Exhibit 4.2



                      NEW CENTURY MORTGAGE SECURITIES, INC.

                                    Depositor


                            [NAME OF MASTER SERVICER]

                          Master Servicer and Servicer


                               [NAME OF SERVICER]

                                    Servicer


                                [NAME OF TRUSTEE]

                                     Trustee


                                       and


                          [NAME OF TRUST ADMINISTRATOR]

                               Trust Administrator

                    -----------------------------------------

                         POOLING AND SERVICING AGREEMENT
                        Dated as of ____________ 1, _____

                    -----------------------------------------


                       Mortgage Pass-Through Certificates

                                 Series 199_-__







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                                TABLE OF CONTENTS
                                -----------------

SECTION                                                                     PAGE
-------                                                                     ----

                                    ARTICLE I

                                   DEFINITIONS

1.01.  Defined Terms...........................................................5
1.02.  Allocation of Certain Interest Shortfalls..............................51

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

2.01.  Conveyance of the Mortgage Loans.......................................53
2.02.  Acceptance of REMIC I by Trustee.......................................55
2.03.  Repurchase or Substitution of Mortgage Loans by the Originators, the
       Seller or the Depositor................................................57
2.04.  Representations and Warranties of the Depositor........................60
2.05.  Representations, Warranties and Covenants of the Servicers.............62
2.06.  Issuance of the Class R-I Certificates.................................65
2.07.  Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II by
       the Trustee............................................................66
2.08.  Issuance of Class R-II Certificates....................................66
2.09.  Conveyance of REMIC II Regular Interests; Acceptance of REMIC III by
       the Trustee............................................................66
2.10.  Issuance of REMIC III Certificates.....................................67


                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

3.01.  Servicers to Act as Servicers..........................................68
3.02.  Sub-Servicing Agreements Between Servicer and Sub-Servicers............70
3.03.  Successor Sub-Servicers................................................72
3.04.  Liability of the Servicer..............................................72
3.05.  No Contractual Relationship Between Sub-Servicers and the Trust
       Administrator, the Trustee or Certificateholders.......................72
3.06.  Assumption or Termination of Sub-Servicing Agreements by Trust
       Administrator..........................................................73
3.07.  Collection of Certain Mortgage Loan Payments...........................73


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SECTION                                                                     PAGE
-------                                                                     ----

3.08.  Sub-Servicing Accounts.................................................74
3.09.  Collection of Taxes, Assessments and Similar Items; Servicing
       Accounts ..............................................................74
3.10.  Collection Account and Distribution Account............................75
3.11.  Withdrawals from the Collection Account and Distribution Account.......78
3.12.  Investment of Funds in the Collection Account, the Expense Account
       and the Distribution Account...........................................80
3.13.  [intentionally omitted]................................................81
3.14.  Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
       Coverage...............................................................81
3.15.  Enforcement of Due-On-Sale Clauses; Assumption Agreements..............83
3.16.  Realization Upon Defaulted Mortgage Loans..............................84
3.17.  Trustee and Trust Administrator to Cooperate; Release of Mortgage
       File...................................................................86
3.18.  Servicing Compensation.................................................88
3.19.  Reports to the Trust Administrator and the Trustee; Collection
       Account Statements.....................................................89
3.20.  Statement as to Compliance.............................................89
3.21.  Independent Public Accountants' Servicing Report.......................89
3.22.  Access to Certain Documentation........................................90
3.23.  Title, Management and Disposition of REO Property......................90
3.24.  Obligations of the Servicer in Respect of Prepayment Interest
       Shortfall..............................................................93
3.25.  Expense Account........................................................94
3.26.  Obligations of the Servicer in Respect of Mortgage Rates and Monthly
       Payments...............................................................94
3.27.  Solicitations..........................................................94


                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

4.01.  Distributions..........................................................96
4.02.  Statements to Certificateholders......................................102
4.03.  Remittance Reports; P&I Advances......................................105
4.04.  Allocation of Realized Losses.........................................107
4.05.  Compliance with Withholding Requirements..............................109
4.06.  Exchange Commission; Additional Information...........................109


                                    ARTICLE V

                                THE CERTIFICATES

5.01.  The Certificates......................................................111
5.02.  Registration of Transfer and Exchange of Certificates.................113
5.03.  Mutilated, Destroyed, Lost or Stolen Certificates.....................117

                                      -ii-

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SECTION                                                                     PAGE
-------                                                                     ----

5.04.  Persons Deemed Owners.................................................118
5.05.  Certain Available Information.........................................118


                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICERS

6.01.  Liability of the Depositor and the Servicers..........................120
6.02.  Merger or Consolidation of the Depositor or the Servicers.............120
6.03.  Limitation on Liability of the Depositor, the Servicers and Others....120
6.04.  Limitation on Resignation of the Servicers............................121
6.05.  Rights of the Depositor in Respect of the Servicers...................122


                                   ARTICLE VII

                                     DEFAULT

7.01.  Servicer Events of Default............................................123
7.02.  Master Servicer, Trust Administrator or Trustee to Act; Appointment
       of Successor..........................................................126
7.03.  Notification to Certificateholders....................................128
7.04.  Waiver of Servicer Events of Default..................................128


                                  ARTICLE VIII

               CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

8.01.  Duties of Trustee and Trust Administrator.............................129
8.02.  Certain Matters Affecting the Trustee and the Trust Administrator.....130
8.03.  Neither Trustee nor Trust Administrator Liable for Certificates or
       Mortgage Loans........................................................131
8.04.  Trustee and Trust Administrator May Own Certificates..................132
8.05.  Trustee's and Trust Administrator's Fees and Expenses.................132
8.06.  Eligibility Requirements for Trustee and Trust Administrator..........133
8.07.  Resignation and Removal of the Trustee and the Trust Administrator....133
8.08.  Successor Trustee or Trust Administrator..............................134
8.09.  Merger or Consolidation of Trustee or Trust Administrator.............135
8.10.  Appointment of Co-Trustee or Separate Trustee.........................135
8.11.  Appointment of Office or Agency.......................................136
8.12.  Representations and Warranties........................................137


                                   ARTICLE IX

                                      -iii-

<PAGE>

                CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER

9.01.  Rights of the Certificate Insurer To Exercise Rights of Class A
       Certificateholders....................................................138
9.02.  Trustee and the Trust Administrator To Act Solely with Consent of
       the Certificate Insurer...............................................138
9.03.  Trust Fund and Accounts Held for Benefit of the Certificate Insurer...139
9.04.  Claims Upon the Policy; Policy Payments Account.......................139
9.05   Effect of Payments by the Certificate Insurer; Subrogation............141
9.06.  Notices to the Certificate Insurer....................................141
9.07.  Third-Party Beneficiary...............................................141
9.08.  Trust Administrator to Hold the Policy................................142


                                    ARTICLE X

                                   TERMINATION
10.01 Termination Upon Repurchase or Liquidation of All Mortgage Loans......143
10.02  Additional Termination Requirements...................................145


                                   ARTICLE XI

                                REMIC PROVISIONS

11.01. REMIC Administration..................................................147
11.02. Prohibited Transactions and Activities................................150
11.03. Master Servicer, Servicers, Trustee and Trust
       Administrator Indemnification.........................................150

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

12.01. Amendment.............................................................152
12.02. Recordation of Agreement; Counterparts................................153
12.03. Limitation on Rights of Certificateholders............................153
12.04. Governing Law.........................................................154
12.05. Notices...............................................................154
12.06. Severability of Provisions............................................155
12.07. Notice to Rating Agencies and the Certificate Insurer.................155
12.08. Article and Section References........................................157
12.09. Grant of Security Interest............................................157


                                      -iv-

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Exhibits

Exhibit A-1   Form of Class A-1 Certificate
Exhibit A-2   Form of Class A-2 Certificate
Exhibit A-3   Form of Class A-3 Certificate
Exhibit A-4   Form of Class A-4 Certificate
Exhibit A-5   Form of Class A-5 Certificate
Exhibit A-6   Form of Class A-6 Certificate
Exhibit A-7   Form of Class A-7 Certificate
Exhibit A-8   Form of Class CE Certificate
Exhibit A-9   Form of Class P Certificate
Exhibit A-10  Form of Class R-I Certificate
Exhibit A-11  Form of Class R-II Certificate
Exhibit A-12  Form of Class R-III Certificate
Exhibit B     Form of Financial Guaranty Insurance Policy
Exhibit C-1   Form of Trust Administrator's Initial Certification
Exhibit C-2   Form of Trust Administrator's Interim Certification
Exhibit C-3   Form of Trust Administrator's Final Certification
Exhibit D     Form of Mortgage Loan Purchase Agreements
Exhibit E-1   Request for Release
Exhibit E-2   Request for Release Mortgage Loans paid in full
Exhibit F-1   Form of Transferor Representation Letter and Form of Transferee
              Representation Letter in Connection with Transfer of the Class CE
              Certificates or Class P Certificates Pursuant to Rule 144A Under
              the 1933 Act
Exhibit F-2   Form of Transfer Affidavit and Agreement and Form of Transferor
              Affidavit in Connection with Transfer of Residual Certificates
Exhibit G     Form of Certification with respect to ERISA and the Code
Exhibit H     Form of Report Pursuant to Section 4.06
Exhibit I     Form of Lost Note Affidavit
Schedule 1    Mortgage Loan Schedule
Schedule 2    Prepayment Charge Schedule


                                       -v-


<PAGE>



          This Pooling and Servicing Agreement, is dated and effective as of
December 1, 1998, among NEW CENTURY MORTGAGE SECURITIES, INC. as Depositor,
[Name of Master Servicer] as Master Servicer and Servicer, OPTION ONE MORTGAGE
CORPORATION as Servicer, [Name of Trustee] as Trustee and U.S. BANK NATIONAL
ASSOCIATION as Trust Administrator.

                             PRELIMINARY STATEMENT:

          The Depositor intends to sell pass-through certificates to be issued
hereunder in multiple classes, which in the aggregate will evidence the entire
beneficial ownership interest in each REMIC (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool of assets comprising
of the Mortgage Loans and certain other related assets subject to this
Agreement.

          As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the Mortgage Loans and certain other related assets
(other than the Servicer Prepayment Charge Payment Amount) subject to this
Agreement as a REMIC for federal income tax purposes, and such segregated pool
of assets will be designated as "REMIC I." The Class R-I Certificates will be
the sole class of "residual interests" in REMIC I for purposes of the REMIC
Provisions (as defined herein). The following table irrevocably sets forth the
designation, the REMIC I Remittance Rate, the initial Uncertificated Balance
and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC I
Regular Interests (as defined herein). None of the REMIC I Regular Interests
will be certificated.


                    REMIC I                 Initial              Latest Possible
Designation     Remittance Rate      Uncertificated Balance     Maturity Date(1)
-----------     ---------------      ----------------------     ----------------
  I-LT1          Variable(2)
  I-LT2          Variable(2)
  I-LT3          Variable(2)
  I-LT4          Variable(2)
  I-LT5          Variable(2)
  I-LT6          Variable(2)
  I-LT7          Variable(2)
  I-LT8          Variable(2)
  I-LT9          Variable(2)
  I-LTP               (3)


                                       -1-


<PAGE>

____________________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each REMIC I Regular Interest.
(2)  Calculated in accordance with the definition of "REMIC I Remittance Rate"
     herein.
(3)  The REMIC I Regular Interest I-LTP will not accrue interest.


          As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the REMIC I Regular Interests as a REMIC for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II." The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions.
The following table irrevocably sets forth the designation, the REMIC II
Remittance Rate, the initial Uncertificated Balance and, solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC II Regular Interests. None of the REMIC II
Regular Interests will be certificated.


                    REMIC II               Initial             Latest Possible
Designation     Remittance Rate     Uncertificated Balance     Maturity Date(1)
-----------     ---------------     ----------------------     ----------------
  II-LT1         Variable(2)
  II-LT2         % per annum
  II-LT3         % per annum
  II-LT4         % per annum
  II-LT5         % per annum
  II-LT6         % per annum
  II-LT7        % per annum(3)
  II-LT8         % per annum
  II-LT9         Variable(2)
  II-LTP              (4)
  II-LT2S         Variable(2)                (5)
  II-LT3S         Variable(2)                (5)
  II-LT4S         Variable(2)                (5)
  II-LT5S         Variable(2)                (5)
  II-LT6S         Variable(2)                (5)
  II-LT7S         Variable(2)                (5)
  II-LT8S         Variable(2)                (5)





                                       -2-


<PAGE>

___________________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each REMIC II Regular Interest.

(2)  Calculated in accordance with the definition of "REMIC II Remittance Rate"
     herein.

(3)  Subject to the Net WAC Pass-Through Rate.

(4)  The REMIC II Regular Interest II-LTP will not accrue interest.

(5)  This REMIC II Regular Interest has no Uncertificated Principal Balance but
     will accrue interest at the related REMIC II Remittance Rate on the related
     Uncertificated Notional Amount, which is equal to the Uncertificated
     Balance of the Uncertificated Corresponding Component.




                                       -3-


<PAGE>



          As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the REMIC II Regular Interests as a REMIC for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC III." The Class R-III Certificates will evidence the sole
class of "residual interests" in REMIC III for purposes of the REMIC Provisions.
The following table irrevocably sets forth the designation, the Pass-Through
Rate, the initial aggregate Certificate Principal Balance and, solely for
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for the indicated Classes of Certificates.


                                        Initial Aggregate       Latest Possible
Designation  Pass-Through Rate   Certificate Principal Balance  Maturity Date(1)
-----------  -----------------   -----------------------------  ----------------
 Class A-1     %per annum
 Class A-2     % per annum
 Class A-3     % per annum
 Class A-4     % per annum
 Class A-5     % per annum
 Class A-6     % per annum(2)
 Class A-7     % per annum
 Class CE      Variable(3)
 Class P           (5)

____________________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.

(2)  Subject to the Net WAC Pass-Through Rate.

(3)  Calculated in accordance with the definition of "Pass-Through Rate" herein.

(4)  The Class CE Certificates will accrue interest at their variable
     Pass-Through Rate on the Notional Amount of the Class CE Certificates
     outstanding from time to time which shall equal the Uncertificated Balance
     of the REMIC II Regular Interests (other than the Uncertificated Balance of
     REMIC II Regular Interest II-LTP). The Class CE Certificates will not
     accrue interest on their Certificate Principal Balance.

(5)  The Class P Certificates will not accrue interest.


          As of the Cut-off Date, the Original Mortgage Loans had an aggregate
Scheduled Principal Balance equal to $______________.

          In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer, the Servicers, the Trustee and the Trust
Administrator agree as follows:


                                       -4-


<PAGE>


                                    ARTICLE I

                                   DEFINITIONS


          SECTION 1.01. Defined Terms.

          Whenever used in this Agreement, including, without limitation, in the
Preliminary Statement hereto, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Unless otherwise specified, all calculations described herein shall be made on
the basis of a 360-day year consisting of twelve 30-day months.

          "Accepted Servicing Practices": The servicing standards set forth in
Section 3.01.

          "Accrued Certificate Interest": With respect to any Class A
Certificate or Class CE Certificate and each Distribution Date, interest accrued
during the related Interest Accrual Period at the Pass-Through Rate for such
Certificate for such Distribution Date on the Certificate Principal Balance, in
the case of the Class A Certificates, or on the Notional Amount, in the case of
the Class CE Certificate, of such Certificate immediately prior to such
Distribution Date. The Class P Certificates are not entitled to distributions in
respect of interest and, accordingly, will not accrue interest. All
distributions of interest on the Class A Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Accrued Certificate
Interest with respect to each Distribution Date, as to any Class A Certificate,
shall be reduced by an amount equal to the portion allocable to such Certificate
pursuant to Section 1.02 hereof of the aggregate amount of any Relief Act
Interest Shortfall, if any, for such Distribution Date. Accrued Certificate
Interest with respect to each Distribution Date, as to any Class CE Certificate,
shall be reduced by an amount equal to the portion allocable to such Certificate
pursuant to Section 1.02 hereof of the sum of (a) the aggregate Prepayment
Interest Shortfall, if any, for such Distribution Date to the extent not covered
by payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief
Act Interest Shortfall, if any, for such Distribution Date. In addition, Accrued
Certificate Interest with respect to each Distribution Date, as to any Class CE
Certificate, shall be reduced by an amount equal to the portion allocable to
such Class CE Certificate of Realized Losses, if any, pursuant to Section 4.04
hereof.

          "Administration Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Administration Fee
Rate, multiplied by (ii) the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the initial Distribution Date, as of the Cut-off Date). The fee
payable to the Trust Administrator for all services rendered by it in the
execution of the trust hereby created and in the exercise and performance of any
of the powers and duties of the Trust Administrator hereunder will be paid by
the Trustee out of the Administration Fee.

          "Administration Fee Rate": ______% per annum.


                                       -5-


<PAGE>



          "Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

          "Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.

          "Annual Loss Percentage": With respect to any Distribution Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate of
all Realized Losses for the twelve months ending on the last day of the
preceding month and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans and REO Properties as of the first day of the
twelfth preceding calendar month.

          "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.

          "Available Distribution Amount": With respect to any Distribution
Date, an amount equal to (1) the sum of (a) the aggregate of the amounts on
deposit in the Collection Account and Distribution Account as of the close of
business on the related Determination Date, (b) the aggregate of any amounts
received in respect of an REO Property withdrawn from any REO Account and
deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicers in respect of Prepayment Interest Shortfalls for such
Distribution Date pursuant to Section 3.24, (d) the aggregate of any P&I
Advances made by the Servicers for such Distribution Date pursuant to Section
4.03, (e) the aggregate of any advances made by the Master Servicer, the Trust
Administrator or the Trustee, as applicable, for such Distribution Date pursuant
to Section 7.02(b) and (f) with respect to the initial Distribution Date, the
Initial Deposit, reduced (to not less than zero), by (2) the sum of (x) the
portion of the amount described in clause (1)(a) above that represents (i)
Monthly Payments on the Mortgage Loans received from a Mortgagor on or prior to
the Determination Date but due during any Due Period subsequent to the related
Due Period, (ii) Principal Prepayments on the Mortgage Loans received after the
related Prepayment Period (together with any interest payments received with
such Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Depositor, either Servicer, the Master
Servicer, the Trustee, either Originator, the Trust Administrator, the Seller or
any Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise payable
in respect of extraordinary Trust Fund expenses, (v) Stayed Funds, (vi) the

                                       -6-


<PAGE>



amount of the Certificate Insurer Premium payable from the Distribution Account
to the Expense Account pursuant to Section 3.25(b) for payment to the
Certificate Insurer, the Administration Fee payable from the Distribution
Account pursuant to Section 8.05 and the Master Servicing Fee payable from the
Distribution Account pursuant to Section 3.11(b)(3), (vii) amounts deposited in
the Collection Account or the Distribution Account in error and (viii) the
amount of any Prepayment Charges collected by the Servicers in connection with
the Principal Prepayment of any of the Mortgage Loans and any Servicer
Prepayment Charge Payment Amount, and (y) amounts reimbursable to the Master
Servicer, the Trustee or the Trust Administrator, as applicable, for an advance
made pursuant to Section 7.02(b) which advance the Master Servicer, the Trustee
or Trust Administrator, as applicable, has determined to be nonrecoverable from
the Stayed Funds in respect of which it was made.

          "Balloon Loan": Any Mortgage Loan that provided on the date of
origination for an amortization schedule extending beyond its stated maturity
date.

          "Balloon Payment": With respect to any Balloon Loan, as of any date of
determination, the Monthly Payment payable on the stated maturity date of such
Mortgage Loan.

          "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.

          "Bankruptcy Loss": With respect to any Mortgage Loan, a Realized Loss
resulting from a Deficient Valuation or Debt Service Reduction.

          "Book-Entry Certificate": The Class A Certificates for so long as the
Certificates of such Class shall be registered in the name of the Depository or
its nominee.

          "Book-Entry Custodian": The custodian appointed pursuant to Section
5.01.

          "Business Day": Any day other than a Saturday, a Sunday or a day on
which banking or savings and loan institutions in the State of __________, the
State of ________, the State of ____________ or in the city in which the
Corporate Trust Office of the Trust Administrator or the Corporate Trust Office
of the Trustee is located, are authorized or obligated by law or executive order
to be closed.

          "Cash-Out Refinancing": With respect to a Mortgage Loan serviced by
___________, a Refinanced Mortgage Loan the proceeds of which are more than a
nominal amount in excess of the principal balance of any existing first mortgage
or subordinate mortgage on the related Mortgaged Property and related closing
costs. With respect to a Mortgage Loan serviced by __________, a Refinanced
Mortgage Loan, the proceeds of which were more than the greater of (a) $1,000 or
(b) 1% of the principal balance of an existing first mortgage on the related
Mortgaged Property and the principal balance of any existing subordinate
mortgages on the related Mortgaged Property, in either case, in excess of the
principal balance of an existing first mortgage on the related Mortgaged
Property, the principal balance of any existing subordinate mortgages on the
related Mortgaged Property and related closing costs, and were used to satisfy
such existing

                                       -7-


<PAGE>



first mortgage, or any such subordinate mortgages, to pay related closing costs
and to provide to the Mortgagor more than $1,000 or the amount calculated in
clause (b) above, as applicable, in addition thereto. Notwithstanding the
foregoing, with respect to __________, any Refinanced Mortgage Loan with a
Loan-to-Value Ratio less than or equal to 80% that was used for the purpose of
debt consolidation is considered a Cash-Out Refinancing.

          "Certificate": Any one of the Depositor's Mortgage Pass-Through
Certificates, Series 199_-___, Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6, Class A-7, Class CE, Class P, Class R-I, Class R-II or Class
R-III, issued under this Agreement.

          "Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class CE
Certificates) of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal and allocations of Realized
Losses in reduction of the Certificate Principal Balance (or the Notional
Amount, in the case of the Class CE Certificates) of such Class of Certificates
to be made on such Distribution Date), and the denominator of which is the
initial aggregate Certificate Principal Balance (or the Notional Amount, in the
case of the Class CE Certificates) of such Class of Certificates as of the
Closing Date.

          "Certificate Insurer": _________________________________, a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.

          "Certificate Insurer Default": The existence and continuance of any of
the following:

               (a) The Certificate Insurer fails to make a payment required
          under the Policy in accordance with its terms; or

               (b)(i) the Certificate Insurer (A) files any petition or
          commences any case or proceeding under any provision or chapter of the
          Bankruptcy Code or any other similar federal or state law relating to
          insolvency, bankruptcy, rehabilitation, liquidation or reorganization,
          (B) makes a general assignment for the benefit of its creditors, or
          (C) has an order for relief entered against it under the Bankruptcy
          Code or any other similar federal or state law relating to insolvency,
          bankruptcy, rehabilitation, liquidation or reorganization which is
          final and nonappealable; or

               (ii) a court of competent jurisdiction, the New York Department
          of Insurance or other competent regulatory authority enters a final
          and nonappealable order, judgment or decree (A) appointing a
          custodian, trustee, agent or receiver for the Certificate Insurer or
          for all or any material portion of its property or (B) authorizing the
          taking of possession by a custodian, trustee, agent or receiver of the
          Certificate Insurer (or the taking of possession of all or any
          material portion of the property of the Certificate Insurer).


                                       -8-


<PAGE>



          "Certificate Insurer Premium": The Policy premium payable pursuant to
Section 3.25(b) hereof.

          "Certificate Insurer Premium Rate": ____% per annum.

          "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or either Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 12.01. The Trustee and the Trust Administrator may
conclusively rely upon a certificate of the Depositor or either Servicer in
determining whether a Certificate is held by an Affiliate thereof. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee and the Trust Administrator shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.

          "Certificate Owner": With respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Certificate as reflected on the books
of the Depository or on the books of a Depository Participant or on the books of
an indirect participating brokerage firm for which a Depository Participant acts
as agent.

          "Certificate Principal Balance": With respect to each Class A
Certificate or Class P Certificate as of any date of determination, the
Certificate Principal Balance of such Certificate on the Distribution Date
immediately prior to such date of determination, minus all distributions
allocable to principal made thereon and Realized Losses allocated thereto on
such immediately prior Distribution Date (or, in the case of any date of
determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Certificate, as stated on the face
thereof). With respect to each Class CE Certificate as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Uncertificated
Balances of the REMIC II Regular Interests over (B) the then aggregate
Certificate Principal Balances of the Class A Certificates and the Class P
Certificates then outstanding.

          "Certificate Register": The register maintained pursuant to Section
5.02.

          "Class": Collectively, all of the Certificates bearing the same class
designation.


                                       -9-


<PAGE>



          "Class A Certificate": Any Class A-1 Certificate, Class A-2
Certificate, Class A-3 Certificate, Class A-4 Certificate, Class A-5
Certificate, Class A-6 Certificate or Class A-7 Certificate.

          "Class A-1 Certificate": Any one of the Class A-1 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-1 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-2 Certificate": Any one of the Class A-2 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-2 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-3 Certificate": Any one of the Class A-3 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-3 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-4 Certificate": Any one of the Class A-4 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-4 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-5 Certificate": Any one of the Class A-5 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-5 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-6 Certificate": Any one of the Class A-6 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-6 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class A-7 Certificate": Any one of the Class A-7 Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-7 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class CE Certificate": Any one of the Class CE Certificates executed,
authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-8 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.


                                      -10-


<PAGE>



          "Class P Certificate": Any one of the Class P Certificates executed,
authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-9 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.

          "Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-10 and evidencing the
Residual Interest in REMIC I for purposes of the REMIC Provisions.

          "Class R-II Certificate": Any one of the Class R-II Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-11 and evidencing the
Residual Interest in REMIC II for purposes of the REMIC Provisions.

          "Class R-III Certificates": Any one of the Class R-III Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-12 and evidencing the
Residual Interest in REMIC III for purposes of the REMIC Provisions.

          "Closing Date": _________________.

          "Code": The Internal Revenue Code of 1986.

          "Collection Account": Each of the accounts created and maintained, or
caused to be created and maintained, by each Servicer pursuant to Section
3.10(a), which shall be entitled as appropriate, "New Century Mortgage
Corporation, as Servicer for Firstar Bank Milwaukee, N.A., as Trustee, in trust
for (A) the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Mortgage Pass-Through Certificates, Series 1998-NC7 and (B) Financial
Security Assurance Inc." or "Option One Mortgage Corporation, as Servicer for
Firstar Bank Milwaukee, N.A., as Trustee, in trust for (A) the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass-Through
Certificates, Series 1998-NC7 and (B) Financial Security Assurance Inc." The
Collection Account must be an Eligible Account.

          "Commission": The Securities and Exchange Commission.

          "Corporate Trust Office": The principal corporate trust office of the
Trust Administrator or the Trustee, as the case may be, at which at any
particular time its corporate trust business in connection with this Agreement
shall be administered, which office, with respect to the Trust Administrator, at
the date of the execution of this instrument is located at
________________________________________, or at such other address as the Trust
Administrator may designate from time to time by notice to the
Certificateholders, the Depositor, each Servicer, the Trustee and the
Certificate Insurer and, with respect to the Trustee, at the date of the
execution of this instrument is located at ____________________________________,
or such other address as the Trustee may designate from time to time by notice
to the Certificateholders, the Depositor, each Servicer, the Trust Administrator
and the Certificate Insurer.


                                      -11-

<PAGE>

          "Corresponding Certificate": With respect to REMIC I Regular Interest
I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4, REMIC I
Regular Interest I- LT5, REMIC I Regular Interest I-LT6, REMIC I Regular
Interest I-LT7, REMIC I Regular Interest I-LT8 and REMIC I Regular Interest
I-LTP, the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6
Certificates, Class A-7 Certificates and Class P Certificates, respectively.
With respect to REMIC II Regular Interest II-LT2, REMIC II Regular Interest
II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest II-LT5,
REMIC II Regular Interest II-LT6, REMIC II Regular Interest II-LT7, REMIC II
Regular Interest II-LT8 and REMIC II Regular Interest II-LTP, the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-7
Certificates and Class P Certificates, respectively.

          "Cumulative Insurance Payments": As of any time of determination, the
aggregate of all Insurance Payments previously made by the Certificate Insurer
under the Policy plus interest thereon from the date such amount became due
until paid in full, at a rate of interest calculated as provided in the
Insurance Agreement minus all payments previously made to the Certificate
Insurer pursuant to Section 4.01 hereof as reimbursement for such amounts.

          "Cumulative Loss Percentage": With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from the Cut-off Date to the last day of the
preceding calendar month and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date.

          "Cut-off Date": With respect to each Original Mortgage Loan, December
1, 1998. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.

          "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.

          "Deficiency Amount": With respect to the Class A Certificates as of
any Distribution Date, the sum of (i) any shortfall in the amounts available in
the Distribution Account to pay the Interest Distribution Amount on such
Certificates for the related Interest Accrual Period, (ii) the excess, if any,
of (a) the aggregate Certificate Principal Balances of the Class A Certificates
then outstanding over (b) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties then outstanding, and (iii) without
duplication of the amount specified in clause (ii), the aggregate Certificate
Principal Balances of the Class A Certificates to the extent unpaid on the final
Distribution Date or earlier termination of the Trust Fund pursuant to the terms
of this Agreement.


                                      -12-

<PAGE>

          "Deficiency Event": The inability of the Trust Administrator to make
the Guaranteed Distribution on any Distribution Date due to a shortage of funds
for such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.

          "Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.

          "Definitive Certificates": As defined in Section 5.01(b).

          "Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
a Qualified Substitute Mortgage Loan.

          "Delinquency Percentage": As of the last day of the related Due
Period, the percentage equivalent of a fraction, the numerator of which is the
aggregate Stated Principal Balance of all Mortgage Loans that, as of the last
day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month; provided, however, that any Mortgage Loan purchased
by the Master Servicer (or by Option One) pursuant to Section 3.16(c) shall not
be included in either the numerator or the denominator for purposes of
calculating the Delinquency Percentage.

          "Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.

          "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

          "Depository Institution": Any depository institution or trust company,
including the Trustee and the Trust Administrator, that (a) is incorporated
under the laws of the United States of America or any State thereof, (b) is
subject to supervision and examination by federal or state banking authorities
and (c) has outstanding unsecured commercial paper or other short-term unsecured
debt obligations (or, in the case of a depository institution that is the
principal subsidiary of a holding company, such holding company has unsecured
commercial paper or other short-term unsecured debt obligations) that are rated
P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not
the Rating Agencies).



                                      -13-
<PAGE>

          "Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

          "Determination Date": With respect to each Distribution Date, the 15th
day of the calendar month in which such Distribution Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.

          "Directly Operate": With respect to any REO Property, the furnishing
or rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by REMIC I other than through an
Independent Contractor; provided, however, that the Trustee (or the related
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the related Servicer on behalf of
the Trustee) establishes rental terms, chooses tenants, enters into or renews
leases, deals with taxes and insurance, or makes decisions as to repairs or
capital expenditures with respect to such REO Property.

          "Disqualified Organization": Any of the following: (i) the United
States, any State or political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for Freddie Mac, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee or the
Trust Administrator based upon an Opinion of Counsel that the holding of an
Ownership Interest in a Residual Certificate by such Person may cause any of
REMIC I, REMIC II or REMIC III or any Person having an Ownership Interest in any
Class of Certificates (other than such Person) to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Residual Certificate to such Person.
The terms "United States," "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.

          "Distribution Account": The trust account or accounts created and
maintained by the Trust Administrator pursuant to Section 3.10(b), which shall
be entitled "U.S. Bank National Association, as Trust Administrator for Firstar
Bank Milwaukee, N.A., as Trustee, in trust for (A) the registered holders of
Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass- Through
Certificates, Series 1998-NC7 and (B) Financial Security Assurance Inc." The
Distribution Account must be an Eligible Account.

          "Distribution Date": The 25th day of any month, or if such 25th day is
not a Business Day, the Business Day immediately following such 25th day,
commencing in ____________________.



                                      -14-
<PAGE>

          "Due Date": With respect to each Distribution Date, the first day of
the calendar month in which such Distribution Date occurs, which is generally
the day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.

          "Due Period": With respect to any Distribution Date, the period
commencing on the second day of the month immediately preceding the month in
which such Distribution Date occurs and ending on the related Due Date.

          "Eligible Account": Any of (i) an account or accounts maintained with
a Depository Institution, (ii) an account or accounts the deposits in which are
fully insured by the FDIC or (iii) a trust account or accounts maintained with
the corporate trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity. Eligible Accounts
may bear interest.

          "ERISA": The Employee Retirement Income Security Act of 1974, as
amended.

          "Estate in Real Property": A fee simple estate in a parcel of land.

          "Excess Overcollateralized Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Overcollateralized Amount for such Distribution Date over (ii) the Required
Overcollateralized Amount for such Distribution Date.

          "Expense Account": The account established and maintained pursuant to
Section 3.25.

          "Expense Adjusted Mortgage Rate": With respect to any Mortgage Loan or
REO Property, the then applicable Mortgage Rate thereon minus the sum of (i) the
Administration Fee Rate, (ii) the Servicing Fee Rate and (iii) the Master
Servicing Fee Rate.

          "Fannie Mae": Fannie Mae, formally known as the Federal National
Mortgage Association ("FNMA"), or any successor thereto.

          "FDIC": Federal Deposit Insurance Corporation or any successor
thereto.

          "Final Recovery Determination": With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the related Originator, the Seller, the Depositor, the Majority Class CE
Certificateholder, the related Servicer, the Master Servicer or the Certificate
Insurer pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 10.01), a determination made by the related Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which such
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. Each Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.


                                      -15-
<PAGE>

          "Freddie Mac": Freddie Mac, formally known as the Federal Home Loan
Mortgage Corporation ("FHLMC"), or any successor thereto.

          "Guaranteed Distribution": As defined in the Policy.

          "Independent": When used with respect to any specified Person, any
such Person who (a) is in fact independent of the Depositor, the Seller, each
Servicer, each Originator and their respective Affiliates, (b) does not have any
direct financial interest in or any material indirect financial interest in the
Depositor, the Seller, either Originator, either Servicer or any Affiliate
thereof, and (c) is not connected with the Depositor, the Seller, either
Originator, either Servicer or any Affiliate thereof as an officer, employee,
promoter, underwriter, trustee, trust administrator, partner, director or Person
performing similar functions; provided, however, that a Person shall not fail to
be Independent of the Depositor, the Seller, either Originator, either Servicer
or any Affiliate thereof merely because such Person is the beneficial owner of
1% or less of any class of securities issued by the Depositor, the Seller,
either Originator, either Servicer or any Affiliate thereof, as the case may be.

          "Independent Contractor": Either (i) any Person (other than the
Servicers) that would be an "independent contractor" with respect to REMIC I
within the meaning of Section 856(d)(3) of the Code if REMIC I were a real
estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35% or more of any Class of Certificates), so long as REMIC I does
not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including either Servicer) if the Trustee and the Trust Administrator have
received an Opinion of Counsel to the effect that the taking of any action in
respect of any REO Property by such Person, subject to any conditions therein
specified, that is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D(a) of
the Code), or cause any income realized in respect of such REO Property to fail
to qualify as Rents from Real Property.

          "Initial Deposit": $________ in cash to be deposited by the Depositor
with the Trust Administrator on or before the Closing Date, which represents
with respect to each Mortgage Loan having a first payment date due in
______________, interest accrued at the Net Mortgage Rate for each such Mortgage
Loan for the initial Interest Accrual Period.

          "Insurance Agreement": The Insurance and Indemnity Agreement, dated as
of _________________, among the Depositor, the Seller, the Servicers and the
Certificate Insurer, as amended or supplemented in accordance with the
provisions thereof.

          "Insurance Payment": Any payment made by the Certificate Insurer under
the Policy with respect to the Class A Certificates.



                                      -16-
<PAGE>

          "Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the related
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.

          "Interest Accrual Period": With respect to any Distribution Date and
the Class A Certificates, the Class CE Certificates, the REMIC I Regular
Interests (other than REMIC I Regular Interest I-LTP) and the REMIC II Regular
Interests (other than REMIC II Regular Interest II-LTP), the one-month period
ending on the last day of the calendar month preceding the month in which such
Distribution Date occurs.

          "Interest Distribution Amount": With respect to any Distribution Date
and any Class of Class A Certificates and any Class CE Certificates, the
aggregate Accrued Certificate Interest on the Certificates of such Class for
such Distribution Date, plus with respect to each Class of Class A Certificates
any undistributed Interest Distribution Amounts from any previous Distribution
Date for which no Insurance Payment relating to such Interest Distribution
Amounts has been previously paid to Holders of each Class of Class A
Certificates.

          "Late Collections": With respect to any Mortgage Loan and any Due
Period, all amounts received subsequent to the Determination Date immediately
following such Due Period, whether as late payments of Monthly Payments or as
Insurance Proceeds, Liquidation Proceeds or otherwise, which represent late
payments or collections of principal and/or interest due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) but
delinquent for such Due Period and not previously recovered.

          "Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from REMIC I by reason of its being purchased, sold or replaced pursuant
to or as contemplated by Section 2.03, Section 3.16(c) or Section 10.01. With
respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 10.01.

          "Liquidation Proceeds": The amount (other than Insurance Proceeds or
amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the applicable Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.

          "Loan-to-Value Ratio": As of any date of determination, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
the related Mortgage Loan at such date (and the principal balance of any related
first-lien Mortgage Loan, with respect to any

                                      -17-
<PAGE>

second-lien Mortgage Loan) and the denominator of which is the Value of the
related Mortgaged Property.


          "Lockout Certificates": The Class A-7 Certificates.

          "Lockout Certificate Percentage": For each Distribution Date, the
percentage equal to the aggregate Certificate Principal Balance of the Class A-7
Certificates immediately prior to such Distribution Date divided by the sum of
the aggregate Certificate Principal Balances of the Class A Certificates
immediately prior to such Distribution Date.

          "Lockout Distribution Percentage": With respect to any Distribution
Date, the percentage indicated below:

         Distribution Date                   Lockout Distribution Percentage
-------------------------------       ------------------------------------------
___________ through ___________       __%
___________ through ___________       __% of the Lockout Certificate Percentage
___________ through ___________       __% of the Lockout Certificate Percentage
___________ through ___________       ___% of the Lockout Certificate Percentage
___________ and thereafter            the lesser of (x) ___% of the Lockout
                                      Certificate Percentage and (y) ___%

Notwithstanding the foregoing, if the Certificate Principal Balances of the
Class A Certificates (other than the Lockout Certificates) have been reduced to
zero, the Lockout Distribution Percentage will be equal to ____%.

          "Majority Class CE Certificateholder": Any single Holder or group of
Holders of Class CE Certificates representing a greater than 50% Percentage
Interest in such Class.

          "Master Servicer": ___________________ or any successor master
servicer appointed as herein provided, in its capacity as Master Servicer
hereunder.

          "Master Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full or in part
made by the Mortgagor during such calendar month, interest for the number of
days covered by such payment of interest) at the applicable Master Servicing Fee
Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.

          "Master Servicing Fee Rate": With respect to each Mortgage Loan
identified on Part A of Schedule 1 hereto ____% per annum. With respect to each
Mortgage Loan identified on Part B of Schedule 1 hereto ____% per annum.

          "Maximum I-LT9 Uncertificated Interest Deferral Amount": With respect
to any Distribution Date, the excess of (i) accrued interest at the REMIC I
Remittance Rate applicable to REMIC I Regular Interest I-LT9 for such
Distribution Date on a balance equal to the Uncertificated Balance of REMIC I
Regular Interest I-LT9 minus the REMIC I Overcollateralized Amount, in each case
for such Distribution Date, over (ii) Uncertificated Interest on REMIC II
Regular Interest II-LT2, REMIC II


                                      -18-
<PAGE>

Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
Interest II-LT5, REMIC II Regular Interest II-LT6, REMIC II Regular Interest
II-LT7 and REMIC II Regular Interest II-LT8 for such Distribution Date.

          "Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the related Servicer pursuant to Section 3.07; and (c) on the assumption that
all other amounts, if any, due under such Mortgage Loan are paid when due.

          ["Moody's": Moody's Investors Service, Inc. or its successor in
interest.]

          "Mortgage": The mortgage, deed of trust or other instrument creating a
first lien or a second lien on, or first priority or second priority security
interest in, a Mortgaged Property securing a Mortgage Note.

          "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

          "Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee and delivered to the Trust Administrator pursuant to Section 2.01 or
Section 2.03(d) of this Agreement, as held from time to time as a part of the
Trust Fund, the Mortgage Loans so held being identified in the Mortgage Loan
Schedule.

