Merrill Lynch Mortgage Investors, Inc.

Transcription

1 Prospectus Supplement (to Prospectus dated January 19, 2005) $752,333,100 (Approximate) Merrill Lynch Mortgage Investors Trust Mortgage Loan Asset-Backed CertiÑcates, Series 2005-WMC2 Merrill Lynch Mortgage Investors, Inc. Depositor Investing in these certificates Merrill Lynch Mortgage Investors Trust, Series 2005-WMC2 will involves risks. You should not issue nineteen classes of certiñcates, sixteen of which are oåered by purchase these certificates unon page S-3 identiñes the various classes of oåered certiñcates and this prospectus supplement and the attached prospectus. The table less you fully understand their risks and structure. See ""Risk speciñes certain characteristics of each such class, including the Factors'' beginning on class's initial certiñcate principal balance, interest rate and rating. page S-16 of this prospectus supplement and page 1 of the The trust fund will consist primarily of sub-prime mortgage loans attached prospectus. secured by Ñrst or second liens on real properties that were acquired by Merrill Lynch Mortgage Capital Inc. from WMC Mortgage These certiñcates will be bene- Corp. Ñcial interests in a trust fund, and will be backed only by the Underwriting Proceeds to Price to Public Discount Depositor assets of the trust fund. Neither these certiñcates nor $752,333,100 $1,780, $750,552, the assets of the trust fund % % % will be obligations of Merrill Lynch, Pierce, Fenner & The price to public and underwriting discount shown are for all Smith Incorporated, Banc of classes of oåered certiñcates in the aggregate. This information is America Securities LLC, shown for each individual class on page S-110. See ""Method of Wells Fargo Bank, N.A., Distribution.'' Wilshire Credit Corporation or any of their açliates. These The proceeds to the depositor will be $750,552, before certiñcates will not be insured deducting expenses, which are estimated at $800, See or guaranteed by any govern- ""Method of Distribution.'' mental agency or any other entity. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement and the attached prospectus. Any representation to the contrary is a criminal oåense. Merrill Lynch & Co. Banc of America Securities LLC The date of this prospectus supplement is May 26, 2005.

2 Where to Find Information in this Prospectus Supplement and the Attached Prospectus Information about the oåered certiñcates is contained in (a) the attached prospectus, which provides general information, some of which may not apply to the certiñcates; and (b) this prospectus supplement, which describes the speciñc terms of the certiñcates. This prospectus supplement and the attached prospectus include cross references to sections in these materials where you can Ñnd further related discussions. The tables of contents in this prospectus supplement and the attached prospectus identify the pages where those sections are located. In this prospectus supplement, the terms ""Depositor,'' ""we,'' ""us'' and ""our'' refer to Merrill Lynch Mortgage Investors, Inc. To understand the structure of these certiñcates, you must read carefully both the attached prospectus and this prospectus supplement in their entirety. Table of Contents The Series 2005-WMC2 CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-3 Payments on Mortgage Loans; Collection Summary Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Account; CertiÑcate Account; Cap Contract Principal Parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Account ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-70 Cut-oÅ Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Distributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-71 Closing Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Overcollateralization ProvisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-73 Distribution Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Subordination of the Payment of the The Trust FundÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-4 Subordinated CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-74 The Series 2005-WMC2 CertiÑcates ÏÏÏÏÏÏÏÏÏÏ S-4 Cap Contracts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-74 Interest Distributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-5 Calculation of One-Month LIBOR ÏÏÏÏÏÏÏÏÏÏÏ S-78 Principal Distributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-5 Reports to CertiÑcateholdersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-78 Cap Contracts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-6 Additional Rights of the Class R Denominations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-6 CertiÑcateholder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-80 Book-Entry Registration ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-6 Restrictions on Transfer of the Class R Credit Enhancement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-6 CertiÑcate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-80 NIMs Insurer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-8 The Pooling and Servicing AgreementÏÏÏÏÏÏÏÏÏÏÏÏÏ S-81 Optional Termination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-8 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-81 Optional Purchase of Delinquent Mortgage Assignment of Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-81 Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-8 AmendmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-82 Legal Investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-8 Optional Termination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-82 Federal Income Tax Consequences ÏÏÏÏÏÏÏÏÏÏÏ S-8 Optional Purchase of Defaulted Loans ÏÏÏÏÏÏÏÏ S-83 ERISA ConsiderationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-9 Events of Default ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-83 RatingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-9 Rights upon Event of Default ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-84 The Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-9 The TrusteeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-84 Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-16 Yield, Prepayment and Maturity Considerations ÏÏÏÏ S-84 Forward-Looking Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-24 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-84 Glossary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 Prepayments and Yields for the CertiÑcates ÏÏÏÏ S-85 The Mortgage PoolÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 Additional InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-103 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 Federal Income Tax Consequences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-103 Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 Taxation of the Basis Risk Arrangements ÏÏÏÏÏÏ S-104 Underwriting Guidelines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-56 Original Issue Discount and Amortizable Bond WMC Underwriting Guidelines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-56 Premium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-105 The Servicer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-62 Special Tax Attributes of the OÅered General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-62 CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-105 Wilshire Credit Corporation's Delinquency and Prohibited Transactions Tax and Other Taxes ÏÏ S-106 Foreclosure Statistics ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-63 Class R CertiÑcate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-106 Servicing of the Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 Tax Return Disclosure RequirementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-108 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 State Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-108 Servicing Compensation and Payment of ERISA ConsiderationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-108 Expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 Legal Investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-110 Adjustment to Servicing Fee in Connection with Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-110 Certain Prepaid Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏ S-64 Method of Distribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-110 Advances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-65 Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-112 Pledge of Servicing RightsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-65 RatingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-113 Description of the CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 Glossary of DeÑned Terms ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-114 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 Annex 1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1 Book-Entry CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 S-2

