EXECUTION VERSION





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                       MORGAN STANLEY ABS CAPITAL I INC.,

                                  as Depositor,

                            FAIRBANKS CAPITAL CORP.,

                                  as Servicer,

                           CDC MORTGAGE CAPITAL INC.,

                             as Unaffiliated Seller,

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY,

                                   as Trustee,

                         POOLING AND SERVICING AGREEMENT

                          Dated as of November 1, 2002

                       CDC MORTGAGE CAPITAL TRUST 2002-HE3

                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2002-HE3






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<PAGE>


                                TABLE OF CONTENTS
<TABLE>
<S><C>
                                                                                                               PAGE
                                                                                                               ----
ARTICLE I DEFINITIONS.............................................................................................5


ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES..........................................40

     Section 2.01     Conveyance of Mortgage Loans...............................................................40
     Section 2.02     Acceptance by the Trustee of the Mortgage Loans............................................44
     Section 2.03     Representations, Warranties and Covenants of the Unaffiliated Seller and the
                      Servicer...................................................................................45
     Section 2.04     The Depositor and the Mortgage Loans.......................................................48
     Section 2.05     Delivery of Opinion of Counsel in Connection with Substitutions and Non-Qualified
                      Mortgages..................................................................................49
     Section 2.06     Execution and Delivery of Certificates.....................................................49
     Section 2.07     REMIC Matters..............................................................................49
     Section 2.08     Representations and Warranties of the Depositor............................................49

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................51

     Section 3.01     Servicer to Service Mortgage Loans.........................................................51
     Section 3.02     Subservicing Agreements Between the Servicer and Subservicers..............................52
     Section 3.03     Successor Subservicers.....................................................................53
     Section 3.04     Liability of the Servicer..................................................................54
     Section 3.05     No Contractual Relationship Between Subservicers and the Trustee...........................54
     Section 3.06     Assumption or Termination of Subservicing Agreements by Trustee............................54
     Section 3.07     Collection of Certain Mortgage Loan Payments; Establishment of Certain Accounts............55
     Section 3.08     Subservicing Accounts......................................................................57
     Section 3.09     Collection of Taxes, Assessments and Similar Items; Escrow Accounts........................58
     Section 3.10     Collection Account.........................................................................59
     Section 3.11     Withdrawals from the Collection Account....................................................60
     Section 3.12     Investment of Funds in the Account.........................................................61
     Section 3.13     Maintenance of Hazard Insurance and Errors and Omissions and Fidelity Coverage.............62
     Section 3.14     Enforcement of Due-On-Sale Clauses Assumption Agreements...................................64
     Section 3.15     Realization Upon Defaulted Mortgage Loans..................................................65
     Section 3.16     Release of Mortgage Files..................................................................66
     Section 3.17     Title, Conservation and Disposition of REO Property........................................67
     Section 3.18     Notification of Adjustments................................................................69
     Section 3.19     Access to Certain Documentation and Information Regarding the Mortgage Loans...............69
     Section 3.20     Documents, Records and Funds in Possession of the Servicer to be Held for the
                      Trustee....................................................................................69
     Section 3.21     Servicing Compensation.....................................................................70
</TABLE>

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<TABLE>
<S><C>
     Section 3.22     Annual Statement as to Compliance..........................................................70
     Section 3.23     Annual Independent Public Accountants' Servicing Statement; Financial Statements...........71
     Section 3.24     Trustee to Act as Servicer.................................................................71
     Section 3.25     Compensating Interest......................................................................72
     Section 3.26     Credit Reporting; Gramm-Leach-Bliley Act...................................................72
     Section 3.27     Advance Facilities.........................................................................72
     Section 3.28     Servicer Performance Evaluations...........................................................74

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER............................................................75

     Section 4.01     Advances...................................................................................75
     Section 4.02     Priorities of Distribution.................................................................76
     Section 4.03     Monthly Statements to Certificateholders...................................................80
     Section 4.04     Certain Matters Relating to the Determination of LIBOR.....................................84
     Section 4.05     The Class A Insurance Policy...............................................................84
     Section 4.06     Effect of Payments by the Class A Certificate Insurer; Subrogation.........................86

ARTICLE V THE CERTIFICATES.......................................................................................86

     Section 5.01     The Certificates...........................................................................86
     Section 5.02     Certificate Register; Registration of Transfer and Exchange of Certificates................87
     Section 5.03     Mutilated, Destroyed, Lost or Stolen Certificates..........................................91
     Section 5.04     Persons Deemed Owners......................................................................92
     Section 5.05     Access to List of Certificateholders' Names and Addresses..................................92
     Section 5.06     Maintenance of Office or Agency............................................................92
     Section 5.07     Rights of the Class A Certificate Insurer to Exercise Rights of Class A
                      Certificateholders.........................................................................93
     Section 5.08     Trustee To Act Solely with Consent of the Class A Certificate Insurer......................93
     Section 5.09     Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Class A
                      Certificate Insurer........................................................................94
     Section 5.10     Class A Certificate Insurer Default........................................................94

ARTICLE VI THE DEPOSITOR AND THE SERVICER........................................................................95

     Section 6.01     Respective Liabilities of the Depositor and the Servicer...................................95
     Section 6.02     Merger or Consolidation of the Depositor or the Servicer...................................95
     Section 6.03     Limitation on Liability of the Depositor, the Servicer and Others..........................95
     Section 6.04     Limitation on Resignation of the Servicer..................................................96
     Section 6.05     Additional Indemnification by the Servicer; Third Party Claims.............................97

ARTICLE VII DEFAULT..............................................................................................97

     Section 7.01     Events of Default..........................................................................97
     Section 7.02     Trustee to Act; Appointment of Successor...................................................99
     Section 7.03     Notification to Certificateholders........................................................100
</TABLE>

                                       ii
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<TABLE>
<S><C>
ARTICLE VIII CONCERNING THE TRUSTEE.............................................................................100

     Section 8.01     Duties of the Trustee.....................................................................100
     Section 8.02     Certain Matters Affecting the Trustee.....................................................101
     Section 8.03     Trustee Not Liable for Certificates or Mortgage Loans.....................................102
     Section 8.04     Trustee May Own Certificates..............................................................103
     Section 8.05     Trustee's Fees and Expenses...............................................................103
     Section 8.06     Eligibility Requirements for the Trustee..................................................103
     Section 8.07     Resignation and Removal of the Trustee....................................................104
     Section 8.08     Successor Trustee.........................................................................104
     Section 8.09     Merger or Consolidation of the Trustee....................................................105
     Section 8.10     Appointment of Co-Trustee or Separate Trustee.............................................105
     Section 8.11     Tax Matters...............................................................................106
     Section 8.12     Periodic Filings..........................................................................109
     Section 8.13     Tax Classification of Certain Accounts....................................................109

ARTICLE IX TERMINATION..........................................................................................111

     Section 9.01     Termination upon Liquidation or Purchase of the Mortgage Loans............................111
     Section 9.02     Final Distribution on the Certificates....................................................112
     Section 9.03     Additional Termination Requirements.......................................................113

ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................113

     Section 10.01    Amendment.................................................................................113
     Section 10.02    Recordation of Agreement; Counterparts....................................................115
     Section 10.03    Governing Law.............................................................................116
     Section 10.04    Intention of Parties......................................................................116
     Section 10.05    Notices...................................................................................116
     Section 10.06    Severability of Provisions................................................................117
     Section 10.07    Assignment................................................................................117
     Section 10.08    Limitation on Rights of Certificateholders................................................118
     Section 10.09    Inspection and Audit Rights...............................................................118
     Section 10.10    Certificates Nonassessable and Fully Paid.................................................119
     Section 10.11    The Class A Certificate Insurer Default...................................................119
     Section 10.12    Third Party Beneficiary...................................................................119
     Section 10.13    Waiver of Jury Trial......................................................................119

SCHEDULES

Schedule I        Mortgage Loan Schedule
Schedule II       Representations and Warranties of the Servicer
Schedule IIA      Further Representations and Warranties of the Servicer
Schedule III      Representations and Warranties as to the Unaffiliated Seller

EXHIBITS

Exhibit A         Form of Class A, Class M-1, Class M-2, Class B-1 and Class B-2 Certificate
Exhibit B         [Reserved]
Exhibit C         Form of Class P Certificate
</TABLE>

                                      iii
<PAGE>


Exhibit D         Form of Class R Certificate
Exhibit E         Form of Class X Certificate
Exhibit F         Form of Initial Certification of Trustee
Exhibit G         Form of Final Certification of Trustee
Exhibit H         Form of Transfer Affidavit
Exhibit I         Form of Transferor Certificate
Exhibit J         Form of Rule 144A Letter
Exhibit K         Form of Request for Release
Exhibit L         Form of Subsequent Transfer Agreement
Exhibit M         Depositor Certification
Exhibit N         Trustee/Servicer Certification
Exhibit O         Performance Standards


                                       iv
<PAGE>



                  THIS POOLING AND SERVICING AGREEMENT,  dated as of November 1,
2002,  among  MORGAN  STANLEY ABS  CAPITAL I INC.,  a Delaware  corporation,  as
depositor (the  "DEPOSITOR"),  FAIRBANKS CAPITAL CORP., a Utah  corporation,  as
servicer (the "SERVICER"), CDC MORTGAGE CAPITAL INC., a New York corporation, as
unaffiliated seller (the "UNAFFILIATED SELLER") and DEUTSCHE BANK NATIONAL TRUST
COMPANY (f/k/a Bankers Trust Company of  California,  N.A.), a national  banking
association, as trustee (the "TRUSTEE"),

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  In consideration of the mutual  agreements  herein  contained,
the parties hereto agree as follows:

                              PRELIMINARY STATEMENT

                  The Trustee shall elect that two segregated asset pools within
the Trust Fund be treated for federal  income tax  purposes  as  comprising  two
REMICs  (each a "REMIC"  or, in the  alternative,  the Lower  Tier REMIC and the
Upper Tier REMIC,  respectively).  Each Certificate,  other than the Class P and
Class R Certificates,  represents  ownership of a regular  interest in the Upper
Tier  REMIC for  purposes  of the  REMIC  Provisions.  The  Class R  Certificate
represents ownership of the sole class of residual interest in each of the Lower
Tier REMIC and the Upper Tier REMIC for purposes of the REMIC Provisions.  Class
UT-R and Class LT-R comprise the Class R  Certificate.  The Startup Day for each
REMIC described  herein is the Closing Date. The latest  possible  maturity date
for each regular  interest is the date  referenced for such regular  interest in
this preliminary statement.

                  The Upper Tier REMIC shall hold as assets the several  classes
of uncertificated  Lower Tier Regular Interests,  set out below. Each such Lower
Tier Regular  Interest is hereby  designated as a regular  interest in the Lower
Tier REMIC.  Class LT-A,  Class  LT-M-1,  Class  LT-M-2,  Class LT-B-1 and Class
LT-B-2 are hereby  designated  the LT Accretion  Directed  Classes.  The Class P
Certificate  represents  beneficial  ownership of the Prepayment Charges,  which
portion of the Trust Fund shall be treated as a grantor trust.

                  The Lower  Tier  REMIC  shall hold as assets all of the assets
included in the Trust Fund other than Prepayment  Charges and the Excess Reserve
Fund Account.

<TABLE>
<CAPTION>
    LOWER TIER CLASS         LOWER TIER       INITIAL LOWER TIER       CORRESPONDING    LATEST POSSIBLE MATURITY
       DESIGNATION         INTEREST RATE       PRINCIPAL AMOUNT            CLASS                  DATE
----------------------   ----------------  ----------------------      -------------    ------------------------
<S>                             <C>        <C>                            <C>                <C>
Class LT-A                      (1)        1/2 of the                     Class A            March 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance

Class LT-M-1                    (1)        1/2 of the                    Class M-1           March 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance
</TABLE>

<PAGE>

<TABLE>
<S>                             <C>        <C>                            <C>                <C>
Class LT-M-2                    (1)        1/2 of the                    Class M-2           March 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance

Class LT-B-1                    (1)        1/2 of the                    Class B-1           March 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance

Class LT-B-2                    (1)        1/2 of the                    Class B-2           March 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance

Class LT-Accrual                (1)        1/2 of the Pool Stated                            March 25, 2033
                                           Principal Balance plus
                                           1/2 of the Subordinated
                                           Amount

Class LT-IO                     (2)        (3)                                              February 25, 2003

Class LT-R                      (4)        (4)
</TABLE>

(1)   The  interest  rate  with  respect  to any  Distribution  Date  for  these
      interests is (i) during the Pre-Funding  Period, an interest rate equal to
      zero, and (ii) thereafter, a per annum variable rate equal to the weighted
      average of the Adjusted Net Mortgage Rates then in effect on the beginning
      of the related Due Period on the Mortgage Loans.

(2)   The  interest  rate with  respect to any  Distribution  Date for the Class
      LT-IO is (i) during the Pre-Funding  Period,  100% of the interest paid on
      the Mortgage Loans, and (ii) thereafter, 0.00%.

(3)   The Class LT-IO will have a notional principal balance equal to (i) during
      the  Pre-Funding  Period,  the Pool  Stated  Principal  Balance,  and (ii)
      thereafter, zero.

(4)   The Class LT-R is the sole class of  residual  interest  in the Lower Tier
      REMIC.  The Class  LT-R does not have a  principal  amount or an  interest
      rate.

                  On  each  Distribution  Date,  50%  of  the  increase  in  the
Subordinated  Amount will be payable as a reduction of the principal balances of
the LT Accretion Directed Classes and will be accrued and added to the principal
balance of the LT-Accrual  Class. On each  Distribution  Date, each LT Accretion
Directed  Class will be reduced by an amount equal to 50% of any increase in the
Subordinated Amount that is attributable to a reduction in the principal balance
of its  Corresponding  Class.  On each  Distribution  Date,  the increase in the
principal  balance of the LT-Accrual Class may not exceed interest  accruals for
such  Distribution  Date for the  LT-Accrual  Class.  If,  with  respect  to any
Distribution  Date,  50% of the  increase  in the  Subordinated  Amount  exceeds
accrued interest on the LT-Accrual Class, the excess  (accumulated with all such
excess



                                       2
<PAGE>

for  all  prior  Distribution  Dates)  will  be  added  to any  increase  in the
Subordinated  Amount  for  purposes  of  calculating  accrued  interest  on  the
LT-Accrual  Class payable as principal on the LT Accretion  Directed  Classes on
the next Distribution Date.

