<PAGE>
                                                                   Exhibit 10.40

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                              AMENDED AND RESTATED

                    MORTGAGE LOAN PURCHASE AND SALE AGREEMENT



                                 BY AND BETWEEN





                         PREFERRED HOME MORTGAGE COMPANY
                                    AS SELLER


                                       AND

                                  GUARANTY BANK
                                    AS BUYER



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


                          DATED AS OF DECEMBER 19, 2003


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




                                   $40,000,000



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



<PAGE>

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

                                TABLE OF CONTENTS

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

<TABLE>
<CAPTION>


                                                                                                               PAGE
                                                                                                               ----
<S>                   <C>                                                                                      <C>
ARTICLE I             CERTAIN DEFINITIONS........................................................................1
ARTICLE II            PURCHASE OF MORTGAGE LOANS AND SALE TO APPROVED TAKEOUT INVESTOR...........................6

         Section 2.01          Purchase of Mortgage Loans........................................................6
         Section 2.02          Sale and Assignment...............................................................8

ARTICLE III           REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE SELLER...................................8

         Section 3.01          Representations and Warranties of the Seller......................................8
         Section 3.02          Representations and Warranties of the Seller Regarding Mortgage Loans.............9
         Section 3.03          Remedies Upon Breach.............................................................13
         Section 3.04          Indemnification..................................................................14

ARTICLE IV            CONDITIONS................................................................................14

         Section 4.01          Conditions to Purchase...........................................................14

ARTICLE V             COVENANTS OF THE SELLER...................................................................15

         Section 5.01          Protection of Right, Title and Interest..........................................15
         Section 5.02          Principal Executive Office.......................................................16
         Section 5.03          Transfer Taxes...................................................................16
         Section 5.04          Costs and Expenses...............................................................16
         Section 5.05          Assignment of Mortgage Loans.....................................................16
         Section 5.06          Seller's Records; Delivery of Financial Statements...............................16
         Section 5.07          Cooperation by the Seller........................................................17

ARTICLE VI            INTERIM SERVICING OF THE MORTGAGE LOANS...................................................17

         Section 6.01          Servicer Files...................................................................17
         Section 6.02          Interim Servicer Reports.........................................................18
         Section 6.03          Custodial Account................................................................18
         Section 6.04          Termination of Interim Servicing Rights..........................................18
         Section 6.05          Transfer to Successor Servicer...................................................19

ARTICLE VII           OPTIONAL REPURCHASE BY SELLER.............................................................19

         Section 7.01          Terms of Repurchase..............................................................19
         Section 7.02          Repurchase Procedures............................................................19
         Section 7.03          Shipment of Mortgage Documents...................................................20

ARTICLE VIII          MISCELLANEOUS PROVISIONS..................................................................20

         Section 8.01          Obligations of the Seller........................................................20
         Section 8.02          Amendment........................................................................20
         Section 8.03          Waivers..........................................................................20
         Section 8.04          Notices..........................................................................21
         Section 8.05          Representations..................................................................21

</TABLE>



                                      -i-





<PAGE>
<TABLE>
<CAPTION>
<S>                   <C>                                                                                      <C>
         Section 8.06          Headings and Cross-References....................................................21
         Section 8.07          GOVERNING LAW; VENUE.............................................................21
         Section 8.08          WAIVER OF JURY TRIAL.............................................................21
         Section 8.09          Time is of the Essence...........................................................22
         Section 8.10          Counterparts.....................................................................22
         Section 8.11          Restatement......................................................................22

</TABLE>


SCHEDULE 1            SCHEDULE OF REQUIRED MORTGAGE DOCUMENTS
SCHEDULE 2            APPROVED TAKEOUT INVESTORS

EXHIBIT A             SELLER ASSIGNMENT
EXHIBIT B             PURCHASE REQUEST
EXHIBIT C             WAREHOUSE LENDER'S RELEASE
EXHIBIT D             RESERVED
EXHIBIT E             SELLER'S REPURCHASE REQUEST UNDER ARTICLE VII
EXHIBIT F             SHIPPING REQUEST
EXHIBIT G             BAILEE LETTER
EXHIBIT H             BUYER'S REPURCHASE REQUEST





                                      -ii-
<PAGE>

                              AMENDED AND RESTATED

                    MORTGAGE LOAN PURCHASE AND SALE AGREEMENT


         This AMENDED AND RESTATED MORTGAGE LOAN PURCHASE AND SALE AGREEMENT is
made as of this 19th day of December, 2003, by and between PREFERRED HOME
MORTGAGE COMPANY, a Florida Corporation (the "SELLER") and GUARANTY BANK, a
federal savings bank (the "BUYER").

         WHEREAS, the Seller has acquired and will acquire in the ordinary
course of business, certain Mortgage Loans, each secured by a lien granted by
the related Mortgagor in the Mortgaged Property financed thereby; and

         WHEREAS, the Seller and the Buyer wish to set forth the terms and
provisions pursuant to which the Mortgage Loans are to be absolutely sold by the
Seller to the Buyer on the Closing Dates;

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                               CERTAIN DEFINITIONS

         As used in this Agreement, the following terms shall, unless the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms of such terms and to the
masculine, feminine and neuter genders of such terms):

         "AFFILIATE" means, 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" means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting equity, by contract or otherwise.

         "AGREEMENT" or "PURCHASE AND SALE AGREEMENT" means this Amended and
Restated Mortgage Loan Purchase and Sale Agreement and all amendments and
restatements hereof and supplements hereto.

         "APPROVED TAKEOUT INVESTOR" means FNMA, FHLMC, GNMA and any other
investor listed on SCHEDULE 2.

         "BUSINESS DAY" means any day except Saturday, Sunday or other day on
which banks located in the city of New York, New York or the city of Dallas,
Texas are authorized or



<PAGE>

obligated by law or executive order to be closed and any day on which the Buyer
is authorized or obligated by law or executive order to be closed.

         "BUYER" means Guaranty Bank, a federal savings bank, its successors and
assigns.

         "BUYER'S REPURCHASE REQUEST" means a request executed by the Buyer and
delivered to the Seller in substantially the form of EXHIBIT H.

         "CLOSING DATE" means any day on which Mortgage Loans are sold by the
Seller to the Buyer.

         "CURE DATE" means, with respect to any Mortgage Loan, the date
occurring fifteen (15) Business Days after the expiration of the related Takeout
Commitment.

         "CUSTODIAL ACCOUNT" has the meaning assigned to it in SECTION 6.03.

         "ELIGIBLE MORTGAGE LOAN "means a Mortgage Loan (a) which has been
designated for purchase hereunder by the Seller and the Buyer, (b) with respect
to which all of the Mortgage Documents have been delivered to the Buyer and are
accurate and complete and (c) with respect to which all of the representations
and warranties of the Seller set forth in SECTION 3.02 of this Agreement are
true, correct and complete.

         "EURODOLLAR RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on the Bloomberg
Eurorate (or, if not available, any other nationally recognized trading screen
reporting on-line trading with Eurorates) at 10:00 a.m. (Dallas, Texas time) as
the Eurorates for deposits in dollars on that day for a period of one month. In
the event such rate ceases to be published, "Eurodollar Rate" shall mean a
comparable rate of interest reasonably selected by the Buyer.

