashflow.
- --------------------------------------------------------------------------------
Principal (Before the Stepdown Date or when a Trigger Event is in Effect)
- --------------------------------------------------------------------------------
first, to the senior certificates of the related group to pay
principal;*
- --------------------------------------------------------------------------------
second, to the senior certificates of the other groups to pay principal
(to the extent not paid in priority first above);*
- --------------------------------------------------------------------------------
third, from the remaining principal collections for all loan groups, to pay
principal to each class of Class M Certificates in numerical order, beginning
with the Class M-1 Certificates;
- --------------------------------------------------------------------------------
fourth, from the remaining principal collections for all loan groups, to pay
principal to the Class B Certificates; and
- --------------------------------------------------------------------------------
fifth, to be distributed as part of monthly excess cashflow.
- --------------------------------------------------------------------------------
Principal (After the Stepdown Date and as long as no Trigger Event is in Effect)
- --------------------------------------------------------------------------------
first, to the senior certificates of the related group to pay
principal, up to their principal distribution amount;*
- --------------------------------------------------------------------------------
second, to the senior certificates of the other groups to pay principal (to the
extent not paid in priority first above), up to their principal distribution
amount;*
- --------------------------------------------------------------------------------
third, from the remaining principal collections for all loan groups, to pay
principal to each class of Class M Certificates in numerical order, up to
their principal distribution amount, beginning with the Class M-1
Certificates;
- --------------------------------------------------------------------------------
fourth, from the remaining principal collections for all loan groups, to pay
principal to the Class B Certificates, up to its principal distribution
amount; and
- --------------------------------------------------------------------------------
fifth, to be distributed as part of monthly excess cashflow.
- --------------------------------------------------------------------------------
* Principal distributions to the group 3 certificates will be made sequentially
for each distribution date prior to the subordination depletion date and
concurrently, on a pro rata basis, for each distribution date on and after the
subordination depletion date.
17
On each distribution date, the sum of excess interest, remaining principal
collections and excess overcollateralization amounts will be distributed in the
following order of priority:
- --------------------------------------------------------------------------------
Excess Cashflow
- --------------------------------------------------------------------------------
first, pro rata, to the senior certificates, to pay any remaining
current interest;
- --------------------------------------------------------------------------------
second, pro rata, to the senior certificates, to pay any interest
previously earned but not paid;
- --------------------------------------------------------------------------------
third, to each class of Class M Certificates, first to pay current interest,
then to pay interest previously earned but not paid and finally to reimburse
for realized losses applied to that class, in numerical order, beginning with
the Class M-1 Certificates;
- --------------------------------------------------------------------------------
fourth, to the Class B Certificates, first to pay current interest, then to pay
interest previously earned but not paid and finally to reimburse for realized
losses applied to that class;
- --------------------------------------------------------------------------------
fifth, to the senior certificates, pro rata, and then to the Class M
Certificates, sequentially in numerical order, and then to the Class B
Certificates, to pay any cap carryover amounts for such classes;
- --------------------------------------------------------------------------------
sixth, to the swap provider, any swap termination payments resulting from a swap
provider trigger event; and
- --------------------------------------------------------------------------------
seventh, to the Class CE, Class R and Class R-X Certificates, in the amounts
specified in the pooling and servicing agreement.
- --------------------------------------------------------------------------------
The Class P Certificates will receive any prepayment charges paid by the
mortgagors during the related prepayment period. The amount of interest and
principal distributions on each class of certificates is more fully described
under "Description of the Certificates--Interest Distributions" and "--Principal
Distributions" in this free writing prospectus.
Interest Distributions
On each distribution date, you will be entitled to receive interest accrued on
your certificate during the related interest accrual period (less the amount of
shortfalls allocated to your certificate due to the Servicemembers Civil Relief
Act or similar state laws) and any interest which you earned previously but
which you did not receive. The interest accrual period for all offered
certificates is the period from the distribution date in the prior month (or the
closing date, in the case of the first distribution date) through the day prior
to the current distribution date. Interest will be calculated for all offered
certificates on the basis of the actual number of days in the interest accrual
period, based on a 360-day year.
There are certain circumstances which could reduce the amount of interest paid
to you. See "Description of the Certificates--Interest Distributions" in this
free writing prospectus.
Principal Distributions
On each distribution date you will receive a distribution of principal if there
are funds available on that date for your class of certificates. As described
above under "--Distributions--General," prior to the stepdown date or in the
event (i) a three-month rolling average of loans two months or more past due or
(ii) cumulative realized losses exceed certain thresholds described under
"Description of the Certificates--Principal Distributions," principal
distributions will be made to the senior certificates until their certificate
principal balances are reduced to zero and no principal will be distributed on
the subordinated certificates or distributed as part of excess cashflow. You
should review the priority of payments described under "Description of the
Certificates--Principal Distributions" in this free writing prospectus.
Credit Enhancement
Credit enhancement is intended to reduce the potential risk of loss to holders
of the certificates as a result of shortfalls in payments received on the
mortgage loans. Credit enhancement can reduce the effect of shortfalls on all
classes, or it can allocate shortfalls so they affect some classes before
others. This transaction employs the following forms of credit enhancement. See
"Description of the Certificates" in this free writing prospectus.
Monthly Excess Interest. Because more interest is expected to be paid by the
mortgagors than is necessary to pay the interest earned on the certificates and
to pay certain fees and expenses of the trust (including any net swap payment
owed to the swap provider and any swap termination payment owed to the swap
provider, other than any swap termination payment resulting from a swap provider
trigger event), it is expected there will be excess interest
18
each month. The excess interest will be used to maintain overcollateralization,
to pay interest that was previously accrued but not paid to the certificates, to
reimburse the certificates for losses and certain shortfalls that they
experienced previously and to pay certain cap carryover amounts.
Overcollateralization. If the total assets in the trust exceed the total
certificate principal balance of the certificates, there is
overcollateralization. Overcollateralization will be available to absorb losses
on the mortgage loans before such losses affect the offered certificates and the
Class B Certificates. On the closing date, the total principal balance of the
mortgage loans will exceed the total initial certificate principal balance of
the certificates by approximately $30,812,461. This results in
overcollateralization equal to approximately 3.65% of the aggregate principal
balance of the mortgage loans as of the cut-off date. If the level of
overcollateralization falls below the targeted overcollateralization amount for
a distribution date, the excess interest for that distribution date will be paid
to the offered certificates and the Class B Certificates as principal. This will
have the effect of reducing the aggregate certificate principal balance of the
certificates faster than the principal balance of the mortgage loans until the
required level of overcollateralization is reached.
Subordination. On each distribution date, classes that are lower in order of
payment priority will not receive payments until the classes that are higher in
order of payment priority have been paid. If there are insufficient funds on a
distribution date to pay all classes, the subordinated classes will be the first
to forego payment. The chart below summarizes the relative seniority of the
various classes of certificates and indicates the approximate initial and
expected post-stepdown level of credit support provided to the various classes
of certificates. The initial credit support percentage shown below is the sum of
the aggregate initial class certificate balance of the class or classes of
certificates subordinate to a class or classes plus the initial
overcollateralization amount as a percentage of the initial aggregate principal
balance of the mortgage loans. The expected credit support percentage after
stepdown is the sum of the expected aggregate class certificate balance of the
class or classes of certificates subordinate to a class or classes plus the
targeted overcollateralization amount on the stepdown date as a percentage of
the expected aggregate principal balance of the mortgage loans as of the end of
the related collection period (after giving effect to expected principal
prepayments in the related prepayment period).
Initial Targeted Credit
Credit Support
Priority of Support Percentage after Allocation
Payment Class or Classes Percentage Stepdown of Losses
- --------------------------------------------------------------------------------
Senior 24.70% 49.40% N/A(1)
Certificates
| --------------------------------------------------------------------
| Class M-1 20.55% 41.10% /|\
| Certificates / | \
| -------------------------------------------------------- |
| Class M-2 16.75% 33.50% |
| Certificates |
| -------------------------------------------------------- |
| Class M-3 14.55% 29.10% |
| Certificates |
| -------------------------------------------------------- |
| Class M-4 12.65% 25.30% |
| Certificates |
| -------------------------------------------------------- |
| Class M-5 10.80% 21.60% |
| Certificates |
| -------------------------------------------------------- |
| Class M-6 9.15% 18.30% |
\ | / Certificates |
\|/ -------------------------------------------------------- |
Class M-7 7.55% 15.10%
Certificates
--------------------------------------------------------
Class M-8 6.10% 12.20%
Certificates
--------------------------------------------------------
Class M-9 4.85% 9.70%
Certificates
--------------------------------------------------------
Class B 3.65% 7.30%
Certificates
- --------------------------------------------------------------------------------
(1) The certificate principal balances of the senior certificates will not be
reduced by realized losses; however, under certain loss scenarios, there will
not be enough interest and principal on the mortgage loans to pay the senior
certificates all interest and principal amounts to which they are entitled.
Application of Realized Losses. If, on any distribution date after the
certificate principal balances of the certificates have been reduced by the
amount of cash paid on that date, the total certificate principal balance of the
certificates is greater than the total principal balance of the mortgage loans,
the certificate principal balance of the subordinated certificates that are
lowest in order of payment priority will be reduced by the amount of such
excess. Once the certificate principal balance of a class is reduced by realized
losses allocated to it, this balance will not be reinstated (except in the case
of subsequent recoveries). The certificate principal balances of the senior
certificates will not be reduced by these realized losses, although these
certificates may experience losses if the credit enhancements described in this
free writing prospectus are exhausted.
19
Cross-Collateralization. In certain circumstances payments on the mortgage loans
in one loan group may be used to make certain distributions to holders of senior
certificates relating to the other loan groups.
Interest Rate Swap Agreement
The trustee, on behalf of the trust, will enter into an interest rate swap
agreement with Bank of America, National Association, as swap provider. Under
the interest rate swap agreement, for any distribution date prior to and
including the distribution date in October 2011, the trust will be obligated to
make fixed payments to the swap provider equal to the product of (x) 5.02375%,
(y) the notional amount (as set forth in Appendix D) for such distribution date
and (z) a fraction, the numerator of which is 30 (or, for the first distribution
date, the number of days elapsed from the closing date to but excluding the
first distribution date on a 30/360 basis), and the denominator of which is 360.
During the same period, the swap provider will be obligated under the interest
rate swap agreement to make floating payments to the trust prior to each
distribution date equal to the product of (x) one-month LIBOR (as determined
pursuant to the interest rate swap agreement), (y) the notional amount (as set
forth on the table in Appendix D) for that distribution date and (z) a fraction,
the numerator of which is the actual number of days elapsed from the previous
distribution date to but excluding the current distribution date (or, for the
first distribution date, the actual number of days elapsed from the closing date
to but excluding the first distribution date), and the denominator of which is
360. To the extent that the fixed payment exceeds the floating payment with
respect to any distribution date, amounts otherwise available to
certificateholders will be applied to pay that excess to the swap provider, and
to the extent that the floating payment exceeds the fixed payment with respect
to any distribution date, the swap provider will pay that excess to the trustee
for deposit into a segregated trust account held by the trust established on the
closing date.
Upon early termination of the interest rate swap agreement, the trust or the
swap provider may be liable to make a swap termination payment to the other
party (regardless of which party caused the termination). The swap termination
payment will be computed in accordance with the procedures set forth in the
interest rate swap agreement. In the event that the trust is required to make a
swap termination payment, that payment will be paid on the business day prior to
the related distribution date, and, until paid in full, one business day prior
to any subsequent distribution dates, generally prior to any distribution to
certificateholders. See "Description of the Certificates--Interest Rate Swap
Agreement, the Swap Provider and the Swap Account" in this free writing
prospectus.
Net swap payments and swap termination payments payable by the trust (other than
swap termination payments resulting from a swap provider trigger event) will be
deducted first from the interest collections for a month and then from principal
collections for a month before distributions to certificateholders and will be
deposited into the swap account before payment, on a first priority basis, to
the swap provider.
Optional Termination
The NIMS Insurer, if any, will have the option to purchase all the mortgage
loans and any properties that the issuing entity acquired in satisfaction of any
of the mortgage loans, subject to certain conditions described under "The
Pooling and Servicing Agreement--Optional Termination" in this free writing
prospectus. If there is no NIMS Insurer, the majority holder of the Class CE
Certificates will have the option. If the majority holder of the Class CE
Certificates fails to exercise the option on the first possible date or is an
affiliate of the sponsor, the servicer will have the option. This option can be
exercised on any distribution date following the distribution date on which the
total principal balance of the mortgage loans, including the mortgage loans
related to REO properties, is 10% or less of the total principal balance of the
mortgage loans on the cut off date. Any such optional termination will be
permitted only pursuant to a "qualified liquidation" as defined in Section 860F
of the Internal Revenue Code of 1986, as amended. If the option is exercised,
your certificate will be retired earlier than it would be otherwise and you will
be entitled to the following amounts (to the extent that there is enough cash to
make such payments):
o the outstanding certificate principal balance of your certificate;
o one month's interest on this balance at the related certificate interest
rate;
o any interest previously earned but not paid; and
o any "cap carryover amount," as described in this free writing prospectus,
from all previous distribution dates.
20
See "The Pooling and Servicing Agreement--Optional Termination" in this free
writing prospectus.
Prepayment and Yield Considerations
The yields to maturity and weighted average lives of the offered certificates
will depend upon, among other things, the price at which such offered
certificates are purchased, the amount and timing of principal payments on the
applicable mortgage loans, the allocation of available funds to various classes
of offered certificates, the amount and timing of mortgagor delinquencies and
defaults on the applicable mortgage loans, the rate of liquidations and realized
losses and the allocation of realized losses to various classes of offered
certificates.
See "Yield, Prepayment and Maturity Considerations" in this free writing
prospectus.
Weighted Average Lives to Maturity (in years)(1)
- --------------------------------------------------------------------------------
ARM PPC 0% 50% 75% 100% 125% 150% 175%
Class --------------------------------------------------------------------------
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- --------------------------------------------------------------------------------
A-1 22.27 4.35 2.93 2.05 1.34 1.14 1.01
A-2 22.25 4.35 2.93 2.05 1.34 1.14 1.02
A-3A 18.15 1.71 1.24 1.00 0.83 0.71 0.62
A-3B 28.42 7.47 4.87 3.19 2.02 1.74 1.55
A-3C 29.78 23.09 15.81 11.52 2.71 2.03 1.95
M-1 28.04 5.22 3.57 3.93 3.99 3.18 2.58
M-2 29.74 8.91 5.83 4.71 5.54 4.25 3.56
M-3 29.78 16.33 10.85 7.85 8.10 6.30 5.19
M-4 29.05 8.96 5.93 4.72 4.26 3.17 2.78
M-5 29.05 8.94 5.91 4.65 4.10 3.06 2.68
M-6 29.05 8.90 5.89 4.59 3.97 2.97 2.59
M-7 29.05 8.85 5.85 4.54 3.87 2.89 2.53
M-8 29.05 8.79 5.80 4.47 3.77 2.83 2.48
M-9 29.05 8.70 5.73 4.41 3.69 2.77 2.41
(1) Determined as described under "Yield, Prepayment and Maturity
Considerations" in this free writing prospectus.
Weighted Average Lives to Optional Termination (in years)(1)(2)
- --------------------------------------------------------------------------------
ARM PPC 0% 50% 75% 100% 125% 150% 175%
Class --------------------------------------------------------------------------
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- --------------------------------------------------------------------------------
A-1 22.27 4.04 2.71 1.89 1.34 1.14 1.01
A-2 22.25 4.04 2.71 1.89 1.34 1.14 1.02
A-3A 18.15 1.71 1.24 1.00 0.83 0.71 0.62
A-3B 28.42 7.07 4.61 3.00 2.02 1.74 1.55
A-3C 29.78 12.36 8.11 5.86 2.71 2.03 1.95
M-1 28.04 5.22 3.57 3.93 3.96 3.14 2.56
M-2 29.74 8.91 5.83 4.71 4.45 3.36 2.86
M-3 29.78 12.35 8.10 5.85 4.45 3.36 2.86
M-4 29.05 8.15 5.38 4.32 3.95 2.92 2.58
M-5 29.05 8.15 5.38 4.26 3.80 2.82 2.49
M-6 29.05 8.15 5.38 4.22 3.68 2.74 2.41
M-7 29.05 8.15 5.37 4.19 3.60 2.68 2.36
M-8 29.05 8.15 5.37 4.16 3.53 2.63 2.33
M-9 29.05 8.15 5.37 4.14 3.49 2.60 2.28
(1) Determined as described under "Yield, Prepayment and Maturity
Considerations" in this free writing prospectus.
(2) Assumes an optional purchase of the mortgage loans on the earliest
distribution date on which it is permitted.
21
Federal Income Tax Consequences
Elections will be made to treat the assets of the trust (exclusive of the
arrangements intended to protect against basis risk for certain of the
certificates, the interest rate swap agreement, the swap account, the cap
carryover reserve account and prepayment charges) as comprised of multiple real
estate mortgage investment conduits in a tiered structure for federal income tax
purposes.
The offered certificates will represent (i) regular interests in a REMIC, which
will be treated as debt instruments of a REMIC, and (ii) interests in certain
cap carryover amounts and the right to receive payments from and the obligation
to make payments to the swap account. Each interest in cap carryover amounts and
the right to receive payments from and the obligation to make payments to the
swap account will be treated as notional principal contracts for federal income
tax purposes.
For further information regarding the federal income tax consequences of
investing in the offered certificates, see "Federal Income Tax Consequences" in
this free writing prospectus and in the prospectus.
Legal Investment
You are encouraged to consult with counsel to see if you are permitted to buy
the offered certificates, since legal investment rules will vary depending on
the type of entity purchasing the offered certificates, whether that entity is
subject to regulatory authority, and if so, by whom. The senior certificates and
the Class M-1, Class M-2 and Class M-3 certificates will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended, so long as they are rated in one of the two highest
rating categories by at least one nationally recognized statistical rating
agency. The Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class M-9
certificates will not constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended. See "Legal
Investment" in this free writing prospectus and in the prospectus.
ERISA Considerations
If you are a fiduciary of any employee benefit plan or other retirement
arrangement subject to the Employee Retirement Income Security Act of 1974, as
amended, or Section 4975 of the Internal Revenue Code of 1986 or any materially
similar provisions of applicable federal, state or local law, you are encouraged
to consult with counsel as to whether you can buy or hold an offered
certificate.
Subject to the considerations and conditions described under "ERISA
Considerations" in this free writing prospectus, it is expected that the senior
certificates may be purchased by a pension or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended, or
Section 4975 of the Internal Revenue Code of 1986, as amended. Prior to the
termination of the interest rate swap agreement, plans or persons using assets
of a plan may only purchase the senior certificates if the purchase and holding
of such certificates also meets the requirements of an investor-based class
exemption issued by the Department of Labor. A fiduciary of an employee benefit
plan must determine that the purchase of a certificate is consistent with its
fiduciary duties under applicable law and does not result in a prohibited
transaction under applicable law. The subordinate certificates may not be
acquired by benefit plans except under certain conditions. See "ERISA
Considerations" in this free writing prospectus and in the prospectus.
Affiliations
Bank of America, National Association, which is the sponsor and swap provider,
is the direct parent of the depositor and is an affiliate of the underwriter.
There are no additional relationships, agreements or arrangements outside of
this transaction among the affiliated parties that are material to an
understanding of the offered certificates.
22
RISK FACTORS
The risk factors discussed below and under the heading "Risk Factors" in
the prospectus describe the material risks of an investment in the offered
certificates and should be carefully considered by all potential investors.
There are risks involving unpredictability of prepayments and the effect of
prepayments on yields
The rate of principal payments, the aggregate amount of distributions and
the yields to maturity of the offered certificates will be related to the rate
and timing of payments of principal on the applicable 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 refinancings,
liquidations of the mortgage loans due to defaults, casualties or condemnations
and repurchases by the sponsor, the originator or the servicer). Mortgagors may
prepay their mortgage loans in whole or in part at any time. We cannot predict
the rate at which mortgagors will repay their mortgage loans. A prepayment of a
mortgage loan generally will result in a prepayment of the certificates.
o If you purchase your certificates at a discount and principal is repaid
more slowly than you anticipate, then your yield may be lower than you
anticipate.
o 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.
o 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 fixed-rate mortgage loans,
those mortgage loans are more likely to prepay than if prevailing rates
remain above the interest rates on such mortgage loans. Conversely, if
prevailing interest rates rise significantly, the prepayments on
fixed-rate mortgage loans are likely to decrease. The prepayment behavior
of the adjustable-rate mortgage loans and of the fixed-rate mortgage loans
may respond to different factors, or may respond differently to the same
factors. If at the time of their first adjustment, the interest rates on
any of the adjustable-rate mortgage loans would be subject to adjustment
to a rate higher than the then prevailing mortgage interest rates
available to the related borrowers, such borrowers may prepay their
adjustable-rate mortgage loans. Adjustable-rate mortgage loans may also
suffer an increase in defaults and liquidations following upward
adjustments of their interest rates, especially following their initial
adjustments.
o The rate of prepayments on pools of mortgage loans may vary significantly
over time and may be influenced by a variety of economic, geographic and
other factors, including changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions.
o As of the cut-off date, certain of the mortgage loans required the
mortgagor to pay a charge if the mortgagor prepays the mortgage loan
during periods ranging, in substantially all cases, from one year to three
years after the mortgage loan was originated. See the mortgage loan tables
under "Summary of Free Writing Prospectus" in this free writing prospectus
for the percentages of the mortgage loans in each loan group and the
mortgage pool that require the mortgagor to pay a prepayment charge. A
prepayment charge may discourage a mortgagor from prepaying the mortgage
loan during the applicable period. Such prepayment charges will be
distributed to holders of the Class P Certificates and not to holders of
the offered certificates. The servicer is entitled to waive prepayment
charges, subject to certain conditions specified in the prospectus under
"Description of the Agreements--Material Terms of the Pooling and
Servicing Agreements and Underlying Servicing Agreements--Collection and
Other Servicing Procedures."
o The originator and the sponsor may be required to purchase mortgage loans
from the trust in the event certain breaches of representations and
warranties have not been cured. In addition, certain parties have the
option to purchase mortgage loans from the trust that are at least 90 days
delinquent under the
23
circumstances described under "The Pooling and Servicing
Agreement--Optional Purchase of Defaulted Mortgage Loans" in this free
writing prospectus and the option to purchase all of the mortgage loans
and REO properties in the trust and thereby effect the early retirement of
the certificates under the circumstances set forth under "The Pooling and
Servicing Agreement--Optional Termination" in this free writing
prospectus. In addition, Option One Mortgage Corporation generally will be
required to repurchase from the trust certain mortgage loans for which the
first scheduled monthly payment due after their purchase by the sponsor
becomes 45 or more days delinquent; provided that the sum of (i) the
principal balance of such mortgage loans repurchased and (ii) the fair
market value on the closing date of any subordinated certificates retained
or acquired by Option One Mortgage Corporation, the sponsor or any
affiliate of the sponsor, is not permitted to exceed 10% of the principal
balance of the mortgage loans as of the cut-off date. These purchases will
have the same effect on the holders of the offered certificates as a
prepayment of the mortgage loans.
o The servicer will generally enforce due-on-sale clauses contained in the
mortgage notes in connection with transfers of mortgaged properties.
o If the rate of default and the amount of losses on the mortgage loans are
higher than you expect, then your yield may be lower than you expect.
o If the level of overcollateralization falls below the targeted
overcollateralization amount for a distribution date, excess interest and,
in certain situations, net swap payments will be paid to the certificates
as principal. This will have the effect of reducing the total certificate
principal balance of the certificates faster than the principal balance of
the mortgage loans until the required level of overcollateralization is
reached.
Adjustable rate mortgage loan borrowers may be more likely to prepay
Mortgage interest rates on the adjustable-rate mortgage loans at any time
may not equal the prevailing mortgage interest rates for similar adjustable-rate
mortgage loans, and accordingly the prepayment rate may be lower or higher than
would otherwise be anticipated. Moreover, some mortgagors who prefer the
certainty provided by fixed-rate mortgage loans may nevertheless obtain
adjustable-rate mortgage loans at a time when they regard the mortgage interest
rates (and, therefore, the payments) on fixed-rate mortgage loans as
unacceptably high. These mortgagors may be induced to refinance adjustable-rate
mortgage loans when the mortgage interest rates and monthly payments on
comparable fixed-rate mortgage loans decline to levels which these mortgagors
regard as acceptable, even though these mortgage interest rates and monthly
payments may be significantly higher than the current mortgage interest rates
and monthly payments on the mortgagors' adjustable-rate mortgage loans. The
ability to refinance a mortgage loan will depend on a number of factors
prevailing at the time refinancing is desired, such as, among other things, real
estate values, the mortgagor's financial situation, prevailing mortgage interest
rates, the mortgagor's equity in the related mortgaged property, tax laws and
prevailing general economic conditions.
There is a risk that interest payments on the mortgage loans may be insufficient
to maintain overcollateralization
Because the weighted average of the interest rates on the mortgage loans
is expected to be higher than the weighted average of the certificate interest
rates on the certificates, the mortgage loans are expected to generate more
interest than is needed to pay interest owed on the certificates as well as
certain fees and expenses of the trust (including any net swap payment owed to
the swap provider and any swap termination payment owed to the swap provider,
other than a swap termination payment resulting from a swap provider trigger
event). After these financial obligations of the trust are covered, the
available excess interest will be used to maintain overcollateralization. Any
remaining interest will then be used to compensate for losses that occur on the
mortgage loans. We cannot assure you, however, that enough excess interest will
be generated to maintain the overcollateralization level required by the rating
agencies. 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:
24
o When a mortgage loan is prepaid in full or repurchased, excess interest
will generally be reduced because the mortgage loan will no longer be
outstanding and generating interest or, in the case of a partial
prepayment, will be generating less interest.
o Every time a mortgage loan is liquidated or written off, excess interest
will be reduced because that mortgage loan will no longer be outstanding
and generating interest.
o If the rates of delinquencies, defaults or losses on the mortgage loans
are higher than expected, excess interest will be reduced by the amount
necessary to compensate for any shortfalls in cash available on a
distribution date to pay certificateholders.
o The certificate interest rates of the offered certificates are based on
one-month LIBOR while the adjustable-rate mortgage loans have rates that
are adjustable based on six-month LIBOR and the fixed-rate mortgage loans
have rates that do not adjust. As a result, the certificate interest rates
on the offered certificates may increase relative to interest rates on the
mortgage loans, thus requiring that more of the interest generated by the
mortgage loans be applied to cover interest on the offered certificates.
Effects of mortgage interest rates and other factors on the certificate interest
rates of the offered certificates
The yields to maturity on the offered certificates may be affected by the
inclusion of fixed-rate mortgage loans and the resetting of the mortgage
interest rates on the adjustable-rate mortgage loans on their related adjustment
dates due to the factors set forth below. The mortgage interest rates on the
fixed-rate mortgage loans are fixed and will not vary with any index and the
mortgage interest rates on the adjustable-rate mortgage loans are based on six
month LIBOR and do not adjust for periods ranging from two to fifteen years
after the dates of their origination, while the certificate interest rates on
the offered certificates are based on one-month LIBOR, are subject to the
applicable maximum rate cap and the applicable cap, and are adjusted monthly.
This mismatch of indices and adjustment frequency may cause the one-month
LIBOR-based certificate interest rates on the offered certificates to increase
relative to the mortgage interest rates on the mortgage loans, which would
require a greater portion of the interest generated by the mortgage loans to be
applied to cover interest accrued on the offered certificates, and could result
in the limitation of the certificate interest rates on some or all of the
offered certificates by the related group cap or the pool cap, as applicable,
and could therefore adversely affect the yield to maturity on such certificates.
The group caps are equal to the weighted average of the interest rates on the
mortgage loans in the related loan group, net of certain expenses of the trust
(including any net swap payment owed to the swap provider and any swap
termination payment owed to the swap provider, other than a swap termination
payment due to a swap termination trigger event). The pool cap is equal to the
weighted average of the group caps, weighted on the basis of the group
subordinate amount for each loan group. In addition, you should note that the
group caps and the pool cap will decrease if the related mortgage loans, in the
case of the group caps, or all the mortgage loans, in the case of the pool cap,
with relatively high mortgage interest rates prepay at a faster rate than the
other mortgage loans in the group or the pool, as applicable, with relatively
low mortgage interest rates, which will increase the likelihood that the group
caps or the pool cap will apply to limit the certificate interest rates on one
or more classes of the offered certificates.
If the certificate interest rate on any class of the offered certificates
is limited by a group cap or the pool cap for any distribution date, the
resulting cap carryover amounts may be recovered by the holders of such classes
of certificates on that same distribution date or on future distribution dates,
to the extent that on that distribution date or future distribution dates there
are any available funds remaining after certain other distributions on the
offered certificates and the Class B Certificates and the payment of certain
fees and expenses of the trust (including any net swap payment owed to the swap
provider and any swap termination payment owed to the swap provider, other than
a swap termination payment due to a swap termination trigger event). You should
note, however, that if the pass-through rate on any class of offered
certificates is based on the applicable maximum rate cap, the amount of cap
carryover will be less during such period on those certificates than if the
pass-through rate were based on one-month LIBOR plus the applicable margin. The
ratings on the offered certificates will not address the likelihood of any such
recovery of cap carryover amounts by holders of such certificates.
Amounts distributed on the offered certificates in respect of such
shortfalls may be supplemented by net payments received from the swap provider
under the interest rate swap agreement, to the extent that the floating payment
payable by the swap provider exceeds the fixed payment payable by the trust on
any distribution date, and
25
such amount is available in the priorities described in this free writing
prospectus. However, the amount received from the swap provider under the
interest rate swap agreement may be insufficient to pay holders of the
applicable certificates the full amount of interest which they would have
received absent the limitations of the related cap.
There are risks relating to alternatives to foreclosure
Certain mortgage loans may become delinquent after the closing date. The
servicer may either foreclose on any such mortgage loan or work out an agreement
with the mortgagor if the delinquency is not cured, which may involve waiving or
modifying certain terms of the mortgage loan. If the servicer extends the
payment period or accepts a lesser amount than stated in the mortgage note in
satisfaction of the mortgage note, your yield may be reduced.
Nature of sub-prime mortgage loans may increase risk of loss
Substantially all of the mortgage loans are of sub-prime credit quality;
i.e., do not meet the customary credit standards of Fannie Mae and Freddie Mac.
The originator makes sub-prime mortgage loans to borrowers that typically have
limited access to traditional mortgage financing for a variety of reasons,
including impaired or limited past credit history, lower credit scores, high
loan-to-value ratios or high debt-to-income ratios. As a result of these
factors, delinquencies and liquidation proceedings are more likely with these
mortgage loans than with mortgage loans that satisfy customary credit standards.
In the event the mortgage loans in the mortgage pool do become delinquent or
subject to liquidation, you may face delays in receiving payment and may suffer
losses if the credit enhancements are insufficient to cover the delays and
losses.
High loan-to-value ratios increase risk of loss
Mortgage loans with high loan-to-value ratios leave the mortgagor with
little to no equity in the related mortgaged property. Substantially all of the
mortgage loans have loan-to-value ratios greater than 90.00% and approximately
0.29% of the mortgage loans (by aggregate principal balance outstanding as of
the cut-off date) have loan-to-value ratios greater than 100.00%. See the
mortgage loan tables in Appendix A to this free writing prospectus for
information regarding the loan-to-value ratios of the mortgage loans. No
mortgage loan had a loan-to-value ratio exceeding 103.00% as of the cut-off
date. An overall decline in the residential real estate market, a rise in
interest rates over a period of time and the general condition of a mortgaged
property, as well as other factors, may have the effect of reducing the value of
such mortgaged property from the appraised value at the time the mortgage loan
was originated. If there is a reduction in value of the mortgaged property, the
loan-to-value ratio may increase over what it was at the time of origination.
Such an increase may reduce the likelihood that liquidation proceeds or other
proceeds will be sufficient to pay off the mortgage loan fully. There can be no
assurance that the loan-to-value ratio of any mortgage loan determined at any
time after origination is less than or equal to its original loan-to-value
ratio. Additionally, the originator's determination of the value of a mortgaged
property used in the calculation of the loan-to-value ratios of the mortgage
loans may differ from the appraised value of such mortgaged property or the
actual value of such mortgaged property.
The interest rate swap agreement is subject to counterparty risk
The assets of the trust include the interest rate swap agreement which
will require the swap provider to make certain payments in the circumstances set
forth herein under "Description of the Certificates--Interest Rate Swap
Agreement, the Swap Provider and the Swap Account." To the extent that payments
on the certificates depend in part on payments to be received by the trustee
under the interest rate swap agreement, the ability of the issuing entity to
make payments on the certificates will be subject to the credit risk of the swap
provider.
There is no assurance that amounts will be received under the interest rate swap
agreement
Any amounts received from the swap provider under the interest rate swap
agreement will be applied as described in this free writing prospectus to pay
interest and basis risk shortfalls, to maintain overcollateralization and to pay
unpaid realized loss amounts. However, no amounts will be payable by the swap
provider unless the floating amount owed by the swap provider with respect to a
distribution date exceeds the fixed amount owed to the swap provider with
respect to that distribution date. This will only occur in periods when
one-month LIBOR (as
26
determined pursuant to the interest rate swap agreement) exceeds 5.02375%. No
assurance can be made 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 arising from the operation of the group caps or the
pool cap, to maintain required overcollateralization or to pay realized losses.
In addition, to the extent that distributions on the offered certificates
depend in part on payments to be received by the trust under the interest rate
swap agreement, the ability of the trustee to make such distributions will be
subject to the credit risk of the swap provider under the interest rate swap
agreement. The credit ratings of the swap provider are lower than the ratings
assigned to the senior certificates. There can also be no assurance that in the
event of an early termination of the interest rate swap agreement, the depositor
will be able to obtain a replacement interest rate swap agreement. See
"Description of the Certificates--Interest Rate Swap Agreement, the Swap
Provider and the Swap Account" in this free writing prospectus.
The credit rating of the swap provider could affect the rating of the offered
certificates
The swap provider (or its guarantor) under the interest rate swap
agreement will have, as of the closing date, at least a long-term debt rating of
"Aa1" from Moody's Investors Service, Inc. and "AA-" from Fitch Ratings. The
ratings on the offered certificates are dependent in part on the credit ratings
of the swap provider. If a credit rating of the swap provider is qualified,
reduced or withdrawn and an arrangement satisfactory to rating agencies is not
obtained in accordance with the terms of the interest rate swap agreement, the
ratings on 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,
the Swap Provider and the Swap Account" in this free writing prospectus.
Payments due to swap provider may result in losses on certificates
Any net payment 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 certificate interest rates of the
certificates. If the rate of prepayment on the mortgage loans is faster than
anticipated, the schedule on which payments due under the interest rate swap
agreement are calculated may exceed the aggregate principal balance of the
mortgage loans, thereby increasing the relative proportion of interest
collections on the mortgage loans that must be applied to make net payments to
the swap provider. The combination of a rapid rate of prepayment and low
prevailing interest rates could adversely affect the yields on the offered
certificates. In addition, any termination payment payable to the swap provider
(other than a termination payment resulting from a swap provider trigger event)
in the event of early termination of the interest rate swap agreement will
reduce amounts available for distribution to certificateholders.
Upon early termination of the interest rate swap agreement, the trust or
the swap provider may be liable to make a swap termination payment to the other
party (regardless of which party caused the termination). The swap termination
payment will be computed in accordance with the procedures set forth in the
interest rate swap agreement. In the event that the trust is required to make a
swap termination payment, that payment will be paid prior to the related
distribution date, and, until paid in full, prior to any subsequent distribution
dates, generally prior to any distribution to certificateholders. This feature
may result in losses on the certificates. Due to the priority of distributions,
the subordinated certificates will bear the effects of any shortfalls resulting
from a net swap payment or swap termination payment by the trust before such
effects are borne by the senior certificates and one or more classes of
subordinated certificates may suffer a loss as a result of such payment.
Some of the mortgage loans have an initial interest only period, which may
result in increased delinquencies and losses or rates of prepayment
Some of the mortgage loans do not require any scheduled payments of
principal during their initial interest only period, but require scheduled
payments of interest only during this time. See the mortgage loan tables under
"Summary of Free Writing Prospectus" in this free writing prospectus for the
percentages of the mortgage loans in each loan group and the mortgage pool that
are interest only mortgage loans. During this period, the payment due from the
related mortgagor will be less than that of a traditional mortgage loan. In
addition, the principal balance of the mortgage loan will not be reduced (except
in the case of prepayments) because there will be no scheduled
27
monthly payments of principal during this period. Accordingly, no principal
payments will be distributed to the related certificates from these mortgage
loans during their interest only period except in the case of a prepayment.
After the initial interest only period, payments on an interest only
mortgage loan will be recalculated to amortize fully its unpaid principal
balance over its remaining life and the mortgagor will be required to make
scheduled payments of both principal and interest. The required payment of
principal will increase the burden on the mortgagor and may increase the risk of
default under the related mortgage loan. This increase in the mortgagor's
scheduled monthly payment will occur when the mortgagor's monthly interest
payment may also be increasing as a result of an increase in the mortgage
interest rate on an adjustment date. In underwriting interest only mortgage
loans, the originator generally does not consider the ability of mortgagors to
make payments of principal at the end of the interest only period. Higher
scheduled monthly payments may induce the related mortgagors to refinance their
mortgage loans, which would result in higher prepayments. In addition, in
default situations losses may be greater on these mortgage loans because they do
not amortize during the initial period. Losses, to the extent not covered by
credit enhancement, will be allocated to the certificates.
The performance of mortgage loans with an initial interest only period may
be significantly different from mortgage loans that amortize from origination.
In particular, these mortgagors may be more likely to refinance their mortgage
loans, which may result in higher prepayment speeds than would otherwise be the
case.
The rate of default on mortgage loans that are secured by investor properties
may be higher than on other mortgage loans.
Certain of the mortgage loans are expected to be secured by investor
properties. See the mortgage loan tables under "Summary of Free Writing
Prospectus" in this free writing prospectus for the percentages of the mortgage
loans in each loan group and the mortgage pool that are secured by investor
properties. An investor property is a property which, at the time of
origination, the mortgagor represented would not be used as the mortgagor's
primary residence or second home. Because the mortgagor is not living on the
property, the mortgagor may be more likely to default on the mortgage loan than
on a comparable mortgage loan secured by a primary residence, or to a lesser
extent, a second home. In addition, income expected to be generated from an
investor property may have been considered for underwriting purposes in addition
to the income of the mortgagor from other sources. Should this income not
materialize, it is possible the mortgagor would not have sufficient resources to
make payments on the mortgage loan.
Balloon mortgage loans increase the risk of loss
Certain of the mortgage loans are expected to be balloon mortgage loans.
See the mortgage loan tables under "Summary of Free Writing Prospectus" in this
free writing prospectus for the percentages of the mortgage loans in each loan
group and the mortgage pool that are balloon mortgage loans. Balloon mortgage
loans require a mortgagor to make a large scheduled lump sum payment of
principal at the end of the loan term. If the mortgagor is unable to pay the
lump sum or refinance such amount, you may suffer a loss. In addition, the
servicer will not advance the unpaid principal balance remaining at maturity of
a balloon mortgage loan.
There are risks relating to simultaneous second mortgage loans
Certain of the mortgage loans may have been originated by the originator
simultaneously with a second lien mortgage loan. See the mortgage loan tables
under "Summary of Free Writing Prospectus" in this free writing prospectus for
the percentages of the mortgage loans in each loan group and the mortgage pool
that have been originated by the originator simultaneously with a second lien
mortgage loan. These second lien mortgage loans may or may not be included in
the trust. With respect to mortgage loans that have junior lien mortgage loans
encumbering the same mortgaged property, foreclosure frequency may be increased
relative to mortgage loans that do not have subordinate financing behind them
because mortgagors have less equity in the mortgaged property. Further, the
servicer may declare a default on the junior lien loan even though the first
lien loan is current, which would constitute a default on the first lien loan.
In addition to the mortgage loans discussed above that have simultaneous
subordinate financing provided by the originator, with respect to certain other
mortgage loans, at the time of origination of the first lien mortgage loan, the
related mortgaged property was also encumbered by a second lien mortgage to a
mortgagee other than the originator. Investors should also note that any
mortgagor may obtain
28
subordinate financing at any time subsequent to the date of origination of their
mortgage loan from the originator or from any other lender.
There are risks relating to geographic concentration of the mortgage loans
The following chart lists the states with the highest concentrations of
mortgage loans for each loan group and in the mortgage pool, based on the
aggregate principal balance of the mortgage loans in each loan group and the
mortgage pool as of the cut off date.
Loan Group 1 Loan Group 2 Loan Group 3 Mortgage Pool
- -------------------------------- --------------------------- ---------------------------- -----------------------------
California 12.23% California 12.54% California 37.03% California 28.17%
Florida 11.62% Massachusetts 9.25% New York 9.05% Florida 8.14%
Massachusetts 5.45% Florida 7.64% Florida 7.31% New York 7.18%
Michigan 5.43% Texas 5.88% Massachusetts 5.75%
California, Florida and several other states have experienced natural
disasters, such as earthquakes, fires, floods and hurricanes, which may not be
fully insured against and which may result in property damage and losses on the
mortgage loans.
In addition, the conditions below will have a disproportionate impact on
the mortgage loans in general:
o Economic conditions in states listed above which may or may not affect
real property values may affect the ability of mortgagors to repay their
loans on time.
o Declines in the residential real estate markets in the states listed above
may reduce the values of properties located in those states, which would
result in an increase in the loan-to-value ratios.
o Any increase in the market value of properties located in the states
listed above would reduce the loan-to-value ratios and could, therefore,
make alternative sources of financing available to the mortgagors at lower
interest rates, which could result in an increased rate of prepayment of
the mortgage loans.
Residential real estate values may fluctuate and adversely affect your
investment
There can be no assurance that values of the mortgaged properties have
remained or will remain at their levels on the dates of origination of the
related mortgage loans. The value of any mortgaged property generally will
change over time from its value on the appraisal or sales date. If residential
real estate values generally or in a particular geographic area decline, the
loan-to-value ratios of the mortgage loans shown in the tables in Appendix A
might not be a reliable indicator of the rates of delinquencies, foreclosures
and losses that could occur on the mortgage loans. If the residential real
estate market should experience an overall decline in property values large
enough to cause the outstanding balances of the mortgage loans and any secondary
financing on the related mortgaged properties to equal or exceed the value of
the mortgaged properties, delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage lending industry or in the
sponsor's prior securitizations involving the depositor.
In addition, adverse economic conditions and other factors (which may or
may not affect real property values) may affect the mortgagors' timely payment
of scheduled payments of principal and interest on the mortgage loans and,
accordingly, the actual rates of delinquencies, foreclosures and losses with
respect to any mortgage pool. These other factors could include excessive
building resulting in an oversupply of housing in a particular area or a
decrease in employment reducing the demand for housing in an area. To the extent
that credit enhancements do not cover such losses, your yield may be adversely
impacted.