3 The Series 2005-WMC2 CertiÑcates Class A-1A Class A-1B Class A-2A Class A-2B Class A-2C Class A-2D Class M-1 Class M-2 Class M-3 Class M-4 Class M-5 Class M-6 Class B-1 Class B-2 Class B-3 Class B-4(8) Class R Initial CertiÑcate Principal Balance(1): $283,447,000 $31,494,000 $155,438,000 $52,540,000 $69,435,000 $26,529,000 $27,315,000 $24,193,000 $15,218,000 $13,657,000 $12,877,000 $12,486,000 $10,145,000 $9,755,000 $7,804,000 $7,804,000 $100 Pass-Through Rate: ÏÏÏÏ LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus LIBOR plus 0.29%(2)(3) 0.26%(2)(3) 0.09%(2)(3) 0.18%(2)(3) 0.25%(2)(3) 0.36%(2)(3) 0.42%(2)(4) 0.44%(2)(4) 0.47%(2)(4) 0.62%(2)(4) 0.65%(2)(4) 0.70%(2)(4) 1.20%(2)(4) 1.30%(2)(4) 1.70%(2)(4) 3.25%(2)(4) 0.29%(2)(3) ERISA Eligible: ÏÏÏÏÏÏÏ Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No First Principal Payment Date(5):ÏÏÏÏÏÏÏÏÏÏÏÏ 6/2005 6/2005 6/2005 2/2007 9/2007 5/2011 2/ / / /2008 9/2008 8/2008 7/2008 7/2008 7/2008 6/2008 N/A Weighted Avg. Life At Issuance: to call (yrs.)(5):ïïïïï N/A to maturity (yrs.)(5): N/A Expected Maturity (to call)(5):ïïïïïïïïïïïï 10/ /2011 2/2007 9/2007 5/ / / / / / / / / / / /2011 N/A Expected Maturity (to maturity)(5): ÏÏÏÏÏÏÏ 3/2020 3/2020 2/2007 9/2007 5/2011 3/2020 2/2018 7/ /2016 6/ /2015 6/ /2014 3/2014 7/ /2012 N/A Last Scheduled Distribution Date(6): 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 4/2036 N/A Interest Accrual Method(7): ÏÏÏÏÏÏÏÏÏ Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 Payment Delay:ÏÏÏÏÏÏÏÏ 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days 0 days Anticipated Ratings (Moody's/S&P): ÏÏÏÏ Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aa1/AA Aa2/AA Aa3/AA A1/AA- A2/A A3/A Baa1/A- Baa2/BBB Baa3/BBB Ba1/BBB- N/A/AAA (1) The initial certiñcate principal balances shown above are subject to a permitted variance of plus or minus 10%. (2) Subject to the related available funds cap. The pass-through rates for these certiñcates are one-month LIBOR plus the applicable pass-through margin. These pass-through rates are subject to adjustment and your pass-through rate may be lower. See ""Description of the CertiÑcatesÌDistributionsÌDistributions of Interest.'' (3) If the 10% optional termination does not occur by the Ñrst distribution date on which it may occur, the margin on each of the class A-1A, class A-1B, class A-2A, class A-2B, class A-2C, class A-2D and class R certiñcates will increase to 2 times its respective margin shown above. (4) If the 10% optional termination does not occur by the Ñrst distribution date on which it may occur, the margin on each of the class M-1, class M-2, class M-3, class M-4, class M-5, class M-6, class B-1, class B-2, class B-3 and class B-4 certiñcates will increase to 1.5 times its respective margin shown above. (5) The information set forth above regarding Ñrst principal payment date, weighted average life at issuance and expected maturity is based on the modeling assumptions deñned beginning on page S-132 and 20% HEP for the Ñxed rate mortgage loans or 100% PPC (a constant prepayment rate of 2% per annum in month 1, building linearly (rounded to the nearest hundredth) to a constant prepayment rate of 30% per annum in month 12 and remaining constant at a constant prepayment rate of 30% per annum from month 12 up to and including month 22, then remaining constant at a constant prepayment rate of 50% per annum from month 23 up to and including month 27 and then remaining constant at a constant prepayment rate of 35% per annum in month 28 and thereafter) for the adjustable rate mortgage loans, as applicable. (6) Latest maturity date for any mortgage loan plus one year. (7) The interest rate index reset date for the certiñcates is two business days prior to the start of each interest accrual period. (8) The class B-4 certiñcates will be privately placed and will not be oåered pursuant to this prospectus supplement. The information presented on the class B-4 certiñcates is provided solely to assist your understanding of the oåered certiñcates. Credit Enhancement: Excess Interest Overcollateralization Subordination Overcollateralization Requirements: Initial Overcollateralization Amount: 2.60% of original mortgage loan balance Targeted Overcollateralization Amount: 2.60% of original mortgage loan balance Stepdown Overcollateralization Amount: 5.20% of current mortgage loan balance Minimum Required Overcollateralization Amount: 0.50% of original mortgage loan balance Earliest Possible Stepdown Date: June 2008 S-3