                  All principal payments (scheduled and prepaid) on the Mortgage
Loans shall be allocated 50% to the LT-Accrual Class and 50% to the LT Accretion
Directed Classes,  until paid in full. To this end,  principal payments shall be
allocated among such LT Accretion  Directed Classes in an amount equal to 50% of
the  principal  amounts  allocated to their  respective  Corresponding  Classes.
Notwithstanding  the  foregoing,  principal  payments  allocated  to the Class X
Certificates  that result in the reduction of the  Subordinated  Amount shall be
allocated to the LT-Accrual  Class until paid in full.  Realized losses shall be
applied so that after all distributions have been made on each Distribution Date
(i) the principal balance of each LT Accretion Directed Class is equal to 50% of
the principal balance of its Corresponding  Class, and (ii) the LT-Accrual Class
is  equal  to  50%  of  the  Pool  Stated  Principal  Balance  plus  50%  of the
Subordinated Amount.

                  The Upper  Tier REMIC  shall  issue the  following  classes of
interests,  and each Upper Tier Interest, other than the Class UT-R Interest, is
hereby designated as a regular interest in the Upper Tier REMIC.

<TABLE>
<CAPTION>
    UPPER TIER CLASS         UPPER TIER        INITIAL UPPER TIER                           LATEST POSSIBLE MATURITY
      DESIGNATION           INTEREST RATE       PRINCIPAL AMOUNT      CORRESPONDING CLASS             DATE
---------------------      ---------------    --------------------   ---------------------  -------------------------
<S>                              <C>            <C>                     <C>                      <C>
   Class A                       (1)            $537,817,000            Class A(8)               March 25, 2033

   Class M-1                     (2)            $ 39,594,000            Class M-1(8)             March 25, 2033

   Class M-2                     (3)            $ 36,294,000            Class M-2(8)             March 25, 2033

   Class B-1                     (4)            $ 26,066,000            Class B-1(8)             March 25, 2033

   Class B-2                     (5)            $ 10,229,000            Class B-2(8)             March 25, 2033

   Class X                       (6)              (6)                   Class X                  March 25, 2033

   Class UT-R                    (7)                                    Class R
</TABLE>

(1)   The Class A will bear interest  during each Interest  Accrual  Period at a
      per annum rate equal to (a) on or prior to the Optional  Termination Date,
      the lesser of (i) LIBOR plus 0.490% and (ii) the WAC Cap and (b) after the
      Optional  Termination  Date,  the lesser of (i) LIBOR plus 0.980% and (ii)
      the WAC Cap.

(2)   The Class M-1 will bear interest during each Interest  Accrual Period at a
      per annum rate equal to (a) on or prior to the Optional  Termination Date,
      the lesser of (i) LIBOR plus 1.100% and (ii) the WAC Cap and (b) after the
      Optional  Termination Date, the lesser of (i) LIBOR plus 1.650%,  and (ii)
      the WAC Cap.

(3)   The Class M-2 will bear interest during each Interest  Accrual Period at a
      per annum rate equal to (a) on or prior to the Optional  Termination Date,
      the lesser of (i) LIBOR plus 2.250% and (ii) the WAC Cap and (b) after the
      Optional  Termination Date, the lesser of (i) LIBOR plus 3.375%,  and (ii)
      the WAC Cap.


                                       3
<PAGE>


(4)   The Class B-1 will bear interest during each Interest  Accrual Period at a
      per annum rate equal to (a) on or prior to the Optional  Termination Date,
      the lesser of (i) LIBOR plus 3.400% and (ii) the WAC Cap and (b) after the
      Optional  Termination Date, the lesser of (i) LIBOR plus 5.100%,  and (ii)
      the WAC Cap.

(5)   The Class B-2 will bear interest during each Interest  Accrual Period at a
      per annum rate equal to (a) on or prior to the Optional  Termination Date,
      the lesser of (i) LIBOR plus 4.000% and (ii) the WAC Cap and (b) after the
      Optional  Termination Date, the lesser of (i) LIBOR plus 6.000%,  and (ii)
      the WAC Cap.

(6)   The Class X has an initial  principal  balance of $9,898,377,  but it will
      not accrue interest on such balance but will accrue interest on a notional
      principal  balance.  As of any Distribution Date, the Class X shall have a
      notional  principal  balance equal to the Pool Stated Principal Balance as
      of the first day of the related Interest  Accrual Period.  With respect to
      any Interest  Accrual  Period,  the Class X shall bear  interest at a rate
      equal to the excess,  if any, of the WAC Cap over the product of (i) 2 and
      (ii) the  weighted  average  Pass-Through  Rate of the Lower Tier  Regular
      Interests,  where each LT Accretion Directed Class is subject to a cap and
      a floor equal to the Pass-Through Rate on its Corresponding Class, and the
      LT-Accrual  Class  is  subject  to a cap  of  zero.  With  respect  to any
      Distribution  Date,  interest  that so accrues on the  notional  principal
      balance  of the  Class X shall  be  deferred  in an  amount  equal  to any
      increase  in the  Subordinated  Amount  on such  Distribution  Date.  Such
      deferred interest shall not itself bear interest.

(7)   The Class UT-R is the sole class of  residual  interest  in the Upper Tier
      REMIC. The Class UT-R does not have an interest rate.

(8)   Each of these  Certificates  will  represent not only the ownership of the
      Corresponding  Class of Upper Tier Regular  Interest but also the right to
      receive  payments  from the Excess  Reserve Fund Account in respect of any
      Basis Risk  CarryForward  Amounts.  For federal  income tax purposes,  the
      Trustee will treat a  Certificateholder's  right to receive  payments from
      the Excess  Reserve Fund Account as payments  made  pursuant to a notional
      principal contract written by the Class X Certificateholder.

                  The minimum denomination for each Class of Certificates, other
than the Class P,  Class R and the Class X  Certificates,  will be  $25,000  and
integral  multiples  of $1  thereof.  The  Class  P,  Class  R and  the  Class X
Certificates will each represent a 100% Percentage Interest in such class.

                  Set forth below are designations of Classes of Certificates to
the categories used herein:

<TABLE>
<S>                                             <C>
Book-Entry Certificates....................     All Classes of Certificates other than the Physical Certificates.

Subordinated Certificates..................     Class M-1, Class M-2, Class B-1 and Class B-2 Certificates.
</TABLE>


                                       4
<PAGE>


<TABLE>
<S>                                             <C>
Delay Certificates.........................     None.

ERISA-Restricted Certificates..............     Class  R   Certificates,   Class  P   Certificate   and  Class  X
                                                Certificate;  any  certificate  with a rating  below  the  lowest
                                                applicable permitted rating under the Underwriters' Exemption.

Floating Rate Certificates.................     Class A and Subordinated Certificates.

LIBOR Certificates.........................     Class A and Subordinated Certificates.

Non-Delay Certificates.....................     Class A, Class X and Subordinated Certificates.

Offered Certificates.......................     All Classes of Certificates other than the Private Certificates.

Physical Certificates......................     Class P, Class X and Class R Certificates.

Private Certificates.......................     Class P, Class X and Class R Certificates.

Rating Agencies............................     Moody's, Fitch, Inc. and Standard & Poor's.

Regular Certificates.......................     All  Classes  of Certificates  other than the Class P and Class R
                                                Certificates.

Residual Certificates......................     Class R Certificates.
</TABLE>


                                    ARTICLE I

                                    DEFINITIONS

                  Whenever  used in this  Agreement,  the  following  words  and
phrases,  unless  the  context  otherwise  requires,  shall  have the  following
meanings:

                  60+ DAY  DELINQUENT  LOAN:  Each Mortgage Loan with respect to
which any portion of a Scheduled Payment is, as of the last day of the prior Due
Period, two months or more past due (without giving effect to any grace period),
each Mortgage Loan in  foreclosure,  all REO Property and each Mortgage Loan for
which the Mortgagor has filed for bankruptcy.

                  ACCEPTED  SERVICING  PRACTICES:  With  respect to any Mortgage
Loan,  those  mortgage  servicing  practices  set forth in Section  3.01 of this
Agreement.

                  ACCOUNT:   Any  of  the  Capitalized   Interest  Account,  the
Collection Account,  the Distribution  Account,  any Escrow Account,  the Excess
Reserve Fund Account,  the Class A Insurance  Payment Account or the Pre-Funding
Account. Each Account shall be an Eligible Account.


                                       5
<PAGE>


                  ACCRUED CERTIFICATE INTEREST DISTRIBUTION AMOUNT: With respect
to any Distribution Date for each Class of Certificates  (other than the Class X
Certificate), the amount of interest accrued during the related Interest Accrual
Period at the  applicable  Pass-Through  Rate on the related  Class  Certificate
Balance  immediately prior to such Distribution Date, as reduced by such Class's
share of Net Prepayment  Interest  Shortfalls and Relief Act Interest Shortfalls
for the related Due Period allocated to such Class pursuant to Section 4.02.

                  ADDITION NOTICE: A written notice from the Unaffiliated Seller
to the Trustee, the Rating Agencies and the Class A Certificate Insurer that the
Unaffiliated Seller desires to make a Subsequent Transfer.

                  ADJUSTABLE   RATE  MORTGAGE  LOAN:  A  Mortgage  Loan  bearing
interest at an adjustable rate.

                  ADJUSTED  MORTGAGE  RATE:  As to each Mortgage Loan and at any
time, the per annum rate equal to the Mortgage Rate less the Servicing Fee Rate.

                  ADJUSTED NET MORTGAGE  RATE:  As to each  Mortgage Loan and at
any time,  the per annum rate equal to the  Mortgage  Rate less the  Expense Fee
Rate.

                  ADJUSTMENT  DATE: As to any Mortgage  Loan, the first Due Date
on which the related  Mortgage Rate adjusts as set forth in the related Mortgage
Note and each Due Date  thereafter  on which the  Mortgage  Rate  adjusts as set
forth in the related Mortgage Note.

                  ADVANCES:  Collectively, the P&I Advances and Servicing
Advances.

                  ADVANCE FACILITY:  As defined in Section 3.27.

                  ADVANCE FACILITY TRUSTEE:  As defined in Section 3.27.

                  ADVANCE REIMBURSEMENT AMOUNT:  As defined in Section 3.27.

                  ADVANCING PERSON:  As defined in Section 3.27.

                  AFFILIATE:  With  respect  to any  Person,  any  other  Person
controlling,  controlled by or under common control with such first 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  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 or supplements hereto.

                  AMOUNT HELD FOR FUTURE DISTRIBUTION: As to the Certificates on
any Distribution  Date, the aggregate  amount held in the Collection  Account at
the close of  business  on the  related  Determination  Date on  account  of (i)
Principal  Prepayments and  Liquidation  Proceeds on the Mortgage Loans received
after the end of the related  Prepayment Period and (ii) all Scheduled  Payments
on the Mortgage Loans due after the end of the related Due Period.

                                       6
<PAGE>


                  APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution
Date, the amount,  if any, by which the aggregate Class  Certificate  Balance of
the Regular  Certificates after  distributions of principal on such Distribution
Date exceeds the aggregate  Stated  Principal  Balance of the Mortgage Loans for
such Distribution Date.

                  APPRAISED  VALUE:  The value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

                  ASSIGNMENT  AND  RECOGNITION  AGREEMENT:  The  BNC  Assignment
Agreement,  the IFC Assignment Agreement,  the Novelle Assignment Agreement, the
Chapel Mortgage Assignment Agreement,  the People's Choice Assignment Agreement,
the SIB Mortgage Assignment  Agreement,  the Fremont Assignment Agreement or the
First NLC Assignment Agreement, as applicable.

                  ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage,  notice
of  transfer  or  equivalent  instrument  in  recordable  form  (other  than the
assignee's  name and recording  information  not yet returned from the recording
office), reflecting the sale of the Mortgage to the Trustee.

                  AVERAGE NET PROCEEDS:  As defined in Exhibit M hereto.

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

                  BASIC  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to any
Distribution  Date, the excess of (i) the Principal  Remittance  Amount for such
Distribution  Date over (ii) the Excess  Subordinated  Amount,  if any, for such
Distribution Date.

                  BASIS RISK CARRYFORWARD  AMOUNT: With respect to each Class of
Regular  Certificates,  as of any  Distribution  Date, the sum of (A) if on such
Distribution Date the Pass-Through Rate for any Class of Regular Certificates is
based upon the WAC Cap,  the excess of (i) the amount of interest  such Class of
Certificates  would otherwise be entitled to receive on such  Distribution  Date
had  such  rate  been  calculated  as  the  sum  of  LIBOR  and  the  applicable
Pass-Through  Margin on such Class of Certificates for such  Distribution  Date,
over  (ii)  the  amount  of  interest  payable  on such  Class  of  Certificates
calculated  at the WAC Cap for such  Distribution  Date and (B) the  Basis  Risk
CarryForward Amount for such Class of Certificates for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal to the
sum  of  LIBOR  and  the  applicable  Pass-Through  Margin  for  such  Class  of
Certificates for such Distribution Date.

                  BASIS RISK PAYMENT: For any Distribution Date, an amount equal
to any Basis Risk CarryForward Amount,  PROVIDED,  HOWEVER, that with respect to
any  Distribution   Date,  the  payment  cannot  exceed  the  amounts  otherwise
distributable  on the Class X  Certificates  plus any Interest  Rate Cap Payment
with respect to such Distribution Date.

                  BEST'S:  Best's Key Rating Guide, as the same shall be amended
from time to time.