         "EVENT OF INSOLVENCY" means, with respect to the Seller, (i) the filing
of a petition, commencing, or authorizing the commencement of any case or
proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be commenced by another; (ii) seeking the
appointment of a receiver, trustee, custodian or similar official for the Seller
or an Affiliate or any substantial part of the property of either, (iii) the
appointment of a receiver, conservator, or manager for the Seller or an
Affiliate by any governmental agency or authority having the jurisdiction to do
so; (iv) the making or offering by the Seller or an affiliate of a concession
with its creditors or a general assignment for the benefit of creditors, (v) the
admission by the Seller or an Affiliate of the Seller's or such Affiliate's
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) any governmental authority or agency or any person, agency or
entity acting or purporting to act under governmental authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control of,
all or any substantial part of the property of the Seller or of any of its
Affiliates, or shall have taken any action to displace the management of the
Seller or of any of its Affiliates or to curtail its authority in the conduct of
the business of the Seller or of any of its Affiliates.

         "EXPIRATION DATE" means, with respect to any Takeout Commitment, the
expiration date thereof.



                                       2
<PAGE>


         "FHA" means the Federal Housing Administration, or any successor
thereto.

         "FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.

         "FNMA" means the Federal National Mortgage Association, or any
successor thereto.

         "FINANCING LEASE" means (i) any lease of Property if the then present
value of the minimum rental commitment thereunder should, in accordance with
generally accepted accounting principles and practices which are recognized as
such by the Financial Accounting Standards Board (or any generally recognized
successor), be capitalized on a balance sheet of the lessee, and (ii) any other
lease obligations which are capitalized on a balance sheet of the lessee.

         "GNMA" means the Government National Mortgage Association.

         "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Financing Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).

         "MARKET VALUE" at any time shall be determined by Buyer, in its
reasonable discretion, based upon (a) information then available to Buyer
regarding quotes to dealers for the purchase of mortgage notes similar to the
Mortgage Note that have been delivered to Buyer pursuant to this Agreement or
(b) sales prices actually received by Seller for mortgage notes sold by Seller
during the immediately preceding thirty (30) day period similar to the Mortgage
Note that have been delivered to Buyer pursuant to this Agreement.

         "MAXIMUM PURCHASE AMOUNT" means $40,000,000.

         "MERS" means Mortgage Electronic Registration, Inc., a Delaware
corporation, or any successor thereto.

         "MERS AGREEMENT" means those agreements by and among Seller, Buyer,
MERS and MERSCORP, Inc., as amended, modified, supplemented, extended, restated
or replaced from time to time.

         "MERS(R) SYSTEM" means the system of recording transfers of mortgages
electronically maintained by MERS.

         "MIN" means, with respect to each Mortgage Loan, the Mortgage
Identification Number for such Mortgage Loan registered with MERS on the MERS(R)
System.

         "MOM LOAN" means, with respect to any Mortgage Loan, MERS acting as the
mortgagee of such Mortgage Loan, solely as nominee for the originator or Seller,
as the case may be, of such Mortgage Loan and its successors and assignees.



                                       3
<PAGE>

         "MONTHLY PAYMENT" means a scheduled monthly payment of principal and
interest on a Mortgage Loan.

         "MORTGAGE" means the trust deed, mortgage, deed of trust, or other
instrument creating a lien on real property securing a Mortgage Note.

         "MORTGAGE DOCUMENTS "means, with respect to each Mortgage Loan, the
documents and other items described on Schedule 1 hereto relating to such
Mortgage Loan.

         "MORTGAGED PROPERTY" means, with respect to any Mortgage Loan, the
property covered by the Mortgage securing such Mortgage Loan.

         "MORTGAGE LOAN" means a mortgage loan made to an individual person that
is not a construction or non-residential commercial loan, is evidenced by a
valid promissory note, and is secured by a Mortgage that grants a perfected
first-priority lien on the residential real property.

         "MORTGAGE LOAN SCHEDULE" means a schedule in a form acceptable to the
Buyer setting forth, at a minimum, the following information concerning each
Mortgage Loan described thereon: loan number, Mortgagor's name, address of the
Mortgaged Property, original amount of Mortgage Note, and date of Mortgage Note.

         "MORTGAGE NOTE" means a promissory note evidencing the indebtedness of
a Mortgagor under a Mortgage Loan.

         "MORTGAGOR" means the current and unreleased obligor(s) on a Mortgage
Note.

         "PASS-THROUGH RATE" means the Floating Eurodollar Rate plus 1.125%.

         "PURCHASE PRICE" means with respect to each Mortgage Loan purchased by
the Buyer on a Closing Date, the amount equal to ninety-eight percent (98%) of
the least of the following:

                  (a) the outstanding principal balance of such Mortgage Loan;

                  (b) the actual out-of-pocket cost to the Seller of such
         Mortgage Loan minus the amount of principal paid to Seller under such
         Mortgage Loan as of the Closing Date;

                  (c) the Trade Price under the applicable Takeout Commitment,
         not to exceed 100% of the original principal balance of such Mortgage
         Loan; or

                  (d) the Market Value of such Mortgage Loan;

(calculated as of such Closing Date with respect to the Mortgage Loans to be
purchased on such Closing Date by 2:00 p.m. Dallas, Texas time on the Business
Day immediately preceding such Closing Date and approved by the Buyer).

         "PURCHASE REQUEST" means a request by the Seller for the purchase of
Mortgage Loans by the Buyer made in the form of EXHIBIT B.



                                       4
<PAGE>

         "REPURCHASE DATE" means (i) with respect to any Seller Repurchase
Request, the date specified in such Seller Repurchase Request with respect to
the Mortgage Loans described therein and (ii) with respect to any Buyer
Repurchase Request, the date specified in such Buyer Repurchase Request.

         "REPURCHASE PRICE" means for any Mortgage Loan repurchased by the
Seller hereunder, an amount equal to the Purchase Price paid by the Buyer for
such Mortgage Loan plus accrued and unpaid interest on such Mortgage Loan at the
Pass-Through Rate from the Closing Date for the purchase of such Mortgage Loan
by the Buyer through the date prior to the repurchase date, both inclusive, less
all payments of principal of and interest on such Mortgage Loan received by the
Buyer during such period, (calculated as of the date of repurchase and delivered
to the Buyer by the Seller by 9:00 a.m. Dallas, Texas time on such date) and
agreed to by the Buyer.

         "SALE AGREEMENT" means the agreement providing for the purchase by an
Approved Takeout Investor of Mortgage Loans from the Seller.

         "SELLER" means Preferred Home Mortgage Company, a Florida corporation,
its successors and assigns.

         "SELLER ASSIGNMENT" means the document of assignment substantially in
the form attached to this Agreement as EXHIBIT A.

         "SELLER REPURCHASE REQUEST" means a request executed by the Seller and
delivered to the Buyer in substantially the form of EXHIBIT E.

         "SERVICER FILES" means, with respect to any Mortgage Loan, all Mortgage
Loan papers and documents required to be maintained pursuant to the Sale
Agreement and all other papers and records of whatever kind or description,
whether developed or originated by the Seller or others, required to document or
service the Mortgage Loan, excluding the Mortgage Documents.

         "SERVICING TERMINATION EVENT" means, with respect to each Mortgage
Loan, the expiration of the term during which Seller has been appointed to
interim service such Mortgage Loan or any other event which results in the
termination of Seller's rights and obligations to service such Mortgage Loan
each pursuant to the terms of Section 6.04.

         "SETTLEMENT DATE" means, with respect to any Mortgage Loan, the date of
payment of the Takeout Proceeds by an Approved Takeout Investor to the Buyer on
behalf of the Seller.

         "SHIPPING REQUEST" means a request to ship Mortgage Loans executed and
delivered by the Seller in the form of EXHIBIT F.