4 Summary Information This section brieöy summarizes major characteristics of the certiñcates and the mortgage loans. It does not contain all of the information that you need to consider in making your investment decision. To fully understand the terms of the certiñcates, you should read both this prospectus supplement and the attached prospectus in their entirety. Principal Parties Issuer: Merrill Lynch Mortgage Investors Trust, Series 2005-WMC2. Depositor: Merrill Lynch Mortgage Investors, Inc., a Delaware corporation whose address is 250 Vesey Street, 4 World Financial Center, 10th Floor, New York, New York and whose telephone number is (212) See ""The Depositor'' in the prospectus. Seller: Merrill Lynch Mortgage Capital Inc., a Delaware corporation whose address is 250 Vesey Street, 4 World Financial Center, 10th Floor, New York, New York and whose telephone number is (212) Distribution Date The 25th day of each month, beginning in June If the 25th day is not a business day, then the distribution date will be the next business day. The Trust Fund The name of the trust fund is Merrill Lynch Mortgage Investors Trust, Series 2005-WMC2. We are forming the trust to own a pool of subprime mortgage loans secured by Ñrst or second liens on real properties. The trust fund will contain both Ñxed rate mortgage loans and adjustable rate mortgage loans. Each class of certiñcates represents an interest in the trust fund. Servicer: Wilshire Credit Corporation, a Nevada corporation whose address is SW Millikan The Series 2005-WMC2 CertiÑcates Way, Suite 200, Beaverton, Oregon and The certiñcates represent beneñcial ownership whose telephone number is (503) See interests in the underlying trust fund assets. The ""The Servicer.'' oåered certiñcates will have the original certiñcate Trustee: Wells Fargo Bank, N.A., a national principal balance, pass-through rate and other banking association whose address is 9062 Old features set forth in the table on page S-3. The Annapolis Road, Columbia, Maryland and trust fund will issue the certiñcates under a whose telephone number is (410) See pooling and servicing agreement dated as of ""The Pooling and Servicing AgreementÌThe May 1, 2005, among Merrill Lynch Mortgage Trustee.'' Investors, Inc., as depositor, Wells Fargo Bank, N.A., as trustee and Wilshire Credit Corporation, Originator: WMC Mortgage Corp., a California as servicer. All collections on the mortgage loans corporation whose address is 3100 Thornton Ave- will be used to pay fees to the servicer and to nue, Burbank, California and whose tele- make interest or principal payments on the certiñphone number is (818) See cates. All principal collections will be paid to one ""Underwriting GuidelinesÌWMC Underwriting or more classes of the certiñcates oåered through Guidelines.'' this prospectus supplement or to other classes of certiñcates which we are not oåering by this Cut-oÅ Date prospectus supplement, based on the outstanding certiñcate principal balances and the remaining The cut-oå date will be May 1, principal amount of the mortgage loans. Any interest collections in excess of the amount paid to holders of the oåered certiñcates (either as Closing Date interest or principal) and the servicer will be paid to the owners of the other classes of certiñcates The closing date will be on or about May 31, that we are not oåering by this prospectus supplement, which are entitled to receive those S-4

5 excess amounts. See ""Description of the CertiÑcatesÌDistributions.'' Interest Distributions As described below, the trust fund will own three one-month LIBOR cap contracts. Amounts re- ceived on the class A-1 cap contract will only be available to make payments on the class A-1A and class A-1B certiñcates, amounts received on the class A-2 cap contract will only be available to make payments on the class A-2A, class A-2B, class A-2C and class A-2D certiñcates, and amounts received on the subordinated certiñcate cap contract will only be available to make payments on the class M-1, class M-2, class M-3, class M-4, class M-5, class M-6, class B-1, class B-2, class B-3 and class B-4 certiñcates, in each case to the extent of the interest shortfall on such certiñcates attributable to the related availa- ble funds cap subject to certain limitations based upon one-month LIBOR and the upper collar on the related cap contract (other than any such shortfalls attributable to the fact that losses are not allocated to the class A certiñcates after the class M and class B certiñcates have been written down to zero). Interest will accrue on each class of certiñcates at the pass-through rate for that class. Interest will accrue on each class of certiñcates from the prior distribution date (or the closing date, in the case of the Ñrst distribution date) to the day prior to the current distribution date. The pass-through rates on the oåered certiñcates and the class B-4 certiñcates will be subject to one of three available funds caps. These caps limit the pass-through rates on the oåered certiñcates and the class B-4 certiñcates. The pass-through rates on the class A-1A, class A-1B and class R certiñcates will be limited by reference to a rate equal to the product of (i) 12 and (ii) the quotient obtained by dividing the amount of interest due on the group one mortgage loans at their net mortgage rates by the aggregate stated principal balance of the group one mortgage loans, with such rate being multiplied by a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related accrual period. Any excess of amounts received on the cap contracts over amounts needed to pay shortfalls on the oåered certiñcates and the class B-4 certiñ- cates arising as a result of the available funds caps (other than such shortfalls arising from the fact that the pooling and servicing agreement does not provide for the reduction of the principal balance of the class A certiñcates as a result of realized losses) will be distributed to the class C certiñ- cates (which we are not oåering pursuant to this prospectus supplement). See ""Description of the CertiÑcatesÌDistributionsÌDistributions of Interest.'' The pass-through rates on the class A-2A, class A-2B, class A-2C and class A-2D certiñcates will be limited by reference to a rate equal to the product of (i) 12 and (ii) the quotient obtained by dividing the amount of interest due on the group two mortgage loans at their net mortgage rates by the aggregate stated principal balance of the group two mortgage loans, with such rate being multiplied by a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related accrual period. The pass-through rates on the class M-1, class M-2, class M-3, class M-4, class M-5, class M-6, class B-1, class B-2, class B-3 and class B-4 certiñcates, which we call the ""subordinated certiñcates'', will be limited by reference to a rate equal to the weighted average (weighted in proportion to the results of subtracting from the aggregate stated principal balance of each mortgage group, the current certiñcate principal balance of the related class A certiñcates) of the class A-1 available funds cap and the class A-2 available funds cap. Any shortfalls arising from the application of an available funds cap will be carried over on a subordinated basis with accrued interest at the then applicable pass-through rate and paid from excess cashöow in a later distribution, if available. Principal Distributions Principal payments to the certiñcates will gener- ally reöect principal collections on the mortgage loans in the trust fund. Principal payments will also include a portion of interest collections to the extent necessary to restore overcollateralization to the required level, as described below. S-5