          "Mortgage Loan Purchase Agreements": The agreement among the
Depositor, the Seller and __________________, in its capacity as an Originator,
regarding the transfer of certain of the Mortgage Loans by the Seller to or at
the direction of the Depositor (the "___________ Mortgage Loan Purchase
Agreement") and the agreement among the Depositor, the Seller and __________, in
its capacity as an Originator, regarding the transfer of certain of the Mortgage
Loans by the Seller to or at the direction of the Depositor (the "__________
Mortgage Loan Purchase Agreement"), each substantially in the form of Exhibit D
annexed hereto.

          "Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in REMIC I on such date, attached hereto as Schedule 1. The Mortgage
Loan Schedule shall set forth the following information with respect to each
Mortgage Loan:

     (i)      the Mortgage Loan identifying number;

     (ii)     the Mortgagor's name;

     (iii)    the street address of the Mortgaged Property including the state
              and zip code;

     (iv)     a code indicating whether the Mortgaged Property is
              owner-occupied;

     (v)      the type of Residential Dwelling constituting the Mortgaged
              Property;


                                      -19-
<PAGE>

     (vi)     the original months to maturity;

     (vii)    the stated remaining months to maturity from the Cut-off Date
              based on the original amortization schedule;

     (viii)   the Loan-to-Value Ratio at origination;

     (ix)     the Mortgage Rate in effect immediately following the Cut-off
              Date;

     (x)      the date on which the first Monthly Payment was due on the
              Mortgage Loan;

     (xi)     the stated maturity date;

     (xii)    the amount of the Monthly Payment at origination;

     (xiii)   the amount of the Monthly Payment due on the first Due Date after
              the Cut-off Date;

     (xiv)    the last Due Date on which a Monthly Payment was actually applied
              to the unpaid Stated Principal Balance;

     (xv)     the original principal amount of the Mortgage Loan;

     (xvi)    the Scheduled Principal Balance of the Mortgage Loan as of the
              close of business on the Cut-off Date;

     (xvii)   [intentionally omitted];

     (xviii)  [intentionally omitted];

     (xix)    a code indicating the purpose of the Mortgage Loan (I.E., purchase
              financing, Rate/Term Refinancing, Cash-Out Refinancing);

     (xx)     [intentionally omitted];

     (xxi)    [intentionally omitted];

     (xxii)   the Mortgage Rate at origination;

     (xxiii)  [intentionally omitted];

     (xxiv)   a code indicating the documentation program (I.E., Full
              Documentation, Limited Documentation, Stated Income
              Documentation);

     (xxv)    [intentionally omitted];

     (xxvi)   [intentionally omitted];

     (xxvii)  the risk grade;


                                      -20-
<PAGE>

     (xxviii) [intentionally omitted];

     (xxix)   [intentionally omitted];

     (xxx)    [intentionally omitted];

     (xxxi)   the Value of the Mortgaged Property;

     (xxxii)  the sale price of the Mortgaged Property, if applicable;

     (xxxiii) the actual unpaid principal balance of the Mortgage Loan as of the
              Cut-off Date;

     (xxxiv)  the type and term of the related Prepayment Charge;

     (xxxv)   [intentionally omitted];

     (xxxvi)  [intentionally omitted];

     (xxxvii) [intentionally omitted];

     (xxxviii)[intentionally omitted];

     (xxxix)  [intentionally omitted];

     (xl)     the program code;

     (xli)    whether the Mortgage Loan is a first or second lien Mortgage Loan.

          The Mortgage Loan Schedule shall be divided into two parts, Part A
includes the Mortgage Loans initially serviced by New Century and Part B
includes the Mortgage Loans initially serviced by Option One. Each part of the
Mortgage Loan Schedule shall set forth the following information with respect to
the Mortgage Loans in the aggregate as of the Cut-Off Date: (1) the number of
Mortgage Loans; (2) the current principal balance of the Mortgage Loans; (3) the
weighted average Mortgage Rate of the Mortgage Loans; and (4) the weighted
average maturity of the Mortgage Loans. The Mortgage Loan Schedule shall be
amended from time to time by the Depositor in accordance with the provisions of
this Agreement. With respect to any Qualified Substitute Mortgage Loan, the
Cut-off Date shall refer to the related Cut-off Date for such Mortgage Loan,
determined in accordance with the definition of Cut-off Date herein.

          "Mortgage Note": The original executed note or other evidence of the
indebtedness of a Mortgagor under a Mortgage Loan.

          "Mortgage Pool": The pool of Mortgage Loans, identified on Schedule 1
from time to time, and any REO Properties acquired in respect thereof.

          "Mortgage Rate": With respect to each Mortgage Loan, the annual rate
at which interest accrues on such Mortgage Loan from time to time in accordance
with the provisions of the related Mortgage Note.


                                      -21-
<PAGE>

          "Mortgaged Property": The underlying property securing a Mortgage
Loan, including any REO Property, consisting of an Estate in Real Property
improved by a Residential Dwelling.

          "Mortgagor": The obligor on a Mortgage Note.

          "Net Monthly Excess Cashflow": With respect to any Distribution Date,
the sum of (i) any Overcollateralization Reduction Amount for such Distribution
Date and (ii) the excess of (x) the Available Distribution Amount for such
Distribution Date over (y) the sum for such Distribution Date of (A) the
Interest Distribution Amounts payable to the holders of the Class A Certificates
and (B) the sum of the amounts described in clauses (b)(i) through (iii) of the
definition of Principal Distribution Amount.

          "Net Monthly Excess Spread": With respect to any Distribution Date,
the excess of (x) the Available Distribution Amount for such Distribution Date
over (y) the sum for such Distribution Date of (A) the Interest Distribution
Amount payable to the holders of the Class A Certificates and (B) the sum of the
amounts described in clauses (b)(i) through (iii) of the definition of Principal
Distribution Amount.

          "Net Mortgage Rate": With respect to any Mortgage Loan (or the related
REO Property) as of any date of determination, a per annum rate of interest
equal to the then applicable Mortgage Rate for such Mortgage Loan minus the
Servicing Fee Rate.

          "Net WAC Pass-Through Rate": With respect to REMIC II Regular Interest
II-LT7 and the Class A-6 Certificates and any Distribution Date, a per annum
rate equal to the fraction, expressed as a percentage, the numerator of which is
(i) an amount equal to (A) 1/12 of the aggregate Scheduled Principal Balance of
the then outstanding Mortgage Loans and REO Properties multiplied by the
weighted average of the Expense Adjusted Mortgage Rates on such Mortgage Loans
and REO Properties minus (B) the amount of the Certificate Insurer Premium
payable to the Certificate Insurer with respect to the Policy for such
Distribution Date, and the denominator of which is (ii) an amount equal to 1/12
of the aggregate Scheduled Principal Balance of the then outstanding Mortgage
Loans and REO Properties.

          "New Lease": Any lease of REO Property entered into on behalf of REMIC
I, including any lease renewed or extended on behalf of REMIC I, if REMIC I has
the right to renegotiate the terms of such lease.

          "Nonrecoverable P&I Advance": Any P&I Advance previously made or
proposed to be made in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the related Servicer, will not or, in the case
of a proposed P&I Advance, would not be ultimately recoverable from related Late
Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.

          "Nonrecoverable Servicing Advance": Any Servicing Advance previously
made or proposed to be made in respect of a Mortgage Loan or REO Property that,
in the good faith business judgment of the related Servicer, will not or, in the
case of a proposed Servicing Advance, would not be ultimately recoverable from
related Late Collections, Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.

          "Non-United States Person": Any Person other than a United States
Person.


                                      -22-
<PAGE>

          "Notional Amount": With respect to the Class CE Certificates and any
Distribution Date, the Uncertificated Balance of the REMIC II Regular Interests
(other than the Uncertificated Balance of REMIC II Regular Interest II-LTP) for
such Distribution Date.

          "Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of related Servicer, the related
Originator, the Seller or the Depositor, as applicable.

          "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be salaried counsel for the Depositor or either Servicer, acceptable
to the Trustee and the Certificate Insurer, if such opinion is delivered to the
Trustee, or acceptable to the Trust Administrator and the Certificate Insurer,
if such opinion is to be delivered to the Trust Administrator, except that any
opinion of counsel relating to (a) the qualification of any of REMIC I, REMIC II
or REMIC III as a REMIC or (b) compliance with the REMIC Provisions must be an
opinion of Independent counsel.

          "Original Mortgage Loan": Any of the Mortgage Loans included in REMIC
I as of the Closing Date.

          "Originators": ___________, or its successor in interest, in its
capacity as an Originator under the _____________ Mortgage Loan Purchase
Agreement, and __________, or its successor in interest, in its capacity as an
Originator under the __________ Mortgage Loan Purchase Agreement.

          "Overcollateralized Amount": With respect to any Distribution Date,
the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties immediately following such Distribution Date
over (b) the sum of the aggregate Certificate Principal Balances of the Class A
Certificates and the Class P Certificates as of such Distribution Date (after
taking into account the payment of the amounts described in clauses (b)(i)
through (iv) of the definition of Principal Distribution Amount on such
Distribution Date).

          "Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Overcollateralized
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date prior to taking into account the
payment of any Overcollateralization Increase Amount on such Distribution Date.

          "Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Overcollateralization Increase Amount) and (b) the amount of
Accrued Certificate Interest payable on the Class CE Certificates on such
Distribution Date as reduced by any Cumulative Insurance Payments or Realized
Losses allocated thereto with respect to such Distribution Date pursuant to
Section 4.04.

          "Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralized Amount and (b) the sum of the amounts available for
distribution specified in clauses (b)(i) through (iii) of the definition of
Principal Distribution Amount.

          "Overcollateralization Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
Overcollateralized Amount, and the denominator


                                      -23-
<PAGE>

of which is the aggregate Stated Principal Balance of the Mortgage Loans and REO
Properties as of the last day of the related Due Period.

          "Ownership Interest": As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.

          "Pass-Through Rate": With respect to:

          (i)  the Class A-1 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

         (ii)  the Class A-2 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

        (iii)  the Class A-3 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

         (iv)  the Class A-4 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

          (v)  the Class A-5 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

         (vi)  the Class A-6 Certificates, for any Distribution Date, the lesser
               of (i) a fixed rate equal to _____% per annum and (ii) the Net
               WAC Pass-Through Rate for such Distribution Date;

        (vii)  the Class A-7 Certificates, for any Distribution Date, a fixed
               rate equal to _______% per annum;

       (viii)  the Class CE Certificates, for any Distribution Date, a rate
               per annum equal to the percentage equivalent of a fraction, the
               numerator of which is the sum of the amounts calculated pursuant
               to clauses (a) through (j) below, and the denominator of which is
               the Uncertificated Balance of the REMIC II Regular Interests
               (other than the Uncertificated Balance of REMIC II Regular
               Interest II-LTP). For purposes of calculating the Pass-Through
               Rate for the Class CE Certificates, the numerator is equal to the
               sum of the following components:

                    (a) the REMIC II Remittance Rate for REMIC II Regular
               Interest II- LT1 minus two (2) times the weighted average of the
               REMIC II Remittance Rates for REMIC II Regular Interest II-LT2,
               REMIC II Regular Interest II-LT3, REMIC II Regular Interest
               II-LT4, REMIC II Regular Interest II-LT5, REMIC II Regular
               Interest II-LT6, REMIC II Regular Interest II-LT7, REMIC II
               Regular Interest II- LT8 and REMIC II Regular Interest II-LT9,
               with the rate on REMIC II Regular Interest II-LT9 equal to zero
               for the purpose of this calculation, applied to an amount equal
               to the Uncertificated Balance of REMIC II Regular Interest
               II-LT1;

                                      -24-


<PAGE>



                    (b) the weighted average of the REMIC II Remittance Rates
               for REMIC II Regular Interest II-LT2, REMIC II Regular Interest
               II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
               Interest II-LT5, REMIC II Regular Interest II-LT6, REMIC II
               Regular Interest II-LT7 and REMIC II Regular Interest II-LT8
               minus two (2) times the weighted average of the REMIC II
               Remittance Rates for REMIC II Regular Interest II-LT2, REMIC II
               Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC
               II Regular Interest II-LT5, REMIC II Regular Interest II-LT6,
               REMIC II Regular Interest II-LT7, REMIC II Regular Interest
               II-LT8 and REMIC II Regular Interest II-LT9, with the rate on
               REMIC II Regular Interest II-LT9 equal to zero for the purpose of
               this calculation, applied to an amount equal to the sum of the
               Uncertificated Balances of REMIC II Regular Interest II-LT2,
               REMIC II Regular Interest II-LT3, REMIC II Regular Interest II-
               LT4, REMIC II Regular Interest II-LT5, REMIC II Regular Interest
               II-LT6, REMIC II Regular Interest II-LT7 and REMIC II Regular
               Interest II-LT8;

                    (c) the REMIC II Remittance Rate for REMIC II Regular
               Interest II- LT9 minus two (2) times the weighted average of the
               REMIC II Remittance Rates for REMIC II Regular Interest II-LT2,
               REMIC II Regular Interest II-LT3, REMIC II Regular Interest
               II-LT4, REMIC II Regular Interest II-LT5, REMIC II Regular
               Interest II-LT6, REMIC II Regular Interest II-LT7, REMIC II
               Regular Interest II- LT8 and REMIC II Regular Interest II-LT9,
               with the rate on REMIC II Regular Interest II-LT9 equal to zero
               for the purpose of this calculation, applied to an amount equal
               to the Uncertificated Balance of REMIC II Regular Interest
               II-LT9; and

                    (d) 100% of the interest on REMIC II Regular Interest
               II-LT2S;

                    (e) 100% of the interest on REMIC II Regular Interest
               II-LT3S;

                    (f) 100% of the interest on REMIC II Regular Interest
               II-LT4S;

                    (g) 100% of the interest on REMIC II Regular Interest
               II-LT5S;

                    (h) 100% of the interest on REMIC II Regular Interest
               II-LT6S;

                    (i) 100% of the interest on REMIC II Regular Interest
               II-LT7S; and

                    (j) 100% of the interest on REMIC II Regular Interest
               II-LT8S.

          "Percentage Interest": With respect to any Class of Certificates
(other than the Residual Certificates), the undivided percentage ownership in
such Class evidenced by such Certificate, expressed as a percentage, the
numerator of which is the initial Certificate Principal Balance represented by
such Certificate and the denominator of which is the aggregate initial
Certificate Principal Balance of all of the Certificates of such Class. The
Class A Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $10,000 and
integral multiples of $1.00 in excess thereof. The Class P Certificates are
issuable only in Percentage Interests corresponding to initial Certificate
Principal Balances of $20 and integral multiples thereof. The Class CE
Certificates are issuable only in minimum Percentage Interests corresponding to
minimum initial Certificate Principal Balances of $10,000 and integral multiples
of $1.00 in excess thereof; provided, however, that a single Certificate of

                                      -25-


<PAGE>



such Class of Certificates may be issued having a Percentage Interest
corresponding to the remainder of the aggregate initial Certificate Principal
Balance of such Class or to an otherwise authorized denomination for such Class
plus such remainder. With respect to any Residual Certificate, the undivided
percentage ownership in such Class evidenced by such Certificate, as set forth
on the face of such Certificate. The Residual Certificates are issuable in
minimum Percentage Interests of 20%.

          "Permitted Investments": Any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, regardless
of whether issued by the Depositor, either Servicer, the Trustee, the Trust
Administrator or any of their respective Affiliates:

               (i) direct obligations of, or obligations fully guaranteed as to
     timely payment of principal and interest by, the United States or any
     agency or instrumentality thereof, provided such obligations are backed by
     the full faith and credit of the United States; provided, however, that any
     obligation of, or guaranteed by, Freddie Mac or Fannie Mae, other than a
     senior debt or a mortgage participation or pass-through certificate
     guaranteed by Freddie Mac or Fannie Mae shall be a Permitted Investment
     only if, at the time of investment, such investment is acceptable to the
     Certificate Insurer;

               (ii) demand and time deposits in, certificates of deposit of, or
     bankers' acceptances issued by, any Depository Institution;

               (iii) repurchase obligations with respect to any security
     described in clause (i) above entered into with a Depository Institution
     (acting as principal);

               (iv) securities bearing interest or sold at a discount that are
     issued by any corporation incorporated under the laws of the United States
     of America or any state thereof and that are rated by each Rating Agency
     that rates such securities in its highest long-term unsecured rating
     categories at the time of such investment or contractual commitment
     providing for such investment;

               (v) commercial paper (including both non-interest-bearing
     discount obligations and interest-bearing obligations payable on demand or
     on a specified date not more than 30 days after the date of acquisition
     thereof) that is rated by each Rating Agency that rates such securities in
     its highest short-term unsecured debt rating available at the time of such
     investment;

               (vi) units of money market funds that have been rated "P-1" by
     Moody's and "AAAm" by S&P; and

               (viii) if previously confirmed in writing to the Trustee and the
     Trust Administrator, any other demand, money market or time deposit, or any
     other obligation, security or investment, as may be acceptable to the
     Rating Agencies and the Certificate Insurer as a permitted investment of
     funds backing securities having ratings equivalent to its highest initial
     rating of the Class A Certificates;

provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.

                                      -26-


<PAGE>



          "Permitted Transferee": Any Transferee of a Residual Certificate other
than a Disqualified Organization or Non-United States Person.

          "Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

          "P&I Advance": As to any Mortgage Loan or REO Property, any advance
made by the related Servicer in respect of any Distribution Date pursuant to
Section 4.03.

          "Plan": Any employee benefit plan or certain other retirement plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans and bank collective investment funds and insurance company general or
separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.

          "Policy": The Financial Guaranty Insurance Policy (No. 50752-N) issued
by the Certificate Insurer relating to the Class A Certificates, including any
endorsements thereto, attached hereto as Exhibit B.

          "Policy Payments Account": The account established pursuant to Section
9.04 hereof.

          "Premium Supplement": As defined in the Insurance Agreement.

          "Prepayment Assumption": A ___% Prepayment Vector. The Prepayment
Assumption is used solely for determining the accrual of original issue discount
on the Certificates for federal income tax purposes. A ___% Prepayment Vector
assumes that the outstanding balance of a pool of mortgage loans prepays at a
rate of ____% CPR in the first month of the life of such pool, such rate
increasing by an additional approximate ____% CPR (precisely 20/11, expressed as
a percentage) each month thereafter through the eleventh month of the life of
such pool, and such rate thereafter remaining at __% CPR for the remainder of
the life of such pool. A CPR (or Constant Prepayment Rate) represents an
annualized constant assumed rate of prepayment each month of a pool of mortgage
loans relative to its outstanding principal balance for the life of such pool.

          "Prepayment Charge": With respect to any Prepayment Period, any
prepayment premium, penalty or charge payable by a Mortgagor in connection with
any Principal Prepayment on a Mortgage Loan pursuant to the terms of the related
Mortgage Note (other than any Servicer Prepayment Charge Payment Amount).

          "Prepayment Charge Schedule": As of any date, the list of Prepayment
Charges on the Mortgage Loans included in REMIC I on such date, attached hereto
as Schedule 2 (including the Prepayment Charge Summary attached thereto). The
Prepayment Charge Schedule shall set forth the following information with
respect to each Prepayment Charge:

     (i)  the Mortgage Loan identifying number;

     (ii) a code indicating the type of Prepayment Charge;

     (iii) the state of origination of the related Mortgage Loan;

     (iv) the date on which the first monthly payment was due on the related
          Mortgage Loan;

                                      -27-


<PAGE>



     (v)  the term of the related Mortgage Loan; and

     (vi) the principal balance of the related Mortgage Loan as of the Cut-off
          Date.

          The Prepayment Charge Schedule shall be amended from time to time by
the Depositor in accordance with the provisions of this Agreement.

          "Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
related Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Servicers in respect of any Prepayment Interest Shortfall are
set forth in Section 3.24.

          "Prepayment Period": With respect to any Distribution Date, the
calendar month preceding the calendar month in which such Distribution Date
occurs.

          "Principal Distribution Amount": With respect to any Distribution
Date, the lesser of:

          (a)  the excess of the Available Distribution Amount over the amount
               payable on the Class A Certificates pursuant to Section
               4.01(a)(2)(i); and

          (b)  the sum of:

               (i) the principal portion of each Monthly Payment on the Mortgage
               Loans due during the related Due Period, whether or not received
               on or prior to the related Determination Date;

               (ii) the Stated Principal Balance of any Mortgage Loan that was
               purchased during the related Prepayment Period pursuant to or as
               contemplated by Section 2.03, Section 3.16(c) or Section 10.01
               and the amount of any shortfall deposited in the Collection
               Account in connection with the substitution of a Deleted Mortgage
               Loan pursuant to Section 2.03 during the related Prepayment
               Period;

               (iii) the principal portion of all other unscheduled collections
               (including, without limitation, Principal Prepayments, Insurance
               Proceeds, Liquidation Proceeds and REO Principal Amortization)
               received during the related Prepayment Period, net of any portion
               thereof that represents a recovery of principal for which an
               advance was made by the related Servicer pursuant to Section 4.03
               in respect of a preceding Distribution Date;

               (iv) the principal portion of any Realized Losses incurred or
               deemed to have been incurred on the Mortgage Loans in the
               calendar month preceding such Distribution Date and the principal
               portion of any Realized Losses allocated to the Class A
               Certificates on previous Distribution Dates but not paid under
               the Policy due to a Certificate Insurer Default and not
               previously paid pursuant to Section

                                      -28-


<PAGE>



               4.01(a)(2)(iii)(b), in each case from Accrued Certificate
               Interest on the Class CE Certificates for such Distribution Date;
               and

               (v) the amount of any Overcollateralization Increase Amount for
               such Distribution Date;

               minus:

               (vi) the amount of any Overcollateralization Reduction Amount for
               such Distribution Date.

          "Principal Prepayment": Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.

          "Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 10.01, and as confirmed by an Officers' Certificate from the related
Servicer or the Master Servicer to the Trustee and the Trust Administrator, an
amount equal to the sum of (i) 100% of the Stated Principal Balance thereof as
of the date of purchase (or such other price as provided in Section 10.01), (ii)
in the case of (x) a Mortgage Loan, accrued interest on such Stated Principal
Balance at the applicable Net Mortgage Rate in effect from time to time from the
Due Date as to which interest was last covered by a payment by the Mortgagor or
an advance by the related Servicer, which payment or advance had as of the date
of purchase been distributed pursuant to Section 4.01, through the end of the
calendar month in which the purchase is to be effected and (y) an REO Property,
the sum of (1) accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an advance by
the related Servicer through the end of the calendar month immediately preceding
the calendar month in which such REO Property was acquired, plus (2) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such purchase is to be effected, net of the total of all
net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that as of the date of purchase had been distributed as or to cover REO Imputed
Interest pursuant to Section 4.01, (iii) any unreimbursed Servicing Advances and
P&I Advances (including Nonrecoverable P&I Advances and Nonrecoverable Servicing
Advances) and any unpaid Servicing Fees allocable to such Mortgage Loan or REO
Property, (iv) any amounts previously withdrawn from the Collection Account in
respect of such Mortgage Loan or REO Property pursuant to Section 3.11(a)(ix)
and Section 3.16(b), and (v) in the case of a Mortgage Loan required to be
purchased pursuant to Section 2.03, expenses reasonably incurred or to be
incurred by the related Servicer, the Trustee or the Trust Administrator in
respect of the breach or defect giving rise to the purchase obligation.

          "Qualified Substitute Mortgage Loan": A mortgage loan substituted for
a Deleted Mortgage Loan pursuant to the terms of this Agreement which must, on
the date of such substitution, (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the Scheduled Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) [reserved], (iv) [reserved], (v) [reserved], (vi)
[reserved], (vii) have a remaining term to maturity not greater than (and not
more than one year less than) that of the Deleted

                                      -29-


<PAGE>



Mortgage Loan, (viii) have the same Due Date as the Due Date on the Deleted
Mortgage Loan, (ix) have a Loan-to-Value Ratio as of the date of substitution
equal to or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan as
of such date, (x) have a risk grading determined by the related Originator at
least equal to the risk grading assigned on the Deleted Mortgage Loan and (xi)
conform to each representation and warranty set forth in Section 6 of the
related Mortgage Loan Purchase Agreement applicable to the Deleted Mortgage
Loan. In the event that one or more mortgage loans are substituted for one or
more Deleted Mortgage Loans, the amounts described in clause (i) hereof shall be
determined on the basis of aggregate principal balances, the Mortgage Rates
described in clause (ii) hereof shall be determined on the basis of weighted
average Mortgage Rates, the terms described in clause (vii) hereof shall be
determined on the basis of weighted average remaining term to maturity, the
Loan-to-Value Ratios described in clause (ix) hereof shall be satisfied as to
each such mortgage loan, the risk gradings described in clause (x) hereof shall
be satisfied as to each such mortgage loan and, except to the extent otherwise
provided in this sentence, the representations and warranties described in
clause (xi) hereof must be satisfied as to each Qualified Substitute Mortgage
Loan or in the aggregate, as the case may be.

          "Rate/Term Refinancing": With respect to Mortgage Loan serviced by
___________, a Refinanced Mortgage Loan, the proceeds of which are not more than
a nominal amount in excess of the existing first mortgage loan and any
subordinate mortgage loan on the related Mortgaged Property and related closing
costs, and were used exclusively (except for such nominal amount) to satisfy the
then existing first mortgage loan and any subordinate mortgage loan of the
Mortgagor on the related Mortgaged Property and to pay related closing costs.
With respect to a Mortgage Loan serviced by _______________, a Refinanced
Mortgage Loan, the proceeds of which were not more than the greater of (a)
$1,000 or (b) 1% of the principal balance of an existing first mortgage on the
related Mortgaged Property and the principal balance of any existing subordinate
mortgages on the related Mortgaged Property, in either case, in excess of the
principal balance of an existing first mortgage on the related Mortgaged
Property, the principal balance of any existing subordinate mortgages on the
related Mortgaged Property and related closing costs, and were used to satisfy
such existing first mortgage, or any such subordinate mortgages, to pay related
closing costs and to provide to the Mortgagor not more than $1,000 or the amount
calculated in clause (b) above, as applicable, in addition thereto.
Notwithstanding the foregoing, with respect to ______________, any Refinanced
Mortgage Loan with a Loan-to-Value Ratio greater than 80% that was used for the
purpose of debt consolidation is considered a Rate/Term Refinancing.

          "Rating Agency or Rating Agencies": [Moody's] and [S&P] or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee,
the Trust Administrator and each Servicer.

          "Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made, an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final

                                      -30-


<PAGE>



Recovery Determination was made, net of amounts that are payable therefrom to
the related Servicer with respect to such Mortgage Loan pursuant to Section
3.11(a)(iii).

          With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the related Servicer in respect of such REO Property or the
related Mortgage Loan for which such Servicer has been or, in connection with
such Final Recovery Determination, will be reimbursed pursuant to Section 3.23
out of rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.23.

          With respect to each Mortgage Loan which has become the subject of a
Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.

          With respect to each Mortgage Loan which has become the subject of a
Debt Service Reduction, the portion, if any, of the reduction in each affected
Monthly Payment attributable to a reduction in the Mortgage Rate imposed by a
court of competent jurisdiction. Each such Realized Loss shall be deemed to have
been incurred on the Due Date for each affected Monthly Payment.

          "Record Date": With respect to each Distribution Date and any
Book-Entry Certificate, the Business Day immediately preceding such Distribution
Date. With respect to each Distribution Date and any other Certificates,
including any Definitive Certificates, the last Business Day of the month
immediately preceding the month in which such Distribution Date occurs.

          "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.

          "Regular Certificate": Any Class A Certificate, Class CE Certificate
or Class P Certificate.

          "Regular Interest": A "regular interest" in a REMIC within the meaning
of Section 860G(a)(1) of the Code.

          "Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

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<PAGE>



          "Relief Act Interest Shortfall": With respect to any Distribution Date
and any Mortgage Loan, any reduction in the amount of interest collectible on
such Mortgage Loan for the most recently ended calendar month as a result of the
application of the Relief Act.

          "REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.

          "REMIC I": The segregated pool of assets subject hereto, constituting
the primary trust created hereby and to be administered hereunder, with respect
to which a REMIC election is to be made, consisting of: (i) such Mortgage Loans
and Prepayment Charges as from time to time are subject to this Agreement,
together with the Mortgage Files relating thereto, and together with all
collections thereon and proceeds thereof; (ii) any REO Property, together with
all collections thereon and proceeds thereof; (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; (iv) the
Depositor's rights under the Mortgage Loan Purchase Agreements (including any
security interest created thereby); (v) the Collection Account (other than any
amounts representing any Servicer Prepayment Charge Payment Amount), the
Distribution Account (other than any amounts representing any Servicer
Prepayment Charge Payment Amount), the Expense Account and any REO Account, and
such assets that are deposited therein from time to time and any investments
thereof, together with any and all income, proceeds and payments with respect
thereto. Notwithstanding the foregoing, however, REMIC I specifically excludes
the Policy and all payments and other collections of principal and interest due
on the Mortgage Loans on or before the Cutoff Date and all Prepayment Charges
payable in connection with Principal Prepayments made before the Cut-off Date.

          "REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular Interest I-
LT1 minus two (2) times the weighted average of the REMIC II Remittance Rates
for REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II-LT4, REMIC II Regular Interest II-LT5, REMIC II Regular
Interest II-LT6, REMIC II Regular Interest II-LT7, REMIC II Regular Interest
II-LT8 and REMIC II Regular Interest II-LT9, with the rate on REMIC II Regular
Interest II-LT9 equal to zero for purposes of this calculation, divided by (b)
12.

          "REMIC I Overcollateralized Amount": With respect to any date of
determination, (i) ____% of the aggregate Uncertificated Balances of the REMIC I
Regular Interests minus (ii) the aggregate of the Uncertificated Balances of
REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular
Interest I-LT4, REMIC I Regular Interest I-LT5, REMIC I Regular Interest I-LT6,
REMIC I Regular Interest I-LT7 and REMIC I Regular Interest I-LT8, in each case
as of such date of determination.

          "REMIC I Principal Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to the product of (i) the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then outstanding and
(ii) 1 minus a fraction, the numerator of which is two times the aggregate of
the Uncertificated Balances of REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5,
REMIC I Regular Interest I-LT6, REMIC I Regular Interest I-LT7 and REMIC I
Regular Interest I-LT8 and the denominator of which is the sum of the
Uncertificated Balances of REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5,
REMIC I Regular Interest I-LT6, REMIC I Regular Interest I-LT7, REMIC I Regular
Interest I-LT8 and REMIC I Regular Interest I-LT9.


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<PAGE>



          "REMIC I Regular Interest": Any of the ten separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
"regular interest" in REMIC I. Each REMIC I Regular Interest (other than REMIC I
Regular Interest I-LTP, with respect to interest) shall accrue interest at the
related REMIC I Remittance Rate in effect from time to time, and shall be
entitled to distributions of principal, subject to the terms and conditions
hereof, in an aggregate amount equal to its initial Uncertificated Balance as
set forth in the Preliminary Statement hereto. The designations for the
respective REMIC I Regular Interests are set forth in the Preliminary Statement
hereto.

          "REMIC I Regular Interest I-LT1": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT1 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT2": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT2 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT3": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT3 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT4": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT4 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT5": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT5 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT6": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT6 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

                                      -33-


<PAGE>



          "REMIC I Regular Interest I-LT7": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT7 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT8": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT8 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LT9": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LT9 shall accrue
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

          "REMIC I Regular Interest I-LTP": One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest I-LTP shall be entitled to
any Prepayment Charges collected by the Servicers and to a distribution of
principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Balance as set forth in the Preliminary
Statement hereto.

          "REMIC I Remittance Rate": With respect to each REMIC I Regular
Interest, the weighted average of the Expense Adjusted Mortgage Rates on the
then outstanding Mortgage Loans and REO Properties.

          "REMIC I Required Overcollateralized Amount": __% of the Required
Overcollateralization Amount.

          "REMIC II": The segregated pool of assets consisting of all of the
REMIC I Regular Interests conveyed in trust to the Trustee, for the benefit of
REMIC III, as holder of the REMIC II Regular Interests, and the Class R-II
Certificateholders pursuant to Section 2.07, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

          "REMIC II Regular Interest": Any of the seventeen separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
(other than REMIC II Regular Interest II-LTP) shall accrue interest at the
related REMIC II Remittance Rate in effect from time to time, and shall be
entitled to distributions of principal, subject to the terms and conditions
hereof, in an aggregate amount equal to its initial Uncertificated Balance as
set forth in the Preliminary Statement hereto. The designations for the
respective REMIC II Regular Interests are set forth in the Preliminary Statement
hereto.

          "REMIC II Regular Interest II-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II.

                                      -34-


<PAGE>



REMIC II Regular Interest II-LT1 shall accrue interest at the related REMIC II
Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT6
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT7": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT7
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT8": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II.

                                      -35-


<PAGE>



REMIC II Regular Interest II-LT8 shall accrue interest at the related REMIC II
Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT9": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT9
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

          "REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall be entitled to any Prepayment Charges collected by the Servicers and to a
distribution of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto.

          "REMIC II Regular Interest II-LT2S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Regular Interest II-LT3S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Regular Interest II-LT4S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Regular Interest II-LT5S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Regular Interest II-LT6S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT6S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Regular Interest II-LT7S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT7S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.


                                      -36-


<PAGE>



          "REMIC II Regular Interest II-LT8S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT8S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

          "REMIC II Remittance Rate": With respect to REMIC II Regular Interest
II-LT1 and REMIC II Regular Interest II-LT9, the weighted average of the Expense
Adjusted Mortgage Rates on the then outstanding Mortgage Loans and REO
Properties minus, with respect to REMIC II Regular Interest II-LT1, the product
of (A) two times the sum of the Uncertificated Balances of REMIC II Regular
Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular Interest
II-LT4, REMIC II Regular II-LT5, REMIC II Regular Interest II-LT6, REMIC II
Regular Interest II-LT7 and REMIC II Regular Interest II- LT8 divided by the sum
of the Uncertificated Balances of REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
II-LT5, REMIC II Regular Interest II-LT6, REMIC II Regular Interest II-LT7,
REMIC II Regular Interest II-LT8 and REMIC II Regular Interest II-LT9 and (B)
the Certificate Insurer Premium Rate. With respect to each of REMIC II Regular
Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular Interest
II-LT4, REMIC II Regular Interest II-LT5, REMIC II Regular Interest II-LT6 and
REMIC II Regular Interest II-LT8, a fixed rate per annum equal to the related
REMIC II Remittance Rate as set forth in the Preliminary Statement hereto. With
respect to REMIC II Regular Interest II-LT7, the lesser of (i) the related fixed
rate per annum equal to the related REMIC II Remittance Rate as set forth in the
Preliminary Statement hereto and (ii) the Net WAC Pass-Through Rate. With
respect to REMIC II Regular Interest II-LT2S, REMIC II Regular Interest II-LT3S,
REMIC II Regular Interest II-LT4S, REMIC II Regular Interest II-LT5S, REMIC II
Regular Interest II-LT6S, REMIC II Regular Interest II-LT7S and REMIC II Regular
Interest II-LT8S, a rate per annum equal to excess of the REMIC I Remittance
Rate for the related Uncertificated Corresponding Component over the REMIC II
Remittance Rate for REMIC II Regular Interest II-LT2, REMIC II Regular Interest
II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest II-LT5,
REMIC II Regular Interest II-LT6, REMIC II Regular Interest II-LT7 and REMIC II
Regular Interest II- LT8, respectively.

          "REMIC III": The segregated pool of assets consisting of all of the
REMIC II Regular Interests conveyed in trust to the Trustee, for the benefit of
the REMIC III Certificateholders pursuant to Section 2.09, and all amounts
deposited therein, with respect to which a separate REMIC election is to be
made.

          "REMIC III Certificate": Any Regular Certificate or Class R-III
Certificate.

          "REMIC III Certificateholder": The Holder of any REMIC III
Certificate.

          "REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of the Code, and related provisions, and proposed, temporary and
final regulations and published rulings, notices and announcements promulgated
thereunder, as the foregoing may be in effect from time to time.

          "Remittance Report": A report in form and substance acceptable to the
Trust Administrator on a magnetic disk or tape prepared by the related Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trust Administrator and such Servicer.

          "Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."

                                      -37-


<PAGE>



          "REO Account": Each of the accounts maintained, or caused to be
maintained, by the related Servicer in respect of an REO Property pursuant to
Section 3.23.

          "REO Disposition": The sale or other disposition of an REO Property on
behalf of REMIC I.

          "REO Imputed Interest": As to any REO Property, for any calendar month
during which such REO Property was at any time part of REMIC I, one month's
interest at the applicable Net Mortgage Rate on the Stated Principal Balance of
such REO Property (or, in the case of the first such calendar month, of the
related Mortgage Loan, if appropriate) as of the close of business on the
Distribution Date in such calendar month.

          "REO Principal Amortization": With respect to any REO Property, for
any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 10.01 that is
allocable to such REO Property) or otherwise, net of any portion of such amounts
(i) payable pursuant to Section 3.23(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the related Servicer pursuant to Section 3.23(d) for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&I
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.

          "REO Property": A Mortgaged Property acquired by the related Servicer
on behalf of REMIC I through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.23.

          "Request for Release": A release signed by a Servicing Officer, in the
form of Exhibit E-1 or Exhibit E-2 attached hereto.

          "Required Overcollateralized Amount": With respect to any Distribution
Date, an amount equal to $_____________ subject to the following: (i) if the
Step Up Trigger has occurred, the Required Overcollateralized Amount for such
Distribution Date will be an amount equal to the entire aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of such
Distribution Date; (ii) if the Step Up Trigger has not occurred but the Step Up
Spread Squeeze Test is met, the Required Overcollateralized Amount for such
Distribution Date will be an amount equal to the sum of (A) the Required
Overcollateralized Amount for such Distribution Date determined as though the
Step Up Spread Squeeze Test were not met plus (B) the Spread Squeeze
Overcollateralization Increase Amount; or (iii) if neither the Step Up Trigger
has occurred nor the Step Up Spread Squeeze Test is met but the Step Down
Trigger has occurred, the Required Overcollateralized Amount for such
Distribution Date will be an amount equal to the greater of (A) ____% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date
and (B) the lesser of (x) $_____________ and (y) the Stepped Down Required
Overcollateralized Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties as of such Distribution Date.

          "Residential Dwelling": Any one of the following: (i) an attached,
detached or semidetached one-family dwelling, (ii) an attached, detached or
semi-detached two- to four-family dwelling, (iii) a one-family dwelling unit in
a Fannie Mae eligible condominium project, or (iv) an attached, detached or
semi-detached one-family dwelling in a planned unit development, none of which
is a co-operative,

                                      -38-


<PAGE>



mobile or in the case of a Mortgage Loan serviced by New Century, a manufactured
home (as defined in 42 United States Code, Section 5402(6)).

          "Residual Certificate": Any one of the Class R-I Certificates, Class
R-II Certificates or Class R-III Certificates.

          "Residual Interest": The sole class of "residual interests" in a REMIC
within the meaning of Section 860G(a)(2) of the Code.

          "Responsible Officer": When used with respect to the Trustee or the
Trust Administrator, the Chairman or Vice Chairman of the Board of Directors or
Trustees, the Chairman or Vice Chairman of the Executive or Standing Committee
of the Board of Directors or Trustees, the President, the Chairman of the
Committee on Trust Matters, any vice president, any assistant vice president,
the Secretary, any assistant secretary, the Treasurer, any assistant treasurer,
the Cashier, any assistant cashier, any trust officer or assistant trust
officer, the Controller and any assistant controller or any other officer of the
Trustee or the Trust Administrator, as the case may be, customarily performing
functions similar to those performed by any of the above designated officers
and, with respect to a particular matter, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.

          "Rolling Delinquency Percentage": With respect to any Distribution
Date, the average of the Delinquency Percentages as of the last day of each of
the three (or one or two, in the case of the first and second Distribution
Dates) preceding calendar months.