Credit scores may not accurately predict the likelihood of default
The originator generally uses credit scores as part of its underwriting
process. The tables in Appendix A show credit scores for the mortgagors of the
mortgage loans obtained at the time of origination of their mortgage loans. A
credit score purports only to be a measurement of the relative degree of risk a
borrower represents to a lender, i.e., that a borrower with a higher score is
statistically expected to be less likely to default in payment than a
29
borrower with a lower score. 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 most mortgage loans.
Furthermore, credit scores were not developed specifically for use in connection
with mortgage loans, but for consumer loans in general. Therefore, credit scores
do not address particular mortgage loan characteristics that influence the
probability of repayment by the borrower. None of the depositor, the sponsor or
the originator makes any representations or warranties as to any borrower's
current credit score or the actual performance of any mortgage loan or that a
particular credit score should be relied upon as a basis for an expectation that
a borrower will repay its mortgage loan according to its terms.
The recording of the mortgages in the name of MERS may affect the yield on your
certificates
The mortgages or assignments of mortgage for some of the mortgage loans
have been recorded in the name of Mortgage Electronic Registration Systems,
Inc., or MERS, solely as nominee for the originator and its successors and
assigns, including the trust. Subsequent assignments of those mortgages are
registered electronically through the MERS system. However, if MERS discontinues
the MERS system and it becomes necessary to record an assignment of mortgage to
the trustee, any related expenses will be paid by the trust and will reduce the
amount available to make distributions on the certificates.
The recording of mortgages in the name of MERS is a relatively new
practice in the mortgage lending industry. Public recording officers and others
may have limited, if any, experience with lenders seeking to foreclose
mortgages, assignments of which are registered with MERS. Accordingly, delays
and additional costs in commencing, prosecuting and completing foreclosure
proceedings and conducting foreclosure sales of the mortgaged properties could
result. Those delays and the additional costs could in turn delay the
distribution of liquidation proceeds to certificateholders and increase the
amount of losses on the mortgage loans. In that regard, a Florida court recently
ruled that MERS lacked standing to pursue foreclosure proceedings on behalf of
the beneficial owners of several mortgage notes who were not named parties to
the proceedings.
There are risks in holding subordinated certificates
The protections afforded the senior certificates in this transaction
create risks for the subordinated certificates. Prior to any purchase of any
subordinated certificates, consider the following factors that may adversely
impact your yield:
o Because the subordinated certificates receive interest and principal
distributions after the senior certificates receive such distributions,
there is a greater likelihood that the subordinated certificates will not
receive the distributions to which they are entitled on any distribution
date.
o If the servicer determines not to advance a delinquent payment on a
mortgage loan because such amount is not recoverable from a mortgagor,
there may be a shortfall in distributions on the certificates which will
impact the subordinated certificates.
o The portion of the shortfalls in the amount of interest collections on
mortgage loans that are attributable to prepayments in full and are not
covered by the servicer and shortfalls in interest collections arising
from the timing of partial principal prepayments may result in a shortfall
in distributions on the certificates, which will disproportionately impact
the subordinated certificates.
o The subordinated certificates are not expected to receive principal
distributions until, at the earliest, November 2009 (unless the senior
certificates are reduced to zero prior to such date) or such later date as
provided in this free writing prospectus. As a result, the weighted
average lives of such certificates will be longer than would be the case
if distributions of principal were allocated among all of the certificates
at the same time. As a result of the longer weighted average lives of the
subordinated certificates, the holders of such certificates have a greater
risk of suffering losses on their investments.
o Because the sequential mezzanine certificates receive principal
distributions sequentially after the stepdown date, the weighted average
lives of the more subordinate sequential mezzanine certificates will be
longer than if these principal distributions were made to the sequential
mezzanine certificates in a pro rata fashion.
30
As a result of the longer weighted average lives of the more subordinate
sequential mezzanine certificates, the holders of such certificates have a
greater risk of suffering losses on their investments.
o Losses resulting from the liquidation of defaulted mortgage loans will
first reduce monthly excess cashflow and then reduce the level of
overcollateralization, if any, for the certificates. Realized losses on
the mortgage loans, to the extent they exceed the amount of excess
interest and overcollateralization following distributions of principal on
the related distribution date and any net swap payments received under the
interest rate swap agreement will be allocated to the subordinated
certificates in reverse order of payment priority. No principal or
interest will be distributable on the amount by which the certificate
principal balance of a class has been reduced by a realized loss allocated
to a subordinated certificate (except where a certificate principal
balance has been increased by a subsequent recovery). A loss allocation
results in a reduction in a certificate balance without a corresponding
distribution of cash to the holder. A lower certificate balance will
result in less interest accruing on the certificate.
o The earlier in the transaction that a loss on a mortgage loan occurs, the
greater the impact on yield.
See "Description of the Certificates" and "Yield, Prepayment and Maturity
Considerations" in this free writing prospectus for more detail.
Decrement tables are based upon assumptions and models
The decrement tables set forth in Appendix B have been prepared on the
basis of the modeling assumptions described under "Yield, Prepayment and
Maturity Considerations--Weighted Average Lives." There will likely be
discrepancies between the characteristics of the actual mortgage loans included
in each loan group and the characteristics of the assumed mortgage loans used in
preparing the decrement tables. Any such discrepancy may have an effect upon the
percentages of original certificate principal balances outstanding set forth in
the decrement tables (and the weighted average lives of the offered
certificates). In addition, to the extent that the mortgage loans that actually
are included in a loan group have characteristics that differ from those assumed
in preparing the decrement tables, the certificate principal balance of a class
of offered certificates could be reduced to zero earlier or later than indicated
by the decrement tables.
The rights of the NIMS Insurer could adversely affect the offered certificates
After the closing date, a separate entity may be established to issue net
interest margin securities secured by all or a portion of the Class CE and Class
P Certificates. A NIMS Insurer may issue a financial guaranty insurance policy
that guarantees payments on those securities. If the net interest margin
securities are so insured, the NIMS Insurer will have a number of rights under
the pooling and servicing agreement that could adversely affect
certificateholders. Pursuant to the pooling and servicing agreement, unless the
NIMS Insurer fails to make a required payment under the policy insuring the net
interest margin securities or the NIMS Insurer is the subject of a bankruptcy
proceeding, the NIMS Insurer will be entitled to exercise, among others, the
following rights of the holders of the offered certificates, without their
consent, and the holders of the offered certificates will be able to exercise
such rights only with the prior written consent of the NIMS Insurer. Rights of
the NIMS Insurer under the pooling and servicing agreement may include, but are
not limited to, the following:
o the right to direct the trustee to terminate the rights and obligations of
the servicer under the pooling and servicing agreement upon a default by
the servicer;
o the right to remove the trustee or any co-trustee pursuant to the pooling
and servicing agreement for failure of such party to perform its
obligations thereunder;
o the right to direct the trustee to make investigations and take actions
pursuant to the pooling and servicing agreement;
o the right to purchase all of the mortgage loans and REO properties in the
trust fund and thereby effect the early retirement of the certificates
under the circumstances set forth under "The Pooling and Servicing
Agreement--Optional Termination" in this free writing prospectus; and
31
o the right to purchase mortgage loans delinquent in payment 90 days or more
under the circumstances set forth under "The Pooling and Servicing
Agreement--Optional Purchase of Defaulted Mortgage Loans."
In addition, unless the NIMS Insurer fails to make a required payment
under the policy insuring the net interest margin securities or the NIMS Insurer
is the subject of a bankruptcy proceeding, the NIMS Insurer's consent will be
required before, among other things,
o the appointment of any co-trustee;
o any otherwise permissible waivers of prepayment charges or extensions of
due dates for payment granted by the servicer with respect to more than 5%
of the number of mortgage loans; or
o any amendment to the pooling and servicing agreement.
Investors in the offered certificates should note that:
o any insurance policy issued by the NIMS Insurer will not cover, and will
not benefit in any manner whatsoever the offered certificates;
o the rights granted to the NIMS Insurer are extensive;
o the interests of the NIMS Insurer may be inconsistent with, and adverse to
the interests of the holders of the offered certificates and the NIMS
Insurer has no obligation or duty to consider the interests of the offered
certificates in connection with the exercise or nonexercise of the NIMS
Insurer's rights; and
o the NIMS Insurer's exercise of its rights and consents may negatively
affect the offered certificates and the existence of the NIMS Insurer's
rights, whether or not exercised, may adversely affect the liquidity of
the offered certificates, relative to other asset-backed certificates
backed by comparable mortgage loans and with comparable payment priorities
and ratings.
United States military operations may increase risk of shortfalls in interest
As a result of military operations in Afghanistan and Iraq, the United
States has placed a substantial number of armed forces reservists and members of
the National Guard on active duty status. It is possible that the number of
reservists and members of the National Guard placed on active duty status may
remain at high levels for an extended time. To the extent that a member of the
military, or a member of the armed forces reserves or National Guard who is
called to active duty, is a mortgagor of a mortgage loan in the trust, the
interest rate limitation of the Servicemembers Civil Relief Act and any
comparable state law, will apply. 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
interest-bearing certificates, irrespective of the availability of excess cash
flow or other credit enhancement. None of the originator, the depositor, the
underwriter, the sponsor, the servicer or any other party has taken any action
to determine whether any of the mortgage loans would be affected by such
interest rate limitation. See "Description of the Certificates--Interest
Distributions" in this free writing prospectus and "Certain Legal Aspects of the
Mortgage Loans--Servicemembers Civil Relief Act" in the prospectus.
THE MORTGAGE POOL
The descriptions of the Mortgage Loans and the Mortgaged Properties below
and in Appendix A are based upon the expected characteristics of the Mortgage
Loans included in the Mortgage Pool as of the close of business on the Cut-off
Date. The Principal Balances of the Mortgage Loans shown have been adjusted for
the scheduled principal payments due on or before the Cut-off Date (each, a "Cut
off Date Principal Balance").
Prior to the Closing Date, Mortgage Loans may be removed from the loan
groups and other Mortgage Loans may be substituted for them. The Depositor
believes that the information set forth in this free writing
32
prospectus is representative of the characteristics of the loan groups as they
will be constituted on the Closing Date. Unless the context requires otherwise,
references below and in Appendix A to percentages of the Mortgage Loans in a
loan group are approximate percentages of the aggregate Principal Balance of the
Mortgage Loans in the loan group as of the Cut-off Date and references below to
percentages of all Mortgage Loans are approximate percentages of the aggregate
Principal Balance of the Mortgage Loans in all loan groups as of the Cut-off
Date.
General
The assets included in the Trust will consist primarily of a pool (the
"Mortgage Pool") of closed-end, fixed-rate and adjustable-rate sub-prime
mortgage loans (the "Mortgage Loans"). The "Principal Balance" of a Mortgage
Loan, as of any date, is equal to the principal balance of such Mortgage Loan as
of the related Cut-off Date, less the sum of (i) all collections and other
amounts credited against the principal balance of any such Mortgage Loan, (ii)
the principal portion of Advances, (iii) any Deficient Valuation and (iv) any
principal reduction resulting from a Servicer Modification. The "Pool Balance"
is equal to the aggregate of the Principal Balances of the Mortgage Loans in all
loan groups as of any date of determination.
The Mortgage Pool will consist of fixed-rate Mortgage-Loans (the
"Fixed-Rate Mortgage Loans") and adjustable-rate Mortgage Loans (the
"Adjustable-Rate Mortgage Loans"). All of the Mortgage Loans that are
Adjustable-Rate Mortgage Loans have an initial fixed mortgage interest rate for
two years, three years, five years or fifteen years.
The Mortgage Loans are secured by mortgages, deeds of trust or other
similar security instruments (each, a "Mortgage") which create a first lien on
one- to four-family residential properties consisting of one- to four-family
dwelling units and individual condominium units (each, a "Mortgaged Property").
Substantially all of the Mortgage Loans have scheduled Monthly Payments due on
the first day of the month (the day such Monthly Payments are due with respect
to each Mortgage Loan, a "Due Date"). Each Mortgage Loan accrues interest at a
per annum rate (the "Mortgage Interest Rate") specified in the related mortgage
note.
Certain of the Mortgage Loans will provide for interest only Monthly
Payments for the first 60 months of the term of such Mortgage Loans (each, an
"Interest Only Mortgage Loan"). See "Summary of Free Writing Prospectus --The
Mortgage Pool" for the percentages of the Mortgage Loans that are Interest Only
Mortgage Loans in each loan group and the Mortgage Pool. The Monthly Payments
for the Mortgage Loans that are Interest Only Mortgage Loans will include
accrued interest and principal on these Mortgage Loans beginning in the 61st
month of the term of these Mortgage Loans. As a result of this payment
structure, Monthly Payments beginning in the 61st month of the term of such
Mortgage Loans may be significantly larger than the first 60 Monthly Payments
required under the related mortgage notes.
Certain of the Mortgage Loans provide for payment by the mortgagor of a
prepayment charge in limited circumstances on certain prepayments. See "Summary
of Free Writing Prospectus --The Mortgage Pool" for the percentages of the
Mortgage Loans in each loan group and the Mortgage Pool that provide for the
payment of a prepayment charge. No such prepayment charge will be distributed to
the holders of the Offered Certificates.
The Mortgage Pool has been divided into three loan groups as described
under "Summary of Free Writing Prospectus --The Mortgage Pool."
All of the Adjustable-Rate Mortgage Loans provide for semi-annual
adjustment to the Mortgage Interest Rate thereon and for corresponding
adjustments to the Monthly Payment amount due thereon, in each case on each
adjustment date applicable thereto (each such date, an "Adjustment Date"). On
each Adjustment Date for each Adjustable-Rate Mortgage Loan, the Mortgage
Interest Rate thereon will be adjusted to equal the sum of Six-Month LIBOR (the
"Index") and a fixed percentage amount (the "Gross Margin"). The Mortgage
Interest Rate on each such Adjustable-Rate Mortgage Loan will not increase or
decrease by more than a percentage specified in the related mortgage note on the
first related Adjustment Date (the "Initial Periodic Rate Cap") and a percentage
on any Adjustment Date thereafter (the "Periodic Rate Cap"). Each Mortgage
Interest Rate on each Adjustable-Rate Mortgage Loan will not exceed a specified
maximum Mortgage Interest Rate over the life of such Mortgage Loan (the "Maximum
Mortgage Interest Rate") or be less than a specified minimum Mortgage Interest
Rate over the life of such Mortgage Loan (the "Minimum Mortgage Interest Rate").
33
Effective with the first Monthly Payment due on each Adjustable-Rate
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 Mortgage Interest Rate as so adjusted. Due to the application of the
Periodic Rate Caps and the Maximum Mortgage Interest Rates, the Mortgage
Interest Rate on each such Mortgage Loan, as adjusted on any related Adjustment
Date, may be less than the sum of the Index and the related Gross Margin. See
"--The Index" in this free writing prospectus.
None of the Adjustable-Rate Mortgage Loans have Mortgage Interest Rates
that may be converted to fixed Mortgage Interest Rates at the option of the
related mortgagor. None of the Mortgage Loans provide for negative amortization.
Certain of the Mortgage Loans will not fully amortize by their respective
maturity dates (each, a "Balloon Loan"). See "Summary of Free Writing Prospectus
- --The Mortgage Pool" for the percentages of the Mortgage Loans in each loan
group and the Mortgage Pool that are Balloon Loans. The Monthly Payment for each
Balloon Loan is based on an amortization schedule of 480 months, except for the
final payment (the "Balloon Payment") which is due and payable on 360th month
following origination of such Mortgage Loan, depending on the terms of the
related mortgage note. The amount of the Balloon Payment on each Balloon Loan is
substantially in excess of the amount of the scheduled Monthly Payment for such
Balloon Loan.
None of the Mortgage Loans were Delinquent as of the Cut-off Date or any
time since origination. A Mortgage Loan is "Delinquent" if the scheduled monthly
payment of principal and interest on such Mortgage Loan which is payable by the
related mortgagor under the related mortgage note (the "Monthly Payment") due on
a Due Date is not paid by the close of business on the next scheduled Due Date
for such Mortgage Loan. Thus, a Mortgage Loan for which the mortgagor failed to
make the Monthly Payment due on October 1, 2006 will be reported as Delinquent
on November 2, 2006 if the payment is not made by the close of business on
November 1, 2006.
The Servicer will be required to make servicing advances on Delinquent
Mortgage Loans and make advances of delinquent payments of principal and
interest on Delinquent Mortgage Loans, each to the extent such advances are
deemed recoverable, until the earlier of such time that the Trust acquires title
to the Mortgage Loan, the Mortgage Loan is paid in full by the mortgagor, until
the Mortgage Loan (or the related Mortgaged Property) is disposed of by the
Trust or until recovery of all Liquidation Proceeds thereon.
The "Loan-to-Value Ratio" of a Mortgage Loan generally means the ratio,
expressed as a percentage of (i) the principal amount of the Mortgage Loan at
origination over (ii) the Value of the related Mortgaged Property. "Value" means
with respect to any Mortgaged Property, the lesser of: (i) an amount determined
by an appraisal done at origination of the Mortgage Loan; provided, however, the
amount may be reduced to reflect the results of a review of such appraisal in
accordance with the Originator's underwriting guidelines and (ii) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the Mortgage Loan; provided, however, that in the case of a refinanced
Mortgage Loan, the value of the Mortgaged Property is based solely upon clause
(i) above.
"Credit Scores" are statistical credit scores obtained by many mortgage
lenders in connection with the loan application to help assess a borrower's
credit-worthiness. Credit Scores are generated by models developed by a third
party and are made available to lenders through three national credit bureaus.
The models were derived by analyzing data on consumers in order to establish
patterns which are believed to be indicative of the borrower's probability of
default. The Credit Score is based on a borrower's historical credit data,
including, among other things, payment history, delinquencies on accounts,
levels of outstanding indebtedness, length of credit history, types of credit,
and bankruptcy experience. Credit Scores generally range from approximately 300
to approximately 850, with higher scores indicating an individual with a more
favorable credit history compared to an individual with a lower score. The
Credit Scores set forth in the table in Appendix A were obtained at either the
time of origination of the Mortgage Loan or more recently. The Depositor makes
no representations or warranties as to the actual performance of any Mortgage
Loan or that a particular Credit Score should be relied upon as a basis for an
expectation that the borrower will repay the Mortgage Loan according to its
terms.
34
The Depositor will purchase the Mortgage Loans from the Sponsor pursuant
to the Mortgage Loan Purchase Agreement (the "Mortgage Loan Purchase
Agreement"), dated as of the Cut-off Date, between the Sponsor and the
Depositor. Pursuant to the Pooling and Servicing Agreement, the Depositor will
cause the Mortgage Loans to be assigned to the Trustee for the benefit of the
Certificateholders. See "The Pooling and Servicing Agreement" in this free
writing prospectus.
The Mortgage Loans were selected by the Sponsor, with advice from Banc of
America Securities LLC (the "Underwriter") as to the characteristics of the
Mortgage Loans in each loan group that will optimize marketability of the
Certificates, from the mortgage loans purchased from the Originator under the
Option One Mortgage Loan Purchase Agreement, and were chosen to meet the
requirements imposed by the rating agencies to achieve the credit support
percentages listed under "Summary of Free Writing Prospectus --Credit Support."
Based on the representations made by Option One, the Depositor believes
that all of the Mortgage Loans in the Mortgage Pool were originated by Option
One and one or more of its affiliates generally in accordance with the
underwriting standards described under "Underwriting Standards" in this free
writing prospectus.
The Originator made certain representations and warranties regarding the
Mortgage Loans, as of September 27, 2006, in the Flow Sale and Servicing
Agreement, dated as of July 28, 2006 (the "Option One Mortgage Loan Purchase
Agreement"), pursuant to which Option One and one or more of its affiliates sold
such Mortgage Loans to the Sponsor. These representations and warranties will be
assigned by the Sponsor to the Depositor and by the Depositor to the Trustee,
for the benefit of the Certificateholders. The Originator, subject to certain
limitations, will be obligated under the Option One Mortgage Loan Purchase
Agreement to repurchase or substitute a similar mortgage loan for any Mortgage
Loan as to which there exists deficient documentation or an uncured breach of
any such representation or warranty, if such breach of any such representation
or warranty materially and adversely affects the Certificateholders' interests
in such Mortgage Loan.
Pursuant to the terms of the Mortgage Loan Purchase Agreement, the Sponsor
will make to the Depositor (and the Depositor will assign to the Trustee for the
benefit of Certificateholders) only certain limited representations and
warranties as of the Closing Date with respect to the Mortgage Loans, generally
intended to address the accuracy of the Mortgage Loan Schedule and the payment
and delinquency status of each Mortgage Loan. In the event of a breach of any
such representation or warranty that does not constitute a breach of any
representation or warranty made by the Originator as described above, the
Sponsor will be obligated in the same manner as the Originator to cure such
breach or purchase or substitute the affected Mortgage Loans, as described
above.
To the extent that any fact, condition or event with respect to a Mortgage
Loan constitutes a breach of both a representation and warranty of the
Originator under the Option One Mortgage Loan Purchase Agreement with the
Sponsor and a breach of a representation and warranty of the Sponsor under the
Mortgage Loan Purchase Agreement, then the only right or remedy of the Trustee
or any Certificateholder will be the Trustee's right to enforce the obligations
of the Originator under the Option One Mortgage Loan Purchase Agreement, and
there will be no remedy against the Sponsor for such breaches (other than the
Sponsor's obligation to reimburse the Trust, if the Originator fails to do so,
for any damages or costs incurred by the Trust as a result of a breach of the
representation as to compliance with federal, state or local laws with respect
to the origination of the Mortgage Loans).
The Sponsor is selling the Mortgage Loans without recourse and will have
no obligation with respect to the Certificates in its capacity as seller other
than the cure, repurchase or substitution obligations with respect to its
limited representations and warranties described above and its reimbursement
obligation described under "The Pooling and Servicing Agreement--Assignment of
the Mortgage Loans" in this free writing prospectus.
See "Description of the Agreements--Material Terms of the Pooling and
Servicing Agreements and Underlying Servicing Agreements--Representations and
Warranties; Repurchases" in the prospectus.
The Index
The Index for all the Adjustable Rate Mortgage Loans is the average of
interbank offered rates for six month U.S. dollar deposits in the London market
calculated as provided in the related note ("Six Month LIBOR").
35
If Six Month LIBOR becomes unpublished or is otherwise unavailable, the Servicer
will select an alternative index which is based upon comparable information.
Terms of the Mortgage Loans
The Mortgage Loans accrue interest on an actuarial basis over the original
terms thereof, calculated based on a 360-day year of twelve 30-day months. When
a full prepayment of principal is made on a Mortgage Loan during a month, the
mortgagor is charged interest only on the days of the month actually elapsed up
to the date of such prepayment, at a daily interest rate that is applied to the
principal amount of the loan so prepaid. When a partial prepayment of principal
is made on a Mortgage Loan during a month, the mortgagor generally is not
charged interest on the amount of the partial prepayment during the month in
which such prepayment is made.
OPTION ONE MORTGAGE CORPORATION
The information set forth in the following paragraphs has been provided by
Option One Mortgage Corporation ("Option One").
General
Option One, a California corporation headquartered in Irvine, California,
originated or acquired all of the Mortgage Loans.
Option One was incorporated in 1992, commenced receiving applications for
mortgage loans under its regular lending program in February 1993 and began
funding such mortgage loans indirectly in the same month. The principal business
of Option One is the origination, sale and servicing of non-prime mortgage
loans. Option One is a wholly-owned subsidiary of Block Financial, which is in
turn a wholly-owned subsidiary of H&R Block, Inc. ("H&R Block"). Borrowers who
qualify under Option One's underwriting guidelines generally have equity in
their property and repayment ability but may have a record of major derogatory
credit items such as outstanding judgments or prior bankruptcies. Option One
originates mortgage loans based on its underwriting guidelines and does not
determine whether such mortgage loans would be acceptable for purchase by Fannie
Mae or Freddie Mac.
36
The following table details Option One's consolidated originations for the
fiscal years ended April 30, 2004, 2005 and 2006 and the three months ended July
31, 2006:
Years Ended April 30, Three Months Ended July 31,
----------------------------------------------------------------------- ---------------------------------
2004 2005 2006 2006
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
----------------------------------------------------------------------------------------------------------
Total $23,256,013 $31,001,724 $40,779,763 $8,051,945
=========== =========== =========== ==========
Information regarding Option One's non-prime originations is as follows:
Years Ended April 30, Three Months Ended July 31,
--------------------------------------------------------- --------------------------------
2004 2005 2006 2006
-------------------------------------------------------------------------------------------
Mortgage Loan type: (Dollars in Thousands)
-------------------------------------------------------------------------------------------
2-year ARM 63.4% 61.6% 43.8% 39.9%
3-year ARM 5.2% 4.0% 1.9% 3.1%
Fixed 1st 28.7% 17.7% 12.7% 9.1%
Fixed 2nd 1.6% 3.8% 4.9% 1.0%
Interest only 0.7% 12.6% 21.1% 11.7%
40-Year 0.0% 0.0% 13.4% 33.0%
Other 0.4% 0.3% 2.2% 2.1%
Loan purpose:
Cash-out refinance 67.1% 63.5% 58.8% 57.0%
Purchase 26.0% 30.8% 35.0% 36.6%
Rate or term refinance 6.9% 5.7% 6.3% 6.4%
Loan characteristics:
Average loan size $151 $160 $217 $205
Weighted-average loan-to-value 78.1% 78.9% 80.6% 82.5%
Weighted-average FICO score 608 614 622 614
UNDERWRITING STANDARDS
The Mortgage Loans originated by Option One will have been originated
generally in accordance with Option One's Non-Prime Guidelines (the "Option One
Underwriting Guidelines"). The Option One Underwriting Guidelines are primarily
intended to assess the value of the mortgaged property, to evaluate the adequacy
of such property as collateral for the mortgage loan and to assess the
applicant's ability to repay the mortgage loan. The Mortgage Loans were also
generally underwritten with a view toward resale in the secondary market. The
Mortgage Loans generally bear higher rates of interest than mortgage loans that
are originated in accordance with customary Fannie Mae and Freddie Mac
standards.
On a case-by-case basis, exceptions to the Option One Underwriting
Guidelines are made where compensating factors exist. Except as specifically
stated herein, the Option One Underwriting Guidelines are the same for first
lien mortgage loans and second lien mortgage loans.
Each mortgage loan applicant completes an application that includes
information with respect to the applicant's liabilities, income, credit history,
employment history and personal information. The Option One Underwriting
Guidelines require a credit report and, if available, a credit score on each
applicant from a credit-reporting agency. 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,
bankruptcies, repossessions or judgments. A credit score is a statistical
ranking of likely future credit performance developed by Fair, Isaac and Co.,
Inc. and made available through the three national credit data
repositories--Equifax, TransUnion and Experian.
Mortgaged properties that are to secure mortgage loans generally are
appraised by qualified independent appraisers. Such appraisers inspect and
appraise the subject property and verify that such property is in acceptable
condition. Following each appraisal, the appraiser prepares a report which
includes a market value analysis based on recent sales of comparable homes in
the area and, when deemed appropriate, replacement cost analysis based on the
current cost of constructing a similar home. All appraisals are required to
conform to the Uniform Standards of
37
Professional Appraisal Practice adopted by the Appraisal Standards Board of the
Appraisal Foundation and are generally on forms acceptable to Fannie Mae and
Freddie Mac.
The Option One Underwriting Guidelines require that mortgage loans be
underwritten in a standardized procedure which complies with applicable federal
and state laws and regulations and require Option One's underwriters to be
satisfied that the value of the property being financed, as indicated by an
appraisal supports the loan balance. The maximum loan amount for mortgage loans
originated under the origination programs varies by state and may be originated
up to $1,400,000. Option One recognizes that an appraised value is an opinion
and thus, allows for variances to the appraisal based on a review of such
appraisal, the loan-to-value ratio ("LTV") and other risk factors. The maximum
variance between the appraisal and a review of the appraisal is limited to (i)
10% for LTVs that are less than or equal to 85%, (ii) 5% for LTVs between 85.01%
and 95%, and (iii) 3% for LTVs over 95%. References to LTV's in this section are
based on loan balance (including the principal balance of the senior lien when
referring to a second lien mortgage loan) relative to (a) in the case of a
purchase money mortgage loan, the lesser of the appraised value or the sales
price of the related mortgaged property and (b) in the case of a refinance
mortgage loan, the appraised value. There can be no assurance that the value of
a mortgaged property estimated in any appraisal or review is equal to the actual
value of such mortgaged property at the time of such appraisal or review.
Furthermore, there can be no assurance that the actual value of a mortgaged
property has not declined subsequent to the time of such appraisal or review.
Option One Underwriting Guidelines require a reasonable determination of
an applicant's ability to repay the loan. Such determination is based on a
review of the applicant's source of income, calculation of a debt
service-to-income ratio based on the amount of income from sources indicated on
the loan application or similar documentation, a review of the applicant's
credit history and the type and intended use of the property being financed.
Except with respect to the No Documentation program that is described
below, the Option One Underwriting Guidelines require verification or evaluation
of the income of each applicant and, for purchase transactions, verification of
the seasoning or source of funds (in excess of $2,500) required for closing. The
income verification required under Option One's various mortgage loan programs
is as follows:
Full documentation, the highest level of income documentation, generally
requires applicants to submit one written form of verification from the employer
of stable income for at least 12 months. A wage-earner may document income by a
current pay stub reflecting year to date income and applicant's most recent W-2
or IRS Form 1040. A self-employed applicant may document income with either the
most recent federal tax returns or bank statements.
Lite Documentation is for applicants who otherwise cannot meet the
requirements of the full documentation program and requires applicants to submit
3 to 6 months' bank statements or a pay stub as verification of income.
Stated Income Documentation applicants are qualified based upon monthly
income as stated on the mortgage loan application.
No Documentation, which is only available under the AA+ credit grade, does
not require any statement or proof of income, employment or assets. The credit
decision is based on the borrower's credit score and credit trade lines.
For wage earning borrowers, all documentation types require a verbal
verification of employment to be conducted within 48 hours prior to funding.
Latitude Advantage Program. The majority of Option One's loan originations
are underwritten using its "Latitude Advantage" program guidelines. Under the
Latitude Advantage program, the maximum LTV is based on an applicant's credit
score, risk grade, income documentation and use and type of property. Maximum
LTV for full documentation loans are generally higher than the maximum LTV for
corresponding Lite Documentation or Stated Income loans. The maximum LTV for
loans secured by owner-occupied properties are generally higher than for loans
secured by properties that are not owner-occupied. The credit report of the
applicant whose credit score is being used for qualifying purposes must reflect
three or more tradelines. A minimum credit score of 500 is required,
38
although a credit score greater than 580 is often required to qualify for the
maximum LTV (100%) under the program. The debt-to-income ratio is generally less
than 55%. Latitude Advantage guidelines generally require bankruptcies be
discharged, dismissed or paid off at or prior to funding. Collections and
judgments which are less than 12 months old and greater than $5,000 must be paid
down or paid off at or prior to closing. Collections and judgments which are 12
or more months old are disregarded. Under the Latitude Advantage program, Option
One has established six risk grades, "AA+" to "CC", based on the applicant's
previous mortgage payment history. Under the AA+ risk category, the applicant
must have no 30-day late mortgage payments within the last 12 months. Under the
AA risk category, the applicant must have no more than one 30 day late mortgage
payment within the past 12 months or no prior mortgage payment history. Under
the A risk grade, the applicant must have no more than two 30-day late mortgage
payments within the past 12 months. Under the B risk grade, the applicant must
have no more than four 30-day late mortgage payments or two 30-day and one
60-day late mortgage payment within the past 12 months. Under the C risk grade,
the applicant must have no more than six 30-day late mortgage payments, one
60-day late mortgage payment and one 90-day late mortgage payment within the
past 12 months, or six 30-day late mortgage payments, two 60-day late mortgage
payments and no 90-day late payments within the last 12 months. CC risk mortgage
delinquencies are considered on a case-by-case basis.
Within the Latitude Advantage program, the Score Advantage feature allows
the use of the co-applicant's credit score for qualifying purposes; provided,
however, to the extent the co-applicant's credit score exceeds the primary
applicant's credit score by more than 100 points, then the qualifying credit
score will be the primary applicant's credit score plus 100 points. Score
Advantage mortgage loans must be owner occupied, full documentation, and have a
maximum LTV of 95%. Score Advantage requires the co-applicant's contribution to
qualifying income to be equal to or greater than 30% of the total qualifying
income. The maximum debt-to-income ratio for this program is 5% less than the
maximum debt-to-income ratio allowed under the corresponding non-Score Advantage
program.
Legacy Program. In addition to its credit score based origination program,
Latitude Advantage, Option One offers first lien mortgage loans under the
"Legacy" program. Under the Legacy program, LTV limitations are determined based
on the applicant's risk grade, income documentation and use and type of
property. In general, the maximum LTV increases with credit quality and are
typically higher for full documentation loans and owner-occupied properties. The
maximum debt-to-income ratio is generally less than 55% for AA, A, and B risk
grades, and less than 60% for C and CC risk grades. If a credit score is
available, the minimum credit score required is 500.
Option One has established five credit grades under the Legacy program,
"AA" to "CC", and considers an applicant's prior mortgage payment history, if
applicable, consumer credit payment history, bankruptcy and foreclosure history,
and debt-to-income ratios when determining a loan's risk grade. The Legacy risk
grades correspond directly with the Latitude Advantage risk grades with respect
to previous mortgage payment history requirements. In addition, under the Legacy
program no foreclosures may have occurred during the preceding three years for
AA credit grade, two years for A grade and B grade with a LTV greater than
80%,18 months for B grade with a LTV less than or equal to 80%, or one year for
C grade applicants. Chapter 7 and Chapter 11 bankruptcies may have occurred
during the preceding two years for AA and A credit grades and B grade with a LTV
greater than 80%, 18 months for B grade with a LTV less than or equal to 80%,
and one year for C grade. CC risk bankruptcies are permitted if paid in full,
discharged or dismissed at or prior to closing. If an applicant's Chapter 13
bankruptcy has been discharged and the applicant has a credit history otherwise
complying with the credit parameters of a credit grade and the mortgage loan LTV
is equal to or less than 80%, then the applicant may qualify for such credit
grade.
Exceptions. As described above, the foregoing risk categories and criteria
are underwriting guidelines only. On a case-by-case basis, it may be determined
that an applicant warrants a debt-to-income ratio exception, a pricing
exception, a loan-to-value exception, a credit score exception or an exception
from certain requirements of a particular risk category. An upgrade will be
granted if the application reflects certain compensating factors, among others:
a relatively lower LTV; a maximum of one 30-day late payment on all mortgage
loans during the last 12 months; stable employment; a fixed source of income
that is greater than 50% of all income; ownership of current residence of four
or more years; or cash reserves equal to or in excess of three monthly payments
of principal, interest, taxes and insurance. Upgrade points may also be earned
if the applicant places a down payment through escrow of at least 10% of the
purchase price of the mortgaged property, or if the new loan reduces the
applicant's monthly aggregate mortgage payment by 20% or more. Accordingly,
certain mortgagors may qualify for a more
39
favorable risk category or for a higher maximum LTV that, in the absence of such
compensating factors, would satisfy only the criteria of a less favorable risk
category or maximum LTV.
THE SERVICER
Servicing Background and Portfolio
Option One began servicing mortgage loans in February 1993, originally
operating as a wholly owned subsidiary of Plaza Home Mortgage Corp. The company
was acquired by Fleet Financial Group and began full servicing operations in May
1995. Block Financial subsequently purchased Option One in June 1997.
Option One services primarily sub-prime first-lien residential mortgage
loans. Over 70% of the mortgage loans serviced by Option One were originated by
Option One and over 65% of the mortgage loans serviced by Option One are in
private residential mortgage asset-backed securities.
Option One has experienced substantial growth in its servicing portfolio
in the past few years, both as a result of its growth in origination and
third-party servicing. The following table summarizes Option One's servicing
portfolio by origin at April 30, 2004, 2005 and 2006 and at July 31, 2006:
At April 30, 2004 At April 30, 2005 At April 30, 2006 At July 31, 2006
--------------------- --------------------- ---------------------- --------------------
Portfolio Balance (Dollars in Thousands)
----------------------------------------------------------------------------------------------
Option One Serviced $36,485,328 $47,554,510 $62,910,568 $64,272,445
Sub-Serviced $8,782,775 $20,439,954 $10,471,509 $10,248,022
--------------------- --------------------- ---------------------- --------------------
Total Portfolio $45,268,103 $67,994,464 $73,382,077 $74,520,467
===================== ===================== ====================== ====================
Loan Count
----------------------------------------------------------------------------------------------
Option One Serviced 274,045 332,652 388,976 388,912
Sub-Serviced 50,319 102,638 53,005 50,795
--------------------- --------------------- ---------------------- --------------------
Total Portfolio 324,364 435,290 441,981 439,707
===================== ===================== ====================== ====================
Option One Loan Servicing Portfolio--Advances
Option One has complied with and fulfilled its obligation to advance
principal and interest for mortgage loans serviced by Option One in connection
with securitizations serviced by Option One for the past three fiscal years
where its advancing obligations are substantially identical to those obligations
for this transaction.
Business Strategy and Organizational Structure
Option One's business strategy includes incremental growth of its
servicing portfolio through origination volume, leveraging and expanding
selective third-party servicing strategic partnerships for both interim and
long-term sub-servicing.
Option One has a scalable technology platform and expansion capacity to
support its business strategy. Option One's loan administration functions are
performed in U.S. servicing sites in Irvine, California and Jacksonville,
Florida, as well as offshore outsource provider's sites. Option One is one of a
number of servicers who outsource certain loan administration functions to
Equinox (based in Gurgaon, Noida and Bangalore, India), iGATE (based in Delhi
and Bangalore, India), and Hispanic Teleservices Corp. (based in Guadalajara,
Mexico). In addition Option One outsources certain loan administrative functions
to its wholly owned subsidiary, Option One Mortgage Corporation India Private
Limited (based in Pune, India). The two U.S. offices operate in parallel,
handling many of the same processes for loans across the entire portfolio. The
use of an offshore outsource provider has increased Option One's ability to
perform customer service, welcome calls, new loan audits, early stage
collections, and other loan administration functions. By allocating staff to
multiple sites, Option One has the ability to extend its service hours and
improve customer satisfaction.
Option One's organizational structure is aligned to best serve its
customers, maximize loan performance and minimize risk exposure. Management
continually refines and improves its technology to enhance automated workflow
processes and boost productivity throughout the operation. Option One utilizes
the Fidelity Mortgage
40
Servicing Package (MSP) as its main servicing system, along with a number of
ancillary vendor and proprietary systems. Option One has also developed its own
data warehouse and REO and loss mitigation management system.
In order to improve servicing efficiency and effectiveness, Option One
outsources certain servicing tasks to a variety of third-party vendors. Such
servicing tasks may include: property tax processing and tracking, hazard
insurance tracking and related forced placed insurance coverage tasks, certain
field services, foreclosure, bankruptcy and loss mitigation and real estate
owned related tasks, lien release services and customer service functions. Three
material components of Option One's outsourcing model include redundancy,
oversight and audit. In some instances, more than one outsource vendor is used
to perform the same function on different segments of the servicing portfolio
which encourages competitive pricing and performance and provides additional
back-up capabilities. Option One's outsource vendor agreements provide that each
vendor strictly comply with Option One's guidelines, policies and procedures and
that any significant or material decisions are not made by the outsource vendor
but are elevated to Option One associates. Option One maintains quality control
and review processes to assure that the outsource vendors are performing their
functions in accordance with investor requirements and are in compliance with
applicable federal and state law. Option One also retains the right to perform
audits of outsource vendor's operations at Option One's sole discretion.
Option One's mortgage loan document custodial responsibilities are
performed by an independent custodian, or if applicable, a trustee in accordance
with the related servicing agreement.
Default Management
Option One defines and measures delinquencies in accordance with
applicable investor guidelines and agreements. The company employs a proactive
approach to resolving delinquencies with an emphasis on expedient timeline
management. Option One pursues a dual track loss mitigation and foreclosure
policy. Initial contact is based on the borrower's previous payment patterns in
tandem with the application of Freddie Mac's EarlyIndicator (EI) scoring model,
which seeks to identify those accounts posing a greater risk of default.
Collectors work extensive evening and weekend shifts to effectively manage the
nationwide portfolio and are trained to identify loss mitigation opportunities
and solicit workout opportunities during the collection process. Workout
specialists maintain contact with borrowers while an account is in foreclosure
in an attempt to arrange an alternate resolution to the delinquency and mitigate
future losses. Option One's borrower assistance department offers borrowers
alternatives, all within specific investor guidelines, to foreclosure that may
include reinstatement, repayment and forbearance plans, modifications,
short-sales, and deed in lieu of foreclosure. A loan will remain in the borrower
assistance area until a resolution has been reached or until a foreclosure has
been completed. Option One's proprietary system, DARES, is a real estate and
loss mitigation web-based database that provides the borrower assistance team
with an automated decision tree and gain/loss analysis, centralization of the
repayment plan process, efficient autodialer utilization by outbound
solicitation, and web-based applications designed to provide customers with
optimal contact avenues. Through DARES, loss mitigation specialists complete an
on-line rules-based net present value analysis form, which documents the
presumed loss exposure on the property and compares it to different
alternatives. DARES is also used for monitoring, tracking, maintaining and
communicating all REO department needs. When properties become REO, Option One
obtains property valuations and analyzes each property individually to determine
what sales decisions will result in the highest net return while limiting the
marketing time. Option One's REO assets are marketed and listed with local real
estate agents and published on local multiple listing services. Option One uses
the internet for additional listing exposure.
The following tables set forth, at or for the years ended December 31,
2003, 2004 and 2005, and at or for the six months ended June 30, 2006, certain
information relating to the delinquency experience (including foreclosures) of
one- to four-family residential mortgage loans included in Option One's entire
servicing portfolio (which portfolio includes mortgage loans originated under
the Option One Guidelines and mortgage loans that are subserviced for others) at
the end of the indicated periods. The indicated periods of delinquency are based
on the number of days past due on a contractual basis (based on the OTS method).
No mortgage loan is considered delinquent for these purposes until it has not
been paid by the next scheduled due date for such mortgage loan.
41
Delinquencies and Foreclosures
(Dollars in Thousands)
At December 31, 2003 At December 31, 2004
------------------------------------------------------- --------------------------------------------------
Percent Percent
By No. By Dollar by No. of Percent by By No. of By Dollar by No. of Percent by
of Loans Amount Loans Dollar Amount Loans Amount Loans Dollar Amount
------------ -------------- ---------- -------------- ---------- ------------- --------- -------------
Total Portfolio 301,778 $41,364,855 N/A N/A 386,770 $59,156,057 N/A N/A
Period of Delinquency
30-59 days 5,207 $604,945 1.73% 1.46% 6,495 $819,245 1.68% 1.38%
60-89 days 2,564 $293,412 0.85% 0.71% 2,989 $359,917 0.77% 0.61%
90 days or more 15,387 $1,597,177 5.10% 3.86% 15,940 $1,722,996 4.12% 2.91%
------------ -------------- ---------- -------------- ---------- ------------- --------- -------------
Total Delinquent Loans 23,158 $2,495,534 7.68% 6.03% 25,424 $2,902,158 6.57% 4.91%
Loans in Foreclosure(1) 10,764 $1,161,361 3.57% 2.81% 9,361 $1,044,624 2.42% 1.77%
At December 31, 2005 At June 30, 2006
------------------------------------------------------- --------------------------------------------------
Percent Percent
By No. By Dollar by No. of Percent by By No. of By Dollar by No. of Percent by
of Loans Amount Loans Dollar Amount Loans Amount Loans Dollar Amount
------------ -------------- ---------- -------------- ---------- ------------- --------- -------------
Total Portfolio 479,216 $79,494,367 N/A N/A 441,332 $74,383,282 N/A N/A
Period of Delinquency
30-59 days 10,875 $1,537,798 2.27% 1.93% 10,780 $1,610,826 2.44% 2.17%
60-89 days 5,103 $679,858 1.06% 0.86% 5,734 $828,221 1.30% 1.11%
90 days or more 22,544 $1,838,816 4.70% 2.31% 26,523 $621,678 6.01% 0.84%
------------ -------------- ---------- -------------- ---------- ------------- --------- -------------
Total Delinquent Loans 38,522 $4,056,472 8.04% 5.10% 43,037 $3,060,725 9.75% 4.11%
Loans in Foreclosure(1) 9,916 $1,157,550 2.07% 1.46% 15,400 $2,139,832 3.49% 2.88%
- -----------
(1) Loans in foreclosure are also included under the heading "Total Delinquent
Loans."