                                       7
<PAGE>

                  BNC:  BNC Mortgage, Inc., a Delaware corporation.

                  BNC  ASSIGNMENT  AGREEMENT:  The  Assignment  and  Recognition
Agreement,  dated as of November 27, 2002, by and among the Unaffiliated Seller,
the Depositor and BNC, and each other  Assignment and  Recognition  Agreement by
and among the Unaffiliated  Seller, the Depositor and BNC in connection with any
Subsequent Transfer of BNC Mortgage Loans.

                  BNC MORTGAGE LOAN: A Mortgage Loan which was acquired from BNC
by the Unaffiliated Seller pursuant to the BNC Purchase Agreement, and which has
been acquired by the Trust Fund.

                  BNC PURCHASE AGREEMENT: The Amended and Restated Mortgage Loan
Purchase and Warranties Agreement,  dated as of February 26, 2002, as amended to
date, by and between the Unaffiliated Seller and BNC.

                  BOOK-ENTRY  CERTIFICATES:  As  specified  in  the  Preliminary
Statement.

                  BUSINESS  DAY: Any day other than (i)  Saturday or Sunday,  or
(ii) a day on which banking and savings and loan institutions,  in (a) the State
of New York, Utah, New Jersey and Florida, (b) the state in which the Servicer's
servicing  operations  are  located,  or (c) the  State in which  the  Trustee's
operations are located, are authorized or obligated by law or executive order to
be closed.

                  CAP AGREEMENT:  The interest rate cap agreement dated November
26, 2002 with the Cap Provider,  as "Party A" thereunder,  and the  Unaffiliated
Seller, as "Party B" thereunder, or any replacement thereof.

                  CAP PROVIDER: Morgan Stanley Capital Services Inc., a Delaware
corporation, and any successor thereto.

                  CAPITALIZED  INTEREST  ACCOUNT:  The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(e) in the name of
the Trustee for the benefit of the  Offered  Certificateholders  and  designated
"Deutsche Bank National Trust  Company,  in trust for registered  holders of CDC
Mortgage  Capital Trust 2002-HE3,  Mortgage  Pass-Through  Certificates,  Series
2002-HE3".

                  CAPITALIZED   INTEREST   REQUIREMENT:   With  respect  to  the
Distribution  Dates occurring in December 2002,  January 2003 and February 2003,
the excess, if any, of (x) the Accrued Certificate Interest Distribution Amounts
for all classes of the Offered  Certificates for such Distribution Date over (y)
all scheduled  installments of interest (net of the related Expense Fees) due on
the Mortgage Loans in the related Due Period.  In no event will the  Capitalized
Interest Requirement be less than zero.

                  CERTIFICATE:  Any  one of  the  Certificates  executed  by the
Trustee in substantially the forms attached hereto as exhibits.

                  CERTIFICATE   BALANCE:   With   respect   to  any   Class   of
Certificates,  other  than the Class R  Certificate,  at any date,  the  maximum
dollar  amount  of  principal  to which  the  Holder


                                       8
<PAGE>


thereof is then entitled hereunder,  such amount being equal to the Denomination
thereof  minus all  distributions  of  principal  previously  made with  respect
thereto and in the case of any Subordinated Certificates, reduced by any Applied
Realized Loss Amounts applicable to such Class of Subordinated Certificates. The
Class R Certificate has no Certificate Balance.

                  CERTIFICATE  OWNER: With respect to a Book-Entry  Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate.

                  CERTIFICATE  REGISTER:  The  register  maintained  pursuant to
Section 5.02.

                  CERTIFICATEHOLDER  OR  HOLDER:  The  person  in  whose  name a
Certificate is registered in the Certificate  Register,  except that, solely for
the purpose of giving any consent  pursuant to this  Agreement,  any Certificate
registered in the name of the Depositor or any affiliate of the Depositor  shall
be deemed not to be Outstanding and the Percentage  Interest  evidenced  thereby
shall not be taken into account in determining  whether the requisite  amount of
Percentage  Interests  necessary  to  effect  such  consent  has been  obtained;
PROVIDED,  HOWEVER,  that if any such Person (including the Depositor) owns 100%
of  the  Percentage  Interests  evidenced  by  a  Class  of  Certificates,  such
Certificates  shall be deemed to be  Outstanding  for purposes of any  provision
hereof that requires the consent of the Holders of  Certificates of a particular
Class as a  condition  to the taking of any  action  hereunder.  The  Trustee is
entitled  to  rely  conclusively  on a  certification  of the  Depositor  or any
affiliate of the Depositor in determining  which  Certificates are registered in
the name of an affiliate of the Depositor.

                  CERTIFICATION:  As defined in Section 8.12(b).

                  CHAPEL  MORTGAGE:  Chapel Mortgage  Corporation,  a New Jersey
corporation.

                  CHAPEL  MORTGAGE  ASSIGNMENT  AGREEMENT:  The  Assignment  and
Recognition  Agreement,  dated  as of  November  27,  2002,  by  and  among  the
Unaffiliated  Seller,  the  Depositor  and  Chapel  Mortgage,   and  each  other
Assignment and Recognition  Agreement by and among the Unaffiliated  Seller, the
Depositor and Chapel  Mortgage in  connection  with any  Subsequent  Transfer of
Chapel Mortgage Mortgage Loans.

                  CHAPEL  MORTGAGE  MORTGAGE  LOAN:  A  Mortgage  Loan which was
acquired from Chapel Mortgage by the Unaffiliated  Seller pursuant to the Chapel
Mortgage Purchase Agreement, and which has been acquired by the Trust Fund.

                  CHAPEL MORTGAGE PURCHASE AGREEMENT: The Mortgage Loan Purchase
and Warranties  Agreement,  dated as of June 4, 2002, as amended to date, by and
between the Unaffiliated Seller and Chapel Mortgage.

                  CLASS: All Certificates  bearing the same class designation as
set forth in the Preliminary Statement.

                  CLASS A  CERTIFICATE  INSURER:  Financial  Security  Assurance
Inc., a monoline stock insurance company organized and created under the laws of
the State of New York, and any successors thereto.

                                       9
<PAGE>

                  CLASS  A  CERTIFICATE  INSURER  DEFAULT:   The  existence  and
continuance of any of the following:

                  (a) the Class A Certificate  Insurer shall have failed to make
         a required payment when due under the Class A Insurance Policy;

                  (b) the Class A  Certificate  Insurer  shall  have (i) filed a
         petition or commenced  any case or  proceeding  under any  provision or
         chapter  of the  United  States  Bankruptcy  Code,  the New York  State
         Insurance  Law or any other  similar  federal or state law  relating to
         insolvency, bankruptcy, rehabilitation, liquidation, or reorganization,
         (ii) made a general  assignment  for the  benefit of its  creditors  or
         (iii) had an order  for  relief  entered  against  it under the  United
         States  Bankruptcy  Code, the New York State Insurance Law or any other
         similar  federal  or state  law  relating  to  insolvency,  bankruptcy,
         rehabilitation,  liquidation,  or  reorganization  that  is  final  and
         nonappealable; or

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

                  CLASS A  CERTIFICATES:  All  Certificates  bearing  the  class
designation of "Class A Certificates".

                  CLASS A DEFICIENCY:  With respect to any Distribution Date and
the Class A Certificates, an amount equal to the excess of the sum of:

                  (i)  the  excess  of  (x)  the  Accrued  Certificate  Interest
         Distribution  Amount for the Class A Certificates on such  Distribution
         Date, over (y) the Interest Amount  Available,  less the Premium Amount
         and the Trustee Fee, in each case for such Distribution Date; plus

                  (ii) the Class A Principal  Parity  Amount,  if any,  for such
         Distribution Date.

                  CLASS A  INSURANCE  PAYMENT  ACCOUNT:  The  separate  Eligible
Account created and maintained by the Trustee pursuant to Section 4.05(c) in the
name of the Trustee for the  benefit of the Class A  Certificateholders  and the
Class A Certificate  Insurer,  and  designated  "Deutsche  Bank  National  Trust
Company,  in trust for  Financial  Security  Assurance  Inc. and the  registered
holders  of  CDC  Mortgage   Capital  Trust  2002-HE3,   Mortgage   Pass-Through
Certificates, Series 2002-HE3."

                  CLASS A INSURANCE  POLICY:  The Financial  Guaranty  Insurance
Policy No. 51369-N,  and all endorsements thereto dated the Closing Date, issued
by  the  Class  A   Certificate   Insurer   for  the  benefit  of  the  Class  A
Certificateholders.

                  CLASS A PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect to any
Distribution Date, the excess of (i) the aggregate Class Certificate  Balance of
the Class A Certificates  immediately


                                       10
<PAGE>


prior to such  Distribution  Date over (ii) the  lesser  of (A) the  product  of
63.00% of the Current  Maximum  Amount and (B) the Current  Maximum Amount minus
$3,299,492.

                  CLASS  A  PRINCIPAL   PARITY  AMOUNT:   With  respect  to  any
Distribution  Date, the excess,  if any, of (i) the aggregate Class  Certificate
Balance of the Class A Certificates on that Distribution Date, after taking into
account any reduction  therein on such Distribution Date from sources other than
the Class A  Insurance  Policy  over  (ii) the  Current  Maximum  Amount on such
Distribution Date.

                  CLASS B-1  CERTIFICATES:  All  Certificates  bearing the class
designation of "Class B-1 Certificates".

                  CLASS B-1 PRINCIPAL  DISTRIBUTION  AMOUNT: With respect to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balance of the Class A  Certificates  (after  taking  into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date), (C) the Class Certificate  Balance of the Class M-2
Certificates (after taking into account  distribution of the Class M-2 Principal
Distribution  Amount on such  Distribution  Date), and (D) the Class Certificate
Balance of the Class B-1  Certificates  immediately  prior to such  Distribution
Date over (ii) the lesser of (A) 93.90% of the  Current  Maximum  Amount and (B)
the Current Maximum Amount minus approximately $3,299,492.

                  CLASS B-2  CERTIFICATES:  All  Certificates  bearing the class
designation of "Class B-2 Certificates".

                  CLASS B-2 PRINCIPAL  DISTRIBUTION  AMOUNT: With respect to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balance of the Class A  Certificates  (after  taking  into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date), (C) the Class Certificate  Balance of the Class M-2
Certificates (after taking into account  distribution of the Class M-2 Principal
Distribution  Amount  on such  Distribution  Date),  (D) the  Class  Certificate
Balance of the Class B-1 Certificates (after taking into account distribution of
the Class B-1 Principal  Distribution Amount on such Distribution Date), and (E)
the Class Certificate Balance of the Class B-2 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 97.00% of the Current Maximum
Amount and (B) the Current Maximum Amount minus approximately $3,299,492.

                  CLASS CERTIFICATE BALANCE: With respect to any Class and as to
any date of  determination,  the  aggregate of the  Certificate  Balances of all
Certificates of such Class as of such date.

                  CLASS M-1  CERTIFICATES:  All  Certificates  bearing the class
designation of "Class M-1 Certificates".

                  CLASS M-1 PRINCIPAL  DISTRIBUTION  AMOUNT: With respect to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A


                                       11
<PAGE>


Certificates  (after taking into account  distribution  of the Class A Principal
Distribution  Amount on such  Distribution  Date), and (B) the Class Certificate
Balance of the Class M-1  Certificates  immediately  prior to such  Distribution
Date over (ii) the lesser of (A) 75.00% of the  Current  Maximum  Amount and (B)
the Current Maximum Amount MINUS approximately $3,299,492.

                  CLASS M-2  CERTIFICATES:  All  Certificates  bearing the class
designation of "Class M-2 Certificates".

                  CLASS M-2 PRINCIPAL  DISTRIBUTION  AMOUNT: With respect to any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class A Principal Distribution Amount on
such Distribution  Date), and (C) the Class Certificate Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (ii) the lesser of
(A) 86.00% of the  Current  Maximum  Amount and (B) the Current  Maximum  Amount
MINUS approximately $3,299,492.

                  CLASS P  CERTIFICATES:  All  Certificates  bearing  the  class
designation of "Class P Certificates".

                  CLASS R  CERTIFICATES:  All  Certificates  bearing  the  class
designation of "Class R Certificates".

                  CLASS X CERTIFICATES: All Certificates bearing the designation
of "Class X Certificates".

                  CLASS X DISTRIBUTABLE  AMOUNT:  On any Distribution  Date, the
sum of (i) the  amount  of  interest  that has  accrued  on the  Class X Regular
Interest  and not  applied  as an Extra  Principal  Distribution  Amount on such
Distribution Date, plus any such accrued interest  remaining  undistributed from
prior  Distribution  Dates, and (ii) any portion of the principal balance of the
Class X Regular  Interest which is  distributable  as a Subordination  Reduction
Amount, less any amounts paid as a Basis Risk Payment.

                  CLOSING DATE:  November 27, 2002.

                  CODE:  The  Internal  Revenue  Code  of  1986,  including  any
successor or amendatory provisions.

                  COLLECTION ACCOUNT:  As defined in Section 3.10(a).

                  COMPENSATING  INTEREST:  For any Distribution Date, the lesser
of (a) the Prepayment Interest Shortfall, if any, for the Distribution Date, and
(b) one-half of the amount of the Servicing Fee payable to the Servicer for such
Distribution Date.

                  CONDEMNATION PROCEEDS: All awards of settlements in respect of
a Mortgaged  Property,  whether  permanent or temporary,  partial or entire,  by
exercise of the power of eminent domain or condemnation.

                                       12
<PAGE>


                  CONSENT PROCEDURES:  As defined in Section 3.27.

                  CORPORATE TRUST OFFICE:  The designated  office of the Trustee
in the State of California at which at any particular  time its corporate  trust
business  with respect to this  Agreement is  administered,  which office at the
date of the  execution  of this  Agreement  is located  at 1761 East St.  Andrew
Place, Santa Ana, California 92705, Attn: Trust Administration-DC02M3, facsimile
no.  (714)   247-6478  and  which  is  the  address  to  which  notices  to  and
correspondence with the Trustee should be directed.