          "Scheduled Principal Balance": With respect to any Mortgage Loan: (a)
as of the Cut-off Date, the outstanding principal balance of such Mortgage Loan
as of such date, net of the principal portion of all unpaid Monthly Payments, if
any, due on or before such date; (b) as of any Due Date subsequent to the
Cut-off Date up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such Mortgage Loan, the Scheduled
Principal Balance of such Mortgage Loan as of the Cut-off Date, minus the sum of
(i) the principal portion of each Monthly Payment due on or before such Due Date
but subsequent to the Cut-off Date, whether or not received, (ii) all Principal
Prepayments received before such Due Date but after the Cut-off Date, (iii) the
principal portion of all Liquidation Proceeds and Insurance Proceeds received
before such Due Date but after the Cut-off Date, net of any portion thereof that
represents principal due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) on a Due Date occurring on or before the
date on which such proceeds were received and (iv) any Realized Loss incurred
with respect thereto as a result of a Deficient Valuation occurring before such
Due Date, but only to the extent such Realized Loss represents a reduction in
the portion of principal of such Mortgage Loan not yet due (without regard to
any acceleration of payments under the related Mortgage and Mortgage Note) as of
the date of such Deficient Valuation; and (c) as of any Due Date subsequent to
the occurrence of a Liquidation Event with respect to such Mortgage Loan, zero.
With respect to any REO Property: (a) as of any Due Date subsequent to the date
of its acquisition on behalf of the Trust Fund up to and including the Due Date
in the calendar month in which a Liquidation Event occurs with respect to such
REO Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.

          "Seller":_____________________, or its successor in interest, in its
capacity as seller under the Mortgage Loan Purchase Agreements.

                                      -39-


<PAGE>



          "Servicer Prepayment Charge Payment Amount": The amounts payable by
the Servicers in respect of any waived Prepayment Charges pursuant to Section
2.05 or Section 3.01.

          "Servicers": ____________ or any successor servicer appointed as
herein provided, in its capacity as servicer hereunder with respect to the
Mortgage Loans identified on Part A of Schedule 1 hereto and the Prepayment
Charges identified on Part A of Schedule 2 hereto and ____________ or any
successor servicer appointed as herein provided, in its capacity as servicer
hereunder with respect to the Mortgage Loans identified on Part B of Schedule 1
hereto and the Prepayment Charges identified on Part B of Schedule 2 hereto.
References to "related Servicer", "applicable Servicer" and similar terms shall
mean the Servicer only with respect to the Mortgage Loans and Prepayment Charges
on the applicable part of Schedule 1 and Schedule 2 attached hereto.

          "Servicer Event of Default": One or more of the events described in
Section 7.01.

          "Servicer Remittance Date": With respect to any Distribution Date,
____ p.m. _____________ time on the 18th day of the calendar month in which such
Distribution Date occurs or, if such 18th day is not a Business Day, the
Business Day immediately succeeding such 18th day.

          "Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.

          "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by either Servicer in connection with a default, delinquency
or other unanticipated event by such Servicer in the performance of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, in respect of a
particular Mortgage Loan, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property, and (iv) the
performance of its obligations under Section 3.01, Section 3.09, Section 3.14,
Section 3.16 and Section 3.23. Neither Servicer shall be required to make any
Servicing Advance in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of such Servicer, would not be ultimately
recoverable from related Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.

          "Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full or in part
made by the Mortgagor during such calendar month, interest for the number of
days covered by such payment of interest) at the applicable Servicing Fee Rate
on the same principal amount on which interest on such Mortgage Loan accrues for
such calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.

          "Servicing Fee Rate": ____% per annum.

          "Servicing Officer": Any officer of the applicable Servicer involved
in, or responsible for, the administration and servicing of Mortgage Loans,
whose name and specimen signature appear on a list of Servicing Officers
furnished by such Servicer to the Trust Administrator, the Trustee, the
Certificate Insurer and the Depositor on the Closing Date, as such list may from
time to time be amended.

          "Single Certificate": With respect to any Class of Certificates (other
than the Class P Certificates and the Residual Certificates), a hypothetical
Certificate of such Class evidencing a Percentage Interest for such Class
corresponding to an initial Certificate Principal Balance or Notional Amount of

                                      -40-


<PAGE>



$1,000. With respect to the Class P Certificates and the Residual Certificates,
a hypothetical Certificate of such Class evidencing a 100% Percentage Interest
in such Class.

          "Spread Squeeze Condition": The Spread Squeeze Condition will be met
with respect to any Distribution Date on or after which the aggregate Stated
Principal Balance of the Mortgage Loans and each REO Property remaining in the
Trust Fund is reduced to less than ___% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date, if the Spread Squeeze
Percentage for such Distribution Date is less than ____%.

          "Spread Squeeze Overcollateralization Increase Amount": For any
Distribution Date on which the Step Up Spread Squeeze Test is met, an amount
determined as follows:

          (a) if the Spread Squeeze Condition is met for such Distribution Date,
     the Spread Squeeze Overcollateralization Increase Amount for such
     Distribution Date shall be equal to the product obtained by multiplying (i)
     three, (ii) the excess, if any, of ____% over the Spread Squeeze Percentage
     for such Distribution Date and (iii) the aggregate Stated Principal Balance
     of the Mortgage Loans as of the Cut-off Date; or

          (b) if the Spread Squeeze Condition is not met for such Distribution
     Date, the Spread Squeeze Overcollateralization Increase Amount for such
     Distribution Date shall be equal to (A) the Spread Squeeze
     Overcollateralization Increase Amount for the most recent Distribution Date
     for which the Spread Squeeze Condition was met minus (B) the product
     obtained by multiplying (i) one sixth of the amount determined under clause
     (A) above and (ii) the number of consecutive Distribution Dates through and
     including the current Distribution Date for which the Spread Squeeze
     Condition was not met.

          "Spread Squeeze Percentage": With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the product
of 12 and the Net Monthly Excess Spread for such Distribution Date, and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans and REO Properties as of such Distribution Date.

          ["S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.]

          "Startup Day": With respect to any of REMIC I, REMIC II and REMIC III,
the day designated as such pursuant to Section 11.01(b) hereof.

          "Stated Principal Balance": With respect to any Mortgage Loan: (a) as
of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the Scheduled Principal Balance of such Mortgage Loan
as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the sum of
(i) the principal portion of each Monthly Payment due on a Due Date subsequent
to the Cut-off Date, to the extent received from the Mortgagor or advanced by
the related Servicer and distributed pursuant to Section 4.01 on or before such
date of determination, (ii) all Principal Prepayments received after the Cut-off
Date, to the extent distributed pursuant to Section 4.01 on or before such date
of determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied
by the related Servicer as recoveries of principal in accordance with the
provisions of Section 3.16, to the extent distributed pursuant to Section 4.01
on or before such date of determination, and (iv) any Realized Loss incurred
with respect thereto as a result of a Deficient Valuation made during or prior
to the Prepayment Period for the most recent Distribution Date coinciding

                                      -41-


<PAGE>



with or preceding such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan
would be distributed, zero. With respect to any REO Property: (a) as of any date
of determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of REMIC I, minus the sum of (i) if such REO Property was
acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the related Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.

          "Stayed Funds": If either Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 7.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds that are in the custody of such Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such Remittance
absent such prohibition.

          "Step Down Cumulative Loss Test": The Step Down Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the ____
through the ____ Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is ____% or less; (ii) for the ____ through the ----
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is ____% or less; (iii) for the ____ through the ____ Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is ____% or less; (iv) for
any Distribution Date after the ____ Distribution Date, if the Cumulative Loss
Percentage for such Distribution Date is ____% or less.

          "Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is __% or less.

          "Step Down Rolling Loss Test": The Step Down Rolling Loss Test will be
met with respect to a Distribution Date if the Annual Loss Percentage is less
than ____%.

          "Step Down Trigger": For any Distribution Date after the ____
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the ____ Distribution Date or any preceding Distribution
Date.

          "Stepped Down Required Overcollateralized Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
$_____________ and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans and REO Properties as of such Distribution Date,
minus (ii) the percentage equivalent of a fraction, the numerator of which is
the product of (A) the percentage calculated under clause (i) above minus ____%,
multiplied by (B) the number of consecutive Distribution Dates through and
including the Distribution Date for which the Stepped Down Required
Overcollateralized Percentage is being calculated, up to a maximum of six, for
which the Step Down Trigger has occurred, and the denominator of which is six.

                                      -42-


<PAGE>



          "Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test will
be met with respect to a Distribution Date as follows: (i) for the ___ through
the ____ Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than ____%; (ii) for the ____ through the ____
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than ____%; (iii) for the ____ through the ____ Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than ____%;
(iv) for the ____ through the ____ Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than ____%; and (v) for the ____
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than ____%.

          "Step Up Rolling Delinquency Test": The Step Up Rolling Delinquency
Test will be met with respect to a Distribution Date if the Rolling Delinquency
Percentage for such Distribution Date is more than ____%; provided, however,
that the Step Up Rolling Delinquency Test shall not be considered met if the
Overcollateralization Percentage is greater than or equal to the Rolling
Delinquency Percentage.

          "Step Up Rolling Loss Test": The Step Up Rolling Loss Test will be met
with respect to a Distribution Date , if the Annual Loss Percentage is equal to
or more than ____%.

          "Step Up Spread Squeeze Test": The Step Up Spread Squeeze Test will be
met with respect to a Distribution Date if the Spread Squeeze Condition is met
for such Distribution Date or was met for any of the five preceding Distribution
Dates.

          "Step Up Trigger": For any Distribution Date, the Step Up Trigger will
have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling Delinquency Test or the Step Up Rolling Loss Test is met.

          "Sub-Servicer": Any Person with which either Servicer has entered into
a Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.

          "Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the applicable Servicer.

          "Sub-Servicing Agreement": The written contract between either
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.

          "Substitution Shortfall Amount": As defined in Section 2.03(d).

          "Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as REMICs
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.

          "Termination Price": As defined in Section 10.01.

          "Terminator": As defined in Section 10.01.


                                      -43-


<PAGE>



          "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

          "Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.

          "Transferor": Any Person who is disposing by Transfer of any Ownership
Interest in a Certificate.

          "Trust Administrator": _______________________, a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.

          "Trust Fund": Collectively, all of the assets of REMIC I, REMIC II and
REMIC III.

          "Trustee": _______________________, a national banking association, or
its successor in interest, or any successor trustee appointed as herein
provided.

          "Uncertificated Balance": The amount of any REMIC I Regular Interest
or REMIC II Regular Interest outstanding as of any date of determination. As of
the Closing Date, the Uncertificated Balance of each REMIC I Regular Interest
and each REMIC II Regular Interest shall equal the amount set forth in the
Preliminary Statement hereto as its initial uncertificated balance. On each
Distribution Date, the Uncertificated Balance of each REMIC I Regular Interest
and each REMIC II Regular Interest shall be reduced by all distributions of
principal made on such REMIC I Regular Interest or such REMIC II Regular
Interest, as applicable, on such Distribution Date pursuant to Section 4.01 and,
if and to the extent necessary and appropriate, shall be further reduced on such
Distribution Date by Realized Losses as provided in Section 4.04 and the
Uncertificated Balances of REMIC I Regular Interest I-LT9 and REMIC II Regular
Interest II-LT9 shall be increased by interest deferrals as provided in Section
4.01(a)(1)(A)(i) and Section 4.01(a)(1)(B)(i), respectively. The Uncertificated
Balance of each REMIC I Regular Interest and each REMIC II Regular Interest
shall never be less than zero.

          "Uncertificated Corresponding Component": With respect to: REMIC II
Regular Interest II-LT1, REMIC I Regular Interest I-LT1; REMIC II Regular
Interest II-LT2 and REMIC II Regular Interest II-LT2S, REMIC I Regular Interest
I-LT2; REMIC II Regular Interest II-LT3 and REMIC II Regular Interest II-LT3S,
REMIC I Regular Interest I-LT3; REMIC II Regular Interest II-LT4 and REMIC II
Regular Interest II-LT4S, REMIC I Regular Interest I-LT4; REMIC II Regular
Interest II-LT5 and REMIC II Regular Interest II-LT5S, REMIC I Regular Interest
I-LT5; REMIC II Regular Interest II-LT6 and REMIC II Regular Interest II-LT6S,
REMIC I Regular Interest I-LT6; REMIC II Regular Interest II- LT7 and REMIC II
Regular Interest II-LT7S, REMIC I Regular Interest I-LT7; REMIC II Regular
Interest II-LT8 and REMIC II Regular Interest II-LT8S, REMIC I Regular Interest
I-LT8; REMIC II Regular Interest II-LT9, REMIC I Regular Interest I-LT9; and
REMIC II Regular Interest II-LTP, REMIC I Regular Interest I-LTP.

          "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. With respect to any REMIC II Regular Interest
for any Distribution Date, one month's interest at the REMIC II Remittance Rate
applicable to such REMIC II Regular Interest for such Distribution Date, accrued
on the Uncertificated Balance thereof immediately prior to such Distribution
Date. Uncertificated Interest in respect of any REMIC I Regular Interest or any
REMIC II

                                      -44-


<PAGE>



Regular Interest shall accrue on the basis of a 360-day year consisting of
twelve 30-day months. Uncertificated Interest with respect to each Distribution
Date, as to any REMIC I Regular Interest or REMIC II Regular Interest, shall be
reduced by an amount equal to the sum of (a) the aggregate Prepayment Interest
Shortfall, if any, for such Distribution Date to the extent not covered by
payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief Act
Interest Shortfall, if any allocated, in each case, to such REMIC I Regular
Interest or REMIC II Regular Interest pursuant to Section 1.02. In addition,
Uncertificated Interest with respect to each Distribution Date, as to any REMIC
I Regular Interest or REMIC II Regular Interest, shall be reduced by Realized
Losses, if any, allocated to such REMIC I Regular Interest or REMIC II Regular
Interest pursuant to Section 1.02 and Section 4.04.

          "Uncertificated Notional Amount": With respect to REMIC II Regular
Interest II-LT2S, REMIC II Regular Interest II-LT3S, REMIC II Regular Interest
II-LT4S, REMIC II Regular Interest II- LT5S, REMIC II Regular Interest II-LT6S,
REMIC II Regular Interest II-LT7S and REMIC II Regular Interest II-LT8S, the
Uncertificated Balance of REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5,
REMIC I Regular Interest I- LT6, REMIC I Regular Interest I-LT7 and REMIC I
Regular Interest I-LT8, respectively.

          "Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.14.

          "United States Person": A citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof (except, in the
case of a partnership, to the extent provided in regulations) or an estate whose
income is subject to United States federal income tax regardless of its source,
or a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust. To
the extent prescribed in regulations by the Secretary of the Treasury, which
have not yet been issued, a trust which was in existence on August 20, 1996
(other than a trust treated as owned by the grantor under subpart E of part I of
subchapter J of chapter 1 of the Code), and which was treated as a United States
person on August 20, 1996 may elect to continue to be treated as a United States
person notwithstanding the previous sentence. The term "United States" shall
have the meaning set forth in Section 7701 of the Code.

          "Value": With respect to any Mortgaged Property relating to a Mortgage
Loan serviced by New Century, the lesser of (i) the lesser of (a) the value
thereof as determined by an appraisal made for the originator of the Mortgage
Loan at the time of origination of the Mortgage Loan by an appraiser who met the
minimum requirements of Fannie Mae and Freddie Mac and (b) the value thereof as
determined by a review appraisal conducted by New Century (in its capacity as an
Originator) in accordance with New Century'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, (A) in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the lesser of (1) the value determined by an appraisal made for the
originator of such Refinanced Mortgage Loan at the time of origination of such
Refinanced Mortgage Loan by an appraiser who met the minimum requirements of
Fannie Mae and Freddie Mac and (2) the value thereof as determined by a review
appraisal conducted by New Century (in its capacity as an Originator) in
accordance with New Century's underwriting guidelines, and (B) in the case of a
Mortgage Loan originated in connection with a "lease-option purchase," such
value of the Mortgaged Property is based on the lower of the value determined by
an appraisal made for the originator of such Mortgage Loan at the time of
origination or the sale price of such Mortgaged

                                      -45-


<PAGE>



Property if the "lease option purchase price" was set less than 12 months prior
to origination, and is based on the value determined by an appraisal made for
the originator of such Mortgage Loan at the time of origination if the "lease
option purchase price" was set 12 months or more prior to origination. With
respect to any Mortgaged Property relating to a Mortgage Loan serviced by Option
One, the lesser of (i) the lesser of (a) the value thereof as determined by an
appraisal made for the originator of the Mortgage Loan at the time of
origination of the Mortgage Loan by an appraiser who met the minimum
requirements of Fannie Mae and Freddie Mac and (b) the value thereof as
determined by a review appraisal conducted by Option One (in its capacity as an
Originator) in the event any such review appraisal determines an appraised value
more than 10% lower than the value thereof, in the case of a Mortgage Loan with
a Loan-to--Value Ratio less than or equal to 80%, or more than 5% lower than the
value thereof, in the case of a Mortgage Loan with a Loan-to-Value Ratio greater
than 80%, as determined by the appraisal referred to in clause (i)(a) above, and
(ii) the purchase price paid for the related Mortgaged Property by the Mortgagor
with the proceeds of the Mortgage Loan; provided, however, (A) in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the lesser of (1) the value determined by an appraisal made for the
originator of such Refinanced Mortgage Loan at the time of origination of such
Refinanced Mortgage Loan by an appraiser who met the minimum requirements of
Fannie Mae and Freddie Mac and (2) the value thereof as determined by a review
appraisal conducted by Option One (in its capacity as Originator) in the event
any such review appraisal determines an appraised value more than 10% lower than
the value thereof, in the case of a Mortgage Loan with a Loan-to--Value Ratio
less than or equal to 80%, or more than 5% lower than the value thereof, in the
case of a Mortgage Loan with a Loan-to-Value Ratio greater than 80%, as
determined by the appraisal referred to in clause (ii)(A)(1) above, and (B) in
the case of a Mortgage Loan originated in connection with a "lease-option
purchase," such value of the Mortgaged Property is based on the lower of the
value determined by an appraisal made for the originator of such Mortgage Loan
at the time of origination or the sale price of such Mortgaged Property if the
"lease option purchase price" was set less than 12 months prior to origination,
and is based on the value determined by an appraisal made for the originator of
such Mortgage Loan at the time of origination if the "lease option purchase
price" was set 12 months or more prior to origination.

          "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, 98% of all Voting Rights will be allocated among the holders of
the Class A Certificates and the Class CE Certificates in proportion to the then
outstanding Certificate Principal Balances of their respective Certificates, 1%
of all Voting Rights will be allocated to the holders of the Class P
Certificates and 1/3 of 1% of all Voting Rights will be allocated among the
holders of each Class of Residual Certificates. The Voting Rights allocated to
each Class of Certificate shall be allocated among Holders of each such Class in
accordance with their respective Percentage Interests as of the most recent
Record Date.

          SECTION 1.02. Allocation of Certain Interest Shortfalls.

          For purposes of calculating the amount of Accrued Certificate Interest
and the amount of the Interest Distribution Amounts for the Class A Certificates
and the Class CE Certificates for any Distribution Date, (1) the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the related Servicer pursuant to Section 3.24) incurred in respect
of the Mortgage Loans for any Distribution Date shall be allocated among the
Class CE Certificates on a PRO RATA basis based on, and to the extent of, one
month's interest at the then applicable respective Pass-Through Rate on the
respective Notional Amount of each such Certificate, (2) the aggregate amount of
any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for
any Distribution Date shall be allocated first, among the Class CE Certificates
on a PRO RATA basis based on, and to the extent of, one month's interest at the
then applicable respective Pass-Through Rate on the respective Notional Amount
of each such

                                      -46-


<PAGE>



Certificate and, thereafter, among the Class A Certificates on a PRO RATA basis
based on, and to the extent of, one month's interest at the then applicable
respective Pass-Through Rate on the respective Certificate Principal Balance of
each such Certificate and (3) the aggregate amount of any Realized Losses
incurred for any Distribution Date shall be allocated among the Class CE
Certificates on a PRO RATA basis based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the respective
Notional Amount of each such Certificate.

          For purposes of calculating the amount of Uncertificated Interest for
the REMIC I Regular Interests for any Distribution Date, (1) the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the related Servicer pursuant to Section 3.24) incurred in respect
of the Mortgage Loans for any Distribution Date shall be allocated, to
Uncertificated Interest payable to REMIC I Regular Interest I-LT1 and REMIC I
Regular Interest I-LT9 up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, __% and __%, respectively and (2) the aggregate amount
of any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans
for any Distribution Date shall be allocated first, to Uncertificated Interest
payable to REMIC I Regular Interest I-LT1 and REMIC I Regular Interest I-LT9 up
to an aggregate amount equal to the REMIC I Interest Loss Allocation Amount,
___% and __%, respectively, and thereafter among REMIC I Regular Interest I-LT1,
REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular
Interest I-LT4, REMIC I Regular Interest I-LT5, REMIC I Regular Interest I-LT6,
REMIC I Regular Interest I-LT7, REMIC I Regular Interest I-LT8 and REMIC I
Regular Interest I-LT9 PRO RATA based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the respective
Uncertificated Balance of each such REMIC I Regular Interest.

          All Prepayment Interest Shortfalls and Relief Act Interest Shortfalls
on the REMIC II Regular Interests shall be allocated by the Trust Administrator
on each Distribution Date among the REMIC II Regular Interests in the proportion
that Prepayment Interest Shortfalls and Relief Act Interest Shortfalls are
allocated to the related Uncertificated Corresponding Component.

                                      -47-


<PAGE>



                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

          SECTION 2.01. Conveyance of the Mortgage Loans.

          The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee
without recourse, for the benefit of the Certificateholders and the Certificate
Insurer, all the right, title and interest of the Depositor, including any
security interest therein for the benefit of the Depositor, in and to the
Mortgage Loans identified on the Mortgage Loan Schedule, the rights of the
Depositor under the Mortgage Loan Purchase Agreements, and all other assets
included or to be included in REMIC I. Such assignment includes all interest and
principal received by the Depositor or either Servicer on or with respect to the
Mortgage Loans (other than payments of principal and interest due on such
Mortgage Loans on or before the Cut-off Date).

          In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Trust Administrator, as custodian for
the Trustee (in which capacity the Trust Administrator will, unless otherwise
specified, be acting under this Article II), the following documents or
instruments with respect to each Mortgage Loan so transferred and assigned (a
"Mortgage File"):

               (i) (a) with respect to each Mortgage Loan on Part A of the
          Mortgage Loan Schedule, the original Mortgage Note, endorsed in the
          following form: "Pay to the order of ___________________, as Trustee
          under the applicable agreement, without recourse," and (b) with
          respect to each Mortgage Loan on Part B of the Mortgage Loan Schedule,
          the original Mortgage Note, endorsed in the following form: "Pay to
          the order of _________________ as trustee," in each case, with all
          prior and intervening endorsements showing a complete chain of
          endorsement from the originator to the Person so endorsing to the
          Trustee or _______________________, as applicable;

               (ii) the original Mortgage with evidence of recording thereon,
          and the original recorded power of attorney, if the Mortgage was
          executed pursuant to a power of attorney, with evidence of recording
          thereon;

               (iii) an original Assignment of the Mortgage executed in the
          following form: "____________________________, as Trustee under the
          applicable agreement";

               (iv) the original recorded Assignment or Assignments of the
          Mortgage showing a complete chain of assignment from the originator to
          the Person assigning the Mortgage to the Trustee as contemplated by
          the immediately preceding clause (iii);

               (v) the original or copies of each assumption, modification,
          written assurance or substitution agreement, if any; and

               (vi) the original lender's title insurance policy, together with
          all endorsements or riders that were issued with or subsequent to the
          issuance of such policy, insuring the priority of the Mortgage as a
          first lien or second lien on the Mortgaged Property represented
          therein as a fee interest vested in the Mortgagor, or in the event
          such original

                                      -48-


<PAGE>



          title policy is unavailable, a written commitment or uniform binder or
          preliminary report of title issued by the title insurance or escrow
          company.

          Within 30 Business Days following the Closing Date, _____________ will
prepare, execute and deliver to the Trust Administrator an endorsement for each
of the Mortgage Loans on Part B of the Mortgage Loan Schedule endorsing each
related Mortgage Note in the following form: "Pay to the order of
_______________________, as Trustee under the applicable agreement, without
recourse" and the endorsement provided for in Section 2.01(i)(b) will be voided
by the Trust Administrator.

          The Trust Administrator, at the expense of the related Servicer, shall
promptly (within sixty Business Days following the later of the Closing Date and
the date of receipt by the Trust Administrator of the recording information for
a Mortgage, but in no event later than ninety days following the Closing Date)
submit or cause to be submitted for recording, at no expense to the Trust Fund,
the Trustee, the Trust Administrator, the Certificate Insurer or the Depositor,
in the appropriate public office for real property records, each Assignment
referred to in Sections 2.01(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
related Servicer shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.

          With respect to a maximum of approximately ___% of the Original
Mortgage Loans, by outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, if any original Mortgage Note referred to in Section
2.01(i) above cannot be located, the obligations of the Depositor to deliver
such documents shall be deemed to be satisfied upon delivery to the Trust
Administrator of a photocopy of such Mortgage Note, if available, with a lost
note affidavit substantially in the form of Exhibit I attached hereto. If any of
the original Mortgage Notes for which a lost note affidavit was delivered to the
Trust Administrator is subsequently located, such original Mortgage Note shall
be delivered to the Trust Administrator within three Business Days. If any of
the documents referred to in Sections 2.01(ii), (iii) or (iv) above has as of
the Closing Date been submitted for recording but either (x) has not been
returned from the applicable public recording office or (y) has been lost or
such public recording office has retained the original of such document, the
obligations of the Depositor to deliver such documents shall be deemed to be
satisfied upon (1) delivery to the Trust Administrator of a copy of each such
document certified by the related Originator in the case of (x) above or the
applicable public recording office in the case of (y) above to be a true and
complete copy of the original that was submitted for recording and (2) if such
copy is certified by the related Originator, delivery to the Trust Administrator
promptly upon receipt thereof of either the original or a copy of such document
certified by the applicable public recording office to be a true and complete
copy of the original. Notice shall be provided to the Trustee, the Trust
Administrator, the Certificate Insurer and the Rating Agencies by the related
Originator if delivery pursuant to clause (2) above will be made more than 180
days after the Closing Date. If the original lender's title insurance policy was
not delivered pursuant to Section 2.01(vi) above, the Depositor shall deliver or
cause to be delivered to the Trust Administrator, promptly after receipt
thereof, the original lender's title insurance policy. The Depositor shall
deliver or cause to be delivered to the Trust Administrator promptly upon
receipt thereof any other original documents constituting a part of a Mortgage
File received with respect to any Mortgage Loan, including, but not limited to,
any original documents evidencing an assumption or modification of any Mortgage
Loan.

          All original documents relating to the Mortgage Loans that are not
delivered to the Trust Administrator are and shall be held by or on behalf of
the related Originator, the Seller, the Depositor or the related Servicer, as
the case may be, in trust for the benefit of the Trustee on behalf of the
Certificateholders and the Certificate Insurer. In the event that any such
original document is required

                                      -49-


<PAGE>



pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Trust Administrator. Any such
original document delivered to or held by the Depositor that is not required
pursuant to the terms of this Section to be a part of a Mortgage File, shall be
delivered promptly to the related Servicer.

          The Depositor herewith delivers to the Trustee and the Trust
Administrator an executed copy of the Mortgage Loan Purchase Agreements. In
addition to the foregoing, the Depositor shall cause the Certificate Insurer to
deliver the Policy to the Trust Administrator for the benefit of the
Certificateholders.

          SECTION 2.02. Acceptance of REMIC I by Trustee.

          The Trust Administrator, on behalf of the Trustee, acknowledges
receipt of the Policy and, subject to the provisions of Section 2.01 and subject
to any exceptions noted on the exception report described in the next paragraph
below, the documents referred to in Section 2.01 (other than such documents
described in Section 2.01(v)) above and all other assets included in the
definition of "REMIC I" under clauses (i), (iii), (iv) and (v) (to the extent of
amounts deposited into the Distribution Account) and declares that it holds and
will hold such documents and the other documents delivered to it constituting a
Mortgage File, and that it holds or will hold all such assets and such other
assets included in the definition of "REMIC I" in trust for the exclusive use
and benefit of all present and future Certificateholders and the Certificate
Insurer.

          The Trust Administrator agrees, for the benefit of the
Certificateholders and the Certificate Insurer, to review each Mortgage File on
or before the Closing Date and to certify in substantially the form attached
hereto as Exhibit C-1 that, (i) as to each Mortgage Loan listed on Part A of the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in the exception report annexed thereto as
not being covered by such certification), (a) all documents constituting part of
such Mortgage File (other than such documents described in Section 2.01(v))
required to be delivered to it pursuant to this Agreement are in its possession,
(b) such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan, (c) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (vi), (x), (xi), (xii), (xv) and (xxii)
of the definition of "Mortgage Loan Schedule" accurately reflects information
set forth in the Mortgage File and (ii) as to each Mortgage Loan listed on Part
B of the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or
any Mortgage Loan specifically identified in the exception report annexed
thereto as not being covered by such certification), (a) the documents
constituting part of such Mortgage File described in Section 2.01(i) and (iii)
are in its possession. It is herein acknowledged that, in conducting such
review, the Trust Administrator was under no duty or obligation (i) to inspect,
review or examine any such documents, instruments, certificates or other papers
to determine whether they are genuine, enforceable, or appropriate for the
represented purpose or whether they have actually been recorded or that they are
other than what they purport to be on their face, or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.

          The Trust Administrator agrees, for the benefit of the
Certificateholders and the Certificate Insurer, to review each Mortgage File
within 60 days after the Closing Date and to certify in substantially the form
attached hereto as Exhibit C-2 that, as to each Mortgage Loan listed on Part B
of the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in the exception report annexed thereto as
not being covered by such certification), (a) all documents constituting part of
such Mortgage File (other than such documents described in Section 2.01(v))
required

                                      -50-


<PAGE>



to be delivered to it pursuant to this Agreement are in its possession and
additionally the endorsement provided in Section 2.01(i)(b) has been voided and
replaced with an endorsement from Option One, endorsing each related Mortgage
Note in the following form: "Pay to the order of Firstar Bank Milwaukee, N.A.,
as Trustee under the applicable agreement, without recourse", (b) such documents
have been reviewed by it and appear regular on their face and relate to such
Mortgage Loan, (c) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (vi), (x), (xi), (xii), (xv) and (xxii) of the definition of
"Mortgage Loan Schedule" accurately reflects information set forth in the
Mortgage File. It is herein acknowledged that, in conducting such review, the
Trust Administrator was under no duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine whether they are genuine, enforceable, or appropriate for the
represented purpose or whether they have actually been recorded or that they are
other than what they purport to be on their face, or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.

          Prior to the first anniversary date of this Agreement the Trust
Administrator shall deliver to the Depositor, each Servicer, the Trustee and the
Certificate Insurer a final certification in the form annexed hereto as Exhibit
C-3 evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon, and the related Servicer shall forward a copy thereof
to any Sub-Servicer.

          If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trust
Administrator finds any document or documents constituting a part of a Mortgage
File to be missing or defective in any material respect, at the conclusion of
its review the Trust Administrator shall so notify the Depositor, the applicable
Servicer, the Trustee and the Certificate Insurer. In addition, upon the
discovery by the Depositor, either Servicer, the Trust Administrator or the
Trustee of a breach of any of the representations and warranties made by either
Originator or the Seller in the Mortgage Loan Purchase Agreements in respect of
any Mortgage Loan which materially adversely affects such Mortgage Loan or the
interests of the related Certificateholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
and the Certificate Insurer.

          The Trust Administrator shall, at the written request and expense of
any Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the related Servicer for servicing purposes.

          SECTION2.03. Repurchase or Substitution of Mortgage Loans by the
                       Originators, the Seller or the Depositor.

          (a) Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File or of the
breach by either Originator or the Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreements in respect of any Mortgage
Loan that materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trust Administrator shall
promptly notify the related Originator, the Seller, the related Servicer, the
Master Servicer, the Trustee and the Certificate Insurer of such defect, missing
document or breach and request that such Originator or the Seller, as the case
may be, deliver such missing document or cure such defect or breach within 60
days from the date such Originator or the Seller, as the case may be, was
notified of such missing document, defect or breach, and if the related
Originator or the Seller, as the case may be, does not deliver such missing
document or cure such defect or breach in all material respects during such
period, the Trustee, in accordance with Section 3.02(b), shall enforce the
obligations of such Originator or the Seller, as the case may be, under the
related Mortgage Loan Purchase

                                      -51-


<PAGE>



Agreement to repurchase such Mortgage Loan from REMIC I at the Purchase Price
within 90 days after the date on which the related Originator or the Seller, as
the case may be, was notified (subject to Section 2.03(e)) of such missing
document, defect or breach, if and to the extent that such Originator or the
Seller, as the case may be, is obligated to do so under the related Mortgage
Loan Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan
shall be deposited in the Collection Account and the Trust Administrator, upon
receipt of written certification from the related Servicer of such deposit,
shall release to the related Originator or the Seller, as the case may be, the
related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as such Originator or
the Seller, as the case may be, shall furnish to it and as shall be necessary to
vest in such Originator or the Seller, as the case may be, any Mortgage Loan
released pursuant hereto and neither the Trustee nor the Trust Administrator
shall have any further responsibility with regard to such Mortgage File. In lieu
of repurchasing any such Mortgage Loan as provided above, if so provided in the
related Mortgage Loan Purchase Agreement, the related Originator or the Seller,
as the case may be, may cause such Mortgage Loan to be removed from REMIC I (in
which case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.03(d). It is understood and agreed that the obligation of
the related Originator or the Seller, as the case may be, to cure or to
repurchase (or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee, the
Certificateholders and the Certificate Insurer.

          (b) Subject to Section 2.03(e), within 90 days of the earlier of
discovery by the Depositor or receipt of notice by the Depositor of the breach
of any representation or warranty of the Depositor set forth in Section 2.04
with respect to any Mortgage Loan, which materially adversely affects the value
of such Mortgage Loan or the interest therein of the Certificateholders, the
Depositor shall (i) cure such breach in all material respects, (ii) repurchase
the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove such
Mortgage Loan from REMIC I (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans in the
manner and subject to the limitations set forth in Section 2.03(d). If any such
breach is a breach of any of the representations and warranties included in
Section 2.04(a)(iv), and the Depositor is unable to cure such breach, the
Depositor shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and correct.
The Purchase Price for any repurchased Mortgage Loan shall be delivered to the
related Servicer for deposit in the Collection Account, and the Trust
Administrator, upon receipt of written certification from the related Servicer
of such deposit, shall at the Depositor's direction release to the Depositor the
related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment furnished by the Depositor, in each case without
recourse, as the Depositor shall furnish to it and as shall be necessary to vest
in the Depositor any Mortgage Loan released pursuant hereto.

          (c) Within 90 days of the earlier of discovery by the either Servicer
or receipt of notice by either Servicer of the breach of any representation,
warranty or covenant of such Servicer set forth in Section 2.05 which materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan or Prepayment Charge, such Servicer shall cure such breach in all material
respects.

          (d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of either
Originator or the Seller, or Section 2.03(b), in the case of the Depositor, must
be effected prior to the date which is two years after the Startup Day for REMIC
I.


                                      -52-


<PAGE>



          As to any Deleted Mortgage Loan for which either Originator or the
Seller or the Depositor substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by such Originator, the Seller or the
Depositor, as the case may be, delivering to the Trust Administrator, on behalf
of the Trustee, for such Qualified Substitute Mortgage Loan or Loans, the
Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trust Administrator shall acknowledge
receipt for such Qualified Substitute Mortgage Loan or Loans and, within ten
Business Days thereafter, review such documents as specified in Section 2.02 and
deliver to the Depositor, the related Servicer, the Trustee and the Certificate
Insurer, with respect to such Qualified Substitute Mortgage Loan or Loans, a
certification substantially in the form attached hereto as Exhibit C-1, with any
applicable exceptions noted thereon. Within one year of the date of
substitution, the Trust Administrator shall deliver to the Depositor, the
related Servicer, the Trustee and the Certificate Insurer a certification
substantially in the form of Exhibit C-2 hereto with respect to such Qualified
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are not part of REMIC I and will be retained by the
Depositor, the related Originator or the Seller, as the case may be. For the
month of substitution, distributions to Certificateholders will reflect the
Monthly Payment due on such Deleted Mortgage Loan on or before the Due Date in
the month of substitution, and the Depositor, the related Originator or the
Seller, as the case may be, shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Depositor
shall give or cause to be given written notice to the Certificateholders that
such substitution has taken place, shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the
Trustee and the Trust Administrator. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and
shall be subject in all respects to the terms of this Agreement and, in the case
of a substitution effected by either Originator or the Seller, the related
Mortgage Loan Purchase Agreement, including, in the case of a substitution
effected by either Originator or the Seller, all applicable representations and
warranties thereof included in such Mortgage Loan Purchase Agreement, and in the
case of a substitution effected by the Depositor, all applicable representations
and warranties thereof set forth in Section 2.04, in each case as of the date of
substitution.

          For any month in which the Depositor, either Originator or the Seller
substitutes one or more Qualified Substitute Mortgage Loans for one or more
Deleted Mortgage Loans, the related Servicer will determine the amount (the
"Substitution Shortfall Amount"), if any, by which the aggregate Purchase Price
of all such Deleted Mortgage Loans exceeds the aggregate of, as to each such
Qualified Substitute Mortgage Loan, the Scheduled Principal Balance thereof as
of the date of substitution, together with one month's interest on such
Scheduled Principal Balance at the applicable Net Mortgage Rate, plus all
outstanding P&I Advances and Servicing Advances (including Nonrecoverable P&I
Advances and Nonrecoverable Servicing Advances) related thereto. On the date of
such substitution, the Depositor, the related Originator or the Seller, as the
case may be, will deliver or cause to be delivered to the related Servicer for
deposit in the Collection Account an amount equal to the Substitution Shortfall
Amount, if any, and the Trust Administrator, upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification by such Servicer
of such deposit, shall release to the Depositor, the related Originator or the
Seller, as the case may be, the related Mortgage File or Files and the Trustee
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as the Depositor, the related Originator or the Seller,
as the case may be, shall deliver to it and as shall be necessary to vest
therein any Deleted Mortgage Loan released pursuant hereto.

                                      -53-


<PAGE>



          In addition, the Depositor, the related Originator or the Seller, as
the case may be, shall obtain at its own expense and deliver to the Trust
Administrator, the Trustee and the Certificate Insurer an Opinion of Counsel to
the effect that such substitution will not cause (a) any federal tax to be
imposed on any of REMIC I, REMIC II or REMIC III, including without limitation,
any federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of
the Code or on "contributions after the startup date" under Section 860G(d)(1)
of the Code, or (b) any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC at any time that any Certificate is outstanding.

          (e) Upon discovery by the Depositor, either Originator, the Seller,
either Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
that any Mortgage Loan does not constitute a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall
within two Business Days give written notice thereof to the Trustee, the Trust
Administrator, the Master Servicer, the related Servicer and the Certificate
Insurer. In connection therewith, the related Originator, the Seller or the
Depositor shall repurchase or, subject to the limitations set forth in Section
2.03(d), substitute one or more Qualified Substitute Mortgage Loans for the
affected Mortgage Loan within 90 days of the earlier of discovery or receipt of
such notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the related Originator or the Seller, as the
case may be, if the affected Mortgage Loan's status as a non-qualified mortgage
is or results from a breach of any representation, warranty or covenant made by
such Originator or the Seller under the related Mortgage Loan Purchase
Agreement, or (ii) the Depositor, if the affected Mortgage Loan's status as a
non-qualified mortgage is a breach of any representation or warranty of the
Depositor set forth in Section 2.04, or if its status as a non-qualified
mortgage is a breach of no representation or warranty. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.03(a),
if made by either Originator or the Seller, or Section 2.03(b), if made by the
Depositor. The Trustee and the Trust Administrator shall reconvey to the
Depositor, the related Originator or the Seller, as the case may be, the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.

          SECTION 2.04. Representations and Warranties of the Depositor.