         "SUCCESSOR SERVICER" means an entity designated by the Buyer, with
notice provided in conformity with SECTION 6.04, to replace the Seller as
servicer of the Mortgage Loans.

         "TAKEOUT COMMITMENT" means a written master commitment of an Approved
Takeout Investor to purchase a pool of Mortgage Loans under which such Eligible
Mortgage Loans will be delivered to such Approved Takeout Investor on terms
satisfactory to the Buyer, in its reasonable discretion.



                                       5
<PAGE>

         "TAKEOUT PROCEEDS" means, with respect to any Mortgage Loan, the
related Trade Principal plus accrued interest as calculated in accordance with
SECTION 2.01(D).

         "THIRD PARTY UNDERWRITER" means any third party, including but not
limited to a mortgage loan pool insurer, who underwrites a Mortgage Loan prior
to the purchase thereof by the Buyer.

         "THIRD PARTY UNDERWRITER'S CERTIFICATE" means a certificate issued by a
Third Party Underwriter with respect to a Mortgage Loan, certifying that such
Mortgage Loan complies with its underwriting requirements.

         "TRADE PRICE" means the trade price set forth on a Takeout Commitment.

         "TRADE PRINCIPAL" means, with respect to any Mortgage Loan, the
aggregate outstanding principal balance of such Mortgage Loan, multiplied by a
percentage equal to the Trade Price.

         "TRANSFER TAXES" means any tax, fee or governmental charge payable by
the Seller or the Buyer to any federal, state or local government attributable
to the assignment of a Mortgage Loan.

         "VA" means the Veteran's Administration, or any successor thereto.

                                   ARTICLE II

                     PURCHASE OF MORTGAGE LOANS AND SALE TO
                            APPROVED TAKEOUT INVESTOR

         Section 2.01. PURCHASE OF MORTGAGE LOANS. Subject to the terms and
conditions of this Agreement, the Seller may, in its sole discretion, offer to
sell to the Buyer, and the Buyer may, in its sole discretion, agree to purchase
from the Seller, Mortgage Loans and the Mortgage Documents relating thereto on
the terms and conditions set forth herein, provided that in no event shall the
aggregate outstanding principal balance of all Mortgage Loans which have been
purchased by the Buyer under this Agreement and which the Buyer continues to own
exceed the Maximum Purchase Amount at any time.

                  (a) PROCEDURES FOR PURCHASE OF MORTGAGE LOANS. The Seller may
request that the Buyer purchase Mortgage Loans by delivering to the Buyer a
Purchase Request and the Mortgage Documents relating to the Mortgage Loans
described in such Purchase Request, no later than 10:00 a.m. one (1) Business
Day prior to the requested Closing Date. Each Purchase Request must be for
Mortgage Loans having an aggregate outstanding principal balance equal to or
greater than $25,000 AND NO MORE THAN ONE PURCHASE REQUEST MAY BE MADE ON ANY
BUSINESS DAY. The Buyer shall notify the Seller whether or not the Buyer agrees
to purchase such Mortgage Loans which constitute Eligible Mortgage Loans) by
12:00 noon on the requested Closing Date. Notwithstanding any other provision of
this Agreement, the Seller understands that the Buyer's consideration of any
such Purchase Request constitutes an independent decision which the Buyer
retains the absolute and unfettered discretion to make and that no commitment to
make any purchase is hereby given by the Buyer. In the event that any Mortgage
Documents delivered by the Seller to the Buyer for purchase hereunder are not
purchased by the Seller



                                       6
<PAGE>

within ten (10) Business Days after the date of delivery thereof to the Buyer,
the Buyer shall promptly return such Mortgage Documents to the Seller at the
Seller's expense.

                  (b) PURCHASE PRICE. If the Buyer agrees to purchase the
Eligible Mortgage Loans described in any Purchase Request, then in consideration
of the sale by the Seller to the Buyer of such Mortgage Loans and the transfer
of the Mortgage Documents relating thereto, the Buyer shall, on the Closing
Date, pay or cause to be paid to the Seller the Purchase Price therefor in the
form of cash by federal wire transfer (same day) funds, and simultaneously with
such payment, the Seller hereby sells, assigns and transfers to the Buyer, (i)
the Eligible Mortgage Loans listed on the Mortgage Loan Schedule attached to the
Seller Assignment delivered on such Closing Date and all Monthly Payments
received thereon after such Closing Date, (ii) all Mortgage Documents related to
those Mortgage Loans, (iii) all rights of the Seller in, to and under those
Mortgage Loans and Mortgage Documents, including, without limitation, the right
to receive principal, interest and all other payments with respect thereto and
all rights under related title and hazard insurance policies, all escrow and
other amounts held by the Seller in connection therewith, and all rights to
service those Mortgage Loans, (iv) all rights of the Seller in, to and under the
real property and improvements thereon securing those Mortgage Loans, including,
without limitation, all rights of the Seller as mortgagee with respect to such
real property and improvements, and (v) all purchase agreements, credit
agreements or other agreements pursuant to which the Seller or any Affiliate of
the Seller acquired such Mortgage Loans and Mortgage Documents and all
promissory notes, security agreements and other instruments and documents
executed by the Seller or any Affiliate of the Seller pursuant thereto or in
connection therewith, insofar as such agreements, instruments and documents
relate to such Mortgage Loans and Mortgage Documents.

                  (c) REPLACEMENT TAKEOUT COMMITMENT. In the event that a
Mortgage Loan is not purchased by an Approved Takeout Investor on or before the
Cure Date, upon not less than five (5) Business Days' notice from the Buyer to
Seller, Seller shall use reasonable efforts to obtain a Takeout Commitment from
an Approved Takeout Investor to purchase such Mortgage Loan. The Seller agrees
that, with respect to any Mortgage Loan purchased by the Buyer, the related
Takeout Commitment shall have an Expiration Date which is not later than thirty
(30) calendar days after the related Closing Date. The Seller further agrees
that any additional Takeout Commitment that it obtains with respect to such
Mortgage Loan if the initial Approved Takeout Investor does not perform under
such Takeout Commitment shall have an Expiration Date which is not later than
sixty (60) calendar days after the related Closing Date. Seller has not and will
not take any action, or fail to act where action is required, the result of
which would be to impair any Takeout Commitment. Seller shall notify and provide
the Buyer with copies of any changes made to any Sale Agreement or any other
correspondence agreements between the Seller and any Approved Takeout Investor
within two (2) Business Days of such change.

                  (d) SET-OFF. In addition to any rights and remedies of the
Buyer provided by this Agreement and by law, the Buyer shall have the right,
without prior notice to Seller, any such notice being expressly waived by Seller
to the extent permitted by applicable law, upon any amount becoming due and
payable by Seller hereunder to set-off and appropriate and apply against such
amount any and all Property and deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured,



                                       7
<PAGE>

at any time held or owing by the Buyer or any Affiliate thereof to or for the
credit or the account of Seller. The exercise of any such right of set-off shall
be without prejudice to the Buyer's right to recover any deficiency.

         Section 2.02. SALE AND ASSIGNMENT. It is the intention of the Seller
and the Buyer that each assignment, transfer and conveyance hereunder constitute
a sale and assignment of the Mortgage Documents from the Seller to the Buyer.
If, notwithstanding the express intention of the parties, this Agreement is
deemed not to constitute a sale, conveyance and assignment of the Mortgage
Documents from the Seller to the Buyer, this Agreement shall be deemed to be a
security agreement within the meaning of Article 8 and Article 9 of the Uniform
Commercial Code as in effect in the State of Texas and the conveyance provided
for in this SECTION 2.02 shall be deemed to be a grant by the Seller to the
Buyer of a valid first priority perfected security interest in all of the
Seller's right, title and interest in and to the Mortgage Documents, to which
Seller hereby consents. The Buyer does not assume and shall not be liable for
any of the Seller's liabilities, duties, or obligations under or in connection
with the Takeout Commitments.