                  CORRESPONDING  CLASS:  The  class of  interests  in any  REMIC
created  under this  Agreement  that  correspond  to the Class of  interests  in
another such REMIC or to a Class of Certificates in the manner set out below:

           LOWER TIER                 UPPER TIER                 CORRESPONDING
        CLASS DESIGNATION              INTEREST                   CERTIFICATE
----------------------------   ---------------------------   -------------------
          Class LT-A                   Class A                     Class A
          Class LT-M-1                 Class M-1                   Class M-1
          Class LT-M-2                 Class M-2                   Class M-2
          Class LT-B-1                 Class B-1                   Class B-1
          Class LT-B-2                 Class B-2                   Class B-2

                  CUMULATIVE LOSS  PERCENTAGE:  With respect to any Distribution
Date,  the  percentage  equivalent of a fraction,  the numerator of which is the
aggregate amount of Applied Realized Loss Amounts incurred from the Cut-off Date
to the last day of the preceding  calendar month less any amounts  received with
respect  to  Applied  Realized  Loss  Amounts  on  the  related  Mortgage  Loans
subsequent to the Final Recovery  Determination  being made with respect to such
Mortgage Loans and the denominator of which is the Scheduled  Principal  Balance
of the Mortgage Loans as of the Cut-off Date.

                  CURRENT MAXIMUM AMOUNT: With respect to any Distribution Date,
the sum of (i) the  aggregate of the Stated  Principal  Balances of the Mortgage
Loans in the Trust at such time, and (ii) with respect to each Distribution Date
on or prior to February 25, 2003, the Pre-Funding  Amount  immediately  prior to
the Distribution Date, net of investment earnings on deposit therein.

                  CUSTODIAL  FILE:  With respect to each Mortgage Loan, the file
retained by the Trustee consisting of items (i) - (viii) of Section 2.01(c).

                  CUT-OFF  DATE:  With  respect to the Initial  Mortgage  Loans,
November 1, 2002, and with respect to each Subsequent Mortgage Loan, the related
Subsequent Cut-off Date.

                  CUT-OFF DATE POOL  PRINCIPAL  BALANCE:  The  aggregate  Stated
Principal Balances of all Mortgage Loans as of the Cut-off Date.

                  CUT-OFF DATE PRINCIPAL  BALANCE:  As to any Mortgage Loan, the
Stated  Principal  Balance  thereof as of the close of  business  on the Cut-off
Date.

                                       13
<PAGE>


                  DATA  TAPE  INFORMATION:   The  information  provided  by  the
Unaffiliated  Seller as of November 1, 2002 to the  Depositor  setting forth the
following  information  with respect to each Mortgage Loan: (1) the  Mortgagor's
name; (2) as to each Mortgage Loan,  the Scheduled  Principal  Balance as of the
Cut-off Date;  (3) the Mortgage Rate Cap; (4) the Index;  (5) a code  indicating
whether the  Mortgaged  Property is  owner-occupied;  (6) the type of  Mortgaged
Property;  (7) the  first  date on  which  the  Monthly  Payment  was due on the
Mortgage Loan and, if such date is not consistent with the Due Date currently in
effect,  such Due Date;  (8) the "paid through date" based on payments  received
from the related  Mortgagor;  (9) the original  principal amount of the Mortgage
Loan; (10) with respect to Adjustable Rate Mortgage Loans,  the Maximum Mortgage
Rate; (11) the type of Mortgage Loan (I.E.,  fixed or  adjustable);  (12) a code
indicating  the purpose of the loan (I.E.,  purchase,  rate and term  refinance,
equity  take-out  refinance);  (13) a code  indicating the  documentation  style
(I.E., full, asset verification, income verification and no documentation); (14)
the credit risk score (FICO  score);  (15) the loan credit grade  classification
(as  described  in the  Underwriting  Guidelines);  (16)  with  respect  to each
Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17) the Mortgage Rate
at  origination;  (18) with respect to each  Adjustable  Rate Mortgage Loan, the
first Adjustment Date immediately  following the Cut-off Date; (19) the Value of
the Mortgaged  Property;  (20) a code indicating the type of Prepayment  Charges
applicable  to such  Mortgage  Loan,  if any;  and  (21)  with  respect  to each
Adjustable  Rate Mortgage Loan, the Periodic  Mortgage Rate Cap. With respect to
the Mortgage Loans in the aggregate,  the Data Tape Information  shall set forth
the following  information,  as of the Cut-off Date:  (1) the number of Mortgage
Loans; (2) the current aggregate  outstanding  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.

                  DEBT SERVICE  REDUCTION:  With respect to any Mortgage Loan, a
reduction  by a court  of  competent  jurisdiction  in a  proceeding  under  the
Bankruptcy  Code in the  Scheduled  Payment for such  Mortgage Loan which became
final and  non-appealable,  except such a reduction  resulting  from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.

                  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:   Any  Certificate  evidenced  by  a
Physical  Certificate  and  any  Certificate  issued  in  lieu  of a  Book-Entry
Certificate pursuant to Section 5.02(e).

                  DELAY CERTIFICATES: As specified in the Preliminary Statement.

                  DELETED  MORTGAGE LOAN: A Mortgage Loan that is repurchased by
the Unaffiliated  Seller or the related Originator,  as applicable,  or replaced
with a  Substitute  Mortgage  Loan in  accordance  with the terms hereof and the
related Mortgage Loan Purchase Agreement.

                                       14
<PAGE>


                  DELINQUENCY TRIGGER EVENT: With respect to a Distribution Date
after the Stepdown Date, the event that is in effect if the quotient  (expressed
as a  percentage)  of (x) the three month  rolling  daily  average of the Stated
Principal  Balance of 60+ Day Delinquent Loans as of the last day of the related
Due Period,  over (y) the Pool Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period  exceeds  37.00% of the prior period's
Senior Enhancement Percentage.

                  DELINQUENT:  A mortgage  loan is  "Delinquent"  if any monthly
payment  due on a due date is not  made by the  close  of  business  on the next
scheduled  due date for that  mortgage  loan  (including  all Mortgage  Loans in
foreclosure,  Mortgage Loans in respect of REO Properties and Mortgage Loans for
which the related  Mortgagor  has declared  bankruptcy).  A mortgage loan is "30
days  Delinquent"  if the monthly  payment has not been received by the close of
business on the corresponding day of the month immediately  succeeding the month
in which that  monthly  payment was due or, if there was no  corresponding  date
(E.G.,  as when a 30-day  month  follows a 31-day month in which the payment was
due on the 31st  day of that  month),  then on the last day of that  immediately
preceding   month;   and  similarly  for  "60  days  Delinquent"  and  "90  days
Delinquent," etc.

                  DELIVERY DATE: With respect to the Initial Mortgage Loans, the
Closing  Date;  with  respect to any  Subsequent  Mortgage  Loans,  the  related
Subsequent Transfer Date therefor.

                  DENOMINATION: With respect to each Certificate, the amount set
forth  on  the  face  thereof  as  the  "Initial  Certificate  Balance  of  this
Certificate" or the Percentage Interest appearing on the face thereof.

                  DEPOSITOR:  Morgan  Stanley  ABS  Capital I Inc.,  a  Delaware
corporation, or its successor in interest.

                  DEPOSITORY:  The initial  Depository  shall be The  Depository
Trust Company,  the nominee of which is CEDE & Co., as the registered  Holder of
the Book-Entry  Certificates.  The Depository  shall at all times be a "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of New York.

                  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 Remittance Date, the
Business Day immediately preceding such Remittance Date.

                  DISTRIBUTION  ACCOUNT:  The separate  Eligible Account created
and  maintained  by the Trustee  pursuant to Section  3.07(d) in the name of the
Trustee for the benefit of the  Certificateholders and designated "Deutsche Bank
National Trust Company,  in trust for registered holders of CDC Mortgage Capital
Trust 2002-HE3, Mortgage Pass-Through Certificates, Series 2002-HE3".



                                       15
<PAGE>


                  DISTRIBUTION  DATE:  The 25th day of each calendar month after
the initial issuance of the Certificates,  or if such day is not a Business Day,
the next succeeding Business Day, commencing in December 2002.

                  DOCUMENT  EXCEPTION  REPORT:  The report attached to Exhibit G
hereto.

                  DUE DATE: The day of the month on which the Scheduled  Payment
is due on a Mortgage Loan, exclusive of any days of grace.

                  DUE PERIOD: With respect to each Distribution Date, the period
commencing on the second day of the calendar month  preceding the month in which
such  Distribution Date occurs and ending on the first day of the calendar month
in which such Distribution Date occurs.

                  ELIGIBLE ACCOUNT:  Either (i) a demand account maintained with
an Eligible  Institution or (ii) a trust account or accounts  maintained  with a
federal or state chartered depository institution or trust company acting in its
fiduciary  capacity or (iii) any other account acceptable to each Rating Agency.
Eligible  Accounts may bear interest,  and may include,  if otherwise  qualified
under this definition, accounts maintained with the Trustee.

                  ELIGIBLE INSTITUTION:  A federal or state chartered depository
institution  or trust company,  which (x) with respect to any Eligible  Account,
the amounts on deposit in which will be held for 30 days or less, the commercial
paper,  short term debt obligations,  or other short-term  deposits of which are
rated at least A-1 by Fitch, A-1 by Standard & Poor's and "P-1" by Moody's (or a
comparable  rating if another  Rating  Agency is specified  by the  Depositor by
written  notice to the  Servicer  and the  Trustee)  or (y) with  respect to any
Eligible Account,  the amounts on deposit in which will be held for more than 30
days, the long-term  unsecured debt  obligations of which are rated at least AA-
by Fitch, AA- by Standard & Poor's and Aa3 by Moody's (or a comparable rating if
another  Rating  Agency is specified by the  Depositor by written  notice to the
Servicer and the Trustee).

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

                  ERISA-QUALIFYING   UNDERWRITING:   A  best   efforts  or  firm
commitment  underwriting  or private  placement that meets the  requirements  of
Prohibited  Transaction  Exemption 97-34, 62 Fed. Reg. 39021 (1997),  as amended
(or  any  successor  thereto),  or  any  substantially  similar   administrative
exemption granted by the U.S. Department of Labor.

                  ERISA-RESTRICTED  CERTIFICATE: As specified in the Preliminary
Statement.

                  ESCROW ACCOUNT:  The Eligible Account or Accounts  established
and maintained pursuant to Section 3.09(b).

                  ESCROW  PAYMENTS:  As  defined  in  Section  3.09(b)  of  this
Agreement.

                  EVENT OF DEFAULT:  As defined in Section 7.01.

                  EXCESS  RESERVE FUND ACCOUNT:  The separate  Eligible  Account
created and maintained by the Trustee  pursuant to Sections  3.07(b) and 3.07(c)
in the name of the Trustee for


                                       16
<PAGE>


the benefit of the Offered  Certificateholders  and  designated  "Deutsche  Bank
National Trust Company,  in trust for registered holders of CDC Mortgage Capital
Trust 2002-HE3, Mortgage Pass-Through Certificates, Series 2002-HE3".

                  EXCESS  SUBORDINATED  AMOUNT: With respect to any Distribution
Date, the excess,  if any, of (a) the Subordinated  Amount on such  Distribution
Date over (b) the Specified Subordinated Amount for such Distribution Date.

                  EXPENSE  FEES:  As to  each  Mortgage  Loan,  the  sum  of the
Servicing Fee and the Trustee Fee.

                  EXPENSE FEE RATE: As to each  Mortgage  Loan, a per annum rate
equal to the sum of the Servicing Fee Rate and the Trustee Fee Rate.

                  EXTRA PRINCIPAL  DISTRIBUTION  AMOUNT:  As of any Distribution
Date,  the  lesser of (x) the  related  Total  Monthly  Excess  Spread  for such
Distribution  Date and (y) the  Subordination  Deficiency for such  Distribution
Date.

                  FAIRBANKS:  Fairbanks Capital Corp. or any successor thereto.

                  FANNIE MAE: The Federal National Mortgage Association,  or any
successor thereto.

                  FANNIE  MAE  GUIDES:  The Fannie  Mae  Sellers'  Guide and the
Fannie Mae Servicers' Guide and all amendments or additions thereto.

                  FDIC:  The  Federal  Deposit  Insurance  Corporation,  or  any
successor thereto.

                  FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

                  FINAL CERTIFICATION:  A certification submitted by the Trustee
in substantially the form of Exhibit G hereto.

                  FINAL  RECOVERY  DETERMINATION:  With respect to any defaulted
Mortgage  Loan or any REO Property  (other than a Mortgage  Loan or REO Property
purchased by an Originator as  contemplated  by the Assignment  and  Recognition
Agreements),  a determination made by the Servicer that all Insurance  Proceeds,
Liquidation Proceeds and other payments or recoveries which the Servicer, in its
reasonable  good faith  judgment,  expects to be finally  recoverable in respect
thereof have been so recovered. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination made thereby.

                  FINAL  SCHEDULED   DISTRIBUTION   DATE:  The  Final  Scheduled
Distribution  Date for each Class of  Certificates is the  Distribution  Date in
each of the following months:

                                       17
<PAGE>

                                                                FINAL SCHEDULED
                                                               DISTRIBUTION DATE

Class A Certificates .......................................    March 25, 2033
Class M-1 Certificates .....................................    March 25, 2033
Class M-2 Certificates .....................................    March 25, 2033
Class B-1 Certificates .....................................    March 25, 2033
Class B-2 Certificates .....................................    March 25, 2033
Class X Certificates .......................................    March 25, 2033
Class P Certificates .......................................    March 25, 2033
Class R Certificates .......................................    March 25, 2033

                  FIRST  NLC:  First  NLC  Financial  Services,  LLC,  a Florida
limited liability company.

                  FIRST NLC ASSIGNMENT AGREEMENT: The Assignment and Recognition
Agreement,  dated as of November 27, 2002, by and among the Unaffiliated Seller,
the Depositor and First NLC, and each other Assignment and Recognition Agreement
by and among the Unaffiliated  Seller, the Depositor and First NLC in connection
with any Subsequent Transfer of First NLC Mortgage Loans.