6 Cap Contracts United States, or Clearstream Banking, societe anonyme or the Euroclear Bank, S.A./N.V. in The trust fund will own three one-month LIBOR Europe, or indirectly through participants in these cap contracts purchased for the benefit of the systems. offered certificates and the class B-4 certificates. The cap contracts will be provided by The Royal You will not be entitled to receive a deñnitive Bank of Scotland plc. The class A-1 cap contract certiñcate representing your interest except under will terminate following the distribution date in limited circumstances. See ""Description of the September Each of the class A-2 cap CertiÑcatesÌBook-Entry CertiÑcates'' in this procontract and the subordinated certificate cap con- spectus supplement and ""Description of the Secutract will terminate following the distribution date rities'' in the prospectus. in February Each cap contract will have a notional balance that will be reduced on each distribution date according to the schedules described in this prospectus supplement under the Credit Enhancement heading ""Description of the CertificatesÌCap Credit enhancement is intended to reduce the harm Contracts'' until it is terminated. The trust fund caused to holders of the certificates as a result of will receive a payment under each cap contract shortfalls in payments received and losses realized with respect to any distribution date on which onethe certificates will consist of excess interest, on the mortgage loans. The credit enhancement for month LIBOR exceeds the lower collar with respect to such distribution date shown in the overcollateralization and subordination features de- tables beginning on page S-. Payments received on the cap contracts will be available to pay scribed in this prospectus supplement. Excess Interest and Overcollateralization. The interest to the holders of the offered certificates overcollateralization amount is the excess of the and the class B-4 certificates up to the amount of aggregate outstanding principal balance of the interest shortfalls on such certificates attributable to mortgage loans over the aggregate principal balance the related available funds cap, except to the extent of the certificates. On the closing date, the that such shortfalls result from the fact that the overcollateralization amount will equal approxipooling and servicing agreement does not provide mately 2.60% of the aggregate outstanding principal for the reduction of the principal balance of the balance of the mortgage loans. Generally, because class A certificates as a result of realized losses. more interest is required to be paid by the Any amounts received on the cap contracts on a mortgagors than is necessary to pay the interest distribution date that are not used to pay such accrued on the certificates and the expenses of the shortfalls will be distributed to the holders of the trust fund, there is expected to be excess interest class C certificates. each month. If the overcollateralization amount is reduced below the overcollateralization target Denominations amount as a result of losses on the mortgage loans, the trust fund will apply some or all of this excess The trust fund will issue the oåered certiñcates interest as principal payments on the most senior and the class B-4 certiñcates (other than the classes of certificates then outstanding until the class R certiñcate) in minimum denominations of overcollateralization target is restored, resulting in a $25,000 in original principal amount and integral limited acceleration of amortization of the certifimultiples of $1 in excess of $25,000. A single cates relative to the mortgage loans. This acceleraclass R certiñcate will be issued in deñnitive form tion feature is intended to restore in a $100 denomination. overcollateralization. Once the required level of overcollateralization is restored, the acceleration Book-Entry Registration feature will again cease, unless it becomes necessary again to maintain the required level of The trust fund will initially issue the oåered overcollateralization. The actual level of overcolcertiñcates (other than the class R certiñcate) and lateralization may increase or decrease over time. the class B-4 certiñcates in book-entry form. You This could result in a temporarily faster or slower may elect to hold your interest in the certiñcates amortization of the certificates. See ""Description of through The Depository Trust Company in the the CertificatesÌOvercollateralization Provisions.'' S-6

7 Subordination. The rights of the holders of the Initial Credit Credit more junior classes of certiñcates to receive Class(es) Support Support distributions will be subordinated to the rights of M-1 Class M-2, 17.20% the holders of the more senior classes of certiñ- Class M-3, cates to receive distributions. Class M-4, In general, the protection aåorded the holders of Class M-5, more senior classes of certiñcates by means of this Class M-6, subordination will be eåected in two ways: Class B-1, Class B-2, by the preferential right of the holders of the Class B-3, more senior classes to receive, prior to any Class B-4 distribution being made on any distribution M-2 Class M-3, 14.10% date to the holders of the more junior classes Class M-4, of certificates, the amount of interest and Class M-5, principal due on the more senior classes of Class M-6, certificates and, if necessary, by the right of Class B-1, the more senior holders to receive future Class B-2, distributions on the mortgage loans that would Class B-3, otherwise have been allocated to the holders of Class B-4 the more junior classes of certificates; and M-3 Class M-4, 12.15% Class M-5, by the allocation to the more junior classes of Class M-6, certificates (in inverse order of seniority) of Class B-1, losses resulting from the liquidation of de- Class B-2, faulted mortgage loans or the bankruptcy of Class B-3, mortgagors prior to the allocation of these Class B-4 losses to the more senior classes of certificates, M-4 Class M-5, 10.40% until their respective certificate principal bal- Class M-6, ances have been reduced to zero. See Class B-1, ""Description of the CertificatesÌSubordination Class B-2, of the Payment of the Subordinated Class B-3, Certificates.'' Class B-4 M-5 Class M-6, The chart below summarizes the relative Class B-1, 8.75% seniority of the various classes of certiñcates Class B-2, and indicates the initial level of credit support Class B-3, provided to the various classes of certiñcates. Class B-4 The initial level of credit support includes the M-6 Class B-1, 7.15% initial overcollateralization level of 2.60%. Class B-2, Initial Class B-3, Credit Credit Class B-4 Class(es) Support Support B-1 Class B-2, 5.85% A and R Class M-1, 20.70% Class B-3, Class M-2, Class B-4 Class M-3, B-2 Class B-3, 4.60% Class M-4, Class B-4 Class M-5, B-3 Class B % Class M-6, B-4 Overcollateralization 2.60% Class B-1, Class B-2, Class B-3, Class B-4 S-7