Real Estate Owned
(Dollars in Thousands)
At December 31, 2003 At December 31, 2004 At December 31, 2005 At June 30, 2006
-------------------------- --------------------------- -------------------------- --------------------------
By No. of By Dollar By No. of By Dollar By No. of By Dollar By No. of By Dollar
Loans Amount Loans Amount Loans Amount Loans Amount
------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total Portfolio 301,778 $41,364,855 386,770 $59,156,057 479,216 $79,494,367 441,332 $74,383,282
Foreclosed Loans(1) 3,361 $293,629 2,536 $225,362 3,382 $316,665 3,704 $375,946
Foreclosure Ratio(2) 1.11% 0.71% 0.66% 0.38% 0.71% 0.40% 0.84% 0.51%
- -----------
(1) For the purpose of these tables, Foreclosed Loans means the principal
balance of mortgage loans secured by mortgaged properties the title to which has
been acquired by Option One, by investors or by an insurer following foreclosure
or delivery of a deed in lieu of foreclosure.
(2) The Foreclosure Ratio is equal to the aggregate principal balance or number
of Foreclosed Loans divided by the aggregate principal balance or number, as
applicable, of mortgage loans in the Total Portfolio at the end of the indicated
period.
42
Loan Loss Experience on Option One's Servicing Portfolio of Mortgage Loans
(Dollars in Thousands)
For the Year Ended December 31,
---------------------------------------------
For the
Six Months Ended
2003 2004 2005 June 30, 2006
---------- ---------- ---------- ------------------
Net Losses(1)(2) $238,634 $239,008 $172,102 $146,096
- ----------
(1) "Net Losses" means "Gross Losses" minus "Recoveries." "Gross Losses" are
actual losses incurred on liquidated properties for each respective period.
Losses are calculated after repayment of all principal, foreclosure costs,
servicing fees and accrued interest to the date of liquidation. "Recoveries" are
recoveries from liquidation proceeds, deficiency judgments and MI proceeds.
(2) "Net Losses" are computed on a loan-by-loan basis and are reported with
respect to the period in which the loan is liquidated. If additional costs are
incurred or recoveries are received after the end of the period, the amounts are
adjusted with respect to the period in which the related loan was liquidated.
Accordingly, the Net Losses reported in the table may change in future periods.
The information in this table reflects loan liquidations through June 2006 and
claims, refunds or the collection of MI proceeds related to such liquidations
through August 2006.
It is unlikely that the delinquency experience of the Mortgage Loans will
correspond to the delinquency experience of Option One's mortgage portfolio set
forth in the foregoing tables. The statistics shown above represent the
delinquency experience for Option One's mortgage servicing portfolio only for
the periods presented, whereas the aggregate delinquency experience on the
Mortgage Loans will depend on the results obtained over the life of the Mortgage
Pool. In particular, investors should note that newly originated mortgage loans
will not be added to the Mortgage Pool, and the Mortgage 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 such statistics
above are compiled. Accordingly, the actual loss and delinquency percentages
with respect to the Mortgage Pool are likely to be substantially higher than
those indicated in the tables above. In addition, 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 Option One. Furthermore, adverse economic conditions may affect
the timely payment by mortgagors of scheduled payments of principal and interest
on such Mortgage Loans and, accordingly, the actual rates of delinquencies and
foreclosures with respect to the Mortgage Pool.
Training, Internal Controls and Compliance
Option One has a training program established for its servicing
associates, offering a wide range of core job specific and non-job-specific
training (corporate, soft skills, and mortgage fundamentals). Training
curriculums are tailored for both new and seasoned associates. Seasoned
employees receive job-specific training annually. The training program includes
new hire orientation, process improvement methodology, computer-based training,
system usage techniques, leadership development, and soft skills, all conducted
by dedicated business unit trainers. The training is structured to ensure that
new representatives are sufficiently knowledgeable of the subject matter and
applicable regulations. Training can take the form of classroom instruction, a
simulated work environment exercise, and side-by-side monitoring and mentoring.
Option One also has ongoing leadership development, mentoring programs, and
policy and procedure manuals citing applicable statutes that are widely
available to employees.
Option One has controls in place which are intended to protect the company
and its investors against risk of loss. An internal audit program is utilized to
evaluate the company's internal controls and safeguard against risk of loss due
to noncompliance with regulatory, investor, company, and prudent servicing
practices. In addition to oversight from the audit function, Option One also has
dedicated compliance and legal teams for servicing-related issues, regulations,
and laws. A quality assurance team performs call monitoring and helps to ensure
Federal Debt Collections Practice Act (FDCPA) and Real Estate Settlement
Procedures Act (RESPA) compliance. A quality control team benchmarks and
measures adherence to best practices, identifies risk areas in servicing
operations, centralizes communication for regulatory, investor, and industry
updates, and ensures that associates are being properly trained on topics
related to best practices and servicing risk. Risk management policies in place
that assist in ensuring prompt, accurate reporting to its investor base include
automated reporting and remitting processes, segregation of duties among
reporting, remitting, and reconciling tasks, web portal access for investors to
view and download securitization data, online access to bank statements, and an
account liquidation database to more closely
43
track historical losses on the portfolio and assist in trend analysis. Option
One uses its own proprietary lock-box, which provides increased cash management
controls resulting from direct oversight over the payment posting process.
Option One maintains separate bank accounts for each investor relationship in
accordance with the related servicing agreement requirements.
Option One is not aware and has not received notice that any default,
early amortization or other performance-triggered event has occurred as to any
other securitization due to any servicing act or servicing failure to act. There
have been no previous disclosures of material noncompliance by Option One with
servicing criteria relating to any other portfolio serviced by Option One.
Litigation Concerning Option One Mortgage Corporation
In July 2004, Option One was named as defendant and served with a class
action complaint filed by Larry and Brandi Freitag, as plaintiffs, in the Third
Judicial Circuit Court in Madison County, Illinois. The complaint alleges breach
of contract, or in the alternative unjust enrichment, and violation of the
Illinois Consumer Fraud and Deceptive Business Practices Act. Specifically, the
plaintiffs allege that Option One improperly retained an extra day of per diem
interest on residential mortgage loans by charging per diem interest up to and
including the date of payoff. The class is defined as all persons in the United
States who paid interest on or after the day of payoff and who did not receive a
refund from Option One of the interest charged on or after the day of payoff.
This action is one of several actions filed earlier against other lenders by the
same attorneys on a similar basis in the same court. In one such action, the
court granted the defendant's motion to dismiss the plaintiff's claims of
defendant's violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act. Plaintiffs have agreed to settle their individual claims;
plaintiffs' counsel has a motion pending to continue prosecution of the class
action. Plaintiff's counsel filed a motion to substitute Larry and Pamela Smith
as plaintiffs, which was granted. Option One filed a motion to compel
arbitration. In a similar action before the same judge in the Third Judicial
Circuit Court in Madison County, Illinois, the Court ruled in favor of the
defendants on the underlying per diem interest claim.
On January 31, 2006, the Circuit Court of Cook County, Illinois County
Department, Chancery Division, certified a nationwide class action against
Option One on a complaint brought by Erin and Earl Austria, in which the
Austrias allege that Option One impermissibly assessed them a reconveyance fee
and authorized the assessment of a title indemnity fee on certain mortgage loans
that have been paid-in-full. The Court has granted Option One's motion for an
interlocutory appeal of the order of class certification.
On February 28, 2006, Option One was named as a defendant and served with
a class action complaint filed by Jeffrey Wright, et al., as plaintiffs, in the
United States District Court for the Central District of California, Southern
Division. The complaint alleges that Option One's affiliate H&R Block Mortgage
Corporation failed to pay overtime wages to its loan officers in accordance with
the Fair Labor Standards Act and that such alleged failure constitutes an unfair
business practice under California's Business and Professions Code. Option One
is named as a defendant under the theory that it and H&R Block Mortgage operate
as a single employer. On May 1, 2006, the Court granted Option One and H&R Block
Mortgage's motion to transfer the action to the District Court in Boston,
Massachusetts. Option One and H&R Block Mortgage intend to file a motion to
compel arbitration after the case has been formally transferred to the
Massachusetts District Court. Option One and H&R Block Mortgage have answered
the complaint denying the plaintiffs' allegation and have filed a motion for
summary judgment on the issue of misclassification.
On July 28, 2006, Option One Mortgage Corporation was named as a defendant
and served with a class action complaint filed by Chadwick Thompson,
individually and on behalf of all persons similarly situated who worked for the
defendants in California, in the United States District Court for the Southern
District of California. The complaint alleges that Option One Mortgage
Corporation's affiliate H&R Block Mortgage Corporation failed to properly
classify and pay loan officers for overtime worked in violation of the Fair
Labor Standards Act, California law, and California's Unfair Competition Law.
The complaint further alleges that Option One and H&R Block Mortgage failed to
provide meal and rest periods and seeks restitution and waiting time penalties.
Option One filed an answer on August 17, 2006 denying the allegations in the
complaint. The plaintiff has voluntarily dismissed his class allegations and
will proceed on his claims solely on an individual basis.
44
THE SPONSOR
The Sponsor, Bank of America, National Association ("Bank of America") is
an indirect wholly-owned subsidiary of Bank of America Corporation.
See "The Pooling and Servicing Agreement" in this free writing prospectus
for more information regarding the Sponsor's material roles and duties in this
transaction and "The Sponsor" in the prospectus for more information about the
Sponsor and its securitization programs.
STATIC POOL INFORMATION
Information concerning the Sponsor's prior residential mortgage loan
securitizations involving sub-prime mortgage loans issued by the Depositor is
available on the internet at http://www.bofa.com/abfc. The website will also
provide information about certain prior securitized pools of sub-prime mortgage
loans originated and serviced by Option One.
Without charge or registration, investors can view on this website the
following information for each of those securitizations:
o summary initial pool information; and
o delinquency, cumulative loss, and prepayment information as of each
distribution date for the five years preceding the date of first use of
this free writing prospectus, with respect to the Sponsor's prior
securitized pools of sub-prime mortgage loans, and for five years
preceding the date of first use of this free writing prospectus with
respect to certain of Option One's prior securitized pools of sub-prime
mortgage loans serviced by Option One.
In the event any changes or updates are made to the information regarding
these securitizations available on the Sponsor's website, the Depositor will
provide a copy of the original information upon request to any person who writes
or calls the Depositor at 214 North Tryon Street, Charlotte, North Carolina
28255, (704) 683-4190, Attention: Luna Nguyen.
The static pool data available on the Sponsor's website relating to any of
the Sponsor's or Option One's mortgage loan securitizations issued prior to
January 1, 2006 is not deemed to be part of this free writing prospectus, the
prospectus or the Depositor's registration statement.
This static pool data may have been influenced in the past by factors
beyond the Sponsor's control, such as unusually robust housing prices, low
interest rates and changes in product type. Therefore, the performance of prior
residential mortgage loan securitizations may not be indicative of the future
performance of the Mortgage Loans.
THE DEPOSITOR
Asset Backed Funding Corporation is a direct wholly-owned subsidiary of
Banc of America Mortgage Capital Corporation and was incorporated in the State
of Delaware on July 23, 1997. It is not expected that the Depositor will have
any business operations other than offering mortgage pass-through certificates
and related activities. The Depositor will have limited obligations and rights
under the Pooling and Servicing Agreement after the Closing Date.
The Depositor maintains its principal executive office at 214 North Tryon
Street, Charlotte, North Carolina 28255. Its telephone number is (704) 386-2400.
THE ISSUING ENTITY
The Issuing Entity will be a New York common law trust (the "Trust"),
formed on the Closing Date pursuant to the Pooling and Servicing Agreement. The
Mortgage Loans will be deposited by the Depositor into the Trust under the
Pooling and Servicing Agreement as described under "The Pooling and Servicing
Agreement--
45
Assignment of the Mortgage Loans" in this free writing prospectus.
The Trust will have no officers or directors and no activities or continuing
duties other than to hold the assets underlying the Certificates and to issue
the Certificates. The fiscal year end of the Trust will be December 31 of each
year.
The Trust will be administered by the Trustee pursuant to the terms of the
Pooling and Servicing Agreement as described under "The Trustee" and "The
Pooling and Servicing Agreement" in this free writing prospectus and under
"Description of the Agreements--Material Terms of the Pooling and Servicing
Agreements and Underlying Servicing Agreements" in the prospectus. The Trustee,
on behalf of the Trust, is only permitted to take the actions specifically
provided in the Pooling and Servicing Agreement prior to an Event of Default.
After an Event of Default, the Trustee will take such actions as a prudent
person would be required to take under the same circumstances. Under the Pooling
and Servicing Agreement, the Trustee on behalf of the Trust will not have the
power to issue additional certificates representing interests in the Trust,
borrow money on behalf of the Trust or make loans from the assets of the Trust
to any person or entity.
The Issuing Entity, as a common law trust, may not be eligible to be a
debtor in a bankruptcy proceeding, unless it can be characterized as a "business
trust" for purposes of the federal bankruptcy laws. Bankruptcy courts consider
various factors in making a determination as to whether an entity is a business
trust, therefore it is not possible to predict with any certainty whether or not
the Issuing Entity would be considered a "business trust." In the event of the
insolvency or bankruptcy of the Sponsor, the Depositor or any other party to the
transaction, it is not anticipated that the trust fund would become a part of
the bankruptcy estate or subject to the bankruptcy control of a third party. See
"Risk Factors--Special Powers of the FDIC in the Event of Insolvency of the
Sponsor Could Delay or Reduce Distributions on the Certificates" and
"--Insolvency of the Depositor May Delay or Reduce Collections on Mortgage
Loans" in the prospectus.
THE TRUSTEE
Wells Fargo Bank, National Association ("Wells Fargo Bank") will act as
Trustee under the Pooling and Servicing Agreement. Wells Fargo Bank is a
national banking association and a wholly-owned subsidiary of Wells Fargo &
Company. A diversified financial services company with approximately $482
billion in assets, 23 million customers and 153,000+ employees as of December
31, 2005, Wells Fargo & Company is a U.S. bank holding company, providing
banking, insurance, trust, mortgage and consumer finance services throughout the
United States and internationally. Wells Fargo Bank provides retail and
commercial banking services and corporate trust, custody, securities lending,
securities transfer, cash management, investment management and other financial
and fiduciary services. The Depositor, the Sponsor and the Servicer may maintain
banking and other commercial relationships with Wells Fargo Bank and its
affiliates. Wells Fargo Bank maintains principal corporate trust offices located
at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 (among other
locations), and its office for certificate transfer services is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479.
Wells Fargo Bank has provided corporate trust services since 1934. As of
June 30, 2006, Wells Fargo Bank acts as a trustee for a variety of transactions
and asset types, including corporate and municipal bonds, mortgage-backed and
asset-backed securities and collateralized debt obligations. As of June 30,
2006, Wells Fargo Bank was acting as trustee on more than approximately 1230
series of residential mortgage-backed securities with an aggregate principal
balance of approximately $282,142,062,265.
Under the terms of the Pooling and Servicing Agreement, the Trustee also
is responsible for securities administration, which includes pool performance
calculations, distribution calculations and the preparation of monthly
distribution reports. As securities administrator, the Trustee is responsible
for the preparation and filing of all REMIC tax returns on behalf of the Issuing
Entity and the preparation of monthly reports on Form 10-D, certain current
reports on Form 8-K 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 and the Depositor will be required to sign any such monthly or annual
reports. Wells Fargo Bank has been engaged in the business of securities
administration since June 30, 1995. As of June 30, 2006, Wells Fargo Bank was
acting as securities administrator with respect to more than $894,733,136,436 of
outstanding residential mortgage-backed securities.
Wells Fargo Bank is acting as custodian of the mortgage loan files
pursuant to the Pooling and Servicing Agreement. In that capacity, Wells Fargo
Bank is responsible to hold and safeguard the mortgage notes and other
46
contents of the mortgage files on behalf of the Trustee and the
Certificateholders. Wells Fargo Bank maintains each mortgage loan file in a
separate file folder marked with a unique bar code to assure loan-level file
integrity and to assist in inventory management. Files are segregated by
transaction or investor. Wells Fargo Bank has been engaged in the mortgage
document custody business for more than 25 years. Wells Fargo Bank maintains
document custody facilities in its Minneapolis, Minnesota headquarters and in
three regional offices located in Richfield, Minnesota, Irvine, California, and
Salt Lake City, Utah. As of June 30, 2006, Wells Fargo Bank maintains mortgage
custody vaults in each of those locations with an aggregate capacity of over
eleven million files.
Wells Fargo Bank serves or may have served within the past two years as
loan file custodian for various mortgage loans owned by the Sponsor or an
affiliate of the Sponsor and anticipates that one or more of those mortgage
loans may be included in the Trust. The terms of any custodial agreement under
which those services are provided by Wells Fargo are customary for the
mortgage-backed securitization industry and provide for the delivery, receipt,
review and safekeeping of mortgage loan files.
The Trustee may appoint one or more co-trustees if necessary to comply
with the fiduciary requirements imposed by any jurisdiction in which a Mortgaged
Property is located. In the case of any appointment of a co-trustee, all rights,
powers, duties and obligations conferred or imposed upon the Trustee will be
conferred or imposed upon and exercised or performed by the Trustee and the
co-trustee jointly, unless the law of a jurisdiction prohibits the Trustee from
performing its duties under the Pooling and Servicing Agreement, in which event
such rights, powers, duties and obligations (including the holding of title to
the Trust or any portion of the Trust in any such jurisdiction) shall be
exercised and performed by the co-trustee at the direction of the Trustee.
See "Description of the Agreements--Material Terms of the Pooling and
Servicing Agreements and Underlying Servicing Agreements" in the prospectus for
more information about the Trustee and its obligations and rights (including its
right to indemnity and reimbursement in certain circumstances) under the Pooling
and Servicing Agreement.
THE CREDIT RISK MANAGER
Clayton Fixed Income Services Inc. (formerly known as The Murrayhill
Company), a Colorado corporation, will act as the Credit Risk Manager. In 1997,
the Credit Risk Manager created the business of independent, third-party
transaction oversight for the fixed income industry. The Credit Risk Manager's
credit risk management portfolio consists of more than $1 trillion in original
principal balance across more than 400 MBS transactions of various collateral
types, including prime, Alt-A, subprime, scratch and dent, manufactured housing,
and HELOCs. The Credit Risk Manager's credit risk management process enhances
transaction performance through loan-level exception management and transaction
oversight.
The Credit Risk Manager will not be responsible for performing any
servicing or administrative functions with respect to the Mortgage Loans, but
rather will perform certain advisory functions in accordance with the provisions
of the credit risk management agreement with the Servicer. These oversight
functions are provided on an exception management basis and aim to identify and
monitor problems in the areas of underwriting, collateral, reporting, and
servicing of the Mortgage Loans, and may include the monitoring and/or making of
recommendations to the Servicer regarding certain Mortgage Loans. The Credit
Risk Manager's advice is made in the form of recommendation only, and the Credit
Risk Manager does not have the right to direct the Servicer to take any specific
course of action. The Servicer may accept or reject a recommendation of the
Credit Risk Manager, in its sole discretion.
The Credit Risk Manager will enter into a consulting agreement, dated as
of the Closing Date, with the Depositor to provide such consulting and advisory
services, including monthly prepayment analysis, mortgage insurance claims
analysis, realized loss analysis, delinquency review, bankruptcy, repayment, REO
and foreclosure analysis, delinquency trends, and periodic servicer reviews.
The Credit Risk Manager will enter into a credit risk management
agreement, dated as of the Closing Date, with the Servicer. The credit risk
management agreement requires the Servicer to provide the Credit Risk Manager
certain information on the Mortgage Loans and/or access to its servicing
personnel.
47
The Credit Risk Manager will be entitled to receive the Credit Risk
Manager Fee until the termination of the Trust or until its removal by a vote of
at least 66-2/3% of the Certificateholders by Voting Rights.
THE POOLING AND SERVICING AGREEMENT
General
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement, dated as of October 1, 2006 (the "Pooling and Servicing Agreement"),
among the Depositor, the Servicer and the Trustee. The "Trust Fund" created
under the Pooling and Servicing Agreement will consist of (i) all of the
Depositor's right, title and interest in the Mortgage Loans, the related
mortgage notes, mortgages and other related documents, (ii) all payments on or
collections in respect of the Mortgage Loans due after the Cut-off Date,
together with any proceeds thereof, (iii) any Mortgaged Properties acquired on
behalf of Certificateholders by foreclosure or by deed in lieu of foreclosure,
and any revenues received thereon, (iv) the Cap Carryover Reserve Account, (v)
the Swap Account, (vi) the right to any Net Swap Payment and any Swap
Termination Payment made by the Swap Provider and deposited into the Swap
Account, (vii) the rights of the Trustee under all insurance policies required
to be maintained pursuant to the Pooling and Servicing Agreement, (viii) the
rights of the Trustee under the Interest Rate Swap Agreement and (ix`) the
rights of the Depositor under the Option One Mortgage Loan Purchase Agreement
and the Mortgage Loan Purchase Agreement. The Offered Certificates will be
transferable and exchangeable at the corporate trust office of the Trustee. The
prospectus contains important additional information regarding the terms and
conditions of the Pooling and Servicing Agreement.
Assignment of the Mortgage Loans
On the Closing Date the Depositor will transfer to the Trust Fund all of
its right, title and interest in and to each Mortgage Loan, the related mortgage
notes, mortgages and other related documents (to the extent required to be
delivered to the Sponsor under the Option One Mortgage Loan Purchase Agreement,
collectively, the "Related Documents"), including all scheduled payments with
respect to each such Mortgage Loan due after the Cut-off Date. The Trustee,
concurrently with such transfers, will deliver the Certificates to the
Depositor. Each Mortgage Loan transferred to the Trust Fund will be identified
on a schedule (the "Mortgage Loan Schedule") delivered to the Trustee pursuant
to the Pooling and Servicing Agreement. The Mortgage Loan Schedule will include
information such as the Principal Balance of each Mortgage Loan as of the
Cut-off Date, its Mortgage Interest Rate as well as other information.
The Pooling and Servicing Agreement will require that the Depositor
deliver or cause to be delivered to the Trustee on behalf of the
Certificateholders (or a custodian, as the Trustee's agent for such purpose) the
mortgage notes endorsed in blank and the Related Documents. In lieu of delivery
of original mortgages or mortgage notes, if such original is not available or
lost, the Depositor may deliver or cause to be delivered true and correct copies
thereof, or, with respect to a lost mortgage note, a lost note affidavit
executed by the Sponsor or the Originator.
Unless otherwise required by a Rating Agency, assignments of the Mortgage
Loans to the Trustee (or its nominee) will not be recorded in any jurisdiction,
but will be delivered to the Trustee in recordable form, so that they can be
recorded in the event recordation is necessary in connection with the servicing
of a Mortgage Loan. In addition, assignments of the Mortgage Loans will not be
recorded with respect to any Mortgage which has been recorded in the name of
Mortgage Electronic Registration Systems, Inc. ("MERS") or its designee. With
respect to any Mortgage which has been recorded in the name of MERS or its
designee, no mortgage assignment in favor of the Trustee will be required to be
prepared or delivered. Instead, the Servicer will be required to take all
actions as are necessary to cause the Trust to be shown as the owner of the
related Mortgage Loan on the records of MERS for purposes of the system of
recording transfers of beneficial ownerships of mortgages maintained by MERS.
Within 60 days following the Closing Date the Trustee will review (or
cause a custodian to review) the Mortgage Loans and the Related Documents
pursuant to the Pooling and Servicing Agreement to determine if the Related
Documents are in its possession, have not been mutilated, damaged or torn,
relate to such Mortgage Loans and that certain information set forth in the
Mortgage Loan Schedule (such as balance and loan identification number)
accurately reflects information set forth in the Mortgage File, and if any
Mortgage Loan or Related Document is found not to conform to this review
criteria and such defect has a material and adverse effect on the
48
Certificateholders and is not cured within 120 days following notification
thereof to the Sponsor (or within 90 days of the earlier of the Sponsor's
discovery or receipt of notification if such defect would cause the Mortgage
Loan not to be a "qualified mortgage" for REMIC purposes), the Sponsor will be
obligated to either (i) substitute for that Mortgage Loan an Eligible Substitute
Mortgage Loan; provided, however, such substitution is permitted only within two
years of the Closing Date and may not be made unless an opinion of counsel is
provided to the effect that such substitution will not disqualify any of the
REMICs comprising the Trust Fund as a REMIC or result in a prohibited
transaction tax under the Code or (ii) purchase such Mortgage Loan at a price
(the "Purchase Price") equal to the outstanding Principal Balance of such
Mortgage Loan as of the date of purchase, plus all accrued and unpaid interest
thereon, computed at the Mortgage Interest Rate through the end of the calendar
month in which the purchase is effected, plus the amount of any unpaid servicing
fees (without duplication) and unreimbursed Advances and Servicing Advances made
by the Servicer. If, however, a Mortgage Loan is discovered to be defective in a
manner that would cause it to be a "defective obligation" within the meaning of
Treasury regulations relating to REMICs, the Sponsor will be obligated to cure
the defect or make the required purchase or substitution no later than 90 days
after the earlier of its discovery or receipt of notification of the defect. The
Purchase Price will be deposited in the Collection Account on or prior to the
next succeeding Determination Date after such obligation arises. The obligation
of the Sponsor to repurchase or substitute for a Defective Mortgage Loan is the
sole remedy regarding any defects in the Mortgage Loans and Related Documents
available to the Trustee or the Certificateholders.
In connection with the substitution of an Eligible Substitute Mortgage
Loan, the Originator or the Sponsor, as the case may be, will be required to
deposit in the Collection Account on or prior to the next succeeding
Determination Date after such obligation arises an amount (the "Substitution
Adjustment") equal to the excess of the Purchase Price of the related Defective
Mortgage Loan over the Principal Balance (plus one month's interest on such
balance) of such Eligible Substitute Mortgage Loan.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Originator or the Sponsor, as applicable, for a Defective Mortgage Loan
which must, on the date of such substitution, (i) have an outstanding Principal
Balance (or in the case of a substitution of more than one Mortgage Loan for a
Defective Mortgage Loan, an aggregate Principal Balance) not in excess of the
Principal Balance of the Defective Mortgage Loan; (ii) be of the same type
(fixed-rate or adjustable-rate) and have a Mortgage Interest Rate not less than
the Mortgage Interest Rate of the Defective Mortgage Loan and not more than 2%
in excess of the Mortgage Interest Rate of such Defective Mortgage Loan and,
with respect to an Adjustable-Rate Mortgage Loan, have the same Index as the
Defective Mortgage Loan and have a Gross Margin equal to or greater than the
Defective Mortgage Loan; (iii) have a Credit Score not less than the Defective
Mortgage Loan; (iv) have a remaining term to maturity not more than one year
earlier and not later than the remaining term to maturity of the Defective
Mortgage Loan; (v) comply with each representation and warranty as to the
Mortgage Loans set forth in the Option One Mortgage Loan Purchase Agreement and
the Mortgage Loan Purchase Agreement (deemed to be made as of the date of
substitution); (vi) have a prepayment charge at least equal to that prepayment
charge, if any, on the Defective Mortgage Loan; and (vii) have a Loan-to-Value
Ratio not greater than that of the Defective Mortgage Loan.
Under the terms of the Option One Mortgage Loan Purchase Agreement, the
Originator made certain representations and warranties regarding the Mortgage
Loans, which will be assigned by the Sponsor to the Depositor, and by the
Depositor to the Trustee for the benefit of the Certificateholders. Within 90
days following its discovery of a breach of any representation or warranty that
materially or adversely affects the interests of Certificateholders in a
Mortgage Loan, or receipt of notice of such breach, the Originator will be
obligated to cure such breach or purchase the affected Mortgage Loan from the
Trust for the Purchase Price (or, in certain circumstances, to substitute an
Eligible Substitute Mortgage Loan). In addition to the foregoing, if the breach
involves the Originator's representation that the Mortgage Loan complies with
any and all requirements of federal, state or local law with respect to the
origination of such Mortgage Loan, including, without limitation, usury, truth
in lending, real estate settlement procedures, consumer credit protection, equal
credit opportunity, predatory and abusive lending laws or disclosure laws
applicable to the Mortgage Loans, the Originator will be obligated to reimburse
the Trust for all costs or damages incurred by the Trust as a result of the
violation of such representation (such amount, the "Reimbursement Amount").
Pursuant to the terms of the Mortgage Loan Purchase Agreement, the Sponsor
will make to the Depositor (and the Depositor will assign to the Trustee for the
benefit of the Certificateholders) only certain limited representations and
warranties as of the Closing Date with respect to the Mortgage Loans such as:
(i) the accuracy
49
of the Mortgage Loan Schedule; (ii) the payment and delinquency status of each
Mortgage Loan; (iii) at the time of transfer to the Depositor, the Sponsor has
transferred or assigned all of its right, title and interest in each Mortgage
Loan and the Related Documents, free of any lien; (iv) each Mortgage Loan
complies with any and all requirements of any federal, state or local law with
respect to the origination of such Mortgage Loan including, without limitation,
usury, truth in lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity, predatory and abusive lending laws or
disclosure laws applicable to the Mortgage Loans; and (v) each Mortgaged
Property securing the Mortgage Loans is in good repair and is undamaged so as
not to affect adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises was intended. In the event of a
breach of any such representation or warranty that does not constitute a breach
of any representation or warranty made by the Originator as described above, the
Sponsor will be obligated in the same matter as the Originator to cure such
breach or purchase the affected Mortgage Loans, as described above. In addition
to the foregoing, if a breach of the representation set forth in clause (iv)
occurs, the Sponsor will be obligated to remit to the Trust any Reimbursement
Amount which the Originator fails to pay.
To the extent that any fact, condition or event with respect to a Mortgage
Loan constitutes a breach of both a representation and warranty of the
Originator under the Option One Mortgage Loan Purchase Agreement, and a breach
of a representation and warranty of the Sponsor under the Mortgage Loan Purchase
Agreement, then the only right or remedy of the Trustee or any Certificateholder
will be the Trustee's right to enforce the obligations of the Originator under
the Option One Mortgage Loan Purchase Agreement, and there will be no remedy
against the Sponsor for such breaches (other than the Sponsor's obligation to
remit to the Trust any Reimbursement Amount which the Originator fails to pay).
Mortgage Loans required to be transferred to the Originator or the Sponsor
as described in the preceding paragraphs are referred to as "Defective Mortgage
Loans."
Payments on Mortgage Loans; Deposits to Collection Account and Distribution
Account
The Servicer will establish and maintain or cause to be maintained a
separate trust account (the "Collection Account") for the benefit of the holders
of the Certificates. The Collection Account will be an Eligible Account (as
defined below). Upon receipt by the Servicer of amounts in respect of the
Mortgage Loans (excluding amounts representing the Servicing Fee or other
servicing compensation, reimbursement for Advances and Servicing Advances,
insurance proceeds to be applied to the restoration or repair of a Mortgaged
Property or similar items), the Servicer will be required to deposit such
amounts in the Collection Account. Amounts so deposited may be invested in
certain investments acceptable to the Rating Agencies maturing no later than one
business day prior to the date on which the amount on deposit therein is
required to be deposited in the Distribution Account. The Trustee will establish
an account (the "Distribution Account") into which the Trustee will deposit,
upon receipt on the Servicer Remittance Date preceding each Distribution Date,
amounts withdrawn from the Collection Account and remitted to it by the Servicer
for distribution to Certificateholders on such Distribution Date and remitted to
it by the Servicer. The Distribution Account will be an Eligible Account.
Amounts on deposit in the Distribution Account may be invested in eligible
investments maturing on or before the business day prior to the related
Distribution Date unless invested in investments managed or advised by the
Trustee or an affiliate, in which case the eligible investments may mature on
the related Distribution Date. The "Servicer Remittance Date" with respect to
each Distribution Date will be the 20th day of the month of such Distribution
Date (or if such day is not a business day, the preceding business day).
An "Eligible Account" is a segregated account that is (i) an account or
accounts maintained with a federal or state chartered depository institution or
trust company (a) the short-term unsecured debt obligations of which are rated
at least P-1 by Moody's and, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the short-term
unsecured debt obligations of such holding company are rated at least F-1 by
Fitch (together with Moody's, the "Rating Agencies"), if the amounts on deposit
are to be held in the account for generally no more than 30 days and are not
intended to be used as credit enhancement or (b) the short-term unsecured debt
obligations of which are rated at least P-1 by Moody's and, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company are rated at least F-1 by Fitch and the long-term unsecured debt
obligations of which are rated at least A1 by Moody's, if the deposits are to be
held more than 30 days but less than 365 days, (ii) an account or accounts the
deposits in which are fully insured by the Federal Deposit Insurance Corporation
(to
50
the limits established by such corporation), the uninsured deposits in which
account are otherwise secured such that, as evidenced by an opinion of counsel
delivered to the Trustee and to each Rating Agency, the Certificateholders will
have a claim with respect to the funds in such account or a perfected first
priority security interest against such collateral (which shall be limited to
eligible investments) securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which such
account is maintained and such uninsured amount would not cause withdraw or
downgrade of the then current ratings of the Certificates, (iii) a trust account
or accounts maintained with the trust department of a federal or state chartered
depository institution, national banking association or trust company acting in
its fiduciary capacity or (iv) otherwise acceptable to each Rating Agency
without reduction or withdrawal of their then current ratings of the
Certificates as evidenced by a letter from each Rating Agency to the Trustee.
Eligible investments are specified in the Pooling and Servicing Agreement and
are limited to investments which meet the criteria of the Rating Agencies from
time to time as being consistent with their then current ratings of the Offered
Certificates.
Advances
Subject to the following limitations, the Servicer will be obligated to
advance or cause to be advanced on each Servicer Remittance Date from its own
funds, or funds in the Collection Account that are not included in the Available
Funds for such Distribution Date, or a combination of both, an amount equal to
the aggregate of all payments of principal and interest, net of the Servicing
Fee, that were due during the related Collection Period on the Mortgage Loans
(other than a Balloon Payment) and that were not received by the related
Determination Date and, with respect to Balloon Loans, with respect to which the
Balloon Payment is not made when due, an assumed monthly payment that would have
been due on the related Due Date based on the original principal amortization
schedule for such Balloon Loan (any such advance, an "Advance").
Advances with respect to Mortgage Loans are required to be made only to
the extent the Servicer deems them to be recoverable from related late
collections, insurance proceeds, condemnation proceeds or liquidation proceeds.
The purpose of making such Advances is to maintain a regular cash flow to the
Certificateholders, rather than to guarantee or insure against losses. The
Servicer will not be required, however, to make any Advances with respect to
reductions in the amount of the Monthly Payments on the Mortgage Loans due to
bankruptcy proceedings or the application of the Servicemembers Civil Relief Act
(the "Relief Act") or similar state laws. Subject to the recoverability standard
above, the Servicer's obligation to make Advances as to any Mortgage Loan will
continue until such Mortgage Loan is paid in full by the mortgagor or disposed
of by the Trust.
All Advances will be reimbursable to the Servicer from late collections,
insurance proceeds, condemnation proceeds and liquidation proceeds from the
Mortgage Loan as to which such unreimbursed Advance was made. In addition, any
Advances previously made in respect of any Mortgage Loan that the Servicer deems
to be nonrecoverable from related late collections, insurance proceeds,
condemnation proceeds or liquidation proceeds may be reimbursed to the Servicer
out of general funds in the Collection Account prior to the distributions on the
Certificates. In addition, the Servicer may withdraw from the Collection Account
funds that were not included in Available Funds for the preceding Distribution
Date to reimburse itself for Advances previously made. In the event the Servicer
fails in its obligation to make any such Advance, the Trustee, in its capacity
as successor servicer, or a successor servicer appointed by the Trustee, will be
obligated to make any such Advance, to the extent required in the Pooling and
Servicing Agreement.
In the course of performing its servicing obligations, the Servicer will
pay all reasonable and customary "out-of-pocket" costs and expenses incurred in
the performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration, inspection and protection of the
Mortgaged Properties, (ii) any enforcement or judicial proceedings, including
foreclosures and (iii) the management and liquidation of Mortgaged Properties
acquired in satisfaction of the related mortgage. Each such expenditure will
constitute a "Servicing Advance."
The Servicer's right to reimbursement for Servicing Advances is limited to
late collections on the related Mortgage Loan, including liquidation proceeds,
released mortgaged property proceeds, insurance proceeds, condemnation proceeds
and such other amounts the Servicer may collect from the related mortgagor or
otherwise relating to the Mortgage Loan in respect of which such unreimbursed
amounts are owed, unless such amounts are
51
deemed to be nonrecoverable by the Servicer, in which event reimbursement will
be made to the Servicer from general funds in the Collection Account.
The Pooling and Servicing Agreement may provide that the Servicer, with
the consent of the parties to the Pooling and Servicing Agreement, may enter
into a facility with any person which provides that such person (an "Advancing
Person") may fund Advances and/or Servicing Advances, although no facility may
reduce or otherwise affect the Servicer's obligation to fund such Advances
and/or Servicing Advances. Any Advances and/or Servicing Advances made by an
Advancing Person will be reimbursed to the Advancing Person in the same manner
as reimbursements would be made to the Servicer.
Compensation and Payment of Expenses of the Servicer, the Trustee and the Credit
Risk Manager
The principal compensation to the Servicer will be the "Servicing Fee"
payable monthly by the Trust equal to 1/12th of the servicing fee rate set forth
in the table below (the "Servicing Fee Rate") in respect of its servicing
activities for the Certificates. The Servicing Fee will accrue on the aggregate
Principal Balance of the Mortgage Loans as of the first day of each month.
The principal compensation to be paid to the Trustee in respect of its
obligations under the Pooling and Servicing Agreement will be earnings on
eligible investments of funds on deposit in the Distribution Account.
The Credit Risk Manager will be entitled to receive a fee (the "Credit
Risk Manager Fee") until the termination of the Trust Fund or until its removal
by a vote of at least 66-2/3% of the Certificateholders by Voting Rights. This
fee will be paid monthly by the Trust equal to 1/12th of the credit risk manager
fee rate (the "Credit Risk Manager Fee Rate"). The Credit Risk Manager Fee will
accrue on the aggregate Principal Balance of the Mortgage Loans as of the first
day of each month.
Distribution Dates Servicing Fee Rate Credit Risk Manager Fee Rate
------------------ ------------------ ----------------------------
November 2006 through 0.30% 0.015%
August 2007
September 2007 through 0.40% 0.015%
April 2009
May 2009 and thereafter 0.65% 0.015%
Any co-trustee, if applicable, will be paid out of Available Funds prior
to any distributions to Certificateholders.
The Servicing Fee for the Mortgage Loans will be retained by the Servicer
out of the interest payments on the Mortgage Loans, prior to remittance to the
Trustee or distributions to Certificateholders. The Credit Risk Manager Fee will
be paid from the Interest Remittance Amount (as described under "Description of
the Certificates--Interest Distributions") to the Credit Risk Manager for its
services prior to any distributions to Certificateholders.
In the event the Trustee succeeds to the role of Servicer, it will be
entitled to the same Servicing Fee as the predecessor servicer and if the
Trustee appoints a successor servicer under the Pooling and Servicing Agreement,
the Trustee may make such arrangements for the compensation of such successor
out of the payments on the Mortgage Loans serviced by the predecessor Servicer
as it and such successor shall agree, not to exceed the Servicing Fee Rate. As
additional servicing compensation, the Servicer is entitled to retain all
service-related fees, including assumption fees, modification fees, extension
fees, bad check fees, late payment charges and Prepayment Interest Excess, to
the extent collected from mortgagors, together with any interest or other income
earned on funds held in the Collection Account and any escrow accounts. The
Servicer is obligated to offset any Prepayment Interest Shortfall resulting from
a principal prepayment in full on the Mortgage Loans on any Distribution Date
(payments made by the Servicer in satisfaction of such obligation, "Compensating
Interest") by an amount not in excess of the sum of its Servicing Fee and any
Prepayment Interest Excess for such Distribution Date. The Servicer is generally
obligated to pay expenses incurred by it in connection with its responsibilities
under the Pooling and Servicing Agreement, unless these expenses constitute
Servicing Advances as described above under "--Advances." These expenses,
including the fees of any subservicer hired by the Servicer, will be paid by the
Servicer out of its own funds, without reimbursement.
52
"Prepayment Interest Excess" with respect to any Distribution Date will be
for each Mortgage Loan that was the subject of a principal prepayment in full
during the portion of the related Prepayment Period beginning on the first day
of the calendar month in which such Distribution Date occurs through the
Determination Date of the calendar month in which such Distribution Date occurs,
an amount equal to interest (to the extent received) at the applicable Mortgage
Interest Rate (net of the Servicing Fee Rate) on the amount of such principal
prepayment for the number of days commencing on the first day of the calendar
month in which such Distribution Date occurs and ending on the date on which
such prepayment is so applied.
With respect to any Determination Date and each Mortgage Loan as to which
a principal prepayment in full was applied during the portion of the related
Prepayment Period occurring in the prior calendar month or as to which a partial
prepayment received during the portion of the related Prepayment Period
occurring in the prior calendar month is applied during such prior calendar
month, the "Prepayment Interest Shortfall" is an amount equal to the interest at
the Mortgage Interest Rate for such Mortgage Loan (net of the Servicing Fee
Rate) on the amount of such principal prepayment for the number of days
commencing on the date on which the principal prepayment is applied and ending
on the last day of the calendar month in which applied.
The Trustee is obligated to pay routine ongoing expenses incurred by it in
connection with its responsibilities under the Pooling and Servicing Agreement.
Those amounts will be paid by the Trustee out of its own funds, without
reimbursement.
The Depositor, the Servicer and the Trustee are entitled to
indemnification and reimbursement of certain expenses from the Trust under the
Pooling and Servicing Agreement as discussed in the prospectus under the
headings "The Depositor," "Description of the Agreements--Material Terms of the
Pooling and Servicing Agreements and Underlying Servicing Agreements--Certain
Matters Regarding Servicers and the Master Servicer" and "--Certain Matters
Regarding the Trustee."