          (a) The Depositor hereby represents and warrants to the Trust
Administrator and the Trustee for the benefit of the Certificateholders and the
Certificate Insurer that as of the Closing Date or as of such other date
specifically provided herein:

               (i) The information set forth in the Mortgage Loan Schedule for
          the Original Mortgage Loans is complete, true and correct in all
          material respects at the date or dates respecting which such
          information is furnished;

               (ii) Except with respect to approximately ____% of the Original
          Mortgage Loans which were 30 days or more but less than 60 days
          delinquent in their Monthly Payment as of ____________ and with
          respect to approximately ____% of the Original Mortgage Loans which
          were ___ days or more but less than ___ days delinquent in their
          Monthly Payments as of _____________, in each case, by outstanding
          principal balance of the Original Mortgage Loans as of the Cut-off
          Date, as of ____________, the Monthly Payment due under each Original
          Mortgage Loan is not ___ or more days delinquent in payment and has
          not been ___ or more days delinquent in payment more than once in the
          twelve month period prior to ______________ (assuming that a "rolling"
          30 day delinquency is considered to be delinquent only once);


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<PAGE>



               (iii) Each Original Mortgage Loan had an original term to
          maturity of not greater than 30 years; except with respect to
          approximately _____% of the Original Mortgage Loans, by outstanding
          principal balance of the Original Mortgage Loans as of the Cut-off
          Date which are Balloon Loans, each Original Mortgage Loan is a
          fixed-rate mortgage loan with payments generally due on the first day
          of each month and each such Mortgage Loan is fully amortizing;;

               (iv) (A) No more than approximately _____%, approximately _____%,
          approximately ____%, approximately _____%, approximately ____%,
          approximately ____%, approximately ____% and approximately ____% of
          the Original Mortgage Loans, by outstanding principal balance of the
          Original Mortgage Loans as of the Cut-off Date, will be secured by
          Mortgaged Properties located in __________, _______, _____, ----,
          ________, _______, ____________ and __________, respectively, and no
          more than ____% of the Original Mortgage Loans, by outstanding
          principal balance of the Original Mortgage Loans as of the Cut-off
          Date, will be secured by Mortgaged Properties located in any other
          state; (B) as of the Cut-off Date, no more than approximately ____% of
          the Original Mortgage Loans, by outstanding principal balance of the
          Original Mortgage Loans as of the Cut-off Date, are secured by
          Mortgaged Properties located in any one __________ zip code area, and
          no more than approximately _____% of the Original Mortgage Loans, by
          outstanding principal balance of the Original Mortgage Loans as of the
          Cut-off Date, are secured by units in two- to four-family dwellings,
          condominiums, town houses, planned unit developments or manufactured
          housing and; (C) at least approximately _____% of the Original
          Mortgage Loans, by outstanding principal balance of the Original
          Mortgage Loans as of the Cut-off Date, are secured by real property
          with a single family residence erected thereon;

               (v) If the Mortgaged Property securing an Original Mortgage Loan
          is identified in the Federal Register by the Federal Emergency
          Management Agency ("FEMA") as having special flood hazards, as of the
          Closing Date, such Mortgaged Property is covered by a flood insurance
          policy that met the requirements of FEMA at the time such policy was
          issued;

               (vi) With respect to each Original Mortgage Loan, the
          Loan-to-Value Ratio was less than or equal to ______% at the
          origination of such Original Mortgage Loan; and

               (vii) With respect to at least approximately _____% of the
          Original Mortgage Loans by outstanding principal balance as of the
          Cut-off Date, at the time that such Mortgage Loan was made, the
          Mortgagor represented that the Mortgagor would occupy the Mortgaged
          Property as the Mortgagor's primary residence. With respect to
          approximately _____% of the Original Mortgage Loans by outstanding
          principal balance as of the Cut-off Date, at the time that such
          Mortgage Loan was made, the Mortgagor represented that the Mortgagor
          would occupy the Mortgaged Property as the Mortgagor's secondary
          residence or that the Mortgaged Property would be an investor
          property.

          (b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trust Administrator and shall inure to the benefit of the
Certificateholders and the Certificate Insurer notwithstanding any restrictive
or qualified endorsement or assignment. Upon discovery by any of the Depositor,
either Servicer, the Trustee or the Trust Administrator of a breach of any of
the foregoing representations and warranties which materially

                                      -55-


<PAGE>



and adversely affects the value of any Mortgage Loan, Prepayment Charge or the
interests therein of the Certificateholders and the Certificate Insurer, the
party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery. It is understood and agreed that the obligations of the Depositor set
forth in Section 2.03(b) to cure, substitute for or repurchase a Mortgage Loan
constitute the sole remedies available to the Certificateholders or to the Trust
Administrator or the Trustee on their behalf respecting a breach of the
representations and warranties contained in this Section 2.04.

          SECTION 2.05. Representations, Warranties and Covenants of the
                        Servicers.

          Each Servicer hereby represents, warrants and covenants to the Trust
Administrator and the Trustee, for the benefit of each of the Trustee, the Trust
Administrator, the Certificateholders, the Certificate Insurer, the Master
Servicer and to the Depositor that as of the Closing Date or as of such date
specifically provided herein:

               (i) Such Servicer is a corporation duly organized, validly
          existing and in good standing under the laws of the State of
          __________ and is duly authorized and qualified to transact any and
          all business contemplated by this Agreement to be conducted by such
          Servicer in any state in which a Mortgaged Property is located or is
          otherwise not required under applicable law to effect such
          qualification and, in any event, is in compliance with the doing
          business laws of any such State, to the extent necessary to ensure its
          ability to enforce each Mortgage Loan and to service the Mortgage
          Loans in accordance with the terms of this Agreement;

               (ii) Such Servicer has the full power and authority to conduct
          its business as presently conducted by it and to execute, deliver and
          perform, and to enter into and consummate, all transactions
          contemplated by this Agreement. Such Servicer has duly authorized the
          execution, delivery and performance of this Agreement, has duly
          executed and delivered this Agreement, and this Agreement, assuming
          due authorization, execution and delivery by the Depositor, the Trust
          Administrator, the Trustee and the other Servicer, constitutes a
          legal, valid and binding obligation of such Servicer, enforceable
          against it in accordance with its terms except as the enforceability
          thereof may be limited by bankruptcy, insolvency, reorganization or
          similar laws affecting the enforcement of creditors' rights generally
          and by general principles of equity;

               (iii) The execution and delivery of this Agreement by such
          Servicer, the servicing of the Mortgage Loans by such Servicer
          hereunder, the consummation by such Servicer of any other of the
          transactions herein contemplated, and the fulfillment of or compliance
          with the terms hereof are in the ordinary course of business of such
          Servicer and will not (A) result in a breach of any term or provision
          of the charter or by-laws of such Servicer or (B) conflict with,
          result in a breach, violation or acceleration of, or result in a
          default under, the terms of any other material agreement or instrument
          to which such Servicer is a party or by which it may be bound, or any
          statute, order or regulation applicable to such Servicer of any court,
          regulatory body, administrative agency or governmental body having
          jurisdiction over such Servicer; and such Servicer is not a party to,
          bound by, or in breach or violation of any indenture or other
          agreement or instrument, or subject to or in violation of any statute,
          order or regulation of any court, regulatory body, administrative
          agency or governmental body having jurisdiction over it, which
          materially and adversely affects or, to such Servicer's knowledge,
          would in the future

                                      -56-


<PAGE>



          materially and adversely affect, (x) the ability of such Servicer to
          perform its obligations under this Agreement or (y) the business,
          operations, financial condition, properties or assets of such Servicer
          taken as a whole;

               (iv) Such Servicer is a HUD approved mortgagee pursuant to
          Section 203 of the National Housing Act. No event has occurred,
          including but not limited to a change in insurance coverage, that
          would make such Servicer unable to comply with HUD eligibility
          requirements or that would require notification to HUD;

               (v) Such Servicer does not believe, nor does it have any reason
          or cause to believe, that it cannot perform each and every covenant
          made by it and contained in this Agreement;

               (vi) With respect to each Mortgage Loan serviced by it, such
          Servicer, or Sub- Servicer, if any, is in possession of a complete
          Mortgage File, except for such documents as have been delivered to the
          Trust Administrator;

               (vii) No litigation is pending against such Servicer that would
          materially and adversely affect the execution, deliver or
          enforceability of this Agreement or the ability of such Servicer to
          service the Mortgage Loans or to perform any of its other obligations
          hereunder in accordance with the terms hereof;

               (viii) There are no actions or proceedings against, or
          investigations known to it of, such Servicer before any court,
          administrative or other tribunal (A) that might prohibit its entering
          into this Agreement, (B) seeking to prevent the consummation of the
          transactions contemplated by this Agreement or (C) that might prohibit
          or materially and adversely affect the performance by such Servicer of
          its obligations under, or validity or enforceability of, this
          Agreement;

               (ix) No consent, approval, authorization or order of any court or
          governmental agency or body is required for the execution, delivery
          and performance by such Servicer of, or compliance by such Servicer
          with, this Agreement or the consummation by it of the transactions
          contemplated by this Agreement, except for such consents, approvals,
          authorizations or orders, if any, that have been obtained prior to the
          Closing Date;

               (x) With respect to ___________, the information set forth in the
          applicable part of the Prepayment Charge Schedule (including the
          applicable part of the prepayment charge summary attached thereto) is
          complete, true and correct in all material respects on the date or
          dates when such information is furnished and each Prepayment Charge is
          permissible and enforceable in accordance with its terms (except to
          the extent that the enforceability thereof may be limited by
          bankruptcy, insolvency, moratorium, receivership and other similar
          laws relating to creditors' rights generally or the collectability
          thereof may be limited due to acceleration in connection with a
          foreclosure) under applicable state law and with respect to __________
          the information set forth in the applicable part of the Prepayment
          Charge Schedule (including the applicable part of the prepayment
          charge summary attached thereto) is complete, true and correct in all
          material respects, and each Prepayment Charge is permissible,
          enforceable and collectible under applicable state law subject to
          bankruptcy and equitable enforcement limitations;


                                      -57-


<PAGE>



               (xi) The related Servicer will not waive any Prepayment Charge
          unless it is waived in accordance with the standard set forth in
          Section 3.01; and

               (xii) The related Servicer's computer and other systems used in
          servicing mortgage loans will be modified and maintained to operate in
          a manner such that at all times, including on and after January 1,
          2000, (i) such Servicer can service the Mortgage Loans in accordance
          with the terms of this Agreement if necessary and (ii) such Servicer
          can operate its business in the same manner as it is operating on the
          date hereof; provided that such Servicer's ability to meet the
          requirements of this representation may be limited in circumstances
          where it relies (after reasonable due diligence in inquiring into and
          obtaining reasonable compliance representations) on third party
          systems which are incompatible with those of such Servicer on or after
          January 1, 2000.

          It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.05 shall survive delivery of the Mortgage
Files to the Trust Administrator and shall inure to the benefit of the Trust
Administrator, the Trustee, the Depositor, the Certificateholders and the
Certificate Insurer. Upon discovery by any of the Depositor, either Servicer,
the Trust Administrator or the Trustee of a breach of any of the foregoing
representations, warranties and covenants which materially and adversely affects
the value of any Mortgage Loan, Prepayment Charge or the interests therein of
the Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the Trust Administrator, the Trustee and the
Certificate Insurer. Subject to Section 7.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of each Servicer set forth in
Section 2.03(c) to cure breaches shall constitute the sole remedy against the
related Servicer available to the Certificateholders, the Depositor or the Trust
Administrator and the Trustee on behalf of the Certificateholders respecting a
breach of the representations, warranties and covenants contained in this
Section 2.05. Notwithstanding the foregoing, within 90 days of the earlier of
discovery by the related Servicer or receipt of notice by such Servicer of the
breach of the representation or covenant of such Servicer set forth in Sections
2.05(x) or 2.05(xi) above which materially and adversely affects the interests
of the Holders of the Class P Certificates in any Prepayment Charge, such
Servicer shall remedy such breach as follows: (a) if the representation made by
the related Servicer in Section 2.05(x) above is breached and a Principal
Prepayment has occurred in the applicable Prepayment Period, such Servicer must
pay the amount of the scheduled Prepayment Charge, for the benefit of the holder
of the Class P Certificate, by depositing such amount into the Collection
Account, net of any amount previously collected by such Servicer and paid by
such Servicer, for the benefit of the Holders of the Class P Certificates, in
respect of such Prepayment Charge; and (b) if any of the covenants made by the
related Servicer in Section 2.05(xi) above is breached, such Servicer must pay
the amount of such waived Prepayment Charge, for the benefit of the holders of
the Class P Certificates, by depositing such amount into the Collection Account.
The foregoing shall not, however, limit any remedies available to the
Certificateholders, the Depositor, the Trust Administrator or the Trustee on
behalf of the Certificateholders, pursuant to the related Mortgage Loan Purchase
Agreement signed by the related Servicer in its capacity as Originator,
respecting a breach of the representations, warranties and covenants of such
Servicer in its capacity as Originator contained in such Mortgage Loan Purchase
Agreement.

          SECTION 2.06. Issuance of the Class R-I Certificates.

          The Trustee acknowledges the assignment to it of the Mortgage Loans
and the delivery to it (or the Trust Administrator on its behalf) of the
Mortgage Files, subject to the provisions of Section 2.01 and Section 2.02,
together with the assignment to it of all other assets included in REMIC I, the
receipt of which is hereby acknowledged. Concurrently with such assignment and
delivery and in exchange

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<PAGE>



therefor, the Trust Administrator, pursuant to the written request of the
Depositor executed by an officer of the Depositor, has executed, authenticated
and delivered to or upon the order of the Depositor, the Class R-I Certificates
in authorized denominations. The interests evidenced by the Class R-I
Certificates, together with the REMIC I Regular Interests, constitute the entire
beneficial ownership interest in REMIC I. The rights of the Class R-I
Certificateholders and REMIC II (as holder of the REMIC I Regular Interests) to
receive distributions from the proceeds of REMIC I in respect of the Class R-I
Certificates and the REMIC I Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-I Certificates and the REMIC I
Regular Interests, shall be as set forth in this Agreement.

          SECTION 2.07. Conveyance of the REMIC I Regular Interests; Acceptance
                        of REMIC II by the Trustee.

          The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee,
without recourse all the right, title and interest of the Depositor in and to
the REMIC I Regular Interests for the benefit of the Class R-II and REMIC III
Certificateholders. The Trustee acknowledges receipt of the REMIC I Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future Class R-II
Certificateholders and REMIC III Certificateholders. The rights of the Class
R-II Certificateholders and REMIC III (as holder of the REMIC II Regular
Interests) to receive distributions from the proceeds of REMIC II in respect of
the Class R-II Certificates and REMIC II Regular Interests, respectively, and
all ownership interests evidenced or constituted by the Class R-II Certificates
and the REMIC II Regular Interests, shall be as set forth in this Agreement.

          SECTION 2.08. Issuance of Class R-II Certificates.

          The Trustee acknowledges the assignment to it of the REMIC I Regular
Interests and, concurrently therewith and in exchange therefor, pursuant to the
written request of the Depositor executed by an officer of the Depositor, the
Trust Administrator has executed, authenticated and delivered to or upon the
order of the Depositor, the Class R-II Certificates in authorized denominations.
The interests evidenced by the Class R-II Certificates, together with the REMIC
II Regular Interests, constitute the entire beneficial ownership interest in
REMIC II.

          SECTION 2.09. Conveyance of REMIC II Regular Interests; Acceptance of
                        REMIC III by the Trustee.

          The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee,
without recourse all the right, title and interest of the Depositor in and to
the REMIC II Regular Interests for the benefit of the REMIC III
Certificateholders and the Certificate Insurer. The Trustee acknowledges receipt
of the REMIC II Regular Interests and declares that it holds and will hold the
same in trust for the exclusive use and benefit of all present and future REMIC
III Certificateholders and the Certificate Insurer. The rights of the REMIC III
Certificateholders to receive distributions from the proceeds of REMIC III in
respect of the REMIC III Certificates, and all ownership interests evidenced or
constituted by the REMIC III Certificates, shall be as set forth in this
Agreement.

          SECTION 2.10. Issuance of REMIC III Certificates.

          The Trustee acknowledges the assignment to it of the REMIC II Regular
Interests and, concurrently therewith and in exchange therefor, pursuant to the
written request of the Depositor executed

                                      -59-


<PAGE>



by an officer of the Depositor, the Trust Administrator has executed,
authenticated and delivered to or upon the order of the Depositor, the REMIC III
Certificates in authorized denominations evidencing the entire
beneficial ownership interest in REMIC III.





                                      -60-


<PAGE>



                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

          SECTION 3.01. Servicers to Act as Servicers.

          (a) Unless otherwise specified, all references to actions to be taken
or previously taken by "the Servicer" under this Article III or any other
provision of this Agreement with respect to a Mortgage Loan or Mortgage Loans or
with respect to an REO Property or REO Properties shall be only to actions to be
taken or previously taken by each Servicer with respect to a Mortgage Loan or
Mortgage Loans serviced by such Servicer or with respect to an REO Property or
REO Properties administered by such Servicer. Furthermore, unless otherwise
specified, all references to actions to be taken or previously taken by "the
Servicer" under this Article III or any other provision of this Agreement with
respect to "the Collection Account" or "the Servicing Account" shall be only to
actions to be taken or previously taken by each Servicer with respect to the
Collection Account or the Servicing Account to be established and maintained by
such Servicer. Consistent with the foregoing, but only insofar as the context so
permits, this Article III is to be read with respect to each Servicer as if such
Servicer alone was servicing and administering its respective Mortgage Loans
hereunder.

          (b) The Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders and the Certificate Insurer (as determined by the Servicer in
its reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers administering similar mortgage
loans but without regard to:

               (i) any relationship that the Servicer, any Sub-Servicer or any
          Affiliate of the Servicer or any Sub-Servicer may have with the
          related Mortgagor;

               (ii) the ownership or non-ownership of any Certificate by the
          Servicer or any Affiliate of the Servicer;

               (iii) the Servicer's obligation to make P&I Advances or Servicing
          Advances; or

               (iv) the Servicer's or any Sub-Servicer's right to receive
          compensation for its services hereunder or with respect to any
          particular transaction.

To the extent consistent with the foregoing, ___________, as Servicer (a) shall
seek to maximize the timely and complete recovery of principal and interest on
the Mortgage Notes and (b) shall waive (or permit a subservicer to waive) a
Prepayment Charge only under the following circumstances: (i) such waiver is
standard and customary in servicing similar Mortgage Loans and (ii) either (A)
such waiver would, in the reasonable judgement of the ____________, as Servicer,
maximize recovery of total proceeds taking into account the value of such
Prepayment Charge and the related Mortgage Loan and, if such waiver is made in
connection with a refinancing of the related Mortgage Loan, such refinancing is
related to a default or a reasonably foreseeable default or (B) such waiver is
made in connection with a refinancing of the related Mortgage Loan unrelated to
a default or a reasonably foreseeable default where (x) the related mortgagor

                                      -61-


<PAGE>



has stated to ____________, as Servicer or an applicable subservicer an
intention to refinance the related Mortgage Loan and (y) ____________, as
Servicer has concluded in its reasonable judgement that the waiver of such
Prepayment Charge would induce such mortgagor to refinance with ____________. If
a Prepayment Charge is waived as permitted by meeting the standards described in
clauses (i) and (ii)(B) above, then ____________, in its capacity as Servicer is
required to pay the amount of such waived Prepayment Charge, for the benefit of
the Holders of the Class P Certificates, by depositing such amount into the
Collection Account together with and at the time that the amount prepaid on the
related Mortgage Loan is required to be deposited into the Collection Account.
To the extent consistent with the foregoing, ____________, as Servicer (a) shall
seek to maximize the timely and complete recovery of principal and interest on
the Mortgage Notes and (b) shall only waive (or permit a subservicer to waive) a
Prepayment Charge or part of a Prepayment Charge if such waiver would maximize
recovery of total proceeds taking into account the value of such Prepayment
Charge and the related Mortgage Loan, and doing so is standard and customary in
servicing similar Mortgage Loans. ____________, as Servicer, may waive a
Prepayment Charge on any Mortgage Loan if the related Mortgagor has chosen to
refinance such Mortgage Loan through the same lender; provided, however,
____________, as Servicer, must pay the amount of the waived Prepayment Charge,
for the benefit of the Holders of the Class P Certificates, by depositing such
amount into the Collection Account together with and at the time that the amount
prepaid on the related Mortgage Loan is required to be deposited into the
Collection Account. Notwithstanding any other provisions of this Agreement, any
payments made by ____________ in respect of any waived Prepayment Charges
pursuant to clauses (i) and (ii)(B) above or any payments made by ____________
in respect of any waived Prepayment Charges pursuant to the preceding sentence
shall be deemed to be paid outside of the Trust Fund. Subject only to the
above-described servicing standards and the terms of this Agreement and of the
respective Mortgage Loans, the Servicer shall have full power and authority,
acting alone or through Sub-Servicers as provided in Section 3.02, to do or
cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer in its own name or in the name of a
Sub-Servicer is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment in accordance with the servicing
standards set forth above, to execute and deliver, on behalf of the
Certificateholders and the Trustee, and upon notice to the Trustee and the Trust
Administrator, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, with
respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Servicer shall
service and administer the Mortgage Loans in accordance with applicable state
and federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. The Servicer shall also comply in the performance of
this Agreement with all reasonable rules and requirements of each insurer under
any standard hazard insurance policy. Subject to Section 3.17, the Trustee shall
execute, at the written request of the Servicer, and furnish to the Servicer and
any Sub-Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Servicer or any Sub-Servicer to carry out
their servicing and administrative duties hereunder and the Trustee shall not be
liable for the actions of the Servicer or any Sub-Servicers under such powers of
attorney.

          Subject to Section 3.09 hereof, in accordance with the standards of
the preceding paragraph, the Servicer shall advance or cause to be advanced
funds as necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be Servicing
Advances reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.09, and further as provided in Section 3.11.
Any cost incurred by the Servicer or by Sub-Servicers in effecting the timely
payment of taxes and assessments on a Mortgaged Property shall

                                      -62-


<PAGE>



not, for the purpose of calculating distributions to Certificateholders, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.

          Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Servicer shall not (i) permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable) or (ii) permit any modification, waiver or
amendment of any term of any Mortgage Loan that would both (A) effect an
exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or
Treasury regulations promulgated thereunder) and (B) cause any of REMIC I, REMIC
II or REMIC III to fail to qualify as a REMIC under the Code or the imposition
of any tax on "prohibited transactions" or "contributions after the startup
date" under the REMIC Provisions.

          The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.

          SECTION 3.02. Sub-Servicing Agreements Between Servicer and
                        Sub-Servicers.

          (a) The Servicer may enter into Sub-Servicing Agreements with
Sub-Servicers for the servicing and administration of the Mortgage Loans;
provided, however, that any Sub-Servicer shall be acceptable to the Certificate
Insurer and provided such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating or any shadow rating on any Class
of Certificates. The Trust Administrator and the Trustee are hereby authorized
to acknowledge, at the request of the Servicer, any Sub-Servicing Agreement that
meets the requirements applicable to Sub-Servicing Agreements set forth in this
Agreement and that is otherwise permitted under this Agreement.

          Each Sub-Servicer shall be (i) authorized to transact business in the
state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement and (ii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Sub-Servicing Agreement must impose on the Sub-Servicer requirements conforming
to the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer will
examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub- Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights; provided, further, that the consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights shall not be required
(i) to cure any ambiguity or defect in a Sub-Servicing Agreement, (ii) to
correct, modify or supplement any provisions of a Sub-Servicing Agreement, or
(iii) to make any other provisions with respect to matters or questions arising
under a Sub-Servicing Agreement, which, in each case, shall not be inconsistent
with the provisions of this Agreement. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08

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<PAGE>



relating to insurance or priority requirements of Sub-Servicing Accounts, or
credits and charges to the Sub- Servicing Accounts or the timing and amount of
remittances by the Sub-Servicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Trustee, the Trust Administrator and the Certificate Insurer
copies of all Sub-Servicing Agreements, and any amendments or modifications
thereof, promptly upon the Servicer's execution and delivery of such
instruments.

          (b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer,
shall enforce the obligations of each Sub- Servicer under the related
Sub-Servicing Agreement and of the related Originator and the Seller under the
related Mortgage Loan Purchase Agreement, including, without limitation, any
obligation to make advances in respect of delinquent payments as required by a
Sub-Servicing Agreement, or to purchase a Mortgage Loan on account of missing or
defective documentation or on account of a breach of a representation, warranty
or covenant, as described in Section 2.03(a). Such enforcement, including,
without limitation, the legal prosecution of claims, termination of
Sub-Servicing Agreements, and the pursuit of other appropriate remedies, shall
be in such form and carried out to such an extent and at such time as the
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement, to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Mortgage Loans,
or (ii) from a specific recovery of costs, expenses or attorneys' fees against
the party against whom such enforcement is directed. Enforcement of the related
Mortgage Loan Purchase Agreement against the related Originator shall be
effected by the Servicer to the extent it is not the related Originator, and
otherwise by the Trustee in accordance with the foregoing provisions of this
paragraph.

          SECTION 3.03. Successor Sub-Servicers.

          The Servicer or the Certificate Insurer shall be entitled to terminate
any Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Servicer without any act or deed on the part of such
Sub-Servicer or the Servicer, and the Servicer either shall service directly the
related Mortgage Loans or shall enter into a Sub-Servicing Agreement with a
successor Sub-Servicer which qualifies under Section 3.02.

          Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Master Servicer, the Trust
Administrator (if the Master Servicer is the Servicer), the Trustee (if the
Trust Administrator is acting as Servicer) or the Certificate Insurer without
fee, in accordance with the terms of this Agreement, in the event that the
Servicer (or the Master Servicer or Trust Administrator, if such party is then
acting as Servicer) shall, for any reason, no longer be the Servicer (including
termination due to a Servicer Event of Default).

          SECTION 3.04. Liability of the Servicer.

          Notwithstanding any Sub-Servicing Agreement or the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Trustee, the
Certificateholders and the Certificate Insurer for the servicing and
administering of the Mortgage Loans in accordance with the provisions of Section
3.01 without diminution of such obligation

                                      -64-


<PAGE>



or liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the Sub-Servicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
any agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.

          SECTION 3.05. No Contractual Relationship Between Sub-Servicers
                        and the Trust Administrator, the Trustee or
                        Certificateholders.

          Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Trust Administrator, the Trustee, Certificateholders or
the Certificate Insurer shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
Sub-Servicer except as set forth in Section 3.06. The Servicer shall be solely
liable for all fees owed by it to any Sub-Servicer, irrespective of whether the
Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees.

          SECTION 3.06. Assumption or Termination of Sub-Servicing Agreements by
                        Trust Administrator.

          In the event the Servicer shall for any reason no longer be the
servicer (including by reason of the occurrence of a Servicer Event of Default),
the Master Servicer (or if the Master Servicer is the departing Servicer, the
Trust Administrator or its designee) shall thereupon assume all of the rights
and obligations of the Servicer under each Sub-Servicing Agreement that the
Servicer may have entered into, unless the Master Servicer (or if the Master
Servicer is the departing Servicer, the Trust Administrator or the Trustee) or
the Certificate Insurer elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03. Upon such assumption, the
Master Servicer (or the Trust Administrator, its designee or the successor
servicer for the Trust Administrator appointed pursuant to Section 7.02) shall
be deemed, subject to Section 3.03, to have assumed all of the departing
Servicer's interest therein and to have replaced the departing Servicer as a
party to each Sub-Servicing Agreement to the same extent as if each
Sub-Servicing Agreement had been assigned to the assuming party, except that (i)
the departing Servicer shall not thereby be relieved of any liability or
obligations under any Sub- Servicing Agreement that arose before it ceased to be
the Servicer and (ii) none of the Master Servicer, the Trust Administrator, its
designee or any successor Servicer shall be deemed to have assumed any liability
or obligation of the Servicer that arose before it ceased to be the Servicer.

          The Servicer at its expense shall, upon request of the Master Servicer
(or if the Master Servicer is the departing Servicer, the Trust Administrator),
deliver to the assuming party all documents and records relating to each
Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.

          SECTION 3.07. Collection of Certain Mortgage Loan Payments.

          The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any applicable insurance policies, follow such collection
procedures as it would follow with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account. Consistent with the foregoing, the
Servicer may in its discretion (i) waive

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<PAGE>



any late payment charge or, if applicable, any penalty interest, or (ii) extend
the due dates for the Monthly Payments due on a Mortgage Note for a period of
not greater than 180 days; provided, however, that any extension pursuant to
clause (ii) above shall not affect the amortization schedule of any Mortgage
Loan for purposes of any computation hereunder, except as provided below. In the
event of any such arrangement pursuant to clause (ii) above, the Servicer shall
make timely advances on such Mortgage Loan during such extension pursuant to
Section 4.03 and in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangement. Notwithstanding
the foregoing, in the event that any Mortgage Loan is in default or, in the
judgment of the Servicer, such default is reasonably foreseeable, the Servicer,
consistent with the standards set forth in Section 3.01, may also waive, modify
or vary any term of such Mortgage Loan (including modifications that would
change the Mortgage Rate, forgive the payment of principal or interest or extend
the final maturity date of such Mortgage Loan), accept payment from the related
Mortgagor of an amount less than the Stated Principal Balance in final
satisfaction of such Mortgage Loan (such payment, a "Short Pay-off"), or consent
to the postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor (any and all such waivers, modifications, variances,
forgiveness of principal or interest, postponements, or indulgences collectively
referred to herein as "forbearance"), provided, however, that in no event shall
the Servicer grant any such forbearance (other than as permitted by the second
sentence of this Section) with respect to any one Mortgage Loan more than once
in any 12 month period or more than three times over the life of such Mortgage
Loan. The Servicer's analysis supporting any forbearance and the conclusion that
any forbearance meets the standards of Section 3.01 (including the standard that
such forbearance will maximize the timely and complete recovery of principal and
interest on the Mortgage Notes) shall be reflected in writing in the Mortgage
File and shall be provided to the Certificate Insurer upon request.

          SECTION 3.08. Sub-Servicing Accounts.

          In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub- Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer shall deposit in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Sub-Servicer's receipt thereof, all
proceeds of Mortgage Loans received by the Sub-Servicer less its servicing
compensation to the extent permitted by the Sub-Servicing Agreement, and shall
thereafter deposit such amounts in the Sub-Servicing Account, in no event more
than two Business Days after the receipt of such amounts. The Sub-Servicer shall
thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Servicer for deposit in the Collection Account not later than
two Business Days after the deposit of such amounts in the Sub-Servicing
Account. For purposes of this Agreement, the Servicer shall be deemed to have
received payments on the Mortgage Loans when the Sub-Servicer receives such
payments.

          SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
                        Servicing Accounts.

          The Servicer shall establish and maintain, or cause to be established
and maintained, one or more accounts (the "Servicing Accounts"), into which all
collections from the Mortgagors (or related advances from Sub-Servicers) for the
payment of taxes, assessments, hazard insurance premiums and comparable items
for the account of the Mortgagors ("Escrow Payments") shall be deposited and
retained. Servicing Accounts shall be Eligible Accounts. The Servicer shall
deposit in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan

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<PAGE>



servicing activities on a daily basis, and in no event more than one Business
Day after the Servicer's receipt thereof, all Escrow Payments collected on
account of the Mortgage Loans and shall thereafter deposit such Escrow Payments
in the Servicing Accounts, in no event more than two Business Days after the
receipt of such Escrow Payments, all Escrow Payments collected on account of the
Mortgage Loans for the purpose of effecting the timely payment of any such items
as required under the terms of this Agreement. Withdrawals of amounts from a
Servicing Account may be made only to (i) effect payment of taxes, assessments,
hazard insurance premiums, and comparable items in a manner and at a time that
assures that the lien priority of the Mortgage is not jeopardized (or, with
respect to the payment of taxes, in a manner and at a time that avoids the loss
of the Mortgaged Property due to a tax sale or the foreclosure as a result of a
tax lien); (ii) reimburse the Servicer (or a Sub-Servicer to the extent provided
in the related Sub- Servicing Agreement) out of related collections for any
advances made pursuant to Section 3.01 (with respect to taxes and assessments)
and Section 3.14 (with respect to hazard insurance); (iii) refund to Mortgagors
any sums as may be determined to be overages; (iv) pay interest, if required and
as described below, to Mortgagors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement in accordance with Article X. The Servicer will be responsible for the
administration of the Servicing Accounts and will be obligated to make advances
to such accounts when and as necessary to avoid the lapse of insurance coverage
on the Mortgaged Property, or which the Servicer knows, or in the exercise of
the required standard of care of the Servicer hereunder should know, is
necessary to avoid the loss of the Mortgaged Property due to a tax sale or the
foreclosure as a result of a tax lien. If any such payment has not been made and
the Servicer receives notice of a tax lien with respect to the Mortgage being
imposed, the Servicer will, within 10 business days of such notice, advance or
cause to be advanced funds necessary to discharge such lien on the Mortgaged
Property. As part of its servicing duties, the Servicer or Sub-Servicers shall
pay to the Mortgagors interest on funds in the Servicing Accounts, to the extent
required by law and, to the extent that interest earned on funds in the
Servicing Accounts is insufficient, to pay such interest from its or their own
funds, without any reimbursement therefor.

          SECTION 3.10. Collection Account and Distribution Account.

          (a) On behalf of the Trust Fund, the Servicer shall establish and
maintain, or cause to be established and maintained, one or more accounts (such
account or accounts, the "Collection Account"), held in trust for the benefit of
the Trustee, the Certificateholders and the Certificate Insurer. On behalf of
the Trust Fund, the Servicer shall deposit or cause to be deposited in the
clearing account in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the Servicer's receipt thereof, as and
when received or as otherwise required hereunder, the following payments and
collections received or made by it subsequent to the Cut-off Date (other than in
respect of principal or interest on the related Mortgage Loans due on or before
the Cut-off Date), or payments (other than Principal Prepayments) received by it
on or prior to the Cut-off Date but allocable to a Due Period subsequent
thereto:

               (i) all payments on account of principal, including Principal
          Prepayments, on the Mortgage Loans;

               (ii) all payments on account of interest (net of the related
          Servicing Fee) on each Mortgage Loan;


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<PAGE>



               (iii) all Insurance Proceeds and Liquidation Proceeds (other than
          proceeds collected in respect of any particular REO Property and
          amounts paid in connection with a purchase of Mortgage Loans and REO
          Properties pursuant to Section 10.01);

               (iv) any amounts required to be deposited pursuant to Section
          3.12 in connection with any losses realized on Permitted Investments
          with respect to funds held in the Collection Account;

               (v) any amounts required to be deposited by the Servicer pursuant
          to the second paragraph of Section 3.14(a) in respect of any blanket
          policy deductibles;

               (vi) all proceeds of any Mortgage Loan repurchased or purchased
          in accordance with Section 2.03 or Section 10.01;

               (vii) all amounts required to be deposited in connection with
          shortfalls in principal amount of Qualified Substitute Mortgage Loans
          pursuant to Section 2.03; and

               (viii) all Prepayment Charges collected by the Servicer in
          connection with the Principal Prepayment of any of the Mortgage Loans.

          The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges,
ancillary income and assumption fees, or insufficient funds charges need not be
deposited by the Servicer in the Collection Account and may be retained by the
Servicer as additional compensation. In the event the Servicer shall deposit in
the Collection Account any amount not required to be deposited therein, it may
at any time withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding.

          (b) On behalf of the Trust Fund, the Trust Administrator, as agent for
the Trustee, shall establish and maintain one or more accounts (such account or
accounts, the "Distribution Account"), held in trust for the benefit of the
Trustee, the Certificateholders and the Certificate Insurer. On behalf of the
Trust Fund, the Servicer shall deliver to the Trust Administrator in immediately
available funds for deposit in the Distribution Account on or before 5:00 p.m.
New York time (i) on the Servicer Remittance Date, that portion of the Available
Distribution Amount (calculated without regard to the references in clause (2)
of the definition thereof to amounts that may be withdrawn from the Distribution
Account) for the related Distribution Date then on deposit in the Collection
Account and the amount of all Prepayment Charges collected by the Servicer in
connection with the Principal Prepayment of any of the Mortgage Loans then on
deposit in the Collection Account, and (ii) on each Business Day as of the
commencement of which the balance on deposit in the Collection Account exceeds
$75,000 following any withdrawals pursuant to the next succeeding sentence, the
amount of such excess, but only if the Collection Account constitutes an
Eligible Account solely pursuant to clause (ii) of the definition of "Eligible
Account." If the balance on deposit in the Collection Account exceeds $75,000 as
of the commencement of business on any Business Day and the Collection Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of "Eligible Account," the Servicer shall, on or before 5:00 p.m. New York time
on such Business Day, withdraw from the Collection Account any and all amounts
payable or reimbursable to the Depositor, the Servicer, the Trustee, the Trust
Administrator, either Originator, the Seller or any Sub- Servicer pursuant to
Section 3.11 and shall pay such amounts to the Persons entitled thereto.


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<PAGE>



          (c) Funds in the Collection Account and the Distribution Account may
be invested in Permitted Investments in accordance with the provisions set forth
in Section 3.12. The Servicer shall give notice to the Trustee, the Trust
Administrator and the Certificate Insurer of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trust Administrator shall give notice to the Servicer, the Depositor, the
Trustee and the Certificate Insurer of the location of the Distribution Account
when established and prior to any change thereof.

          (d) Funds held in the Collection Account at any time may be delivered
by the Servicer to the Trust Administrator for deposit in an account (which may
be the Distribution Account and must satisfy the standards for the Distribution
Account as set forth in the definition thereof) and for all purposes of this
Agreement shall be deemed to be a part of the Collection Account; provided,
however, that the Trustee and the Trust Administrator shall have the sole
authority to withdraw any funds held pursuant to this subsection (d). In the
event the Servicer shall deliver to the Trust Administrator for deposit in the
Distribution Account any amount not required to be deposited therein, it may at
any time request that the Trust Administrator withdraw such amount from the
Distribution Account and remit to it any such amount, any provision herein to
the contrary notwithstanding. In addition, the Servicer, with respect to items
(i) through (v) below, shall deliver to the Trust Administrator from time to
time for deposit, and the Trust Administrator, with respect to items (i) through
(vi) below, shall so deposit, in the Distribution Account:

               (i) any P&I Advances, as required pursuant to Section 4.03;

               (ii) any amounts required to be deposited pursuant to Section
          3.23(d) or (f) in connection with any REO Property;

               (iii) any amounts to be paid in connection with a purchase of
          Mortgage Loans and REO Properties pursuant to Section 10.01;

               (iv) any amounts required to be deposited pursuant to Section
          3.24 in connection with any Prepayment Interest Shortfall;

               (v) any Stayed Funds, as soon as permitted by the federal
          bankruptcy court having jurisdiction in such matters; and

               (vi) any amounts required to be transferred from the Policy
          Payments Account pursuant to Section 9.04(b) on any Distribution Date.

          (e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, federal bankruptcy court or other source, the
Trust Administrator shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.

          (f) The Servicer shall deposit in the Collection Account any amounts
required to be deposited pursuant to Section 3.12(b) in connection with losses
realized on Permitted Investments with respect to funds held in the Collection
Account.


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<PAGE>



          SECTION 3.11. Withdrawals from the Collection Account and Distribution
                        Account.

          (a) The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:

               (i) to remit to the Trust Administrator for deposit in the
          Distribution Account the amounts required to be so remitted pursuant
          to Section 3.10(b) or permitted to be so remitted pursuant to the
          first sentence of Section 3.10(d);

               (ii) subject to Section 3.16(d), to reimburse the Servicer for
          P&I Advances, but only to the extent of amounts received which
          represent Late Collections (net of the related Servicing Fees) of
          Monthly Payments, Liquidation Proceeds and Insurance Proceeds on
          Mortgage Loans with respect to which such P&I Advances were made in
          accordance with the provisions of Section 4.03;

               (iii) subject to Section 3.16(d), to pay the Servicer or any
          Sub-Servicer (a) any unpaid Servicing Fees, (b) any unreimbursed
          Servicing Advances with respect to each Mortgage Loan, but only to the
          extent of any Late Collections, Liquidation Proceeds and Insurance
          Proceeds received with respect to such Mortgage Loan, and (c) any
          Nonrecoverable Servicing Advances with respect to the final
          liquidation of a Mortgage Loan, but only to the extent that Late
          Collections, Liquidation Proceeds and Insurance Proceeds received with
          respect to such Mortgage Loan are insufficient to reimburse the
          Servicer or any Sub-Servicer for Servicing Advances;

               (iv) to pay to the Servicer as servicing compensation (in
          addition to the Servicing Fee) on the Servicer Remittance Date any
          interest or investment income earned on funds deposited in the
          Collection Account;

               (v) to pay to the Servicer, the Master Servicer, the Depositor,
          each Originator or the Seller, as the case may be, with respect to
          each Mortgage Loan that has previously been purchased or replaced
          pursuant to Section 2.03 or Section 3.16(c) all amounts received
          thereon subsequent to the date of purchase or substitution, as the
          case may be;

               (vi) to reimburse the Servicer for any P&I Advance previously
          made which the Servicer has determined to be a Nonrecoverable P&I
          Advance in accordance with the provisions of Section 4.03;

               (vii) to reimburse the Servicer or the Depositor for expenses
          incurred by or reimbursable to the Servicer or the Depositor, as the
          case may be, pursuant to Section 6.03;

               (viii) to reimburse the Servicer, the Trustee or the Trust
          Administrator, as the case may be, for expenses reasonably incurred in
          connection with any breach or defect giving rise to the purchase
          obligation under Section 2.03 or Section 2.04 of this Agreement,
          including any expenses arising out of the enforcement of the purchase
          obligation;


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<PAGE>



               (ix) to pay, or to reimburse the Servicer for Servicing Advances
          in respect of, expenses incurred in connection with any Mortgage Loan
          pursuant to Section 3.16(b); and

               (x) to clear and terminate the Collection Account pursuant to
          Section 10.01.