                  FIRST NLC MORTGAGE  LOAN:  A Mortgage  Loan which was acquired
from First NLC by the  Unaffiliated  Seller  pursuant to the First NLC  Purchase
Agreement, and which has been acquired by the Trust Fund.

                  FIRST NLC PURCHASE  AGREEMENT:  The Mortgage Loan Purchase and
Warranties  Agreement,  dated as of October 14, 2002, as amended to date, by and
between the Unaffiliated Seller and First NLC.

                  FITCH:  Fitch,  Inc. If Fitch is designated as a Rating Agency
in the Preliminary  Statement,  for purposes of Section 10.05(b) the address for
notices to Fitch shall be Fitch,  Inc., One State St. Plaza,  New York, New York
10004,  Attention:  Residential Mortgage Surveillance Group - Morgan Stanley ABS
Capital I Inc. 2002-HE3, or such other address as Fitch may hereafter furnish to
the Depositor and the Servicer.

                  FIXED RATE MORTGAGE LOAN: A Mortgage Loan bearing  interest at
a fixed rate.

                  FLOATING RATE  CERTIFICATES:  As specified in the  Preliminary
Statement.

                  FLOOR AMOUNT:  An amount equal to the product of (x) 0.50% and
(y) the Maximum Pool Principal Balance.

                  FREMONT:   Fremont   Investment   and   Loan,   a   California
corporation.

                  FREMONT ASSIGNMENT  AGREEMENT:  The Assignment and Recognition
Agreement,  dated as of November 27, 2002, by and among the Unaffiliated Seller,
the Depositor and Fremont,  and each other Assignment and Recognition  Agreement
by and among the Unaffiliated


                                       18
<PAGE>


Seller, the Depositor and Fremont in connection with any Subsequent  Transfer of
Fremont Mortgage Loans.

                  FREMONT MORTGAGE LOAN: A Mortgage Loan which was acquired from
Fremont by the Unaffiliated  Seller pursuant to the Fremont Purchase  Agreement,
and which has been acquired by the Trust Fund.

                  FREMONT  PURCHASE  AGREEMENT:  The Mortgage  Loan Purchase and
Warranties  Agreement,  dated as of July 24,  2002,  as amended to date,  by and
between the Unaffiliated Seller and Fremont.

                  GROSS MARGIN:  With respect to each  Adjustable  Rate Mortgage
Loan, the fixed  percentage  amount set forth in the related Mortgage Note to be
added to the applicable Index to determine the Mortgage Rate.

                  IFC:  IMPAC Funding Corporation, a California corporation.

                  IFC  ASSIGNMENT  AGREEMENT:  The  Assignment  and  Recognition
Agreement,  dated as of November 27, 2002, by and among the Unaffiliated Seller,
the Depositor and IFC, and each other  Assignment and  Recognition  Agreement by
and among the Unaffiliated  Seller, the Depositor and IFC in connection with any
Subsequent Transfer of IFC Mortgage Loans.

                  IFC MORTGAGE LOAN: A Mortgage Loan which was acquired from IFC
by the Unaffiliated Seller pursuant to the IFC Purchase Agreement, and which has
been acquired by the Trust Fund.

                  IFC  PURCHASE  AGREEMENT:   The  Mortgage  Loan  Purchase  and
Warranties Agreement,  dated as of July 10, 2001 by and between the Unaffiliated
Seller and IFC.

                  I&I  PAYMENTS:  Payments due and owing under the Insurance and
Indemnity Agreement.

                  INDEX:  As to each  Adjustable  Rate Mortgage  Loan, the index
from time to time in effect for the adjustment of the Mortgage Rate set forth as
such on the related Mortgage Note.

                  INITIAL CUT-OFF DATE:  November 1, 2002.

                  INITIAL  MORTGAGE  LOANS:  The Mortgage Loans delivered by the
Depositor on the Startup Date.

                  INITIAL PRE-FUNDED AMOUNT:  The amount of $110,092,857.

                  INSURANCE AND INDEMNITY AGREEMENT: The Insurance and Indemnity
Agreement  dated as of November 1, 2002 among the Class A  Certificate  Insurer,
the Servicer and the  Unaffiliated  Seller,  as such agreement may be amended or
supplemented in accordance with the provisions thereof.


                                       19
<PAGE>


                  INSURED PAYMENT:  With respect to any  Distribution  Date, the
Class A Deficiency for that Distribution Date.

                  INSURANCE  POLICY:  With respect to any Mortgage Loan included
in the Trust Fund, any insurance  policy,  including all riders and endorsements
thereto  in  effect,  including  any  replacement  policy  or  policies  for any
Insurance Policies.

                  INSURANCE  PROCEEDS:  With  respect  to  each  Mortgage  Loan,
proceeds  of  insurance  policies  insuring  the  Mortgage  Loan or the  related
Mortgaged Property.

                  INTEREST  ACCRUAL  PERIOD:  With  respect to any  Distribution
Date, the period beginning with the immediately preceding  Distribution Date (or
in the case of the first  Distribution  Date,  the period from and including the
Closing Date to but excluding  such first  Distribution  Date) and ending on the
day prior to the current Distribution Date (on an actual/360 day count basis).

                  INTEREST AMOUNT  AVAILABLE:  With respect to any  Distribution
Date, the sum of (i) the Interest Remittance Amount received by the Trustee from
the Servicer on the related  Remittance Date and (ii) the  Capitalized  Interest
Requirement,  if any, deposited to the Distribution Account on such Distribution
Date.

                  INTEREST RATE ADJUSTMENT DATE: With respect to each Adjustable
Rate Mortgage  Loan,  the date,  specified in the related  Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Rate is adjusted.

                  INTEREST RATE CAP PAYMENT: Beginning on the first Distribution
Date and continuing through the 26 Distribution Dates thereafter, the amount, if
any,  equal to the  product  of (a) the  number of basis  points by which  LIBOR
exceeds  7.25% (up to a maximum  excess of 130 basis  points) and (b) the amount
set forth on the notional  balance and multiplier  schedule  attached to the Cap
Agreement as  applicable to that  Distribution  Date,  based on an  "actual/360"
accrual.

                  INTEREST  REMITTANCE  AMOUNT:  With respect to any  Remittance
Date, the sum, without duplication, of:

                  (i) all scheduled installments of interest due on the Mortgage
         Loans  during the  related  Due Period and  received or advanced by the
         Servicer on or prior to the related Remittance Date;

                  (ii)  Compensating  Interest  paid  by the  Servicer  on  such
         Remittance Date;

                  (iii) the interest  component of all  Substitution  Adjustment
         Amounts and Repurchase Prices;

                  (iv) the  interest  component  of all  Condemnation  Proceeds,
         Insurance  Proceeds and Liquidation  Proceeds  received by the Servicer
         during the related Due Period (in each case, net (but not to be reduced
         below zero) of  unreimbursed  expenses  incurred in  connection  with a
         liquidation or foreclosure and unreimbursed Advances, if any); and

                                       20
<PAGE>


                  (v) the interest  component of the proceeds of any termination
         of the Trust Fund.

REDUCED by the Servicing  Fee for the related Due Period,  together with amounts
in reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to the Agreement.

                  INVESTMENT ACCOUNT:  As defined in Section 3.12(a).

                  JPMORGAN CREDIT AGREEMENT:  As defined in Section 3.27.

                  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.

                  LATE PAYMENT  RATE:  Has the meaning  ascribed  thereto in the
Insurance and Indemnity Agreement.

                  LIBOR:  With  respect to any Interest  Accrual  Period for the
LIBOR  Certificates,  the rate  determined  by the Trustee on the related  LIBOR
Determination  Date on the basis of the offered rate for one-month  U.S.  dollar
deposits  as such rate  appears on Telerate  Page 3750 as of 11:00 a.m.  (London
time) on such date;  PROVIDED that if such rate does not appear on Telerate Page
3750,  the rate for such  date will be  determined  on the basis of the rates at
which  one-month  U.S.  dollar  deposits are offered by the  Reference  Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank  market.  In such event, the Trustee will request the principal London
office of each of the Reference  Banks to provide a quotation of its rate. If at
least  two such  quotations  are  provided,  the rate for that  date will be the
arithmetic mean of the quotations  (rounded  upwards if necessary to the nearest
whole  multiple  of  1/16%).  If  fewer  than two  quotations  are  provided  as
requested,  the rate for that  date  will be the  arithmetic  mean of the  rates
quoted  by  major  banks  in  New  York  City,  selected  by  the  Servicer,  at
approximately  11:00 a.m. (New York City time) on such date for  one-month  U.S.
dollar loan to leading European banks.

                  LIBOR CERTIFICATES: As specified in the Preliminary Statement.

                  LIBOR DETERMINATION DATE: With respect to any Interest Accrual
Period  (other  than  the  initial   Interest  Accrual  Period)  for  the  LIBOR
Certificates,  the second London Business Day preceding the commencement of such
Interest Accrual Period.

                  LIQUIDATED  MORTGAGE  LOAN:  With respect to any  Distribution
Date,  a  defaulted  Mortgage  Loan  (including  any  REO  Property)  which  was
liquidated in the calendar month preceding the month of such  Distribution  Date
and as to which the Servicer has certified (in accordance  with this  Agreement)
that it has  received all amounts it expects to receive in  connection  with the
liquidation  of such Mortgage Loan  including  the final  disposition  of an REO
Property.

                                       21
<PAGE>


                  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  coverage  under  this  Agreement  by reason of its being
purchased,  sold or replaced  pursuant to or as  contemplated by this Agreement.
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  coverage  under this  Agreement by reason of its being
purchased pursuant to this Agreement.

                  LIQUIDATION  PROCEEDS:  Cash received in  connection  with the
liquidation  of a defaulted  Mortgage  Loan,  whether  through  trustee's  sale,
foreclosure sale or otherwise.

                  LOAN-TO-VALUE RATIO or LTV: With respect to any Mortgage Loan,
the ratio  (expressed as a  percentage)  of the original  outstanding  principal
amount of the Mortgage Loan as of the Cut-off Date (unless otherwise indicated),
to  the  lesser  of  (a)  the  Appraised  Value  of the  Mortgaged  Property  at
origination, and (b) if the Mortgage Loan was made to finance the acquisition of
the related Mortgaged Property, the purchase price of the Mortgaged Property.

                  LONDON  BUSINESS DAY: Any day on which dealings in deposits of
United States dollars are transacted in the London interbank market.

                  LOSS TRIGGER EVENT: With respect to any Distribution Date, the
event that is in effect if the  aggregate  amount of  Realized  Losses  incurred
since the related  Cut-off Date  through the last day of the related  Prepayment
Period  divided by the Maximum Pool  Principal  Balance  exceeds the  applicable
percentage as follows with respect to such Distribution  Date: (a) 3.10% for the
Distribution  Dates occurring from December 2004 to November 2005; (b) 4.10% for
the Distribution  Dates occurring from December 2005 to November 2006; (c) 4.75%
for  Distribution  Dates  occurring from December 2006 to November 2007; and (d)
5.35% for Distribution Dates occurring in December 2007 and thereafter.

                  LOWER TIER REGULAR  INTEREST:  As described in the Preliminary
Statement.

                  LOWER TIER REMIC:  As described in the Preliminary Statement

                  MAXIMUM  MORTGAGE RATE:  With respect to each  Adjustable Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape  Information and in
the related  Mortgage  Note and (ii) is the maximum  interest  rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be increased  during the
lifetime of such Mortgage Loan.

                  MAXIMUM POOL PRINCIPAL BALANCE: The aggregate Stated Principal
Balances of all Initial  Mortgage Loans as of the Initial  Cut-off Date plus the
Initial Pre-Funded Amount.

                  MINIMUM  MORTGAGE RATE:  With respect to each  Adjustable Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape  Information and in
the related  Mortgage  Note and (ii) is the minimum  interest  rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be decreased  during the
lifetime of such Mortgage Loan.

                                       22
<PAGE>


                  MONTHLY   STATEMENT:    The   statement   delivered   to   the
Certificateholders pursuant to Section 4.03.

                  MOODY'S:   Moody's  Investors  Service,  Inc.  If  Moody's  is
designated  as a Rating  Agency in the  Preliminary  Statement,  for purposes of
Section  10.05(b) the address for notices to Moody's shall be Moody's  Investors
Service,  Inc.,  99  Church  Street,  New  York,  New  York  10007,   Attention:
Residential  Mortgage  Pass-Through  Group, or such other address as Moody's may
hereafter furnish to the Depositor and the Servicer.

                  MORTGAGE:  The  mortgage,  deed of trust  or other  instrument
identified on the Mortgage Loan Schedule as securing a Mortgage Note.

                  MORTGAGE FILE: The items  pertaining to a particular  Mortgage
Loan contained in either the Servicing File or Custodial File.

                  MORTGAGE LOAN PURCHASE AGREEMENT:  The BNC Purchase Agreement,
the IFC Purchase Agreement,  the Novelle Purchase Agreement, the People's Choice
Purchase  Agreement,  the Chapel Mortgage Purchase  Agreement,  the SIB Mortgage
Purchase  Agreement,  the Fremont  Purchase  Agreement or the First NLC Purchase
Agreement, as applicable.

                  MORTGAGE  LOANS:  An  individual  Mortgage  Loan  which is the
subject of this  Agreement,  each Mortgage Loan  originally  sold and subject to
this Agreement  being  identified on the Mortgage Loan Schedule,  which Mortgage
Loan includes,  without  limitation,  the Mortgage File, the Scheduled Payments,
Principal Prepayments,  Liquidation Proceeds,  Condemnation Proceeds,  Insurance
Proceeds, REO Disposition proceeds, and all other rights, benefits, proceeds and
obligations  arising from or in connection  with such Mortgage  Loan,  excluding
replaced or repurchased Mortgage Loans. As applicable,  "Mortgage Loan" shall be
deemed to refer to REO Property.