                                  ARTICLE III

                        REPRESENTATIONS, WARRANTIES, AND
                             COVENANTS OF THE SELLER

         Section 3.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents, warrants and covenants that:

                  (a) SELLER AND ORIGINATORS. The Seller is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it was incorporated or organized, and has all licenses, registrations and
certifications necessary to carry on its mortgage lending business. The Seller
is not operating under any type of agreement or order (including, without
limitation, a supervisory agreement, memorandum of understanding, cease and
desist order, capital or supervisory directive, or consent decree) with or by
the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the
Office of the Comptroller of the Currency or any other applicable regulatory
authority, and the Seller is in compliance with any and all capital, leverage
and other financial requirements imposed by any applicable regulatory authority.

                  (b) AUTHORITY. The Seller has the full corporate power and
authority to execute and deliver all agreements, contracts, commitments,
issuances of checks or drafts, or other papers related to conducting business
with the Buyer and to perform in accordance with each of the terms hereof, and
to enter into and consummate all transactions contemplated hereby. The Seller
has duly authorized and completed the execution, delivery and performance of
this Agreement. This Agreement constitutes a legal, valid and binding obligation
of the Seller, enforceable in accordance with its terms. The Seller is a FNMA
and FHLMC approved lender in good standing. The Seller has obtained all licenses
and effected all registrations required under all applicable local, state and
federal laws, regulations and orders by virtue of any of the activities
conducted, or property owned, by it.

                  (c) ORDINARY COURSE OF BUSINESS. The consummation of the
transactions contemplated by this Agreement is in the ordinary course of
business of the Seller, and the



                                       8
<PAGE>

transfer, assignment and conveyance of each Mortgage Note and related Mortgage
Documents by the Seller pursuant to this Agreement is not subject to the bulk
transfer laws or any similar statutory provisions in effect in any applicable
jurisdiction.

                  (d) NO CONFLICTS. Neither the execution and delivery of this
Agreement, the acquisition and/or making of each Mortgage Loan by the Seller,
the sale of each Mortgage Loan to the Buyer, the consummation of the
transactions contemplated thereby nor the fulfillment of or compliance with the
terms and conditions of this Agreement will conflict with or result in a breach
of any of the terms, conditions or provisions of the Seller's articles of
incorporation, charter, by-laws or other organizational document, or of any
legal restriction or regulatory directive or any agreement or instrument to
which the Seller is now a party or by which it is bound, or constitute a default
or result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Seller or any of its property is subject.

                  (e) NO CONSENT REQUIRED. No consent, approval, authorization,
order or review by or on behalf of any person, entity, court, authority or
agency, governmental or otherwise, is required for the execution and performance
by the Seller of, or compliance by the Seller with, this Agreement.

                  (f) NO LITIGATION PENDING. There is no action, suit,
proceeding, inquiry, review, audit or investigation pending or threatened
against the Seller (i) that could have any material adverse impact on the
Seller's business, operations, license, financial condition or general
prospects, (ii) which would draw into question the validity of the Mortgage Loan
or enforceability of the Mortgage Documents, or (iii) which would be likely to
materially impair the ability of the Seller to perform its obligations under
this Agreement.

         Section 3.02. REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
MORTGAGE LOANS. The Seller hereby represents, warrants and covenants as to each
Mortgage Loan sold hereunder, as of the date herein below specified or, if no
such date is specified, then as of the applicable Closing Date that:

                  (a) As of the Closing Date, the Seller has good title to, and
is the sole owner of, such Mortgage Loan delivered and sold to the Buyer. The
assignment of the Mortgage Loan by the Seller validly transfers such Mortgage
Loan to the Buyer free and clear of any pledge, lien, equity, charge, claim or
security interest, or any other encumbrance. The sale and transfer of each
Mortgage Loan to the Buyer do not violate any applicable state laws. To the
extent that any applicable state law places any restrictions on the transfer of
any Mortgage Loan, the Seller has notified the Buyer in writing of that
restriction and any related state licensing or registration requirements.

                  (b) The origination and servicing of each Mortgage Loan have
been in all respects legal, proper, prudent and customary, and have conformed to
customary standards of the residential mortgage origination and servicing
business.

                  (c) All parties which have had any interest in the Mortgage
Documents, whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they



                                       9
<PAGE>

held and disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (ii) organized under the laws of such state, or
qualified to do business in such state, or federal savings and Mortgage Loan
associations or national banks having principal offices in such state, or not
doing business in such state so as to require qualification as a foreign
corporation in order to use the courts of such state to enforce the Mortgage
Documents.

                  (d) Except as otherwise disclosed in writing to the Buyer
prior to the registration with the Buyer of any Mortgage Loans, the Seller has
not dealt with any broker, investment banker, agent or other person or entity,
except for the Buyer, who may be entitled to any commission or compensation from
the Seller in connection with the sale of any Mortgage Loans.

                  (e) Each of the Mortgage Loans delivered and sold to the Buyer
has been underwritten in accordance with FNMA, FHLMC, FHA or VA guidelines
and/or meets all applicable requirements for sale to the applicable Approved
Takeout Investor.

                  (f) The sale of the Mortgage Loan is not subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of this Agreement, or the exercise of
any right hereunder, render the sale unenforceable, in whole or in part, or
subject to any right of rescission, set off, counterclaim or defense, and no
such right of rescission, set off, counterclaim or defense has been asserted
with respect thereto.

                  (g) Each Mortgage Document contains customary and enforceable
provisions which render the rights and remedies of the holder adequate to the
benefits of the security against the Mortgaged Property, including: (i) in the
case of a Mortgage Documents designed as a deed of trust, by trustee's sale,
(ii) by summary foreclosure, if available under applicable law, and (iii)
otherwise by foreclosure, and there are no homestead or other exemptions of
dower, curtesy or other rights or interests available to the Mortgagor or the
Mortgagor's spouse, survivors or estate, or any other person or entity that
would, or could, interfere with such right to sell at a trustee's sale or right
to foreclose, except for those arising by operation of law. To the extent
necessary to protect the interests of the holder of the Mortgage Note and the
Mortgage Documents, both spouses shall be signatories on, and jointly and
severally liable under, the Mortgage Note and the Mortgage Documents.