          The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (iv), (v), (vi), (viii) and (ix) above.
The Servicer shall provide written notification to the Trust Administrator, on
or prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclauses (vi) and (vii)
above; provided that an Officer's Certificate in the form described under
Section 4.03(d) shall suffice for such written notification to the Trust
Administrator in respect hereof.

          (b) The Trust Administrator shall, from time to time, make withdrawals
from the Distribution Account, for any of the following purposes, without
priority:

               (i) to make distributions to Certificateholders and the
          Certificate Insurer in accordance with Section 4.01;

               (ii) to pay to itself and the Trustee amounts to which each is
          entitled pursuant to Section 8.05;

               (iii) to pay to the Master Servicer on each Distribution Date the
          Master Servicing Fee and as servicing compensation any interest or
          investment income earned on funds deposited in the Distribution
          Account pursuant to Section 3.12(c);

               (iv) to reimburse itself pursuant to Section 7.02;

               (v) to pay any amounts in respect of taxes pursuant to Section
          11.01(g)(iii); and

               (vi) to clear and terminate the Distribution Account pursuant to
          Section 10.01.

          Notwithstanding the foregoing, the Trust Administrator shall be
entitled to withdraw amounts from the Distribution Account to transfer funds to
the Expense Account on the Business Day immediately preceding each Distribution
Date pursuant to Section 3.25(b) prior to any payments to Certificateholders and
the Certificate Insurer pursuant to Section 4.01.

          SECTION 3.12. Investment of Funds in the Collection Account, the
                        Expense Account and the Distribution Account.

          (a) The Servicer may direct any depository institution maintaining the
Collection Account (for purposes of this Section 3.12, an "Investment Account"),
and the Master Servicer may direct any depository institution maintaining the
Distribution Account and the Expense Account (each, for purposes of this Section
3.12, an "Investment Account"), to invest the funds (other than the Initial
Deposit) in such Investment Account in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on demand, (i) no
later than the Business Day immediately preceding the date on which such funds
are required to be withdrawn from such account pursuant to this Agreement, if a
Person other than the Trust Administrator is the obligor thereon, and (ii) no
later than the date on which

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<PAGE>



such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trust Administrator is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Trust
Administrator (in its capacity as such), as agent for the Trustee, or in the
name of a nominee of the Trust Administrator. The Trust Administrator shall be
entitled to sole possession (except with respect to investment direction of
funds held in the Collection Account, the Distribution Account and the Expense
Account and any income and gain realized thereon) over each such investment, and
any certificate or other instrument evidencing any such investment shall be
delivered directly to the Trust Administrator or its agent, together with any
document of transfer necessary to transfer title to such investment to the Trust
Administrator or its nominee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trust Administrator shall:

          (x)  consistent with any notice required to be given thereunder,
               demand that payment thereon be made on the last day such
               Permitted Investment may otherwise mature hereunder in an amount
               equal to the lesser of (1) all amounts then payable thereunder
               and (2) the amount required to be withdrawn on such date; and

          (y)  demand payment of all amounts due thereunder promptly upon
               determination by a Responsible Officer of the Trust Administrator
               that such Permitted Investment would not constitute a Permitted
               Investment in respect of funds thereafter on deposit in the
               Investment Account.

          (b) All income and gain realized from the investment of funds
deposited in the Collection Account and any REO Account held by or on behalf of
the Servicer shall be for the benefit of the Servicer and shall be subject to
its withdrawal in accordance with Section 3.11 or Section 3.23, as applicable.
The Servicer shall deposit in the Collection Account or any REO Account, as
applicable, the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.

          (c) All income and gain realized from the investment of funds
deposited in the Distribution Account and the Expense Account held by or on
behalf of the Master Servicer shall be for the benefit of the Master Servicer
and shall be subject to its withdrawal by the Trustee or the Trust Administrator
for distribution in accordance with Section 3.11 or Section 3.25, as applicable.
The Master Servicer shall deposit in the Distribution Account and the Expense
Account, as applicable, the amount of any loss of principal incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon realization of such loss.

          (d) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee may and, subject to Section 8.01 and Section 8.02(v),
upon the request of the Certificate Insurer or the Holders of Certificates
representing more than 50% of the Voting Rights allocated to any Class of
Certificates, shall take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.


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<PAGE>



          SECTION 3.13. [intentionally omitted]

          SECTION 3.14. Maintenance of Hazard Insurance and Errors and Omissions
                        and Fidelity Coverage.

          (a) The Servicer shall cause to be maintained for each Mortgage Loan
fire insurance with extended coverage on the related Mortgaged Property in an
amount which is at least equal to the lesser of the current principal balance of
such Mortgage Loan and the amount necessary to fully compensate for any damage
or loss to the improvements that are a part of such property on a replacement
cost basis, in each case in an amount not less than such amount as is necessary
to avoid the application of any coinsurance clause contained in the related
hazard insurance policy. The Servicer shall also cause to be maintained fire
insurance with extended coverage on each REO Property in an amount which is at
least equal to the lesser of (i) the maximum insurable value of the improvements
which are a part of such property and (ii) the outstanding principal balance of
the related Mortgage Loan at the time it became an REO Property. The Servicer
will comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. Any amounts to be
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Servicer would follow in servicing loans held for its own
account, subject to the terms and conditions of the related Mortgage and
Mortgage Note) shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11, if received in respect of a Mortgage Loan,
or in the REO Account, subject to withdrawal pursuant to Section 3.23, if
received in respect of an REO Property. Any cost incurred by the Servicer in
maintaining any such insurance shall not, for the purpose of calculating
distributions to Certificateholders and the Certificate Insurer, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards and flood insurance has been made available, the Servicer will cause to
be maintained a flood insurance policy in respect thereof. Such flood insurance
shall be in an amount equal to the lesser of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).

          In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
Key Rating Guide (or such other rating that is comparable to such rating)
insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a deductible clause, in which case the Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property or REO Property a policy complying with the first two sentences of this
Section 3.14, and there shall have been one or more losses which would have been
covered by such policy, deposit to the Collection Account from its own funds the
amount not otherwise payable under the blanket policy because of such deductible
clause. In connection with its activities as administrator and servicer of the
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of itself,
the Trustee, Certificateholders and the Certificate Insurer, claims under any
such blanket policy in a timely fashion in accordance with the terms of such
policy.


                                      -73-


<PAGE>



          (b) The Servicer shall keep in force during the term of this Agreement
a policy or policies of insurance covering errors and omissions for failure in
the performance of the Servicer's obligations under this Agreement, which policy
or policies shall be in such form and amount that would meet the requirements of
Fannie Mae or Freddie Mac if it were the purchaser of the Mortgage Loans, unless
the Servicer has obtained a waiver of such requirements from Fannie Mae or
Freddie Mac. The Servicer shall also maintain a fidelity bond in the form and
amount that would meet the requirements of Fannie Mae or Freddie Mac, unless the
Servicer has obtained a waiver of such requirements from Fannie Mae or Freddie
Mac. The Servicer shall be deemed to have complied with this provision if an
Affiliate of the Servicer has such errors and omissions and fidelity bond
coverage and, by the terms of such insurance policy or fidelity bond, the
coverage afforded thereunder extends to the Servicer. Any such errors and
omissions policy and fidelity bond shall by its terms not be cancelable without
thirty days' prior written notice to the Trustee and the Trust Administrator.
The Servicer shall also cause each Sub-Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet
such requirements.

          SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
                        Agreements.

          The Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not be required to take such action if in its sole business
judgment the Servicer believes it is not in the best interests of the Trust Fund
and shall not exercise any such rights if prohibited by law from doing so. If
the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, or if any of the other conditions set forth in the
proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note, provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer and has a credit risk rating
at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption, modification or substitution of
liability agreement shall be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including but not limited to the related Mortgage Rate and the
amount of the Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Servicer shall notify the Trustee
and the Trust Administrator that any such substitution, modification or
assumption agreement has been completed by forwarding to the Trust Administrator
(with a copy to the Trustee) the executed original of such substitution,
modification or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.


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<PAGE>



          Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.

          SECTION 3.16. Realization Upon Defaulted Mortgage Loans.

          (a) The Servicer shall use its best efforts, consistent with Accepted
Servicing Practices, to foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans (including selling
any such Mortgage Loans other than converting the ownership of the related
properties) as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.07. The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that such costs and
expenses will be recoverable as Servicing Advances by the Servicer as
contemplated in Section 3.11 and Section 3.23. The foregoing is subject to the
provision that, in any case in which Mortgaged Property shall have suffered
damage from an Uninsured Cause, the Servicer shall not be required to expend its
own funds toward the restoration of such property unless it shall determine in
its discretion that such restoration will increase the proceeds of liquidation
of the related Mortgage Loan after reimbursement to itself for such expenses.

          (b) Notwithstanding the foregoing provisions of this Section 3.16 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Servicer has received actual notice of, or has actual knowledge of,
the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trustee, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Trust Administrator, the Trust Fund, the Certificateholders or
the Certificate Insurer would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Servicer has also previously determined, based
on its reasonable judgment and a report prepared by a Person who regularly
conducts environmental audits using customary industry standards, that:

               (1) such Mortgaged Property is in compliance with applicable
          environmental laws or, if not, that it would be in the best economic
          interest of the Trust Fund to take such actions as are necessary to
          bring the Mortgaged Property into compliance therewith; and

               (2) there are no circumstances present at such Mortgaged Property
          relating to the use, management or disposal of any hazardous
          substances, hazardous materials, hazardous wastes, or petroleum-based
          materials for which investigation, testing, monitoring, containment,
          clean-up or remediation could be required under any federal, state or
          local law or regulation, or that if any such materials are present for
          which such action could be required, that it would be in the best
          economic interest of the Trust Fund to take such actions with respect
          to the affected Mortgaged Property.


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<PAGE>



          The cost of the environmental audit report contemplated by this
Section 3.16 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11(a)(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.

          If the Servicer determines, as described above, that it is in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring any such Mortgaged Property into compliance with applicable environmental
laws, or to take such action with respect to the containment, clean-up or
remediation of hazardous substances, hazardous materials, hazardous wastes or
petroleum-based materials affecting any such Mortgaged Property, then the
Servicer shall take such action as it deems to be in the best economic interest
of the Trust Fund; provided that any amounts disbursed by the Servicer pursuant
to this Section 3.16(b) shall constitute Servicing Advances, subject to Section
4.03(d). The cost of any such compliance, containment, cleanup or remediation
shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section
3.11(a)(iii) and (a)(ix), such right of reimbursement being prior to the rights
of Certificateholders to receive any amount in the Collection Account received
in respect of the affected Mortgage Loan or other Mortgage Loans.

          (c) The Master Servicer may at its option purchase from REMIC I any
Mortgage Loan or related REO Property that is 90 days or more delinquent, which
the Master Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trust Administrator, the Trustee and the Certificate Insurer
prior to purchase), at a price equal to the Purchase Price; provided, however,
that (i) the Master Servicer shall purchase any such Mortgage Loans or related
REO Properties on the basis of delinquency, purchasing the most delinquent
Mortgage Loans or related REO Properties first and (ii) after it has purchased
5% of the Mortgage Loans and related REO Properties (including any Mortgage
Loans or related REO Properties purchased by ____________ as provided below), by
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date,
pursuant to clause (i) above, the Master Servicer must also obtain the consent
of the Certificate Insurer prior to any further purchases, provided that failure
of the Certificate Insurer to respond within five Business Days following actual
receipt of any such request for consent by the Master Servicer shall be deemed
to constitute consent to the additional purchases identified in such request for
consent. The Purchase Price for any Mortgage Loan or related REO Property
purchased hereunder shall be deposited in the Distribution Account, and the
Trust Administrator, upon receipt of such deposit, shall release or cause to be
released to the Master Servicer the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as the Master Servicer shall furnish and as shall be necessary
to vest in the Master Servicer title to any Mortgage Loan or related REO
Property released pursuant hereto. Notwithstanding the foregoing, prior to
purchasing any Mortgage Loan or related REO Property on Part B of Schedule 1
attached hereto pursuant to this Section 3.16(c), the Master Servicer must give
____________ the right of first refusal to purchase such Mortgage Loan or
related REO Property by written notice; and if ____________ does not exercise
such right within 10 Business Days after receipt of such written notice, the
Master Servicer may purchase such Mortgage Loan or related REO Property. If
____________ purchases such Mortgage Loan or related REO Property, the Purchase
Price shall be deposited in the Distribution Account by ____________, and the
Trust Administrator, upon receipt of such deposit, shall release or cause to be
released to ____________ the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
____________ shall furnish and as shall be necessary to vest in ____________
title to any Mortgage Loan or related REO Property released pursuant hereto.


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<PAGE>



          (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
P&I Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); SECOND, to accrued
and unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Distribution Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and THIRD, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than the full amount
of accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: FIRST, to unpaid
Servicing Fees; and SECOND, to the balance of the interest then due and owing.
The portion of the recovery so allocated to unpaid Servicing Fees shall be
reimbursed to the Servicer or any Sub-Servicer pursuant to Section 3.11(a)(iii).

          SECTION 3.17. Trustee and Trust Administrator to Cooperate; Release of
                        Mortgage Files.

          (a) Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will notify or cause to be
notified the Trust Administrator by a certification in the form of Exhibit E-2
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the Trust
Administrator shall, within five Business Days, release and send by overnight
mail, at the expense of the Servicer, the related Mortgage File to the Servicer.
The Trust Administrator agrees to indemnify the Servicer, out of its own funds,
for any loss, liability or expense (other than special, indirect, punitive or
consequential damages which will not be paid by the Trust Administrator)
incurred by the Servicer as a proximate result of the Trust Administrator's
breach of its obligations pursuant to this Section 3.17. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Collection Account or the Distribution Account. The Trust
Administrator will provide to the Certificate Insurer and the Trustee an updated
listing of any Mortgage Files released pursuant to this Section 3.17(a) on March
30, June 30, September 30 and December 30 of each year, beginning in March 1999
and as otherwise requested by the Certificate Insurer or the Trustee.

          (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trust Administrator
shall, upon any request made by or on behalf of the Servicer and delivery to the
Trust Administrator of a Request for Release in the form of Exhibit E-l, release
the related Mortgage File to the Servicer, and the Trustee shall, at the
direction of the Servicer, execute such documents as shall be necessary to the
prosecution of any such proceedings. Such Request for Release shall obligate the
Servicer to return each and every document previously requested from the
Mortgage File to the Trust Administrator when the need therefor by the Servicer
no longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the Servicer has delivered, or caused to be delivered, to the Trust
Administrator an additional Request for Release certifying as to such
liquidation or action or proceedings. Upon the request of the Trust
Administrator, the Trustee or the Certificate Insurer, the Servicer shall
provide notice to the Trust

                                      -77-


<PAGE>



Administrator, the Trustee and the Certificate Insurer of the name and address
of the Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, any outstanding Requests for
Release with respect to such Mortgage Loan shall be released by the Trust
Administrator to the Servicer or its designee.

          (c) Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer or the Sub-Servicer, as the case may
be, and upon the request of the Certificate Insurer the Servicer shall deliver
or cause to be delivered to the Certificate Insurer copies of, any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Each such certification shall include a request that such
pleadings or documents be executed by the Trustee and a statement as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Trustee will not invalidate or otherwise affect the lien
of the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.

          SECTION 3.18. Servicing Compensation.

          As compensation for the activities of the Master Servicer hereunder,
the Master Servicer shall be entitled to the Master Servicing Fee with respect
to each Mortgage Loan payable solely from payments of interest in respect of
such Mortgage Loan. As compensation for the activities of the Servicer
hereunder, the Servicer shall be entitled to the Servicing Fee with respect to
each Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.24. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.23. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement; provided,
however, that the Servicer may pay from the Servicing Fee any amounts due to a
Sub-Servicer pursuant to a Sub-Servicing Agreement entered into under Section
3.02.

          Additional servicing compensation in the form of assumption fees,
ancillary income and late payment charges, insufficient funds charges or
otherwise (subject to Section 3.24 and other than Prepayment Charges) shall be
retained by the Servicer only to the extent such fees or charges are received by
the Servicer. The Servicer shall also be entitled pursuant to Section
3.11(a)(iv) to withdraw from the Collection Account and pursuant to Section
3.23(b) to withdraw from any REO Account, as additional servicing compensation,
interest or other income earned on deposits therein, subject to Section 3.12 and
Section 3.24. The Servicer shall be required to pay all expenses incurred by it
in connection with its servicing activities hereunder (including premiums for
the insurance required by Section 3.14, to the extent such premiums are not paid
by the related Mortgagors or by a Sub-Servicer and servicing compensation of
each Sub-Servicer) and shall not be entitled to reimbursement therefor except as
specifically provided herein.

          The Master Servicer shall be entitled pursuant to Section 3.11 to be
paid by the Trust Administrator from the Distribution Account, pursuant to
Section 3.25 to be paid by the Trust

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<PAGE>



Administrator from the Expense Account, as additional servicing compensation,
interest or other income earned on deposits therein, subject to Section 3.12.
The Servicer shall be required to pay all expenses incurred by it in connection
with its servicing activities hereunder (including to the extent provided herein
in Section 8.05, the fees and expenses of the Trustee and the Trust
Administrator) and shall not be entitled to reimbursement therefor except as
specifically provided herein.

          SECTION 3.19. Reports to the Trust Administrator and the Trustee;
                        Collection Account Statements.

          Not later than twenty days after each Distribution Date, the Servicer
shall forward, upon request, to the Trust Administrator, the Trustee, the
Certificate Insurer and the Depositor the most current available bank statement
for the Collection Account. Copies of such statement shall be provided by the
Trust Administrator to any Certificateholder and to any Person identified to the
Trust Administrator as a prospective transferee of a Certificate, upon request
at the expense of the requesting party, provided such statement is delivered by
the Servicer to the Trust Administrator.

          SECTION 3.20. Statement as to Compliance.

          The Servicer will deliver to the Trust Administrator, the Trustee, the
Certificate Insurer and the Depositor not later than 90 days following the end
of the fiscal year of the Servicer, commencing in _____, which as of the Closing
Date ends on the last day in December with respect to ______________ and ends on
the last day of _______ with respect to ___________, an Officers' Certificate
stating, as to each signatory thereof, that (i) a review of the activities of
the Servicer during the preceding year and of performance under this Agreement
has been made under such officers' supervision and (ii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. Copies of any such
statement shall be provided by the Trust Administrator to any Certificateholder
and to any Person identified to the Trust Administrator as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Servicer to the Trust
Administrator.

          SECTION 3.21. Independent Public Accountants' Servicing Report.

          Not later than 90 days following the end of each fiscal year of the
Servicer, commencing in ____, the Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Servicer a report stating that (i) it has obtained a letter of
representation regarding certain matters from the management of the Servicer
which includes an assertion that the Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America, with respect to the servicing of residential mortgage
loans during the most recently completed fiscal year and (ii) on the basis of an
examination conducted by such firm in accordance with standards established by
the American Institute of Certified Public Accountants, such representation is
fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. In rendering its report such firm may
rely, as to matters relating to the direct servicing of residential mortgage
loans by Sub-Servicers, upon comparable reports of firms of independent
certified public accountants rendered on the basis of examinations conducted in
accordance with the same standards (rendered within one year of such report)
with respect to those Sub-Servicers. Immediately upon receipt of such report,
the Servicer shall furnish a copy of such report to the Trust Administrator, the
Trustee, the Certificate Insurer and each Rating Agency. Copies of such
statement shall be provided by the Trust

                                      -79-


<PAGE>



Administrator to any Certificateholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Trust
Administrator.

          SECTION 3.22. Access to Certain Documentation.

          The Servicer shall provide to the Office of Thrift Supervision, the
FDIC, and any other federal or state banking or insurance regulatory authority
that may exercise authority over any Certificateholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Certificate
Insurer, the Trustee, the Trust Administrator and to any Person identified to
the Servicer as a prospective transferee of a Certificate, upon reasonable
request during normal business hours at the offices of the Servicer designated
by it at the expense of the Person requesting such access.

          SECTION 3.23. Title, Management and Disposition of REO Property.

          (a) The deed or certificate of sale of any REO Property shall be taken
in the name of the Trustee, or its nominee, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Servicer, on behalf of REMIC
I, shall either sell any REO Property within three years after REMIC I acquires
ownership of such REO Property for purposes of Section 860G(a)(8) of the Code or
request from the Internal Revenue Service, no later than 60 days before the day
on which the three-year grace period would otherwise expire, an extension of the
three-year grace period, unless the Servicer shall have delivered to the Trust
Administrator and the Trustee an Opinion of Counsel, addressed to the Trust
Administrator, the Trustee, the Certificate Insurer and the Depositor, to the
effect that the holding by REMIC I of such REO Property subsequent to three
years after its acquisition will not result in the imposition on REMIC I, REMIC
II or REMIC III of taxes on "prohibited transactions" thereof, as defined in
Section 860F of the Code, or cause any of REMIC I, REMIC II or REMIC III to fail
to qualify as a REMIC under Federal law at any time that any Certificates are
outstanding. The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or result in the receipt by REMIC I, REMIC II or REMIC III of any
"income from non-permitted assets" within the meaning of Section 860F(a)(2)(B)
of the Code, or any "net income from foreclosure property" which is subject to
taxation under the REMIC Provisions.

          (b) The Servicer shall separately account for all funds collected and
received in connection with the operation of any REO Property and shall
establish and maintain, or cause to be established and maintained, with respect
to REO Properties an account held in trust for the Trustee for the benefit of
the Certificateholders and the Certificate Insurer (the "REO Account"), which
shall be an Eligible Account. The Servicer shall be permitted to allow the
Collection Account to serve as the REO Account, subject to separate ledgers for
each REO Property. The Servicer shall be entitled to retain or withdraw any
interest income paid on funds deposited in the REO Account.

          (c) The Servicer shall have full power and authority, subject only to
the specific requirements and prohibitions of this Agreement, to do any and all
things in connection with any REO Property as are consistent with the manner in
which the Servicer manages and operates similar property owned by the Servicer
or any of its Affiliates, all on such terms and for such period as the Servicer
deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer shall deposit, or

                                      -80-


<PAGE>



cause to be deposited in the clearing account in which it customarily deposits
payments and collections on mortgage loans in connection with its mortgage loan
servicing activities on a daily basis, and in no event more than one Business
Day after the Servicer's receipt thereof, and shall thereafter deposit in the
REO Account, in no event more than two Business Days after the Servicer's
receipt thereof, all revenues received by it with respect to an REO Property and
shall withdraw therefrom funds necessary for the proper operation, management
and maintenance of such REO Property including, without limitation:

               (i) all insurance premiums due and payable in respect of such REO
          Property;

               (ii) all real estate taxes and assessments in respect of such REO
          Property that may result in the imposition of a lien thereon; and

               (iii) all costs and expenses necessary to maintain such REO
          Property.

To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.

          Notwithstanding the foregoing, none of the Servicer, the Trust
Administrator or the Trustee shall:

               (i) authorize the Trust Fund to enter into, renew or extend any
          New Lease with respect to any REO Property, if the New Lease by its
          terms will give rise to any income that does not constitute Rents from
          Real Property;

               (ii) authorize any amount to be received or accrued under any New
          Lease other than amounts that will constitute Rents from Real
          Property;

               (iii) authorize any construction on any REO Property, other than
          the completion of a building or other improvement thereon, and then
          only if more than ten percent of the construction of such building or
          other improvement was completed before default on the related Mortgage
          Loan became imminent, all within the meaning of Section 856(e)(4)(B)
          of the Code; or

               (iv) authorize any Person to Directly Operate any REO Property on
          any date more than 90 days after its date of acquisition by the Trust
          Fund;

unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Trust Administrator, the Trustee and the Certificate Insurer, to
the effect that such action will not cause such REO Property to fail to qualify
as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code
at any time that it is held by REMIC I, in which case the Servicer may take such
actions as are specified in such Opinion of Counsel.

          The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:


                                      -81-


<PAGE>



               (i) the terms and conditions of any such contract shall not be
          inconsistent herewith;

               (ii) any such contract shall require, or shall be administered to
          require, that the Independent Contractor pay all costs and expenses
          incurred in connection with the operation and management of such REO
          Property, including those listed above and remit all related revenues
          (net of such costs and expenses) to the Servicer as soon as
          practicable, but in no event later than thirty days following the
          receipt thereof by such Independent Contractor;

               (iii) none of the provisions of this Section 3.23(c) relating to
          any such contract or to actions taken through any such Independent
          Contractor shall be deemed to relieve the Servicer of any of its
          duties and obligations to the Trustee on behalf of the
          Certificateholders and the Certificate Insurer with respect to the
          operation and management of any such REO Property; and

               (iv) the Servicer shall be obligated with respect thereto to the
          same extent as if it alone were performing all duties and obligations
          in connection with the operation and management of such REO Property.

The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.18 is sufficient to pay such fees; provided,
however, that to the extent that any payments made by such Independent
Contractor would constitute Servicing Advances if made by the Servicer, such
amounts shall be reimbursable as Servicing Advances made by the Servicer.

          (d) In addition to the withdrawals permitted under Section 3.23(c),
the Servicer may from time to time make withdrawals from the REO Account for any
REO Property: (i) to pay itself or any Sub-Servicer unpaid Servicing Fees in
respect of the related Mortgage Loan; and (ii) to reimburse itself or any
Sub-Servicer for unreimbursed Servicing Advances and P&I Advances made in
respect of such REO Property or the related Mortgage Loan. On the Servicer
Remittance Date, the Servicer shall withdraw from each REO Account maintained by
it and deposit into the Distribution Account in accordance with Section
3.10(d)(ii), for distribution on the related Distribution Date in accordance
with Section 4.01, the income from the related REO Property received during the
prior calendar month, net of any withdrawals made pursuant to Section 3.23(c) or
this Section 3.23(d).

          (e) Subject to the time constraints set forth in Section 3.23(a), each
REO Disposition shall be carried out by the Servicer at such price and upon such
terms and conditions as the Servicer shall deem necessary or advisable, as shall
be normal and usual in its Accepted Servicing Practices.

          (f) The proceeds from the REO Disposition, net of any amount required
by law to be remitted to the Mortgagor under the related Mortgage Loan and net
of any payment or reimbursement to the Servicer or any Sub-Servicer as provided
above, shall be deposited in the Distribution Account in accordance with Section
3.10(d)(ii) on the Servicer Remittance Date in the month following the receipt
thereof for distribution on the related Distribution Date in accordance with
Section 4.01. Any REO

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<PAGE>



Disposition shall be for cash only (unless changes in the REMIC Provisions made
subsequent to the Startup Day allow a sale for other consideration).

          (g) The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient to meet the reporting requirements imposed by
such Sections 6050H, 6050J and 6050P of the Code.

          SECTION 3.24. Obligations of the Servicer in Respect of Prepayment
                        Interest Shortfalls.

          The Servicer shall deliver to the Trust Administrator for deposit into
the Distribution Account on or before 5:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from full or partial Principal Prepayments during the related
Prepayment Period and (ii) the aggregate Servicing Fee for the related
Prepayment Period. Any amounts paid by the Servicer pursuant to this Section
3.24 shall not be reimbursed by REMIC I.

          SECTION 3.25. Expense Account.

          (a) On behalf of the Trust Fund, the Trust Administrator, as agent for
the Trustee, shall establish and maintain in its name, for the benefit of the
Trustee, the Certificateholders and the Certificate Insurer, the Expense
Account. The Expense Account shall be an Eligible Account, and funds on deposit
therein shall be held separate and apart from, and shall not be commingled with,
any other moneys, including, without limitation, other moneys of the Trust
Administrator held pursuant to this Agreement.

          (b) On the Business Day immediately preceding each Distribution Date,
the Trust Administrator shall withdraw from the Distribution Account and deposit
into the Expense Account an amount equal to 1/12 of the Certificate Insurer
Premium Rate on the Certificate Principal Balance of the Class A Certificates
for such Distribution Date.

          (c) The Trust Administrator shall make withdrawals from the Expense
Account to pay the Certificate Insurer Premium on each Distribution Date.

          (d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer on each
Distribution Date as additional servicing compensation. The Trust Administrator
shall give notice to the Depositor, the Trustee and the Certificate Insurer of
the location of the Expense Account on the Closing Date and prior to any change
thereof.

          (e) Upon termination of the Trust Fund in accordance with Section
10.01, any amounts remaining in the Expense Account following the payment of all
unpaid Certificate Insurer Premiums shall be released to the Master Servicer as
additional servicing compensation.


                                      -83-


<PAGE>



          SECTION 3.26. Obligations of the Servicer in Respect of Mortgage Rates
                        and Monthly Payments.

          In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Mortgage Rates, Monthly Payments or Stated Principal Balances that were made by
the Servicer in a manner not consistent with the terms of the related Mortgage
Note and this Agreement, the Servicer, upon discovery or receipt of notice
thereof, immediately shall deliver to the Trust Administrator for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trust Administrator, the
Trustee, the Certificate Insurer, the Depositor and any successor servicer in
respect of any such liability. Such indemnities shall survive the termination or
discharge of this Agreement. Notwithstanding the foregoing, this Section 3.26
shall not limit the ability of the Servicer to seek recovery of any such amounts
from the related Mortgagor under the terms of the related Mortgage Note, as
permitted by law.

          SECTION 3.27. Solicitations.

          From and after the Closing Date, the ____________ agrees that it will
not take any action or permit or cause any action to be taken by any of its
agents and Affiliates, or by any independent contractors or independent mortgage
brokerage companies on ____________'s behalf, to personally, by telephone or
mail, solicit the Mortgagor under any Mortgage Loan for the purpose of
refinancing such Mortgage Loan, nor will ____________ purchase any loan to a
Mortgagor secured by a Mortgaged Property, in whole or in part; provided, that
____________ may solicit any Mortgagor for whom ____________ has received a
request for verification of mortgage from an originator of mortgage loan
products similar to the Mortgage Loans that indicates that such Mortgagor
intends to refinance his or her Mortgage Loan, a request for demand for pay-off
or a Mortgagor initiated a written or verbal communication with ____________
indicating a desire to prepay the related Mortgage Loan; provided further, it is
understood and agreed that promotions undertaken by ____________ or any of its
Affiliates which (i) concern optional insurance products or other additional
products or (ii) are directed to the general public at large, including, without
limitation, mass mailings based on commercially acquired mailing lists,
newspaper, radio and television advertisements shall not constitute solicitation
under this Section 3.27.


                                      -84-


<PAGE>



                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

          SECTION 4.01. Distributions.

          (a)(1)(A) On each Distribution Date, the following amounts, in the
following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests:

               (i) to the Holders of REMIC I Regular Interests (other than REMIC
          I Regular Interest I-LTP), in an amount equal to (A) the
          Uncertificated Interest for such Distribution Date, plus (B) any
          amounts in respect thereof remaining unpaid from previous Distribution
          Dates. Amounts payable as Uncertificated Interest in respect of REMIC
          I Regular Interest I-LT9 shall be reduced when the REMIC I
          Overcollateralized Amount is less than the REMIC I Required
          Overcollateralized Amount, by the lesser of (x) the amount of such
          difference and (y) the Maximum I-LT9 Uncertificated Interest Deferral
          Amount; and

               (ii) on each Distribution Date, to the Holders of REMIC I Regular
          Interests, in an amount equal to the remainder of the Available
          Distribution Amount for such Distribution Date after the distributions
          made pursuant to clause (i) above, allocated as follows (except as
          provided below):


                    (a) to the Holders of the REMIC I Regular Interest I-LTP, on
               the Distribution Date immediately following the expiration of the
               latest Prepayment Charge term as identified on the Mortgage Loan
               Schedule and each Distribution Date thereafter until $____ has
               been distributed pursuant to this clause;

                    (b) to the Holders of the REMIC I Regular Interest I-LT1,
               _____% of the amount remaining after application of clause (a),
               until the Uncertificated Balance of such REMIC I Regular Interest
               is reduced to zero and any remaining amounts to the Holders of
               the Class R-I Certificates;

                    (c) to the Holders of the REMIC I Regular Interest I-LT2,
               REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4,
               REMIC I Regular Interest I-LT5, REMIC I Regular Interest I-LT6,
               REMIC I Regular Interest I-LT7 and REMIC I Regular Interest
               I-LT8, ____% of the amount remaining after application of clause
               (a), in the same proportion as principal payments are allocated
               to the related Corresponding Certificate, until the
               Uncertificated Balances of such REMIC I Regular Interests are
               reduced to zero, and any remaining amounts to the Holders of the
               Class R-I Certificates;

                    (d) to the Holders of the REMIC I Regular Interest I-LT9,
               _____% of the amount remaining after application of clause (a),
               until the Uncertificated Balance of such REMIC I Regular Interest
               is reduced to zero and any remaining amounts to the Holders of
               the Class R-I Certificates;


                                      -85-


<PAGE>



provided, however, that _____% and ____% of any principal payments that are
attributable to a Overcollateralization Reduction Amount shall be allocated to
Holders of the REMIC I Regular Interest I- LT1 and REMIC I Regular Interest
I-LT9, respectively.

          (B) On each Distribution Date, the following amounts shall be
distributed by REMIC II to REMIC III on account of the REMIC II Regular
Interests:

               (i) any amounts paid as either Uncertificated Interest paid or
          accrued to the REMIC I Regular Interests (other than REMIC I Regular
          Interest I-LTP) shall be deemed to have been paid to the related
          Uncertificated Corresponding Component in REMIC II in accordance with
          the REMIC II Remittance Rates and any amounts deferred on REMIC I
          Regular Interest I-LT9 pursuant to Section 4.01(A)(1)(A) shall be
          deemed to have been deferred with respect to REMIC II Regular Interest
          II-LT9; and

               (ii) any amounts paid as principal on the REMIC I Regular
          Interests shall be deemed to have been paid to the related
          Uncertificated Corresponding Component in REMIC II in accordance with
          the same priorities and conditions.

          (2) On each Distribution Date, the Trust Administrator shall withdraw
from the Distribution Account an amount equal to the Available Distribution
Amount (other than any amount in the Distribution Account that was transferred
from the Policy Payments Account to the Distribution Account pursuant to Section
9.04) and distribute to the Certificateholders the following amounts, in the
following order of priority:

               (i) (a) to the Holders of the Class A Certificates, in an amount
          (allocable among such Certificates PRO RATA in accordance with the
          respective amounts payable as to each pursuant to this clause (i))
          equal to the aggregate of the Interest Distribution Amounts for such
          Distribution Date for such Certificates;

               (ii) to the Holders of the Class A Certificates, in an amount
          equal to the Principal Distribution Amount (except for any portion
          thereof consisting of any Overcollateralization Increase Amount and
          any amount payable pursuant to clause (iii) below), in the priorities
          and amounts set forth in Section 4.01(a)(3) below, until the
          Certificate Principal Balances of such Certificates have been reduced
          to zero;

               (iii) to the Holders of the Class A Certificates in the
          priorities and amounts set forth in Section 4.01(a)(3) below, payable
          from Net Monthly Excess Cashflow (exclusive of any
          Overcollateralization Reduction Amount), in an amount equal to (a) the
          principal portion of any Realized Losses incurred or deemed to have
          been incurred on the Mortgage Loans, applied to reduce the Certificate
          Principal Balances of such Certificates until the aggregate
          Certificate Principal Balance of such Certificates is reduced to zero,
          plus (b) the principal portion of any Realized Losses allocated to
          such Certificates on previous Distribution Dates but not paid under
          the Policy due to a Certificate Insurer Default and not previously
          paid pursuant to this clause (iii)(b);

               (iv) to the Certificate Insurer, payable from Net Monthly Excess
          Cashflow, to reimburse the Certificate Insurer for claims under the
          Policy, to the extent of Cumulative Insurance Payments;


                                      -86-


<PAGE>



               (v) to the Holders of the Class A Certificates in the priorities
          and amounts set forth in Section 4.01(a)(3) below, payable from Net
          Monthly Excess Cashflow, in an amount equal to the portion of the
          Principal Distribution Amount consisting of any Overcollateralization
          Increase Amount, applied to reduce the Certificate Principal Balances
          of such Certificates, until the aggregate Certificate Principal
          Balances of such Certificates is reduced to zero;

               (vi) to the Holders of the Class A Certificates, payable from Net
          Monthly Excess Cashflow, in an amount equal to any Relief Act
          Shortfalls that were allocated pursuant to Section 1.02;

               (vii) to the Certificate Insurer, payable from Net Monthly Excess
          Cashflow, any amounts remaining due to the Insurer under the terms of
          the Insurance Agreement (including any Premium Supplement);

               (viii) to the Holders of the Class CE Certificates, payable from
          Net Monthly Excess Cashflow, the Interest Distribution Amount and any
          Overcollateralization Reduction Amount for such Distribution Date; and

               (ix) to the Holders of the Class R-III Certificates, any
          remaining amounts; provided that if such Distribution Date is the
          Distribution Date immediately following the expiration of the latest
          Prepayment Charge term as identified on the Mortgage Loan Schedule or
          any Distribution Date thereafter, then any such remaining amounts will
          be distributed FIRST, to the Holders of the Class P Certificates,
          until the Certificate Principal Balance thereof has been reduced to
          zero; and SECOND, to the Holders of the Class R-III Certificates.

          (3) On each Distribution Date, the aggregate distributions made on
such date in respect of the Class A Certificates pursuant to Section
4.01(a)(2)(ii), (a)(2)(iii) or (a)(2)(v) above shall be applied among the
various Classes thereof in the following order of priority:

          FIRST, to the holders of the Lockout Certificates, the Lockout
          Distribution Percentage of the Principal Distribution Amount, until
          the Certificate Balance of such Class has been reduced to zero;

          SECOND, to the holders of the Class A-1 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;

          THIRD, to the holders of the Class A-2 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;

          FOURTH, to the holders of the Class A-3 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;

          FIFTH, to the holders of the Class A-4 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;

          SIXTH, to the holders of the Class A-5 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;

                                      -87-


<PAGE>



          SEVENTH, to the holders of the Class A-6 Certificates, until the
          Certificate Principal Balance of such Class has been reduced to zero;
          and

          EIGHTH, to the holders of the Lockout Certificates until the
          Certificate Principal Balance of such Class has been reduced to zero.

     Notwithstanding the foregoing priorities, if a Certificate Insurer Default
     exists, the sequential nature of distributions of principal among the Class
     A Certificates will be disregarded and distributions allocable to principal
     will be paid on each succeeding Distribution Date to holders of the Class A
     Certificates on a PRO RATA basis, based on the Certificate Principal
     Balances thereof.

          (b) On each Distribution Date, the Trust Administrator shall withdraw
any amounts then on deposit in the Distribution Account that represent
Prepayment Charges collected by either Servicer in connection with the Principal
Prepayment of any of the Mortgage Loans or any Servicer Prepayment Charge
Payment Amount, and shall distribute such amounts to the Holders of the Class P
Certificates. Such distributions shall not be applied to reduce the Certificate
Principal Balance of the Class P Certificates.