Optional Termination
The NIMS Insurer, if there is a NIMS Insurer, or if there is no NIMS
Insurer, the majority holder of the Class CE Certificates or, if (i) such holder
is the Sponsor or is affiliated with the Sponsor or (ii) there is no majority
holder of the Class CE Certificates, the Servicer, will have the right to
purchase all of the Mortgage Loans and REO Properties in the Trust Fund and
thereby effect the early retirement of the Certificates, on any Distribution
Date following the Distribution Date on which the aggregate Principal Balance of
such Mortgage Loans and REO Properties is 10% or less of the sum of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. The
first Distribution Date on which such option could be exercised is referred to
herein as the "Optional Termination Date." In the event that the option is
exercised, the purchase will be made at a price (the "Termination Price")
generally equal to the sum of (x) par plus accrued interest for each Mortgage
Loan at the related Mortgage Interest Rate to but not including the first day of
the month in which such purchase price is distributed plus the amount of any
unpaid Servicing Fees and unreimbursed Advances and Servicing Advances, and (y)
any Swap Termination Payment owed to the Swap Provider pursuant to the Interest
Rate Swap Agreement. If any of the parties listed above is subject to regulation
by the OCC, the FDIC, the Federal Reserve or the Office of Thrift Supervision,
however, such entity may not exercise this option unless the aggregate fair
market value of the Mortgage Loans and REO Properties is greater than or equal
to the Termination Price. In addition, no option may be exercised until any due
and unpaid Reimbursement Amounts have been paid to the Trust. Proceeds from such
purchase will be included in Available Funds and will be distributed to the
holders of the Certificates in accordance with the Pooling and Servicing
Agreement. Any such purchase of Mortgage Loans and REO Properties will result in
the early retirement of the Certificates. Any such optional termination will be
permitted only pursuant to a "qualified liquidation" as defined in Section 860F
of the Code.
In connection with the issuance of any net interest margin securities
secured by all or a portion of the Class CE and Class P Certificates, a party
may agree to refrain from exercising this option while those securities are
outstanding.
Optional Purchase of Defaulted Mortgage Loans
As to any Mortgage Loan which is Delinquent in payment by 90 days or more,
the NIMS Insurer, if there is a NIMS Insurer, or if there is no NIMS Insurer,
the majority holder of the Class CE Certificates or, if (i) such holder
53
is the Sponsor or is affiliated with the Sponsor or (ii) there is no majority
holder of the Class CE Certificates, the Servicer may, at its option and in
accordance with the terms of the Pooling and Servicing Agreement, purchase such
Mortgage Loan from the Trust Fund at the Purchase Price for such Mortgage Loan.
In addition, the Servicer may only exercise such right if delinquencies on the
Mortgage Loans exceed a specified level set forth in the Pooling and Servicing
Agreement until such delinquencies are reduced to or below such specified level,
subject to certain other conditions set forth in the Pooling and Servicing
Agreement, including but not limited to the condition that the Servicer must
first purchase the Mortgage Loan that, as of the time of such purchase, has been
Delinquent for the greatest period before purchasing Mortgage Loans that have
been Delinquent for lesser periods.
Events of Servicing Termination
Events of servicing termination will consist, among other things, of: (i)
any failure by the Servicer to deposit in the Collection Account the required
amounts or remit to the Trustee for deposit in the Distribution Account any
payment which continues unremedied for one business day after the first date on
which (x) the Servicer has knowledge of such failure or (y) written notice of
such failure is given to the Servicer; (ii) any failure of the Servicer to make
any Advance with respect to a Mortgage Loan or to cover any Prepayment Interest
Shortfalls on Mortgage Loans, as described herein, which failure continues
unremedied for one business day after the first date on which (x) the Servicer
has knowledge of such failure or (y) written notice of such failure is given to
the Servicer; (iii) any failure by the Servicer to observe or perform in any
material respect any other of its covenants or agreements in the Pooling and
Servicing Agreement, which continues unremedied for 30 days after the first date
on which (x) the Servicer has knowledge of such failure or (y) written notice of
such failure is given to the Servicer (or a lesser number of days set forth in
the Pooling and Servicing Agreement in the case of failure to perform any
covenants or agreements relating to the requirements of Regulation AB); or (iv)
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, and certain actions by or on behalf of the Servicer
indicating its insolvency or inability to pay its obligations.
Rights upon Event of Servicing Termination
So long as an event of servicing termination (as defined in the Pooling
and Servicing Agreement) remains unremedied, the Trustee may, and at the
direction of the holders of the Certificates evidencing not less than 51% of the
Voting Rights is required to, terminate all of the rights and obligations of the
Servicer in its capacity as servicer with respect to the Mortgage Loans, as
provided in the Pooling and Servicing Agreement, whereupon the Trustee will
succeed to (or appoint a successor servicer to assume) all of the
responsibilities and duties of the Servicer pursuant to the Pooling and
Servicing Agreement, including the obligation to make any required Advances and
Servicing Advances. No assurance can be given that termination of the rights and
obligations of the Servicer under the Pooling and Servicing Agreement would not
adversely affect the servicing of the related Mortgage Loans, including the
delinquency experience of such Mortgage Loans.
Voting Rights
With respect to any date of determination, the percentage of all the
Voting Rights allocated among holders of the Certificates (other than the Class
CE, Class P, Class R and Class R-X Certificates) will be 98% and will be
allocated among the classes of such Certificates in the proportion that the
aggregate Certificate Principal Balance of all the Certificates of such class
then outstanding bear to the aggregate Certificate Principal Balance of all
Certificates then outstanding. With respect to any date of determination, 1% of
all the Voting Rights will be allocated to the holders of each of the Class CE
and Class P Certificates. The Voting Rights allocated to a class of Certificates
will be allocated among all holders of each such class in proportion to the
outstanding certificate balances (or percentage interest) of such Certificates.
The Class R and Class R-X Certificates will not have any Voting Rights.
No holder of an Offered Certificate, solely by virtue of such holder's
status as a holder of an Offered Certificate, will have any right under the
Pooling and Servicing Agreement to institute any proceeding with respect
thereto, unless such holder previously has given to the Trustee written notice
of default and unless the holders of Certificates having not less than 51% of
the Voting Rights evidenced by the Certificates so agree and have offered
indemnity satisfactory to the Trustee.
54
Amendment
The Pooling and Servicing Agreement may be amended by the Depositor, the
Servicer and the Trustee, with the consent of the NIMS insurer and without the
consent of the holders of the Certificates, for any of the purposes set forth
under "Description of the Agreements--Material Terms of the Pooling and
Servicing Agreements and Underlying Servicing Agreements--Amendment" in the
prospectus or to provide for the rights of a NIMS Insurer, if any, as described
under "--Rights of the NIMS Insurer under the Pooling and Servicing Agreement."
In addition, the Pooling and Servicing Agreement may be amended by the
Depositor, the Servicer and the Trustee and the holders of a majority in
interest of any class of Certificates affected thereby for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Pooling and Servicing Agreement or of modifying in any manner the rights
of the holders of any class of Certificates; provided, however, that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of,
distributions required to be made on any class of Certificates without the
consent of the holders of such Certificates; (ii) adversely affect in any
material respect the interests of the Swap Provider or 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 such class evidencing percentage interests
aggregating not less than 51% of the Voting Rights represented by such class; or
(iii) reduce the aforesaid percentage of aggregate outstanding principal amounts
of Certificates, the holders of which are required to consent to any such
amendment, without the consent of the holders of all such Certificates.
Notwithstanding the foregoing, the Trustee will not consent to any amendment
that would result in the imposition of a tax on any REMIC constituting part of
the Trust Fund or cause any such REMIC to fail to qualify as a REMIC at any time
that the Certificates (other than the Class P Certificates) are outstanding.
Rights of the NIMS Insurer under the Pooling and Servicing Agreement
After the Closing Date, a separate trust may be established to issue net
interest margin securities secured by all or a portion of the Class CE and Class
P Certificates. Those net interest margin securities may or may not have the
benefit of a financial guaranty insurance policy. If a policy is obtained, the
NIMS Insurer that issues that policy will be a third party beneficiary of the
Pooling and Servicing Agreement and will have a number of rights under the
Pooling and Servicing Agreement, including the following:
o the right to consent to the Servicer's exercise of its discretion to waive
assumption fees, late payment or other charges in connection with a
Mortgage Loan or to arrange for the extension of Due Dates for payments
due on a mortgage note for no more than 125 days, if the waivers or
extensions relate to more than 5% of the Mortgage Loans as of the Cut-off
Date;
o the right to direct the Trustee to terminate all of the rights and
obligations of the Servicer under the Pooling and Servicing Agreement
relating to the Trust Fund and the assets of the Trust Fund following the
occurrence of an event of servicing termination under the Pooling and
Servicing Agreement;
o the right to approve or reject the appointment of any successor servicer
other than the Trustee, if the Servicer is required to be replaced and the
Trustee is unwilling or unable to act as successor servicer;
o the right to remove the Trustee or any co-trustee pursuant to the Pooling
and Servicing Agreement;
o the right to direct the Trustee to make investigations and take actions
pursuant to the Pooling and Servicing Agreement;
o the right to consent to any amendment to the Pooling and Servicing
Agreement;
o the right to purchase all of the Mortgage Loans and REO Properties in the
Trust Fund and thereby effect the early retirement of the Certificates
under the circumstances set forth under "The Pooling and Servicing
Agreement--Optional Termination" in this free writing prospectus; and
o the right to purchase Mortgage Loans Delinquent in payment 90 days or more.
55
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will consist of (i) the fourteen classes of Offered
Certificates listed in the table beginning on page 7 of this free writing
prospectus and (ii) the Class B, Class CE, Class P, Class R and Class R-X
Certificates.
The Offered Certificates will be issuable in the forms and denominations
set forth in the table beginning on page 7. The Offered Certificates are not
intended to be and should not be directly or indirectly held or beneficially
owned in amounts lower than the minimum denominations in the table.
Distributions on the Offered Certificates will be made by wire transfer if a
Certificateholder notifies the Trustee in writing at least five business days
prior to the related Record Date.
Allocation of Available Funds
Distributions to holders of each class of Offered Certificates will be
made on each Distribution Date from Available Funds. "Available Funds" will be
equal to the sum of the following amounts with respect to the Mortgage Loans,
net of amounts reimbursable or payable to the Servicer, including amounts in
respect of indemnification of the Servicer, the Servicing Fee and any accrued
and unpaid Servicing Fee, amounts payable to the Trustee and the Credit Risk
Manager in respect of certain expenses and indemnification and any amounts
payable to the Swap Provider (including any Net Swap Payment owed to the Swap
Provider and any Swap Termination Payment owed to the Swap Provider but
excluding any Swap Termination Payment owed to the Swap Provider resulting from
a Swap Provider Trigger Event): (i) the aggregate amount of Monthly Payments on
the Mortgage Loans due during the related Collection Period and received by the
Servicer on or prior to the related Determination Date, (ii) certain unscheduled
payments in respect of the Mortgage Loans, including prepayments (but excluding
any prepayment charges and Prepayment Interest Excess), insurance proceeds,
Subsequent Recoveries, condemnation proceeds and liquidation proceeds, net of
certain expenses, received during the related Prepayment Period, (iii) payments
from the Servicer in connection with Advances and Compensating Interest for such
Distribution Date, (iv) the Purchase Price for any repurchased Mortgage Loan
deposited to the Collection Account during the related Prepayment Period, (v)
any Substitution Adjustments deposited in the Collection Account during the
related Prepayment Period, (vi) any Reimbursement Amount deposited to the
Collection Account during the related Prepayment Period and (vii) on the
Distribution Date on which the Trust is to be terminated in accordance with the
Pooling and Servicing Agreement, the Termination Price.
Interest Distributions
On each Distribution Date, based upon the information provided to it in a
remittance report prepared by the Servicer, the Trustee will distribute the
Interest Remittance Amount in the following order of priority to the extent
available:
first, to the Credit Risk Manager, the Credit Risk Manager Fee;
second, concurrently, as follows:
(1) from the Group 1 Interest Remittance Amount to the Class A-1
Certificates, the Accrued Certificate Interest thereon for such
Distribution Date;
(2) from the Group 2 Interest Remittance Amount to the Class A-2
Certificates, the Accrued Certificate Interest thereon for such
Distribution Date; and
(3) concurrently, from the Group 3 Interest Remittance Amount to the
Class A-3A, Class A-3B and Class A-3C Certificates, pro rata, the
applicable Accrued Certificate Interest thereon for such Distribution
Date;
56
third, concurrently, as follows:
(1) from the Group 1 Interest Remittance Amount to the Class A-1
Certificates, the Interest Carry Forward Amount thereon for such
Distribution Date;
(2) from the Group 2 Interest Remittance Amount to the Class A-2
Certificates, the Interest Carry Forward Amount thereon for such
Distribution Date; and
(3) concurrently, from the Group 3 Interest Remittance Amount to the
Class A-3A, Class A-3B and Class A-3C Certificates, pro rata, the
applicable Interest Carry Forward Amount thereon for such Distribution
Date;
fourth, concurrently, as follows:
(1) if the Group 1 Interest Remittance Amount is insufficient to pay
the Class A-1 Certificates' Accrued Certificate Interest for such
Distribution Date in priority second above, from the remaining Group 2
Interest Remittance Amount and Group 3 Interest Remittance Amount, to the
Class A-1 Certificates, to cover such shortfall for such Distribution
Date;
(2) if the Group 2 Interest Remittance Amount is insufficient to pay
the Class A-2 Certificates' Accrued Certificate Interest for such
Distribution Date in priority second above, from the remaining Group 1
Interest Remittance Amount and Group 3 Interest Remittance Amount, to the
Class A-2 Certificates, to cover such shortfall for such Distribution
Date; and
(3) if the Group 3 Interest Remittance Amount is insufficient to pay
the Class A-3A, Class A-3B and Class A-3C Certificates' applicable Accrued
Certificate Interest for such Distribution Date in priority second above,
concurrently, from the remaining Group 1 Interest Remittance Amount and
Group 2 Interest Remittance Amount, to the Class A-3A, Class A-3B and
Class A-3C Certificates, pro rata, to cover such shortfall for such
Distribution Date;
fifth, concurrently, as follows:
(1) if the Group 1 Interest Remittance Amount is insufficient to pay
the Class A-1 Certificates' Interest Carry Forward Amount for such
Distribution Date in priority third above, from the remaining Group 2
Interest Remittance Amount and Group 3 Interest Remittance Amount, to the
Class A-1 Certificates, to cover such shortfall for such Distribution
Date;
(2) if the Group 2 Interest Remittance Amount is insufficient to pay
the Class A-2 Certificates' Interest Carry Forward Amount for such
Distribution Date in priority third above, from the remaining Group 1
Interest Remittance Amount and Group 3 Interest Remittance Amount, to the
Class A-2 Certificates, to cover such shortfall for such Distribution
Date; and
(3) if the Group 3 Interest Remittance Amount is insufficient to pay
the Class A-3A, Class A-3B and Class A-3C Certificates' applicable
Interest Carry Forward Amount for such Distribution Date in priority third
above, concurrently, from the remaining Group 1 Interest Remittance Amount
and Group 2 Interest Remittance Amount, to the Class A-3A, Class A-3B and
Class A-3C Certificates, pro rata, to cover such shortfall for such
Distribution Date;
sixth, to the Class M-1 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
seventh, to the Class M-2 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
eighth, to the Class M-3 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
ninth, to the Class M-4 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
tenth, to the Class M-5 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
57
eleventh, to the Class M-6 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
twelfth, to the Class M-7 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
thirteenth, to the Class M-8 Certificates, the Accrued Certificate
Interest thereon for such Distribution Date;
fourteenth, to the Class M-9 Certificates, the Accrued Certificate
Interest thereon for such Distribution Date;
fifteenth, to the Class B Certificates, the Accrued Certificate Interest
thereon for such Distribution Date; and
sixteenth, the amount, if any, of the Interest Remittance Amount remaining
after application with respect to the priorities set forth above which is
defined below as the "Monthly Excess Interest Amount" for such Distribution
Date, will be applied as described below under "--Application of Monthly Excess
Cashflow Amounts."
"Accrued Certificate Interest" for each Class of Offered Certificates and
the Class B Certificates and each Distribution Date means an amount equal to the
interest accrued during the related Interest Accrual Period at the applicable
Certificate Interest Rate on the Certificate Principal Balance of such class of
Certificates, minus each class's Interest Percentage of shortfalls caused by the
Relief Act or similar state laws for such Distribution Date.
The "Group 1 Interest Remittance Amount" means as of any Distribution
Date, the excess of:
(A) the sum, without duplication, of:
(i) all interest collected or advanced with respect to the
related Collection Period on the group 1 Mortgage Loans received by the
Servicer on or prior to the Determination Date for such Distribution Date
(less the Servicing Fee for such Mortgage Loans, certain amounts available
for reimbursement of Advances and Servicing Advances with respect to such
Mortgage Loans as described above under "The Pooling and Servicing
Agreement--Advances" and certain other reimbursable expenses or
indemnification payments pursuant to the Pooling and Servicing Agreement);
(ii) all Compensating Interest paid by the Servicer on such
Distribution Date with respect to the group 1 Mortgage Loans;
(iii) the portion of any payment in connection with any principal
prepayment (other than any Prepayment Interest Excess), substitution,
Purchase Price, Termination Price, liquidation proceeds (net of certain
expenses) or insurance proceeds relating to interest with respect to the
group 1 Mortgage Loans received during the related Prepayment Period; and
(iv) the portion of any Reimbursement Amount relating to interest
on the group 1 Mortgage Loans received during the related Prepayment Period;
over (B) the product of (x) any amounts payable to the Swap Provider
(including any Net Swap Payment and any Swap Termination Payment owed to the
Swap Provider but excluding any Swap Termination Payment owed to the Swap
Provider resulting from a Swap Provider Trigger Event) multiplied by (y) a
fraction, the numerator of which is the aggregate Principal Balance of the group
1 Mortgage Loans as of the first day of the related Collection Period and the
denominator of which is the Pool Balance as of the first day of the related
Collection Period.
The "Group 2 Interest Remittance Amount" means as of any Distribution
Date, the excess of
(A) the sum, without duplication, of:
(i) all interest collected or advanced with respect to the
related Collection Period on the group 2 Mortgage Loans received by the
Servicer on or prior to the Determination Date for such Distribution Date
(less the Servicing Fee for such Mortgage Loans, certain amounts available
for reimbursement of Advances and
58
Servicing Advances with respect to such Mortgage Loans as described above
under "The Pooling and Servicing Agreement--Advances" and certain other
reimbursable expenses or indemnification payments pursuant to the Pooling and
Servicing Agreement);
(ii) all Compensating Interest paid by the Servicer on such
Distribution Date with respect to the group 2 Mortgage Loans,
(iii) the portion of any payment in connection with any principal
prepayment (other than any Prepayment Interest Excess), substitution,
Purchase Price, Termination Price, liquidation proceeds (net of certain
expenses) or insurance proceeds relating to interest with respect to the
group 2 Mortgage Loans received during the related Prepayment Period; and
(iv) the portion of any Reimbursement Amount relating to interest
on the group 2 Mortgage Loans received during the related Prepayment Period;
over (B) the product of (x) any amounts payable to the Swap Provider
(including any Net Swap Payment and any Swap Termination Payment owed to the
Swap Provider but excluding any Swap Termination Payment owed to the Swap
Provider resulting from a Swap Provider Trigger Event) multiplied by (y) a
fraction, the numerator of which is the aggregate Principal Balance of the group
2 Mortgage Loans as of the first day of the related Collection Period and the
denominator of which is the Pool Balance as of the first day of the related
Collection Period.
The "Group 3 Interest Remittance Amount" means as of any Distribution
Date, the excess of
(A) the sum, without duplication, of:
(i) all interest collected or advanced with respect to the
related Collection Period on the group 3 Mortgage Loans received by the
Servicer on or prior to the Determination Date for such Distribution Date
(less the Servicing Fee for such Mortgage Loans, certain amounts available
for reimbursement of Advances and Servicing Advances with respect to such
Mortgage Loans as described above under "The Pooling and Servicing
Agreement--Advances" and certain other reimbursable expenses or
indemnification payments pursuant to the Pooling and Servicing Agreement);
(ii) all Compensating Interest paid by the Servicer on such
Distribution Date with respect to the group 3 Mortgage Loans,
(iii) the portion of any payment in connection with any principal
prepayment (other than any Prepayment Interest Excess), substitution,
Purchase Price, Termination Price, liquidation proceeds (net of certain
expenses) or insurance proceeds relating to interest with respect to the
group 3 Mortgage Loans received during the related Prepayment Period; and
(iv) the portion of any Reimbursement Amount relating to interest
on the group 3 Mortgage Loans received during the related Prepayment Period;
over (B) the product of (x) any amounts payable to the Swap Provider
(including any Net Swap Payment and any Swap Termination Payment owed to the
Swap Provider but excluding any Swap Termination Payment owed to the Swap
Provider resulting from a Swap Provider Trigger Event) multiplied by (y) a
fraction, the numerator of which is the aggregate Principal Balance of the group
3 Mortgage Loans as of the first day of the related Collection Period and the
denominator of which is the Pool Balance as of the first day of the related
Collection Period.
The "Interest Accrual Period" for any Distribution Date and each class of
Offered Certificates and the Class B Certificates will be the period from and
including the preceding Distribution Date, or in the case of the first
Distribution Date, from the Closing Date, through and including the day prior to
the current Distribution Date, and calculations of interest will be made on the
basis of the actual number of days in the Interest Accrual Period and on a
360-day year.
59
The "Interest Carry Forward Amount" means for any class of Offered
Certificates and the Class B Certificates and any Distribution Date, the sum of
(a) the excess, if any, of the Accrued Certificate Interest for such
Distribution Date over the amount in respect of interest actually distributed on
such class for such Distribution Date, (b) any remaining unpaid Interest Carry
Forward Amount from prior Distribution Dates and (c) interest on such remaining
Interest Carryforward Amount referred to in clause (b) at the applicable
Certificate Interest Rate on the basis of the actual number of days elapsed
since the prior Distribution Date.
The "Interest Percentage" is, with respect to any class of Offered
Certificates and the Class B Certificates and any Distribution Date, the ratio
(expressed as a decimal carried to six places) of the Accrued Certificate
Interest for such class to the Accrued Certificate Interest for all classes of
Offered Certificates and the Class B Certificates, in each case for that
Distribution Date and without regard to shortfalls caused by the Relief Act or
similar state laws.
The "Interest Remittance Amount" means as of any Distribution Date, the
sum of the Group 1 Interest Remittance Amount, the Group 2 Interest Remittance
Amount and the Group 3 Interest Remittance Amount.
Principal Distributions
For any Distribution Date (a) before the Stepdown Date or (b) as to which
a Trigger Event is in effect, the Principal Distribution Amount will be
allocated among and distributed in reduction of the Certificate Principal
Balances of the Certificates in the following order of priority:
first, concurrently, as follows:
(i) the Group 1 Senior Principal Distribution Amount to the Class
A-1 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
(ii) the Group 2 Senior Principal Distribution Amount to the
Class A-2 Certificates, until the Certificate Principal Balance thereof
has been reduced to zero; and
(iii) (a) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, the Group 3 Senior Principal
Distribution Amount to the Class A-3A, Class A-3B and Class A-3C
Certificates, in that order, until the Certificate Principal Balances
thereof have been reduced to zero; and
(b) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, the Group 3 Senior Principal
Distribution Amount to the Class A-3A, Class A-3B and Class A-3C
Certificates, pro rata, until the Certificate Principal Balances thereof
have been reduced to zero;
second, concurrently, as follows:
(i) concurrently, the Group 1 Senior Principal Distribution
Amount remaining after priority first above, pro rata, as follows:
(a) to the Class A-2 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and
(b) (1) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, to the Class A-3A, Class
A-3B and Class A-3C Certificates, in that order, until the
Certificate Principal Balances thereof have been reduced to zero;
and
(2) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, to the Class A-3A, Class
A-3B and Class A-3C Certificates, pro rata, until the Certificate
Principal Balances thereof have been reduced to zero; and
60
(ii) concurrently, the Group 2 Senior Principal Distribution
Amount remaining after priority first above, pro rata, as follows:
(a) to the Class A-1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and
(b) (1) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, to the Class A-3A, Class
A-3B and Class A-3C Certificates, in that order, until the
Certificate Principal Balances thereof have been reduced to zero;
and
(2) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, to the Class A-3A, Class
A-3B and Class A-3C Certificates, pro rata, until the Certificate
Principal Balances thereof have been reduced to zero; and
(iii) the Group 3 Senior Principal Distribution Amount remaining
after priority first above, concurrently, to the Class A-1 and Class A-2
Certificates, pro rata, until the Certificate Principal Balances thereof
have been reduced to zero;
third, to the Class M-1 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
fourth, to the Class M-2 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
fifth, to the Class M-3 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
sixth, to the Class M-4 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
seventh, to the Class M-5 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
eighth, to the Class M-6 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
ninth, to the Class M-7 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
tenth, to the Class M-8 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
eleventh, to the Class M-9 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero;
twelfth, to the Class B Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; and
thirteenth, any remaining Principal Distribution Amount will be
distributed as part of the Monthly Excess Cashflow Amount as described below
under "--Application of Monthly Excess Cashflow Amounts."
For any Distribution Date (a) on or after the Stepdown Date and (b) as
long as a Trigger Event is not in effect, the Principal Distribution Amount will
be allocated among and distributed in reduction of the Certificate Principal
Balances of the Certificates in the following order of priority:
first, concurrently, as follows:
(i) the Group 1 Senior Principal Distribution Amount to the Class
A-1 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
(ii) the Group 2 Senior Principal Distribution Amount to the
Class A-2 Certificates, until the Certificate Principal Balance thereof
has been reduced to zero; and
61
(iii) (a) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, the Group 3 Senior Principal
Distribution Amount to the Class A-3A, Class A-3B and Class A-3C
Certificates, in that order, until the Certificate Principal Balances
thereof have been reduced to zero; and
(b) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, the Group 3 Senior Principal
Distribution Amount to the Class A-3A, Class A-3B and Class A-3C
Certificates, pro rata, until the Certificate Principal Balances thereof
have been reduced to zero;
second, concurrently, as follows:
(i) concurrently, the Group 1 Senior Principal Distribution
Amount remaining after priority first above, pro rata, as follows:
(a) to the Class A-2 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero, up to an
amount equal to the Group 2 Senior Principal Distribution Amount
not paid pursuant to priority first above; and
(b) (1) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, up to an amount equal
to the Group 3 Senior Principal Distribution Amount not paid
pursuant to priority first above, to the Class A-3A, Class A-3B
and Class A-3C Certificates, in that order, until the Certificate
Principal Balances thereof have been reduced to zero; and
(2) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, up to an amount equal
to the Group 3 Senior Principal Distribution Amount not paid
pursuant to priority first above, to the Class A-3A, Class A-3B
and Class A-3C Certificates, pro rata, until the Certificate
Principal Balances thereof have been reduced to zero; and
(ii) concurrently, the Group 2 Senior Principal Distribution
Amount remaining after priority first above, pro rata, as follows:
(a) to the Class A-1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero, up to an amount
equal to the Group 1 Senior Principal Distribution Amount not paid
pursuant to priority first above;
(b) (1) with respect to any Distribution Date prior to the
Subordination Depletion Date, sequentially, up to an amount equal
to the Group 3 Senior Principal Distribution Amount not paid
pursuant to priority first above, to the Class A-3A, Class A-3B
and Class A-3C Certificates, in that order, until the Certificate
Principal Balances thereof have been reduced to zero; and
(2) with respect to any Distribution Date on or after the
Subordination Depletion Date, concurrently, up to an amount equal
to the Group 3 Senior Principal Distribution Amount not paid
pursuant to priority first above, to the Class A-3A, Class A-3B
and Class A-3C Certificates, pro rata, until the Certificate
Principal Balances thereof have been reduced to zero; and
(iii) concurrently, the Group 3 Senior Principal Distribution
Amount remaining after priority first above, pro rata, as follows:
(a) to the Class A-1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero, up to an amount
equal to the Group 1 Senior Principal Distribution Amount not paid
pursuant to priority first above; and
62
(b) to the Class A-2 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero, up to an amount
equal to the Group 2 Senior Principal Distribution Amount not paid
pursuant to priority first above;
third, sequentially, to the Class M-1, Class M-2 and Class M-3
Certificates, in that order, up to the Sequential Mezzanine Principal
Distribution Amount, until the Certificate Principal Balances thereof have been
reduced to zero;
fourth, to the Class M-4 Certificates, up to the Class M-4 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
fifth, to the Class M-5 Certificates, up to the Class M-5 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
sixth, to the Class M-6 Certificates, up to the Class M-6 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
seventh, to the Class M-7 Certificates, up to the Class M-7 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
eighth, to the Class M-8 Certificates, up to the Class M-8 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
ninth, to the Class M-9 Certificates, up to the Class M-9 Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero;
tenth, to the Class B Certificates, up to the Class B Principal
Distribution Amount, until the Certificate Principal Balance thereof has been
reduced to zero; and
eleventh, any remaining Principal Distribution Amount will be distributed
as part of the Monthly Excess Cashflow Amount as described below under
"--Application of Monthly Excess Cashflow Amounts."
For purposes of the foregoing, the following terms will have the
respective meanings set forth below.
The "Certificate Principal Balance" with respect to any class of
Certificates (other than the Class CE, Class R and Class R-X Certificates, which
have no Certificate Principal Balance) and any Distribution Date, will equal the
principal balance of that class on the date of the initial issuance of the
Certificates as reduced, but not below zero, by:
o all amounts distributed on previous Distribution Dates on that class on
account of principal; and
o any Applied Realized Loss Amounts allocated to that class for previous
Distribution Dates;
and increased by:
o any Subsequent Recoveries allocated to that class for previous
Distribution Dates.
"Sequential Mezzanine Principal Distribution Amount" means as of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the sum of (i) the sum of the Certificate
Principal Balances of the Senior Certificates (after taking into account the
payment of the Senior Principal Distribution Amount on such Distribution Date)
and (ii) the sum of the Certificate Principal Balances of the Sequential
Mezzanine Certificates immediately prior to such Distribution Date over (y) the
lesser of (a) the product of (i) approximately 70.90% and (ii) the Pool Balance
as of the last day of the related Collection Period after giving effect to
principal prepayments in the related Prepayment Period and (b) the amount by
which the Pool Balance as of the last day of the related Collection Period after
giving effect to principal prepayments in the related Prepayment Period exceeds
the product of (i) 0.50% and (ii) the Pool Balance on the Cut-off Date.
63
"Class M-4 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date) and (iii) 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)
approximately 74.70% and (ii) the Pool Balance as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period and (b) the amount by which the Pool Balance as of the last
day of the related Collection Period after giving effect to principal
prepayments in the related Prepayment Period exceeds the product of (i) 0.50%
and (ii) the Pool Balance on the Cut-off Date.
"Class M-5 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date), (iii) 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 (iv) 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) approximately 78.40% and (ii) the Pool Balance as of the last day
of the related Collection Period after giving effect to principal prepayments in
the related Prepayment Period and (b) the amount by which the Pool Balance as of
the last day of the related Collection Period after giving effect to principal
prepayments in the related Prepayment Period exceeds the product of (i) 0.50%
and (ii) the Pool Balance on the Cut-off Date.
"Class M-6 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date), (iii) 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), (iv) 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 (v) the Certificate Principal Balance of
the Class M-6 Certificates immediately prior to such Distribution Date over (y)
the lesser of (a) the product of (i) approximately 81.70% and (ii) the Pool
Balance as of the last day of the related Collection Period after giving effect
to principal prepayments in the related Prepayment Period and (b) the amount by
which the Pool Balance as of the last day of the related Collection Period after
giving effect to principal prepayments in the related Prepayment Period exceeds
the product of (i) 0.50% and (ii) the Pool Balance on the Cut-off Date.
"Class M-7 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date), (iii) 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), (iv) 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), (v) the Certificate Principal Balance of the
Class M-6 Certificates (after taking into account the payment of the Class M-6
Principal Distribution Amount on such Distribution Date) and (vi) the
Certificate Principal Balance of the Class M-7 Certificates immediately prior to
such Distribution Date over (y) the lesser of (a) the product of (i)
approximately 84.90% and (ii) the Pool Balance as of the last day of the related
Collection Period after giving
64
effect to principal prepayments in the related Prepayment Period and (b) the
amount by which the Pool Balance as of the last day of the related Collection
Period after giving effect to principal prepayments in the related Prepayment
Period exceeds the product of (i) 0.50% and (ii) the Pool Balance on the Cut-off
Date.
"Class M-8 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date), (iii) 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), (iv) 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), (v) the Certificate Principal Balance of the
Class M-6 Certificates (after taking into account the payment of the Class M-6
Principal Distribution Amount on such Distribution Date), (vi) the Certificate
Principal Balance of the Class M-7 Certificates (after taking into account the
payment of the Class M-7 Principal Distribution Amount on such Distribution
Date) and (vii) the Certificate Principal Balance of the Class M-8 Certificates
immediately prior to such Distribution Date over (y) the lesser of (a) the
product of (i) approximately 87.80% and (ii) the Pool Balance as of the last day
of the related Collection Period after giving effect to principal prepayments in
the related Prepayment Period and (b) the amount by which the Pool Balance as of
the last day of the related Collection Period after giving effect to principal
prepayments in the related Prepayment Period exceeds the product of (i) 0.50%
and (ii) the Pool Balance on the Cut-off Date.
"Class M-9 Principal Distribution Amount" means as of any Distribution
Date on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the sum of the Certificate Principal
Balances of the Senior Certificates (after taking into account the payment of
the Senior Principal Distribution Amount on such Distribution Date), (ii) the
sum of the Certificate Principal Balances of the Sequential Mezzanine
Certificates (after taking into account the payment of the Sequential Mezzanine
Principal Distribution Amount on such Distribution Date), (iii) 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), (iv) 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), (v) the Certificate Principal Balance of the
Class M-6 Certificates (after taking into account the payment of the Class M-6
Principal Distribution Amount on such Distribution Date), (vi) the Certificate
Principal Balance of the Class M-7 Certificates (after taking into account the
payment of the Class M-7 Principal Distribution Amount on such Distribution
Date), (vii) the Certificate Principal Balance of the Class M-8 Certificates
(after taking into account the payment of the Class M-8 Principal Distribution
Amount on such Distribution Date) and (viii) the Certificate Principal Balance
of the Class M-9 Certificates immediately prior to such Distribution Date over
(y) the lesser of (a) the product of (i) approximately 90.30% and (ii) the Pool
Balance as of the last day of the related Collection Period after giving effect
to principal prepayments in the related Prepayment Period and (b) the amount by
which the Pool Balance as of the last day of the related Collection Period after
giving effect to principal prepayments in the related Prepayment Period exceeds
the product of (i) 0.50% and (ii) the Pool Balance on the Cut-off Date.
"Class B Principal Distribution Amount" means as of any Distribution Date
on or after the Stepdown Date and as long as a Trigger Event is not in effect,
the excess of (x) the sum of (i) the sum of the Certificate Principal Balances
of the Senior Certificates (after taking into account the payment of the Senior
Principal Distribution Amount on such Distribution Date), (ii) the sum of the
Certificate Principal Balances of the Sequential Mezzanine Certificates (after
taking into account the payment of the Sequential Mezzanine Principal
Distribution Amount on such Distribution Date), (iii) 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), (iv) 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), (v) the Certificate Principal Balance of the Class M-6
Certificates (after taking into account the payment of the Class M-6 Principal
Distribution Amount on such Distribution Date), (vi) the Certificate Principal
Balance of the Class M-7 Certificates (after taking into account the payment of
the Class M-7 Principal Distribution Amount on such Distribution Date), (vii)
the Certificate Principal Balance of the Class M-8 Certificates (after taking
into account the payment of the Class M-8 Principal Distribution Amount on such
Distribution Date), (viii) the Certificate Principal Balance of the Class M-9
Certificates (after taking into account the payment of the Class M-9 Principal
Distribution Amount on such Distribution Date) and
65
(ix) the Certificate Principal Balance of the Class B Certificates immediately
prior to such Distribution Date over (y) the lesser of (a) the product of (i)
approximately 92.70% and (ii) the Pool Balance as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period and (b) the amount by which the Pool Balance as of the last
day of the related Collection Period after giving effect to principal
prepayments in the related Prepayment Period exceeds the product of (i) 0.50%
and (ii) the Pool Balance on the Cut-off Date.
"Credit Enhancement Percentage" for any class of Certificates and any
Distribution Date is the percentage obtained by dividing (x) the sum of (i) the
aggregate Certificate Principal Balance of the class or classes of Certificates
with a lower distribution priority than such class before taking into account
the distribution of the Principal Distribution Amount on such Distribution Date
and (ii) the Overcollateralization Amount after taking into account the
distribution of the Principal Distribution Amount as of the prior Distribution
Date by (y) the Pool Balance as of the last day of the related Collection Period
after giving effect to principal prepayments in the related Prepayment Period.
"Extra Principal Distribution Amount" means as of any Distribution Date,
the lesser of (x) the Monthly Excess Interest Amount for that Distribution Date
and (y) the Overcollateralization Deficiency for that Distribution Date.
"Group 1 Principal Percentage" means for any Distribution Date and the
Group 1 Certificates, the percentage equivalent to a fraction, the numerator of
which is the Principal Remittance Amount allocable to the group 1 Mortgage Loans
for such Distribution Date, and the denominator of which is equal to the
Principal Remittance Amount for such Distribution Date.
"Group 1 Senior Principal Distribution Amount" means as of any
Distribution Date (i) before the Stepdown Date or as to which a Trigger Event is
in effect, the Group 1 Principal Percentage of the Principal Distribution Amount
and (ii) on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (a) the Certificate Principal Balance of the Group 1
Certificates immediately prior to that Distribution Date over (b) the lesser of
(x) the product of (1) approximately 50.60% and (2) the aggregate Principal
Balance of the group 1 Mortgage Loans as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period and (y) the amount by which the aggregate Principal Balance of
the group 1 Mortgage Loans as of the last day of the related Collection Period
after giving effect to principal prepayments in the related Prepayment Period
exceeds the product of (1) 0.50% and (2) the aggregate Principal Balance of the
group 1 Mortgage Loans on the Cut-off Date.
"Group 2 Principal Percentage" means for any Distribution Date and the
Group 2 Certificates, the percentage equivalent to a fraction, the numerator of
which is the Principal Remittance Amount allocable to the group 2 Mortgage Loans
for that Distribution Date, and the denominator of which is equal to the
Principal Remittance Amount for that Distribution Date.
"Group 2 Senior Principal Distribution Amount" means as of any
Distribution Date (i) before the Stepdown Date or as to which a Trigger Event is
in effect, the Group 2 Principal Percentage of the Principal Distribution Amount
and (ii) on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (a) the aggregate Certificate Principal Balance of the
Group 2 Certificates immediately prior to that Distribution Date over (b) the
lesser of (x) the product of (1) approximately 50.60% and (2) the aggregate
Principal Balance of the group 2 Mortgage Loans as of the last day of the
related Collection Period after giving effect to principal prepayments in the
related Prepayment Period and (y) the amount by which the aggregate Principal
Balance of the group 2 Mortgage Loans as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period exceeds the product of (1) 0.50% and (2) the aggregate
Principal Balance of the group 2 Mortgage Loans on the Cut-off Date.
"Group 3 Principal Percentage" means for any Distribution Date and the
Group 3 Certificates, the percentage equivalent to a fraction, the numerator of
which is the Principal Remittance Amount allocable to the group 3 Mortgage Loans
for that Distribution Date, and the denominator of which is equal to the
Principal Remittance Amount for that Distribution Date.
66
"Group 3 Senior Principal Distribution Amount" means as of any
Distribution Date (i) before the Stepdown Date or as to which a Trigger Event is
in effect, the Group 3 Principal Percentage of the Principal Distribution Amount
and (ii) on or after the Stepdown Date and as long as a Trigger Event is not in
effect, the excess of (a) the aggregate Certificate Principal Balance of the
Group 3 Certificates immediately prior to that Distribution Date over (b) the
lesser of (x) the product of (1) approximately 50.60% and (2) the aggregate
Principal Balance of the group 3 Mortgage Loans as of the last day of the
related Collection Period after giving effect to principal prepayments in the
related Prepayment Period and (y) the amount by which the aggregate Principal
Balance of the group 3 Mortgage Loans as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period exceeds the product of (1) 0.50% and (2) the aggregate
Principal Balance of the group 3 Mortgage Loans on the Cut-off Date.
"Overcollateralization Amount" means as of any Distribution Date the
excess, if any, of (x) the Pool Balance as of the last day of the related
Collection Period after giving effect to principal prepayments in the related
Prepayment Period over (y) the aggregate Certificate Principal Balance of all
classes of Certificates (after taking into account all distributions of
principal on that Distribution Date and the increase of any Certificate
Principal Balance as a result of Subsequent Recoveries).
"Overcollateralization Deficiency" means as of any Distribution Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount over (y) the
Overcollateralization Amount for that Distribution Date, calculated for this
purpose after taking into account the reduction on that Distribution Date of the
Certificate Principal Balances of all classes of Certificates resulting from the
distribution of the Principal Distribution Amount (but not the Extra Principal
Distribution Amount) on that Distribution Date, but prior to taking into account
any Applied Realized Loss Amounts on that Distribution Date.
"Overcollateralization Release Amount" means with respect to any
Distribution Date on or after the Stepdown Date on which a Trigger Event is not
in effect, the lesser of (x) the Principal Remittance Amount for that
Distribution Date and (y) the excess, if any, of (i) the Overcollateralization
Amount for that Distribution Date, assuming that 100% of the Principal
Remittance Amount is applied as a principal payment on the Certificates on that
Distribution Date over (ii) the Targeted Overcollateralization Amount. With
respect to any Distribution Date on which a Trigger Event is in effect, the
Overcollateralization Release Amount will be zero.
"Principal Distribution Amount" means as of any Distribution Date, the sum
of (i) the Principal Remittance Amount (minus the Overcollateralization Release
Amount, if any) and (ii) the Extra Principal Distribution Amount, if any.
"Principal Remittance Amount" means with respect to any Distribution Date,
the amount equal to the excess of:
(A) the sum (less certain amounts available for reimbursement of Advances
and Servicing Advances as described above under "The Pooling and Servicing
Agreement--Advances" and certain other reimbursable expenses or indemnification
payments pursuant to the Pooling and Servicing Agreement) of the following
amounts (without duplication) with respect to the Mortgage Loans:
(i) each payment of principal on a Mortgage Loan due during the
immediately preceding Collection Period and received by the Servicer on or
prior to the Determination Date for that Distribution Date, including any
Advances with respect thereto;
(ii) all full and partial principal prepayments received by the
Servicer during the related Prepayment Period;
(iii) the insurance proceeds, Subsequent Recoveries and
liquidation proceeds (net of certain expenses) allocable to principal
actually collected by the Servicer during the related Prepayment Period;
(iv) the portion of the Purchase Price allocable to principal of
all repurchased Defective Mortgage Loans with respect to that Prepayment
Period;
(v) any Substitution Adjustments received during the related
Prepayment Period; and
67
(vi) on the Distribution Date on which the Trust is to be
terminated in accordance with the Pooling and Servicing Agreement, that
portion of the Termination Price in respect of principal;
over (B) to the extent any amounts payable to the Swap Provider (including
any Net Swap Payment and any Swap Termination Payment owed to the Swap Provider
but excluding any Swap Termination Payment owed to the Swap Provider resulting
from a Swap Provider Trigger Event) exceed the Interest Remittance Amount for
such Distribution Date (without giving effect to clause (B) of the definitions
of "Group 1 Interest Remittance Amount," "Group 2 Interest Remittance Amount"
and "Group 3 Interest Remittance Amount"), the amount of such excess.