                  (h) Such Mortgage Loan is a binding and valid obligation of
the Mortgagor thereon, in full force and effect and enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar terms affecting creditor's rights in
general and by general principles of equity;

                  (i) Such Mortgage Loan is genuine in all respects as appearing
on its face and as represented in the books and records of the Seller, and all
information set forth therein is true and correct;

                  (j) Such Mortgage Loan is free of any default (other than as
permitted by subparagraph (k) below) of any party thereto (including the
Seller), counterclaims, offsets and



                                       10
<PAGE>

defenses, including the defense of usury, and from any rescission, cancellation
or avoidance, and all right thereof, whether by operation of law or otherwise;

                  (k) No more than thirty (30) calendar days have elapsed since
the date of the Mortgage Note evidencing such Mortgage Loan, and no Monthly
Payment is more than thirty (30) calendar days past due;

                  (l) Such Mortgage Loan contains the entire agreement of the
parties thereto with respect to the subject matter thereof, has not been
modified or amended in any respect not expressed in writing therein and is free
of concessions or understandings with the Mortgagor thereon of any kind not
expressed in writing therein;

                  (m) All advance payments and other deposits on such Mortgage
Loan have been paid in cash, and no part of said sums has been loaned, directly
or indirectly, by the Seller to the Mortgagor, and, other than as disclosed to
the Buyer in writing, there have been no prepayments;

                  (n) Such Mortgage Loan matures within 30 years after such date
of origination;

                  (o) At all times such Mortgage Loan will be free and clear of
all Liens, except Liens in favor of the Buyer, Liens that are junior to the Lien
created by the Mortgage securing such Mortgage Loan, and any other Lien which
has been disclosed to the Buyer in writing and is permitted hereunder;

                  (p) The Mortgaged Property covered by such Mortgage Loan is
insured against loss or damage by fire and all other hazards normally included
within standard extended coverage in accordance with the provisions of such
Mortgage Loan with the originator named as a loss payee thereon;

                  (q) Such Mortgage Loan is secured by a first lien on Mortgaged
Property consisting of a completed one-to-eight unit single family residence
which is not used for commercial purposes and which is not a construction loan;

                  (r) There are no delinquent taxes, insurance premiums, water,
sewer and municipal charges, governmental assessments or any other outstanding
charges affecting the Mortgaged Property.

                  (s) Each Mortgage Loan has been closed and fully disbursed and
there is no requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with (except for
escrow funds held by the title company pending disbursement for on-site
improvements to be constructed, to a maximum amount of $50,000 for any
individual Mortgage Loan).

                  (t) Additionally, the Seller warrants that the Seller has not
made arrangements with any Mortgagor for any payment forbearance or future
refinancing with



                                       11
<PAGE>

respect to any Mortgage Loan except to the extent provided in the related
Mortgage or the Mortgage Note.

                  (u) With respect to each deed of trust, a trustee duly
qualified under applicable law to serve as such is properly named, designated
and serving.

                  (v) Except in connection with a trustee's sale after default
by the Mortgagor, no fees or expenses are or will become payable by the Seller
or the Buyer to the trustee under any deed of trust.

                  (w) The application for each Mortgage Loan was taken from the
Mortgagor and each Mortgage Loan was made in compliance with, and is enforceable
under all applicable local, state and federal laws, regulations and orders in
all material respects (including, but not limited to, state usury laws, federal
Equal Credit Opportunity and Fair Credit Reporting Acts, the Real Estate
Settlement Procedures Act, and the federal Truth-in-Lending Act and Regulation Z
thereunder), and neither the transfer of any interest in any Mortgage Loan to
the Buyer nor any other act provided for in this Agreement will involve the
violation of any such law, regulation or order. This warranty is made to the
best knowledge of the Seller with respect to each Mortgage Loan originated by an
entity other than the Seller or any of its Affiliates. The Seller further
warrants that the funds utilized by the Mortgagor in the purchase of the
Mortgaged Property and in obtaining a Mortgage Loan relating thereto were not
obtained or in any way related to illegal gambling or to the use of or
trafficking in illegal drugs.

                  (x) A commitment or policy for title insurance, in the form
and amount required by this Agreement, was effective as of the closing of each
Loan, is valid and binding, and remains in full force and effect. No claims have
been made under such title insurance policy and no holder of the related
mortgage, including the Seller, has done or omitted to do anything which would
impair the coverage of such title insurance policy.

                  (y) As to each Mortgage Loan secured by a Mortgaged Property
located in Iowa, and if an American Land Title Association (ALTA) policy of
title insurance has not been provided, an attorney's certificate, in the form
and amount required by this Agreement, duly delivered and effective as of the
closing of each such Mortgage Loan, is valid and binding, and remains in full
force and effect.

                  (z) If required by this Agreement, primary mortgage insurance
has been obtained, the premium has been paid, and the mortgage insurance
coverage is in full force and effect meeting the requirements of this Agreement.

                  (aa) The improvements upon the Mortgaged Property are insured
against loss by fire and other hazards as required by this Agreement, including
flood insurance if required under the National Flood Insurance Act of 1968, as
amended. The Mortgage Documents requires the Mortgagor to maintain such casualty
insurance at the Mortgagor's cost and expense, and on the Mortgagor's failure to
do so, authorizes the holder of the Mortgage Documents to obtain and maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor.



                                       12
<PAGE>

                  (bb) The Mortgaged Property is free of damage and in good
repair, and no notice of condemnation has been given with respect thereto and no
circumstances exist involving the Mortgage Documents, the Mortgaged Property or
the Mortgagor's credit standing that could: (i) cause investors to regard the
Mortgage Loan as an unacceptable investment, (ii) cause the Mortgage Loan to
become delinquent, or (iii) adversely affect the value or marketability of the
Mortgaged Property or the Mortgage Loan. The Seller warrants that, to the best
of Seller's knowledge, the Mortgaged Property is free from toxic materials or
other environmental hazards. The Seller warrants compliance with local, state or
federal laws or regulations designed to protect the health and safety of the
occupants of the property.

                  (cc) The Mortgaged Property is lawfully occupied under
applicable law and all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property,
or with respect to the use and occupancy of the same (including, without
limitation, certificates of occupancy and fire underwriting certificates), have
been made or obtained by the Seller from the appropriate authorities.

                  (dd) Reserved.

                  (ee) The Mortgage Loan has been originated and underwritten in
compliance with all applicable requirements of this Agreement, (ii) Seller's
underwriting standards and procedures applicable to such Mortgage Loan and (iii)
all applicable rules and guidelines. Any appraisal made with respect to any
Mortgaged Property was made by an appraiser who is licensed or certified as
appropriate under applicable state law and meets the minimum qualifications for
appraisers as set forth in herein.

                  (ff) No Mortgage Loan is, to the Seller's actual knowledge, in
bankruptcy, in litigation or in foreclosure.

                  (gg) Unless the Mortgage Loan complies with FNMA, GNMA or
FHLMC, it has a credit score of at least 650 from a repository acceptable to the
Buyer.

         Section 3.03. REMEDIES UPON BREACH.

                  (a) If discovery is made by the Buyer or its agent or the
Seller at anytime during the life of any Mortgage Loan hereunder of an
inaccuracy or a breach of any of the Seller's representations and warranties set
forth herein, the party discovering such breach shall give prompt written notice
of such breach to the other party. In such event, the Seller shall, within
thirty (30) Business Days of its discovery or receipt of written notice by the
Buyer, use its reasonable efforts to cure such inaccuracy or breach.

                  (b) If the Seller fails to cure an inaccuracy or breach within
the thirty (30) day period set forth in SUBPARAGRAPH (A) above, the Seller shall
repurchase the affected Mortgage Loan from the Buyer within five (5) Business
Days after receipt of a Buyer's Repurchase Request by delivery of the Repurchase
Price therefor to the Buyer in immediately available funds. Unless the Buyer
otherwise agrees, the repurchase date shall occur not later than ten (10)
Business Days after the deadline by which such inaccuracy or breach is to be
cured as provided herein.



                                       13
<PAGE>

                  (c) With respect to any Mortgage Loan repurchased by the
Seller pursuant to this Agreement, the Buyer shall assign, without recourse,
representation or warranty (other than as specifically provided in this SECTION
3.03(C) to the Seller all the Buyer's right, title and interest in and to such
Mortgage Loan; provided that Buyer shall represent that such Mortgage Loan is
free of any Lien created by, through or under Buyer and Buyer has not
transferred such Mortgage Loan to any other person.