          (c) In addition to making the distributions required pursuant to
Section 4.01(a)(2), on each Distribution Date for which there exists a
Deficiency Amount, the Trust Administrator shall withdraw from the Distribution
Account any amount therein that was transferred from the Policy Payments Account
to the Distribution Account pursuant to Section 9.04 and distribute to the
Holders of the Class A Certificates (i) an amount equal to any amount required
to be paid to such Class pursuant to Section 4.01(a)(2)(i) for such Distribution
Date remaining unpaid after giving effect to all distributions made pursuant to
Section 4.01(a)(2) for such Distribution Date, (ii) an amount equal to the
principal portion of any Realized Losses allocated to such Class on such
Distribution Date after giving effect to all distributions made pursuant to
Section 4.01(a)(2) for such Distribution Date and (iii) without duplication, any
other amount constituting a Deficiency Amount.

          (c) Each Holder of a Class A Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate from amounts paid under the Policy, (i) the
Certificate Insurer shall be subrogated in the manner herein provided to the
rights of the Holder of such Class A Certificate to receive from amounts on
deposit in the Distribution Account the distributions allocable to principal and
interest that would have been distributable to such Holder if no such
distribution to such Holder had been made from amounts paid under the Policy;
and (ii) in addition to the rights of the Holders of the Class A Certificates
that the Certificate Insurer may exercise in accordance with the provisions of
Section 9.01, the Certificate Insurer may exercise any option, vote, right,
power or the like with respect to each Class A Certificate for which Cumulative
Insurance Payments are outstanding.

          (d) All distributions made with respect to each Class of Certificates
on each Distribution Date shall be allocated PRO RATA among the outstanding
Certificates in such Class based on their respective Percentage Interests.
Payments in respect of each Class of Certificates on each Distribution Date will
be made to the Holders of the respective Class of record on the related Record
Date (except as otherwise provided in Section 4.01(f) or Section 10.01
respecting the final distribution on such Class), based on the aggregate
Percentage Interest represented by their respective Certificates, and shall be
made by wire transfer of immediately available funds to the account of any such
Holder at a bank or other entity having appropriate facilities therefor, if such
Holder shall have so notified the Trust Administrator in writing at least five
Business Days prior to the Record Date immediately prior to such Distribution
Date

                                      -88-


<PAGE>



and is the registered owner of Certificates having an initial aggregate
Certificate Principal Balance that is in excess of the lesser of (i) $5,000,000
or (ii) two-thirds of the initial Certificate Principal Balance of such Class of
Certificates, or otherwise by check mailed by first class mail to the address of
such Holder appearing in the Certificate Register. The final distribution on
each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution. Payments to the Certificate Insurer on any Distribution Date will
be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer under the Premium Letter (as defined in
the Insurance Agreement).

          Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trust Administrator,
the Trustee, the Depositor or the Servicers shall have any responsibility
therefor except as otherwise provided by this Agreement or applicable law.

          (e) The rights of the Certificateholders to receive distributions in
respect of the Certificates, and all interests of the Certificateholders in such
distributions, shall be as set forth in this Agreement. None of the Holders of
any Class of Certificates, the Trust Administrator, the Trustee or the Servicers
shall in any way be responsible or liable to the Holders of any other Class of
Certificates in respect of amounts properly previously distributed on the
Certificates.

          (f) Except as otherwise provided in Section 10.01, whenever the Trust
Administrator expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trust Administrator
shall, no later than three (3) days before the related Distribution Date, mail
to each Holder on such date of such Class of Certificates and the Certificate
Insurer a notice to the effect that:

          (i) the Trust Administrator expects that the final distribution with
     respect to such Class of Certificates will be made on such Distribution
     Date but only upon presentation and surrender of such Certificates at the
     office of the Trust Administrator therein specified, and

          (ii) no interest shall accrue on such Certificates from and after the
     end of the related Interest Accrual Period.

Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trust Administrator and credited to the account of the appropriate
non-tendering Holder or Holders. If any Certificates as to which notice has been
given pursuant to this Section 4.01(f) shall not have been surrendered for
cancellation within six months after the time specified in such notice, the
Trust Administrator shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trust Administrator shall, directly or through an agent, (i)
mail a final notice to the remaining non-tendering Certificateholders concerning
surrender of their Certificates and (ii) pay to the Certificate Insurer any
amount of such funds which were paid by the Certificate Insurer under the Policy

                                      -89-


<PAGE>



but shall continue to hold any remaining funds for the benefit of non-tendering
Certificateholders, and all liability of the Certificate Insurer with respect to
such funds shall thereupon cease. The costs and expenses of maintaining the
funds in trust and of contacting such Certificateholders shall be paid out of
the assets remaining in such trust fund. If within one year after the final
notice any such Certificates shall not have been surrendered for cancellation,
the Trust Administrator shall pay to Salomon Smith Barney Inc. all such amounts,
and all rights of non-tendering Certificateholders in or to such amounts shall
thereupon cease. No interest shall accrue or be payable to any Certificateholder
on any amount held in trust by the Trust Administrator as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 4.01(f). Any such amounts held in trust
by the Trust Administrator shall be held in an Eligible Account and the Trust
Administrator may direct any depository institution maintaining such account to
invest the funds in one or more Permitted Investments. All income and gain
realized from the investment of funds deposited in such accounts held in trust
by the Trust Administrator shall be for the benefit of the Trust Administrator;
provided, however, that the Trust Administrator shall deposit in such account
the amount of any loss of principal incurred in respect of any such Permitted
Investment made with funds in such accounts immediately upon the realization of
such loss.

          (g) Notwithstanding anything to the contrary herein, (i) in no event
shall the Certificate Principal Balance of a Class A Certificate be reduced more
than once in respect of any particular amount both (a) allocated to such
Certificate in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed to the Holder of such Certificate in reduction of the Certificate
Principal Balance thereof pursuant to this Section 4.01 from Net Monthly Excess
Cashflow or from amounts paid under the Policy and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.

          SECTION 4.02. Statements to Certificateholders.

          On each Distribution Date, the Trust Administrator shall prepare and
forward by mail to each Holder of the Regular Certificates, a statement as to
the distributions made on such Distribution Date setting forth:

               (i) the amount of the distribution made on such Distribution Date
          to the Holders of the Certificates of each Class allocable to
          principal, and the amount of the distribution made on such
          Distribution Date to the Holders of the Class P Certificates allocable
          to Prepayment Charges;

               (ii) the amount of the distribution made on such Distribution
          Date to the Holders of the Certificates of each Class allocable to
          interest;

               (iii) the aggregate Servicing Fee received by each Servicer and
          the aggregate Master Servicing Fee received by the Master Servicer
          during the related Due Period and such other customary information as
          the Trust Administrator deems necessary or desirable, or which a
          Certificateholder reasonably requests, to enable Certificateholders to
          prepare their tax returns;

               (iv) the Guaranteed Distribution for such Distribution Date and
          the respective portions thereof allocable to principal and interest;


                                      -90-


<PAGE>



               (v) the amount of any Insurance Payment made to the Class A
          Certificates on such Distribution Date, the amount of any
          reimbursement payment made to the Certificate Insurer on such
          Distribution Date pursuant to Section 4.01(a)(2)(iv) and the amount of
          Cumulative Insurance Payments after giving effect to any such
          Insurance Payment to the Class A Certificateholders or any such
          reimbursement payment to the Certificate Insurer;

               (vi) the aggregate amount of P&I Advances for such Distribution
          Date;

               (vii) the aggregate Stated Principal Balance of the Mortgage
          Loans and any REO Properties as of the close of business on such
          Distribution Date;

               (viii) the number, aggregate principal balance, weighted average
          remaining term to maturity and weighted average Mortgage Rate of the
          Mortgage Loans as of the related Due Date;

               (ix) the number and aggregate unpaid principal balance of
          Mortgage Loans (a) delinquent 30 to 59 days, (b) delinquent 60 to 89
          days, (c) delinquent 90 or more days, in each case, as of the last day
          of the preceding calendar month, (d) as to which foreclosure
          proceedings have been commenced and (e) with respect to which the
          related Mortgagor has filed for protection under applicable bankruptcy
          laws, with respect to whom bankruptcy proceedings are pending or with
          respect to whom bankruptcy protection is in force;

               (x) with respect to any Mortgage Loan that became an REO Property
          during the preceding calendar month, the loan number of such Mortgage
          Loan, the unpaid principal balance and the Stated Principal Balance of
          such Mortgage Loan as of the date it became an REO Property;

               (xi) the book value of any REO Property as of the close of
          business on the last Business Day of the calendar month preceding the
          Distribution Date;

               (xii) the aggregate amount of Principal Prepayments made during
          the related Prepayment Period;

               (xiii) the aggregate amount of Realized Losses incurred during
          the related Prepayment Period (or, in the case of Bankruptcy Losses
          allocable to interest, during the related Due Period), separately
          identifying whether such Realized Losses constituted Bankruptcy Losses
          and the aggregate amount of Realized Losses incurred since the Closing
          Date;

               (xiv) the aggregate amount of extraordinary Trust Fund expenses
          withdrawn from the Collection Account or the Distribution Account for
          such Distribution Date;

               (xv) the aggregate Certificate Principal Balance of each Class of
          Certificates, after giving effect to the distributions, and
          allocations of Realized Losses, made on such Distribution Date,
          separately identifying any reduction thereof due to allocations of
          Realized Losses;


                                      -91-


<PAGE>



               (xvi) the Certificate Factor for each such Class of Certificates
          applicable to such Distribution Date;

               (xvii) the Interest Distribution Amounts in respect of each Class
          of Class A Certificates and the Class CE Certificates for such
          Distribution Date and, in the case of each Class of Class A
          Certificates, the portion thereof, if any, paid under the Policy or
          (in the event of a Deficiency Event) remaining unpaid following the
          distributions made in respect of the Class A Certificates on such
          Distribution Date and, in the case of the Class A Certificates or the
          Class CE Certificates, separately identifying any reduction thereof
          due to allocations of Realized Losses, Prepayment Interest Shortfalls
          and Relief Act Interest Shortfalls;

               (xviii) the aggregate amount of any Prepayment Interest Shortfall
          for such Distribution Date, to the extent not covered by payments by
          the Servicers pursuant to Section 3.24;

               (xix) the aggregate amount of Relief Act Interest Shortfalls for
          such Distribution Date;

               (xx) the Required Overcollateralized Amount for such Distribution
          Date;

               (xxi) the Overcollateralization Increase Amount, if any, for such
          Distribution Date;

               (xxii) the Overcollateralization Reduction Amount, if any, for
          such Distribution Date; and

               (xxiii) the Pass-Through Rate applicable to the Class CE
          Certificates for such Distribution Date.

          In the case of information furnished pursuant to subclauses (i)
through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

          Within a reasonable period of time after the end of each calendar
year, the Trust Administrator shall furnish to each Person who at any time
during the calendar year was a Holder of a Regular Certificate a statement
containing the information set forth in subclauses (i) through (iii) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trust Administrator
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trust Administrator pursuant to
any requirements of the Code as from time to time are in force.

          On each Distribution Date, the Trust Administrator shall forward to
the Depositor, the Trustee, to each Holder of a Residual Certificate, the
Certificate Insurer and to the Servicers, a copy of the reports forwarded to the
Regular Certificateholders on such Distribution Date and a statement setting
forth the amounts, if any, actually distributed with respect to the Residual
Certificates, respectively, on such Distribution Date.


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          Within a reasonable period of time after the end of each calendar
year, the Trust Administrator shall furnish to each Person who at any time
during the calendar year was a Holder of a Residual Certificate a statement
setting forth the amount, if any, actually distributed with respect to the
Residual Certificates, as appropriate, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.

          The Trust Administrator shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trust Administrator's duties are limited to
the extent that the Trust Administrator receives timely reports as required from
the Servicers.

          On each Distribution Date the Trust Administrator shall provide
Bloomberg Financial Markets, L.P. ("Bloomberg") CUSIP level factors for each
class of Certificates as of such Distribution Date, using a format and media
mutually acceptable to the Trust Administrator and Bloomberg.

          SECTION 4.03. Remittance Reports; P&I Advances.

          (a) On the Business Day following each Determination Date, each
Servicer shall deliver to the Trust Administrator, the Trustee and the
Certificate Insurer by telecopy (or by such other means as such Servicer, the
Trust Administrator, the Trustee or the Certificate Insurer, as the case may be,
may agree from time to time) a Remittance Report with respect to the related
Distribution Date. On the same date, the related Servicer shall forward to the
Trust Administrator by overnight mail or internet mail an electronic file
containing the information set forth in such Remittance Report with respect to
the related Distribution Date. The Trust Administrator hereby agrees to forward
a copy of the Remittance Report received from Option One in electronic format to
the Master Servicer by the Business Day following its receipt thereof. Such
Remittance Reports will include (i) the amount of P&I Advances to be made by the
related Servicer in respect of the related Distribution Date, the aggregate
amount of P&I Advances outstanding after giving effect to such P&I Advances, and
the aggregate amount of Nonrecoverable P&I Advances in respect of such
Distribution Date and (ii) such other information with respect to the Mortgage
Loans as the Trust Administrator may reasonably require to perform the
calculations necessary to make the distributions contemplated by Section 4.01
and to prepare the statements to Certificateholders contemplated by Section
4.02. Not later than the close of business on the third Business Day prior to
the Distribution Date, the Trust Administrator shall deliver or cause to be
delivered to the Certificate Insurer, in addition to the information provided on
the Remittance Report, a report setting forth (i) the Guaranteed Distribution
for such Distribution Date, separately identifying the portions thereof
allocable to principal and interest; (ii) the Available Distribution Amount for
such Distribution Date; (iii) whether the Available Distribution Amount expected
to be on deposit in the Distribution Account on such Distribution Date will be
sufficient to cover the Guaranteed Distribution and, if not, the amount of the
shortfall; (iv) with respect to any reimbursement to be made to the Certificate
Insurer on such Distribution Date pursuant to Section 4.01(a)(2)(iv), the
amount, if any, allocable to principal and the amount allocable to interest; and
(v) Cumulative Insurance Payments after giving effect to the distributions to be
made on such Distribution Date. The Trust Administrator shall not be responsible
(except with regard to any information regarding the Prepayment Charges to the
extent set forth below) to recompute, recalculate or verify any information
provided to it by the Servicers. Notwithstanding the foregoing, in connection
with any Principal Prepayment on any Mortgage Loan listed on Schedule 2 hereto,
the Trust Administrator shall verify that the related Prepayment Charge was
delivered to the Trust Administrator for deposit in the Distribution

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Account in the amount set forth on such Schedule 2 or that such Prepayment
Charge was waived in accordance with the terms hereof.

          (b) The amount of P&I Advances to be made by each Servicer for any
Distribution Date shall equal, subject to Section 4.03(d), the sum of (i) the
aggregate amount of Monthly Payments (with each interest portion thereof net of
the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans (other than with respect to any Balloon Loan with a delinquent
Balloon Payment as described in clause (iii) below), which Monthly Payments were
delinquent as of the close of business on the related Determination Date, plus
(ii) with respect to each REO Property (other than with respect to any REO
Property relating to a Balloon Loan with a Delinquent Balloon Payment as
described in clause (iv) below), which REO Property was acquired during or prior
to the related Prepayment Period and as to which REO Property an REO Disposition
did not occur during the related Prepayment Period, an amount equal to the
excess, if any, of the REO Imputed Interest on such REO Property for the most
recently ended calendar month, over the net income from such REO Property
transferred to the Distribution Account pursuant to Section 3.23 for
distribution on such Distribution Date, plus (iii) with respect to each Balloon
Loan with a delinquent Balloon Payment, an amount equal to the assumed monthly
principal and interest payment (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date based on
the original principal amortization schedule for such Balloon Loan assuming such
Mortgage Loan was not a Balloon Loan, plus (iv) with respect to each REO
Property relating to a Balloon Loan with a delinquent Balloon Payment, which REO
Property was acquired during or prior to the related Prepayment Period and as to
which REO Property an REO Disposition did not occur during the related
Prepayment Period, an amount equal to the excess, if any, of the assumed monthly
principal and interest payment (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date based on
the original principal amortization schedule for the related Balloon Loan
assuming such Mortgage Loan was not a Balloon Loan, over the net income from
such REO Property transferred to the Distribution Account pursuant to Section
3.23 for distribution on such Distribution Date.

          On or before 5:00 p.m. New York time on the Servicer Remittance Date,
each Servicer shall remit in immediately available funds to the Trust
Administrator for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by such
Servicer in discharge of any such P&I Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of P&I Advances to be
made by such Servicer with respect to the Mortgage Loans and REO Properties. Any
amounts held for future distribution and so used shall be appropriately
reflected in the related Servicer's records and replaced by the such Servicer by
deposit in the Collection Account on or before any future Servicer Remittance
Date to the extent that the Available Distribution Amount for the related
Distribution Date (determined without regard to P&I Advances to be made on the
Servicer Remittance Date) shall be less than the total amount that would be
distributed to the Classes of Certificateholders pursuant to Section 4.01 on
such Distribution Date if such amounts held for future distributions had not
been so used to make P&I Advances. The Trust Administrator will provide notice
to the Trustee, the applicable Servicer and the Certificate Insurer by telecopy
by the close of business on the Business Day immediately following the Servicer
Remittance Date in the event that the amount remitted by such Servicer to the
Trust Administrator on such date is less than the P&I Advances required to be
made by such Servicer for the related Distribution Date.


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<PAGE>



          (c) The obligation of each Servicer to make such P&I Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section.

          (d) Notwithstanding anything herein to the contrary, no P&I Advance or
Servicing Advance shall be required to be made hereunder by either Servicer if
such P&I Advance or Servicing Advance would, if made, constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance, respectively.
The determination by either Servicer that it has made a Nonrecoverable P&I
Advance or a Nonrecoverable Servicing Advance or that any proposed P&I Advance
or Servicing Advance, if made, would constitute a Nonrecoverable P&I Advance or
Nonrecoverable Servicing Advance, respectively, shall be evidenced by an
Officers' Certificate of such Servicer delivered to the Depositor, the Trust
Administrator, the Trustee and the Certificate Insurer.

          (e) If, at the close of business on the third Business Day prior to
any Distribution Date, the funds on deposit in the Distribution Account are less
than the Guaranteed Distribution for such Distribution Date, the Trust
Administrator shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Distribution Date.

          SECTION 4.04. Allocation of Realized Losses.

          (a) Prior to each Determination Date, each Servicer shall determine as
to each Mortgage Loan and REO Property: (i) the total amount of Realized Losses,
if any, incurred in connection with any Final Recovery Determinations made
during the related Prepayment Period; (ii) whether and the extent to which such
Realized Losses constituted Bankruptcy Losses; and (iii) the respective portions
of such Realized Losses allocable to interest and allocable to principal. Prior
to each Determination Date, each Servicer shall also determine as to each
Mortgage Loan: (i) the total amount of Realized Losses, if any, incurred in
connection with any Deficient Valuations made during the related Prepayment
Period; and (ii) the total amount of Realized Losses, if any, incurred in
connection with Debt Service Reductions in respect of Monthly Payments due
during the related Due Period. The information described in the two preceding
sentences that is to be supplied by the Servicers shall be evidenced by an
Officers' Certificate delivered to the Trust Administrator, the Trustee and the
Certificate Insurer by the related Servicer prior to the Determination Date
immediately following the end of (i) in the case of Bankruptcy Losses allocable
to interest, the Due Period during which any such Realized Loss was incurred,
and (ii) in the case of all other Realized Losses, the Prepayment Period during
which any such Realized Loss was incurred.

          (b) All Realized Losses on the Mortgage Loans allocated to any REMIC
II Regular Interest pursuant to Section 4.04(c) on the Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date as follows:
first, to Net Monthly Excess Cashflow; second, to the Class CE Certificates,
until the Certificate Principal Balance thereof has been reduced to zero; and
third, among the Class A Certificates on a PRO RATA basis. All Realized Losses
to be allocated to the Certificate Principal Balances of all Classes on any
Distribution Date shall be so allocated after the actual distributions to be
made on such date as provided above. All references above to the Certificate
Principal Balance of any Class of Certificates shall be to the Certificate
Principal Balance of such Class immediately prior to the relevant Distribution
Date, before reduction thereof by any Realized Losses, in each case to be
allocated to such Class of Certificates, on such Distribution Date. No
allocations of Realized Losses pursuant to this

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<PAGE>



Section 4.04 shall affect any liability of the Certificate Insurer with respect
to such amounts under the Policy.

          Any allocation of Realized Losses to a Class A Certificate on any
Distribution Date shall be made by reducing the Certificate Principal Balance
thereof by the amount so allocated; any allocation of Realized Losses to a Class
CE Certificate shall be made by reducing the amount otherwise payable in respect
thereof pursuant to Section 4.01(a)(2)(viii). No allocations of any Realized
Losses shall be made to the Certificate Principal Balance of the Class P
Certificates.

          As used herein, an allocation of a Realized Loss on a "PRO RATA basis"
among two or more specified Classes of Certificates means an allocation on a PRO
RATA basis, among the various Classes so specified, to each such Class of
Certificates on the basis of their then outstanding Certificate Principal
Balances prior to giving effect to distributions to be made on such Distribution
Date. All Realized Losses and all other losses allocated to a Class of
Certificates hereunder will be allocated among the Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.

          (c) All Realized Losses on the Mortgage Loans shall be allocated by
the Trust Administrator on each Distribution Date to the following REMIC I
Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I Regular Interest I-LT1 and REMIC
I Regular Interest I-LT9 up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT9 up to an aggregate amount equal to the REMIC I Principal Loss Allocation
Amount, 98% and 2%, respectively; third, 98% to the Uncertificated Balance of
REMIC I Regular Interest I-LT1, 1% to the Uncertificated Balances of REMIC I
Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest
I-LT4, REMIC I Regular Interest I-LT5, REMIC I Regular Interest I-LT6, REMIC I
Regular Interest I-LT7 and REMIC I Regular Interest I-LT8 on a PRO RATA basis
and 1% to REMIC I Regular Interest I-LT9.

          (d) All Realized Losses on the REMIC II Regular Interests shall be
allocated by the Trust Administrator on each Distribution Date among the REMIC
II Regular Interests in the proportion that Realized Losses are allocated to the
related Uncertificated Corresponding Component; Realized Losses allocated to
principal on REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3,
REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5, REMIC I Regular
Interest I-LT6, REMIC I Regular Interest I-LT7 and REMIC I Regular Interest
I-LT8 shall be allocated to REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest
II-LT5, REMIC II Regular Interest II-LT6, REMIC II Regular Interest II-LT7 and
REMIC II Regular Interest II-LT8, respectively.

          As used herein, an allocation of a Realized Loss on a "PRO RATA basis"
among the REMIC I Regular Interests (other than REMIC I Regular Interest I-LTP)
means an allocation on a PRO RATA basis among the REMIC I Regular Interests
(other than REMIC I Regular Interest I-LTP) on the basis of their then
outstanding Uncertificated Balances, in each case prior to giving effect to
distributions to be made on such Distribution Date.

          SECTION 4.05. Compliance with Withholding Requirements .

          Notwithstanding any other provision of this Agreement, the Trust
Administrator shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trust Administrator reasonably believes are applicable under the Code. The

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<PAGE>



consent of Certificateholders shall not be required for such withholding. In the
event the Trust Administrator does withhold any amount from interest or original
issue discount payments or advances thereof to any Certificateholder pursuant to
federal withholding requirements, the Trust Administrator shall indicate the
amount withheld to such Certificateholders.

          SECTION 4.06. Exchange Commission; Additional Information.

          Within 15 days after each Distribution Date, the Trust Administrator
shall file with the Commission via the Electronic Data Gathering and Retrieval
System, a Form 8-K with a copy of the statement to Certificateholders for such
Distribution Date as an exhibit thereto. Prior to _________________, the Trust
Administrator shall file a Form 15 Suspension Notification with respect to the
Trust Fund, if applicable. Prior to ______________, the Trust Administrator
shall file a Form 10-K, substantially in the form attached hereto as Exhibit H,
with respect to the Trust Fund. The Depositor hereby grants to the Trust
Administrator a limited power of attorney to execute and file each such document
on behalf of the Depositor. Such power of attorney shall continue until the
earlier of (i) receipt by the Trust Administrator from the Depositor of written
termination of such power of attorney and (ii) the termination of the Trust
Fund. Upon request, the Trust Administrator shall deliver to the Depositor a
copy of any Form 8-K or Form 10-K filed pursuant to this Section 4.06.




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<PAGE>




                                    ARTICLE V

                                THE CERTIFICATES

          SECTION 5.01. The Certificates.

          (a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.

          The Certificates will be substantially in the forms annexed hereto as
Exhibits A-1 through A-12. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.

          Upon original issue, the Certificates shall be executed by the
Trustee, and authenticated and delivered by the Trustee or the Trust
Administrator to or upon the order of the Depositor. The Certificates shall be
executed by manual or facsimile signature on behalf of the Trustee or the Trust
Administrator by an authorized signatory. Certificates bearing the manual or
facsimile signatures of individuals who were at any time the proper officers of
the Trustee or the Trust Administrator shall bind the Trustee or the Trust
Administrator, as applicable, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form provided herein
executed by the Trustee or the Trust Administrator by manual signature, and such
certificate of authentication shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.

          (b) The Class A Certificates shall initially be issued as one or more
Certificates held by the Book-Entry Custodian or, if appointed to hold such
Certificates as provided below, the Depository and registered in the name of the
Depository or its nominee and, except as provided below, registration of such
Certificates may not be transferred by the Trust Administrator except to another
Depository that agrees to hold such Certificates for the respective Certificate
Owners with Ownership Interests therein. The Certificate Owners shall hold their
respective Ownership Interests in and to such Certificates through the
book-entry facilities of the Depository and, except as provided below, shall not
be entitled to definitive, fully registered Certificates ("Definitive
Certificates") in respect of such Ownership Interests. All transfers by
Certificate Owners of their respective Ownership Interests in the Book-Entry
Certificates shall be made in accordance with the procedures established by the
Depository Participant or brokerage firm representing such Certificate Owner.
Each Depository Participant shall only transfer the Ownership Interests in the
Book-Entry Certificates of Certificate Owners it represents or of brokerage
firms for which it acts as agent in accordance with the Depository's normal
procedures. The Trust Administrator is hereby initially appointed as the
Book-Entry Custodian and hereby agrees to act as such in accordance herewith and
in accordance with the agreement that it has with the Depository authorizing it
to act as such. The Book- Entry Custodian may, and, if it is no longer qualified
to act as such, the Book-Entry Custodian shall, appoint, by a written instrument
delivered to the Depositor, each Servicer, the Certificate Insurer, the Trustee
and, if the Trust Administrator is not the Book-Entry Custodian, the Trust
Administrator, any other transfer agent (including the Depository or any
successor Depository) to act as Book-Entry Custodian under such conditions as
the predecessor Book-Entry Custodian and the Depository or any successor

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Depository may prescribe, provided that the predecessor Book-Entry Custodian
shall not be relieved of any of its duties or responsibilities by reason of any
such appointment of other than the Depository. If the Trust Administrator
resigns or is removed in accordance with the terms hereof, the Trustee, the
successor trust administrator or, if it so elects, the Depository shall
immediately succeed to its predecessor's duties as Book-Entry Custodian. The
Depositor shall have the right to inspect, and to obtain copies of, any
Certificates held as Book-Entry Certificates by the Book-Entry Custodian.

          The Trust Administrator, the Trustee, each Servicer, the Certificate
Insurer and the Depositor may for all purposes (including the making of payments
due on the Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book- Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trust Administrator may establish a
reasonable record date in connection with solicitations of consents from or
voting by Certificateholders and shall give notice to the Depository of such
record date.

          If (i)(A) the Depositor advises the Trust Administrator in writing
that the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trust
Administrator in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Event of
Default, Certificate Owners representing in the aggregate not less than 51% of
the Ownership Interests of the Book-Entry Certificates advise the Trust
Administrator through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trust Administrator shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trust Administrator of the Book-Entry Certificates
by the Book-Entry Custodian or the Depository, as applicable, accompanied by
registration instructions from the Depository for registration of transfer, the
Trust Administrator shall issue the Definitive Certificates. Such Definitive
Certificates will be issued in minimum denominations of $10,000, except that any
beneficial ownership that was represented by a Book-Entry Certificate in an
amount less than $10,000 immediately prior to the issuance of a Definitive
Certificate shall be issued in a minimum denomination equal to the amount
represented by such Book-Entry Certificate. None of the Depositor, the
Servicers, the Trust Administrator or the Trustee shall be liable for any delay
in the delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trust Administrator, to the extent applicable with respect to such
Definitive Certificates, and the Trust Administrator shall recognize the Holders
of the Definitive Certificates as Certificateholders hereunder.

          SECTION 5.02. Registration of Transfer and Exchange of Certificates.

          (a) The Trust Administrator shall cause to be kept at one of the
offices or agencies to be appointed by the Trust Administrator in accordance
with the provisions of Section 8.11 a Certificate Register for the Certificates
in which, subject to such reasonable regulations as it may prescribe, the Trust
Administrator shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided.

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<PAGE>



          (b) No transfer of any Class CE Certificate, Class P Certificate or
Residual Certificate shall be made unless that transfer is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), and effective registration or qualification under applicable
state securities laws, or is made in a transaction that does not require such
registration or qualification. In the event that such a transfer of a Class CE
Certificate, Class P Certificate or Residual Certificate is to be made without
registration or qualification (other than in connection with the initial
transfer of any such Certificate by the Depositor to an affiliate of the
Depositor), the Trust Administrator shall require receipt of: (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Certificateholder desiring to effect the
transfer and from such Certificateholder's prospective transferee, substantially
in the forms attached hereto as Exhibit F-1; and (ii) in all other cases, an
Opinion of Counsel satisfactory to it that such transfer may be made without
such registration or qualification (which Opinion of Counsel shall not be an
expense of the Trust Fund or of the Depositor, the Trust Administrator, the
Trustee, each Servicer in its capacity as such, any Sub-Servicer or the
Certificate Insurer), together with copies of the written certification(s) of
the Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. None of the Depositor, the Trust Administrator or the Trustee is
obligated to register or qualify any such Certificates under the 1933 Act or any
other securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of any such
Certificate shall, and does hereby agree to, indemnify the Trust Administrator,
the Trustee, the Depositor, the Servicers and the Certificate Insurer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          (c) No transfer of a Class CE Certificate, Class P Certificate or
Residual Certificate or any interest therein shall be made to any Plan subject
to ERISA or Section 4975 of the Code, any Person acting, directly or indirectly,
on behalf of any such Plan or any Person acquiring such Certificates with "Plan
Assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trust Administrator, the Trustee, the Certificate Insurer and the Servicers
are provided with an Opinion of Counsel which establishes to the satisfaction of
the Depositor, the Trust Administrator, the Trustee, the Certificate Insurer and
the Servicers that the purchase of such Certificates is permissible under
applicable law, will not constitute or result in any prohibited transaction
under ERISA or Section 4975 of the Code and will not subject the Depositor,
either Servicer, the Trust Administrator, the Trustee, the Certificate Insurer
or the Trust Fund to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in this Agreement, which Opinion of Counsel shall not be an expense
of the Depositor, the Servicers, the Trust Administrator, the Trustee, the
Certificate Insurer or the Trust Fund. In lieu of such Opinion of Counsel, any
prospective Transferee of such Certificates may provide a certification in the
form of Exhibit G to this Agreement (or other form acceptable to the Depositor,
the Trust Administrator, the Trustee, the Certificate Insurer and the
Servicers), which the Trust Administrator may rely upon without further inquiry
or investigation. Neither an Opinion of Counsel nor any certification will be
required in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor (in which case, the Depositor or any
affiliate thereof shall have deemed to have represented that such affiliate is
not a Plan or a Person investing Plan Assets) and the Trust Administrator shall
be entitled to conclusively rely upon a representation (which, upon the request
of the Trust Administrator, shall be a written representation) from the
Depositor of the status of such transferee as an affiliate of the Depositor.

          (d) (i) Each Person who has or who acquires any Ownership Interest in
a Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to

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<PAGE>



be bound by the following provisions and to have irrevocably authorized the
Trust Administrator or its designee under clause (iii)(A) below to deliver
payments to a Person other than such Person and to negotiate the terms of any
mandatory sale under clause (iii)(B) below and to execute all instruments of
Transfer and to do all other things necessary in connection with any such sale.
The rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

                         (A) Each Person holding or acquiring any Ownership
                    Interest in a Residual Certificate shall be a Permitted
                    Transferee and shall promptly notify the Trust Administrator
                    of any change or impending change in its status as a
                    Permitted Transferee.

                         (B) In connection with any proposed Transfer of any
                    Ownership Interest in a Residual Certificate, the Trust
                    Administrator shall require delivery to it, and shall not
                    register the Transfer of any Residual Certificate until its
                    receipt of, an affidavit and agreement (a "Transfer
                    Affidavit and Agreement," in the form attached hereto as
                    Exhibit F-2) from the proposed Transferee, in form and
                    substance satisfactory to the Trust Administrator,
                    representing and warranting, among other things, that such
                    Transferee is a Permitted Transferee, that it is not
                    acquiring its Ownership Interest in the Residual Certificate
                    that is the subject of the proposed Transfer as a nominee,
                    trustee or agent for any Person that is not a Permitted
                    Transferee, that for so long as it retains its Ownership
                    Interest in a Residual Certificate, it will endeavor to
                    remain a Permitted Transferee, and that it has reviewed the
                    provisions of this Section 5.02(d) and agrees to be bound by
                    them.

                         (C) Notwithstanding the delivery of a Transfer
                    Affidavit and Agreement by a proposed Transferee under
                    clause (B) above, if a Responsible Officer of the Trust
                    Administrator who is assigned to this transaction has actual
                    knowledge that the proposed Transferee is not a Permitted
                    Transferee, no Transfer of an Ownership Interest in a
                    Residual Certificate to such proposed Transferee shall be
                    effected.

                         (D) Each Person holding or acquiring any Ownership
                    Interest in a Residual Certificate shall agree (x) to
                    require a transferor affidavit (a "Transferor Affidavit," in
                    the form attached hereto as Exhibit F-2) from any other
                    Person to whom such Person attempts to transfer its
                    Ownership Interest in a Residual Certificate and (y) not to
                    transfer its Ownership Interest unless it provides a
                    Transferor Affidavit (in the form attached hereto as Exhibit
                    F-2) to the Trust Administrator stating that, among other
                    things, it has no actual knowledge that such other Person is
                    not a Permitted Transferee.

                         (E) Each Person holding or acquiring an Ownership
                    Interest in a Residual Certificate, by purchasing an
                    Ownership Interest in such Certificate, agrees to give the
                    Trust Administrator written notice that it is a
                    "pass-through interest holder" within the meaning of
                    temporary Treasury regulation Section 1.67- 3T(a)(2)(i)(A)
                    immediately upon acquiring an Ownership Interest in a
                    Residual Certificate, if it is, or is holding an Ownership
                    Interest in a Residual Certificate on behalf of, a
                    "pass-through interest holder."


                                      -101-


<PAGE>



               (ii) The Trust Administrator will register the Transfer of any
          Residual Certificate only if it shall have received the Transfer
          Affidavit and Agreement and all of such other documents as shall have
          been reasonably required by the Trust Administrator as a condition to
          such registration. In addition, no Transfer of a Residual Certificate
          shall be made unless the Trust Administrator shall have received a
          representation letter from the Transferee of such Certificate to the
          effect that such Transferee is a Permitted Transferee.

               (iii) (A) If any purported Transferee shall become a Holder of a
          Residual Certificate in violation of the provisions of this Section
          5.02(d), then the last preceding Permitted Transferee shall be
          restored, to the extent permitted by law, to all rights as holder
          thereof retroactive to the date of registration of such Transfer of
          such Residual Certificate. The Trust Administrator shall be under no
          liability to any Person for any registration of Transfer of a Residual
          Certificate that is in fact not permitted by this Section 5.02(d) or
          for making any payments due on such Certificate to the holder thereof
          or for taking any other action with respect to such holder under the
          provisions of this Agreement.

                     (B) If any purported Transferee shall become a holder of a
          Residual Certificate in violation of the restrictions in this Section
          5.02(d) and to the extent that the retroactive restoration of the
          rights of the holder of such Residual Certificate as described in
          clause (iii)(A) above shall be invalid, illegal or unenforceable, then
          the Trust Administrator shall have the right, without notice to the
          holder or any prior holder of such Residual Certificate, to sell such
          Residual Certificate to a purchaser selected by the Trust
          Administrator on such terms as the Trust Administrator may choose.
          Such purported Transferee shall promptly endorse and deliver each
          Residual Certificate in accordance with the instructions of the Trust
          Administrator. Such purchaser may be the Trust Administrator itself or
          any Affiliate of the Trust Administrator. The proceeds of such sale,
          net of the commissions (which may include commissions payable to the
          Trust Administrator or its Affiliates), expenses and taxes due, if
          any, will be remitted by the Trust Administrator to such purported
          Transferee. The terms and conditions of any sale under this clause
          (iii)(B) shall be determined in the sole discretion of the Trust
          Administrator, and the Trust Administrator shall not be liable to any
          Person having an Ownership Interest in a Residual Certificate as a
          result of its exercise of such discretion.

               (iv) The Trust Administrator shall make available to the Internal
          Revenue Service and those Persons specified by the REMIC Provisions
          all information necessary to compute any tax imposed (A) as a result
          of the Transfer of an Ownership Interest in a Residual Certificate to
          any Person who is a Disqualified Organization, including the
          information described in Treasury regulations sections 1.860D-1(b)(5)
          and 1.860E-2(a)(5) with respect to the "excess inclusions" of such
          Residual Certificate and (B) as a result of any regulated investment
          company, real estate investment trust, common trust fund, partnership,
          trust, estate or organization described in Section 1381 of the Code
          that holds an Ownership Interest in a Residual Certificate having as
          among its record holders at any time any Person which is a
          Disqualified Organization. Reasonable compensation for providing such
          information may be accepted by the Trust Administrator.

               (v) The provisions of this Section 5.02(d) set forth prior to
          this subsection (v) may be modified, added to or eliminated, provided
          that there shall have been delivered to the Trust Administrator at the
          expense of the party seeking to modify, add to or eliminate any such
          provision the following:

                                      -102-


<PAGE>



                    (A) written notification from each Rating Agency to the
               effect that the modification, addition to or elimination of such
               provisions will not cause such Rating Agency to downgrade its
               then-current ratings of any Class of Certificates; and

                    (B) an Opinion of Counsel, in form and substance
               satisfactory to the Trust Administrator, to the effect that such
               modification of, addition to or elimination of such provisions
               will not cause any of REMIC I, REMIC II or REMIC III to cease to
               qualify as a REMIC and will not cause any of REMIC I, REMIC II or
               REMIC III, as the case may be, to be subject to an entity-level
               tax caused by the Transfer of any Residual Certificate to a
               Person that is not a Permitted Transferee or a Person other than
               the prospective transferee to be subject to a REMIC-tax caused by
               the Transfer of a Residual Certificate to a Person that is not a
               Permitted Transferee.

          (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the Trust
Administrator maintained for such purpose pursuant to Section 8.11, the Trust
Administrator shall execute, authenticate and deliver, in the name of the
designated Transferee or Transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.

          (f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trust Administrator maintained for
such purpose pursuant to Section 8.11. Whenever any Certificates are so
surrendered for exchange the Trust Administrator shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for transfer or
exchange shall (if so required by the Trust Administrator) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trust Administrator duly executed by, the Holder thereof or his attorney
duly authorized in writing.

          (g) No service charge to the Certificateholders shall be made for any
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.

          (h) All Certificates surrendered for transfer and exchange shall be
canceled and destroyed by the Trust Administrator in accordance with its
customary procedures.

          SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.

          If (i) any mutilated Certificate is surrendered to the Trust
Administrator, or the Trust Administrator receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate, and (ii) there is
delivered to each of the Trustee and the Trust Administrator such security or
indemnity as may be required by it to save it harmless, then, in the absence of
actual knowledge by the Trust Administrator or the Trustee that such Certificate
has been acquired by a bona fide purchaser, the Trustee, or the Trust
Administrator on behalf of the Trustee shall execute, and the Trustee or the
Trust Administrator shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of the same Class and of like denomination and Percentage Interest. Upon

                                      -103-


<PAGE>



the issuance of any new Certificate under this Section, the Trust Administrator
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Trust
Administrator) connected therewith. Any replacement Certificate issued pursuant
to this Section shall constitute complete and indefeasible evidence of ownership
in the applicable REMIC created hereunder, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be found at any time.