"Senior Principal Distribution Amount" means as of any Distribution Date,
the sum of the Group 1 Senior Principal Distribution Amount, the Group 2 Senior
Principal Distribution Amount and the Group 3 Senior Principal Distribution
Amount.
"60+ Day Delinquent Loan" means each Mortgage Loan (including each
Mortgage Loan in foreclosure and each Mortgage Loan for which the mortgagor has
filed for bankruptcy after the Closing Date) with respect to which any portion
of a Monthly Payment is, as of the last day of the prior Collection Period, two
months or more past due and each Mortgage Loan relating to an REO Property.
"Stepdown Date" means the earlier to occur of (i) the Distribution Date
following the Distribution Date on which the aggregate Certificate Principal
Balance of the Senior Certificates is reduced to zero and (ii) the later to
occur of (x) the Distribution Date in November 2009 and (y) the Distribution
Date on which the Credit Enhancement Percentage for the Senior Certificates is
greater than or equal to 49.40%.
"Subordination Depletion Date" means the Distribution Date on which (i)
the Certificate Principal Balances of the Class M Certificates and the
Certificate Principal Balance of the Class B Certificates is reduced to zero and
(ii) the Overcollateralization Amount is reduced to zero.
"Subsequent Recovery" means any amount (net of reimbursable expenses)
received on a Mortgage Loan subsequent to such Mortgage Loan being determined to
be a Liquidated Mortgage Loan that resulted in a Realized Loss in a prior month.
If Subsequent Recoveries are received, they will be included as part of the
Principal Remittance Amount for the following Distribution Date relating to the
Prepayment Period in which received and distributed in accordance with the
priorities described above. In addition, after giving effect to all
distributions on a Distribution Date, the Unpaid Realized Loss Amount for the
class of Subordinated Certificates then outstanding with the highest
distribution priority will be decreased by the amount of Subsequent Recoveries
until reduced to zero (with any remaining Subsequent Recoveries applied to
reduce the Unpaid Realized Loss Amount of the class with the next highest
distribution priority), and the Certificate Principal Balance of such class or
classes of Subordinated Certificates will be increased by the same amount.
"Targeted Overcollateralization Amount" means as of any Distribution Date,
(x) prior to the Stepdown Date, approximately 3.65% of the Pool Balance of the
Mortgage Loans on the Cut-off Date and (y) on and after the Stepdown Date, (i)
if a Trigger Event has not occurred, the greater of (a) approximately 7.30% of
the Pool Balance as of the last day of the related Collection Period after
giving effect to principal prepayments in the related Prepayment Period and (b)
0.50% of the Pool Balance of the Mortgage Loans on the Cut-off Date and (ii) if
a Trigger Event has occurred, the Targeted Overcollateralization Amount for the
immediately preceding Distribution Date.
A "Trigger Event" has occurred on a Distribution Date if:
(i) the three-month rolling average of 60+ Day Delinquent Loans (as a
percentage of the Pool Balance as of the last day of the related Collection
Period) equals or exceeds the applicable percentages of the Credit Enhancement
Percentage as set forth below for the most senior class of Class A, Class M and
Class B Certificates then outstanding;
68
Class Percentage
---------------------- --------------
Class A Certificates 40.85%
Class M-1 Certificates 49.10%
Class M-2 Certificates 60.25%
Class M-3 Certificates 69.35%
Class M-4 Certificates 79.75%
Class M-5 Certificates 93.45%
Class M-6 Certificates 110.30%
Class M-7 Certificates 133.65%
Class M-8 Certificates 165.45%
Class M-9 Certificates 208.10%
Class B Certificates 276.50%
or (ii) the aggregate amount of Realized Losses incurred since the Cut-off
Date through the last day of the related Collection Period (reduced by the
aggregate amount of Subsequent Recoveries received since the Cut-off Date
through the last day of the related Collection Period) divided by the Pool
Balance of the Mortgage Loans on the Cut-off Date exceeds the applicable
percentages set forth below with respect to that Distribution Date:
Distribution Date Occurring In Percentage
- ----------------------------------- -------------------------------------------
November 2008 through October 2009 1.85% for the first month, plus an
additional 1/12th of 2.30% for each
month thereafter
November 2009 through October 2010 4.15% for the first month, plus an
additional 1/12th of 2.30% for each
month thereafter
November 2010 through October 2011 6.45% for the first month, plus an
additional 1/12th of 1.85% for each
month thereafter
November 2011 through October 2012 8.30% for the first month, plus an
additional 1/12th of 1.00% for each
month thereafter
November 2012 and thereafter 9.30%
Allocation of Losses
A "Realized Loss" is:
o as to any Liquidated Mortgage Loan, its unpaid Principal
Balance less the net proceeds from the liquidation of, and any
insurance proceeds from, that Mortgage Loan and the related
Mortgaged Property which are applied to the Principal Balance of
that Mortgage Loan.
o as to any Mortgage Loan, a Deficient Valuation.
o as to any Mortgage Loan, a reduction in its Principal Balance
resulting from a Servicer Modification.
A "Liquidated Mortgage Loan" is any defaulted Mortgage Loan as to which
the Servicer has determined that all amounts which it expects to recover from or
on account of the Mortgage Loan have been recovered.
A Realized Loss may result from the personal bankruptcy of a mortgagor if
the bankruptcy court establishes the value of the Mortgaged Property at an
amount less than the then outstanding Principal Balance of the Mortgage Loan
secured by that Mortgaged Property and reduces the secured debt to such value.
In such case, the Trust, as the holder of the Mortgage Loan, would become an
unsecured creditor to the extent of the difference between the outstanding
Principal Balance of the Mortgage Loan and the reduced secured debt (the
difference, a "Deficient Valuation").
If a Mortgage Loan is in default, or if default is reasonably foreseeable,
the Servicer may permit a modification of the Mortgage Loan to reduce its
Principal Balance and/or extend its term to a term not longer than the latest
maturity date of any other Mortgage Loan (any such modification, a "Servicer
Modification"). Any such
69
principal reduction will constitute a Realized Loss at the time of the
reduction. An extension of the term will not result in a Realized Loss unless
coupled with a principal reduction.
Realized Losses will, in effect, be absorbed first by the Class CE
Certificates through the application of the Monthly Excess Cashflow Amount to
fund the deficiency, as well as through a reduction in the Overcollateralization
Amount. In addition, Net Swap Payments from the Swap Provider may be used to pay
Realized Losses as described under "--Interest Rate Swap Agreement, the Swap
Provider and the Swap Account" below.
If, after giving effect to the distribution of the Principal Distribution
Amount and any Net Swap Payment from the Swap Provider on any Distribution Date
and the increase of any Certificate Principal Balances as a result of Subsequent
Recoveries, the aggregate Certificate Principal Balance of the Certificates
exceeds the Pool Balance as of the end of the related Collection Period after
giving effect to principal prepayments in the related Prepayment Period, the
resulting excess (the "Applied Realized Loss Amount") will be allocated
sequentially to the Class B, Class M-9, Class M-8, Class M-7, Class M-6, Class
M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, until their
respective Certificate Principal Balances are reduced to zero. The Certificate
Principal Balances of the Senior Certificates will not be reduced by any Applied
Realized Loss Amounts; however, under certain loss scenarios, there will not be
enough interest and principal on the Mortgage Loans to pay the Senior
Certificates all interest and principal amounts to which they are entitled. Any
reduction of a Certificate Principal Balance will not be reversed or reinstated
(except in the case of Subsequent Recoveries). However, on future Distribution
Dates, Certificateholders of the related class may receive payments up to the
Unpaid Realized Loss Amount for such class as described under "--Application of
Monthly Excess Cashflow Amounts" or from the Swap Account, according to the
priorities set forth under "--Interest Rate Swap Agreement, the Swap Provider
and the Swap Account" below. These subsequent payments will be applied
sequentially to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class
M-6, Class M-7, Class M-8, Class M-9 and Class B Certificates.
Application of Monthly Excess Cashflow Amounts
The weighted average Net Mortgage Interest Rate for the Mortgage Loans is
generally expected to be higher than the weighted average of the Certificate
Interest Rates on the Certificates, thus generating certain excess interest
collections which, in the absence of losses, will not be necessary to fund
interest distributions on the Certificates. This excess interest for a
Collection Period less any Net Swap Payment payable to the Swap Provider and any
Swap Termination Payment (not resulting from a Swap Provider Trigger Event)
payable to the Swap Provider, together with interest on the
Overcollateralization Amount itself, is the "Monthly Excess Interest Amount."
The "Net Mortgage Interest Rate" for each Mortgage Loan is the applicable
Mortgage Interest Rate less the sum of (i) the Servicing Fee Rate and (ii) the
Credit Risk Manager Fee Rate.
If Realized Losses occur that are not covered by the Monthly Excess
Cashflow Amount and any Net Swap Payment from the Swap Provider, these Realized
Losses will result in an Overcollateralization Deficiency (since they will
reduce the Pool Balance without giving rise to a corresponding reduction of the
aggregate Certificate Principal Balance of the Certificates). The cashflow
priorities in this situation increase the Extra Principal Distribution Amount
(subject to the availability of any Monthly Excess Cashflow Amount in subsequent
months) for the purpose of re-establishing the Overcollateralization Amount at
the then-required Targeted Overcollateralization Amount.
On and after the Stepdown Date and assuming that a Trigger Event is not in
effect, the Targeted Overcollateralization Amount may be permitted to decrease
or "stepdown." If the Targeted Overcollateralization Amount is permitted to
stepdown on a Distribution Date, the cashflow priorities of this transaction
permit a portion of the Principal Remittance Amount for that Distribution Date
not to be passed through as a distribution of principal on the Certificates on
that Distribution Date. This has the effect of decelerating the amortization of
the Certificates relative to the Pool Balance, thereby reducing the actual level
of the Overcollateralization Amount to the new, lower Targeted
Overcollateralization Amount. This portion of the Principal Remittance Amount
not distributed as principal on the Certificates therefore releases a limited
portion of the overcollateralization from the Trust Fund.
On any Distribution Date, the sum of the Monthly Excess Interest Amount,
the Overcollateralization Release Amount and any portion of the Principal
Distribution Amount (without duplication) remaining after
70
principal distributions on the Certificates is the "Monthly Excess Cashflow
Amount," which is required to be applied in the following order of priority (the
"Monthly Excess Cashflow Allocation") on that Distribution Date:
(i) to the Senior Certificates, pro rata, any remaining Accrued
Certificate Interest for such classes for that Distribution Date;
(ii) to the Senior Certificates, pro rata, any Interest Carry
Forward Amounts for such classes for that Distribution Date;
(iii) to the Class M-1 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(iv) to the Class M-1 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(v) to the Class M-1 Certificates, any Class M-1 Realized Loss
Amortization Amount for that Distribution Date;
(vi) to the Class M-2 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(vii) to the Class M-2 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(viii) to the Class M-2 Certificates, any Class M-2 Realized Loss
Amortization Amount for that Distribution Date;
(ix) to the Class M-3 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(x) to the Class M-3 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xi) to the Class M-3 Certificates, any Class M-3 Realized Loss
Amortization Amount for that Distribution Date;
(xii) to the Class M-4 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xiii) to the Class M-4 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xiv) to the Class M-4 Certificates, any Class M-4 Realized Loss
Amortization Amount for that Distribution Date;
(xv) to the Class M-5 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xvi) to the Class M-5 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xvii) to the Class M-5 Certificates, any Class M-5 Realized Loss
Amortization Amount for that Distribution Date;
(xviii) to the Class M-6 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
71
(xix) to the Class M-6 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xx) to the Class M-6 Certificates, any Class M-6 Realized Loss
Amortization Amount for that Distribution Date;
(xxi) to the Class M-7 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xxii) to the Class M-7 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xxiii) to the Class M-7 Certificates, any Class M-7 Realized
Loss Amortization Amount for that Distribution Date;
(xxiv) to the Class M-8 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xxv) to the Class M-8 Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xxvi) to the Class M-8 Certificates, any Class M-8 Realized Loss
Amortization Amount for that Distribution Date;
(xxvii) to the Class M-9 Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xxviii) to the Class M-9 Certificates, any Interest Carry
Forward Amount thereon for that Distribution Date;
(xxix) to the Class M-9 Certificates, any Class M-9 Realized Loss
Amortization Amount for that Distribution Date;
(xxx) to the Class B Certificates, any remaining Accrued
Certificate Interest thereon for that Distribution Date;
(xxxi) to the Class B Certificates, any Interest Carry Forward
Amount thereon for that Distribution Date;
(xxxii) to the Class B Certificates, any Class B Realized Loss
Amortization Amount for that Distribution Date;
(xxxiii) to the Cap Carryover Reserve Account, in respect of
amounts otherwise distributable to the Class CE Certificates, an amount up
to the aggregate of any Cap Carryover Amounts for such Distribution Date;
(xxxiv) to the Swap Account, any Swap Termination Payments
resulting from a Swap Provider Trigger Event; and
(xxxv) to the Class CE Certificates, in the amounts specified in
the Pooling and Servicing Agreement.
For purposes of the foregoing, the following terms will have the
respective meanings set forth below.
"Class M-1 Realized Loss Amortization Amount" means as to the Class M-1
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-1 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (iv) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
72
"Class M-2 Realized Loss Amortization Amount" means as to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-2 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (vii) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-3 Realized Loss Amortization Amount" means as to the Class M-3
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-3 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (x) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-4 Realized Loss Amortization Amount" means as to the Class M-4
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-4 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xiii) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-5 Realized Loss Amortization Amount" means as to the Class M-5
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-5 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xvi) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-6 Realized Loss Amortization Amount" means as to the Class M-6
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-6 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xix) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-7 Realized Loss Amortization Amount" means as to the Class M-7
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-7 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xxii) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-8 Realized Loss Amortization Amount" means as to the Class M-8
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-8 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xxv) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class M-9 Realized Loss Amortization Amount" means as to the Class M-9
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-9 Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xxviii) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Class B Realized Loss Amortization Amount" means as to the Class B
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class B Certificates as of that Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in clauses (i) through (xxxi) of the Monthly Excess
Cashflow Allocation for that Distribution Date.
"Realized Loss Amortization Amount" means each of the Class M-1 Realized
Loss Amortization Amount, the Class M-2 Realized Loss Amortization Amount, the
Class M-3 Realized Loss Amortization Amount, the Class M-4 Realized Loss
Amortization Amount, the Class M-5 Realized Loss Amortization Amount, the Class
M-6 Realized Loss Amortization Amount, the Class M-7 Realized Loss Amortization
Amount, the Class M-8 Realized Loss Amortization Amount, the Class M-9 Realized
Loss Amortization Amount and the Class B Realized Loss Amortization Amount.
"Unpaid Realized Loss Amount" means for any class of Subordinated
Certificates and as to any Distribution Date, the excess of (x) the cumulative
amount of related Applied Realized Loss Amounts allocated to that class for all
prior Distribution Dates, as described under "--Allocation of Losses" above,
over (y) the sum of (a) the cumulative amount of any Subsequent Recoveries
allocated to that class, (b) the cumulative amount of related Realized Loss
Amortization Amounts for that class for all prior Distribution Dates and (c) the
cumulative
73
amount of Unpaid Realized Loss Amounts reimbursed to such class for all prior
Distribution Dates out of funds in the Swap Account.
Certificate Interest Rates
Interest for each Distribution Date will accrue on the Offered
Certificates and the Class B Certificates during the related Interest Accrual
Period at a per annum rate (the "Certificate Interest Rate") equal to the least
of (i) One-Month LIBOR plus the applicable certificate margin set forth in the
table beginning on page 7, (ii) the applicable Maximum Rate Cap (the lesser of
(i) and (ii) for each such class, the "Pass-Through Rate") and (iii) the
applicable Cap for such Distribution Date. During each Interest Accrual Period
relating to the Distribution Dates after the Optional Termination Date, each of
the certificate margins will be "stepped-up" to the applicable margin set forth
in the table beginning on page 7 if the optional termination right is not
exercised.
The "Group 1 Cap" for any Distribution Date and for the Group 1
Certificates will be (a) a per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Mortgage Interest Rates for the group 1 Mortgage
Loans, weighted on the basis of the Principal Balances of the group 1 Mortgage
Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) any Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event) and the denominator of which is the Pool Balance as of
the first day of the related Collection Period.
The "Group 1 Maximum Rate Cap" for any Distribution Date and for the Group
1 Certificates will be a (a) per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Maximum Mortgage Interest Rates for the group 1
Mortgage Loans, weighted on the basis of the Principal Balances of the group 1
Mortgage Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) any Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event), and the denominator of which is equal to the Pool
Balance as of the first day of the related Collection Period plus (c) a
percentage, expressed as a per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is equal to any Net Swap
Payment made by the Swap Provider and the denominator of which is equal to the
Pool Balance as of the first day of the related Collection Period.
The "Group 2 Cap" for any Distribution Date and for the Group 2
Certificates will be (a) a per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Mortgage Interest Rates for the group 2 Mortgage
Loans, weighted on the basis of the Principal Balances of the group 2 Mortgage
Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) any Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event) and the denominator of which is the Pool Balance as of
the first day of the related Collection Period.
The "Group 2 Maximum Rate Cap" for any Distribution Date and for the Group
2 Certificates will be a (a) per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Maximum Mortgage Interest Rates for the group 2
Mortgage Loans, weighted on the basis of the Principal Balances of the group 2
Mortgage Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) any Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event), and the denominator of which is equal to the Pool
Balance as of the first day of the related Collection Period
74
plus (c) a percentage, expressed as a per annum rate (subject to adjustment
based on the actual number of days elapsed in the related Interest Accrual
Period), calculated as a fraction, the numerator of which is equal to any Net
Swap Payment made by the Swap Provider and the denominator of which is equal to
the Pool Balance as of the first day of the related Collection Period.
The "Group 3 Cap" for any Distribution Date and for the Group 3
Certificates will be (a) a per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Mortgage Interest Rates for the group 3 Mortgage
Loans, weighted on the basis of the Principal Balances of the group 3 Mortgage
Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) the Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event) and the denominator of which is the Pool Balance as of
the first day of the related Collection Period.
The "Group 3 Maximum Rate Cap" for any Distribution Date and for the Group
3 Certificates will be a (a) per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period) equal to
the weighted average of the Net Maximum Mortgage Interest Rates for the group 3
Mortgage Loans, weighted on the basis of the Principal Balances of the group 3
Mortgage Loans as of the first day of the related Collection Period minus (b) a
percentage, expressed as a per annum rate (subject to an adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is the sum of (i) any Net Swap
Payment owed to the Swap Provider and (ii) any Swap Termination Payment owed to
the Swap Provider (other than any Swap Termination Payment resulting from a Swap
Provider Trigger Event), and the denominator of which is equal to the Pool
Balance as of the first day of the related Collection Period plus (c) a
percentage, expressed as a per annum rate (subject to adjustment based on the
actual number of days elapsed in the related Interest Accrual Period),
calculated as a fraction, the numerator of which is equal to any Net Swap
Payment made by the Swap Provider and the denominator of which is equal to the
Pool Balance as of the first day of the related Collection Period.
The "Pool Cap" for any Distribution Date and for the Class M and Class B
Certificates will be a per annum rate equal to the weighted average of the Group
1 Cap, the Group 2 Cap and the Group 3 Cap, weighted on the basis of the related
Group Subordinate Amount.
The "Pool Maximum Rate Cap" for any Distribution Date and for the Class M
and Class B Certificates will be a per annum rate equal to the weighted average
of the Group 1 Maximum Rate Cap, the Group 2 Maximum Rate Cap and the Group 3
Maximum Rate Cap, weighted on the basis of the related Group Subordinate Amount.
Each of the Group 1 Cap, the Group 2 Cap, the Group 3 Cap and the Pool Cap
are sometimes referred to in this free writing prospectus as a "Cap" and each of
the Group 1 Maximum Rate Cap, the Group 2 Maximum Rate Cap, the Group 3 Maximum
Rate Cap and the Pool Maximum Rate Cap are sometimes referred to in this free
writing prospectus as a "Maximum Rate Cap."
The "Net Maximum Mortgage Interest Rate" for each Adjustable-Rate Mortgage
Loan is the applicable Maximum Mortgage Interest Rate and for each Fixed-Rate
Mortgage Loan is the Mortgage Interest Rate for such Mortgage Loan, in each case
less the sum of (i) the Servicing Fee Rate and (ii) the Credit Risk Manager Fee
Rate.
The "Group Subordinate Amount" for any Distribution Date and (i) the group
1 Mortgage Loans, will be equal to the excess of the aggregate Principal Balance
of the group 1 Mortgage Loans as of the first day of the related Collection
Period over the Certificate Principal Balance of the Group 1 Certificates
immediately prior to that Distribution Date, (ii) the group 2 Mortgage Loans,
will be equal to the excess of the aggregate Principal Balance of the group 2
Mortgage Loans as of the first day of the related Collection Period over the
Certificate Principal Balance of the Group 2 Certificates immediately prior to
that Distribution Date and (iii) the group 3 Mortgage Loans, will be equal to
the excess of the aggregate Principal Balance of the group 3 Mortgage Loans as
of the first day of the related Collection Period over the aggregate Certificate
Principal Balance of the Group 3 Certificates immediately prior to that
Distribution Date.
75
If on any Distribution Date, the Accrued Certificate Interest for any
Certificate is based on the applicable Cap, the excess of (i) the amount of
interest such Certificate would have been entitled to receive on that
Distribution Date based on its Pass-Through Rate over (ii) the amount of
interest such Certificate received on that Distribution Date based on the Cap,
together with the unpaid portion of any such excess from prior Distribution
Dates (and interest accrued thereon at the then applicable Pass-Through Rate on
such Certificate) will be the "Cap Carryover Amount." Any Cap Carryover Amount
may be paid on the same or future Distribution Dates from amounts that would
otherwise be distributed on the Class CE Certificates, and then, to the extent
remaining unpaid, from amounts in the Swap Account, as set forth herein under
"--Interest Rate Swap Agreement, the Swap Provider and the Swap Account." On the
Closing Date, the Trustee will establish the Cap Carryover Reserve Account ("Cap
Carryover Reserve Account") pursuant to the Pooling and Servicing Agreement from
which distributions of Monthly Excess Cashflow Amount in respect of Cap
Carryover Amounts on the Offered Certificates and the Class B Certificates will
be made. The Cap Carryover Reserve Account will be an asset of the Trust but not
of any REMIC.
The Cap Carryover Reserve Account will be funded from amounts otherwise
distributable to the Class CE Certificates under clause (xxxiii) of the Monthly
Excess Cashflow Allocation. On each Distribution Date, amounts on deposit in the
Cap Carryover Reserve Account will be distributed, sequentially, as follows:
first, concurrently, to the Class A-1, Class A-2, Class A-3A, Class A-3B
and Class A-3C Certificates, pro rata (based on the Cap Carryover Amount for
each such class), any Cap Carryover Amount for such class; and
second, sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4,
Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class B Certificates,
any Cap Carryover Amount for such class.
Interest Rate Swap Agreement, the Swap Provider and the Swap Account
The Interest Rate Swap Agreement
On or before the Closing Date, the Trustee on behalf of the Trust will
enter into an Interest Rate Swap Agreement with the Swap Provider. With respect
to any Distribution Date prior to and including the Distribution Date in October
2011, the Trustee will deposit into the Swap Account certain amounts, if any,
received from the Swap Provider and such amounts will be distributed as
described under "--The Swap Account." The Swap Account will be an asset of the
Trust Fund but not of any REMIC.
Under the Interest Rate Swap Agreement, with respect to any Distribution
Date occurring prior to and including the Distribution Date in October 2011, the
Trust will be obligated to pay to the Swap Provider from Available Funds a fixed
amount equal to the product of (x) 5.02375%, (y) the notional amount for that
Distribution Date set forth on the table in Appendix D and (z) a fraction, the
numerator of which is 30 (or, for the first Distribution Date, the number of
days elapsed from the Closing Date to but excluding the first Distribution Date
on a 30/360 basis), and the denominator of which is 360, and the Swap Provider
will be obligated to pay to the Trustee a floating amount equal to the product
of (x) one-month LIBOR (as determined pursuant to the Interest Rate Swap
Agreement), (y) the notional amount for that Distribution Date set forth on the
table in Appendix D and (z) a fraction, the numerator of which is the actual
number of days elapsed from the previous Distribution Date to but excluding the
current Distribution Date (or, for the first Distribution Date, the actual
number of days elapsed from the Closing Date to but excluding the first
Distribution Date), and the denominator of which is 360. A net payment will be
required to be made on or before the business day prior to each Distribution
Date (each such net payment, a "Net Swap Payment") (a) by the Trust, to the Swap
Provider, to the extent that the fixed amount exceeds the corresponding floating
amount, or (b) by the Swap Provider, to the Trust, to the extent that the
floating amount exceeds the corresponding fixed amount.
The initial notional amount for the Interest Rate Swap Agreement will be
approximately $836,173,837. The Interest Rate Swap Agreement will terminate
immediately after the Distribution Date in October 2011 unless terminated
earlier upon the occurrence of a Swap Default, a Swap Early Termination or an
Additional Termination Event.
The respective obligations of the Swap Provider and the Trustee to pay
specified amounts due under the Interest Rate Swap Agreement will be subject to
the following conditions precedent: (1) no Swap Default or event that with the
giving of notice or lapse of time or both would become a Swap Default, in each
case, in respect of the
76
other party, shall have occurred and be continuing with respect to the Interest
Rate Swap Agreement and (2) no "Early Termination Date" (as defined in the ISDA
Master Agreement) has occurred or been effectively designated by the Swap
Provider or the Trustee under the Interest Rate Swap Agreement.
Upon the occurrence of any Swap Default under the Interest Rate Swap
Agreement, the non-defaulting party will have the right to designate an Early
Termination Date. With respect to Termination Events (including Additional
Termination Events), an Early Termination Date may be designated by one of the
parties (as specified in the Interest Rate Swap Agreement) and will occur only
after notice has been given of the Termination Event, all as set forth in the
Interest Rate Swap Agreement.
Upon any Swap Early Termination, the Trust or the Swap Provider may be
liable to make a Swap Termination Payment to the other (regardless, if
applicable, of which of the parties has caused the termination). The Swap
Termination Payment will be based on the value of the Interest Rate Swap
Agreement computed in accordance with the procedures set forth in the Interest
Rate Swap Agreement taking into account the present value of the unpaid amounts
that would have been owed to and by the Swap Provider under the remaining
scheduled term of the Interest Rate Swap Agreement. In the event that the Trust
is required to make a Swap Termination Payment (other than a Swap Termination
Payment resulting from a Swap Provider Trigger Event), that payment will be paid
from the Trust prior to the related Distribution Date, and, until paid in full,
prior to any subsequent Distribution Dates, prior to distributions to
Certificateholders.
Upon a Swap Early Termination, the Trustee, at the direction of the
Depositor and with the consent of the NIMS Insurer, if any, will seek a
replacement swap provider to enter into a replacement interest rate swap
agreement or similar agreement. To the extent the Trust receives a Swap
Termination Payment from the Swap Provider, the Trustee will apply, as set forth
in the Pooling and Servicing Agreement, all or such portion of such Swap
Termination Payment as may be required to the payment of amounts due to a
replacement swap provider under a replacement interest rate swap agreement or
similar agreement. Furthermore, to the extent the Trust is required to pay a
Swap Termination Payment to the Swap Provider, the Trust will apply all or a
portion of such amount received from a replacement swap provider upon entering
into a replacement interest rate swap agreement or similar agreement to the Swap
Termination Payment owing to the Swap Provider.
Upon the occurrence of a Downgrade Provision, the Swap Provider will be
required to (1) post collateral securing its obligations under the Interest Rate
Swap Agreement or (2) obtain a substitute Swap Provider acceptable to the Rating
Agencies, that will assume the obligations of the Swap Provider under the
Interest Rate Swap Agreement or (3) obtain a guaranty of its obligations from a
third party satisfactory to the Rating Agencies or (4) establish any other
arrangement satisfactory to the applicable Rating Agency or Rating Agencies.
For purposes of the foregoing, the following terms will have the
respective meanings set forth below.
The "Downgrade Provisions" of the Interest Rate Swap Agreement will be
triggered if the Swap Provider's short-term or long-term credit ratings fall
below the levels specified in the Interest Rate Swap Agreement.
"Events of Default" under the Interest Rate Swap Agreement (each, a "Swap
Default") include the following standard events of default under the 1992 ISDA
Master Agreement published by the International Swaps and Derivatives
Association, Inc. (the "ISDA Master Agreement"), as modified by the Interest
Rate Swap Agreement:
o failure to pay or deliver,
o breach of agreement (in respect of the Swap Provider only),
o default under the credit support annex,
o breach of representation (in respect of the Swap Provider only),
o cross-default (in respect of the Swap Provider only),
o bankruptcy and insolvency events, and
77
o a merger by the Swap Provider or the Trust without an assumption of its
obligations under the Interest Rate Swap Agreement,
as described in the ISDA Master Agreement.
The "Swap Account" means a segregated trust account in which payments owed
to or received from the Swap Provider will be deposited.
A "Swap Early Termination" means the occurrence of an Early Termination
Date under the Interest Rate Swap Agreement.
The "Swap Provider" means Bank of America, National Association.
A "Swap Provider Trigger Event" means a Swap Termination Payment that is
triggered upon: (i) an Event of Default under the Interest Rate Swap Agreement
with respect to which the Swap Provider is a Defaulting Party (as defined in the
Interest Rate Swap Agreement) or (ii) a Termination Event under the Interest
Rate Swap Agreement with respect to which the Swap Provider is the sole Affected
Party (as defined in the Interest Rate Swap Agreement).
The "Swap Termination Payment" means the amount, if any, owed by the Trust
or the Swap Provider upon a Swap Early Termination.
A "Termination Event" under the Interest Rate Swap Agreement consists of
the following standard events under the ISDA Master Agreement:
o illegality (which generally relates to changes in law causing it to become
unlawful for either party to perform its obligations under the Interest
Rate Swap Agreement),
o a tax event (which generally relates to either party 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),
and
o a tax event upon merger (which generally relates to the Swap Provider's
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),
as described in the ISDA Master Agreement.
In addition, there are "Additional Termination Events" under the Interest
Rate Swap Agreement consisting of the following events:
o upon the irrevocable direction to dissolve or otherwise terminate the
Trust following which all assets of the Trust will be liquidated and the
proceeds of such liquidation will be distributed to certificateholders,
o upon the exercise of an optional termination,
o if the Pooling and Servicing Agreement is amended or modified without the
prior written consent of the Swap Provider where written consent is
required, and
o solely with respect to the Swap Provider, if the Swap Provider fails to
comply with the Downgrade Provisions.
It may 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 CFR ss.229 ("Regulation AB"), to disclose any
financial data relating to the Swap Provider. If such determination is made, the
Swap Provider will be required, at its own expense, to (a) provide to the
Depositor the required financial data, (b) subject to rating agency
requirements, select a successor
78
swap provider who will provide the required financial data or (c) subject to
rating agency requirements, obtain a guarantee from an affiliate, who will
provide the required financial data. If the Swap Provider does not comply with
the immediately preceding sentence, then it will be an Additional Termination
Event and the Swap Provider or the Trust may be required to make a termination
payment under the Interest Rate Swap Agreement.
The Trust will not be required to make any gross-up payments to the Swap
Provider on account of any tax withholding.
As of the date of this free writing prospectus, the maximum probable
exposure to the Swap Provider under the Interest Rate Swap Agreement is less
than 10% of the Pool Balance as of the Cut-off Date.
The Swap Provider may be an affiliate of the Depositor, the Sponsor and
the Underwriter which arrangement may create certain conflicts of interest.
The Swap Provider
The Swap Provider is a national banking association organized under the
laws of the United States, with its principal executive offices located in
Charlotte, North Carolina. The Swap Provider is a wholly-owned indirect
subsidiary of Bank of America Corporation and is engaged in a general consumer
banking, commercial banking and trust business, offering a wide range of
commercial, corporate, international, financial market, retail and fiduciary
banking services. As of June 30, 2006, the Swap Provider had consolidated assets
of $1,160 billion, consolidated deposits of $564 billion and stockholder's
equity of $102 billion based on regulatory accounting principles.
Bank of America Corporation is a bank holding company and a financial
holding company, with its principal executive offices located in Charlotte,
North Carolina. Additional information regarding Bank of America Corporation is
set forth in its Annual Report on Form 10-K for the fiscal year ended December
31, 2005, together with any subsequent documents it filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
Moody's currently rates the Swap Provider's long-term debt as "Aa1" and
short-term debt as "P-1." Fitch rates the long-term debt of the Swap Provider as
"AA-" and short-term debt as "F1+." Further information with respect to such
ratings may be obtained from each of the Rating Agencies. No assurances can be
given that the current ratings of the Swap Provider's instruments will be
maintained.
The Swap Provider is an affiliate of the Depositor and the Underwriter.
The Swap Account
The Interest Rate Swap Agreement will be administered by the Trustee
pursuant to the Pooling and Servicing Agreement. For any Distribution Date on
which the Interest Rate Swap Agreement is in effect, the Trustee will be
required to deposit into the Swap Account established by the Trustee, any Swap
Termination Payment (including a Swap Termination Payment resulting from a Swap
Provider Trigger Event) and any Net Swap Payment. Any Net Swap Payments and Swap
Termination Payments (other than any Swap Termination Payment resulting from a
Swap Provider Trigger Event) payable by the Trust on a Distribution Date, will
be deducted from interest collections on the Mortgage Loans and, to the extent
interest collections on the Mortgage Loans for such Distribution Date are
insufficient to pay such amounts, from principal collections on the Mortgage
Loans for such Distribution Date before any distributions on the Certificates
for such Distribution Date.
On each Distribution Date, to the extent required, following the
distribution of the Monthly Excess Cashflow Amount as described under
"--Application of Monthly Excess Cashflow Amounts" in this free writing
prospectus and withdrawals from the Cap Carryover Reserve Account as described
under "--Certificate Interest Rates," the Trustee will distribute amounts on
deposit in the Swap Account in the following order of priority:
first, to the Swap Provider, any Net Swap Payment owed to the Swap
Provider pursuant to the Interest Rate Swap Agreement for such Distribution
Date;
79
second, to the Swap Provider, any Swap Termination Payment (other than a
Swap Termination Payment resulting from a Swap Provider Trigger Event) owed to
the Swap Provider pursuant to the Interest Rate Swap Agreement for such
Distribution Date;
third, concurrently, to each class of Class A Certificates, the related
Accrued Certificate Interest and Interest Carry Forward Amount remaining
undistributed after the distributions of the Group 1 Interest Remittance Amount,
the Group 2 Interest Remittance Amount, the Group 3 Interest Remittance Amount
and the Monthly Excess Cashflow Amount, on a pro rata basis, based on such
respective remaining Accrued Certificate Interest and Interest Carry Forward
Amount;
fourth, sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4,
Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class B Certificates,
in that order, the related Accrued Certificate Interest and Interest Carry
Forward Amount, to the extent remaining undistributed after the distributions of
the Group 1 Interest Remittance Amount, the Group 2 Interest Remittance Amount,
the Group 3 Interest Remittance Amount and the Monthly Excess Cashflow Amount;
fifth, to the holders of the class or classes of Certificates then
entitled to receive distributions in respect of principal in the priority
described under "--Principal Distributions" for such Distribution Date, but only
to the extent necessary to restore the Overcollateralization Amount to the
Targeted Overcollateralization Amount;
sixth, to the Offered Certificates and Class B Certificates, to pay Cap
Carryover Amounts in the following order of priority, to the extent remaining
undistributed after distributions are made from the Cap Carryover Reserve
Account;
(i) concurrently, to the Class A Certificates, pro rata (based on
the remaining Cap Carryover Amount of each such Class) any remaining Cap
Carryover Amount for such Class; and
(ii) sequentially, to the Class M-1, Class M-2, Class M-3, Class
M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class B
Certificates, in that order, any remaining Cap Carryover Amount for such
Class;
seventh, sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4,
Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class B Certificates,
in that order, to the extent of any remaining Unpaid Realized Loss Amounts for
each such class;
eighth, to the Trust, to fund any Swap Termination Payment resulting from
a Swap Provider Trigger Event; and
ninth, to the Class CE Certificates, any remaining amounts.
Amounts distributed in respect of priorities fifth and seventh above will
not exceed the aggregate of current or prior Realized Losses not previously
reimbursed by Subsequent Recoveries or the Monthly Excess Cashflow Amount.
Calculation of One-Month LIBOR
One-Month LIBOR for the first Distribution Date will be determined on the
second business day preceding the Closing Date and for each subsequent
Distribution Date will be determined on the second business day prior to the
immediately preceding Distribution Date (each such date, a "LIBOR Determination
Date"). With respect to each Distribution Date, "One-Month LIBOR" will equal the
interbank offered rate for one-month United States dollar deposits in the London
market as quoted on Telerate Page 3750 as of 11:00 A.M., London time, on the
related LIBOR Determination Date. "Telerate Page 3750" means the display
designated as page 3750 on the Reuters Telerate (or such other page as may
replace page 3750 on that service for the purpose of displaying London interbank
offered rates of major banks). If such rate does not appear on that page (or
such other page as may replace that page on that service, or if such service is
no longer offered, another service for displaying One-Month LIBOR or comparable
rates as may be selected by the Trustee), the rate will be the Reference Bank
Rate. The "Reference Bank Rate" will be determined on the basis of the rates at
which deposits in U.S. Dollars are offered by the
80
reference banks (which shall be three major banks that are engaged in
transactions in the London interbank market, selected by the Trustee) as of
11:00 A.M., London time, on the related LIBOR Determination Date to prime banks
in the London interbank market for a period of one month in amounts
approximately equal to the aggregate Certificate Principal Balance of the
Offered Certificates and the Class B Certificates. The Trustee will 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 will be the
arithmetic mean of the quotations. If on such date fewer than two quotations are
provided as requested, the rate will be the arithmetic mean of the rates quoted
by one or more major banks in New York City, selected by the Trustee, as of
11:00 A.M., New York City time, on such date for loans in United States dollars
to leading European banks for a period of one month in amounts approximately
equal to the aggregate Certificate Principal Balance of the Offered Certificates
and the Class B Certificates. If no quotations can be obtained, the rate will be
One-Month LIBOR for the prior Distribution Date.
The establishment of One-Month LIBOR on each LIBOR Determination Date by
the Trustee and the Trustee's calculation of the rate of interest applicable to
the Offered Certificates and the Class B Certificates for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.
Restrictions on Transfer of the Subordinate Certificates
Under current law the purchase and holding of the Subordinate Certificates by
or on behalf of a Plan may result in "prohibited transactions" within the
meaning of ERISA, Section 4975 of the Code or Similar Law. Transfers of the
Subordinate Certificates will not be made unless the transferee delivers to the
Trustee either:
(A) a representation letter, in form and substance satisfactory to the
Trustee, stating that:
(1) it is not, and is not acting on behalf of, any such Plan or using
the assets of any such Plan to effect such purchase; or
(2) if it is an insurance company, that the source of funds used to
purchase the Subordinate Certificates is an "insurance company general
account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTE 95-60"), 60 Fed. Reg. 35925 (July
12, 1995)), that there is no Plan with respect to which the amount of such
general account's reserves and liabilities for the contract(s) held by or
on behalf of such Plan and all other Plans maintained by the same employer
(or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or by
the same employee organization exceeds 10% of the total of all reserves
and liabilities of such general account (as such amounts are determined
under Section I(a) of PTE 95-60) at the date of acquisition and that all
Plans that have an interest in such general account are Plans to which PTE
95-60 applies; or
(B) an opinion of counsel, in form and substance satisfactory to the
Trustee and the Depositor, to the effect that the purchase or holding of the
Subordinate Certificates by or on behalf of such Plan will not constitute or
result in a non-exempt prohibited transaction within the meaning of ERISA,
Section 4975 of the Code or Similar Law and will not subject the Depositor,
the Servicer or the Trustee to any obligation in addition to those undertaken
in the Pooling and Servicing Agreement.
The Subordinate Certificates will contain a legend describing these
restrictions on transfer. Any transferee of a Subordinate Certificate that does
not comply with either clause (A) or clause (B) above will be deemed to have
made the representation described in clause (A) above.
The Pooling and Servicing Agreement will provide that any attempted or
purported transfer in violation of these transfer restrictions will be null and
void and will vest no rights in any purported transferee.
See "ERISA Considerations" in this free writing prospectus and in the
prospectus.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The yields to maturity and weighted average lives of the Offered
Certificates will depend upon, among other things, the price at which such
Offered Certificates are purchased, the amount and timing of principal payments
on the applicable Mortgage Loans, the allocation of Available Funds to various
classes of Offered
81
Certificates, the amount and timing of mortgagor delinquencies and defaults on
the applicable Mortgage Loans, the rate of liquidations and Realized Losses and
the allocation of Realized Losses to various classes of Offered Certificates and
the relationship between payments made by the Trust (if any) and payments made
by the Swap Provider (if any) under the Interest Rate Swap Agreement.
The rate of payment of principal, the aggregate amount of distributions
and the yield to maturity of the Offered Certificates will be affected by the
rate of defaults resulting in Realized Losses and by the severity and timing of
these losses. If a purchaser of an Offered Certificate calculates its
anticipated yield based on an assumed rate of default and amount of Realized
Losses that is lower than the default rate and amount of losses actually
incurred, its actual yield to maturity will be lower than the yield calculated.
The timing of Realized Losses will also affect an investor's actual yield to
maturity, even if the average rate of defaults and severity of losses are
consistent with an investor's expectations. In general, the earlier a loss
occurs, the greater the effect on an investor's yield to maturity. There can be
no assurance as to the delinquency, foreclosure or loss experience of the
Mortgage Loans. The Mortgage Loans may have a greater than normal risk of future
defaults and delinquencies, as compared to newly originated, high quality one-
to four-family residential mortgage loans of comparable size and geographic
concentration because the Mortgage Loans are of sub-prime credit quality. See
"Risk Factors--Nature of sub-prime mortgage loans may increase risk of loss" in
this free writing prospectus and "Risk Factors--Risks Associated with the
Assets--Sub-Prime Mortgage Loans May Experience Greater Rates of Delinquency and
Foreclosure" in the prospectus.
The rate of principal payments, the aggregate amount of distributions and
the yields to maturity of the Offered Certificates will be related to the rate
and timing of payments of principal on the applicable 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 the Sponsor, the Originator or the Servicer). Because certain
of the Mortgage Loans contain prepayment charges, the rate of principal payments
may be less than the rate of principal payments for mortgage loans which did not
have prepayment charges. The Mortgage Loans are subject to the "due-on-sale"
provisions in the related mortgage notes. See "Yield Considerations" in the
prospectus.