         Section 3.04. INDEMNIFICATION. In addition to, and not in limitation
of, the provisions hereof, in the event that the Buyer determines at any time
after the initial Closing Date that the Seller has breached any of the
representations, warranties or covenants made by it in this Agreement, whether
with respect to any Mortgage Loan sold to the Buyer, itself or another matter,
the Buyer shall promptly notify the Seller, and the Seller shall, at its sole
cost and expense, promptly cure such breach in a manner acceptable to the Buyer,
or if such breach cannot be promptly so cured, indemnify, defend and hold
harmless the Buyer, and each of the Buyer's directors, officers, employees and
agents, from and against any and all liabilities, losses, claims, damages, costs
or expenses (including reasonable attorneys' fees and costs of litigation or
defense), which may be suffered or sustained by the Buyer, or asserted against
the Buyer, based upon, arising out of or as a result of the breach of any of the
Seller's representations, warranties or covenants contained in this Agreement.

                                   ARTICLE IV

                                   CONDITIONS

         Section 4.01. CONDITIONS TO PURCHASE. Any purchase of Mortgage Loans by
the Buyer is subject to the satisfaction of the following conditions:

                  (a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Seller hereunder shall be true, correct and complete on
each Closing Date, and the Seller shall have performed all obligations to be
performed by it hereunder on or prior to such Closing Date.

                  (b) FILES MARKED; FILES AND RECORDS OWNED BY THE BUYER. The
Seller shall, at its own expense, on or prior to each Closing Date, indicate in
its files that the Mortgage Loans sold to the Buyer on such Closing Date have
been absolutely assigned to the Buyer pursuant to this Agreement. Further, the
Seller hereby agrees that the computer files and other physical records of the
Mortgage Loans maintained by the Seller will bear an indication reflecting that
the Mortgage Loans are owned by the Buyer.

                  (c) ORGANIZATIONAL DOCUMENTS. The Seller shall have delivered
to the Buyer a certified copy of a resolution adopted by the appropriate
Persons, authorizing Seller's execution, delivery and performance of this
Agreement and the other agreements contemplated to be executed by it in
connection herewith through its representative(s), together with (a) a
certificate of its corporate secretary or assistant secretary as to incumbency,
(b) certified copies of the Seller's formation documents and copies of all other
organizational documents, (c) evidence of the Seller's right to transact
business in those jurisdictions where applicable, and (d) such other



                                       14
<PAGE>

documents as the Buyer may reasonably require as evidence of the Seller's good
standing or as further evidence of such authority.

                  (d) SELLER ASSIGNMENT. As of each Closing Date, the Seller
shall execute and deliver to the Buyer a Seller Assignment substantially in the
form of EXHIBIT A hereto covering the Mortgage Loans and Mortgage Documents
being purchased by the Buyer on such Closing Date.

                  (e) WAREHOUSE LENDER'S RELEASE. The Seller will deliver to the
Buyer a Warehouse Lender's Release in the form of EXHIBIT C, duly executed by
all Persons holding a lien, security interest or other encumbrance on the
Mortgage Loans being purchased by the Buyer, except for liens, security
interests and other encumbrances held by the Buyer.

                  (f) MERS AGREEMENT. Seller shall have delivered to Buyer a
duly executed original of the MERS Agreement.

                  (g) OTHER DOCUMENTS. Such other documents as the Buyer may
reasonably request.

                  (h) LOAN FILE FEE. A loan file fee in the amount of $15 for
each Mortgage Loan reviewed by Buyer after the execution date of this Agreement,
up to and including the 2,800th file so reviewed, and thereafter a loan file fee
in the amount of $10 for each Mortgage Loan reviewed by Buyer, in each case less
the amount of any loan file fee previously paid by the Seller with respect to
such Mortgage Loan.

                                    ARTICLE V

                             COVENANTS OF THE SELLER

         The Seller agrees with the Buyer as follows:

         Section 5.01. PROTECTION OF RIGHT, TITLE AND INTEREST.

                  (a) FURTHER ASSURANCES. The Seller will, at its expense as
from time to time reasonably requested by the Buyer, promptly execute and
deliver all further instruments, agreements, filings and registrations, and take
all further action, in order to confirm and validate this Agreement and the
Buyer's rights and remedies hereunder, or to otherwise give the Buyer the full
benefits of the rights and remedies described in or granted under this
Agreement.

                  (b) NAME CHANGE. Within ten (10) Business Days after the
Seller makes any change in its name, identity or corporate structure which would
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the applicable provisions of the
UCC or any title statute, the Seller shall give the Buyer written notice of any
such change, and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Buyer's security interest in the
Mortgage Documents.



                                       15
<PAGE>

         Section 5.02. PRINCIPAL EXECUTIVE OFFICE. Since its inception, the
Seller has maintained and, from the date of this Agreement, shall maintain its
principal executive office in the State set forth in the Seller's address on the
signature page hereof.

         Section 5.03. TRANSFER TAXES. In the event that the Buyer receives
actual notice of any Transfer Taxes arising out of the transfer, assignment and
conveyance of the Mortgage Loans on written demand by the Buyer or upon the
Seller's otherwise being given notice thereof by the Buyer, the Seller shall
pay, and otherwise indemnify and hold the Buyer harmless, on an after-tax basis,
from and against any and all such Transfer Taxes (it being understood that the
Buyer shall have no obligation to pay such Transfer Taxes).

         Section 5.04. COSTS AND EXPENSES. The Seller agrees to pay all
reasonable costs and out-of-pocket expenses in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement, the
documents and instruments executed and delivered in connection therewith
(including but not limited to the delivery of the Mortgage Documents by the
Seller to the Buyer and the delivery of the Mortgage Documents by the Buyer to
the Seller upon any repurchase of Mortgage Loans by the Seller), and any
subsequent consents, waivers or modifications thereof, (ii) the perfection, as
against all third parties, of the sale and assignment to the Buyer of the
Seller's right, title and interest in and to the Mortgage Loans, and (iii) the
enforcement of the obligations of the Seller under this Agreement, including but
not limited to reasonable attorneys' fees and disbursements.

         Section 5.05. ASSIGNMENT OF MORTGAGE LOANS. The Seller will take no
action inconsistent with the Buyer's ownership of the Mortgage Loans. If a third
party, including a potential buyer of the Mortgage Loans from the Buyer, should
inquire, the Seller will promptly indicate that ownership of the Mortgage Loans
has been absolutely assigned to the Buyer. If the Mortgage Loan is registered on
the MERS(R) System, the Seller shall enter the name of the Buyer in the "interim
funder" category of such system with respect to such Mortgage Loan.

         Section 5.06. SELLER'S RECORDS; DELIVERY OF FINANCIAL STATEMENTS.

                  (a) SELLER'S RECORDS. This Agreement and all related documents
describe the transfer of the Mortgage Loans from the Seller as a sale and
assignment by the Seller to the Buyer and evidence the clear intention by the
Seller to effectuate a sale and assignment of such Mortgage Loans.

                  (b) FINANCIAL STATEMENTS.

                           (i) Promptly after becoming available, and in any
                  event within ninety (90) calendar days after the close of each
                  fiscal year of the Seller, the balance sheet of the Seller as
                  of the end of such year, and the related statements of income,
                  stockholders' equity and cash flows of the Seller for such
                  year, setting forth in each case in comparative form the
                  corresponding figures for the preceding fiscal year; and

                           (ii) Promptly after becoming available, and in any
                  event within forty-five (45) calendar days after the end of
                  each calendar quarter, a balance



                                       16
<PAGE>

                  sheet of the Seller as of the end of such month and the
                  related statements of income and stockholders' equity of the
                  Seller for such month.

         Section 5.07 COOPERATION BY THE SELLER.