          SECTION 5.04. Persons Deemed Owners.

          The Depositor, each Servicer, the Trust Administrator, the Trustee,
the Certificate Insurer and any agent of any of them may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 4.01 and for all
other purposes whatsoever, and none of the Depositor, the Servicers, the Trust
Administrator, the Trustee or any agent of any of them shall be affected by
notice to the contrary.

          SECTION 5.05. Certain Available Information.

          On or prior to the date of the first sale of any Class CE Certificate,
Class P Certificate or Residual Certificate to an Independent third party, the
Depositor shall provide to the Trust Administrator ten copies of any private
placement memorandum or other disclosure document used by the Depositor in
connection with the offer and sale of such Certificate. In addition, if any such
private placement memorandum or disclosure document is revised, amended or
supplemented at any time following the delivery thereof to the Trust
Administrator, the Depositor promptly shall inform the Trust Administrator of
such event and shall deliver to the Trust Administrator ten copies of the
private placement memorandum or disclosure document, as revised, amended or
supplemented. The Trust Administrator shall maintain at its Corporate Trust
Office and shall make available free of charge during normal business hours for
review by any Holder of a Certificate or any Person identified to the Trust
Administrator as a prospective transferee of a Certificate, originals or copies
of the following items: (i) in the case of a Holder or prospective transferee of
a Class CE Certificate, Class P Certificate or Residual Certificate, the related
private placement memorandum or other disclosure document relating to such Class
of Certificates, in the form most recently provided to the Trust Administrator;
and (ii) in all cases, (A) this Agreement and any amendments hereof entered into
pursuant to Section 12.01, (B) all monthly statements required to be delivered
to Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trust Administrator since the Closing
Date pursuant to Section 11.01(h), (D) any and all Officers' Certificates
delivered to the Trust Administrator by either Servicer since the Closing Date
to evidence such Servicer's determination that any P&I Advance or Servicing
Advance was, or if made, would be a Nonrecoverable P&I Advance or Nonrecoverable
Servicing Advance, respectively, and (E) any and all Officers' Certificates
delivered to the Trust Administrator by the Servicers since the Closing Date
pursuant to Section 4.04(a). Copies and mailing of any and all of the foregoing
items will be available from the Trust Administrator upon request at the expense
of the Person requesting the same.

                                      -104-


<PAGE>



                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICERS

          SECTION 6.01. Liability of the Depositor and the Servicers.

          The Depositor and each Servicer shall be liable in accordance herewith
only to the extent of the obligations specifically imposed by this Agreement and
undertaken hereunder by the Depositor and each Servicer herein.

          SECTION 6.02. Merger or Consolidation of the Depositor or the
                        Servicers.

          Subject to the following paragraph, the Depositor will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation. Subject to the following paragraph, each
Servicer will keep in full effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation. The
Depositor and each Servicer will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.

          The Depositor or either Servicer may be merged or consolidated with or
into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or such Servicer shall be a party, or any Person succeeding
to the business of the Depositor or such Servicer, shall be the successor of the
Depositor or such Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
the successor or surviving Person to such Servicer shall be qualified to service
mortgage loans on behalf of Fannie Mae or Freddie Mac; and provided further that
the Rating Agencies' ratings and shadow ratings of the Class A Certificates in
effect immediately prior to such merger or consolidation will not be qualified,
reduced or withdrawn as a result thereof (as evidenced by a letter to such
effect from the Rating Agencies).

          SECTION 6.03. Limitation on Liability of the Depositor, the Servicers
                        and Others.

          None of the Depositor, either Servicer or any of the directors,
officers, employees or agents of the Depositor or either Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, either Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Depositor or such Servicer pursuant hereto, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
each Servicer and any director, officer, employee or agent of the Depositor or
such Servicer may rely in good faith on any document of any kind which, PRIMA
FACIE, is properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor, each Servicer and any director, officer,
employee or agent of the Depositor or such Servicer shall be indemnified and
held harmless by the Trust Fund against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense relating to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) or any loss,
liability or expense

                                      -105-


<PAGE>



incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor either Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Depositor and each Servicer may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, unless the
Depositor or either Servicer acts without the consent of the Certificate Insurer
prior to a Certificate Insurer Default or without the consent of Holders of
Certificates entitled to at least 51% of the Voting Rights after a Certificate
Insurer Default, the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and each Servicer shall be entitled to be reimbursed therefor from the
Collection Account as and to the extent provided in Section 3.11, any such right
of reimbursement being prior to the rights of the Certificateholders to receive
any amount in the Collection Account.

          SECTION 6.04. Limitation on Resignation of the Servicers.

          Neither Servicer nor the Master Servicer shall resign from the
obligations and duties hereby imposed on it except upon determination that its
duties hereunder are no longer permissible under applicable law. Any such
determination pursuant to the preceding sentence permitting the resignation of
the Master Servicer or either Servicer shall be evidenced by an Opinion of
Counsel to such effect obtained at the expense of such Master Servicer or
Servicer and delivered to the Trustee and the Trust Administrator. No
resignation of the Master Servicer or either Servicer shall become effective
until the Master Servicer (if the Master Servicer is not the resigning
Servicer), the Trustee, the Trust Administrator or a successor servicer shall
have assumed such Master Servicer's or Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.

          Except as expressly provided herein, neither Servicer nor the Master
Servicer shall assign or transfer any of its rights, benefits or privileges
hereunder to any other Person, or delegate to or subcontract with, or authorize
or appoint any other Person to perform any of the duties, covenants or
obligations to be performed by such Master Servicer or Servicer hereunder. The
foregoing prohibition on assignment shall not prohibit either Servicer from
designating a Subservicer as payee of any indemnification amount payable to the
related Servicer hereunder; provided, however, that as provided in Section 3.06
hereof, no Subservicer shall be a third-party beneficiary hereunder and the
parties hereto shall not be required to recognize any Subservicer as an
indemnitee under this Agreement. If, pursuant to any provision hereof, the
duties of the Master Servicer or either Servicer are transferred to a successor
servicer, the entire amount of the Master Servicing Fee or Servicing Fee and
other compensation payable to such Master Servicer or Servicer pursuant hereto
shall thereafter be payable to such successor servicer.

          SECTION 6.05. Rights of the Depositor in Respect of the Servicers.

          The Master Servicer and each Servicer shall afford (and any
Sub-Servicing Agreement shall provide that each Sub-Servicer shall afford) the
Depositor, the Trustee, the Trust Administrator and the Certificate Insurer,
upon reasonable notice, during normal business hours, access to all records
maintained by the such Master Servicer or Servicer (and any such Sub-Servicer)
in respect of such Master Servicer's or Servicer's rights and obligations
hereunder and access to officers of such Master Servicer or

                                      -106-


<PAGE>



Servicer (and those of any such Sub-Servicer) responsible for such obligations.
Upon request, the Master Servicer and each Servicer shall furnish to the
Depositor, the Trustee, the Trust Administrator and the Certificate Insurer its
(and any such Sub-Servicer's) most recent financial statements and such other
information relating to such Master Servicer's or Servicer's capacity to perform
its obligations under this Agreement as it possesses (and that any such
Sub-Servicer possesses). To the extent such information is not otherwise
available to the public, the Depositor, the Trustee, the Trust Administrator and
the Certificate Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Master Servicer's or the related
Servicer's written consent, except as required pursuant to this Agreement or to
the extent that it is appropriate to do so (i) in working with legal counsel,
auditors, taxing authorities or other governmental agencies or (ii) pursuant to
any law, rule, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Depositor, the
Trustee, the Trust Administrator, the Certificate Insurer or the Trust Fund, and
in any case, the Depositor, the Trustee, the Trust Administrator or the
Certificate Insurer, as the case may be, shall use its best efforts to assure
the confidentiality of any such disseminated non-public information. The
Depositor may, but is not obligated to, enforce the obligations of the Master
Servicer and each Servicer under this Agreement and may, but is not obligated
to, perform, or cause a designee to perform, any defaulted obligation of the
Master Servicer or either Servicer under this Agreement or exercise the rights
of the Master Servicer or either Servicer under this Agreement; provided that
neither Servicer nor the Master Servicer shall be relieved of any of its
obligations under this Agreement by virtue of such performance by the Depositor
or its designee. The Depositor shall not have any responsibility or liability
for any action or failure to act by the Master Servicer or either Servicer and
is not obligated to supervise the performance of the Master Servicer or either
Servicer under this Agreement or otherwise.

                                      -107-


<PAGE>



                                   ARTICLE VII

                                     DEFAULT

          SECTION 7.01. Servicer Events of Default.

          (a) "Servicer Event of Default," wherever used herein, means any one
of the following events; provided, however, that neither Servicer shall be
obligated or liable for any default by the other Servicer:

               (i) any failure by the related Servicer to remit to the Trust
          Administrator for distribution to the Certificateholders any payment
          (other than a P&I Advance required to be made from its own funds on
          any Servicer Remittance Date pursuant to Section 4.03) required to be
          made under the terms of the Certificates and this Agreement which
          continues unremedied for a period of one Business Day after the date
          upon which written notice of such failure, requiring the same to be
          remedied, shall have been given to such Servicer by the Depositor, the
          Certificate Insurer, the Trustee or the Trust Administrator (in which
          case notice shall be provided by telecopy), or to such Servicer, the
          Depositor, the Certificate Insurer, the Trustee and the Trust
          Administrator by the Holders of Certificates entitled to at least 25%
          of the Voting Rights; or

               (ii) any failure on the part of the related Servicer duly to
          observe or perform in any material respect any other of the covenants
          or agreements on the part of such Servicer contained in this
          Agreement, or the breach by the related Servicer of any representation
          and warranty contained in Section 2.05, which continues unremedied for
          a period of 30 days after the earlier of (i) the date on which written
          notice of such failure, requiring the same to be remedied, shall have
          been given to the related Servicer by the Depositor, the Certificate
          Insurer, the Trustee, the Trust Administrator or to the related
          Servicer, the Depositor, the Certificate Insurer, the Trustee and the
          Trust Administrator by the Holders of Certificates entitled to at
          least 25% of the Voting Rights and (ii) actual knowledge of such
          failure by a Servicing Officer of the related Servicer; or

               (iii) a decree or order of a court or agency or supervisory
          authority having jurisdiction in the premises in an involuntary case
          under any present or future federal or state bankruptcy, insolvency or
          similar law or the appointment of a conservator or receiver or
          liquidator in any insolvency, readjustment of debt, marshalling of
          assets and liabilities or similar proceeding, or for the winding-up or
          liquidation of its affairs, shall have been entered against the
          related Servicer and such decree or order shall have remained in force
          undischarged or unstayed for a period of 90 days; or

               (iv) the related Servicer shall consent to the appointment of a
          conservator or receiver or liquidator in any insolvency, readjustment
          of debt, marshalling of assets and liabilities or similar proceedings
          of or relating to it or of or relating to all or substantially all of
          its property; or

               (v) the related Servicer shall admit in writing its inability to
          pay its debts generally as they become due, file a petition to take
          advantage of any applicable insolvency or reorganization statute, make
          an assignment for the benefit of its creditors, or voluntarily suspend
          payment of its obligations; or

                                      -108-


<PAGE>



               (vi) there shall have occurred, and the Certificate Insurer shall
          have notified the related Servicer, the Trustee and the Trust
          Administrator of, an event of default by such Servicer under the
          Insurance Agreement, provided (except in the case of a default by such
          Servicer under Section 5.01(f) of the Insurance Agreement) that no
          Certificate Insurer Default exists; or

               (vii) any failure of the related Servicer to make any P&I Advance
          on any Servicer Remittance Date required to be made from its own funds
          pursuant to Section 4.03 which continues unremedied until 5:00 p.m.
          New York time on the second Business Day immediately following the
          Servicer Remittance Date.

Subject to Article IX, if a Servicer Event of Default described in clauses (i)
through (vi) of this Section shall occur, then, and in each and every such case,
so long as such Servicer Event of Default shall not have been remedied, the
Depositor, the Certificate Insurer or the Trustee may (with the consent of the
Certificate Insurer), and at the written direction of the Holders of
Certificates entitled to at least 51% of Voting Rights (with the consent of the
Certificate Insurer), the Trustee shall, by notice in writing to the defaulting
Servicer (and to the Depositor, the Trust Administrator, the Master Servicer and
the Certificate Insurer if given by the Trustee or to the Trustee, the Master
Servicer and the Trust Administrator if given by the Depositor or the
Certificate Insurer), terminate all of the rights and obligations of such
Servicer in its capacity as a Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. In
connection with the foregoing, in the event a Servicer Event of Default has
occurred with respect to Option One, the Master Servicer has the right to
request the Certificate Insurer to terminate all of the rights and obligations
of Option One as Servicer under this Agreement; provided, however such decision
to terminate shall be solely at the discretion of the Certificate Insurer.
Subject to Article IX, if a Servicer Event of Default described in clause (vii)
hereof shall occur, the Trustee shall, by notice in writing to the defaulting
Servicer, the Certificate Insurer, the Master Servicer, the Trust Administrator
and the Depositor, terminate all of the rights and obligations of such Servicer
in its capacity as a Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof. On or after the receipt by the defaulting
Servicer of such written notice, all authority and power of such Servicer under
this Agreement, whether with respect to the Certificates (other than as a Holder
of any Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass
to and be vested in the Master Servicer (or if the Master Servicer is the
defaulting Servicer, the Trust Administrator, on behalf of the Trustee) pursuant
to and under this Section, and, without limitation, the Master Servicer (or if
the Master Servicer is the defaulting Servicer, the Trust Administrator, on
behalf of the Trustee) is hereby authorized and empowered, as attorney-in-fact
or otherwise, to execute and deliver, on behalf of and at the expense of such
Servicer, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. The
defaulting Servicer agrees promptly (and in any event no later than ten Business
Days subsequent to such notice) to provide the Master Servicer (or if the Master
Servicer is the defaulting Servicer, the Trust Administrator) with all documents
and records requested by it to enable it to assume such Servicer's functions
under this Agreement, and to cooperate with the Master Servicer or the Trust
Administrator and the Trustee, as the case may be, in effecting the termination
of such Servicer's responsibilities and rights under this Agreement, including,
without limitation, the transfer within one Business Day to the Master Servicer
(or if the Master Servicer is the defaulting Servicer, the Trust Administrator)
for administration by it of all cash amounts which at the time shall be or
should have been credited by such Servicer to the Collection Account held by or
on behalf of such Servicer, the Distribution Account, the Expense Account, the
Policy Payments Account or any REO Account or Servicing Account held by or on
behalf of such Servicer or thereafter be received with respect to the Mortgage
Loans or any REO Property serviced by

                                      -109-


<PAGE>



such Servicer (provided, however, that the related Servicer shall continue to be
entitled to receive all amounts accrued or owing to it under this Agreement on
or prior to the date of such termination, whether in respect of P&I Advances or
otherwise, and shall continue to be entitled to the benefits of Section 6.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 7.01, each of the Trustee and
the Trust Administrator shall not be deemed to have knowledge of a Servicer
Event of Default unless a Responsible Officer of the Trustee or the Trust
Administrator, as applicable, assigned to and working in the Trustee's or the
Trust Administrator's, as the case may be, Corporate Trust Office has actual
knowledge thereof or unless written notice of any event which is in fact such a
Servicer Event of Default is received by the Trustee or the Trust Administrator,
as applicable, and such notice references the Certificates, the Trust Fund or
this Agreement. Notwithstanding the foregoing, in the event the Master Servicer
is terminated as Servicer hereunder, it shall also be terminated as Master
Servicer.

          Each Servicer hereby covenants and agrees to act as a Servicer under
this Agreement for an initial term, commencing on the Closing Date and ending on
______________, which term shall be extendable by the Certificate Insurer for
successive terms of three calendar months thereafter, until the termination of
the Trust Fund pursuant to Article X. Each such notice of extension (a "Servicer
Extension Notice") shall be delivered by the Certificate Insurer to the Trustee,
the Trust Administrator and the related Servicer. Each Servicer hereby agrees
that, upon its receipt of any such Servicer Extension Notice, such Servicer
shall become bound for the duration of the term covered by such Servicer
Extension Notice to continue as a Servicer subject to and in accordance with the
other provisions of this Agreement. The Trust Administrator agrees that if as of
the fifteenth (15th) day prior to the last day of any term of a Servicer the
Trust Administrator shall not have received any Servicer Extension Notice in
respect of that Servicer from the Certificate Insurer, the Trust Administrator
will within five (5) days thereafter, give written notice of such non-receipt to
the Certificate Insurer, the Trustee and the related Servicer. The failure of
the Certificate Insurer to deliver a Servicer Extension Notice by the end of a
calendar term shall result in the termination of the related Servicer (in its
capacity as Servicer and Master Servicer, in the case of the Master Servicer).
If the term of the related Servicer shall expire without the Certificate Insurer
having delivered to such Servicer a Servicer Extension Notice, but the related
Servicer shall continue without objection from the Trust Administrator, the
Trustee or the Certificate Insurer to perform the functions of servicer
hereunder (and in the absence of ground for termination under any agreement
referred to in Section 7.04), the related Servicer shall be entitled to receive
a prorated portion of the Servicing Fee specified hereunder for the time during
which it shall so act; PROVIDED, that it is understood and agreed that the
foregoing provision for payment of the prorated Servicing Fee is intended solely
to avoid unjust enrichment of the Trust Fund and does not contemplate or give
rise to any implicit renewal of such Servicer's term. The foregoing provisions
of this paragraph shall not apply to the Trust Administrator or the Trustee in
the event the Trust Administrator or the Trustee, as applicable, succeeds to the
rights and obligations of the related Servicer and the Trust Administrator or
the Trustee, as applicable, shall continue in such capacity until the earlier of
the termination of this Agreement pursuant to Article X or the appointment of a
successor servicer, but shall apply to the Master Servicer if the Master
Servicer succeeds to the rights and obligations of Option One as Servicer.

          SECTION 7.02. Master Servicer, Trust Administrator or Trustee to Act;
                        Appointment of Successor.

          (a) (1) On and after the time a defaulting Servicer receives a notice
of termination, the Master Servicer (or if the Master Servicer is the defaulting
Servicer, the Trust Administrator and in the event the Trust Administrator fails
in its obligation, the Trustee) shall be the successor in all respects to such
Servicer in its capacity as a Servicer under this Agreement and the transactions
set forth or provided

                                      -110-


<PAGE>



for herein, and all the responsibilities, duties and liabilities relating
thereto and arising thereafter shall be assumed by the Master Servicer, the
Trust Administrator or the Trustee, as applicable, (except for any
representations or warranties of the such Servicer under this Agreement, the
responsibilities, duties and liabilities contained in Section 2.03(c) and the
obligation to deposit amounts in respect of losses pursuant to Section 3.12) by
the terms and provisions hereof including, without limitation, the such
Servicer's obligations to make P&I Advances pursuant to Section 4.03; provided,
however, that if the Trust Administrator or the Trustee, as applicable, is
prohibited by law or regulation from obligating itself to make advances
regarding delinquent mortgage loans, then the Trust Administrator or the
Trustee, as applicable, shall not be obligated to make P&I Advances pursuant to
Section 4.03; and provided further, that any failure to perform such duties or
responsibilities caused by such Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Master
Servicer, the Trust Administrator or the Trustee, as applicable, as successor to
such Servicer hereunder. As compensation therefor, the Master Servicer, the
Trust Administrator or the Trustee, as applicable, shall be entitled to the
Servicing Fee and all funds relating to the Mortgage Loans to which such
defaulting Servicer would have been entitled if it had continued to act
hereunder. Notwithstanding the above and subject to Section 7.02(a)(2) below,
the Trust Administrator or the Trustee, as applicable, may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if it is prohibited
by law from making advances regarding delinquent mortgage loans or if the
Certificate Insurer or if the Holders of Certificates entitled to at least 51%
of the Voting Rights so request in writing to the Trust Administrator or the
Trustee, as applicable, promptly appoint or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing institution
selected by the Certificate Insurer and acceptable to each Rating Agency and
having a net worth of not less than $15,000,000, as the successor to such
defaulting Servicer under this Agreement in the assumption of all or any part of
the responsibilities, duties or liabilities of such Servicer under this
Agreement.

               (2) No appointment of a successor to a defaulting Servicer under
this Agreement shall be effective until the assumption by the successor of all
of such Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Trust
Administrator or the Trustee, as applicable, may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the applicable Servicer as such hereunder. The
Depositor, the Master Servicer, the Trustee, the Trust Administrator and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Pending appointment of a successor
to a defaulting Servicer under this Agreement, the Trust Administrator or the
Trustee, as applicable, shall act in such capacity as hereinabove provided.

          (b) If either Servicer fails to remit to the Trust Administrator for
distribution to the Certificateholders any payment required to be made under the
terms of this Agreement (for purposes of this Section 7.02(b), a "Remittance")
because such Servicer is the subject of a proceeding under the federal
Bankruptcy Code and the making of such Remittance is prohibited by Section 362
of the federal Bankruptcy Code, the Trust Administrator shall (and in the event
the Trust Administrator fails in its obligation, the Trustee) upon notice of
such prohibition, regardless of whether it has received a notice of termination
under Section 7.01, advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Distribution Date. The Trust
Administrator or the Trustee, as applicable, shall be obligated to make such
advance only if (i) such advance, in the good faith judgment of the Trust
Administrator or the Trustee, as applicable, can reasonably be expected to be
ultimately recoverable from Stayed Funds and (ii) the Trust Administrator or the
Trustee, as applicable, is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trust
Administrator or the deposit thereof in the Distribution Account by such
Servicer, a

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<PAGE>



trustee in bankruptcy or a federal bankruptcy court, the Trust Administrator or
the Trustee, as applicable, may recover the amount so advanced, without
interest, by withdrawing such amount from the Distribution Account; however,
nothing in this Agreement shall be deemed to affect the Trust Administrator's or
Trustee's, as applicable, rights to recover from such Servicer's own funds
interest on the amount of any such advance. If the Trust Administrator or the
Trustee, as the case may be, at any time makes an advance under this Subsection
which it later determines in its good faith judgment will not be ultimately
recoverable from the Stayed Funds with respect to which such advance was made,
the Trust Administrator or the Trustee, as applicable, shall be entitled to
reimburse itself for such advance, without interest, by withdrawing from the
Distribution Account, out of amounts on deposit therein, an amount equal to the
portion of such advance attributable to the Stayed Funds.

          SECTION 7.03. Notification to Certificateholders.

          (a) Upon any termination of either Servicer pursuant to Section 7.01
above or any appointment of a successor to such Servicer pursuant to Section
7.02 above, the Trust Administrator shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.

          (b) Not later than the later of 60 days after the occurrence of any
event, which constitutes or which, with notice or lapse of time or both, would
constitute a Servicer Event of Default or five days after a Responsible Officer
of the Trustee or the Trust Administrator becomes aware of the occurrence of
such an event, the Trustee or the Trust Administrator shall transmit (or, in the
case of the Trustee, the Trustee shall cause the Trust Administrator to
transmit) by mail to all Holders of Certificates notice of each such occurrence,
unless such default or Servicer Event of Default shall have been cured or
waived.

          SECTION 7.04. Waiver of Servicer Events of Default.

          Subject to Article IX, the Holders representing at least 66% of the
Voting Rights evidenced by all Classes of Certificates affected by any default
or Servicer Event of Default hereunder, with the written consent of the
Certificate Insurer, may waive such default or Servicer Event of Default;
PROVIDED, HOWEVER, that a default or Servicer Event of Default under clause (i)
or (vi) of Section 7.01 may be waived only by all of the Holders of the Regular
Certificates with the written consent of the Certificate Insurer. Upon any such
waiver of a default or Servicer Event of Default, such default or Servicer Event
of Default shall cease to exist and shall be deemed to have been remedied for
every purpose hereunder. No such waiver shall extend to any subsequent or other
default or Servicer Event of Default or impair any right consequent thereon
except to the extent expressly so waived.

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<PAGE>



                                  ARTICLE VIII

               CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

          SECTION 8.01. Duties of Trustee and Trust Administrator.

          Each of the Trustee and the Trust Administrator, prior to the
occurrence of a Servicer Event of Default and after the curing of all Servicer
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. During a
Servicer Event of Default, each of the Trustee and the Trust Administrator shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. Any permissive right of the Trustee or the Trust Administrator
enumerated in this Agreement shall not be construed as a duty.

          Each of the Trustee and the Trust Administrator, upon receipt of all
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to it, which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement. If any
such instrument is found not to conform to the requirements of this Agreement in
a material manner, it shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to its
satisfaction, it will provide notice thereof to the Certificateholders and the
Certificate Insurer.

          No provision of this Agreement shall be construed to relieve the
Trustee or the Trust Administrator from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided, however, that:

               (i) Prior to the occurrence of a Servicer Event of Default, and
          after the curing of all such Servicer Events of Default which may have
          occurred, the duties and obligations of each of the Trustee and the
          Trust Administrator shall be determined solely by the express
          provisions of this Agreement, neither the Trustee nor the Trust
          Administrator shall be liable except for the performance of such
          duties and obligations as are specifically set forth in this
          Agreement, no implied covenants or obligations shall be read into this
          Agreement against the Trustee or the Trust Administrator and, in the
          absence of bad faith on the part of the Trustee or the Trust
          Administrator, as applicable, the Trustee or the Trust Administrator,
          as the case may be, may conclusively rely, as to the truth of the
          statements and the correctness of the opinions expressed therein, upon
          any certificates or opinions furnished to the Trustee or the Trust
          Administrator, as the case may be, that conform to the requirements of
          this Agreement;

               (ii) Neither the Trustee nor the Trust Administrator shall be
          personally liable for an error of judgment made in good faith by a
          Responsible Officer or Responsible Officers of it unless it shall be
          proved that it was negligent in ascertaining the pertinent facts; and

               (iii) Neither the Trustee nor the Trust Administrator shall be
          personally liable with respect to any action taken, suffered or
          omitted to be taken by it in good faith in accordance with the
          direction of the Certificate Insurer or Holders of Certificates
          entitled to at least 25% of the Voting Rights relating to the time,
          method and place of conducting

                                      -113-


<PAGE>



          any proceeding for any remedy available to it or exercising any trust
          or power conferred upon it under this Agreement.

          SECTION 8.02. Certain Matters Affecting the Trustee and the Trust
                        Administrator.

          (a) Except as otherwise provided in Section 8.01:

               (i) Each of the Trustee and the Trust Administrator may request
          and rely upon and shall be protected in acting or refraining from
          acting upon any resolution, Officers' Certificate, certificate of
          auditors or any other certificate, statement, instrument, opinion,
          report, notice, request, consent, order, appraisal, bond or other
          paper or document reasonably believed by it to be genuine and to have
          been signed or presented by the proper party or parties;

               (ii) Each of the Trustee and the Trust Administrator may consult
          with counsel and any Opinion of Counsel shall be full and complete
          authorization and protection in respect of any action taken or
          suffered or omitted by it hereunder in good faith and in accordance
          with such Opinion of Counsel;

               (iii) Neither the Trustee nor the Trust Administrator shall be
          under any obligation to exercise any of the trusts or powers vested in
          it by this Agreement or to institute, conduct or defend any litigation
          hereunder or in relation hereto at the request, order or direction of
          any of the Certificateholders, pursuant to the provisions of this
          Agreement, unless such Certificateholders shall have offered to the
          Trustee or the Trust Administrator, as applicable, reasonable security
          or indemnity against the costs, expenses and liabilities which may be
          incurred therein or thereby; nothing contained herein shall, however,
          relieve the Trustee or the Trust Administrator of the obligation, upon
          the occurrence of a Servicer Event of Default (which has not been
          cured or waived), to exercise such of the rights and powers vested in
          it by this Agreement, and to use the same degree of care and skill in
          their exercise as a prudent person would exercise or use under the
          circumstances in the conduct of such person's own affairs;

               (iv) Neither the Trustee nor the Trust Administrator shall be
          personally liable for any action taken, suffered or omitted by it in
          good faith and believed by it to be authorized or within the
          discretion or rights or powers conferred upon it by this Agreement;

               (v) Prior to the occurrence of a Servicer Event of Default
          hereunder and after the curing of all Servicer Events of Default which
          may have occurred, neither the Trustee nor the Trust Administrator
          shall be bound to make any investigation into the facts or matters
          stated in any resolution, certificate, statement, instrument, opinion,
          report, notice, request, consent, order, approval, bond or other paper
          or document, unless requested in writing to do so by the Certificate
          Insurer or by Holders of Certificates entitled to at least 25% of the
          Voting Rights; provided, however, that if the payment within a
          reasonable time to the Trustee or the Trust Administrator, as
          applicable, of the costs, expenses or liabilities likely to be
          incurred by it in the making of such investigation is, in the opinion
          of the Trustee or the Trust Administrator, as applicable, not
          reasonably assured to the Trustee or the Trust Administrator, as
          applicable, by such Certificateholders or the Certificate

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<PAGE>



          Insurer, the Trustee or the Trust Administrator, as applicable, may
          require reasonable indemnity against such expense, or liability from
          such Certificateholders or the Certificate Insurer as a condition to
          taking any such action;

               (vi) Each of the Trustee and the Trust Administrator may execute
          any of the trusts or powers hereunder or perform any duties hereunder
          either directly or by or through agents or attorneys; and

               (vii) Neither the Trustee nor the Trust Administrator shall be
          personally liable for any loss resulting from the investment of funds
          held in the Collection Account or the Expense Account at the direction
          of the related Servicer pursuant to Section 3.12.

          (b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.

          SECTION 8.03. Neither Trustee nor Trust Administrator Liable for
                        Certificates or Mortgage Loans.

          The recitals contained herein and in the Certificates (other than the
signature of the Trustee or the Trust Administrator, on behalf of the Trustee,
the authentication of the Trustee or the Trust Administrator on the
Certificates, the acknowledgments of the Trustee and the Trust Administrator
contained in Article II and the representations and warranties of the Trustee
and the Trust Administrator in Section 8.12) shall be taken as the statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness. Neither the Trustee nor the Trust
Administrator makes any representations or warranties as to the validity or
sufficiency of this Agreement (other than as specifically set forth in Section
8.12) or of the Certificates (other than the signature of the Trustee, or the
Trust Administrator on behalf of the Trustee, and authentication of the Trustee
or the Trust Administrator on the Certificates) or of any Mortgage Loan or
related document. Neither the Trustee nor the Trust Administrator shall be
accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or either Servicer in respect of
the Mortgage Loans or deposited in or withdrawn from the Collection Account by
either Servicer, other than any funds held by or on behalf of the Trustee or the
Trust Administrator in accordance with Section 3.10.

          SECTION 8.04. Trustee and Trust Administrator May Own Certificates.

          Each of the Trustee and the Trust Administrator in its individual
capacity or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee or Trust
Administrator, as applicable.

          SECTION 8.05. Trustee's and Trust Administrator's Fees and Expenses.

          The Trust Administrator shall withdraw from the Distribution Account
on each Distribution Date and pay to itself the related portion of the
Administration Fee and pay to the Trustee the related portion of the
Administration Fee and, to the extent that the funds therein are at anytime
insufficient for such purpose, the Master Servicer shall pay such fees. Each of
the Trustee and the Trust Administrator

                                      -115-


<PAGE>



and any director, officer, employee or agent of the Trustee or the Trust
Administrator, as applicable, shall be indemnified by the Trust Fund and held
harmless against any loss, liability or expense (not including expenses,
disbursements and advances incurred or made by the Trustee or the Trust
Administrator, as applicable, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
or Trust Administrator's, as the case may be, performance in accordance with the
provisions of this Agreement) incurred by the Trustee or the Trust
Administrator, as applicable, in connection with any claim or legal action or
any pending or threatened claim or legal action arising out of or in connection
with the acceptance or administration of its obligations and duties under this
Agreement, other than any loss, liability or expense (i) resulting from any
breach of either Servicer's (and in the case of the Trustee, the Trust
Administrator's or in the case of the Trust Administrator, the Trustee's)
obligations in connection with this Agreement, (ii) that constitutes a specific
liability of the Trustee or the Trust Administrator, as applicable, pursuant to
Section 11.01(g) or (iii) any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties hereunder
or in the case of the Trust Administrator, as a result of a breach of the Trust
Administrator's obligations under Article XI hereof. Each Servicer agrees to
indemnify the Trustee and the Trust Administrator, from, and hold each harmless
against, any loss, liability or expense arising in respect of any breach by such
Servicer of its obligations in connection with this Agreement. Such indemnity
shall survive the termination or discharge of this Agreement and the resignation
or removal of the Trustee or the Trust Administrator, as the case may be. Any
payment hereunder made by either Servicer to the Trustee or the Trust
Administrator shall be from such Servicer's own funds, without reimbursement
from REMIC I therefor.

          SECTION 8.06. Eligibility Requirements for Trustee and Trust
                        Administrator.

          Each of the Trustee and the Trust Administrator hereunder shall at all
times be a corporation or an association (other than the Depositor, either
Originator, the Seller, either Servicer or any Affiliate of the foregoing)
organized and doing business under the laws of any state or the United States of
America, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 (or a member of a bank
holding company whose capital and surplus is at least $50,000,000) and subject
to supervision or examination by federal or state authority. If such corporation
or association publishes reports of conditions at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of conditions so published. In
case at any time the Trustee or the Trust Administrator shall cease to be
eligible in accordance with the provisions of this Section, the Trustee or the
Trust Administrator, as the case may be, shall resign immediately in the manner
and with the effect specified in Section 8.07.

          SECTION 8.07. Resignation and Removal of the Trustee and the Trust
                        Administrator.

          Either of the Trustee or the Trust Administrator may at any time
resign and be discharged from the trust hereby created by giving written notice
thereof to the Depositor, the Certificate Insurer, each Servicer and to the
Certificateholders and, if the Trustee is resigning, to the Trust Administrator,
or, if the Trust Administrator is resigning, to the Trustee. Upon receiving such
notice of resignation, the Depositor shall, with the written consent of the
Certificate Insurer, promptly appoint a successor trustee or trust administrator
(which may be the same Person in the event both the Trustee and the Trust
Administrator resign or are removed) by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee or Trust Administrator
and to the successor trustee or trust administrator, as applicable.

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<PAGE>



A copy of such instrument shall be delivered to the Certificateholders, the
Certificate Insurer, the Trustee or Trust Administrator, as applicable, and each
Servicer by the Depositor. If no successor trustee or trust administrator shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee or Trust
Administrator, as applicable, may petition any court of competent jurisdiction
for the appointment of a successor trustee or trust administrator, as
applicable.

          If at any time the Trustee or the Trust Administrator shall cease to
be eligible in accordance with the provisions of Section 8.06 and shall fail to
resign after written request therefor by the Depositor or the Certificate
Insurer (or in the case of the Trust Administrator, the Trustee), or if at any
time the Trustee or the Trust Administrator shall become incapable of acting, or
shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or the
Trust Administrator or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or the Trust Administrator or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor (or in the case of the Trust Administrator, the
Trustee) may remove the Trustee or the Trust Administrator, as applicable, and
appoint a successor trustee or trust administrator (which may be the same Person
in the event both the Trustee and the Trust Administrator resign or are removed)
by written instrument, in duplicate, which instrument shall be delivered to the
Trustee or Trust Administrator, as the case may be, so removed and to the
successor trustee or trust administrator. A copy of such instrument shall be
delivered to the Certificateholders, the Certificate Insurer, the Trustee or the
Trust Administrator, as applicable, and each Servicer by the Depositor.

          The Certificate Insurer or the Holders of Certificates entitled to at
least 51% of the Voting Rights, with the written consent of the Certificate
Insurer, may at any time remove the Trustee or the Trust Administrator and
appoint a successor trustee or trust administrator by written instrument or
instruments, in triplicate, signed by the Certificate Insurer or such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to the Depositor, one complete set to the Trustee or the
Trust Administrator, as the case may be, so removed and one complete set to the
successor so appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and each Servicer by the Depositor.
In addition, if the Trustee has knowledge that the Trust Administrator has
breached any of its duties under this Agreement, the Trustee, with the consent
of the Certificate Insurer, may remove the Trust Administrator in the same
manner as provided in the prior sentence. For purposes of this Section, the
Trustee shall not be deemed to have knowledge of a breach by the Trust
Administrator of any of its duties hereunder, unless a Responsible Officer of
the Trustee, assigned to and working in the Trustee's Corporate Trust Office has
actual knowledge thereof or unless written notice of any event which is in fact
such a breach is received by the Trustee, and such notice references the
Certificates, the Trust Fund or this Agreement.

          Any resignation or removal of the Trustee or the Trust Administrator
and appointment of a successor trustee or trust administrator, as the case may
be, pursuant to any of the provisions of this Section shall not become effective
until acceptance of appointment by the successor trustee or trust administrator
as provided in Section 8.08. Notwithstanding the foregoing, in the event the
Trust Administrator advises the Trustee that it is unable to continue to perform
its obligations pursuant to the terms of this Agreement prior to the appointment
of a successor, the Trustee shall be obligated to perform such obligations until
a new trust administrator is appointed. Such performance shall be without
prejudice to any claim by a party hereto or beneficiary hereof resulting from
the Trust Administrator's breach of its obligations hereunder.


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<PAGE>



          SECTION 8.08. Successor Trustee or Trust Administrator.

          Any successor trustee or trust administrator appointed as provided in
Section 8.07 shall execute, acknowledge and deliver to the Depositor, the
Certificate Insurer, the Trustee or the Trust Administrator, as applicable, and
its predecessor trustee or trust administrator an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee or trust administrator shall become effective and such
successor trustee or trust administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee or trust administrator herein. The predecessor trustee or trust
administrator shall deliver to the successor trustee or trust administrator all
Mortgage Files and related documents and statements to the extent held by it
hereunder, as well as all moneys, held by it hereunder, and the Depositor and
the predecessor trustee or trust administrator shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee or trust
administrator all such rights, powers, duties and obligations.

          No successor trustee or trust administrator shall accept appointment
as provided in this Section unless at the time of such acceptance such successor
trustee or trust administrator shall be eligible under the provisions of Section
8.06 and the appointment of such successor trustee or trust administrator shall
not result in a downgrading of any Class of Certificates by either Rating
Agency, as evidenced by a letter from each Rating Agency.

          Upon acceptance of appointment by a successor trustee or trust
administrator as provided in this Section, the Depositor shall mail notice of
the succession of such trustee or trust administrator hereunder to the
Certificate Insurer and to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Depositor fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee or trust
administrator, the successor trustee or trust administrator shall cause such
notice to be mailed at the expense of the Depositor.

          Notwithstanding anything to the contrary contained herein, so long as
no Certificate Insurer Default has occurred and is continuing, the appointment
of any successor trustee or trust administrator pursuant to any provision of
this Agreement will be subject to the prior written consent of the Certificate
Insurer.

          SECTION 8.09. Merger or Consolidation of Trustee or Trust
                        Administrator.

          Any corporation or association into which either the Trustee or the
Trust Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Trust Administrator, as
the case may be, shall be a party, or any corporation or association succeeding
to the business of the Trustee or the Trust Administrator, as applicable, shall
be the successor of the Trustee or the Trust Administrator, as the case may be,
hereunder, provided such corporation or association shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.


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<PAGE>



          SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.

          Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of REMIC I or property securing the same may at the time be located, the Trustee
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee or separate trustee or separate trustees, of all or any
part of REMIC I, and to vest in such Person or Persons, in such capacity, such
title to REMIC I, or any part thereof, and, subject to the other provisions of
this Section 8.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06 hereunder and no notice to Holders of Certificates of
the appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof.

          In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to REMIC I or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the direction
of the Trustee.

          Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trust conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee, or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee.

          Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee to the extent permitted by law, without the appointment of a new or
successor trustee or co-trustee.

          SECTION 8.11. Appointment of Office or Agency.

          The Trust Administrator will appoint an office or agency in the City
of St. Paul, Minnesota where the Certificates may be surrendered for
registration of transfer or exchange, and presented for final distribution, and
where notices and demands to or upon the Trust Administrator in respect of the
Certificates and this Agreement may be served.


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          SECTION 8.12. Representations and Warranties.

          Each of the Trustee and the Trust Administrator hereby represents and
warrants to each Servicer, the Depositor, the Trustee or the Trust
Administrator, as applicable, and the Certificate Insurer, as of the Closing
Date, that:

          (i) it is a national banking association duly organized, validly
     existing and in good standing under the laws of the United States of
     America.