8 NIMs Insurer The NIMs Insurer, if any, may issue a Ñnancial guaranty insurance policy covering certain payments to be made on net interest margin securities to be issued by a separate trust and secured by all or a portion of two classes of certiñcates, the class C certiñcates and the class P certiñcates, that we are not oåering pursuant to this prospec- tus supplement. In such event, the NIMs Insurer will be able to exercise rights in a manner which could adversely impact the certiñcateholders. See ""Risk FactorsÌRights of the NIMs Insurer, if any, may negatively impact the oåered certiñcates.'' Optional Purchase of Delinquent Mortgage Loans As to any mortgage loan that is 90 days or more delinquent, the servicer will have the option (but not the obligation), subject to the limitations described in the pooling and servicing agreement, to purchase such mortgage loan from the trust fund for a price equal to the sum of (i) the aggregate outstanding principal balance of such mortgage loan together with any unreimbursed advances, (ii) accrued interest thereon and (iii) any unreimbursed out-of-pocket costs and expenses. See ""The Pooling and Servicing Agreement-Optional Purchase of Defaulted Loans.'' Optional Termination Subject to restrictions described in this prospectus supplement, before the Ñrst distribution date after the distribution date on which the aggregate unpaid principal balance of the mortgage loans is reduced to less than or equal to 10% of the aggregate stated principal balance of the mortgage loans as of the cut-oå date, the trustee will be directed, pursuant to the pooling and servicing agreement, to attempt to terminate the trust fund through a one-time auction process mutually acceptable to the trustee and the depositor. If the trust fund is not terminated because a suçcient purchase price is not achieved at such auction, the NIMs Insurer, if any, may purchase all of the mortgage loans, which would result in the termination of the trust fund. If the auction fails to achieve the suçcient purchase price and the NIMs Insurer, if any, fails to exercise its option to purchase all of the mortgage loans, under certain circumstances the servicer may purchase all of the mortgage loans, which similarly would result in the termination of the trust fund. See ""The Pooling and Servicing AgreementÌOptional Termination.'' Legal Investment As of the closing date, the certiñcates will not constitute ""mortgage related securities'' under the Secondary Mortgage Market Enhancement Act of 1984, as amended. We make no representation as to the appropriate characterization of the certiñcates under any laws relating to investment restrictions. You should consult your own counsel as to whether you have the legal authority to invest in these securities. See ""Risk FactorsÌThe certiñcates lack SMMEA eligibility and may lack liquidity, which may limit your ability to sell'' and ""Legal Investment'' in this prospectus supplement and the prospectus. Federal Income Tax Consequences For federal income tax purposes, the trust fund, other than the cap contract account, rights to receive payments on the cap contracts and rights to receive prepayment charges, will elect to be treated as multiple real estate mortgage invest- ment conduits (""REMICs''). For federal income tax purposes, the oåered certiñcates (other than the class R certiñcate) will represent ownership of regular interests in a REMIC and the right to receive payments under certain non-remic contracts. To the extent that the oåered certiñcates represent regular interests in a REMIC, they will generally be treated as debt instruments for federal income tax purposes. Holders of oåered certiñcates will be required to include in income all interest and original issue discount on the portion of their oåered certiñcates that represents a regular interest in a REMIC, in accordance with the accrual method of accounting. See ""Federal Income Tax Consequences'' in this prospectus supplement and ""Material Federal Income Tax Consequences'' in the prospectus for a discussion of the federal income tax treatment of a holder of a regular interest in a REMIC and for a discus- sion of the federal income tax consequences associated with the deemed rights to receive payments under the non-remic contracts. See ""Federal Income Tax Consequences'' in this pro- spectus supplement and ""Material Federal Income Tax Consequences'' in the prospectus. S-8