Unscheduled payments of principal (whether resulting from prepayments,
liquidations, casualties, condemnations, repurchases due to breaches of
representations and warranties, or purchase in connection with optional
termination) will result in distributions on the related 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 such 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 such class of Offered
Certificates is purchased at a discount or premium, and the degree to which the
timing of payments thereon is sensitive to prepayments, liquidations and
purchases of the applicable 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 applicable Mortgage Loans could result in an actual yield to such 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 applicable Mortgage Loans could result in an actual yield to
such 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 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 Interest Rates on
the Mortgage Loans, such Mortgage Loans could be subject to higher prepayment
rates than if prevailing interest rates were to remain at or above the Mortgage
Interest Rates on such Mortgage Loans. Conversely, if prevailing interest rates
were to rise significantly, the rate of prepayments on such Mortgage Loans would
generally be expected to decrease. As is the case with the Fixed-Rate Mortgage
Loans, the Adjustable-Rate Mortgage Loans 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 adjustable-rate mortgage
loans may be inclined to refinance their adjustable-rate mortgage loans with a
fixed-rate loan to "lock in" a lower interest rate. The existence of the
82
applicable Periodic Rate Cap and Maximum Mortgage Interest Rate also may affect
the likelihood of prepayments resulting from refinancings. No assurances can be
given as to the rate of prepayments on the Mortgage Loans in stable or changing
interest rate environments. In addition, the delinquency and loss experience of
the Adjustable-Rate Mortgage Loans may differ from that on the Fixed-Rate
Mortgage Loans because the amount of the Monthly Payments on each
Adjustable-Rate Mortgage Loan is subject to adjustment on each Adjustment Date.
Further, a majority of the Adjustable-Rate Mortgage Loans will not have their
initial Adjustment Date for two to five years after their origination. The
Adjustable-Rate 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 Mortgage Interest Rates on such
Adjustable-Rate Mortgage Loans as borrowers seek to avoid changes in their
Monthly Payments.
The weighted average life and yield to maturity of each class of
Certificates will also be influenced by the amount of Monthly Excess Cashflow
Amounts generated by the Mortgage Loans and applied in reduction of the
Certificate Principal Balances of such Certificates. The level of Monthly Excess
Cashflow Amounts available on any Distribution Date to be applied in reduction
of the Certificate Principal Balances of the Certificates will be influenced by,
among other factors, (i) the overcollateralization level of the Mortgage Loans
at such time (i.e., the extent to which interest on the Mortgage Loans is
accruing on a higher Principal Balance than the aggregate Certificate Principal
Balance of the Certificates); (ii) the delinquency and default experience of the
Mortgage Loans; and (iii) the level of the Index for the Adjustable-Rate
Mortgage Loans. To the extent that greater amounts of Monthly Excess Cashflow
Amounts are distributed in reduction of the Certificate Principal Balance of a
class of Certificates, the weighted average life thereof can be expected to
shorten. No assurance can be given as to the amount of Monthly Excess Cashflow
Amounts distributed at any time or in the aggregate.
The Class M and Class B Certificates are not expected to receive any
principal distributions until at least the Distribution Date in November 2009
(unless the aggregate Certificate Principal Balance of the Senior Certificates
is reduced to zero prior thereto). As a result, the weighted average lives of
the Class M and Class B Certificates will be longer than would have been the
case if principal distributions were to be made on a pro rata basis. The longer
weighted average lives may increase the risk that an Applied Realized Loss
Amount will be allocated to one or more classes of Class M and Class B
Certificates.
Option One generally will be required to repurchase from the Trust certain
Mortgage Loans for which the first scheduled monthly payment due after their
purchase by the Sponsor becomes 45 or more days Delinquent; provided that the
sum of (i) the Principal Balance of such Mortgage Loans repurchased and (ii) the
fair market value on the Closing Date of any Subordinated Certificates retained
or acquired by Option One, the Sponsor or any affiliate of the Sponsor, is not
permitted to exceed 10% of the Principal Balance of the Mortgage Loans as of the
Cut-off Date. Such repurchase obligation will have the same effect on the
holders of the Offered Certificates as a prepayment on the Mortgage Loans. See
"Risk Factors--There are risks involving unpredictability of prepayments and the
effect of prepayments on yields" in this free writing prospectus.
Weighted Average Lives
The timing of changes in the rate of principal prepayments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even if
the average rate of principal prepayments is consistent with such investor's
expectation. In general, the earlier a principal prepayment on the Mortgage
Loans occurs, the greater the effect of such principal prepayment on an
investor's yield to maturity. The effect on an investor's yield of principal
prepayments occurring at a rate higher (or lower) than the rate anticipated by
the investor during the period immediately following the issuance of the Offered
Certificates may not be offset by a subsequent like decrease (or increase) in
the rate of principal prepayments.
The projected weighted average life of any class of Offered Certificates
is the average amount of time that will elapse from the Closing Date, until each
dollar of principal is scheduled to be repaid to the investors in such class of
Offered Certificates. Because it is expected that there will be prepayments and
defaults on the Mortgage Loans, the actual weighted average lives of the classes
of Offered Certificates are expected to vary substantially from the weighted
average remaining terms to stated maturity of the Mortgage Loans as set forth in
the tables in this free writing prospectus under "Summary of Free Writing
Prospectus."
83
Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The prepayment models used in this free writing
prospectus (the "Prepayment Assumptions") are based on an assumed rate of
prepayment each month of the then unpaid principal balance of three hypothetical
pools of mortgage loans similar to the Mortgage Loans.
For the Fixed-Rate Mortgage Loans, the Prepayment Assumption is the
"Fixed-Rate Prepayment Curve" or "FRM PPC," which assumes a prepayment rate of
2.30% CPR per annum of the then-outstanding principal balance of a hypothetical
pool of fixed-rate mortgage loans in the first month of the life of such
mortgage loans and an additional 2.30% per annum in each month thereafter until
23% CPR is reached in the tenth month. Beginning in the tenth month and in each
month thereafter during the life of such mortgage loans, FRM PPC assumes a
constant prepayment rate of 23.00% CPR per annum each month.
For the Adjustable-Rate Mortgage Loans, the Prepayment Assumption is the
"Adjustable-Rate Prepayment Curve" or "ARM PPC," which assumes a prepayment rate
of 5% CPR per annum of the then-outstanding principal balance of a hypothetical
pool of adjustable rate mortgage loans in the first month of the life of such
mortgage loans and an additional approximate 2.273% per annum in each month
thereafter until 30% CPR is reached in the twelfth month. Beginning in the
twelfth month, ARM PPC assumes a constant prepayment rate of 30% CPR per annum
each month until the twenty-fifth month is reached. Beginning in the
twenty-fifth month, ARM PPC assumes a constant prepayment rate of 60% CPR per
annum each month until the twenty-eighth month is reached. Beginning in the
twenty-eighth month and in each month thereafter during the life of such
mortgage loans, ARM PPC assumes a constant prepayment rate of 35% CPR per annum
each month. Notwithstanding the foregoing, CPR is capped at 90% with respect to
all of the decrement tables.
"CPR" represents a constant assumed rate of principal prepayment each
month relative to the then-outstanding principal balance of a pool of mortgage
loans for the life of such mortgage loans. No Prepayment Assumption purports to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
Mortgage Loans.
The decrement tables set forth in Appendix B were prepared on the basis of
the Structuring Assumptions in the following paragraph. There may be certain
differences between the loan characteristics included in such assumptions and
the characteristics of the actual Mortgage Loans. Any such discrepancy may have
an effect upon the percentages of original Certificate Principal Balances
outstanding and weighted average lives of the Offered Certificates set forth in
the decrement tables. In addition, since the actual Mortgage Loans in the Trust
Fund will have characteristics that differ from those assumed in preparing the
table in Appendix C, the distributions of principal of the Offered Certificates
may be made earlier or later than indicated in the tables.
The percentages and weighted average lives in the decrement tables were
determined using the following assumptions collectively (the "Structuring
Assumptions"): (i) the Mortgage Loans have the characteristics set forth in the
table in Appendix C, (ii) the closing date for the Offered Certificates occurs
on November 14, 2006 and the Offered Certificates are sold to investors on such
date, (iii) distributions on the Certificates are made on the 25th day of each
month regardless of the day on which the Distribution Date actually occurs,
commencing in November 2006, in accordance with the allocation of Available
Funds set forth above under "Description of the Certificates," (iv) the Mortgage
Loans prepay in accordance with the Prepayment Assumptions indicated, (v) there
are no Prepayment Interest Shortfalls, (vi) neither the Sponsor nor the
Originator is required to substitute or repurchase any of the Mortgage Loans
pursuant to the Option One Mortgage Loan Purchase Agreement, the Mortgage Loan
Purchase Agreement or the Pooling and Servicing Agreement and no optional
termination is exercised (except with respect to the entries identified by the
row heading "Weighted Avg. Life to Optional Termination Date" in the tables in
Appendix B), (vii) the Targeted Overcollateralization Amount is set initially as
specified herein and thereafter decreases as described in the definition
thereof, (viii) scheduled payments for all Mortgage Loans are received on the
Due Date commencing in November 2006, the principal portion of such payments is
computed prior to giving effect to prepayments received in such month and there
are no losses or delinquencies with respect to such Mortgage Loans, (ix) such
prepayments are received on the last day of each month commencing in October
2006, (x) the Servicing Fee Rate is 0.30% per annum for the first 10 calendar
months, 0.40% per annum for the 11th through 30th calendar months and 0.65% per
annum for all calendar months thereafter, and the Credit Risk Manager Fee Rate
is 0.015% per annum, (xi) One-Month LIBOR is at all times equal to 5.32%, (xii)
the Certificate Interest Rates for the Offered Certificates are calculated as
described above under "Description of the Certificates--Certificate Interest
Rates" based upon assumed margins for each Offered Certificate, (xiii) the
Mortgage Interest
84
Rate for each Adjustable-Rate Mortgage Loan (which are indicated as such in
Appendix C with the designation ARM under the column Interest Type) adjusts
semi-annually on its next Adjustment Date (and on subsequent Adjustment Dates,
if necessary) to equal the sum of (a) the assumed level of the Index and (b) the
respective Gross Margin (this sum subject to the applicable Periodic Rate Caps,
Minimum Mortgage Interest Rates and Maximum Mortgage Interest Rates), (xiv) the
Index with respect to each of the Adjustable-Rate Mortgage Loans is Six-Month
LIBOR and Six-Month LIBOR is equal to 5.4163% and (xv) the Net Swap Payment is
calculated as described under "Description of the Certificates--Interest Rate
Swap Agreement, the Swap Provider and the Swap Account" and no Swap Termination
Payment is made. Nothing contained in the foregoing assumptions should be
construed as a representation that the Mortgage Loans will not experience
delinquencies or losses.
Based on the foregoing Structuring Assumptions, the decrement tables
indicate the projected weighted average lives of each class of Offered
Certificates and set forth the percentages of the original Certificate Principal
Balance of each such class that would be outstanding after each of the dates
shown at the indicated percentages of the applicable Prepayment Assumption.
FEDERAL INCOME TAX CONSEQUENCES
General
The Pooling and Servicing Agreement provides that designated portions of the
Trust Fund will comprise multiple real estate mortgage investment conduits
(each, a "REMIC") organized in a tiered REMIC structure consisting of one or
more lower-tier REMICs and one or more upper-tier REMICs (each, a "Trust
REMIC"). The lower-tier REMICs will issue uncertificated regular interests and
those interests will be held by the Trust REMIC above it in the tiered
structure. Each of the Trust REMICs will designate a single class of interests
as the residual interest in that REMIC. Elections will be made to treat each of
the Trust REMICs as a REMIC for federal income tax purposes. Each class of
Offered Certificates (exclusive of the right to receive payments from the Swap
Account or the obligation to make payments to the Swap Account) will represent
beneficial ownership of the corresponding class of regular interests issued by
the related Trust REMIC. The Trust Fund will also include a grantor trust that
will hold the uncertificated interests in the related Trust REMIC and the Basis
Risk Arrangements, as defined below.
The Offered Certificates will represent beneficial ownership of the
corresponding class of regular interests issued by the related Trust REMIC and
of the right to receive Cap Carryover Amounts from amounts otherwise
distributable to the Class CE Certificates as part of the Monthly Excess
Cashflow Amount or from the Swap Account. Holders of the Offered Certificates
must allocate their basis between their regular interest and their right to
receive such Cap Carryover Amounts as set forth below under "--Taxation of Basis
Risk Arrangements."
Upon the issuance of the Offered Certificates, Cadwalader, Wickersham & Taft
LLP will deliver its opinion to the effect that, assuming compliance with the
Pooling and Servicing Agreement, for federal income tax purposes, each of the
Trust REMICs will qualify as a REMIC within the meaning of Section 860D of the
Internal Revenue Code of 1986, as amended (the "Code") and the portion of the
Trust Fund exclusive of the Trust REMICs will qualify as a grantor trust under
subpart E, Part 1 of subchapter J of the Code.
Taxation of Regular Interests
For federal income tax reporting purposes, the regular interest portion of
the classes of Offered Certificates may be treated as having been issued with
original issue discount ("OID"). The Prepayment Assumption that will be used in
determining the rate of accrual of original issue discount, premium and market
discount, if any, for federal income tax purposes will be based on the
assumption that subsequent to the date of any determination the Mortgage Loans
will prepay at a constant rate of 100% ARM PPC with respect to the
Adjustable-Rate Mortgage Loans and 100% FRM PPC with respect to the Fixed-Rate
Mortgage Loans. No representation is made that the Mortgage Loans will prepay at
such rate or at any other rate. See "Federal Income Tax
Consequences--REMICs--Taxation of Owners of Regular Securities--Original Issue
Discount" in the prospectus.
The IRS has issued regulations (the "OID Regulations") under Sections 1271 to
1275 of the Code generally addressing the treatment of debt instruments issued
with original issue discount. Purchasers of the Offered Certificates should be
aware that the OID Regulations do not adequately address certain issues relevant
to, or are not
85
applicable to, securities such as the Offered Certificates. Because of the
uncertainty concerning the application of Section 1272(a)(6) of the Code to such
Certificates, and because the rules of the OID Regulations are limited in their
application in ways that could preclude their application to such Certificates
even in the absence of Section 1272(a)(6) of the Code, the IRS could assert that
the Offered Certificates should be treated as issued with original issue
discount or should be governed by the rules applicable to debt instruments
having contingent payments or by some other manner not yet set forth in
regulations. Prospective purchasers of the Offered Certificates are advised to
consult their tax advisors concerning the tax treatment of such Certificates.
Each holder of an Offered Certificate is deemed to own an undivided
beneficial ownership interest in a REMIC regular interest (the "Regular Interest
component") and the right to receive payments from the Cap Carryover Reserve
Account and the Swap Account in respect of the related Cap Carryover Amount or
the obligation to make payments to the Swap Account (the "Basis Risk
component"). Holders of the Offered Certificates must allocate their basis
between their Regular Interest component and their Basis Risk component as set
forth below under "--Taxation of the Basis Risk Arrangements." The Cap Carryover
Reserve Account, the Interest Rate Swap Agreement and the Swap Account are not
assets of any Trust REMIC. The Regular Interest component corresponding to an
Offered Certificate generally will be entitled to receive interest and principal
payments at the times and in the amounts equal to those made on the certificate
to which it corresponds, except that (i) the maximum interest rate of that
Regular Interest component will equal the lesser of the applicable Cap or
Maximum Rate Cap computed without regard to any Swap Termination Payment and
(ii) any Swap Termination Payment will be treated as being payable first from
Monthly Excess Cashflow Amounts and second from amounts distributed on the
Regular Interests. As a result of the foregoing, the amount of distributions on
the Regular Interest component corresponding to an Offered Certificate may
exceed the actual amount of distributions on the Offered Certificate.
The Regular Interest components of the Offered Certificates (but not the
Basis Risk components) generally will be treated as assets described in Section
7701(a)(19)(C) of the Code for a domestic building and loan association and
"real estate assets" under Section 856(c)(5)(B) of the Code for a real estate
investment trust (a "REIT"), in the same proportion that the assets in the Trust
Fund would be so treated. In addition, interest on the Offered Certificates
generally will be treated as "interest on obligations secured by mortgages on
real property" under Section 856(c)(3)(B) of the Code for a REIT, to the extent
that the Offered Certificates are treated as "real estate assets" under Section
856(c)(5)(B) of the Code. See "Federal Income Tax
Consequences--REMICs--Characterization of Investments in REMIC Securities" in
the prospectus. If more than 95% of the Regular Interest components and income
qualify for these treatments, the Regular Interest components generally will
qualify for such treatments in their entirety. However, no portion of an offered
certificateholder's basis or income allocable to a Basis Risk component will
qualify for such treatment. As a result, the Offered Certificates are not
suitable investments for inclusion in another REMIC.
Taxation of the Basis Risk Arrangements
General. Each holder of an Offered Certificate will be treated for federal
income tax purposes as having entered into a notional principal contract
pursuant to its rights to receive payment with respect to Cap Carryover Amounts
from the Cap Carryover Reserve Account and the obligation to make certain
payments to the Swap Account on the date it purchases its Certificates. The
rights to receive or the obligation to make such payments (referred to as the
"Basis Risk Arrangements") are beneficially owned by holders of Offered
Certificates in the portion of the Trust Fund, exclusive of the Trust REMICs,
which is treated as a grantor trust for federal income tax purposes. The
Internal Revenue Service (the "IRS") has issued final regulations under Section
446 of the Code relating to notional principal contracts (the "Swap
Regulations").
In general, the holders of the Offered Certificates must allocate the price
they pay for the Offered Certificates between the Regular Interest component and
the applicable Basis Risk component based on their relative fair market values.
To the extent rights to receive payments are determined to have a value on the
Closing Date that is greater than zero, a portion of such purchase price will be
allocable to such rights, and such portion will be treated as a cap premium (the
"Cap Premium") paid by the holders of the applicable Offered Certificates. A
holder of an Offered Certificate will be required to amortize the Cap Premium
under a level payment method as if the Cap Premium represented the present value
of a series of equal payments made over the life of the applicable Basis Risk
Arrangement (adjusted to take into account decreases in notional principal
amount), discounted at a rate equal to the rate used to determine the amount of
the Cap Premium (or some other reasonable rate). Prospective purchasers of
86
Offered Certificates are encouraged to consult their own tax advisors regarding
the appropriate method of amortizing any Cap Premium. The Swap Regulations treat
a nonperiodic payment made under a notional principal contract as a loan for
federal income tax purposes if the payment is "significant." It is not known
whether any Cap Premium would be treated in part as a loan under the Swap
Regulations.
Under the Swap Regulations (i) all taxpayers must recognize periodic payments
with respect to a notional principal contract under the accrual method of
accounting, and (ii) any periodic payments received under the applicable Basis
Risk components must be netted against payments, if any, deemed made as a result
of the Cap Premiums or periodic payments made by the related Offered
Certificates over the recipient's taxable year, rather than accounted for on a
gross basis. Net income or deduction with respect to net payments under a
notional principal contract for a taxable year should constitute ordinary income
or ordinary deduction. The IRS could contend the amount is capital gain or loss,
but such treatment is unlikely, at least in the absence of further regulations.
Any regulations requiring capital gain or loss treatment presumably would apply
only prospectively. Individuals may be limited in their ability to deduct any
such net deduction and are encouraged to consult their tax advisors prior to
investing in the Offered Certificates.
Any payments made to a beneficial owner of an Offered Certificate in excess
of the amounts payable on the corresponding Regular Interest component will be
treated as having been received as a payment on a notional principal contract.
To the extent the sum of such periodic payments for any year exceeds that year's
amortized cost of any Cap Carryover Amounts, such excess represents net income
for that year. 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
such Regular Interest component in excess of the amount of payments on the
Offered Certificate to which it relates will be treated as having been received
by the beneficial owners of such Certificates and then paid by such owners to
the Class CE Certificates for payment to the Swap Provider pursuant to the
Interest Rate Swap Agreement, and such excess should be treated as a periodic
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 any Cap
Carryover Amounts for such taxable year.
A beneficial owner's ability to recognize a net deduction with respect to the
Basis Risk component is limited under Sections 67 and 68 of the Code in the case
of (i) estates and trusts and (ii) 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, such a beneficial owner will not be able to
recognize a net deduction with respect to the Basis Risk component in computing
the beneficial owner's alternative minimum tax liability.
Any amount of proceeds from the sale, redemption or retirement of an Offered
Certificate that is considered to be allocated to rights under a Basis Risk
Arrangement would be considered a "termination payment" under the Swap
Regulations. It is anticipated that the Trustee will account for any termination
payments for reporting purposes in accordance with the Swap Regulations, as
described below.
Termination Payments. Any amount of sales proceeds that is considered to be
allocated to the selling beneficial owner's rights under the applicable Basis
Risk Arrangement in connection with the sale or exchange of an Offered
Certificate would be considered a "termination payment" under the Swap
Regulations allocable to that Offered Certificate. A holder of an Offered
Certificate will have gain or loss from such a termination of a Basis Risk
Arrangement equal to (i) any termination payment it received or is deemed to
have received minus (ii) the unamortized portion of any Cap Premium paid (or
deemed paid) by the beneficial owner upon entering into or acquiring its
interest in a Basis Risk Arrangement.
Gain or loss realized upon the termination of a Basis Risk Arrangement will
generally be treated as capital gain or loss. Moreover, in the case of a bank or
thrift institution, Code Section 582(c) would likely not apply to treat such
gain or loss as ordinary.
87
REMIC Taxes and Reporting
It is not anticipated that the Trust Fund will engage in any transactions
that would subject it to the prohibited transactions tax as defined in Section
860F(a)(2) of the Code, the contributions tax as defined in Section 860G(d) of
the Code or the tax on net income from foreclosure property as defined in
Section 860G(c) of the Code. However, in the event that any such tax is imposed
on the Trust Fund, such tax will be borne (i) by the Trustee, if the Trustee has
breached its obligations with respect to REMIC compliance under the Agreement,
(ii) the Servicer, if the Servicer has breached its obligations with respect to
REMIC compliance under the Agreement, and (iii) otherwise by the Trust Fund,
with a resulting reduction in amounts otherwise distributable to Holders of the
Offered Certificates. See "Description of the Securities--General" and "Federal
Income Tax Consequences--REMICs--Taxes That May Be Imposed on the REMIC
Pool--Prohibited Transactions" in the prospectus.
The responsibility for filing annual federal information returns and other
reports will be borne by the Trustee. See "Federal Income Tax
Consequences--REMICs--Taxes That May Be Imposed on the REMIC
Pool--Administrative Matters" in the prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Federal Income Tax
Consequences--REMICs" in the prospectus.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), prohibits "parties in interest" with respect to an employee
benefit plan subject to ERISA and/or a plan or other arrangement subject to the
excise tax provisions set forth under Section 4975 of the Code (each of the
foregoing, an "ERISA Plan") from engaging in certain transactions involving such
ERISA Plan and its assets unless a statutory, regulatory or administrative
exemption applies to the transaction. Section 4975 of the Code imposes certain
excise taxes on prohibited transactions involving plans described under that
Section; ERISA authorizes the imposition of civil penalties for prohibited
transactions involving plans not covered under Section 4975 of the Code. Any
ERISA Plan fiduciary which proposes to cause an ERISA Plan to acquire any of the
Offered Certificates is encouraged to consult with its counsel with respect to
the potential consequences under ERISA and the Code of the ERISA Plan's
acquisition and ownership of such Certificates. See "ERISA Considerations" in
the prospectus.
Certain employee benefit plans, including governmental plans and certain
church plans (collectively with ERISA Plans, "Plans"), are not subject to
ERISA's requirements. However, such plans may be subject to the provisions of
other applicable federal, state or local law ("Similar Law") materially similar
to the foregoing provisions of ERISA and the Code. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
may nonetheless be subject to the prohibited transaction rules set forth in
Section 503 of the Code.
Except as noted above, investments by Plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. A fiduciary which decides to
invest the assets of a Plan in the Offered Certificates should consider, among
other factors, the extreme sensitivity of the investments to the rate of
principal payments (including prepayments) on the Mortgage Loans.
The U.S. Department of Labor has extended to the Underwriter an
administrative exemption (the "Exemption") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The Exemption can apply to certificates in a
pass-through trust holding mortgage loans secured by residential real properties
with loan-to-value ratios in excess of 100% but not exceeding 125%, and the
Exemption may apply to the Senior Certificates.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
88
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as favorable
to the Plan as they would be in an arm's length transaction with an
unrelated party;
(2) the certificates acquired by the Plan are not subordinated to
any other class of certificates issued by the trust and have received a
rating at the time of such acquisition that is one of the two highest
generic rating categories from Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., Moody's or Fitch (collectively, the
"Exemption Rating Agencies");
(3) the trustee must not be 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 an underwriter
in connection with the distribution of the certificates represents not
more than reasonable compensation for underwriting the certificates; the
sum of all payments made to and retained by the seller pursuant to the
assignment of the loans to the trust represents not more than the fair
market value of such loans; the sum of all payments made to and retained
by the servicer represents not more than reasonable compensation for such
person's services under the agreement pursuant to which the loans are
pooled and reimbursements of such person's reasonable expenses in
connection therewith; and
(5) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act").
The trust must also meet the following requirements:
(i) the corpus of the trust must consist solely of assets of the type
that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the two highest generic rating categories by an Exemption Rating
Agency for at least one year prior to the Plan's acquisition of
certificates; and
(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at least
one year prior to any Plan's acquisition of the certificates.
Moreover, the Exemption provides relief from certain self-dealing/conflict of
interest prohibited transactions that may occur when the Plan fiduciary causes a
Plan to acquire certificates in a trust holding receivables as to which the
fiduciary (or its affiliate) is an obligor provided that, among other
requirements, (i) in the case of an acquisition in connection with the initial
issuance of certificates, at least fifty percent (50%) of each class of
certificates in which Plans have invested is acquired by persons independent of
the Restricted Group; (ii) such fiduciary (or its affiliate) is an obligor with
respect to five percent (5%) or less of the fair market value of the obligations
contained in the trust; (iii) a Plan's investment in certificates of any class
does not exceed twenty-five percent (25%) of all of the certificates of that
class outstanding at the time of the acquisition; and (iv) immediately after the
acquisition, no more than twenty-five percent (25%) of the assets of any Plan
with respect to which such person is a fiduciary are invested in certificates
representing an interest in one or more trusts containing assets sold or
serviced by the same entity. The Exemption does not apply to Plans sponsored by
any Underwriter, the Trustee, the Servicer, the Swap Provider, any obligor with
respect to Mortgage Loans included in the Trust constituting more than five
percent of the aggregate unamortized principal balance of the assets in the
Trust, or any affiliate of such parties (the "Restricted Group").
For so long as the holder of a Senior Certificate also holds an interest
in the Interest Rate Swap Agreement, the holder will be deemed to have acquired
and be holding the Senior Certificate without the right to receive payments from
the Interest Rate Swap Agreement and, separately, the right to receive payments
from the Interest Rate Swap Agreement. A holder's rights with respect to the
Interest Rate Swap Agreement are not covered by the Exemption. However, certain
other exemptions may apply. Accordingly, no Plan or other person using assets of
a Plan may acquire or hold a Senior Certificate while the Interest Rate Swap
Agreement is in existence, unless (1) such Plan is an accredited investor within
the meaning of the Exemption and (2) such acquisition or holding is eligible for
the exemptive relief available under Department of Labor Prohibited Transaction
Class Exemption 84-14
89
(for transactions by independent "qualified professional asset managers"), 91-38
(for transactions by bank collective investment funds), 90-1 (for transactions
by insurance company pooled separate accounts), 95-60 (for transactions by
insurance company general accounts) or 96-23 (for transactions effected by
"in-house asset managers"). For so long as the Interest Rate Swap Agreement is
in existence, each beneficial owner of a Senior Certificate or any interest
therein, shall be deemed to have represented, by virtue of its acquisition or
holding of the Senior Certificate, or interest therein, that either (i) it is
not a Plan or (ii) (A) it is an accredited investor within the meaning of the
Exemption and (B) the holder's rights under the Interest Rate Swap Agreement are
eligible for the exemptive relief available under one of the five prohibited
transaction class exemptions enumerated above.
If any Senior Certificate or any interest therein is acquired or held in
violation of the conditions described herein, the next preceding permitted
beneficial owner will be treated as the beneficial owner of that Senior
Certificate, retroactive to the date of transfer to the purported beneficial
owner. Any purported beneficial owner whose acquisition or holding of any such
certificate or interest therein was effected in violation of the conditions
described in the preceding paragraph will indemnify and hold harmless the
Depositor, the Trustee, the Servicer, any subservicer, any NIMS Insurer and the
Trust from and against any and all liabilities, claims, costs or expenses
incurred by those parties as a result of that acquisition or holding.
The Exemption will apply to the acquisition and holding by Plans of the
Senior Certificates if all conditions of the Exemption are met. Prospective Plan
investors are encouraged to consult with their legal advisors concerning the
impact of ERISA, Section 4975 of the Code and Similar Law, the applicability of
PTCE 83-1 described in the prospectus and the Exemption, and the potential
consequences in their specific circumstances, prior to making an investment in
the Senior Certificates. Moreover, each Plan fiduciary should determine whether
under the general fiduciary standards of investment prudence and
diversification, an investment in the Senior Certificates is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Because the Subordinate Certificates are subordinated to the Senior
Certificates and because some of the Mortgage Loans have Loan-to-Value Ratios in
excess of 100%, the Subordinate Certificates may not be transferred unless the
transferee has delivered (i) a representation letter to the Trustee stating that
either the transferee is not a Plan and is not acting on behalf of a Plan or
using the assets of a Plan to effect such purchase or, subject to the conditions
described in this free writing prospectus, the source of funds used to purchase
the Subordinate Certificates is an "insurance company general account" or (ii)
an opinion of counsel and such other documentation as described in this free
writing prospectus under "Description of the Certificates -- Restrictions on
Transfer of the Subordinate Certificates." Any transferee of a Subordinate
Certificate that does not comply with either clause (i) or clause (ii) of the
preceding sentence will be deemed to have made one of the representations
described in clause (i) of the preceding sentence.
For more information about ERISA considerations, see the information under
the heading "ERISA Considerations" in the prospectus.
LEGAL INVESTMENT
The Senior Certificates and the Class M-1, Class M-2 and Class M-3
Certificates will constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"), so long
as they are rated in one of the two highest rating categories by at least one
nationally recognized statistical rating agency. The Class M-4, Class M-5, Class
M-6, Class M-7, Class M-8 and Class M-9 Certificates will not constitute
"mortgage related securities" for purposes of SMMEA.
There may be restrictions on the ability of certain investors, including
depository institutions, either to purchase the Offered Certificates or to
purchase Offered Certificates representing more than a specified percentage of
the investor's assets. Investors are encouraged to consult their own legal
advisors in determining whether and to what extent the Offered Certificates
constitute legal investments for such investors. See "Legal Investment" in the
prospectus.
90
REPORTS TO CERTIFICATEHOLDERS
The Trustee will prepare on a monthly basis a statement containing, among
other things, information relating to principal and interest distributions on
the Certificates and the status of the Mortgage Pool and certain other
information, as set forth in the Pooling and Servicing Agreement, required under
Item 1121 of Regulation AB as described under "Description of the
Agreements--Material Terms of the Pooling and Servicing Agreements and
Underlying Servicing Agreements--Reports to Securityholders" in the prospectus.
In addition, the Trustee and the Servicer, and potentially certain other parties
as described in the Pooling and Servicing Agreement, will furnish to the
Depositor and the Trustee, as applicable, the compliance statements, assessments
and attestation reports in accordance with Item 1122 and Item 1123 of Regulation
AB detailed under "Description of the Agreements--Material Terms of the Pooling
and Servicing Agreements and Underlying Servicing Agreements--Evidence as to
Compliance" in the prospectus.
Copies of these statements and reports will be filed on Form 10-D and Form
10-K with the SEC through its EDGAR system located at "http://www.sec.gov" under
the name of the Issuing Entity for so long as the Issuing Entity is subject to
the reporting requirement of the Securities Exchange Act of 1934, as amended.
The Trustee will make the statement described in the prospectus under
"Description of the Agreements--Material Terms of the Pooling and Servicing
Agreements and Underlying Servicing Agreements--Reports to Securityholders"
available each month to Certificateholders and the other parties to the Pooling
and Servicing Agreement via the Trustee's internet website. To the extent set
forth in the Pooling and Servicing Agreement, the Trustee will also make the
Periodic Reports described in the prospectus under "Where You Can Find More
Information" relating to the Issuing Entity available through its website. The
Trustee's internet website will initially be located at "www.ctslink.com."
Assistance in using the website can be obtained by calling the Trustee's
customer service desk at (301) 815-6600. Parties that are unable to use the
website are entitled to have a paper copy mailed to them at no charge via first
class mail by calling the customer service desk.
LEGAL MATTERS
The legality of the Offered Certificates and certain tax matters will be
passed upon for the Depositor and the Underwriter by Cadwalader, Wickersham &
Taft LLP, New York, New York.
RATINGS
It is a condition to the issuance of the Offered Certificates that the
Certificates receive at least the rating set forth in the table beginning on
page 7 of this free writing prospectus from Moody's Investors Service, Inc.
("Moody's") or Fitch Ratings ("Fitch").
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 of the payment of any Cap Carryover Amount, the frequency of
prepayments on the Mortgage Loans, or the possibility that a holder of an
Offered Certificate might realize a lower than anticipated yield.
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. In the event that the ratings initially assigned to any of the
Offered Certificates by the Rating Agencies 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.
In addition, the rating agencies that assign the initial ratings to the
Offered Certificates will monitor those ratings for so long as the Offered
Certificates remain outstanding.
91
INDEX OF DEFINED TERMS
6
60+ Day Delinquent Loan.......................................................68
A
Accrued Certificate Interest..................................................58
Act...........................................................................89
Additional Termination Events.................................................78
Adjustable-Rate Mortgage Loans................................................33
Adjustable-Rate Prepayment Curve..............................................84
Adjustment Date...............................................................33
Advance.......................................................................51
Advancing Person..............................................................52
Applied Realized Loss Amount..................................................70
ARM PPC.......................................................................84
Available Funds...............................................................56
B
Balloon Loan..................................................................34
Balloon Payment...............................................................34
Bank of America...............................................................45
Basis Risk Arrangements.......................................................86
Basis Risk component..........................................................86
C
Cap...........................................................................75
Cap Carryover Amount..........................................................76
Cap Carryover Reserve Account.................................................76
Cap Premium...................................................................86
Certificate Interest Rate.....................................................74
Certificate Principal Balance.................................................63
Class B Principal Distribution Amount.........................................65
Class B Realized Loss Amortization Amount.....................................73
Class M-1 Realized Loss Amortization Amount...................................72
Class M-2 Realized Loss Amortization Amount...................................73
Class M-3 Realized Loss Amortization Amount...................................73
Class M-4 Principal Distribution Amount.......................................64
Class M-4 Realized Loss Amortization Amount...................................73
Class M-5 Principal Distribution Amount.......................................64
Class M-5 Realized Loss Amortization Amount...................................73
Class M-6 Principal Distribution Amount.......................................64
Class M-6 Realized Loss Amortization Amount...................................73
Class M-7 Principal Distribution Amount.......................................64
Class M-7 Realized Loss Amortization Amount...................................73
Class M-8 Principal Distribution Amount.......................................65
Class M-8 Realized Loss Amortization Amount...................................73
Class M-9 Principal Distribution Amount.......................................65
Class M-9 Realized Loss Amortization Amount...................................73
Code..........................................................................85
Collection Account............................................................50
Compensating Interest.........................................................52
CPR...........................................................................84
Credit Enhancement Percentage.................................................66
Credit Risk Manager Fee.......................................................52
Credit Risk Manager Fee Rate..................................................52
Credit Scores.................................................................34
Cut off Date Principal Balance................................................32
D
Defective Mortgage Loans......................................................50
Deficient Valuation...........................................................69
Delinquent....................................................................34
Distribution Account..........................................................50
Downgrade Provisions..........................................................77
Due Date......................................................................33
E
Early Termination Date........................................................77
Eligible Account..............................................................50
Eligible Substitute Mortgage Loan.............................................49
ERISA.........................................................................88
ERISA Plan....................................................................88
Events of Default.............................................................77
Exemption.....................................................................88
Exemption Rating Agencies.....................................................89
Extra Principal Distribution Amount...........................................66
F
Fitch.........................................................................91
Fixed-Rate Mortgage Loans.....................................................33
Fixed-Rate Prepayment Curve...................................................84
FRM PPC.......................................................................84
FSMA...........................................................................6
G
Gross Margin..................................................................33
Group 1 Cap...................................................................74
Group 1 Interest Remittance Amount............................................58
92
Group 1 Maximum Rate Cap......................................................74
Group 1 Principal Percentage..................................................66
Group 1 Senior Principal Distribution Amount..................................66
Group 2 Cap...................................................................74
Group 2 Interest Remittance Amount............................................58
Group 2 Maximum Rate Cap......................................................74
Group 2 Principal Percentage..................................................66
Group 2 Senior Principal Distribution Amount..................................66
Group 3 Cap...................................................................75
Group 3 Interest Remittance Amount............................................59
Group 3 Maximum Rate Cap......................................................75
Group 3 Principal Percentage..................................................66
Group 3 Senior Principal Distribution Amount..................................67
Group Subordinate Amount......................................................75
H
H&R Block.....................................................................36
I
Index.........................................................................33
Initial Periodic Rate Cap.....................................................33
Interest Accrual Period.......................................................59
Interest Carry Forward Amount.................................................60
Interest Only Mortgage Loan...................................................33
Interest Percentage...........................................................60
Interest Remittance Amount....................................................60
IRS...........................................................................86
ISDA Master Agreement.........................................................77
L
LIBOR Determination Date......................................................80
Liquidated Mortgage Loan......................................................69
Loan-to-Value Ratio...........................................................34
LTV...........................................................................38
M
Maximum Mortgage Interest Rate................................................33
Maximum Rate Cap..............................................................75
MERS..........................................................................48
Minimum Mortgage Interest Rate................................................33
Monthly Excess Cashflow Allocation............................................71
Monthly Excess Cashflow Amount................................................71
Monthly Excess Interest Amount................................................58
Monthly Excess Interest Amount................................................70
Monthly Payment...............................................................34
Moody's.......................................................................91
Mortgage......................................................................33
Mortgage Interest Rate........................................................33
Mortgage Loan Purchase Agreement..............................................35
Mortgage Loan Schedule........................................................48
Mortgage Loans................................................................33
Mortgage Pool.................................................................33
Mortgaged Property............................................................33
N
Net Maximum Mortgage Interest Rate............................................75
Net Mortgage Interest Rate....................................................70
Net Swap Payment..............................................................76
NIMS Insurer...................................................................9
O
OID...........................................................................85
OID Regulations...............................................................85
One-Month LIBOR...............................................................80
Option One....................................................................36
Option One Mortgage Loan Purchase Agreement...................................35
Option One Underwriting Guidelines............................................37
Optional Termination Date.....................................................53
Overcollateralization Amount..................................................67
Overcollateralization Deficiency..............................................67
Overcollateralization Release Amount..........................................67
P
Pass-Through Rate.............................................................74
Periodic Rate Cap.............................................................33
Plans.........................................................................88
Pool Balance..................................................................33
Pool Cap......................................................................75
Pool Maximum Rate Cap.........................................................75
Pooling and Servicing Agreement...............................................48
Prepayment Assumptions........................................................84
Prepayment Interest Excess....................................................53
Prepayment Interest Shortfall.................................................53
Principal Balance.............................................................33
Principal Distribution Amount.................................................67
Principal Remittance Amount...................................................67
Purchase Price................................................................49
Q
qualified liquidation.........................................................53
R
Rating Agencies...............................................................50
Realized Loss.................................................................69
Realized Loss Amortization Amount.............................................73
Reference Bank Rate...........................................................80
Regular Interest component....................................................86
Regulation AB.................................................................78
Reimbursement Amount..........................................................49
REIT..........................................................................86
Related Documents.............................................................48
93
Relevant Implementation Date...................................................5
Relevant Member State..........................................................5
Relevant Persons...............................................................6
Relief Act....................................................................51
REMIC.........................................................................85
Restricted Group..............................................................89
S
Senior Principal Distribution Amount..........................................68
Sequential Mezzanine Principal Distribution Amount............................63
Servicer Modification.........................................................69
Servicer Remittance Date......................................................50
Servicing Advance.............................................................51
Servicing Fee.................................................................52
Servicing Fee Rate............................................................52
Similar Law...................................................................88
Six Month LIBOR...............................................................35
SMMEA.........................................................................90
Stepdown Date.................................................................68
Structuring Assumptions.......................................................84
Subordination Depletion Date..................................................68
Subsequent Recovery...........................................................68
Substitution Adjustment.......................................................49
Swap Account..................................................................78
Swap Default..................................................................77
Swap Early Termination........................................................78
Swap Provider.................................................................78
Swap Provider Trigger Event...................................................78
Swap Regulations..............................................................86
Swap Termination Payment......................................................78
T
Targeted Overcollateralization Amount.........................................68
Telerate Page 3750............................................................80
Termination Event.............................................................78
Termination Price.............................................................53
Trigger Event.................................................................68
Trust.........................................................................45
Trust Fund....................................................................48
Trust REMIC...................................................................85
U
Underwriter...................................................................35
Unpaid Realized Loss Amount...................................................73
V
Value.........................................................................34
W
Weighted Avg. Life to Optional Termination Date...............................84
Wells Fargo Bank..............................................................46
94
$803,217,000
(Approximate)
Asset Backed Funding Corporation
Depositor
ABFC 2006-OPT3 Trust
Issuing Entity
Bank of America, National Association
Sponsor
Option One Mortgage Corporation
Servicer
Asset Backed Funding Corporation
Asset-Backed Certificates, Series 2006-OPT3
-------------------------------------------------------------
FREE WRITING PROSPECTUS
-------------------------------------------------------------
Banc of America Securities LLC
We are not offering the Offered Certificates in any state where the offer
is not permitted.
We do not claim that the information in this free writing prospectus and
prospectus is accurate as of any date other than the dates stated on the
respective covers.