                  (a) INSURANCE AND GUARANTEES. The Seller will cooperate fully
and in a timely manner with the Buyer in connection with: (i) the filing of any
claims with an insurer or guarantor or any agent of any insurer or guarantor
under any insurance policy or guaranty affecting a Mortgagor or any of the
Mortgaged Property; (ii) supplying any additional information as may be
requested by the Buyer or any such agent or insurer in connection with the
processing of any such claim; (iii) the execution or endorsement of any check or
draft made payable to the Seller representing proceeds from any such claim and
(iv) the sale of any Mortgage Loan under a Takeout Commitment. The Seller shall
take all such actions as may be reasonably requested by the Buyer to protect the
rights of the Buyer in and to any proceeds under any and all of the foregoing
insurance policies. The Seller shall not take or cause to be taken any action
which would impair the rights of the Buyer in and to any proceeds under any of
the foregoing insurance policies.

                  (b) ENDORSEMENT OF CHECK AND DELIVERY OF FUNDS. The Seller
shall, within one (1) Business Day of receipt thereof, endorse any check or
draft payable to the Seller representing insurance proceeds as to Mortgage Loans
sold to Buyer and (i) in the event there are no other payees on such check or
draft, deliver such check or draft to the Buyer and (ii) in the event such check
or draft is also payable to the Buyer, forward, via overnight courier, such
endorsed check or draft to the Buyer for endorsement and return. The Seller will
hold in trust and remit to the Buyer, within one (1) Business Day of receipt
thereof, any funds received with respect to the Mortgage Loans after the initial
Closing Date.

                                   ARTICLE VI

                     INTERIM SERVICING OF THE MORTGAGE LOANS

         Section 6.01 SERVICER FILES. Upon payment of the Purchase Price for a
Mortgage Loan, the Buyer shall own all rights to service such Mortgage Loan, all
Servicer Files and Mortgage Documents for such Mortgage Loan and all derivative
information created by the Seller or other third party used or useful in
servicing such Mortgage Loan. The Seller (or a subservicer approved by the
Buyer) shall interim service and administer such Mortgage Loan on behalf of the
Buyer in accordance with prudent mortgage loan servicing standards and
procedures generally accepted by prudent lenders in the mortgage banking
industry and in accordance with the requirements of an Approved Takeout
Investors, provided that the Seller shall at all times comply with applicable
law and the terms of the related Mortgage Loan Documents, and the requirements
of any applicable insurer or guarantor including, without limitation, any Third
Party Underwriter, so that the insurance in respect of any Mortgage Loan is not
voided or reduced. The Seller shall at all times maintain accurate and complete
records of its interim servicing of each Mortgage Loan, and the Buyer may, at
any time during the Seller's business hours on reasonable notice, examine and
make copies of such records. At the request and in accordance with the
directions of the Buyer, the Seller shall deliver to the Buyer copies of any
Servicer Files within three (3) Business Days of such request by the Buyer. In
addition, upon not



                                       17
<PAGE>

less than two (2) Business Days' notice to the Seller, the Buyer shall have the
right to perform a due diligence review of the Seller, including the Seller's
servicing capabilities.

         Section 6.02 INTERIM SERVICER REPORTS. If any Mortgage Loans are not
purchased by an Approved Takeout Investor on or before the Cure Date, the Seller
shall at the Buyer's request deliver to the Buyer monthly reports regarding the
status of such Mortgage Loans, which reports shall include, but shall not be
limited to, a description of any default which has existed for more than thirty
(30) calendar days, and such other circumstances that could materially adversely
affect any such Mortgage Loan, the Buyer's ownership of any such Mortgage Loan
or the collateral securing any such Mortgage Loan. The Seller shall deliver such
a report to the Buyer every thirty (30) calendar days until the purchase by an
Approved Takeout Investor of such Mortgage Loans pursuant to the related Takeout
Commitment.

         Section 6.03 CUSTODIAL ACCOUNT. The Seller shall establish and maintain
a separate custodial account (the "CUSTODIAL ACCOUNT") for collections received
in respect of the Mortgage Loans purchased hereunder. Upon the request of the
Buyer, the Seller shall establish the Custodial Account hereunder. The Seller
shall promptly deposit into the Custodial Account in the form received with any
necessary endorsements all collections received in respect of each Mortgage Loan
that are payable to the Buyer as the owner of such Mortgage Loan. Amounts
deposited in the Custodial Account with respect to any Mortgage Loan shall be
held in trust for the Buyer as the owner of such Mortgage Loan and shall be
released only as follows:

                  (a) Except as otherwise provided in SECTION 6.03(C), following
receipt by the Buyer or its designee of the Takeout Proceeds for such Mortgage
Loan from an Approved Takeout Investor, amounts deposited in the Custodial
Account related to such Mortgage Loan not otherwise subject to setoff as
provided hereunder shall be released to the Seller. The amounts paid to the
Seller (if any) pursuant to this SECTION 6.03 shall constitute the Seller's sole
compensation for interim servicing the Mortgage Loans.

                  (b) If Successor Servicer takes delivery of such Mortgage Loan
(either under the circumstances set forth in SECTION 6.04 or otherwise), all
amounts deposited in the custodian Account shall be paid to the Buyer promptly
upon such delivery.

                  (c) If a Mortgage Loan is not purchased by an Approved Takeout
Investor on or before the Cure date, during the period thereafter that the
Seller remains as interim servicer, all amounts deposited in the Custodial
Account shall be released only in accordance with the Buyer's written
instructions.

         Section 6.04 TERMINATION OF INTERIM SERVICING RIGHTS. The Seller's
rights and obligations to interim service each Mortgage Loan as provided in this
Agreement, shall terminate on the earlier of the related Settlement Date or the
date which is thirty (30) calendar days following the related Closing Date;
provided that, the Buyer may in its sole discretion extend such thirty (30) day
interim servicing period by one or more additional thirty (30) day periods by
providing written notice to Seller prior to the termination of such interim
servicing period. If an Event of Insolvency or any default hereunder by the
Seller occurs at any time, the Seller's rights and obligations to service the
Mortgage Loan(s), as provided in this Agreement, shall terminate immediately,
without any notice of action by the Buyer. Upon any such termination, the Buyer




                                       18
<PAGE>

is hereby authorized and empowered to sell and transfer such rights to service
the Mortgage Loan(s) for such price and on such terms and conditions as the
Buyer shall reasonably determine, and the Seller shall have no right to attempt
to sell or transfer such rights to service. The Seller shall perform all acts
and take all actions so that the Mortgage Loan(s) and all files and documents
relating to such Mortgage Loan held by the Seller, together with all escrow
amounts relating to such Mortgage Loan, are delivered to Successor Servicer. To
the extent that the approval of any Third Party Underwriter or any other insurer
or guarantor is required for any such sale or transfer, the Seller shall fully
cooperate with the Buyer to obtain such approval. All amounts paid by the
purchaser of such rights to service the Mortgage Loan(s) shall be the property
of the Buyer.

         Section 6.05 TRANSFER TO SUCCESSOR SERVICER. Each Mortgage Loan
delivered to the Buyer hereunder shall be delivered on a servicing released
basis free of any servicing rights in favor of the Seller and free of any title,
interest, lien, encumbrance or claim of any kind of the Seller and the Seller
hereby waives its right to assert any interest, lien, encumbrance or claim of
any kind. Upon transfer of such servicing rights to any Successor Servicer, the
Seller shall deliver or cause to be delivered all files and documents relating
to each Mortgage Loan held by the Seller to Successor Servicer. The Seller shall
promptly take such actions and furnish to the Buyer such documents that the
Buyer deems necessary or appropriate to enable the Buyer to cure any defect in
each such Mortgage Loan or to enforce such Mortgage Loans, as appropriate.