9 For federal income tax purposes, the class R Ratings certiñcate will represent the residual interest in each of the REMICs included in the trust fund The oåered certiñcates are required to receive the and the right to receive payments under certain ratings indicated under the heading ""Anticipated non-remic contracts. The class R certiñcate will Ratings'' in the chart shown on page S-3 of this not be treated as a debt instrument for federal prospectus supplement. income tax purposes. The beneñcial owner of the class R certiñcate will be required to include the taxable income or loss of the REMICs in detersell or hold securities and may be subject to A security rating is not a recommendation to buy, mining its taxable income. All or most of the taxable income of the REMICs includable by the revision or withdrawal at any time by any rating beneñcial owner of the class R certiñcate will be agency. The ratings on the certiñcates address the treated as ""excess inclusion'' income that is likelihood of the receipt by holders of the certiñsubject to special limitations for federal income cates of all distributions on the underlying mort- tax purposes. As a result of this tax treatment, the gage loans to which they are entitled. They do not after-tax return on the class R certiñcate may be represent any assessment of the likelihood or rate signiñcantly lower than would be the case if the of principal prepayments or the likelihood that any class R certiñcate were taxed as a debt instrument, interest carry forward amount will be paid. or may be negative. See ""Federal Income Tax ConsequencesÌClass R CertiÑcate'' in this The ratings do not address the likelihood that any prospectus supplement. payments will be made to the oåered certiñcates (other than the class R certiñcates) under the cap Additionally, the class R certiñcate will be treated contracts. See ""Ratings.'' as a ""noneconomic residual interest'' for tax purposes and, as a result, certain transfers of the class R certiñcate may be disregarded for federal income tax purposes, with the transferor continuing The Mortgage Loans to have tax liabilities for the transferred certiñcates. See ""Description of the CertiÑcatesÌ We will divide the mortgage loans into two Restrictions on Transfer of the Class R CertiÑ- separate groups referred to as Group One and cate'' and ""Federal Income Tax ConsequencesÌ Group Two. Group One will consist of Ñrst and Class R CertiÑcate'' in this prospectus supplement second lien Ñxed rate mortgage loans and adjustaand ""Material Federal Income Tax Conse- ble rate mortgage loans that had a principal quencesìtax-related Restrictions on Transfers of balance at origination of no more than $359,650 if REMIC Residual CertiÑcates'' in the prospectus. a single-unit property (or $539,475 if the property is located in Hawaii or Alaska), $460,400 if a ERISA Considerations two-unit property (or $690,600 if the property is located in Hawaii or Alaska), $556,500 if a three- Under current law, in general, the oåered certiñ- unit property (or $834,750 if the property is cates (other than the class R certiñcate) will be located in Hawaii or Alaska), or $691,600 if a eligible for acquisition by retirement or other four-unit property (or $1,037,400 if the property is employee beneñt plans subject to Title I of the located in Hawaii or Alaska) and second lien Employee Retirement Income Security Act of Ñxed rate mortgage loans that had a principal 1974, as amended, or Section 4975 of the Internal balance at origination of no more than $179,825 Revenue Code of 1986, as amended. Prospective (or $269,725 if the property is located in Hawaii investors should consult with legal counsel regard- or Alaska). Group Two will consist of Ñrst and ing the consequences of the acquisition and second lien Ñxed rate mortgage loans and adjustaholding of the oåered certiñcates by such a ble rate mortgage loans that had a principal retirement or other employee beneñt plan. See balance at origination that may or may not ""ERISA Considerations'' herein and in the conform to the criteria speciñed above for mortprospectus. gage loans included in Group One. S-9

10 The following tables summarize approximate characteristics of the entire mortgage pool as of May 1, When we refer to percentages of mortgage loans in the following tables, we are describing the percentage of the aggregate principal balance of the mortgage loans in the trust fund as of May 1, 2005, which we refer to as the cut-oå date. The sum of the percentages may not equal % due to rounding. For additional information on the mortgage loans, see ""The Mortgage PoolÌMortgage Loans.'' S-10

11 The Mortgage Pool Mortgage Loan Characteristics Number of loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,432 Aggregate outstanding principal balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $780,433,779 Number of loans with prepayment charges at originationïïïïïïïïïïïïïïïïïïïïïïïïïïïïïï 3,051 Weighted average prepayment term at origination for loans with prepayment charges (in months)ïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïï 24 Average or Weighted Average Outstanding principal balance(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $176,091 $13, to $848, Original principal balance(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $176,355 $13, to $850, Current mortgage rates(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.057% 4.500% to % Original loan-to-value ratio(2)ïïïïïïïïïïïïïïïïïïïïïïïïï 82.85% 9.77% to % Stated remaining term to maturity (in months)(2) ÏÏÏÏÏÏÏ months to 359 months Credit Score(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ to 806 Maximum mortgage rates(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % % to % Minimum mortgage rates(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.665% 4.500% to % Gross Margin(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.233% 2.775% to 9.500% Initial Rate Cap(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.753% 1.000% to 5.000% Periodic Rate Cap(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.002% 1.000% to 2.000% Months to Roll(2)(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 4 to 58 (1) Indicates average. (2) Indicates weighted average. (3) Adjustable Rate Mortgage Loans only. Range S-11

12 Mortgage Rates for the Mortgage Pool 25.0% 20.0% 17.39% 20.83% 20.65% 15.0% 10.0% 10.63% 8.93% 5.0% 0.0% 5.21% 5.500% or less 5.501% to 6.000% 6.001% to 6.500% 6.501% to 7.000% 7.001% to 7.500% 7.501% to 8.000% 3.59% 8.001% to 8.500% 2.83% 8.501% to 9.000% 2.14% 9.001% to 9.500% 3.13% 9.501% to % 1.50% % to % 2.16% % to % 1.02% % or greater S-12

13 Original Principal Balances for the Mortgage Pool 14.0% 12.70% 12.0% 10.0% 9.67% 10.60% 10.85% 10.49% 10.12% 9.81% 11.32% 8.0% 6.0% 5.88% 5.50% 4.0% 3.06% 2.0% 0.0% $50,000 or less $50,001 to $100,000 $100,001 to $150,000 $150,001 to $200,000 $200,001 to $250,000 $250,001 to $300,000 $300,001 to $350,000 $350,001 to $400,000 $400,001 to $450,000 $450,001 to $500,000 $500,001 or more Product Types for the Mortgage Pool Balloon Loans 10.83% 5/25 LIBOR Loans 3.70% 3/27 LIBOR Loans 2.36% 15 Year Fixed Loans 0.76% 10 Year Fixed Loans 0.03% 20 Year Fixed Loans 0.21% 25 Year Fixed Loans 0.05% 30 Year Fixed Loans 5.92% Six-Month LIBOR Loans 0.12% 2/28 LIBOR Loans 76.02% S-13

