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Fitch Rates FHASI $268MM Mtge P-T Ctfs Series 2004-AR7.

NEW YORK -- Fitch Ratings has assigned First Horizon Asset Securities Inc. (FHASI) mortgage pass-through certificates, series 2004-AR7 classes I-A-1, I-A-R, II-A-1, II-A-2, II-A-3, II-A-4, III-A-1, and IV-A-1 ($268,106,100.0) an 'AAA' rating.

The 'AAA' rating on the senior certificates reflects the 3.60% subordination provided by the class B certificates (which are not rated by Fitch). Fitch believes the above credit enhancement will be adequate to support mortgagor defaults, as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and the servicing capabilities of First Horizon Home Loan Corporation, currently rated 'RPS2' by Fitch.

The certificates represent ownership interests in a trust fund that consists of four cross-collateralized pools of mortgages. The senior certificates whose class designation begins with I, II, III, and IV correspond to Pools I, II, III, and IV, respectively. Each of the senior certificates generally receives distributions based on principal and interest collected from mortgage loans in its corresponding mortgage pool. If on any distribution date a pool is undercollateralized and borrower payments from the underlying loans are insufficient to pay senior certificate principal and interest, borrower payments from the other pools that would have been distributed to the subordinate certificates will instead be distributed as principal and interest to the undercollateralized group's senior certificates. The subordinate certificates will only receive principal and/or interest distributions after all the senior certificates receive all their required principal and interest distributions.

Pool I consists of 3/1 hybrid adjustable-rate mortgage loans (ARMs). The loans have an initial fixed interest rate period of three years. Thereafter, the interest rate will adjust annually based on the weekly average yield on U.S. Treasury Securities (one-year CMT) plus a gross margin. Approximately 83.09% of the mortgage loans in Pool I have interest-only payments scheduled during the three-year fixed-rate period, with principal and interest payments commencing after the first rate-adjustment date. The aggregate principal balance of this pool is $70,043,215 and consists of conventional, fully amortizing, ARMs secured by first liens on single-family residential properties, substantially all of which have original terms to maturity of 30 years. The average principal balance of the loans in this pool is approximately $503,908. The mortgage pool has a weighted average original loan-to-value ratio (OLTV) of 74.2%. Rate/Term and cash-out refinance loans account for 29.24% and 14.07% of the pool, respectively. Second homes represent 3.24% of the pool and 0.6% are investor occupancies. The states with the largest concentrations are California (42.68%), Virginia (14.39%), and Massachusetts (6.74%). All other states represent less than 5% of the pool as of the cut-off date.

Pool II consists of 5/1 hybrid ARMs. The loans have an initial fixed interest rate period of five years. Thereafter, the interest rate will adjust annually based on the weekly average yield on U.S. Treasury Securities (one-year CMT) plus a gross margin. Approximately 67.43% of the mortgage loans in Pool II have interest-only payments scheduled during the five-year fixed-rate period, with principal and interest payments commencing after the first rate-adjustment date. The aggregate principal balance of this pool is $140,011,117 and consists of conventional, fully amortizing, ARMs secured by first liens on single-family residential properties, substantially all of which have original terms to maturity of 30 years.

The average principal balance of the loans in this pool is approximately $540,583. The mortgage pool has a weighted average OLTV of 72.9%. Rate/Term and cash-out refinance loans account for 23.8% and 10.5% of the pool, respectively. Second homes represent 3.63% of the pool and 0.34% are investor occupancies. The states with the largest concentration are California (47.47%), Virginia (12.78%), Washington (10.15%), and Maryland (5.50%). All other states represent less than 5% of the pool as of the cut-off date.

Pool III consists of 7/1 hybrid ARMs. The loans have an initial fixed interest rate period of seven years. Thereafter, the interest rate will adjust annually based on the weekly average yield on U.S. Treasury Securities (one-year CMT) plus a gross margin. Approximately 55.65% of the mortgage loans in Pool III have interest-only payments scheduled during the seven-year fixed-rate period, with principal and interest payments commencing after the first rate-adjustment date. The aggregate principal balance of this pool is $18,038,526 and consists of conventional, fully amortizing, ARMs secured by first liens on single-family residential properties, substantially all of which have original terms to maturity of 30 years. The average principal balance of the loans in this pool is approximately $501,070. The mortgage pool has a weighted average OLTV of 73.4%. Rate/Term and cash-out refinance loans account for 25.48% and 9.86% of the pool, respectively. There are no second homes or investor occupancies. The states with the largest concentrations are California (39.23%), Washington (12.76%), Massachusetts (9.85%), Virginia (7.47%), and New Jersey (5.09%). All other states represent less than 5% of the pool as of the cut-off date.

Pool IV consists of 10/1 hybrid ARMs. The loans have an initial fixed interest rate period of 10 years. Thereafter, the interest rate will adjust annually based on the weekly average yield on U.S. Treasury Securities (one-year CMT) plus a gross margin. Approximately 67.43% of the mortgage loans in Pool IV have interest-only payments scheduled during the 10-year fixed-rate period, with principal and interest payments commencing after the first rate-adjustment date. The aggregate principal balance of this pool is $50,026,177 and consists of conventional, fully amortizing, ARMs secured by first liens on single-family residential properties, substantially all of which have original terms to maturity of 30 years. The average principal balance of the loans in this pool is approximately $588,543. The mortgage pool has a weighted average OLTV of 69.3%. Rate/Term and cash-out refinance loans account for 39.09% and 10.14% of the pool, respectively. Second homes represent 0.97% of the pool; there are no investor occupancies. The states with the largest concentrations are California (68.17%) and Virginia (11.26%). All other states represent less than 5% of the pool as of the cut-off date.

None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available on the Fitch Ratings web site at 'www.fitchratings.com'.

All the mortgage loans were originated or acquired in accordance with First Horizon Home Loan Corporation's underwriting guidelines. The trust, First Horizon Mortgage Pass-Through Trust 2004-AR7, was created for the sole purpose of issuing the certificates. For federal income tax purposes, an election will be held to treat the trust as multiple real estate mortgage investment conduits (REMICs). The Bank of New York will act as trustee.
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Publication:Business Wire
Geographic Code:1USA
Date:Dec 30, 2004
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