                                   ARTICLE VII

                          OPTIONAL REPURCHASE BY SELLER

         Section 7.01 TERMS OF REPURCHASE. So long as no breach of any of the
Seller's representations or warranties set forth herein shall be in existence,
and the Seller has otherwise complied with the terms and conditions hereof, the
Seller may repurchase Mortgage Loans any time and from time to time by
delivering to the Buyer a Seller's Repurchase Request at least one (1) Business
Day before the requested repurchase date (in this Article called the "REPURCHASE
DATE"); provided that any such repurchase shall include Mortgage Loans having an
aggregate Book Value of $25,000. Such repurchase shall be on a whole-loan,
servicing-released basis without recourse, representation or warranty of the
Buyer, at the Repurchase Price.

         Section 7.02 REPURCHASE PROCEDURES. Upon receipt of a properly executed
Seller's Repurchase Request, Buyer agrees to sell, assign and transfer to the
Seller the following (the "Repurchased Property"): (i) the Mortgage Loans listed
on the Seller Repurchase Request, (ii) all Mortgage Documents related to those
Mortgage Loans, (iii) all rights of the Buyer in, to and under those Mortgage
Loans and Mortgage Documents, including, without limitation, the right to
receive principal, interest and all other payments with respect thereto after
the Repurchase Date and all rights under related title and hazard insurance
policies, all escrow and other amounts held by the Buyer in connection
therewith, and all rights to service those Mortgage Loans, and (iv) all rights
of the Buyer in, to and under the real property and improvements thereon
securing those Mortgage Loans, including, without limitation, all rights of the
Buyer as mortgagee with respect to such real property and improvements provided
that the terms and conditions hereof are satisfied; PROVIDED THAT the Buyer
shall have the right to substitute for all or part of the Mortgage Loans listed
on the Seller Repurchase Request, other Mortgage Loans that in the aggregate
have



                                       19
<PAGE>

substantially similar average outstanding principal balances, interest rates and
terms to maturity. Such repurchase shall be on a whole-loan, servicing-released
basis without recourse, representation or warranty of the Buyer, at the
Repurchase Price (in the case of any such substitution, adjusted as the Buyer
and the Seller shall agree is necessary to achieve the same economics that would
have existed with respect to the repurchase of the Mortgage Loans listed in the
Seller Repurchase Request had no such substitution occurred). Such sale shall be
effective as of the Repurchase Date upon receipt by Buyer of the Repurchase
Price in the form of cash by federal wire transfer (same day) funds. To secure
the Repurchase Price, the Seller hereby grants to the Buyer a continuing
security interest in the Repurchased Property and all proceeds thereof. The
Seller further agrees that the Buyer shall have all of the rights and remedies
of a secured party under the Uniform Commercial Code as adopted in the State of
Texas with respect to such security interest and that the failure to deliver the
Repurchase Price to the Buyer on the Repurchase Date shall constitute a default
for purposes of such security interest. The Buyer's security interest in the
Repurchased Property shall continue until the Buyer receives payment of the
Repurchase Price in full in the Custodial Account (or another account designated
by the Seller and acceptable to Buyer). At such time such security interest
shall be released automatically and the Buyer shall execute any documents
reasonably requested by the Seller to evidence the release of such security
interest.

         Section 7.03 SHIPMENT OF MORTGAGE DOCUMENTS. Together with the delivery
of a Seller's Repurchase Request, the Seller may request that the Buyer ship
Mortgage Documents relating to the Repurchased Property to an Approved Takeout
Investor or its servicer or custodian for purchase. The Buyer shall ship such
Mortgage Documents to that Approved Takeout Investor or its servicer or
custodian under a Bailee Letter in the form attached hereto as EXHIBIT G.

                                  ARTICLE VIII

                            MISCELLANEOUS PROVISIONS

         Section 8.01 OBLIGATIONS OF THE SELLER. The obligations of the Seller
under this Agreement shall not be affected by reason of any invalidity,
illegality or irregularity of any Mortgage Loan.

         Section 8.02 AMENDMENT. This Agreement may be amended, restated or
supplemented from time to time by a written agreement duly executed and
delivered by the Seller and the Buyer. The Seller shall deliver to the Persons
identified on a list provided to the Seller, as such list may be amended from
time to time, a copy of any amendment to this Agreement.

         Section 8.03 WAIVERS. No failure or delay on the part of the Buyer in
exercising any power, right or remedy under this Agreement or a Seller
Assignment shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other or further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
of the terms and provisions hereof must be in writing and must be consented to
in writing by the Buyer.



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         Section 8.04 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered personally
or mailed by first-class registered or certified mail, postage prepaid, or by
telephonic facsimile transmission and overnight delivery service, postage
prepaid, to any party at its address shown in the opening portion of this
Agreement or at such other address as may be designated by it by notice to the
other party and shall be deemed given when so delivered, or if mailed.

         Section 8.05 REPRESENTATIONS. The respective agreements,
representations, warranties and other statements by the Seller and the Buyer set
forth in or made pursuant to this Agreement shall remain in full force and
effect and will survive each Closing Date.

         Section 8.06 HEADINGS AND CROSS-REFERENCES. The various headings in
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in this
Agreement to Section names or numbers are to such Sections of this Agreement.

         Section 8.07 GOVERNING LAW; VENUE. THIS AGREEMENT AND THE PURCHASE
REQUEST AND THE SELLER ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE PURCHASE REQUEST AND
THE SELLER ASSIGNMENT SHALL BE BROUGHT AND MAINTAINED IN THE APPLICABLE STATE OR
FEDERAL COURT IN DALLAS COUNTY, TEXAS. THIS AGREEMENT IS PERFORMABLE IN DALLAS
COUNTY, TEXAS AND THE PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO BE SUED
ELSEWHERE. THE PARTIES HERETO CONSENT TO PERSONAL JURISDICTION IN DALLAS COUNTY,
TEXAS.

         Section 8.08 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES,
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE OTHER DOCUMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.



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         Section 8.09 TIME IS OF THE ESSENCE. Time is of the essence with
respect to the performance of the obligations contained in this Agreement.

         Section 8.10 COUNTERPARTS. This Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

         Section 8.11 RESTATEMENT. This Agreement is executed in renewal,
modification and amendment (but not in extinguishment) of that certain Mortgage
Loan Purchase and Sale Agreement dated as of August 1, 2002 by and between Buyer
and Seller (as previously amended and restated from time to time, the "ORIGINAL
PURCHASE AGREEMENT") in its entirety, effective as of the date first written
above, and all of the terms and provisions hereof shall supersede the terms and
provisions of the Original Purchase Agreement.


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         IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
and year first written above.


Seller's Address:                           PREFERRED HOME MORTGAGE COMPANY,
123 NW 13th Street, Suite 207               as the Seller
Boca Raton, Florida 33432
Attn: Peter J. Strawser, President


with a copy to:
Patricia M. Petersen                        By: /s/ PATRICIA M. PETERSEN
Technical Olympic USA, Inc.                     --------------------------------
4000 Hollywood Boulevard, Suite 500N            Patricia M. Petersen
Hollywood, Florida 33021                        Secretary



Buyer's Address:                            GUARANTY BANK, as the Buyer
8333 Douglas Avenue
Dallas, Texas 75225
                                            By: /s/ RANDALL S. REID
                                                --------------------------------
                                                Randall S. Reid
                                                Senior Vice President





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