                  MORTGAGE LOAN  SCHEDULE:  A schedule of Mortgage Loans annexed
hereto as Schedule I, such schedule setting forth the following information with
respect to each Mortgage Loan: (1) the  Originator's  Mortgage Loan number;  (2)
the city,  state and zip code of the Mortgaged  Property;  (3) a code indicating
whether  the  Mortgaged  Property  is  a  single  family  residence,  two-family
residence,  three-family residence,  four-family residence,  PUD or condominium;
(4) the current  Mortgage  Interest Rate; (5) the current net Mortgage Rate; (6)
the current  Monthly  Payment;  (7) the Gross  Margin;  (8) the original term to
maturity;  (9) the scheduled  maturity date;  (10) the principal  balance of the
Mortgage  Loan as of the Cut-off  Date after  deduction of payments of principal
due  on  or  before  the  Cut-off  Date  whether  or  not  collected;  (11)  the
Loan-to-Value  Ratio;  (12) the next Interest  Rate  Adjustment  Date;  (13) the
lifetime  Mortgage  Interest  Rate  Cap;  (14)  whether  the  Mortgage  Loan  is
convertible  or not;  (15) a code  indicating  the mortgage  guaranty  insurance
company;  (16) the Servicing Fee; (17) the identity of the related Originator of
such Mortgage Loan; (18) the  Mortgagor's  name;  (19) the  "paid-through"  date
(based on payments received from the related  Mortgagor) as of the Cut-off Date;
and (20) the Servicing Transfer Date.

                  MORTGAGE NOTE: The note or other evidence of the  indebtedness
of a Mortgagor under a Mortgage Loan.

                                       23
<PAGE>


                  MORTGAGE RATE: The annual rate of interest borne on a Mortgage
Note,  which shall be adjusted from time to time with respect to Adjustable Rate
Mortgage Loans.

                  MORTGAGE  RATE  CAPS:  With  respect  to  an  Adjustable  Rate
Mortgage  Loan, the Periodic  Mortgage Rate Cap, the Maximum  Mortgage Rate, and
the Minimum Mortgage Rate for such Mortgage Loan.

                  MORTGAGED PROPERTY: The real property (or leasehold estate, if
applicable)  identified on the Mortgage  Loan Schedule as securing  repayment of
the debt evidenced by a Mortgage Note.

                  MORTGAGOR:  The obligor(s) on a Mortgage Note.

                  NET MONTHLY  EXCESS CASH FLOW: For any  Distribution  Date the
amount remaining for distribution  pursuant to subsection  4.02(a)(iii)  (before
giving effect to distributions pursuant to such subsection).

                  NET PREPAYMENT INTEREST SHORTFALL:  For any Distribution Date,
the amount by which the sum of the Prepayment  Interest  Shortfalls  exceeds the
sum of the Compensating Interest payments made on such Distribution Date.

                  NIM CLOSING DATE:  On or about November 27, 2002.

                  NIMS TRUST: CDC Mortgage  Capital Inc. NIM Trust 2002-HE3N,  a
Delaware business trust.

                  NON-DELAY  CERTIFICATES:   As  specified  in  the  Preliminary
Statement.

                  NONRECOVERABLE ADVANCE: Any Servicing Advances previously made
or proposed to be made in respect of a Mortgage Loan or REO Property,  which, in
the good faith business judgment of the Servicer,  will not or, in the case of a
proposed  Servicing Advance,  would not, be ultimately  recoverable from related
late payments,  Insurance  Proceeds,  Liquidation  Proceeds or otherwise on such
Mortgage Loan or REO  Property.  The  determination  by the Servicer that it has
made a Nonrecoverable  Advance or that any proposed Servicing Advances, if made,
would  constitute a Nonrecoverable  Advance,  shall be evidenced by an Officers'
Certificate delivered to the Trustee.

                  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  Servicer,  will not or, in the case of a
proposed  P&I Advance,  would not be  ultimately  recoverable  from related late
payments,  Insurance  Proceeds or Liquidation  Proceeds on such Mortgage Loan or
REO Property as provided herein.

                  NOTICE  OF  FINAL  DISTRIBUTION:  The  notice  to be  provided
pursuant  to Section  9.02 to the effect that final  distribution  on any of the
Certificates shall be made only upon presentation and surrender thereof.

                  NOVELLE:   Novelle  Financial  Services,  Inc.,  a  California
corporation.

                                       24
<PAGE>


                  NOVELLE ASSIGNMENT  AGREEMENT:  The Assignment and Recognition
Agreement,  dated as of November 27, 2002, by and among the Unaffiliated Seller,
the Depositor and Novelle,  and each other Assignment and Recognition  Agreement
by and among the  Unaffiliated  Seller,  the Depositor and Novelle in connection
with any Subsequent Transfer of Novelle Mortgage Loans.

                  NOVELLE MORTGAGE LOAN: A Mortgage Loan which was acquired from
Novelle by the Unaffiliated  Seller pursuant to the Novelle Purchase  Agreement,
and which has been acquired by the Trust Fund.

                  NOVELLE  PURCHASE  AGREEMENT:  The Mortgage  Loan Purchase and
Warranties  Agreement,  dated  as of  September  27,  2002  by and  between  the
Unaffiliated Seller and Novelle.

                  OFFERED   CERTIFICATES:   As  specified  in  the   Preliminary
Statement.

                  OFFICER'S  CERTIFICATE:  A certificate signed by an officer of
the Servicer with  responsibility  for the  servicing of the Mortgage  Loans and
listed on a list delivered to the Trustee pursuant to this Agreement.

                  OPINION OF COUNSEL:  A written opinion of counsel,  who may be
in-house counsel for the Servicer or the Subservicer,  reasonably  acceptable to
the Trustee and to the Class A Certificate Insurer, PROVIDED that any Opinion of
Counsel  relating to (a)  qualification  of the Mortgage Loans in a REMIC or (b)
compliance with the REMIC  Provisions,  must be (unless otherwise stated in such
Opinion of Counsel) an opinion of counsel who (i) is in fact  independent of the
Servicer  of the  Mortgage  Loans,  (ii)  does not have any  material  direct or
indirect  financial  interest  in the  Servicer of the  Mortgage  Loans or in an
affiliate of either and (iii) is not connected with the Servicer of the Mortgage
Loans as an officer, employee, director or person performing similar functions.

                  OPTIONAL TERMINATION DATE:  means:

                  (i) For so long as the Class X  Certificates  are 100%  owned,
         either  directly  or  indirectly,  by the  Unaffiliated  Seller  or any
         Affiliate thereof, then the Servicer may cause the Optional Termination
         Date to occur  on any  Distribution  Date  when  the  aggregate  Stated
         Principal  Balance  of the  Mortgage  Loans  is  10.00%  or less of the
         Maximum Pool Principal Balance; and

                  (ii) If the Class X  Certificates  are not 100% owned,  either
         directly or  indirectly,  by the  Unaffiliated  Seller or any Affiliate
         thereof, then the Holders of a majority in Class Certificate Balance of
         the Class X  Certificates  may cause the Optional  Termination  Date to
         occur on any  Distribution  Date when the  aggregate  Stated  Principal
         Balance of the  Mortgage  Loans is 10.00% or less of the  Maximum  Pool
         Principal Balance,  and, if such Class X  Certificateholders  do not do
         so, then the Servicer shall also have such right.

                  ORIGINATOR:  The party that  originated or acquired a Mortgage
Loan and, more  specifically,  (i) with respect to any BNC Mortgage  Loan,  BNC,
(ii) with  respect to any IFC  Mortgage  Loan,  IFC,  (iii) with  respect to any
Novelle Mortgage Loan, Novelle, (iv) with respect


                                       25
<PAGE>


to any People's Choice Mortgage Loan,  People's Choice,  (v) with respect to any
Chapel  Mortgage Loan,  Chapel  Mortgage,  (vi) with respect to any SIB Mortgage
Loan, SIB Mortgage, (vii) with respect to any Fremont Mortgage Loan, Fremont and
(viii) with respect to any First NLC Mortgage Loan, First NLC.

                  OTS: Office of Thrift Supervision, and any successor thereto.

                  OUTSTANDING:  With respect to the  Certificates as of any date
of determination,  all Certificates theretofore executed and authenticated under
this Agreement except:

                  (i)  Certificates  theretofore  canceled  by  the  Trustee  or
         delivered to the Trustee for cancellation; and

                  (ii)  Certificates  in exchange  for which or in lieu of which
         other  Certificates  have been  executed  and  delivered by the Trustee
         pursuant to this Agreement.

                  OUTSTANDING MORTGAGE LOAN: As of any Due Date, a Mortgage Loan
with a Stated Principal Balance greater than zero which was not the subject of a
Principal  Prepayment  in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.

                  OWNERSHIP  INTEREST:  As  to  any  Residual  Certificate,  any
ownership   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.

                  P&I ADVANCE:  As to any  Mortgage  Loan or REO  Property,  any
advance made by the Servicer in respect of any  Remittance  Date with respect to
any Mortgage  Loan  representing  the aggregate of all payments of principal and
interest on such Mortgage Loan, net of the related Servicing Fee, that were due,
and that were  delinquent  or unpaid on the  related  Determination  Date,  plus
certain  amounts  representing  assumed  payments not covered by any current net
income on the Mortgaged  Properties  acquired by  foreclosure or deed in lieu of
foreclosure as determined pursuant to Section 4.01.

                  PASS-THROUGH  MARGIN:  With  respect  to each Class of Regular
Certificates,  on or  prior  to the  Optional  Termination  Date  the  following
percentages: Class A Certificates, 0.490%, Class M-1 Certificates, 1.100%, Class
M-2  Certificates,   2.250%,  Class  B-1  Certificates,  3.400%  and  Class  B-2
Certificates,  4.000%.  Commencing  on the  first  Distribution  Date  after the
Optional  Termination Date, the Pass-Through  Margins shall increase to: Class A
Certificates,  0.980%,  Class M-1 Certificates,  1.650%, Class M-2 Certificates,
3.375%, Class B-1 Certificates, 5.100% and Class B-2 Certificates, 6.000%.

                  PASS-THROUGH  RATE:  For each Class of  Certificates  and each
Lower Tier Regular  Interest,  the per annum rate set forth or calculated in the
manner described in the Preliminary Statement.

                  PEOPLE'S  CHOICE:  People's Choice Home Loan,  Inc., a Wyoming
corporation.

                                       26
<PAGE>

                  PEOPLE'S  CHOICE  ASSIGNMENT  AGREEMENT:  The  Assignment  and
Recognition Agreement, dated as of November 27, 2002, as amended to date, by and
among the Unaffiliated Seller, the Depositor and People's Choice, and each other
Assignment and Recognition  Agreement by and among the Unaffiliated  Seller, the
Depositor and People's  Choice in  connection  with any  Subsequent  Transfer of
People's Choice Mortgage Loans.

                  PEOPLE'S  CHOICE  MORTGAGE  LOAN:  A  Mortgage  Loan which was
acquired  from  People's  Choice  by the  Unaffiliated  Seller  pursuant  to the
People's  Choice  Purchase  Agreement,  and which has been acquired by the Trust
Fund.

                  PEOPLE'S CHOICE PURCHASE  AGREEMENT:  The Amended and Restated
Mortgage Loan Purchase and Warranties Agreement,  dated as of April 16, 2002, by
and between the Unaffiliated Seller and People's Choice.

                  PERCENTAGE  INTEREST:  As to any  Certificate,  the percentage
interest  evidenced thereby in distributions  required to be made on the related
Class, such percentage  interest being set forth on the face thereof or equal to
the percentage  obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.

                  PERFORMANCE STANDARDS: The servicing performance standards set
forth on Exhibit O hereto.

                  PERIODIC MORTGAGE RATE CAP: With respect to an Adjustable Rate
Mortgage Loan, the periodic limit on each Mortgage  Interest Rate  adjustment as
set forth in the related Mortgage Note.

                  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  Servicer,  the  Trustee  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;

                  (ii) demand and time deposits in,  certificates of deposit of,
         or bankers'  acceptances (which shall each have an original maturity of
         not more than 90 days and, in the case of bankers'  acceptances,  shall
         in no  event  have an  original  maturity  of more  than  365 days or a
         remaining  maturity of more than 30 days)  denominated in United States
         dollars and issued by, any Eligible Institution;

                  (iii)  repurchase  obligations  with  respect to any  security
         described in clause (i) above entered into with a Eligible  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;

                                       27
<PAGE>


                  (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, including money market funds
         advised by the Depositor or an Affiliate thereof,  that have been rated
         "Aaa" by Moody's, "AAA" by Fitch and "AAA" by Standard & Poor's; and

                  (vii) if previously confirmed in writing to the Trustee and to
         the Class A Certificate Insurer, any other demand, money market or time
         deposit,  or any other  obligation,  security or investment,  as may be
         acceptable  to the Rating  Agencies as a permitted  investment of funds
         backing "Aaa" or "AAA" rated securities;

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.

                  PERMITTED  TRANSFEREE:  Any  person  other than (i) the United
States,  any  State  or  political   subdivision   thereof,  or  any  agency  or
instrumentality   of  any  of  the   foregoing,   (ii)  a  foreign   government,
International  Organization  or any agency or  instrumentality  of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives described
in section 521 of the Code) which is exempt from tax imposed by Chapter 1 of the
Code (including the tax imposed by section 511 of the Code on unrelated business
taxable  income) on any excess  inclusions (as defined in section  860E(c)(1) of
the Code) with  respect to any  Residual  Certificate,  (iv) rural  electric and
telephone  cooperatives  described in section  1381(a)(2)(C)  of the Code, (v) a
Person that is not a U.S. Person,  (vi) an "electing large  partnership"  within
the meaning of section 775 of the Code and (vii) any other Person so  designated
by the  Depositor  based  upon an Opinion of  Counsel  that the  Transfer  of an
Ownership Interest in a Residual  Certificate to such Person may cause the REMIC
hereunder  to fail to qualify as a REMIC at any time that the  Certificates  are
outstanding. The terms "United States," "State" and "International Organization"
shall  have the  meanings  set forth in  section  7701 of the Code or  successor
provisions.  A  corporation  will not be  treated as an  instrumentality  of the
United  States  or of any  State or  political  subdivision  thereof  for  these
purposes if all of its  activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such government unit.