          (ii) The execution and delivery of this Agreement by it, and the
     performance and compliance with the terms of this Agreement by it, will not
     violate its articles of association or bylaws or constitute a default (or
     an event which, with notice or lapse of time, or both, would constitute a
     default) under, or result in the breach of, any material agreement or other
     instrument to which it is a party or which is applicable to it or any of
     its assets.

          (iii) It has the full power and authority to enter into and consummate
     all transactions contemplated by this Agreement, has duly authorized the
     execution, delivery and performance of this Agreement, and has duly
     executed and delivered this Agreement.

          (iv) This Agreement, assuming due authorization, execution and
     delivery by the other parties hereto, constitutes a valid, legal and
     binding obligation of it, enforceable against it in accordance with the
     terms hereof, subject to (A) applicable bankruptcy, insolvency,
     receivership, reorganization, moratorium and other laws affecting the
     enforcement of creditors' rights generally, and (B) general principles of
     equity, regardless of whether such enforcement is considered in a
     proceeding in equity or at law.

          (v) It is not in violation of, and its execution and delivery of this
     Agreement and its performance and compliance with the terms of this
     Agreement will not constitute a violation of, any law, any order or decree
     of any court or arbiter, or any order, regulation or demand of any federal,
     state or local governmental or regulatory authority, which violation, in
     its good faith and reasonable judgment, is likely to affect materially and
     adversely either the ability of it to perform its obligations under this
     Agreement or its financial condition.

          (vi) No litigation is pending or, to the best of its knowledge,
     threatened against it, which would prohibit it from entering into this
     Agreement or, in its good faith reasonable judgment, is likely to
     materially and adversely affect either the ability of it to perform its
     obligations under this Agreement or its financial condition.



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                                   ARTICLE IX

                CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER

          SECTION 9.01. Rights of the Certificate Insurer To Exercise Rights of
                        Class A Certificateholders.

          Each of the Depositor, the Servicers, the Trust Administrator and the
Trustee, and, by accepting its Certificate, each Class A Certificateholder,
agrees that unless a Certificate Insurer Default has occurred and is continuing,
the Certificate Insurer shall have the right to exercise all rights of the Class
A Certificateholders under this Agreement (except as provided in clause (i) of
the second paragraph of Section 12.01) without any further consent of the Class
A Certificateholders, including, without limitation:

          (a) the right to direct foreclosures upon Mortgage Loans upon failure
     of the related Servicer to do so;

          (b) the right to require the Seller or the Depositor to repurchase or
     substitute for Mortgage Loans pursuant to Section 2.03;

          (c) the right to give notices of breach or to terminate the rights and
     obligations of either Servicer as Servicer pursuant to Section 7.01;

          (d) the right to direct the actions of the Trustee and the Trust
     Administrator during the continuance of a Servicer Event of Default
     pursuant to Sections 7.01 and 7.02;

          (e) the right to consent to or direct any waivers of Servicer Events
     of Default pursuant to Section 7.04;

          (f) the right to direct the Trustee and the Trust Administrator to
     investigate certain matters pursuant to Section 8.02(a)(v); and

          (g) the right to remove the Trustee or the Trust Administrator
     pursuant to Section 8.07 hereof.

          In addition, each Class A Certificateholder agrees that, unless a
Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.

          SECTION 9.02. Trustee and the Trust Administrator To Act Solely with
                        Consent of the Certificate Insurer.

          Unless a Certificate Insurer Default has occurred and is continuing,
neither the Trustee nor the Trust Administrator shall:

          (a) agree to any amendment pursuant to Section 12.01; or

          (b) undertake any litigation pursuant to Section 8.02(a)(iii);


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without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.

          SECTION 9.03. Trust Fund and Accounts Held for Benefit of the
                        Certificate Insurer.

          The Trustee and the Trust Administrator shall hold the Trust Fund and
the Mortgage Files for the benefit of the Certificateholders and the Certificate
Insurer and all references in this Agreement (including, without limitation, in
Sections 2.01 and 2.02) and in the Certificates to the benefit of Holders of the
Certificates shall be deemed to include the Certificate Insurer. Each of the
Trustee and the Trust Administrator shall cooperate in all reasonable respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates.

          Each Servicer hereby acknowledges and agrees that it shall service and
administer the related Mortgage Loans and any REO Properties, and shall maintain
the Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, neither Servicer shall terminate any
Sub- Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither Servicer nor the Depositor shall undertake any litigation
pursuant to Section 6.03 (other than litigation to enforce their respective
rights hereunder) without the prior consent of the Certificate Insurer.

          SECTION 9.04. Claims Upon the Policy; Policy Payments Account.

          (a) If, by the close of business on the third Business Day prior to a
Distribution Date, the Trust Administrator determines that a Deficiency Amount
for any Distribution Date is greater than zero, then the Trust Administrator
shall give notice to the Certificate Insurer by telephone or telecopy of the
amount of such Deficiency Amount. Such notice of such Deficiency Amount shall be
confirmed in writing in the form set forth as Exhibit A to the Endorsement of
the Policy, to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m. New York time on the second Business
Day prior to such Distribution Date. Following Receipt (as defined in the
Policy) by the Certificate Insurer of such notice in such form, the Certificate
Insurer or the Fiscal Agent will pay any amount payable under the Policy on the
later to occur of (i) 12:00 noon New York time on the second Business Day
following such receipt and (ii) 12:00 noon New York time on the Distribution
Date to which such deficiency relates, as provided in the Endorsement to the
Policy.

          (b) The Trust Administrator shall establish a separate special purpose
trust account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trust Administrator shall have exclusive control and sole right of
withdrawal. The Trust Administrator shall deposit any amount paid under the
Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of Class A Certificates of the Guaranteed
Distribution for which a claim was made, and such amount may not be applied to
satisfy any costs, expenses or liabilities of either Servicer, the Master
Servicer, the Trustee, the Trust Administrator or the Trust Fund. Amounts paid
under the Policy shall be transferred to the Distribution Account in accordance
with the next succeeding paragraph and disbursed by the Trust Administrator to
Holders of Class A Certificates in accordance with Section 4.01(c) or Section
10.01, as

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<PAGE>



applicable. It shall not be necessary for such payments to be made by checks or
wire transfers separate from the checks or wire transfers used to pay the
Guaranteed Distribution with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Class A
Certificates to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the Certificate Register
and in the statement to be furnished to Holders of the Class A Certificates
pursuant to Section 4.02. Funds held in the Policy Payments Account shall not be
invested.

          On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trust Administrator as
a result of any claim under the Policy, to the extent required to make the
Guaranteed Distribution on such Distribution Date, shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied by
the Trust Administrator, together with the other funds to be withdrawn from the
Distribution Account pursuant to Section 4.01(c) or Section 10.01, as
applicable, directly to the payment in full of the Guaranteed Distribution due
on the Class A Certificates. Funds received by the Trust Administrator as a
result of any claim under the Policy shall be deposited by the Trust
Administrator in the Policy Payments Account and used solely for payment to the
Holders of the Class A Certificates and may not be applied to satisfy any costs,
expenses or liabilities of the Servicers, the Trustee, the Trust Administrator
or the Trust Fund. Any funds remaining in the Policy Payments Account on the
first Business Day following a Distribution Date shall be remitted to the
Certificate Insurer, pursuant to the instructions of the Certificate Insurer, by
the end of such Business Day.

          (c) The Trust Administrator shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Class A
Certificate from moneys received under the Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trust Administrator.

          (d) The Trustee and the Trust Administrator shall promptly notify the
Certificate Insurer and Fiscal Agent of any proceeding or the institution of any
action, of which a Responsible Officer of the Trustee or the Trust
Administrator, as applicable, has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any Guaranteed Distribution made with
respect to the Class A Certificates. Each Holder of the Class A Certificates, by
its purchase of such Certificates, the Servicers, the Trust Administrator and
the Trustee hereby agree that the Certificate Insurer (so long as no Certificate
Insurer Default has occurred and is continuing) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Certificate
Insurer shall be subrogated to the rights of the Master Servicer, the Servicers,
the Trustee, the Trust Administrator and each Holder of the Class A Certificates
in the conduct of any such Preference Claim, including, without limitation, all
rights of any party to an adversary proceeding action with respect to any court
order issued in connection with any such Preference Claim.

          SECTION 9.05  Effect of Payments by the Certificate Insurer;
                        Subrogation.

          Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Policy shall not be
considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such

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<PAGE>



Certificates within the meaning of Section 4.01. The Depositor, the Master
Servicer, each Servicer, the Trustee and the Trust Administrator acknowledge,
and each Holder by its acceptance of a Class A Certificate agrees, that without
the need for any further action on the part of the Certificate Insurer, the
Depositor, the Servicers, the Master Servicer, the Trustee or the Trust
Administrator (a) to the extent the Certificate Insurer makes payments, directly
or indirectly, on account of principal of or interest on any Class A
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to the rights of such Holders to receive such principal and
interest from the Trust Fund and (b) the Certificate Insurer shall be paid such
principal and interest but only from the sources and in the manner provided
herein for the payment of such principal and interest.

          The Trustee, the Trust Administrator, the Master Servicer and the
Servicers shall cooperate in all respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement without limiting the rights or
affecting the interests of the Holders as otherwise set forth herein.

          SECTION 9.06. Notices to the Certificate Insurer.

          All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.

          SECTION 9.07. Third-Party Beneficiary.

          The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.

          SECTION 9.08. Trust Administrator to Hold the Policy.

          The Trust Administrator, on behalf of the Trustee, will hold the
Policy in trust as agent for the Holders of the Class A Certificates for the
purpose of making claims thereon and distributing the proceeds thereof. Upon the
later of (i) the date upon which the Certificate Principal Balances of the Class
A Certificates have been reduced to zero and all Guaranteed Distributions have
been made and (ii) the date the Term of the Policy (as defined in the Policy)
ends, the Trust Administrator, on behalf of the Trustee, shall surrender the
Policy to the Certificate Insurer for cancellation. Neither the Policy nor the
amounts paid on the Policy will constitute part of the Trust Fund or assets of
any REMIC created by this Agreement. Each Holder of Class A Certificates, by
accepting its Certificates, appoints the Trustee and the Trust Administrator as
attorneys-in-fact for the purpose of making claims on the Policy.

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<PAGE>




                                    ARTICLE X

                                   TERMINATION

          SECTION 10.01 Termination Upon Repurchase or Liquidation of All
                        Mortgage Loans.

          (a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicers, the
Master Servicer, the Trustee and the Trust Administrator (other than the
obligations of the Servicers to the Trustee and the Trust Administrator pursuant
to Section 8.05 and of the Servicers to provide for and the Trust Administrator
to make payments in respect of the REMIC I Regular Interests, the REMIC II
Regular Interests or the Classes of Certificates as hereinafter set forth) shall
terminate upon payment to the Certificateholders and the deposit of all amounts
held by or on behalf of the Trustee and required hereunder to be so paid or
deposited on the Distribution Date coinciding with or following the earlier to
occur of (i) the purchase by the Terminator (as defined below) of all Mortgage
Loans and each REO Property remaining in REMIC I and (ii) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in REMIC I; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof. Subject to Section 3.11 hereof, the purchase by the Terminator of all
Mortgage Loans and each REO Property remaining in REMIC I shall be at a price
(the "Termination Price") equal to the greater of (A) the aggregate Purchase
Price of all the Mortgage Loans included in REMIC I, plus the appraised value of
each REO Property, if any, included in REMIC I, such appraisal to be conducted
by an appraiser mutually agreed upon by the Terminator and the Trustee in their
reasonable discretion (and approved by the Certificate Insurer in its reasonable
discretion) and (B) the aggregate fair market value of all of the assets of
REMIC I (as determined by the Terminator, the Certificate Insurer (to the extent
the Certificate Insurer is not the Terminator) and the Trustee, as of the close
of business on the third Business Day next preceding the date upon which notice
of any such termination is furnished to Certificateholders pursuant to the third
paragraph of this Section 10.01); provided, however, that in the event the
Majority Class CE Certificateholder is the Terminator, and subject to Section
3.11 hereof, the purchase by the Majority Class CE Certificateholder of all
Mortgage Loans and each REO Property remaining in REMIC I shall be at a price
equal to the greater of: (i) the amount designated in clause (A) above or (ii)
the lesser of (x) the sum of the amount designated in clause (A) above and any
amounts due under the Insurance Agreement and (y) the amount designated in
clause (B) above.

          (b) The Majority Class CE Certificateholder shall have the right and,
to the extent the Majority Class CE Certificateholder fails to exercise such
right, the Certificate Insurer shall have the right and, to the extent neither
the Majority Class CE Certificateholder nor the Certificate Insurer exercises
such right, the Master Servicer shall have the right (the party exercising such
right, the "Terminator"), to purchase all of the Mortgage Loans and each REO
Property remaining in REMIC I pursuant to clause (i) of the preceding paragraph
no later than the Determination Date in the month immediately preceding the
Distribution Date on which the Certificates will be retired; provided, however,
that the Terminator may elect to purchase all of the Mortgage Loans and each REO
Property remaining in REMIC I pursuant to clause (i) above only if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust Fund at the time of such election is reduced to less than 10%, in
the event the Majority Class CE Certificateholder is the Terminator, or 5%, in
the event the Master Servicer or the Certificate Insurer is the Terminator, in
each case of the aggregate Stated Principal Balance of the

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Mortgage Loans as of the Cut-off Date. By acceptance of the Class R-I
Certificates, the Holder of the Class R-I Certificates agrees, in connection
with any termination hereunder, to assign and transfer any amounts in excess of
par, and to the extent received in respect of such termination, to pay any such
amounts to the Holders of the Class CE Certificates.

          (c) Notice of the liquidation of the REMIC I Regular Interests shall
be given promptly by the Trust Administrator by letter to Certificateholders and
the Certificate Insurer mailed (a) in the event such notice is given in
connection with the purchase of the Mortgage Loans and each REO Property by the
Terminator, not earlier than the 15th day and not later than the 25th day of the
month next preceding the month of the final distribution on the Certificates or
(b) otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and the final payment in respect
of the REMIC I Regular Interests, the REMIC II Regular Interests and the
Certificates will be made upon presentation and surrender of the related
Certificates at the office of the Trust Administrator therein designated, (ii)
the amount of any such final payment, (iii) that no interest shall accrue in
respect of the REMIC I Regular Interests, the REMIC II Regular Interests or the
Certificates from and after the Interest Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trust
Administrator. In the event such notice is given in connection with the purchase
of all of the Mortgage Loans and each REO Property remaining in REMIC I by the
Terminator, the Terminator shall deliver to the Trust Administrator for deposit
in the Distribution Account not later than the last Business Day of the month
next preceding the month of the final distribution on the Certificates an amount
in immediately available funds equal to the above-described purchase price. The
Trust Administrator shall remit to each Servicer from such funds deposited in
the Distribution Account (i) any amounts which the related Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trust Administrator to
the related Servicer from amounts on deposit in the Distribution Account
pursuant to the terms of this Agreement, in each case prior to making any final
distributions pursuant to Section 10.01(d) below. Upon certification to the
Trust Administrator by a Servicing Officer (a copy of which certification shall
be delivered to the Certificate Insurer) of the making of such final deposit,
the Trust Administrator shall promptly release to the Terminator the Mortgage
Files for the remaining Mortgage Loans, and the Trustee shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer.

          (d) Upon presentation of the Certificates by the Certificateholders on
the final Distribution Date, the Trust Administrator shall distribute to each
Certificateholder so presenting and surrendering its Certificates the amount
otherwise distributable on such Distribution Date in accordance with Section
4.01 in respect of the Certificates so presented and surrendered. Any funds not
distributed to any Holder or Holders of Certificates being retired on such
Distribution Date because of the failure of such Holder or Holders to tender
their Certificates shall, on such date, be set aside and held in trust and
credited to the account of the appropriate non-tendering Holder or Holders. If
any Certificates as to which notice has been given pursuant to this Section
10.01 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trust Administrator shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trust
Administrator shall, directly or through an agent, (i) mail a final notice to
the remaining non-tendering Certificateholders concerning surrender of their
Certificates and (ii) pay to the Certificate Insurer any amount of such funds
which were paid by the Certificate Insurer under the Policy but shall continue
to hold any remaining funds for the benefit of non-tendering Certificateholders,
and all liability of the Certificate Insurer with respect to such

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<PAGE>



funds shall thereupon cease. The costs and expenses of maintaining the funds in
trust and of contacting such Certificateholders shall be paid out of the assets
remaining in the trust funds. If within one year after the final notice any such
Certificates shall not have been surrendered for cancellation, the Trust
Administrator shall pay to Salomon Smith Barney Inc. all such amounts, and all
rights of non-tendering Certificateholders in or to such amounts shall thereupon
cease. No interest shall accrue or be payable to any Certificateholder on any
amount held in trust by the Trust Administrator as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 10.01. Any such amounts held in trust by
the Trust Administrator shall be held in an Eligible Account and the Trust
Administrator may direct any depository institution maintaining such account to
invest the funds in one or more Permitted Investments. All income and gain
realized from the investment of funds deposited in such accounts held in trust
by the Trust Administrator shall be for the benefit of the Trust Administrator;
provided, however, that the Trust Administrator shall deposit in such account
the amount of any loss of principal incurred in respect of any such Permitted
Investment made with funds in such accounts immediately upon the realization of
such loss.

          Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.

          SECTION 10.02 Additional Termination Requirements.

          (a) In the event that the Terminator purchases all the Mortgage Loans
and each REO Property or the final payment on or other liquidation of the last
Mortgage Loan or REO Property remaining in REMIC I pursuant to Section 10.01 or
Section 10.02, the Trust Fund shall be terminated in accordance with the
following additional requirements:

               (i) The Trustee shall specify the first day in the 90-day
          liquidation period in a statement attached to REMIC I's, REMIC II's
          and REMIC III's final Tax Return pursuant to Treasury regulation
          Section 1.860F-1 and shall satisfy all requirements of a qualified
          liquidation under Section 860F of the Code and any regulations
          thereunder, as evidenced by an Opinion of Counsel obtained at the
          expense of the Terminator;

               (ii) During such 90-day liquidation period and, at or prior to
          the time of making of the final payment on the Certificates, the
          Trustee shall sell all of the assets of REMIC I to the Terminator for
          cash; and

               (iii) At the time of the making of the final payment on the
          Certificates, the Trust Administrator shall distribute or credit, or
          cause to be distributed or credited, to the Holders of the Residual
          Certificates all cash on hand in the Trust Fund (other than cash
          retained to meet claims), and the Trust Fund shall terminate at that
          time.

          (b) At the expense of the requesting Terminator (or, if the Trust Fund
is being terminated as a result of the occurrence of the event described in
clause (ii) of the first paragraph of Section 10.01, at the expense of the Trust
Administrator without the right of reimbursement from the Trust Fund), the Trust
Administrator shall prepare or cause to be prepared the documentation required
in connection with the adoption of a plan of liquidation of each of REMIC I ,
REMIC II and REMIC III pursuant to this Section 10.02.


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<PAGE>



          (c) By their acceptance of Certificates, the Holders thereof hereby
agree to authorize the Trustee to specify the 90-day liquidation period for each
of REMIC I, REMIC II and REMIC III, which authorization shall be binding upon
all successor Certificateholders.

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<PAGE>



                                   ARTICLE XI

                                REMIC PROVISIONS

          SECTION 11.01. REMIC Administration.

          (a) The Trustee shall elect to treat each of REMIC I, REMIC II and
REMIC III as a REMIC under the Code and, if necessary, under applicable state
law. Each such election will be made by the Master Servicer on behalf of the
Trustee on Form 1066 or other appropriate federal tax or information return or
any appropriate state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of REMIC I, the REMIC I Regular Interests shall be
designated as the Regular Interests in REMIC I and the Class R-I Certificates
shall be designated as the Residual Interests in REMIC I. The REMIC II Regular
Interests shall be designated as the Regular Interests in REMIC II and the Class
R-II Certificates shall be designated as the Residual Interests in REMIC II. The
Class A Certificates, the Class CE Certificates and the Class P Certificates
shall be designated as the Regular Interests in REMIC III and the Class R-III
Certificates shall be designated as the Residual Interests in REMIC III. Neither
the Trustee nor the Trust Administrator shall permit the creation of any
"interests" in REMIC I, REMIC II or REMIC III (within the meaning of Section
860G of the Code) other than the REMIC I Regular Interests, the REMIC II Regular
Interests and the interests represented by the Certificates.

          (b) The Closing Date is hereby designated as the "Startup Day" of
REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of the
Code.

          (c) The Master Servicer shall pay out of its own funds, without any
right of reimbursement, any and all expenses relating to any tax audit of the
Trust Fund (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect to any REMIC I, REMIC II or
REMIC III that involve the Internal Revenue Service or state tax authorities),
other than the expense of obtaining any tax related Opinion of Counsel except as
specified herein. The Master Servicer, as agent for all of REMIC I's, REMIC II's
and REMIC III's tax matters person shall (i) act on behalf of the Trust Fund in
relation to any tax matter or controversy involving any of REMIC I, REMIC II or
REMIC III and (ii) represent the Trust Fund in any administrative or judicial
proceeding relating to an examination or audit by any governmental taxing
authority with respect thereto. The holder of the largest Percentage Interest of
each Class of Residual Certificates shall be designated, in the manner provided
under Treasury regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1, as the tax matters person of the related REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of each Class of Residual Certificates hereby agrees to irrevocably
appoint the Master Servicer or an Affiliate as its agent to perform all of the
duties of the tax matters person for the Trust Fund.

          (d) The Master Servicer shall prepare and the Trustee shall sign and
the Trust Administrator shall file all of the Tax Returns in respect of each
REMIC created hereunder. The expenses of preparing and filing such returns shall
be borne by the Master Servicer without any right of reimbursement therefor.

          (e) The Master Servicer shall perform on behalf of each of REMIC I,
REMIC II and REMIC III all reporting and other tax compliance duties that are
the responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions

                                      -129-


<PAGE>



or other such compliance guidance, the Master Servicer shall provide (i) to any
Transferor of a Residual Certificate such information as is necessary for the
application of any tax relating to the transfer of a Residual Certificate to any
Person who is not a Permitted Transferee, (ii) to the Certificateholders such
information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption as required) and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of REMIC I, REMIC II and REMIC
III. The Depositor shall provide or cause to be provided to the Master Servicer,
within ten (10) days after the Closing Date, all information or data that the
Master Servicer reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.

          (f) The Master Servicer, each Servicer, the Trustee and the Trust
Administrator shall take such action and shall cause each REMIC created
hereunder to take such action as shall be necessary to create or maintain the
status thereof as a REMIC under the REMIC Provisions. The Master Servicer, the
Servicers, the Trustee and the Trust Administrator shall not take any action,
cause the Trust Fund to take any action or fail to take (or fail to cause to be
taken) any action that, under the REMIC Provisions, if taken or not taken, as
the case may be, could (i) endanger the status of REMIC I, REMIC II or REMIC III
as a REMIC or (ii) result in the imposition of a tax upon the Trust Fund
(including but not limited to the tax on prohibited transactions as defined in
Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth
in Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Trustee and the Trust Administrator have received an Opinion of
Counsel, addressed to the Trustee, the Trust Administrator and the Certificate
Insurer (at the expense of the party seeking to take such action but in no event
at the expense of the Trust Administrator or the Trustee) to the effect that the
contemplated action will not, with respect to any of REMIC I, REMIC II or REMIC
III, endanger such status or result in the imposition of such a tax, nor shall
the Master Servicer or the Servicers take or fail to take any action (whether or
not authorized hereunder) as to which the Trustee or the Trust Administrator has
advised it in writing that it has received an Opinion of Counsel to the effect
that an Adverse REMIC Event could occur with respect to such action; provided
that the Master Servicer and the Servicers may conclusively rely on such Opinion
of Counsel and shall incur no liability for its action or failure to act in
accordance with such Opinion of Counsel. In addition, prior to taking any action
with respect to any of REMIC I, REMIC II or REMIC III or the respective assets
of each, or causing REMIC I, REMIC II or REMIC III to take any action, which is
not contemplated under the terms of this Agreement, the Master Servicer and the
Servicers will consult with the Trustee and the Trust Administrator or its
designee, in writing, with respect to whether such action could cause an Adverse
REMIC Event to occur with respect to REMIC I, REMIC II or REMIC III, and neither
the Master Servicer nor the Servicers shall take any such action or cause REMIC
I, REMIC II or REMIC III to take any such action as to which the Trustee or the
Trust Administrator has advised it in writing that an Adverse REMIC Event could
occur; provided that the Master Servicer and the Servicers may conclusively rely
on such writing and shall incur no liability for its action or failure to act in
accordance with such writing. The Trust Administrator and the Trustee may
consult with counsel to make such written advice, and the cost of same shall be
borne by the party seeking to take the action not permitted by this Agreement,
but in no event shall such cost be an expense of the Trustee or the Trust
Administrator, as applicable. At all times as may be required by the Code, the
Trust Administrator, the Trustee, the Master Servicer, or each Servicer will
ensure that substantially all of the assets of both REMIC I and REMIC II will
consist of "qualified mortgages" as defined in Section 860G(a)(3) of the Code
and "permitted investments" as defined in Section 860G(a)(5) of the Code, to the
extent such obligations are within such party's control and not otherwise
inconsistent with the terms of this Agreement.


                                      -130-


<PAGE>



          (g) In the event that any tax is imposed on "prohibited transactions"
of any REMIC created hereunder as defined in Section 860F(a)(2) of the Code, on
the "net income from foreclosure property" of such REMIC as defined in Section
860G(c) of the Code, on any contributions to any such REMIC after the Startup
Day therefor pursuant to Section 860G(d) of the Code, or any other tax is
imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trust Administrator pursuant to Section
11.03 hereof, if such tax arises out of or results from a breach by the Trust
Administrator of any of its obligations under this Article XI, (ii) to the
Trustee pursuant to Section 11.03 hereof, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article XI,
(iii) to the Master Servicer or the related Servicer pursuant to Section 11.03
hereof, if such tax arises out of or results from a breach by the Master
Servicer or such Servicer of any of its obligations under Article III or this
Article XI, or (iv) against amounts on deposit in the Distribution Account and
shall be paid by withdrawal therefrom.

          (h) On or before April 15 of each calendar year, commencing April 15,
1999, the Master Servicer and each Servicer shall deliver to each Rating Agency
an Officer's Certificate of the Master Servicer and each Servicer stating the
Master Servicer's or such Servicer's compliance with this Article XI.

          (i) The Master Servicer shall, for federal income tax purposes,
maintain books and records with respect to each of REMIC I, REMIC II and REMIC
III on a calendar year and on an accrual basis.

          (j) Following the Startup Day, the Master Servicer, the Servicers, the
Trustee and the Trust Administrator shall not accept any contributions of assets
to any of REMIC I, REMIC II or REMIC III other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the Trust Fund will not cause the related REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject such REMIC to any tax under the REMIC Provisions or other applicable
provisions of federal, state and local law or ordinances.

          (k) None of the Trustee, the Trust Administrator, the Master Servicer
or the Servicers shall enter into any arrangement by which REMIC I, REMIC II or
REMIC III will receive a fee or other compensation for services nor permit
either REMIC to receive any income from assets other than "qualified mortgages"
as defined in Section 860G(a)(3) of the Code or "permitted investments" as
defined in Section 860G(a)(5) of the Code.

          SECTION 11.02. Prohibited Transactions and Activities.

          None of the Depositor, the Master Servicer, the Servicers, the Trust
Administrator or the Trustee shall sell, dispose of or substitute for any of the
Mortgage Loans (except in connection with (i) the foreclosure of a Mortgage
Loan, including but not limited to, the acquisition or sale of a Mortgaged
Property acquired by deed in lieu of foreclosure, (ii) the bankruptcy of REMIC
I, (iii) the termination of REMIC I pursuant to Article X of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for any of REMIC I, REMIC II or REMIC III (other than REO Property
acquired in respect of a defaulted Mortgage Loan), nor sell or dispose of any
investments in the Collection Account or the Distribution Account for gain, nor
accept any contributions to any of REMIC I, REMIC II or REMIC III after the
Closing Date (other than a Qualified Substitute Mortgage Loan delivered in
accordance with Section 2.03), unless it has received an Opinion of Counsel,
addressed to the Trustee, the Trust

                                      -131-


<PAGE>



Administrator and the Certificate Insurer (at the expense of the party seeking
to cause such sale, disposition, substitution, acquisition or contribution but
in no event at the expense of the Trustee or the Trust Administrator) that such
sale, disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of any of REMIC I, REMIC II or REMIC III as a REMIC or (b)
cause any of REMIC I, REMIC II or REMIC III to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.

          SECTION 11.03. Master Servicer, Servicers, Trustee and Trust
                         Administrator Indemnification.

          (a) The Trustee agrees to indemnify the Trust Fund, the Depositor, the
Certificate Insurer, the Servicers and the Trust Administrator for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer, the
Servicers or the Trust Administrator, as a result of a breach of the Trustee's
covenants set forth in this Article XI.

          (b) The Trust Administrator agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer, the Servicers and the Trustee for any taxes
and costs including, without limitation, any reasonable attorneys fees imposed
on or incurred by the Trust Fund, the Depositor, the Certificate Insurer, the
Servicers or the Trustee, as a result of a breach of the Trust Administrator's
covenants set forth in this Article XI.

          (b) The Master Servicer and each Servicer, severally, agree to
indemnify the Trust Fund, the Depositor, the Certificate Insurer, the Trustee,
the Master Servicer, the other Servicer and the Trust Administrator for any
taxes and costs including, without limitation, any reasonable attorneys' fees
imposed on or incurred by the Trust Fund, the Depositor, the Certificate
Insurer, the Trustee, the Master Servicer, the other Servicer or the Trust
Administrator, as a result of a breach of the Master Servicer's or such
Servicer's covenants set forth in Article III or this Article XI.

                                      -132-


<PAGE>



                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

          SECTION 12.01. Amendment.

          This Agreement may be amended with the consent of the Certificate
Insurer from time to time by the Depositor, the Servicers, the Master Servicer,
the Trustee and the Trust Administrator without the consent of any of the
Certificateholders, (i) to cure any ambiguity or defect, (ii) to correct, modify
or supplement any provisions herein (including to give effect to the
expectations of Certificateholders), or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee, the
Trust Administrator and the Certificate Insurer, adversely affect in any
material respect the interests of any Certificateholder or the Certificate
Insurer, and provided further that such Opinion of Counsel shall not be
necessary if the party seeking such amendment delivers to the Trustee and the
Trust Administrator a letter from each Rating Agency stating that such amendment
would not cause a downgrade or withdrawal of the then current ratings of the
Certificates without regard to the Policy. No amendment shall be deemed to
adversely affect in any material respect the interests of any Certificateholder
who shall have consented thereto, and no Opinion of Counsel shall be required to
address the effect of any such amendment on any such consenting
Certificateholder.

          This Agreement may also be amended from time to time by the Depositor,
the Servicers, the Master Servicer, the Trustee and the Trust Administrator with
the consent of the Certificate Insurer and the Holders of Certificates entitled
to at least 66% of the Voting Rights for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Holders of Certificates;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the Holders of any Class of Certificates in a manner, other than as described
in (i), without the consent of the Holders of Certificates of such Class
evidencing at least 66% of the Voting Rights allocated to such Class, or (iii)
modify the consents required by the immediately preceding clauses (i) and (ii)
without the consent of the Certificate Insurer and the Holders of all
Certificates then outstanding. Notwithstanding any other provision of this
Agreement, for purposes of the giving or withholding of consents pursuant to
this Section 12.01, Certificates registered in the name of the Depositor, the
Master Servicer or either Servicer or any Affiliate thereof shall be entitled to
Voting Rights with respect to matters affecting such Certificates.

          Notwithstanding any contrary provision of this Agreement, neither the
Trustee nor the Trust Administrator shall consent to any amendment to this
Agreement unless it shall have first received an Opinion of Counsel to the
effect that such amendment will not result in the imposition of any tax on any
of REMIC I, REMIC II or REMIC III pursuant to the REMIC Provisions or cause any
of REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time that
any Certificates are outstanding. Any such amendment pursuant to the first
paragraph of this Section 12.01 shall not be deemed to adversely affect in any
material respect the interests of any Certificateholder if such change is
required by the Certificate Insurer, so long as no Certificate Insurer Default
has occurred and is continuing, and the Trustee and the Trust Administrator
receive written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to reduce the then current rating or any shadow
rating of the affected Certificates.


                                      -133-


<PAGE>



          Promptly after the execution of any such amendment the Trust
Administrator shall furnish a copy of such amendment to each Certificateholder
and the Certificate Insurer.

          It shall not be necessary for the consent of Certificateholders under
this Section 12.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee or the Trust Administrator may prescribe.

          The cost of any Opinion of Counsel to be delivered pursuant to this
Section 12.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Trustee or Trust
Administrator.

          Each of the Trustee and the Trust Administrator may, but shall not be
obligated to enter into any amendment pursuant to this Section that affects its
rights, duties and immunities under this Agreement or otherwise.

          SECTION 12.02. Recordation of Agreement; Counterparts.

          To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Master Servicer at the expense of the Certificateholders, but only upon
direction of the Trustee or the Trust Administrator accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.

          For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

          SECTION 12.03. Limitation on Rights of Certificateholders.

          The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.

          No Certificateholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.

          No Certificateholder shall have any right by virtue of any provision
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written notice of default and of
the

                                      -134-


<PAGE>



continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

          SECTION 12.04. Governing Law.

          This Agreement shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

          SECTION 12.05. Notices.

          All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when received if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
or delivered in any other manner specified herein, to (a) in the case of the
Depositor, _______________________________________, Attention: ______________
(telecopy number ______________), or such other address or telecopy number as
may hereafter be furnished to the Master Servicer, the Servicers, the Trustee,
the Trust Administrator and the Certificate Insurer in writing by the Depositor,
(b) in the case of the Master Servicer, _____________________________________
(telecopy number: ______________), or such other address or telecopy number as
may hereafter be furnished to the Trustee, the Trust Administrator, the
Certificate Insurer, the Servicers and the Depositor in writing by the Master
Servicer, (c) in the case of __________________________________, Attention:
_____________ (telecopy number: ______________), or such other address or
telecopy number as may hereafter be furnished to the Trustee, the Trust
Administrator, the Certificate Insurer, the Master Servicer and the Depositor in
writing by _______________, (d) in the case of the Trust Administrator,
__________________, Attention: _________________ (telecopy number ____________),
or such other address or telecopy number as may hereafter be furnished to the
Servicers, the Master Servicer, the Certificate Insurer, the Depositor and the
Trustee in writing by the Trust Administrator, (d) in the case of the Trustee,
________________________________, Attention: ____________ (telecopy number
___________), or such other address or telecopy number as may hereafter be
furnished to the Servicers, the Master Servicer, the Certificate Insurer, the
Trust Administrator and the Depositor in writing by the Trustee and (e) in the
case of the Certificate Insurer, ____________________________, Attention:
Surveillance Department (telecopy number ____________ or ___________) or such
other address or telecopy number as may hereafter be furnished to the Trustee,
the Trust Administrator, the Depositor, the Master Servicer and the Servicers in
writing by the Certificate Insurer. In each case in which a notice or other
communication to the Certificate Insurer refers to a Servicer Event of Default
or a claim under the Policy or with respect to which failure on the part of the
Certificate Insurer to respond shall be deemed to constitute consent or

                                      -135-


<PAGE>



acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head-Financial Guaranty
Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED." Any notice
required or permitted to be given to a Certificateholder shall be given by first
class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder also shall be mailed to the appropriate
party in the manner set forth above.

          SECTION 12.06. Severability of Provisions.

          If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

          SECTION 12.07. Notice to Rating Agencies and the Certificate Insurer.

          The Trust Administrator shall use its best efforts promptly to provide
notice to the Rating Agencies and the Certificate Insurer with respect to each
of the following of which it has actual knowledge:

          1.   Any material change or amendment to this Agreement;

          2.   The occurrence of any Servicer Event of Default that has not been
               cured or waived;

          3.   The resignation or termination of either Servicer, the Trustee or
               the Trust Administrator;

          4.   The repurchase or substitution of Mortgage Loans pursuant to or
               as contemplated by Section 2.03;

          5.   The final payment to the Holders of any Class of Certificates;

          6.   Any change in the location of the Collection Account or the
               Distribution Account;

          7.   Any event that would result in the inability of the Trust
               Administrator or the Trustee, as applicable, to make advances
               regarding delinquent Mortgage Loans;

          8.   Any Certificate Insurer Default that has not been cured; and

          9.   The filing of any claim under either Servicer's blanket bond and
               errors and omissions insurance policy required by Section 3.14 or
               the cancellation or material modification of coverage under any
               such instrument.

          In addition, the Trust Administrator shall promptly furnish to each
Rating Agency and the Certificate Insurer copies of each report to
Certificateholders described in Section 4.02 and the related Servicer shall
promptly furnish to each Rating Agency copies of the following:

                                      -136-


<PAGE>



          1.   Each annual statement as to compliance described in Section 3.20;
               and

          2.   Each annual independent public accountants' servicing report
               described in Section 3.21.

          Any such notice pursuant to this Section 12.07 shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, or by express delivery service to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, and to
Standard & Poor's Ratings Services, 25 Broadway, New York, New York 10004, or
such other addresses as the Rating Agencies may designate in writing to the
parties hereto.

          SECTION 12.08. Article and Section References.

          All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.

          SECTION 12.09. Grant of Security Interest.

          It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans to the Trust Administrator, on behalf of the Trustee, be, and
be construed as, a sale of the Mortgage Loans and not a pledge of the Mortgage
Loans by the Depositor to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee.

                                      -137-


<PAGE>



          IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Servicers,
the Trust Administrator and the Trustee have caused their names to be signed
hereto by their respective officers thereunto duly authorized, in each case as
of the day and year first above written.

                                     NEW CENTURY MORTGAGE
                                     SECURITIES, INC.,
                                     as Depositor

                                     By:__________________________________
                                     Name:
                                     Title:

                                     [Name of Master Servicer]
                                     as Master Servicer and Servicer


                                     By:__________________________________
                                     Name:
                                     Title:

                                     [Name of Servicer]
                                     as Servicer


                                     By:__________________________________
                                     Name:
                                     Title:

                                     [Name of Trust Administartor]
                                     as Trust Administrator


                                     By:__________________________________
                                      Name:
                                     Title:

                                     [Name of Trustee]
                                     as Trustee


                                     By:__________________________________
                                     Name:
                                     Title:





<PAGE>



STATE OF CALIFORNIA          )
                             ) ss.:
COUNTY OF ORANGE             )



          On the ____ day of ______________, before me, a notary public in and
for said State, personally appeared ________________, known to me to be an
______________ of New Century Mortgage Securities, Inc., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.




                                     __________________________________
                                                  Notary Public

[Notarial Seal]





<PAGE>



STATE OF ____________        )
                             ) ss.:
COUNTY OF ___________        )



          On the ___ day of ________________, before me, a notary public in and
for said State, personally appeared _____________ known to me to be ___________
of ________________________, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.





                                     __________________________________
                                                  Notary Public

[Notarial Seal]





<PAGE>



STATE OF ___________         )
                             ) ss.:
COUNTY OF __________         )



          On the _____ day of ___________________, before me, a notary public in
and for said State, personally appeared ________________, known to me to be
_________________ of _________________________, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.




                                     __________________________________
                                                  Notary Public

[Notarial Seal]





<PAGE>



STATE OF ____________        )
                             ) ss.:
COUNTY OF ___________        )



          On the _____ day of ________________, before me, a notary public in
and for said State, personally appeared ______________, known to me to be a
_____________ of ______________________________, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.





                                     __________________________________
                                                  Notary Public

[Notarial Seal]




<PAGE>



STATE OF ___________         )
                             ) ss.:
COUNTY OF __________         )



          On the ____ day of ____________, before me, a notary public in and for
said State, personally appeared __________________, known to me to be __________
of ______________________________, one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.





                                     __________________________________
                                                  Notary Public

[Notarial Seal]





<PAGE>


STATE OF ______________      )
                             ) ss.:
COUNTY OF __________         )



          On the _____ day of _____________, before me, a notary public in and
for said State, personally appeared ____________, known to me to be a
________________ of ____________________________, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.




                                     __________________________________
                                                  Notary Public

[Notarial Seal]