14 Original Loan-to-Value Ratios for the Mortgage Pool 60.0% 50.0% 52.57% 40.0% 30.0% 20.0% 10.0% 0.0% 0.97% 0.59% 0.94% 1.29% 50.00% or less 50.01% to 55.00% 55.01% to 60.00% 60.01% to 65.00% 2.98% 65.01% to 70.00% 4.86% 70.01% to 75.00% 75.01% to 80.00% 7.07% 80.01% to 85.00% 10.85% 10.71% 7.15% 85.01% to 90.00% 90.01% to 95.00% 95.01% to % * With respect to the mortgage loans in the mortgage pool which are in a second lien position, this chart was calculated using the combined loan-to-value ratio for such mortgage loans. Approximately 11.01% of the mortgage loans in the mortgage pool are in a second lien position. Credit Score Summary for the Mortgage Pool 40.0% 35.0% 36.70% 30.0% 25.0% 27.22% 20.0% 15.0% 14.72% 13.21% 10.0% 5.0% 0.0% 0.06% % 501 to to to to to % 751 to % 801 to 806 S-14

15 Credit Grade Summary for the Mortgage Pool A- 9.41% B+ 5.28% B 4.87% C 0.53% AA 46.85% A 33.07% Original Prepayment Penalty Terms for the Mortgage Pool 70.0% 60.0% 61.41% 50.0% 40.0% 30.0% 27.31% 20.0% 10.0% 4.87% 6.41% 0.0% None 12 Months 24 Months 36 Months S-15

16 Risk Factors The overcollateralization provisions of your certiñcates will aåect the yield to maturity of the certiñcates The overcollateralization provisions of the trust fund will aåect the weighted average life of the certiñcates and consequently the yield to maturity of these certiñcates. To the extent necessary to maintain the required amount of overcollateralization, net excess cashöow will be applied as distributions of principal to the most senior classes of certiñcates then outstanding, thereby reducing the weighted average lives of the certiñcates. The actual required amount of overcollateralization may change from distribution date to distribution date, producing uneven distributions of accelerated payments in respect of principal under these circumstances. We cannot predict whether, or to what degree, it will be necessary to apply net excess cashöow as distributions of principal in order to maintain the required amount of overcollateralization. Net excess cashöow generally is the excess of interest collected or advanced on the mortgage loans over the interest required to pay interest on the oåered certiñcates and the class B-4 certiñcates and the trust fund expenses. Mortgage loans with higher interest rates will contribute more interest to the net excess cashöow. Mortgage loans with higher interest rates may prepay faster than mortgage loans with relatively lower interest rates in response to a given change in market interest rates. Any disproportionate prepayments of mortgage loans that have higher interest rates may adversely aåect the amount of net excess cashöow. As a result of the interaction of these factors, the eåect of the overcollateralization provisions on the weighted average life of the oåered certiñcates may vary signiñcantly over time. See ""Yield, Prepayment and Maturity Considerations'' in this prospectus supplement and ""Yield ConsiderationsÌ PrepaymentsÌMaturity and Weighted Average Life'' in the prospectus. Prepayments on the mortgage loans will aåect the yield to maturity of the certiñcates The yield to maturity and weighted average life of the certiñcates will be aåected primarily by the rate and timing of principal payments (including prepayments, liquidations, repurchases and defaults) of, and losses on, the mortgage loans. Prepayment experience may be aåected by many factors, including general economic conditions, interest rates and the availability of alternative Ñnancing, homeowner mobility and the solicitation of mortgagors to reñnance their mortgage loans. In addition, substantially all of the mortgage loans contain due-on-sale provisions. The servicer intends to enforce these provisions unless enforcement is not permitted by applicable law, or the servicer, in a manner consistent with accepted servicing practices, permits the purchaser of the related mortgaged property to assume the mortgage loan. To the extent permitted by applicable law, any assumption will not release the original borrower from its obligation under the mortgage loan. See ""Yield, Prepayment and Maturity Considerations'' in this prospectus supplement and ""Material Legal Aspects of the Mortgage LoansÌEnforceability of Due-on-Sale Clauses'' in the prospectus for a description of the provisions of the mortgage loans that may aåect their prepayment experience. The trustee will be directed in the pooling and servicing agreement to conduct a one-time auction of the assets remaining in the trust fund in an attempt to terminate the trust fund after the aggregate unpaid principal balance of the mortgage loans is reduced to less than or equal to 10% of the aggregate stated principal balance of the mortgage loans as of the cut-oå date. If the auction fails to realize a suçcient purchase price, the NIMs Insurer may purchase all of the mortgage loans. If the auction fails to realize a suçcient purchase price and the NIMs Insurer fails to exercise its purchase option, under certain circumstances the servicer may purchase all of the mortgage loans. The yield on the certiñcates will also be sensitive to the level of one-month LIBOR and the level of the mortgage index. In addition, the yield to maturity of any oåered certiñcates that you purchase at a discount or premium will be more sensitive to the rate and timing of payments thereon. You should consider, in the case of any oåered certiñcates that you purchase at a discount, the risk that a slower than S-16