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

                  PHYSICAL   CERTIFICATES:   As  specified  in  the  Preliminary
Statement.


                                       28
<PAGE>

                  POOL STATED PRINCIPAL  BALANCE:  As to any Distribution  Date,
the aggregate of the Stated  Principal  Balances of the Mortgage  Loans for such
Distribution  Date which were  Outstanding  Mortgage Loans as of the last day of
the related Due Period.

                  PREFERENCE AMOUNT:  Any amounts  distributed in respect of the
Class  A  Certificates  which  are  recovered  from  any  Holder  of a  Class  A
Certificate as a voidable  preference by a trustee in bankruptcy pursuant to the
United States  Bankruptcy  Code or other similar law in accordance with a final,
nonappealable order of a court having competent  jurisdiction and which have not
theretofore been repaid to such Holder.

                  PREFERENCE CLAIM:  As defined in Section 4.05(f) hereof.

                  PRE-FUNDING ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the Trustee
for  the  benefit  of the  Certificateholders,  and  designated  "Deutsche  Bank
National Trust Company,  in trust for registered holders of CDC Mortgage Capital
Trust 2002-HE3, Mortgage Pass-Through Certificates, Series 2002-HE3".

                  PRE-FUNDING  AMOUNT:  With respect to any date,  the amount on
deposit in the Pre-Funding Account.

                  PRE-FUNDING EARNINGS:  The actual investment earnings realized
on amounts deposited in the Pre-Funding Account.

                  PRE-FUNDING  PERIOD: The period commencing on the Startup Date
and  ending  on the  earliest  to occur of (i) the date on which  the  amount on
deposit in the  Pre-Funding  Account  (exclusive of any investment  earnings) is
less than $100,000, (ii) the date on which any Event of Default occurs and (iii)
February 24, 2003.

                  PREMIUM  AMOUNT:  The  product  of the  Premium  Rate  and the
Certificate  Balance  of the  Class A  Certificates  immediately  prior  to such
Distribution Date.

                  PREMIUM RATE: The rate at which the "Premium" is determined as
described in the letter dated November 27, 2002 between the Unaffiliated  Seller
and the Class A  Certificate  Insurer (a copy of which  shall be provided by the
Unaffiliated Seller to the Trustee).

                  PREPAYMENT CHARGE: Any prepayment  premium,  penalty or charge
collected  by the Servicer  with respect to a Mortgage  Loan from a Mortgagor in
connection with any voluntary Principal Prepayment in full pursuant to the terms
of the related Mortgage Note.

                  PREPAYMENT INTEREST SHORTFALL:  With respect to any Remittance
Date,  the sum of,  for each  Mortgage  Loan that was  during  the  related  Due
Period the subject of a Principal  Prepayment  in Full,  an amount  equal to the
product of (a) the Mortgage Rate net of the Servicing Fee Rate for such Mortgage
Loan,  (b) the amount of the Principal  Prepayment  for such Mortgage  Loan, (c)
1/360 and (d) the number of days  commencing on the date on which such Principal
Prepayment  was  applied  and  ending  on the  last  day of the  calendar  month
preceding such Due Period.

                                       29
<PAGE>


                  PREPAYMENT PERIOD:  With respect to any Distribution Date, the
period from the 15th day of the calendar month preceding the month in which such
Distribution Date occurs (or, in the case of the first  Distribution  Date, from
the Cut-off Date)  through the 14th day of the month in which such  Distribution
Date occurs.

                  PRINCIPAL  DISTRIBUTION AMOUNT: For any Distribution Date, the
sum of (i) the Basic Principal  Distribution  Amount for such  Distribution Date
and (ii) the Extra Principal Distribution Amount for such Distribution Date.

                  PRINCIPAL  PREPAYMENT:  Any full or  partial  payment or other
recovery of  principal  on a Mortgage  Loan  (including  upon  liquidation  of a
Mortgage Loan) which is received in advance of its scheduled Due Date, excluding
any  prepayment  penalty or premium  thereon and which is not  accompanied by an
amount of interest  representing  scheduled interest due on any date or dates in
any month or months subsequent to the month of prepayment.

                  PRINCIPAL PREPAYMENT IN FULL: Any Principal Prepayment made by
a Mortgagor of the entire principal balance of a Mortgage Loan.

                  PRINCIPAL  REMITTANCE  AMOUNT:  With respect to any Remittance
Date, the sum, without duplication, of:

                  (i)  all  scheduled  installments  of  principal  due  on  the
         Mortgage  Loans  during the related Due Period and received or advanced
         by the Servicer on or prior to the related Remittance Date;

                  (ii) the  principal  component of all  Condemnation  Proceeds,
         Insurance  Proceeds  and  Liquidation  Proceeds  during the related Due
         Period (in each case,  net of remaining  (I.E.,  not deducted  from the
         Interest   Remittance   Amount)   unreimbursed   expenses  incurred  in
         connection with a liquidation or foreclosure and unreimbursed Advances,
         if any);

                  (iii) all partial or full  prepayments  on the Mortgage  Loans
         received during the related Prepayment Period;

                  (iv) the principal  component of all  Substitution  Adjustment
         Amounts and Repurchase Prices; and

                  (v) the principal component of the proceeds of any termination
         of the Trust Fund.

reduced by remaining  amounts (I.E.,  not deducted from the Interest  Remittance
Amount)  in  reimbursement  for  Advances  previously  made with  respect to the
Mortgage  Loans and other  amounts as to which the  Servicer  is  entitled to be
reimbursed pursuant to this Agreement.

                  PRIVATE   CERTIFICATES:   As  specified  in  the   Preliminary
Statement.

                  PROSPECTUS  SUPPLEMENT:   The  Prospectus  Supplement,   dated
November 25, 2002, relating to the Offered Certificates.

                                       30
<PAGE>


                  PTCE 95-60:  As defined in Section 5.02(b).

                  PUD:  Planned Unit Development.

                  QUALIFIED  INSURER: A mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of business
and each state  having  jurisdiction  over such insurer in  connection  with the
insurance  policy issued by such insurer,  duly  authorized and licensed in such
states to transact a mortgage guaranty  insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as a
FNMA- or  FHLMC-approved  mortgage  insurer  or having a claims  paying  ability
rating  of at  least  "AA"  or  equivalent  rating  by a  nationally  recognized
statistical  rating  organization.  Any  replacement  insurer  with respect to a
Mortgage Loan must have at least as high a claims paying  ability  rating as the
insurer it replaces had on the Closing Date.

                  RATING AGENCY:  Each of the Rating  Agencies  specified in the
Preliminary  Statement.  If such  organization  or a  successor  is no longer in
existence,  "Rating  Agency"  shall be such  nationally  recognized  statistical
rating  organization,  or  other  comparable  Person,  as is  designated  by the
Depositor, notice of which designation shall be given to the Trustee. References
herein to a given rating or rating  category of a Rating  Agency shall mean such
rating category without giving effect to any modifiers.  For purposes of Section
10.05(b),  the  addresses for notices to each Rating Agency shall be the address
specified  therefor in the definition  corresponding  to the name of such Rating
Agency, or such other address as either such Rating Agency may hereafter furnish
to the Depositor and the Servicer.

                  RECORD DATE: With respect to any Distribution  Date, the close
of business on the Business Day immediately  preceding such  Distribution  Date;
PROVIDED,  HOWEVER,  that for any  Certificate  issued in Definitive  Form,  the
Record Date shall be the close of business on the last Business Day of the month
immediately preceding such applicable Distribution Date.

                  REALIZED LOSS: The excess of the outstanding principal balance
of a defaulted  Mortgage  Loan over the net  Liquidation  Proceeds  with respect
thereto that are allocable to principal.

                  REFERENCE BANK:  As defined in Section 4.04.

                  REGULAR   CERTIFICATES:   As  specified  in  the   Preliminary
Statement.

                  REIMBURSEMENT  AMOUNT: As of any Distribution Date, the sum of
(a)(i)  all  Insured  Payments  previously  received  by  the  Trustee  and  all
Preference  Amounts  previously  paid by the Class A Certificate  Insurer and in
each case not previously  repaid to the Class A Certificate  Insurer pursuant to
Sections  6.05(a)(ii)  hereof plus (ii)  interest  accrued on each such  Insured
Payment and  Preference  Amounts not  previously  repaid  calculated at the Late
Payment Rate from the date the Trustee  received the related  Insured Payment or
Preference  Amounts were paid by the Class A Certificate  Insurer and (b)(i) any
amounts  then  due and  owing  to the  Class A  Certificate  Insurer  under  the
Insurance  and Indemnity  Agreement  (excluding  the Premium  Amount due on such
Distribution  Date),  as  certified  to the  Trustee by the Class A  Certificate
Insurer  plus  (ii)  interest  on such  amounts  at the  rate  specified  in the
Insurance and Indemnity

                                       31
<PAGE>


Agreement.  The Class A  Certificate  Insurer  shall  notify the Trustee and the
Unaffiliated Seller of the amount of any Reimbursement Amount.

                  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 Due Period as a
result of the  application  of the  Soldiers'  and Sailors'  Civil Relief Act of
1940, as amended, and similar state laws.

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

                  REMIC  PROVISIONS:  Provisions  of the federal  income tax law
relating to REMICs,  which appear at sections  860A through 860G of Subchapter M
of Chapter 1 of the Code, and related  provisions,  and regulations  promulgated
thereunder,  as the  foregoing  may be in  effect  from  time to time as well as
provisions of applicable state laws.

                  REMIC TRUST:  The segregated pool of assets  consisting of the
Trust Fund, exclusive of Prepayment Charges and the Excess Reserve Fund Account.

                  REMITTANCE  DATE:  The 18th day (or if such  18th day is not a
Business Day, the first Business Day immediately preceding) of any month.

                  REO  DISPOSITION:  The final sale by the  Servicer  of any REO
Property.

                  REO IMPUTED INTEREST: As to any REO Property,  for any period,
an amount  equivalent to interest (at the Mortgage Rate net of the Servicing Fee
Rate that would have been  applicable  to the related  Mortgage Loan had it been
outstanding) on the unpaid principal balance of the Mortgage Loan as of the date
of acquisition  thereof (as such balance is reduced  pursuant to Section 3.17 by
any income from the REO Property treated as a recovery of principal).

                  REO PROPERTY:  A Mortgaged Property acquired by the Trust Fund
through  foreclosure  or  deed-in-lieu  of  foreclosure  in  connection  with  a
defaulted Mortgage Loan.

                  REPRESENTATIVE:   Morgan  Stanley  &  Co.   Incorporated,   as
representative on behalf of itself and Banc of America Securities LLC.

                  REPURCHASE PRICE: With respect to any Mortgage Loan, an amount
equal to the sum of (i) the unpaid principal balance of such Mortgage Loan as of
the date of repurchase  and (ii) (x) if such Mortgage Loan is being  repurchased
by the  Unaffiliated  Seller,  the sum of (A) interest on such unpaid  principal
balance of such  Mortgage  Loan at the Mortgage  Rate from the last date through
which  interest has been paid and  distributed to the Trustee to the last day of
the  month in which  such  repurchase  occurs,  (B) all  unreimbursed  Servicing
Advances and (C) all expenses reasonably incurred by the Servicer,  the Trustee,
the Class A Certificate Insurer or the Unaffiliated  Seller, as the case may be,
in  respect  of a breach or  defect,  including,  without  limitation,  expenses
arising  out of any such  party's  enforcement  of the  Originator's  repurchase
obligation,  to the extent not included in (B), or (y) if such  Mortgage Loan is
being repurchased by the related  Originator,  all other amounts payable by such
Originator  in accordance  with the terms of the related  Mortgage Loan Purchase
Agreement.

                                       32
<PAGE>

                  REQUEST FOR RELEASE:  The Request for Release submitted by the
Servicer to the Trustee, substantially in the form of Exhibit K.

                  RESIDUAL   CERTIFICATES:   As  specified  in  the  Preliminary
Statement.

                  RESPONSIBLE  OFFICER:  When used with  respect to the Trustee,
any Vice President,  any Assistant Vice President,  any Assistant Secretary, any
Assistant Treasurer or any other officer of the Trustee  customarily  performing
functions similar to those performed by any of the above designated officers who
at such time shall be officers to whom,  with  respect to a  particular  matter,
such matter is referred  because of such officer's  knowledge of and familiarity
with the  particular  subject and who shall have direct  responsibility  for the
administration of this Agreement.

                  RULE 144A LETTER:  As defined in Section 5.02(b).

                  SCHEDULED PAYMENT: The scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless otherwise specified herein,  shall give effect to any related
Debt Service  Reduction and any Deficient  Valuation  that affects the amount of
the monthly payment due on such Mortgage Loan.

                  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 reduction in the principal  balance of such Mortgage Loan incurred with
respect thereto as a result of a Deficient  Valuation  occurring before such Due
Date,  but only to the extent such reduction in principal  balance  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.

                  SEC:  As defined in Section 8.12(a).

                  SECURITIES ACT:  The Securities Act of 1933, as amended.

                  SENIOR   ENHANCEMENT   PERCENTAGE:   With   respect   to   any
Distribution  Date, the  percentage  obtained by dividing (x) the sum of (i) the
aggregate Class  Certificate  Balance of the Subordinated  Certificates and (ii)
the Subordinated Amount (in each case after taking into


                                       33
<PAGE>


account  the  distributions  of  the  Principal  Distribution  Amount  for  such
Distribution Date) by (y) the Current Maximum Amount for that Distribution Date.

                  SENIOR  SPECIFIED  ENHANCEMENT  PERCENTAGE:  As of any date of
determination, 37.00%.