November 3, 2006
APPENDIX A
MORTGAGE LOAN DATA
The Mortgage Loans are expected to have the following characteristics as of
the Cut-off Date (the sum in any column may not equal the total indicated due to
rounding):
Cut-off Date Principal Balances of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Principal Balance Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
$0.01 to $50,000.00 ................ 0 1 8 9 $0.00 $49,966.82 $399,714.48
$50,000.01 to $100,000.00 .......... 80 86 307 473 7,213,981.45 6,869,811.77 22,549,626.93
$100,000.01 to $150,000.00 ......... 273 113 271 657 34,290,111.05 14,541,667.77 34,140,297.58
$150,000.01 to $200,000.00 ......... 204 73 214 491 35,327,791.50 12,668,648.34 37,197,532.84
$200,000.01 to $250,000.00 ......... 127 80 188 395 28,446,998.15 18,303,667.58 42,455,977.13
$250,000.01 to $300,000.00 ......... 97 53 186 336 26,449,469.00 14,593,595.86 51,680,374.52
$300,000.01 to $350,000.00 ......... 47 110 141 298 15,042,626.80 35,790,178.15 45,699,777.15
$350,000.01 to $400,000.00 ......... 12 91 109 212 4,477,613.83 34,182,740.22 40,758,179.46
$400,000.01 to $450,000.00 ......... 0 19 121 140 0.00 7,823,847.28 51,849,575.15
$450,000.01 to $500,000.00 ......... 0 7 103 110 0.00 3,307,201.99 49,224,491.39
$500,000.01 to $550,000.00 ......... 1 5 91 97 508,000.00 2,590,063.93 47,800,788.92
$550,000.01 to $600,000.00 ......... 0 2 69 71 0.00 1,128,635.89 39,766,446.77
$600,000.01 to $650,000.00 ......... 0 0 49 49 0.00 0.00 30,660,416.11
$650,000.01 to $700,000.00 ......... 0 0 20 20 0.00 0.00 13,645,165.08
$700,000.01 to $750,000.00 ......... 0 0 7 7 0.00 0.00 5,154,588.44
$750,000.01 to $800,000.00 ......... 0 0 13 13 0.00 0.00 10,199,310.08
$800,000.01 and above .............. 0 0 20 20 0.00 0.00 17,370,581.32
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Principal Balance Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
$0.01 to $50,000.00 ................ $449,681.30 0.00% 0.03% 0.07% 0.05%
$50,000.01 to $100,000.00 .......... 36,633,420.15 4.75 4.52 4.17 4.34
$100,000.01 to $150,000.00 ......... 82,972,076.40 22.60 9.58 6.32 9.83
$150,000.01 to $200,000.00 ......... 85,193,972.68 23.28 8.34 6.88 10.09
$200,000.01 to $250,000.00 ......... 89,206,642.86 18.75 12.05 7.85 10.57
$250,000.01 to $300,000.00 ......... 92,723,439.38 17.43 9.61 9.56 10.98
$300,000.01 to $350,000.00 ......... 96,532,582.10 9.91 23.57 8.45 11.44
$350,000.01 to $400,000.00 ......... 79,418,533.51 2.95 22.51 7.54 9.41
$400,000.01 to $450,000.00 ......... 59,673,422.43 0.00 5.15 9.59 7.07
$450,000.01 to $500,000.00 ......... 52,531,693.38 0.00 2.18 9.11 6.22
$500,000.01 to $550,000.00 ......... 50,898,852.85 0.33 1.71 8.84 6.03
$550,000.01 to $600,000.00 ......... 40,895,082.66 0.00 0.74 7.36 4.84
$600,000.01 to $650,000.00 ......... 30,660,416.11 0.00 0.00 5.67 3.63
$650,000.01 to $700,000.00 ......... 13,645,165.08 0.00 0.00 2.52 1.62
$700,000.01 to $750,000.00 ......... 5,154,588.44 0.00 0.00 0.95 0.61
$750,000.01 to $800,000.00 ......... 10,199,310.08 0.00 0.00 1.89 1.21
$800,000.01 and above .............. 17,370,581.32 0.00 0.00 3.21 2.06
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) The average Cut-off Date Principal Balance of all the Mortgage Loans was
$248,428.33, of the group 1 Mortgage Loans was $180,447.79, of the group 2
Mortgage Loans was $237,265.67 and of the group 3 Mortgage Loans was
$281,978.53.
A-1
Mortgage Interest Rates of the Mortgage Loans as of the Cut-off Date(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Mortgage Interest
Rates Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
5.501% to 6.000% ................... 0 1 6 7 $0.00 $227,500.00 $2,716,755.98
6.001% to 6.500% ................... 4 7 24 35 1,220,443.84 2,423,629.64 10,866,444.03
6.501% to 7.000% ................... 20 16 58 94 5,651,772.57 5,681,892.22 28,576,556.21
7.001% to 7.500% ................... 38 27 90 155 9,779,980.49 8,870,540.47 42,705,705.68
7.501% to 8.000% ................... 76 62 203 341 19,520,197.79 19,849,788.44 90,361,775.11
8.001% to 8.500% ................... 99 77 189 365 21,867,266.26 25,392,183.27 73,616,911.67
8.501% to 9.000% ................... 159 93 267 519 28,964,630.30 25,242,543.95 91,463,367.30
9.001% to 9.500% ................... 146 106 190 442 24,260,587.64 24,624,857.65 56,990,648.92
9.501% to 10.000% .................. 171 108 215 494 24,384,921.72 20,629,385.82 55,568,675.16
10.001% to 10.500% ................. 79 65 170 314 10,539,025.03 10,141,338.95 29,567,203.13
10.501% to 11.000% ................. 36 58 165 259 4,296,684.23 6,766,796.23 22,916,477.87
11.001% to 11.500% ................. 11 14 114 139 1,079,318.74 1,622,366.30 13,295,918.71
11.501% to 12.000% ................. 2 3 128 133 191,763.17 193,803.90 13,058,007.54
12.001% to 12.500% ................. 0 3 67 70 0.00 183,398.76 5,798,740.99
12.501% to 13.000% ................. 0 0 31 31 0.00 0.00 3,049,655.05
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Mortgage Interest
Rates Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
5.501% to 6.000% ................... $2,944,255.98 0.00% 0.15% 0.50% 0.35%
6.001% to 6.500% ................... 14,510,517.51 0.80 1.60 2.01 1.72
6.501% to 7.000% ................... 39,910,221.00 3.72 3.74 5.29 4.73
7.001% to 7.500% ................... 61,356,226.64 6.44 5.84 7.90 7.27
7.501% to 8.000% ................... 129,731,761.34 12.86 13.07 16.72 15.37
8.001% to 8.500% ................... 120,876,361.20 14.41 16.72 13.62 14.32
8.501% to 9.000% ................... 145,670,541.55 19.09 16.62 16.92 17.26
9.001% to 9.500% ................... 105,876,094.21 15.99 16.22 10.54 12.54
9.501% to 10.000% .................. 100,582,982.70 16.07 13.59 10.28 11.92
10.001% to 10.500% ................. 50,247,567.11 6.94 6.68 5.47 5.95
10.501% to 11.000% ................. 33,979,958.33 2.83 4.46 4.24 4.03
11.001% to 11.500% ................. 15,997,603.75 0.71 1.07 2.46 1.90
11.501% to 12.000% ................. 13,443,574.61 0.13 0.13 2.42 1.59
12.001% to 12.500% ................. 5,982,139.75 0.00 0.12 1.07 0.71
12.501% to 13.000% ................. 3,049,655.05 0.00 0.00 0.56 0.36
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Mortgage Interest Rate of all
the Mortgage Loans was approximately 8.788%, of the group 1 Mortgage Loans
was approximately 8.810%, of the group 2 Mortgage Loans was approximately
8.807% and of the group 3 Mortgage Loans was approximately 8.776%.
A-2
Original Debt-to-Income Ratios of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Original
Debt-to-Income Ratios Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
0.01 to 20.00 ...................... . 0 21 40 61 $0.00 $4,491,512.74 $11,372,453.68
20.01 to 25.00 ..................... .19 9 57 85 2,907,988.43 1,543,555.40 9,165,275.32
25.01 to 30.00 ..................... .43 28 120 191 7,418,671.49 4,976,269.55 23,149,390.70
30.01 to 35.00 ..................... .68 50 188 306 10,882,719.64 10,018,776.38 43,905,598.83
35.01 to 40.00 ..................... 124 93 269 486 21,276,858.10 19,884,080.76 69,572,021.22
40.01 to 45.00 ..................... 177 117 406 700 32,305,311.17 27,503,907.29 114,466,102.57
45.01 to 50.00 ..................... 209 131 429 769 39,016,368.06 31,038,842.33 140,056,840.19
50.01 to 55.00 ..................... 167 155 332 654 31,343,230.20 42,274,979.10 100,851,486.30
55.01 and above .................... .34 36 76 146 6,605,444.69 10,118,102.05 28,013,674.54
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Original
Debt-to-Income Ratios Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
0.01 to 20.00 ...................... $15,863,966.42 0.00% 2.96% 2.10% 1.88%
20.01 to 25.00 ..................... 13,616,819.15 1.92 1.02 1.70 1.61
25.01 to 30.00 ..................... 35,544,331.74 4.89 3.28 4.28 4.21
30.01 to 35.00 ..................... 64,807,094.85 7.17 6.60 8.12 7.68
35.01 to 40.00 ..................... 110,732,960.08 14.02 13.09 12.87 13.12
40.01 to 45.00 ..................... 174,275,321.03 21.29 18.11 21.18 20.64
45.01 to 50.00 ..................... 210,112,050.58 25.71 20.44 25.91 24.89
50.01 to 55.00 ..................... 174,469,695.60 20.65 27.84 18.66 20.67
55.01 and above .................... 44,737,221.28 4.35 6.66 5.18 5.30
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Debt-to-Income Ratio of all
the Mortgage Loans was approximately 43.77%, of the group 1 Mortgage Loans
was approximately 44.09%, of the group 2 Mortgage Loans was approximately
44.54% and of the group 3 Mortgage Loans was approximately 43.46%.
Loan-to-Value Ratios of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Loan-to-
Value Ratios Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
85.01% to 90.00% ................... 0 0 1 1 $0.00 $0.00 $179,157.18
90.01% to 95.00% ................... 354 228 778 1,360 66,522,498.52 63,677,464.47 168,181,616.74
95.01% to 100.00% .................. 487 412 1,127 2,026 85,234,093.26 88,172,561.13 369,726,751.82
100.01% to 103.00% ................. 0 0 11 11 0.00 0.00 2,465,317.61
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Loan-to-
Value Ratios Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
85.01% to 90.00% ................... $179,157.18 0.00% 0.00% 0.03% 0.02%
90.01% to 95.00% ................... 298,381,579.73 43.83 41.93 31.11 35.35
95.01% to 100.00% .................. 543,133,406.21 56.17 58.07 68.40 64.34
100.01% to 103.00% ................. 2,465,317.61 0.00 0.00 0.46 0.29
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Loan-to-Value Ratio of all
the Mortgage Loans was approximately 98.13%, of the group 1 Mortgage Loans
was approximately 97.68%, of the group 2 Mortgage Loans was approximately
97.71% and of the group 3 Mortgage Loans was approximately 98.37%.
A-3
Original Terms to Maturity of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Original Term
(months) Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
121 to 180 ......................... 2 0 3 5 $222,321.39 $0.00 $486,810.25
181 to 240 ......................... 0 1 1 2 0.00 368,244.73 97,396.71
301 to 360 ......................... 839 639 1,913 3,391 151,534,270.39 151,481,780.87 539,968,636.39
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Original Term
(months) Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
121 to 180 ......................... $709,131.64 0.15% 0.00% 0.09% 0.08%
181 to 240 ......................... 465,641.44 0.00 0.24 0.02 0.06
301 to 360 ......................... 842,984,687.65 99.85 99.76 99.89 99.86
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average original term to maturity of
all the Mortgage Loans was approximately 360 months, of the group 1
Mortgage Loans was approximately 360 months, of the group 2 Mortgage Loans
was approximately 360 months and of the group 3 Mortgage Loans was
approximately 360 months.
Remaining Terms to Maturity of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Remaining Term (months) Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
121 to 180 ......................... 2 0 3 5 $222,321.39 $0.00 $486,810.25
181 to 240 ......................... 0 1 1 2 0.00 368,244.73 97,396.71
301 to 360 ......................... 839 639 1,913 3,391 151,534,270.39 151,481,780.87 539,968,636.39
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Remaining Term (months) Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
121 to 180 ......................... $709,131.64 0.15% 0.00% 0.09% 0.08%
181 to 240 ......................... 465,641.44 0.00 0.24 0.02 0.06
301 to 360 ......................... 842,984,687.65 99.85 99.76 99.89 99.86
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average remaining term to maturity of
all the Mortgage Loans was approximately 357 months, of the group 1
Mortgage Loans was approximately 357 months, of the group 2 Mortgage Loans
was approximately 357 months and of the group 3 Mortgage Loans was
approximately 357 months.
A-4
Property Types of the Mortgage Loans
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Property Type Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Single Family ...................... 692 516 1,487 2,695 $123,186,117.98 $113,516,713.18 $408,012,001.26
Planned Unit Development ........... 85 69 235 389 15,611,758.89 20,287,222.75 69,535,292.71
Two- to Four-Family ................ 28 36 89 153 5,324,150.48 13,266,552.82 32,595,085.26
Low Rise Condominium ............... 36 18 98 152 7,634,564.43 4,454,956.58 28,264,069.07
High Rise Condominium .............. 0 1 8 9 0.00 324,580.27 2,146,395.05
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Property Type Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Single Family ...................... $644,714,832.42 81.17% 74.76% 75.48% 76.37%
Planned Unit Development ........... 105,434,274.35 10.29 13.36 12.86 12.49
Two- to Four-Family ................ 51,185,788.56 3.51 8.74 6.03 6.06
Low Rise Condominium ............... 40,353,590.08 5.03 2.93 5.23 4.78
High Rise Condominium .............. 2,470,975.32 0.00 0.21 0.40 0.29
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
Credit Score(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Credit Scores Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
801 to 850 ......................... 1 1 2 4 $249,850.15 $170,820.15 $478,388.84
751 to 800 ......................... 5 12 39 56 889,959.18 2,732,604.75 15,867,034.75
701 to 750 ......................... 56 36 151 243 12,181,516.48 9,929,572.78 64,226,192.20
651 to 700 ......................... 161 123 391 675 32,765,920.43 31,418,262.94 141,752,394.59
601 to 650 ......................... 471 359 800 1,630 79,838,612.24 80,479,873.30 221,251,813.32
551 to 600 ......................... 118 99 333 550 20,194,417.77 24,277,110.37 64,767,733.08
501 to 550 ......................... 29 10 193 232 5,636,315.53 2,841,781.31 30,859,950.94
500 ................................ 0 0 2 2 0.00 0.00 390,225.34
Not Available ...................... 0 0 6 6 0.00 0.00 959,110.29
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Credit Scores Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
801 to 850 ......................... $899,059.14 0.16% 0.11% 0.09% 0.11%
751 to 800 ......................... 19,489,598.68 0.59 1.80 2.94 2.31
701 to 750 ......................... 86,337,281.46 8.03 6.54 11.88 10.23
651 to 700 ......................... 205,936,577.96 21.59 20.69 26.22 24.40
601 to 650 ......................... 381,570,298.86 52.61 53.00 40.93 45.20
551 to 600 ......................... 109,239,261.22 13.31 15.99 11.98 12.94
501 to 550 ......................... 39,338,047.78 3.71 1.87 5.71 4.66
500 ................................ 390,225.34 0.00 0.00 0.07 0.05
Not Available ...................... 959,110.29 0.00 0.00 0.18 0.11
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Credit Scores (where Credit
Scores were available) of all the Mortgage Loans was approximately 640, of
the group 1 Mortgage Loans was approximately 634, of the group 2 Mortgage
Loans was approximately 634 and of the group 3 Mortgage Loans was
approximately 643.
A-5
Credit Grades(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Credit Grade Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
AA+ ................................ 740 567 1,583 2,890 132,775,352.12 $131,958,862.36 $474,803,803.56
AA ................................. 90 55 292 437 16,992,470.49 14,973,262.73 56,373,580.04
A .................................. 10 17 33 60 $1,854,078.39 4,593,044.92 8,078,301.09
B .................................. 1 1 6 8 134,690.78 324,855.59 905,980.76
C .................................. 0 0 3 3 0.00 0.00 391,177.90
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Credit Grade Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
AA+ ................................ 739,538,018.04 87.49% 86.90% 87.84% 87.61%
AA ................................. 88,339,313.26 11.20 9.86 10.43 10.46
A .................................. $14,525,424.40 1.22 3.02 1.49 1.72
B .................................. 1,365,527.13 0.09 0.21 0.17 0.16
C .................................. 391,177.90 0.00 0.00 0.07 0.05
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) See "Underwriting Standards" in this free writing prospectus for an
explanation of the credit grades presented in this table.
Original Prepayment Charge Term(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Original Prepayment
Charge Term (months) Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
0 .................................. 195 176 438 809 $33,969,539.32 $43,049,608.33 $111,045,751.23
12 ................................. .26 32 143 201 5,468,393.15 10,999,023.97 59,828,920.50
24 ................................. 532 376 1,152 2,060 94,436,079.18 80,510,448.66 315,042,442.42
30 ................................. . 2 1 5 8 370,484.71 334,645.82 1,219,083.23
36 ................................. .86 55 179 320 17,512,095.42 16,956,298.82 53,416,645.97
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Original Prepayment
Charge Term (months) Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
0 .................................. $188,064,898.88 22.38% 28.35% 20.54% 22.28%
12 ................................. 76,296,337.62 3.60 7.24 11.07 9.04
24 ................................. 489,988,970.26 62.23 53.02 58.28 58.04
30 ................................. 1,924,213.76 0.24 0.22 0.23 0.23
36 ................................. 87,885,040.21 11.54 11.17 9.88 10.41
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average original prepayment charge
term of all the Mortgage Loans was approximately 24 months, of the group 1
Mortgage Loans was approximately 25 months, of the group 2 Mortgage Loans
was approximately 25 months and of the group 3 Mortgage Loans was
approximately 24 months.
A-6
Occupancy Status of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Occupancy Status Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Owner Occupied ..................... 769 585 1,799 3,153 $139,318,532.90 $137,715,258.84 $520,823,752.56
Investor ........................... .55 49 107 211 9,353,562.46 12,380,125.13 16,830,412.78
Secondary .......................... .17 6 11 34 3,084,496.42 1,754,641.63 2,898,678.01
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Occupancy Status Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Owner Occupied ..................... $797,857,544.30 91.80% 90.69% 96.35% 94.52%
Investor ........................... 38,564,100.37 6.16 8.15 3.11 4.57
Secondary .......................... 7,737,816.06 2.03 1.16 0.54 0.92
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) Based on a representation made by the borrower at the time of origination.
Purpose of the Mortgage Loans
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Purpose Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Purchase ........................... 404 355 1,517 2,276 $61,771,925.44 $61,724,878.15 $407,427,040.32
Cash-Out Refinance ................. 360 232 314 906 74,985,719.39 75,035,552.11 110,444,577.60
Rate-Term Refinance ................ 77 53 86 216 14,998,946.95 15,089,595.34 22,681,225.43
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Purpose Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Purchase ........................... $530,923,843.91 40.70% 40.65% 75.37% 62.89%
Cash-Out Refinance ................. 260,465,849.10 49.41 49.41 20.43 30.86
Rate-Term Refinance ................ 52,769,767.72 9.88 9.94 4.20 6.25
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
A-7
Product Type of the Mortgage Loans
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Product Type Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
15 YR FIXED ........................ 1 0 2 3 $140,935.00 $0.00 $418,936.20
15/15 6ML with 5 yr IO ............. 0 1 0 1 0.00 118,500.00 0.00
20 YR FIXED ........................ 0 1 1 2 0.00 368,244.73 97,396.71
2/13 6ML ........................... 1 0 1 2 81,386.39 0.00 67,874.05
2/28 6ML ........................... 418 321 890 1,629 64,114,922.10 61,347,855.29 163,898,128.75
2/28 6ML with 5 yr IO .............. 41 79 264 384 11,900,849.10 20,808,437.40 115,796,637.19
2/28 6ML 30/40 BALLOON ............. 250 152 484 886 50,214,104.33 42,764,966.67 180,058,152.47
30 YR FIXED ........................ 62 20 114 196 11,891,897.72 6,306,276.88 25,925,541.27
30 YR FIXED with 5 yr IO ........... 0 2 2 4 0.00 507,300.00 960,963.69
30/40 BALLOON ...................... 15 22 41 78 3,407,445.41 7,779,278.23 14,761,815.36
3/27 6ML ........................... 3 3 24 30 411,013.87 330,143.79 3,907,478.06
3/27 6ML with 5 yr IO .............. 3 1 10 14 609,000.00 215,000.00 4,328,393.76
3/27 6ML 30/40 BALLOON ............. 10 5 15 30 1,715,278.94 1,329,773.32 4,623,072.82
5/25 6ML ........................... 16 9 29 54 2,837,156.37 2,322,982.12 6,837,654.69
5/25 6ML with 5 yr IO .............. 5 8 15 28 1,243,405.07 2,486,539.56 7,862,763.00
5/25 6ML 30/40 BALLOON ............. 16 16 25 57 3,189,197.48 5,164,727.61 11,008,035.33
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Product Type Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
15 YR FIXED ........................ $559,871.20 0.09% 0.00% 0.08% 0.07%
15/15 6ML with 5 yr IO ............. 118,500.00 0.00 0.08 0.00 0.01
20 YR FIXED ........................ 465,641.44 0.00 0.24 0.02 0.06
2/13 6ML ........................... 149,260.44 0.05 0.00 0.01 0.02
2/28 6ML ........................... 289,360,906.14 42.25 40.40 30.32 34.28
2/28 6ML with 5 yr IO .............. 148,505,923.69 7.84 13.70 21.42 17.59
2/28 6ML 30/40 BALLOON ............. 273,037,223.47 33.09 28.16 33.31 32.34
30 YR FIXED ........................ 44,123,715.87 7.84 4.15 4.80 5.23
30 YR FIXED with 5 yr IO ........... 1,468,263.69 0.00 0.33 0.18 0.17
30/40 BALLOON ...................... 25,948,539.00 2.25 5.12 2.73 3.07
3/27 6ML ........................... 4,648,635.72 0.27 0.22 0.72 0.55
3/27 6ML with 5 yr IO .............. 5,152,393.76 0.40 0.14 0.80 0.61
3/27 6ML 30/40 BALLOON ............. 7,668,125.08 1.13 0.88 0.86 0.91
5/25 6ML ........................... 11,997,793.18 1.87 1.53 1.26 1.42
5/25 6ML with 5 yr IO .............. 11,592,707.63 0.82 1.64 1.45 1.37
5/25 6ML 30/40 BALLOON ............. 19,361,960.42 2.10 3.40 2.04 2.29
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
Lien Position of the Mortgage Loans
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Lien Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
First .............................. 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Lien Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
First .............................. $844,159,460.73 100.00% 100.00% 100.00% 100.00%
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
A-8
Geographic Distribution of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Location Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Alabama ............................ 12 6 27 45 $1,501,055.57 $1,375,222.39 $2,722,703.41
Alaska ............................. 1 1 0 2 134,955.54 214,790.99 0.00
Arizona ............................ 10 14 21 45 2,384,388.34 3,883,210.54 4,998,549.86
Arkansas ........................... 3 4 9 16 346,199.09 531,542.06 908,936.37
California ......................... 61 54 410 525 18,567,243.21 19,034,942.77 200,157,912.65
Colorado ........................... 34 23 43 100 6,466,779.09 5,440,602.26 12,509,136.57
Connecticut ........................ 17 14 14 45 3,406,236.22 3,736,474.91 3,613,542.34
Delaware ........................... 1 1 1 3 124,902.35 394,493.76 239,790.38
District of Columbia ............... 0 1 2 3 0.00 334,827.98 570,663.54
Florida ............................ 86 47 146 279 17,639,051.54 11,606,453.47 39,492,330.79
Georgia ............................ 38 21 61 120 5,455,834.98 4,376,906.38 10,522,212.50
Hawaii ............................. 1 5 11 17 508,000.00 2,392,404.79 6,702,635.83
Idaho .............................. 4 8 10 22 512,513.49 1,649,805.73 3,098,916.86
Illinois ........................... 12 13 60 85 2,159,019.52 2,165,555.26 11,062,743.46
Indiana ............................ 26 18 28 72 3,641,930.59 2,392,630.60 3,618,277.98
Iowa ............................... 12 2 14 28 1,567,336.88 389,879.13 1,459,147.70
Kansas ............................. 3 6 10 19 363,171.83 857,532.24 2,104,410.84
Kentucky ........................... 6 4 12 22 906,668.15 332,804.40 1,605,239.58
Louisiana .......................... 1 4 22 27 135,751.29 547,760.43 4,481,308.96
Maine .............................. 14 12 11 37 2,760,316.13 2,012,944.28 1,691,864.21
Maryland ........................... 12 21 27 60 2,460,909.46 6,336,570.61 8,488,861.19
Massachusetts ...................... 37 42 73 152 8,265,267.71 14,041,440.76 26,254,711.22
Michigan ........................... 57 34 57 148 8,247,237.83 5,841,126.65 7,597,971.47
Minnesota .......................... 9 8 8 25 1,252,009.45 1,347,543.45 1,082,682.89
Mississippi ........................ 1 2 5 8 80,723.37 461,985.40 312,338.94
Missouri ........................... 12 11 23 46 1,670,753.54 1,600,386.92 4,015,345.45
Montana ............................ 0 2 1 3 0.00 481,500.00 68,820.98
Nebraska ........................... 1 0 3 4 76,935.83 0.00 233,331.13
Nevada ............................. 10 15 31 56 2,485,831.47 4,693,390.24 10,518,731.03
New Hampshire ...................... 10 12 11 33 2,269,253.62 2,903,370.39 2,913,495.52
New Jersey ......................... 15 21 55 91 2,860,533.54 6,788,067.15 19,428,297.02
New York ........................... 26 21 127 174 4,707,309.77 6,983,093.76 48,939,271.34
North Carolina ..................... 30 9 45 84 4,967,999.59 1,380,650.34 7,413,884.64
North Dakota ....................... 3 1 0 4 320,418.49 160,877.45 0.00
Ohio ............................... 57 25 74 156 7,408,864.23 3,143,029.90 10,484,405.26
Oklahoma ........................... 5 13 12 30 624,730.07 1,712,440.04 1,534,870.08
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Location Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Alabama ............................ $5,598,981.37 0.99% 0.91% 0.50% 0.66%
Alaska ............................. 349,746.53 0.09 0.14 0.00 0.04
Arizona ............................ 11,266,148.74 1.57 2.56 0.92 1.33
Arkansas ........................... 1,786,677.52 0.23 0.35 0.17 0.21
California ......................... 237,760,098.63 12.23 12.54 37.03 28.17
Colorado ........................... 24,416,517.92 4.26 3.58 2.31 2.89
Connecticut ........................ 10,756,253.47 2.24 2.46 0.67 1.27
Delaware ........................... 759,186.49 0.08 0.26 0.04 0.09
District of Columbia ............... 905,491.52 0.00 0.22 0.11 0.11
Florida ............................ 68,737,835.80 11.62 7.64 7.31 8.14
Georgia ............................ 20,354,953.86 3.60 2.88 1.95 2.41
Hawaii ............................. 9,603,040.62 0.33 1.58 1.24 1.14
Idaho .............................. 5,261,236.08 0.34 1.09 0.57 0.62
Illinois ........................... 15,387,318.24 1.42 1.43 2.05 1.82
Indiana ............................ 9,652,839.17 2.40 1.58 0.67 1.14
Iowa ............................... 3,416,363.71 1.03 0.26 0.27 0.40
Kansas ............................. 3,325,114.91 0.24 0.56 0.39 0.39
Kentucky ........................... 2,844,712.13 0.60 0.22 0.30 0.34
Louisiana .......................... 5,164,820.68 0.09 0.36 0.83 0.61
Maine .............................. 6,465,124.62 1.82 1.33 0.31 0.77
Maryland ........................... 17,286,341.26 1.62 4.17 1.57 2.05
Massachusetts ...................... 48,561,419.69 5.45 9.25 4.86 5.75
Michigan ........................... 21,686,335.95 5.43 3.85 1.41 2.57
Minnesota .......................... 3,682,235.79 0.83 0.89 0.20 0.44
Mississippi ........................ 855,047.71 0.05 0.30 0.06 0.10
Missouri ........................... 7,286,485.91 1.10 1.05 0.74 0.86
Montana ............................ 550,320.98 0.00 0.32 0.01 0.07
Nebraska ........................... 310,266.96 0.05 0.00 0.04 0.04
Nevada ............................. 17,697,952.74 1.64 3.09 1.95 2.10
New Hampshire ...................... 8,086,119.53 1.50 1.91 0.54 0.96
New Jersey ......................... 29,076,897.71 1.88 4.47 3.59 3.44
New York ........................... 60,629,674.87 3.10 4.60 9.05 7.18
North Carolina ..................... 13,762,534.57 3.27 0.91 1.37 1.63
North Dakota ....................... 481,295.94 0.21 0.11 0.00 0.06
Ohio ............................... 21,036,299.39 4.88 2.07 1.94 2.49
Oklahoma ........................... 3,872,040.19 0.41 1.13 0.28 0.46
A-9
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Location Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Oregon ............................. 11 3 11 25 2,423,516.34 949,291.32 3,275,588.23
Pennsylvania ....................... 37 19 52 108 5,922,851.33 4,065,240.42 9,193,443.92
Rhode Island ....................... 6 10 12 28 1,407,899.66 3,018,319.56 3,306,309.19
South Carolina ..................... 21 9 26 56 3,496,649.02 1,762,939.48 4,444,067.26
South Dakota ....................... 1 2 2 5 103,428.96 375,266.85 352,269.45
Tennessee .......................... 11 8 23 42 1,395,112.10 850,977.32 2,868,973.89
Texas .............................. 47 26 220 293 5,942,931.88 3,384,617.48 31,806,017.37
Utah ............................... 12 1 11 24 2,082,319.04 327,383.07 2,581,254.81
Vermont ............................ 2 11 3 16 353,293.87 2,336,850.71 584,891.24
Virginia ........................... 24 23 35 82 4,021,612.28 6,027,602.27 8,834,603.53
Washington ......................... 22 17 30 69 4,747,209.36 4,519,329.25 9,017,302.27
Wisconsin .......................... 19 13 25 57 3,303,234.03 1,911,594.95 2,935,787.46
Wyoming ............................ 1 3 3 7 276,402.13 774,355.49 504,992.74
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Location Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Oregon ............................. 6,648,395.89 1.60% 0.63% 0.61% 0.79%
Pennsylvania ....................... 19,181,535.67 3.90 2.68 1.70 2.27
Rhode Island ....................... 7,732,528.41 0.93 1.99 0.61 0.92
South Carolina ..................... 9,703,655.76 2.30 1.16 0.82 1.15
South Dakota ....................... 830,965.26 0.07 0.25 0.07 0.10
Tennessee .......................... 5,115,063.31 0.92 0.56 0.53 0.61
Texas .............................. 41,133,566.73 3.92 2.23 5.88 4.87
Utah ............................... 4,990,956.92 1.37 0.22 0.48 0.59
Vermont ............................ 3,275,035.82 0.23 1.54 0.11 0.39
Virginia ........................... 18,883,818.08 2.65 3.97 1.63 2.24
Washington ......................... 18,283,840.88 3.13 2.98 1.67 2.17
Wisconsin .......................... 8,150,616.44 2.18 1.26 0.54 0.97
Wyoming ............................ 1,555,750.36 0.18 0.51 0.09 0.18
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) The greatest ZIP Code geographic concentration of the group 1 Mortgage
Loans by Cut-off Date Principal Balance was approximately 0.68% in the
02302 ZIP Code, located in Massachusetts, for the group 2 Mortgage Loans
was approximately 0.85% in the 02302 ZIP Code, located in Massachusetts,
for the group 3 Mortgage Loans was approximately 1.06% in the 92392 ZIP
Code, located in California and for all of the Mortgage Loans was 0.68% in
the 92392 ZIP Code, located in California.
Documentation Levels of the Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Documentation Level Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
Full Documentation ................. 725 543 1,512 2,780 $128,239,897.35 $126,420,216.01 $373,197,144.23
Stated Income Documentation ........ 112 95 391 598 22,868,718.40 25,309,247.60 162,569,344.30
Limited Documentation .............. 1 1 9 11 243,363.95 60,758.75 3,481,272.71
Business Bank Statements ........... 3 1 5 9 404,612.08 59,803.24 1,305,082.11
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Documentation Level Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
Full Documentation ................. $627,857,257.59 84.50% 83.25% 69.04% 74.38%
Stated Income Documentation ........ 210,747,310.30 15.07 16.67 30.07 24.97
Limited Documentation .............. 3,785,395.41 0.16 0.04 0.64 0.45
Business Bank Statements ........... 1,769,497.43 0.27 0.04 0.24 0.21
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) For a description of each documentation level, see "Underwriting
Standards" in this free writing prospectus.
A-10
The following tables present certain statistical information relevant only
to the Adjustable-Rate Mortgage Loans:
Maximum Mortgage Interest Rate of the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of Maximum
Mortgage Interest Rates Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
9.501% to 10.000% .................. 0 0 1 1 $0.00 $0.00 $265,789.80
10.001% to 10.500% ................. 0 1 0 1 0.00 397,735.94 0.00
10.501% to 11.000% ................. 1 0 0 1 289,605.56 0.00 0.00
11.001% to 11.500% ................. 1 0 0 1 179,953.84 0.00 0.00
11.501% to 12.000% ................. 0 1 9 10 0.00 227,500.00 3,299,276.68
12.001% to 12.500% ................. 3 7 22 32 582,039.30 2,017,684.58 9,588,033.67
12.501% to 13.000% ................. 18 14 46 78 4,808,196.01 4,916,414.36 22,778,047.30
13.001% to 13.500% ................. 31 24 83 138 8,099,613.17 7,455,649.22 38,700,524.69
13.501% to 14.000% ................. 72 52 194 318 18,629,306.71 15,985,173.58 85,805,325.75
14.001% to 14.500% ................. 92 69 184 345 20,337,455.31 22,474,738.97 71,227,777.50
14.501% to 15.000% ................. 146 86 247 479 26,438,047.32 22,689,933.27 84,776,344.09
15.001% to 15.500% ................. 133 99 181 413 21,839,989.92 23,068,458.05 54,889,191.00
15.501% to 16.000% ................. 149 105 184 438 20,475,953.21 19,823,158.54 47,167,582.48
16.001% to 16.500% ................. 73 61 152 286 9,605,742.99 9,339,081.84 26,822,861.09
16.501% to 17.000% ................. 33 56 154 243 3,954,541.86 6,493,828.45 21,446,254.74
17.001% to 17.500% ................. 10 14 96 120 995,346.03 1,622,366.30 11,257,182.66
17.501% to 18.000% ................. 1 3 119 123 80,522.42 193,803.90 12,373,833.69
18.001% to 18.500% ................. 0 3 59 62 0.00 183,398.76 5,295,935.83
18.501% to 19.000% ................. 0 0 26 26 0.00 0.00 2,694,229.15
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Range of Maximum
Mortgage Interest Rates Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
9.501% to 10.000% .................. $265,789.80 0.00% 0.00% 0.05% 0.03%
10.001% to 10.500% ................. 397,735.94 0.00 0.29 0.00 0.05
10.501% to 11.000% ................. 289,605.56 0.21 0.00 0.00 0.04
11.001% to 11.500% ................. 179,953.84 0.13 0.00 0.00 0.02
11.501% to 12.000% ................. 3,526,776.68 0.00 0.17 0.66 0.46
12.001% to 12.500% ................. 12,187,757.55 0.43 1.47 1.92 1.58
12.501% to 13.000% ................. 32,502,657.67 3.53 3.59 4.57 4.21
13.001% to 13.500% ................. 54,255,787.08 5.94 5.45 7.77 7.03
13.501% to 14.000% ................. 120,419,806.04 13.67 11.68 17.22 15.61
14.001% to 14.500% ................. 114,039,971.78 14.92 16.42 14.29 14.78
14.501% to 15.000% ................. 133,904,324.68 19.39 16.58 17.01 17.35
15.001% to 15.500% ................. 99,797,638.97 16.02 16.85 11.01 12.93
15.501% to 16.000% ................. 87,466,694.23 15.02 14.48 9.46 11.34
16.001% to 16.500% ................. 45,767,685.92 7.05 6.82 5.38 5.93
16.501% to 17.000% ................. 31,894,625.05 2.90 4.74 4.30 4.13
17.001% to 17.500% ................. 13,874,894.99 0.73 1.19 2.26 1.80
17.501% to 18.000% ................. 12,648,160.01 0.06 0.14 2.48 1.64
18.001% to 18.500% ................. 5,479,334.59 0.00 0.13 1.06 0.71
18.501% to 19.000% ................. 2,694,229.15 0.00 0.00 0.54 0.35
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Maximum Mortgage Interest
Rate of all the Adjustable-Rate Mortgage Loans was approximately 14.787%,
of the group 1 Adjustable-Rate Mortgage Loans was approximately 14.799%,
of the group 2 Adjustable-Rate Mortgage Loans was approximately 14.843%
and of the group 3 Adjustable-Rate Mortgage Loans as of the Cut-off Date
was approximately 14.768%.
A-11
Minimum Mortgage Interest Rate of the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Range of
Minimum
Mortgage
Interest Rates Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
5.501% to 6.000% ................... 0 1 6 7 $0.00 $227,500.00 $2,716,755.98
6.001% to 6.500% ................... 1 5 21 27 332,500.00 1,693,900.65 9,487,439.59
6.501% to 7.000% ................... 17 14 47 78 4,698,799.70 4,916,414.36 23,043,837.10
7.001% to 7.500% ................... 32 24 82 138 8,341,613.17 7,765,423.68 38,523,119.23
7.501% to 8.000% ................... 72 50 194 316 18,794,009.92 15,553,734.44 85,805,325.75
8.001% to 8.500% ................... 92 69 183 344 20,275,409.15 22,474,738.97 71,124,263.62
8.501% to 9.000% ................... 146 86 250 482 26,438,047.32 22,689,933.27 85,358,864.79
9.001% to 9.500% ................... 135 102 181 418 22,089,529.22 23,743,740.59 54,928,542.32
9.501% to 10.000% .................. 150 105 184 439 20,585,349.52 19,823,158.54 47,167,582.48
10.001% to 10.500% ................. 73 62 153 288 9,605,742.99 9,427,043.32 27,000,266.55
10.501% to 11.000% ................. 34 57 154 245 4,079,444.21 6,573,768.98 21,446,254.74
11.001% to 11.500% ................. 10 14 97 121 995,346.03 1,622,366.30 11,360,696.54
11.501% to 12.000% ................. 1 3 119 123 80,522.42 193,803.90 12,373,833.69
12.001% to 12.500% ................. 0 3 60 63 0.00 183,398.76 5,357,178.59
12.501% to 13.000% ................. 0 0 26 26 0.00 0.00 2,694,229.15
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Range of
Minimum
Mortgage
Interest Rates Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
5.501% to 6.000% ................... $2,944,255.98 0.00% 0.17% 0.55% 0.38%
6.001% to 6.500% ................... 11,513,840.24 0.24 1.24 1.90 1.49
6.501% to 7.000% ................... 32,659,051.16 3.45 3.59 4.62 4.23
7.001% to 7.500% ................... 54,630,156.08 6.12 5.67 7.73 7.08
7.501% to 8.000% ................... 120,153,070.11 13.79 11.36 17.22 15.57
8.001% to 8.500% ................... 113,874,411.74 14.87 16.42 14.27 14.76
8.501% to 9.000% ................... 134,486,845.38 19.39 16.58 17.13 17.43
9.001% to 9.500% ................... 100,761,812.13 16.20 17.35 11.02 13.06
9.501% to 10.000% .................. 87,576,090.54 15.10 14.48 9.46 11.35
10.001% to 10.500% ................. 46,033,052.86 7.05 6.89 5.42 5.97
10.501% to 11.000% ................. 32,099,467.93 2.99 4.80 4.30 4.16
11.001% to 11.500% ................. 13,978,408.87 0.73 1.19 2.28 1.81
11.501% to 12.000% ................. 12,648,160.01 0.06 0.14 2.48 1.64
12.001% to 12.500% ................. 5,540,577.35 0.00 0.13 1.07 0.72
12.501% to 13.000% ................. 2,694,229.15 0.00 0.00 0.54 0.35
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Minimum Mortgage Interest
Rate of all the Adjustable-Rate Mortgage Loans was approximately 8.799%,
of the group 1 Adjustable-Rate Mortgage Loans was approximately 8.819%, of
the group 2 Adjustable-Rate Mortgage Loans was approximately 8.866% and of
the group 3 Adjustable-Rate Mortgage Loans was approximately 8.776%.
A-12
Initial Periodic Cap of the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Initial Periodic Cap Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
3.000% ............................. 763 595 1,757 3,115 $136,316,313.65 $136,888,925.76 $498,388,190.12
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Initial Periodic Cap Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
3.000% ............................. $771,593,429.53 100.00% 100.00% 100.00% 100.00%
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Initial Periodic Cap for all
the Adjustable-Rate Mortgage Loans was approximately 3.000%, for the group
1 Adjustable-Rate Mortgage Loans was approximately 3.000%, for the group 2
Adjustable-Rate Mortgage Loans was approximately 3.000% and for the group
3 Adjustable-Rate Mortgage Loans was approximately 3.000%.
Periodic Cap of the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Periodic Cap Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
1.000% ............................. 763 595 1,757 3,115 $136,316,313.65 $136,888,925.76 $498,388,190.12
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Periodic Cap Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
1.000% ............................. $771,593,429.53 100.00% 100.00% 100.00% 100.00%
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Periodic Cap for all the
Adjustable-Rate Mortgage Loans was approximately 1.000%, for the group 1
Adjustable-Rate Mortgage Loans was approximately 1.000%, for the group 2
Adjustable-Rate Mortgage Loans was approximately 1.000% and for the group
3 Adjustable-Rate Mortgage Loans was approximately 1.000%.
A-13
Gross Margins of the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Gross Margin Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
2.501% to 3.000% ................... 0 0 2 2 $0.00 $0.00 $129,309.78
3.501% to 4.000% ................... 0 0 4 4 0.00 0.00 389,196.31
4.001% to 4.500% ................... 1 1 1 3 229,785.76 81,904.51 83,969.46
4.501% to 5.000% ................... 2 2 10 14 293,132.37 311,999.50 1,841,414.06
5.001% to 5.500% ................... 4 2 6 12 779,104.80 481,352.34 1,474,302.96
5.501% to 6.000% ................... 39 37 99 175 6,365,943.49 8,420,414.55 26,468,690.12
6.001% to 6.500% ................... 713 545 1,617 2,875 128,062,379.35 126,198,342.53 464,546,661.82
6.501% to 7.000% ................... 2 5 8 15 324,913.24 1,006,053.37 1,703,296.40
7.001% to 7.500% ................... 2 1 10 13 261,054.64 59,821.32 1,751,349.21
7.501% to 8.000% ................... 0 1 0 1 0.00 116,731.52 0.00
8.001% to 8.500% ................... 0 1 0 1 0.00 212,306.12 0.00
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Gross Margin Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
2.501% to 3.000% ................... $129,309.78 0.00% 0.00% 0.03% 0.02%
3.501% to 4.000% ................... 389,196.31 0.00 0.00 0.08 0.05
4.001% to 4.500% ................... 395,659.73 0.17 0.06 0.02 0.05
4.501% to 5.000% ................... 2,446,545.93 0.22 0.23 0.37 0.32
5.001% to 5.500% ................... 2,734,760.10 0.57 0.35 0.30 0.35
5.501% to 6.000% ................... 41,255,048.16 4.67 6.15 5.31 5.35
6.001% to 6.500% ................... 718,807,383.70 93.95 92.19 93.21 93.16
6.501% to 7.000% ................... 3,034,263.01 0.24 0.73 0.34 0.39
7.001% to 7.500% ................... 2,072,225.17 0.19 0.04 0.35 0.27
7.501% to 8.000% ................... 116,731.52 0.00 0.09 0.00 0.02
8.001% to 8.500% ................... 212,306.12 0.00 0.16 0.00 0.03
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average Gross Margin of all the
Mortgage Loans was approximately 6.106%, of the group 1 Mortgage Loans was
approximately 6.100%, of the group 2 Mortgage Loans was approximately
6.111% and of the group 3 Mortgage Loans was approximately 6.106%.
