FIRST HORIZON ASSET SECURITIES INC. MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2007-AR3 TERMS AGREEMENT (to Underwriting Agreement, dated March 24, 2006 among the Company, First Horizon Home Loan Corporation and the Underwriter)

EXECUTION

FIRST HORIZON ASSET SECURITIES INC.

MORTGAGE PASS-THROUGH CERTIFICATES

SERIES 2007-AR3

TERMS AGREEMENT

(to Underwriting Agreement,

dated March 24, 2006

among the Company, First Horizon

Home Loan Corporation

and the Underwriter)

First Horizon Asset Securities Inc.	Xxxxxxx, Xxxxxxxxx
0000 Horizon Way	September 24, 2007
Xxxxxx, Xxxxx 00000

FTN Financial Capital Markets, a division of First Tennessee Bank National Association (the “Underwriter”) agrees, subject to the terms and provisions herein and of the captioned Underwriting Agreement (the “Underwriting Agreement”), to purchase such Classes of First Horizon Mortgage Pass-Through Trust 2007-AR3, Mortgage Pass-Through Certificates, Series 2007-AR3 (the “Series 2007-AR3 Certificates”) specified in Section 2(a) hereof (the “Offered Certificates”). This letter supplements and modifies the Underwriting Agreement solely as it relates to the purchase and sale of the Offered Certificates described below. The Series 2007-AR3 Certificates are registered with the Securities and Exchange Commission by means of an effective Registration Statement (No. 333-143015). Capitalized terms used and not defined herein have the meanings given them in the Underwriting Agreement.

Section 1. The Mortgage Pools: The Series 2007-AR3 Certificates shall evidence the entire beneficial ownership interest in three mortgage pools (the “Mortgage Pools”) of primarily 30-year adjustable rate, first lien, one-to-four family residential mortgage loans (the “Mortgage Loans”) having the following characteristics as of September 1, 2007 (the “Cut-off Date”):

(a) Aggregate Principal Amount of the Mortgage Pools: Approximately $456,774,313 aggregate principal balance as of the Cut-off Date, subject to an upward or downward variance of up to 5%, the precise aggregate principal balance to be determined by the Company.

(b) Original Term to Maturity: The original term to maturity of each Mortgage Loan included in the Mortgage Pools shall be 360 months.

Section 2. The Certificates: The Offered Certificates shall be issued as follows:

(a) Classes: The Offered Certificates shall be issued with the following Class designations, initial pass-through rates and class principal balances, subject in the aggregate to the variance referred to in Section 1(a) and, as to any particular Class, to an upward or downward variance of up to 5%:

		Class Principal			Initial Pass- Through			Class Purchase Price			Required Ratings
Class		Balance			Rate(1)			Percentage			S&P			Fitch
Class I-A-1		$	269,086,000.00			6.1457	%		99.195849800	%		AAA			AAA
Class I-A-2		$	10,484,000.00			6.1457	%		99.195849800	%		AAA			AAA
Class I-A-R		$	100.00			6.1457	%		99.195849800	%		AAA			AAA
Class II-A-1		$	15,000,000.00			6.3270	%		99.195542360	%		AAA			AAA
Class II-A-2		$	88,472,000.00			6.3270	%		99.195542360	%		AAA			AAA
Class II-A-3		$	3,447,000.00			6.3270	%		99.195542360	%		AAA			AAA
Class III-A-1		$	53,156,000.00			6.3116	%		99.080463220	%		AAA			AAA

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

(b) The Offered Certificates shall have such other characteristics as described in the related Prospectus.

Section 3. Purchase Price: The Purchase Price for each Class of the Offered Certificates shall be the Class Purchase Price Percentage therefor (as set forth in Section 2(a) above) of the initial Class Principal Balance thereof plus accrued interest at the applicable per annum initial pass-through rate set forth in 2(a) above from and including the Cut-off Date up to, but not including, September 27, 2007 (the “Closing Date”).

Section 4. Required Ratings: The Offered Certificates shall have received at least the Required Ratings from Fitch Ratings (“Fitch”) and Standard & Poor’s, a division of The XxXxxx-Xxxx Companies, Inc. (“S&P”) set forth in Section 2(a) above.

Section 5. Tax Treatment: One or more elections will be made to treat the assets of the Trust Fund as a REMIC.

Section 6. Acknowledgment of Merger: The Underwriter hereby acknowledges that, effective May 31, 2007, First Horizon Home Loan Corporation merged with and into First Tennessee Bank National Association. All references in the Underwriting Agreement to First Horizon Home Loan Corporation shall be deemed to refer to First Horizon Home Loans, a division of First Tennessee Bank National Association, as successor by merger to First Horizon Home Loan Corporation.

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Underwriter, First Horizon Home Loans, a division of First Tennessee Bank National Association, and the Company.

Very truly yours,   

FTN FINANCIAL CAPITAL MARKETS, a division of First Tennessee Bank  National Association

By:

Name: Xxxx Xxxxxx

Title:   Senior Vice President

The foregoing Agreement is hereby confirmed and accepted as of the date first above written.

FIRST HORIZON ASSET SECURITIES INC.

By:

Name: Xxxxxx Xxxxx

Title:   Vice President

FIRST HORIZON HOME LOANS, a division of First Tennessee Bank National Association

By:

Name: Xxxxx X. XxXxx

Title:   Executive Vice President