17 anticipated rate of principal payments could result in an actual yield that is lower than the anticipated yield and, in the case of any oåered certiñcates that you purchase at a premium, the risk that a faster than anticipated rate of principal payments could result in an actual yield that is lower than the anticipated yield. Because approximately 72.69% of the mortgage loans contain prepayment charges, the rate of principal prepayments during the term of such prepayment charges may be less than the rate of principal prepayments for mortgage loans which do not contain prepayment charges; however, principal prepayments on the mortgage loans could be expected to increase, perhaps materially, at or near the time of the expiration of such prepayment charges. We cannot make any representation as to the anticipated rate of prepayments on the mortgage loans, the amount and timing of losses on the mortgage loans, the level of one-month LIBOR or the mortgage index or the resulting yield to maturity of any oåered certiñcates. Any reinvestment risks resulting from a faster or slower incidence of prepayments on the mortgage loans will be borne entirely by the oåered certiñcateholders as described in this prospectus supplement. See ""Yield, Prepayment and Maturity Considerations'' in this prospectus supplement and ""Yield ConsiderationsÌ PrepaymentsÌMaturity and Weighted Average Life'' in the prospectus. Mortgage loans originated under the underwriting guidelines described in this prospectus supplement carry a risk of higher delinquencies The underwriting guidelines used by WMC Mortgage Corp. in connection with the origination of the mortgage loans in the trust fund consider the credit quality of a mortgagor and the value of the mortgaged property. The mortgagors generally do not qualify for loans conforming to Fannie Mae or Freddie Mac guidelines. Furthermore, the underwriting guidelines used in connection with the origination of the mortgage loans in the trust fund do not prohibit a borrower from obtaining secondary Ñnancing on the mortgaged property. Secondary Ñnancing would reduce the borrower's equity in the related mortgaged property. As a result of the underwriting guidelines used in connection with the origination of the mortgage loans in the trust fund, these mortgage loans are likely to experience rates of delinquency, foreclosure and bankruptcy that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten to Fannie Mae and Freddie Mac conforming guidelines. Furthermore, changes in the values of mortgaged properties may have a greater eåect on the delinquency, foreclosure, bankruptcy and loss experience of the mortgage loans than on mortgage loans originated in a more traditional manner. Similarly, an overall general decline in residential real estate values could cause a particularly severe decline in the value of the mortgaged properties relating to mortgage loans in the trust fund. We cannot provide any assurance that the mortgaged properties will not experience an overall decline in value. The interest rate on the certiñcates may be capped depending on Öuctuations in one-month LIBOR and six-month LIBOR The pass-through rates on the oåered certiñcates and the class B-4 certiñcates are calculated based upon the value of an index (one-month LIBOR) that is diåerent from the value of the index applicable to substantially all of the adjustable rate mortgage loans (six-month LIBOR) in the mortgage pool as described under ""The Mortgage PoolÌGeneral'' and are subject to available funds caps. In addition, the Ñxed rate mortgage loans have mortgage rates which are not dependent on any index. The available funds caps eåectively limit the amount of interest accrued on each class of oåered certiñcates and the class B-4 certiñcates. The pass-through rates on the class A-1A, class A-1B and class R certiñcates will be limited by reference to a rate equal to the product of (i) 12 and (ii) the quotient obtained by dividing the amount of interest due on the group one mortgage loans at their net mortgage rates by the aggregate stated principal balance of the group one mortgage loans, with such rate being multiplied by a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related accrual period. The pass-through rates on the class A-2A, class A-2B, class A-2C and class A-2D certiñcates will be limited by reference to a rate equal to the product of (i) 12 and (ii) the quotient obtained by dividing S-17

18 the amount of interest due on the group two mortgage loans at their net mortgage rates by the aggregate stated principal balance of the group two mortgage loans, with such rate being multiplied by a fraction, the numerator of which is 30 and the denominator of which is the actual number of days in the related accrual period. The pass-through rates on the subordinated certiñcates will be limited by reference to a rate equal to the weighted average (weighted in proportion to the results of subtracting from the aggregate stated principal balance of each mortgage group, the current certiñcate principal balance of the related class A certiñcates) of the class A-1 available funds cap and the class A-2 available funds cap. Various factors may cause the available funds caps described above to limit the interest rate on the oåered certiñcates and the class B-4 certiñcates. First, this can result if one-month LIBOR increases more rapidly than six-month LIBOR. In addition, the pass-through rates on the oåered certiñcates and the class B-4 certiñcates adjust monthly, while the interest rates on the adjustable rate mortgage loans adjust less frequently and the interest rates on the Ñxed rate mortgage loans remain constant, with the result that the operation of the available funds caps described above may limit increases in the pass-through rates for extended periods in a rising interest rate environment. The adjustable rate mortgage loans are also subject to periodic (i.e., semi-annual) adjustment caps and maximum rate caps, and the weighted average margin is subject to change based upon prepayment experience, which also may result in the available funds caps described above limiting increases in the pass-through rates for the oåered certiñcates and the class B-4 certiñcates. Consequently, the interest that becomes due on the adjustable rate mortgage loans (net of the servicing fee rate) with respect to any distribution date may not equal the amount of interest that would accrue at one-month LIBOR plus the applicable margin on the oåered certiñcates and the class B-4 certiñcates during the related period. Furthermore, if the available funds caps described above determine the pass-through rates for a class of oåered certiñcates or the class B-4 certiñcates for a distribution date, the market value of those certiñcates may be temporarily or permanently reduced. The protection aåorded to your certiñcates by subordination is limited The rights of the class M-1 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A certiñcates to receive those distributions; the rights of the class M-2 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A and the class M-1 certiñcates to receive those distributions; the rights of the class M- 3 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M-1 and class M-2 certiñcates to receive those distributions; the rights of the class M-4 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M-1, class M-2 and class M-3 certiñcates to receive those distributions; the rights of the class M-5 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M-1, class M-2, class M-3 and class M-4 certiñcates to receive those distributions; the rights of the class M-6 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M-1, class M-2, class M-3, class M-4 and class M-5 certiñcates to receive those distributions; the rights of the class B-1 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A and class M certiñcates to receive those distributions; the rights of the class B-2 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M and class B-1 certiñcates to receive those distributions; the rights of the class B-3 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M, class B-1 and class B-2 certiñcates to receive those distributions; and the rights of the class B-4 certiñcates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the class A, class M, class B-1, class B-2 and class B-3 certiñcates to receive those distributions. This subordination is intended to enhance the likelihood of regular receipt by higher-ranking classes of certiñcates of the full amount of the monthly distributions allocable to them, and to aåord protection against losses. S-18