A-14
Next Adjustment Date for the Adjustable-Rate Mortgage Loans(1)
Number of Principal Balance
Mortgage Loans Outstanding as of the Cut-off Date
----------------------------------- ---------------------------------------------------
Month of Next Mortgage
Interest Rate Change Group 1 Group 2 Group 3 Total Group 1 Group 2 Group 3
- ------------------------------------ ------- ------- ------- ----- --------------- --------------- ---------------
November 2007 ...................... 1 0 0 1 $142,084.86 $0.00 $0.00
January 2008 ....................... 0 0 1 1 0.00 0.00 77,598.93
February 2008 ...................... 0 1 3 4 0.00 59,821.32 352,808.98
March 2008 ......................... 0 0 1 1 0.00 0.00 51,150.34
April 2008 ......................... 1 0 2 3 120,815.29 0.00 181,440.53
May 2008 ........................... 2 1 16 19 315,809.76 126,044.05 2,976,475.97
June 2008 .......................... 4 3 10 17 622,502.06 369,728.90 3,937,973.76
July 2008 .......................... 271 184 539 994 51,458,333.39 42,309,671.42 158,392,567.75
August 2008 ........................ 371 322 949 1,642 63,307,006.01 72,255,745.05 266,441,149.04
September 2008 ..................... 60 41 117 218 10,344,710.55 9,800,248.62 27,204,627.16
October 2008 ....................... 0 0 1 1 0.00 0.00 205,000.00
March 2009 ......................... 1 0 0 1 83,491.02 0.00 0.00
July 2009 .......................... 6 4 17 27 1,147,966.52 1,033,910.27 3,628,448.55
August 2009 ........................ 6 5 27 38 947,598.29 841,006.84 7,726,586.34
September 2009 ..................... 3 0 5 8 556,236.98 0.00 1,503,909.75
June 2011 .......................... 0 0 1 1 0.00 0.00 94,871.28
July 2011 .......................... 15 13 22 50 3,060,735.36 4,027,617.81 8,876,454.70
August 2011 ........................ 21 20 36 77 4,134,052.41 5,946,631.48 14,127,153.69
September 2011 ..................... 1 0 10 11 74,971.15 0.00 2,609,973.35
July 2021 .......................... 0 1 0 1 0.00 118,500.00 0.00
------- ------- ------- ----- --------------- --------------- ---------------
Total: 841 640 1,917 3,398 $151,756,591.78 $151,850,025.60 $540,552,843.35
======= ======= ======= ===== =============== =============== ===============
Principal
Balance
Outstanding % of Aggregate
as of the Principal Balance Outstanding
Cut-off Date as of the Cut-off Date
--------------- ----------------------------------------
Month of Next Mortgage
Interest Rate Change Total Group 1 Group 2 Group 3 Total
- ------------------------------------ --------------- ------- ------- ------- -------
November 2007 ...................... $142,084.86 0.10% 0.00% 0.00% 0.02%
January 2008 ....................... 77,598.93 0.00 0.00 0.02 0.01
February 2008 ...................... 412,630.30 0.00 0.04 0.07 0.05
March 2008 ......................... 51,150.34 0.00 0.00 0.01 0.01
April 2008 ......................... 302,255.82 0.09 0.00 0.04 0.04
May 2008 ........................... 3,418,329.78 0.23 0.09 0.60 0.44
June 2008 .......................... 4,930,204.72 0.46 0.27 0.79 0.64
July 2008 .......................... 252,160,572.56 37.75 30.91 31.78 32.68
August 2008 ........................ 402,003,900.10 46.44 52.78 53.46 52.10
September 2008 ..................... 47,349,586.33 7.59 7.16 5.46 6.14
October 2008 ....................... 205,000.00 0.00 0.00 0.04 0.03
March 2009 ......................... 83,491.02 0.06 0.00 0.00 0.01
July 2009 .......................... 5,810,325.34 0.84 0.76 0.73 0.75
August 2009 ........................ 9,515,191.47 0.70 0.61 1.55 1.23
September 2009 ..................... 2,060,146.73 0.41 0.00 0.30 0.27
June 2011 .......................... 94,871.28 0.00 0.00 0.02 0.01
July 2011 .......................... 15,964,807.87 2.25 2.94 1.78 2.07
August 2011 ........................ 24,207,837.58 3.03 4.34 2.83 3.14
September 2011 ..................... 2,684,944.50 0.05 0.00 0.52 0.35
July 2021 .......................... 118,500.00 0.00 0.09 0.00 0.02
--------------- ------- ------- ------- -------
Total: $844,159,460.73 100.00% 100.00% 100.00% 100.00%
=============== ======= ======= ======= =======
- ----------
(1) As of the Cut-off Date, the weighted average months to the next Adjustment
Date for all the Adjustable-Rate Mortgage Loans was approximately 24
months, for the group 1 Adjustable-Rate Mortgage Loans was approximately
24 months, for the group 2 Adjustable-Rate Mortgage Loans was
approximately 25 months and for the group 3 Adjustable-Rate Mortgage Loans
was approximately 24 months.
A-15
APPENDIX B
DECREMENT TABLES
The following tables have been prepared based on the assumptions described
in this prospectus supplement under "Yield, Prepayment and Maturity
Considerations" and should be read in conjunction with that section.
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class A-1
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 99 85 78 71 64 56 49
October 25, 2008 99 64 49 34 20 6 0
October 25, 2009 98 47 27 10 0 0 0
October 25, 2010 98 33 23 10 0 0 0
October 25, 2011 97 28 17 10 0 0 0
October 25, 2012 96 23 13 6 0 0 0
October 25, 2013 95 19 9 4 0 0 0
October 25, 2014 94 16 7 3 0 0 0
October 25, 2015 93 13 5 2 0 0 0
October 25, 2016 92 11 4 1 0 0 0
October 25, 2017 91 9 3 1 0 0 0
October 25, 2018 89 7 2 1 0 0 0
October 25, 2019 88 6 2 0 0 0 0
October 25, 2020 86 5 1 0 0 0 0
October 25, 2021 84 4 1 0 0 0 0
October 25, 2022 81 3 1 0 0 0 0
October 25, 2023 79 3 0 0 0 0 0
October 25, 2024 76 2 0 0 0 0 0
October 25, 2025 73 2 0 0 0 0 0
October 25, 2026 69 1 0 0 0 0 0
October 25, 2027 65 1 0 0 0 0 0
October 25, 2028 61 1 0 0 0 0 0
October 25, 2029 56 1 0 0 0 0 0
October 25, 2030 50 1 0 0 0 0 0
October 25, 2031 44 0 0 0 0 0 0
October 25, 2032 37 0 0 0 0 0 0
October 25, 2033 31 0 0 0 0 0 0
October 25, 2034 27 0 0 0 0 0 0
October 25, 2035 22 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 22.27 4.35 2.93 2.05 1.34 1.14 1.01
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 22.27 4.04 2.71 1.89 1.34 1.14 1.01
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-1
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class A-2
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 99 85 78 71 64 56 49
October 25, 2008 99 65 49 34 20 6 0
October 25, 2009 98 47 27 10 0 0 0
October 25, 2010 98 33 23 10 0 0 0
October 25, 2011 97 28 17 10 0 0 0
October 25, 2012 96 23 13 6 0 0 0
October 25, 2013 96 19 9 4 0 0 0
October 25, 2014 95 16 7 3 0 0 0
October 25, 2015 94 13 5 2 0 0 0
October 25, 2016 92 11 4 1 0 0 0
October 25, 2017 91 9 3 1 0 0 0
October 25, 2018 90 7 2 1 0 0 0
October 25, 2019 88 6 2 0 0 0 0
October 25, 2020 86 5 1 0 0 0 0
October 25, 2021 84 4 1 0 0 0 0
October 25, 2022 82 3 1 0 0 0 0
October 25, 2023 79 3 0 0 0 0 0
October 25, 2024 76 2 0 0 0 0 0
October 25, 2025 73 2 0 0 0 0 0
October 25, 2026 69 1 0 0 0 0 0
October 25, 2027 65 1 0 0 0 0 0
October 25, 2028 61 1 0 0 0 0 0
October 25, 2029 55 1 0 0 0 0 0
October 25, 2030 50 1 0 0 0 0 0
October 25, 2031 43 0 0 0 0 0 0
October 25, 2032 36 0 0 0 0 0 0
October 25, 2033 31 0 0 0 0 0 0
October 25, 2034 27 0 0 0 0 0 0
October 25, 2035 22 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 22.25 4.35 2.93 2.05 1.34 1.14 1.02
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 22.25 4.04 2.71 1.89 1.34 1.14 1.02
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-2
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class A-3A
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 99 75 62 50 37 25 12
October 25, 2008 98 39 12 0 0 0 0
October 25, 2009 98 8 0 0 0 0 0
October 25, 2010 97 0 0 0 0 0 0
October 25, 2011 96 0 0 0 0 0 0
October 25, 2012 95 0 0 0 0 0 0
October 25, 2013 93 0 0 0 0 0 0
October 25, 2014 92 0 0 0 0 0 0
October 25, 2015 90 0 0 0 0 0 0
October 25, 2016 88 0 0 0 0 0 0
October 25, 2017 86 0 0 0 0 0 0
October 25, 2018 83 0 0 0 0 0 0
October 25, 2019 80 0 0 0 0 0 0
October 25, 2020 77 0 0 0 0 0 0
October 25, 2021 74 0 0 0 0 0 0
October 25, 2022 70 0 0 0 0 0 0
October 25, 2023 65 0 0 0 0 0 0
October 25, 2024 60 0 0 0 0 0 0
October 25, 2025 55 0 0 0 0 0 0
October 25, 2026 49 0 0 0 0 0 0
October 25, 2027 42 0 0 0 0 0 0
October 25, 2028 34 0 0 0 0 0 0
October 25, 2029 25 0 0 0 0 0 0
October 25, 2030 16 0 0 0 0 0 0
October 25, 2031 5 0 0 0 0 0 0
October 25, 2032 0 0 0 0 0 0 0
October 25, 2033 0 0 0 0 0 0 0
October 25, 2034 0 0 0 0 0 0 0
October 25, 2035 0 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 18.15 1.71 1.24 1.00 0.83 0.71 0.62
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 18.15 1.71 1.24 1.00 0.83 0.71 0.62
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-3
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class A-3B
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 81 46 11 0
October 25, 2009 100 100 62 21 0 0 0
October 25, 2010 100 79 52 21 0 0 0
October 25, 2011 100 65 38 20 0 0 0
October 25, 2012 100 53 27 12 0 0 0
October 25, 2013 100 43 19 7 0 0 0
October 25, 2014 100 35 14 4 0 0 0
October 25, 2015 100 28 9 1 0 0 0
October 25, 2016 100 23 6 0 0 0 0
October 25, 2017 100 18 4 0 0 0 0
October 25, 2018 100 14 2 0 0 0 0
October 25, 2019 100 11 1 0 0 0 0
October 25, 2020 100 9 0 0 0 0 0
October 25, 2021 100 6 0 0 0 0 0
October 25, 2022 100 5 0 0 0 0 0
October 25, 2023 100 3 0 0 0 0 0
October 25, 2024 100 2 0 0 0 0 0
October 25, 2025 100 1 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 90 0 0 0 0 0 0
October 25, 2033 75 0 0 0 0 0 0
October 25, 2034 64 0 0 0 0 0 0
October 25, 2035 52 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 28.42 7.47 4.87 3.19 2.02 1.74 1.55
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 28.42 7.07 4.61 3.00 2.02 1.74 1.55
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-4
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class A-3C
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 0
October 25, 2009 100 100 100 100 0 0 0
October 25, 2010 100 100 100 100 0 0 0
October 25, 2011 100 100 100 100 0 0 0
October 25, 2012 100 100 100 100 0 0 0
October 25, 2013 100 100 100 100 0 0 0
October 25, 2014 100 100 100 100 0 0 0
October 25, 2015 100 100 100 100 0 0 0
October 25, 2016 100 100 100 94 0 0 0
October 25, 2017 100 100 100 64 0 0 0
October 25, 2018 100 100 100 36 0 0 0
October 25, 2019 100 100 100 9 0 0 0
October 25, 2020 100 100 89 0 0 0 0
October 25, 2021 100 100 66 0 0 0 0
October 25, 2022 100 100 49 0 0 0 0
October 25, 2023 100 100 24 0 0 0 0
October 25, 2024 100 100 5 0 0 0 0
October 25, 2025 100 100 0 0 0 0 0
October 25, 2026 100 100 0 0 0 0 0
October 25, 2027 100 85 0 0 0 0 0
October 25, 2028 100 68 0 0 0 0 0
October 25, 2029 100 54 0 0 0 0 0
October 25, 2030 100 35 0 0 0 0 0
October 25, 2031 100 16 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 100 0 0 0 0 0 0
October 25, 2034 100 0 0 0 0 0 0
October 25, 2035 100 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.78 23.09 15.81 11.52 2.71 2.03 1.95
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.78 12.36 8.11 5.86 2.71 2.03 1.95
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-5
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-1
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 74
October 25, 2009 100 100 100 100 79 78 10
October 25, 2010 100 98 19 39 72 0 0
October 25, 2011 100 57 0 0 0 0 0
October 25, 2012 100 22 0 0 0 0 0
October 25, 2013 100 0 0 0 0 0 0
October 25, 2014 100 0 0 0 0 0 0
October 25, 2015 100 0 0 0 0 0 0
October 25, 2016 100 0 0 0 0 0 0
October 25, 2017 100 0 0 0 0 0 0
October 25, 2018 100 0 0 0 0 0 0
October 25, 2019 100 0 0 0 0 0 0
October 25, 2020 100 0 0 0 0 0 0
October 25, 2021 100 0 0 0 0 0 0
October 25, 2022 100 0 0 0 0 0 0
October 25, 2023 100 0 0 0 0 0 0
October 25, 2024 100 0 0 0 0 0 0
October 25, 2025 100 0 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 85 0 0 0 0 0 0
October 25, 2034 53 0 0 0 0 0 0
October 25, 2035 17 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 28.04 5.22 3.57 3.93 3.99 3.18 2.58
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 28.04 5.22 3.57 3.93 3.96 3.14 2.56
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-6
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-2
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 100 100
October 25, 2010 100 100 100 100 100 66 15
October 25, 2011 100 100 75 18 81 6 0
October 25, 2012 100 100 41 0 24 0 0
October 25, 2013 100 92 16 0 0 0 0
October 25, 2014 100 66 0 0 0 0 0
October 25, 2015 100 45 0 0 0 0 0
October 25, 2016 100 27 0 0 0 0 0
October 25, 2017 100 12 0 0 0 0 0
October 25, 2018 100 0 0 0 0 0 0
October 25, 2019 100 0 0 0 0 0 0
October 25, 2020 100 0 0 0 0 0 0
October 25, 2021 100 0 0 0 0 0 0
October 25, 2022 100 0 0 0 0 0 0
October 25, 2023 100 0 0 0 0 0 0
October 25, 2024 100 0 0 0 0 0 0
October 25, 2025 100 0 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 100 0 0 0 0 0 0
October 25, 2034 100 0 0 0 0 0 0
October 25, 2035 100 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.74 8.91 5.83 4.71 5.54 4.25 3.56
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.74 8.91 5.83 4.71 4.45 3.36 2.86
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-7
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-3
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 100 100
October 25, 2010 100 100 100 100 100 100 100
October 25, 2011 100 100 100 100 100 100 56
October 25, 2012 100 100 100 87 100 58 15
October 25, 2013 100 100 100 58 85 22 0
October 25, 2014 100 100 95 39 49 2 0
October 25, 2015 100 100 71 26 21 0 0
October 25, 2016 100 100 53 18 4 0 0
October 25, 2017 100 100 40 7 0 0 0
October 25, 2018 100 99 30 0 0 0 0
October 25, 2019 100 82 22 0 0 0 0
October 25, 2020 100 67 17 0 0 0 0
October 25, 2021 100 55 8 0 0 0 0
October 25, 2022 100 45 0 0 0 0 0
October 25, 2023 100 37 0 0 0 0 0
October 25, 2024 100 30 0 0 0 0 0
October 25, 2025 100 24 0 0 0 0 0
October 25, 2026 100 20 0 0 0 0 0
October 25, 2027 100 16 0 0 0 0 0
October 25, 2028 100 8 0 0 0 0 0
October 25, 2029 100 2 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 100 0 0 0 0 0 0
October 25, 2034 100 0 0 0 0 0 0
October 25, 2035 100 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.78 16.33 10.85 7.85 8.10 6.30 5.19
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.78 12.35 8.10 5.85 4.45 3.36 2.86
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-8
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-4
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 8
October 25, 2011 100 82 50 28 15 7 1
October 25, 2012 100 68 37 19 9 1 0
October 25, 2013 100 56 28 13 5 0 0
October 25, 2014 100 46 21 8 0 0 0
October 25, 2015 100 38 15 6 0 0 0
October 25, 2016 100 32 12 3 0 0 0
October 25, 2017 100 26 9 0 0 0 0
October 25, 2018 100 22 6 0 0 0 0
October 25, 2019 100 18 5 0 0 0 0
October 25, 2020 100 15 1 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 10 0 0 0 0 0
October 25, 2023 100 8 0 0 0 0 0
October 25, 2024 100 7 0 0 0 0 0
October 25, 2025 100 5 0 0 0 0 0
October 25, 2026 100 4 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.96 5.93 4.72 4.26 3.17 2.78
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.38 4.32 3.95 2.92 2.58
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-9
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-5
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 8
October 25, 2011 100 82 50 28 15 7 0
October 25, 2012 100 68 37 19 9 0 0
October 25, 2013 100 56 28 13 5 0 0
October 25, 2014 100 46 21 8 0 0 0
October 25, 2015 100 38 15 6 0 0 0
October 25, 2016 100 32 12 0 0 0 0
October 25, 2017 100 26 9 0 0 0 0
October 25, 2018 100 22 6 0 0 0 0
October 25, 2019 100 18 5 0 0 0 0
October 25, 2020 100 15 0 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 10 0 0 0 0 0
October 25, 2023 100 8 0 0 0 0 0
October 25, 2024 100 7 0 0 0 0 0
October 25, 2025 100 5 0 0 0 0 0
October 25, 2026 100 2 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.94 5.91 4.65 4.10 3.06 2.68
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.38 4.26 3.80 2.82 2.49
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-10
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-6
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 8
October 25, 2011 100 82 50 28 15 7 0
October 25, 2012 100 68 37 19 9 0 0
October 25, 2013 100 56 28 13 4 0 0
October 25, 2014 100 46 21 8 0 0 0
October 25, 2015 100 38 15 6 0 0 0
October 25, 2016 100 32 12 0 0 0 0
October 25, 2017 100 26 9 0 0 0 0
October 25, 2018 100 22 6 0 0 0 0
October 25, 2019 100 18 1 0 0 0 0
October 25, 2020 100 15 0 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 10 0 0 0 0 0
October 25, 2023 100 8 0 0 0 0 0
October 25, 2024 100 7 0 0 0 0 0
October 25, 2025 100 4 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.90 5.89 4.59 3.97 2.97 2.59
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.38 4.22 3.68 2.74 2.41
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-11
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-7
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 8
October 25, 2011 100 82 50 28 15 7 0
October 25, 2012 100 68 37 19 9 0 0
October 25, 2013 100 56 28 13 0 0 0
October 25, 2014 100 46 21 8 0 0 0
October 25, 2015 100 38 15 1 0 0 0
October 25, 2016 100 32 12 0 0 0 0
October 25, 2017 100 26 9 0 0 0 0
October 25, 2018 100 22 6 0 0 0 0
October 25, 2019 100 18 0 0 0 0 0
October 25, 2020 100 15 0 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 10 0 0 0 0 0
October 25, 2023 100 8 0 0 0 0 0
October 25, 2024 100 6 0 0 0 0 0
October 25, 2025 100 0 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.85 5.85 4.54 3.87 2.89 2.53
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.37 4.19 3.60 2.68 2.36
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-12
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-8
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 6
October 25, 2011 100 82 50 28 15 1 0
October 25, 2012 100 68 37 19 9 0 0
October 25, 2013 100 56 28 13 0 0 0
October 25, 2014 100 46 21 8 0 0 0
October 25, 2015 100 38 15 0 0 0 0
October 25, 2016 100 32 12 0 0 0 0
October 25, 2017 100 26 9 0 0 0 0
October 25, 2018 100 22 0 0 0 0 0
October 25, 2019 100 18 0 0 0 0 0
October 25, 2020 100 15 0 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 10 0 0 0 0 0
October 25, 2023 100 7 0 0 0 0 0
October 25, 2024 100 0 0 0 0 0 0
October 25, 2025 100 0 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.79 5.80 4.47 3.77 2.83 2.48
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.37 4.16 3.53 2.63 2.33
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-13
Percentage of Original Principal Balance Outstanding(1) at the
Specified Percentages of the Applicable Prepayment Assumption
Class M-9
ARM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
FRM PPC 0% 50% 75% 100% 125% 150% 175%
- ------------------------------ ----- ----- ----- ----- ----- ----- -----
Distribution Date
Initial Percentage 100 100 100 100 100 100 100
October 25, 2007 100 100 100 100 100 100 100
October 25, 2008 100 100 100 100 100 100 100
October 25, 2009 100 100 100 100 100 26 18
October 25, 2010 100 99 67 43 25 13 0
October 25, 2011 100 82 50 28 15 0 0
October 25, 2012 100 68 37 19 3 0 0
October 25, 2013 100 56 28 13 0 0 0
October 25, 2014 100 46 21 1 0 0 0
October 25, 2015 100 38 15 0 0 0 0
October 25, 2016 100 32 12 0 0 0 0
October 25, 2017 100 26 2 0 0 0 0
October 25, 2018 100 22 0 0 0 0 0
October 25, 2019 100 18 0 0 0 0 0
October 25, 2020 100 15 0 0 0 0 0
October 25, 2021 100 12 0 0 0 0 0
October 25, 2022 100 8 0 0 0 0 0
October 25, 2023 100 0 0 0 0 0 0
October 25, 2024 100 0 0 0 0 0 0
October 25, 2025 100 0 0 0 0 0 0
October 25, 2026 100 0 0 0 0 0 0
October 25, 2027 100 0 0 0 0 0 0
October 25, 2028 100 0 0 0 0 0 0
October 25, 2029 100 0 0 0 0 0 0
October 25, 2030 100 0 0 0 0 0 0
October 25, 2031 100 0 0 0 0 0 0
October 25, 2032 100 0 0 0 0 0 0
October 25, 2033 94 0 0 0 0 0 0
October 25, 2034 81 0 0 0 0 0 0
October 25, 2035 66 0 0 0 0 0 0
October 25, 2036 0 0 0 0 0 0 0
Weighted Avg. Life to Maturity
(in years)(2) 29.05 8.70 5.73 4.41 3.69 2.77 2.41
Weighted Avg. Life to Optional
Termination Date (in
years)(3) 29.05 8.15 5.37 4.14 3.49 2.60 2.28
- ----------
(1) Rounded to the nearest whole percentage.
(2) The weighted average life of any class of Certificates is determined by
(i) multiplying the assumed net reduction, if any, in the Certificate
Principal Balance on each Distribution Date of such class of Certificates
by the number of years from the date of issuance of the Certificates to
the related Distribution Date, (ii) summing the results, and (iii)
dividing the sum by the aggregate amount of the assumed net reduction in
the Certificate Principal Balance of such class of Certificates.
(3) Calculated pursuant to footnote two but assumes that the optional right to
purchase the Mortgage Loans is exercised on the earliest possible
Distribution Date on which such right is permitted.
B-14
APPENDIX C
Assumed Mortgage Loan Characteristics
Gross Original Months to
Cut-off Date Mortgage Original Original Loan Interest Next
Loan Interest Principal Interest Term Amortization Age Only Term Gross Adjustment
Group Type Balance ($) Rate (%) (months) Term (months) (months) (months) Margin (%) Date
- ----- -------- -------------- -------- -------- -------------- -------- --------- ---------- ----------
1 FIX 140,935.00 9.7000 180 180 3 0 N/A N/A
1 FIX 1,691,254.60 8.6350 360 360 3 0 N/A N/A
1 FIX 1,526,944.44 9.2558 360 360 3 0 N/A N/A
1 FIX 674,296.57 9.6489 360 360 2 0 N/A N/A
1 FIX 196,703.91 9.4500 360 360 3 0 N/A N/A
1 FIX 7,802,698.20 8.7178 360 360 2 0 N/A N/A
1 FIX 609,498.85 8.3493 360 480 3 0 N/A N/A
1 FIX 249,855.89 7.9900 360 480 2 0 N/A N/A
1 FIX 2,548,090.67 8.3769 360 480 3 0 N/A N/A
1 ARM 81,386.39 9.7250 180 180 3 0 6.1000 21
1 ARM 17,685,776.33 9.2582 360 360 2 0 6.0641 22
1 ARM 2,153,033.65 8.2822 360 360 2 0 6.1427 22
1 ARM 44,025,921.59 9.3189 360 360 2 0 6.1195 22
1 ARM 250,190.53 9.9571 360 360 2 0 6.1000 22
1 ARM 2,340,830.36 8.6869 360 360 2 60 6.0142 22
1 ARM 370,000.00 7.9900 360 360 2 60 6.1000 22
1 ARM 9,190,018.74 7.7771 360 360 2 60 6.0934 22
1 ARM 8,822,829.80 8.7067 360 480 3 0 6.0439 21
1 ARM 1,168,559.17 9.0222 360 480 3 0 6.1857 21
1 ARM 39,834,038.93 8.4611 360 480 2 0 6.1102 22
1 ARM 173,780.80 9.2500 360 480 2 0 6.1000 22
1 ARM 214,895.63 8.5800 360 480 2 0 6.1000 22
1 ARM 243,267.43 9.6635 360 360 2 0 6.1000 34
1 ARM 167,746.44 9.4300 360 360 3 0 6.1000 33
1 ARM 609,000.00 7.8939 360 360 2 60 6.0470 34
1 ARM 815,904.91 8.7523 360 480 3 0 6.1206 33
1 ARM 306,417.83 9.4013 360 480 1 0 5.8500 35
1 ARM 592,956.20 8.4972 360 480 2 0 6.1506 34
1 ARM 1,195,379.68 9.1099 360 360 2 0 6.1001 58
1 ARM 109,142.11 9.5000 360 360 2 0 5.8500 58
1 ARM 1,532,634.58 8.4737 360 360 2 0 6.0745 58
1 ARM 1,243,405.07 7.4134 360 360 3 60 6.1000 57
1 ARM 423,862.36 7.6375 360 480 3 0 6.1000 57
1 ARM 214,857.02 8.9000 360 480 3 0 6.3000 57
Maximum Minimum
Initial Mortgage Mortgage
Loan Periodic Rate Periodic Interest Interest Rate
Group Cap (%) Rate Cap (%) Rate (%) (%)
- ----- ------------- ------------ -------- -------------
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 N/A N/A N/A N/A
1 3.0000 1.0000 15.7250 9.7250
1 3.0000 1.0000 15.2201 9.2582
1 3.0000 1.0000 13.8787 8.2822
1 3.0000 1.0000 15.3114 9.3189
1 3.0000 1.0000 15.9571 9.9571
1 3.0000 1.0000 14.6869 8.6869
1 3.0000 1.0000 13.9900 7.9900
1 3.0000 1.0000 13.8034 7.7771
1 3.0000 1.0000 14.7067 8.7067
1 3.0000 1.0000 15.0222 9.0222
1 3.0000 1.0000 14.4362 8.4611
1 3.0000 1.0000 15.2500 9.2500
1 3.0000 1.0000 14.5800 8.5800
1 3.0000 1.0000 15.6635 9.6635
1 3.0000 1.0000 15.4300 9.4300
1 3.0000 1.0000 13.8939 7.8939
1 3.0000 1.0000 14.7523 8.7523
1 3.0000 1.0000 15.4013 9.4013
1 3.0000 1.0000 14.4972 8.4972
1 3.0000 1.0000 15.1099 9.1099
1 3.0000 1.0000 15.5000 9.5000
1 3.0000 1.0000 14.4737 8.4737
1 3.0000 1.0000 13.4134 7.4134
1 3.0000 1.0000 13.6375 7.6375
1 3.0000 1.0000 14.9000 8.9000
C-1
Gross Original Months to
Cut-off Date Mortgage Original Original Loan Interest Next
Loan Interest Principal Interest Term Amortization Age Only Term Gross Adjustment
Group Type Balance ($) Rate (%) (months) Term (months) (months) (months) Margin (%) Date
- ----- -------- -------------- -------- -------- -------------- -------- --------- ---------- ----------
1 ARM 2,550,478.10 8.3522 360 480 2 0 6.1161 58
2 FIX 368,244.73 8.6250 240 240 3 0 N/A N/A
2 FIX 1,171,261.21 8.7513 360 360 3 0 N/A N/A
2 FIX 1,351,020.00 8.1710 360 360 3 0 N/A N/A
2 FIX 202,929.74 10.3000 360 360 2 0 N/A N/A
2 FIX 3,581,065.93 8.7114 360 360 3 0 N/A N/A
2 FIX 141,300.00 8.2000 360 360 2 60 N/A N/A
2 FIX 366,000.00 7.3500 360 360 2 60 N/A N/A
2 FIX 1,743,222.03 8.6606 360 480 3 0 N/A N/A
2 FIX 713,681.24 7.5790 360 480 1 0 N/A N/A
2 FIX 5,322,374.96 7.6876 360 480 3 0 N/A N/A
2 ARM 17,631,036.28 9.3556 360 360 2 0 6.0925 22
2 ARM 4,637,071.06 9.2448 360 360 2 0 6.1303 22
2 ARM 38,745,102.13 9.4481 360 360 2 0 6.1212 22
2 ARM 334,645.82 9.1750 360 360 2 0 6.1000 22
2 ARM 5,041,034.64 9.0269 360 360 2 60 6.0649 22
2 ARM 703,250.00 7.9764 360 360 2 60 6.1000 22
2 ARM 14,770,552.76 8.2019 360 360 2 60 6.0995 22
2 ARM 293,600.00 8.0433 360 360 3 60 6.1000 21
2 ARM 12,104,395.15 8.5563 360 480 2 0 6.1135 22
2 ARM 3,244,316.00 8.8483 360 480 2 0 6.1000 22
2 ARM 26,791,864.03 8.3975 360 480 2 0 6.1176 22
2 ARM 624,391.49 8.6198 360 480 3 0 6.1000 21
2 ARM 249,704.67 10.0631 360 360 2 0 6.1000 34
2 ARM 80,439.12 10.7500 360 360 2 0 6.1000 34
2 ARM 215,000.00 8.9750 360 360 2 60 6.1000 34
2 ARM 324,182.33 10.5123 360 480 2 0 6.1000 34
2 ARM 349,685.67 7.8700 360 480 3 0 6.1000 33
2 ARM 655,905.32 8.7953 360 480 3 0 6.1000 33
2 ARM 1,822,177.00 8.9714 360 360 3 0 6.3796 57
2 ARM 500,805.12 8.0295 360 360 2 0 6.1000 58
2 ARM 598,200.00 7.7077 360 360 2 60 6.1000 58
2 ARM 1,888,339.56 7.9132 360 360 2 60 6.0945 58
2 ARM 2,223,095.02 8.4900 360 480 2 0 5.9405 58
2 ARM 2,941,632.59 7.8052 360 480 3 0 6.1000 57
2 ARM 118,500.00 8.8000 360 360 3 60 6.3000 177
3 FIX 59,758.60 12.0000 180 180 2 0 N/A N/A
3 FIX 359,177.60 9.5500 180 180 2 0 N/A N/A
3 FIX 97,396.71 10.1500 240 240 2 0 N/A N/A
Maximum Minimum
Initial Mortgage Mortgage
Loan Periodic Rate Periodic Interest Interest Rate
Group Cap (%) Rate Cap (%) Rate (%) (%)
- ----- ------------- ------------ -------- -------------
1 3.0000 1.0000 14.3522 8.3522
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 N/A N/A N/A N/A
2 3.0000 1.0000 15.3556 9.3556
2 3.0000 1.0000 15.2448 9.2448
2 3.0000 1.0000 15.4065 9.4481
2 3.0000 1.0000 15.1750 9.1750
2 3.0000 1.0000 15.0269 9.0269
2 3.0000 1.0000 13.9764 7.9764
2 3.0000 1.0000 14.2019 8.1569
2 3.0000 1.0000 14.0433 8.0433
2 3.0000 1.0000 14.5563 8.5563
2 3.0000 1.0000 14.8483 8.8483
2 3.0000 1.0000 14.3632 8.3975
2 3.0000 1.0000 14.6198 8.6198
2 3.0000 1.0000 16.0631 10.0631
2 3.0000 1.0000 16.7500 10.7500
2 3.0000 1.0000 14.9750 8.9750
2 3.0000 1.0000 16.5123 10.5123
2 3.0000 1.0000 13.8700 7.8700
2 3.0000 1.0000 14.7953 8.7953
2 3.0000 1.0000 14.9714 8.9714
2 3.0000 1.0000 14.0295 8.0295
2 3.0000 1.0000 13.7077 7.7077
2 3.0000 1.0000 13.9132 7.9132
2 3.0000 1.0000 14.4900 8.4900
2 3.0000 1.0000 13.3996 7.8052
2 3.0000 1.0000 14.8000 8.8000
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
C-2
Gross Original Months to
Cut-off Date Mortgage Original Original Loan Interest Next
Loan Interest Principal Interest Term Amortization Age Only Term Gross Adjustment
Group Type Balance ($) Rate (%) (months) Term (months) (months) (months) Margin (%) Date
- ----- -------- -------------- -------- -------- -------------- -------- --------- ---------- ----------
3 FIX 4,744,144.34 9.2904 360 360 2 0 N/A N/A
3 FIX 4,802,466.46 8.9783 360 360 3 0 N/A N/A
3 FIX 364,537.85 10.6143 360 360 3 0 N/A N/A
3 FIX 634,873.53 11.0223 360 360 2 0 N/A N/A
3 FIX 15,379,519.09 8.8272 360 360 3 0 N/A N/A
3 FIX 960,963.69 9.3537 360 360 3 60 N/A N/A
3 FIX 1,771,596.50 10.1327 360 480 2 0 N/A N/A
3 FIX 1,603,145.20 8.7547 360 480 2 0 N/A N/A
3 FIX 81,976.32 10.3300 360 480 2 0 N/A N/A
3 FIX 11,305,097.34 7.9155 360 480 3 0 N/A N/A
3 ARM 67,874.05 10.1500 180 180 2 0 5.8500 22
3 ARM 53,093,783.55 9.7903 360 360 2 0 6.0806 22
3 ARM 8,398,854.57 8.7718 360 360 2 0 6.1588 22
3 ARM 101,833,006.25 9.8517 360 360 2 0 6.1269 22
3 ARM 572,484.38 9.8941 360 360 3 0 6.1398 21
3 ARM 16,211,037.21 8.7294 360 360 2 60 6.1314 22
3 ARM 9,323,462.41 8.4087 360 360 2 60 6.0679 22
3 ARM 89,810,137.57 7.8230 360 360 2 60 6.1128 22
3 ARM 452,000.00 7.0250 360 360 3 60 6.1000 21
3 ARM 29,643,459.01 9.0115 360 480 2 0 6.0687 22
3 ARM 27,729,171.95 8.3591 360 480 2 0 6.0971 22
3 ARM 121,775,016.52 8.3117 360 480 2 0 6.1100 22
3 ARM 910,504.99 9.1591 360 480 3 0 5.9853 21
3 ARM 1,335,552.96 10.0510 360 360 3 0 6.1000 33
3 ARM 287,537.63 9.0500 360 360 2 0 6.1000 34
3 ARM 236,827.48 10.3000 360 360 2 0 6.1000 34
3 ARM 354,869.34 9.7800 360 360 2 0 6.1000 34
3 ARM 1,692,690.65 10.0036 360 360 3 0 6.1155 33
3 ARM 622,500.00 9.0855 360 360 2 60 6.1000 34
3 ARM 570,000.00 7.7300 360 360 1 60 6.1000 35
3 ARM 3,135,893.76 7.9914 360 360 2 60 6.1000 34
3 ARM 1,667,393.96 9.4582 360 480 2 0 6.1019 34
3 ARM 1,844,016.74 8.5525 360 480 2 0 6.0187 34
3 ARM 1,111,662.12 8.5898 360 480 2 0 6.1000 34
3 ARM 658,153.82 10.9400 360 360 2 0 6.1732 58
3 ARM 1,790,571.73 9.0709 360 360 2 0 6.1000 58
3 ARM 360,413.65 8.4798 360 360 3 0 6.1000 57
3 ARM 229,340.36 9.6500 360 360 1 0 6.1000 59
3 ARM 3,799,175.13 8.9650 360 360 2 0 6.0795 58
3 ARM 327,000.00 8.2500 360 360 2 60 6.1000 58
3 ARM 7,535,763.00 7.4225 360 360 2 60 6.0549 58
3 ARM 911,371.28 8.7823 360 480 3 0 6.1000 57
3 ARM 3,479,693.81 8.0868 360 480 2 0 6.0556 58
3 ARM 415,256.02 9.4750 360 480 1 0 5.8500 59
3 ARM 6,201,714.22 7.8870 360 480 2 0 6.1022 58
Maximum Minimum
Initial Mortgage Mortgage
Loan Periodic Rate Periodic Interest Interest Rate
Group Cap (%) Rate Cap (%) Rate (%) (%)
- ----- ------------- ------------ -------- -------------
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 N/A N/A N/A N/A
3 3.0000 1.0000 16.1500 10.1500
3 3.0000 1.0000 15.7903 9.7903
3 3.0000 1.0000 14.7718 8.7718
3 3.0000 1.0000 15.8367 9.8517
3 3.0000 1.0000 15.8941 9.8941
3 3.0000 1.0000 14.7294 8.7294
3 3.0000 1.0000 14.4087 8.4087
3 3.0000 1.0000 13.8230 7.8230
3 3.0000 1.0000 13.0250 7.0250
3 3.0000 1.0000 15.0115 9.0115
3 3.0000 1.0000 14.3591 8.3591
3 3.0000 1.0000 14.2925 8.3117
3 3.0000 1.0000 15.1591 9.1591
3 3.0000 1.0000 16.0510 10.0510
3 3.0000 1.0000 15.0500 9.0500
3 3.0000 1.0000 16.3000 10.3000
3 3.0000 1.0000 15.7800 9.7800
3 3.0000 1.0000 16.0036 10.0036
3 3.0000 1.0000 15.0855 9.0855
3 3.0000 1.0000 13.7300 7.7300
3 3.0000 1.0000 13.9914 7.9914
3 3.0000 1.0000 15.4582 9.4582
3 3.0000 1.0000 14.5525 8.5525
3 3.0000 1.0000 14.5898 8.5898
3 3.0000 1.0000 16.9400 10.9400
3 3.0000 1.0000 15.0709 9.0709
3 3.0000 1.0000 14.4798 8.4798
3 3.0000 1.0000 15.6500 9.6500
3 3.0000 1.0000 14.9650 8.9650
3 3.0000 1.0000 14.2500 8.2500
3 3.0000 1.0000 13.4225 7.4225
3 3.0000 1.0000 14.7823 8.7823
3 3.0000 1.0000 14.0868 8.0868
3 3.0000 1.0000 15.4750 9.4750
3 3.0000 1.0000 13.8870 7.8870
C-3
Gross Original Months to
Cut-off Date Mortgage Original Original Loan Interest Next
Loan Interest Principal Interest Term Amortization Age Only Term Gross Adjustment
Group Type Balance ($) Rate (%) (months) Term (months) (months) (months) Margin (%) Date
- ----- -------- -------------- -------- -------- -------------- -------- --------- ---------- ----------
3 ARM 327,000.00 8.2500 360 360 2 60 6.1000 58
3 ARM 7,535,763.00 7.4225 360 360 2 60 6.0549 58
3 ARM 911,371.28 8.7823 360 480 3 0 6.1000 57
3 ARM 3,479,693.81 8.0868 360 480 2 0 6.0556 58
3 ARM 415,256.02 9.4750 360 480 1 0 5.8500 59
3 ARM 6,201,714.22 7.8870 360 480 2 0 6.1022 58
Maximum Minimum
Initial Mortgage Mortgage
Loan Periodic Rate Periodic Interest Interest Rate
Group Cap (%) Rate Cap (%) Rate (%) (%)
- ----- ------------- ------------ -------- -------------
3 3.0000 1.0000 14.2500 8.2500
3 3.0000 1.0000 13.4225 7.4225
3 3.0000 1.0000 14.7823 8.7823
3 3.0000 1.0000 14.0868 8.0868
3 3.0000 1.0000 15.4750 9.4750
3 3.0000 1.0000 13.8870 7.8870
C-4
APPENDIX D
INTEREST RATE SWAP AGREEMENT NOTIONAL AMOUNT SCHEDULE
Distribution Date Notional Amount ($)
----------------- -------------------
November 25, 2006 836,173,837
December 25, 2006 826,307,936
January 25, 2007 814,574,131
February 25, 2007 800,997,057
March 25, 2007 785,613,894
April 25, 2007 768,474,526
May 25, 2007 749,641,590
June 25, 2007 729,325,017
July 25, 2007 707,651,518
August 25, 2007 684,741,318
September 25, 2007 662,572,532
October 25, 2007 641,123,821
November 25, 2007 620,371,731
December 25, 2007 600,293,578
January 25, 2008 580,867,414
February 25, 2008 562,072,009
March 25, 2008 543,886,827
April 25, 2008 526,292,001
May 25, 2008 509,268,311
June 25, 2008 492,797,166
July 25, 2008 474,970,432
August 25, 2008 77,025,785
September 25, 2008 73,167,123
October 25, 2008 69,540,723
November 25, 2008 66,323,214
December 25, 2008 64,285,757
January 25, 2009 62,336,872
February 25, 2009 60,450,412
March 25, 2009 58,624,263
April 25, 2009 56,856,388
May 25, 2009 55,144,822
June 25, 2009 53,487,669
July 25, 2009 50,515,708
August 25, 2009 45,625,022
September 25, 2009 44,058,010
October 25, 2009 42,791,442
November 25, 2009 41,563,155
December 25, 2009 40,371,926
January 25, 2010 39,216,569
February 25, 2010 38,095,942
March 25, 2010 37,008,939
April 25, 2010 35,954,492
May 25, 2010 34,931,569
June 25, 2010 33,939,174
July 25, 2010 32,976,340
August 25, 2010 32,042,138
September 25, 2010 31,135,667
October 25, 2010 30,256,055
November 25, 2010 29,402,461
December 25, 2010 28,574,071
D-1
Distribution Date Notional Amount ($)
----------------- -------------------
January 25, 2011 27,770,099
February 25, 2011 26,989,784
March 25, 2011 26,232,389
April 25, 2011 25,497,205
May 25, 2011 24,783,542
June 25, 2011 24,090,735
July 25, 2011 23,033,122
August 25, 2011 18,207,076
September 25, 2011 17,731,594
October 25, 2011 17,292,144
November 25, 2011
D-2