                  SERVICER: Fairbanks Capital Corp., a Utah corporation, and its
successors and assigns, in its capacity as servicer hereunder.

                  SERVICER  EVALUATION  TERMINATION:   Any  termination  of  the
Servicer pursuant to the provisions of Section 3.28.

                  SERVICER PERFORMANCE  EVALUATION:  The evaluation described in
Section 3.28.

                  SERVICER TRIGGER:  With respect to any Distribution  Date, the
Servicer Trigger will be in effect with respect to the Servicer if either of the
following tests are failed:

                  (a) the  Cumulative  Loss  Percentage  exceeds (i) in months 1
         through 24, 2.50%, (ii) in months 25 through 36, 4.00%, (iii) in months
         37 through 48, 5.25% and (iv) in month 49 and thereafter, 6.70%; or

                  (b) the quotient (expressed as a percentage) of (x) the Stated
         Principal  Balance of Mortgage  Loans 60 days  Delinquent or more as of
         the  end of  the  related  Due  Period  (including  Mortgage  Loans  in
         bankruptcy, foreclosure or represented by an REO Property) over (y) the
         aggregate Stated Principal  Balance of the Mortgage Loans as of the end
         of the related Due Period, exceeds 20%.

                  SERVICING ADVANCES:  The reasonable  "out-of-pocket" costs and
expenses  (including  legal fees) incurred by the Servicer in the performance of
its servicing  obligations  in connection  with a default,  delinquency or other
unanticipated  event,  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 and litigation,  in
respect  of  a  particular  Mortgage  Loan,  (iii)  the  management   (including
reasonable  fees in connection  therewith) and  liquidation of any REO Property,
(iv) the  performance  of its  obligations  under  Section  3.01,  Section 3.09,
Section 3.13 and Section 3.15 hereof,  (v) locating any  documents  missing from
the Mortgage Files, and (vi) obtaining broker price opinions. The Servicer shall
not be required to make any Nonrecoverable Advances.

                  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 made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which  interest on such Mortgage Loan accrues for such calendar  month.  Such
fee shall be payable monthly,  and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this Agreement.
The  Servicing  Fee is payable  solely  from,  the interest  portion  (including
recoveries  with  respect to interest  from  Liquidation  Proceeds  and proceeds
received  with  respect to REO  Properties,  to the


                                       34
<PAGE>

extent  permitted  by Section  3.11) of such  Monthly  Payment  collected by the
Servicer, or as otherwise provided under Section 3.11.

                  SERVICING FEE RATE: With respect to each Mortgage Loan,  0.50%
per annum.

                  SERVICING  FILE:  With respect to each Mortgage Loan, the file
retained by the Servicer  consisting  of originals or copies of all documents in
the Mortgage File which are not  delivered to the Trustee in the Custodial  File
and copies of each of the other Mortgage Loan documents required to be delivered
by the related  Originator  pursuant to the terms of the related  Mortgage  Loan
Purchase Agreement.

                  SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible  for, the  administration  and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Servicer on the Closing Date pursuant to this  Agreement,  as
such list may from time to time be amended.

                  SERVICING  TRANSFER DATE:  With respect to each Mortgage Loan,
the date on which Fairbanks commenced servicing such Mortgage Loan, as set forth
on the Mortgage Loan Schedule.

                  SIB MORTGAGE:  SIB Mortgage Corp., a New Jersey corporation.

                  SIB  MORTGAGE   ASSIGNMENT   AGREEMENT:   The  Assignment  and
Recognition  Agreement,  dated  as of  November  27,  2002,  by  and  among  the
Unaffiliated  Seller, the Depositor and SIB Mortgage,  and each other Assignment
and Recognition  Agreement by and among the Unaffiliated  Seller,  the Depositor
and SIB  Mortgage in  connection  with any  Subsequent  Transfer of SIB Mortgage
Mortgage Loans.

                  SIB MORTGAGE MORTGAGE LOAN: A Mortgage Loan which was acquired
from SIB  Mortgage  by the  Unaffiliated  Seller  pursuant  to the SIB  Mortgage
Purchase Agreement, and which has been acquired by the Trust Fund.

                  SIB MORTGAGE  PURCHASE  AGREEMENT:  The Mortgage Loan Purchase
and Warranties Agreement,  dated as of July 11, 2002, as amended to date, by and
between the Unaffiliated Seller and SIB Mortgage.

                  SIMILAR LAW:  As defined in Section 5.02(b).

                  SPECIFIED   SUBORDINATED   AMOUNT:   With   respect   to   any
Distribution  Date prior to the Stepdown  Date,  an amount equal to 1.50% of the
Maximum Pool Principal Balance; and with respect to any Distribution Date on and
after the Stepdown Date, an amount equal to 3.00% of the Current  Maximum Amount
for that  Distribution  Date  subject to a minimum  amount equal to 0.50% of the
Maximum Pool Principal Balance; PROVIDED,  HOWEVER, that if, on any Distribution
Date, a  Delinquency  Trigger Event has  occurred,  the  Specified  Subordinated
Amount shall not be reduced to the applicable  percentage of the Current Maximum
Amount, but instead remain the same as the prior period's Specified Subordinated
Amount until the  distribution  date on which a Delinquency  Trigger Event is no
longer occurring;  provided,  further, that if, on any Distribution Date, a Loss
Trigger Event exists, the Specified Subordinated Amount shall equal 1.90% of the

                                       35
<PAGE>


Maximum  Pool  Principal  Balance  until the  Distribution  Date on which a Loss
Trigger Event no longer exists. When the Class Certificate Balance of each Class
of LIBOR  Certificates  has been  reduced to zero,  the  Specified  Subordinated
Amount shall thereafter equal zero.

                  STANDARD  & POOR'S:  Standard  & Poor's  Ratings  Services,  a
division of the McGraw-Hill  Companies,  Inc. If Standard & Poor's is designated
as a Rating  Agency  in the  Preliminary  Statement,  for  purposes  of  Section
10.05(b)  the  address  for  notices to  Standard & Poor's  shall be  Standard &
Poor's,  55 Water,  New York, New York 10041,  Attention:  Residential  Mortgage
Surveillance Group - Morgan Stanley ABS Capital I Inc.  2002-HE3,  or such other
address as  Standard & Poor's may  hereafter  furnish to the  Depositor  and the
Servicer.

                  STARTUP DAY:  For each REMIC  created  hereunder,  the Closing
Date.

                  STATED  PRINCIPAL  BALANCE:  As to each Mortgage Loan, (i) the
principal  balance of the Mortgage  Loan at the Cut-off Date after giving effect
to payments of  principal  due on or before  such date,  to the extent  actually
received,  minus (ii) all amounts  previously  distributed  to the Trustee  with
respect to the related  Mortgage  Loan  representing  payments or  recoveries of
principal, including Advances in respect of scheduled payments of principal. For
purposes of any Distribution  Date, the Stated Principal Balance of any Mortgage
Loan will  give  effect to any  scheduled  payments  of  principal  received  or
advanced  prior to the related  Remittance  Date and any  unscheduled  principal
payments and other unscheduled principal collections received during the related
Prepayment Period.

                  STEPDOWN  DATE: The later to occur of (i) the earlier to occur
of (a) the Distribution  Date in December 2005 and (b) the Distribution  Date on
which the aggregate Class  Certificate  Balances of the Class A Certificates are
reduced  to zero and (ii)  the  first  Distribution  Date on  which  the  Senior
Enhancement  Percentage  (calculated  for this  purpose  only after  taking into
account scheduled and unscheduled payments of principal on the Mortgage Loans on
the last  day of the  related  Due  Period  but  prior  to any  applications  of
Principal  Distribution  Amount to the Offered  Certificates  on the  applicable
Distribution Date) is greater than or equal to the Senior Specified  Enhancement
Percentage.

                  SUBORDINATED  AMOUNT: As of any Distribution Date, the excess,
if any, of (a) the Current  Maximum  Amount for that  Distribution  Date on such
Distribution  Date over (b) the aggregate of the Class  Certificate  Balances of
the Class A and Subordinated  Certificates as of such  Distribution  Date (after
giving  effect  to the  payment  of the  Principal  Remittance  Amount  on  such
Certificates on such Distribution Date).

                  SUBORDINATED  CERTIFICATES:  As specified  in the  Preliminary
Statement.

                  SUBORDINATION  DEFICIENCY:  With  respect to any  Distribution
Date, the excess, if any, of (a) the Specified Subordinated Amount applicable to
such  Distribution  Date over (b) the  Subordinated  Amount  applicable  to such
Distribution Date.

                  SUBORDINATION   REDUCTION   AMOUNT:   With   respect   to  any
Distribution Date, an amount equal to the lesser of (a) the Excess  Subordinated
Amount and (b) the Total Monthly Excess Spread.


                                       36
<PAGE>

                  SUBSERVICER:  As defined in Section 3.02(a).

                  SUBSERVICING ACCOUNT:  As defined in Section 3.08.

                  SUBSERVICING AGREEMENT:  As defined in Section 3.02 hereof.

                  SUBSEQUENT CUT-OFF DATE: As to any Subsequent  Mortgage Loans,
the date  specified in the Addition  Notice  delivered in connection  therewith,
which date shall be the close of business on the first day of the month in which
such Subsequent Mortgage Loans will be conveyed to the Trust Fund.

                  SUBSEQUENT   MORTGAGE  LOANS:  The  Mortgage  Loans  hereafter
transferred and assigned to the Trust Fund pursuant to Section 2.01(d),  each of
which shall have been purchased by the Unaffiliated Seller under a Mortgage Loan
Purchase Agreement.

                  SUBSEQUENT  TRANSFER:  The  transfer  and  assignment  by  the
Depositor to the Trust of the  Subsequent  Mortgage  Loans pursuant to the terms
hereof.

                  SUBSEQUENT TRANSFER AGREEMENT: A subsequent transfer agreement
in substantially the form of Exhibit L.

                  SUBSEQUENT   TRANSFER  DATE:  The  Business  Day  on  which  a
Subsequent Transfer occurs.

                  SUBSTITUTE  MORTGAGE LOAN: A Mortgage Loan  substituted by the
Unaffiliated  Seller or an Originator for a Deleted  Mortgage Loan in accordance
with  the  terms  of  this  Agreement  or the  related  Mortgage  Loan  Purchase
Agreement,  which must,  on the date of such  substitution,  as  confirmed  in a
Request for Release,  substantially  in the form of Exhibit K, (i) have a Stated
Principal  Balance,  after  deduction of the principal  portion of the Scheduled
Payment  due in the month of  substitution,  not in excess of, and not more than
10% less than, the Stated  Principal  Balance of the Deleted Mortgage Loan; (ii)
be  accruing  interest  at a rate no lower  than and not more  than 1% per annum
higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio
no higher than that of the Deleted  Mortgage Loan; (iv) have a remaining term to
maturity  no  greater  than  (and not more  than one year less than that of) the
Deleted Mortgage Loan; and (v) comply with each  representation and warranty set
forth in Sections  3.01(f) and (h) of the  Unaffiliated  Seller's  Agreement and
each  representation  and warranty  set forth in the  applicable  Mortgage  Loan
Purchase Agreement.

                  SUBSTITUTION  ADJUSTMENT  AMOUNT: The meaning ascribed to such
term pursuant to Section 2.03.

                  TAX SERVICE CONTRACT:  As defined in Section 3.09(a).

                  TELERATE PAGE 3750:  The display page  currently so designated
on the Bridge  Telerate  Service (or such other page as may replace that page on
that service for displaying comparable rates or prices).

                                       37
<PAGE>


                  TOTAL MONTHLY EXCESS SPREAD:  As to any Distribution  Date, an
amount equal to the excess if any, of (i) the interest  collected  (prior to the
Remittance  Date) or advanced  on the  Mortgage  Loans for Due Dates  during the
related  Due  Period  (net of Expense  Fees,  Premium  Amount and  Reimbursement
Amounts,  if any) over (ii) the sum of the  interest  payable to the  Classes of
Floating Rate Certificates on such Distribution Date.

                  TRANSFER:  Any  direct  or  indirect  transfer  or sale of any
Ownership Interest in a Residual Certificate.

                  TRANSFER AFFIDAVIT:  As defined in section 5.02(b).

                  TRANSFEROR CERTIFICATE:  As defined in Section 5.02(b).

                  TRIGGER EVENT: The occurrence of either a Delinquency  Trigger
Event or a Loss Trigger Event.

                  TRUST  FUND:  The  corpus  of  the  trust  created   hereunder
consisting of (i) the Mortgage Loans and all interest and principal  received on
or with respect thereto after the related Cut-off Date,  other than such amounts
which were due on the Mortgage Loans on or before the related Cut-off Date; (ii)
each  Account,  and all amounts  deposited  therein  pursuant to the  applicable
provisions of this  Agreement;  (iii)  property that secured a Mortgage Loan and
has been acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; (iv)
all  rights  of  the  Depositor  against  the  Unaffiliated   Seller  under  the
Unaffiliated  Seller's  Agreement;  (v) all rights of the Depositor against each
Originator  under the  related  Assignment  and  Recognition  Agreement  and the
related  Mortgage Loan Purchase  Agreement;  (vi) the Class A Insurance  Policy;
(vii)   the  Cap   Agreement,   solely   for  the   benefit   of  the   Class  A
Certificateholders;  and (viii) all  proceeds of the  conversion,  voluntary  or
involuntary, of any of the foregoing.

                  TRUSTEE:   Deutsche  Bank  National   Trust  Company  and  its
successors and, if a successor trustee is appointed hereunder, such successor.

                  TRUSTEE FEE: As to any  Distribution  Date, an amount equal to
the sum of (a) the product of  one-twelfth of the Trustee Fee Rate times the sum
of (i) the aggregate Stated Principal  Balances of the Mortgage Loans at the end
of the prior Due  Period,  and (ii) the  amount on  deposit  in the  Pre-Funding
Account at the end of such prior Due Period and (b) any reasonable  compensation
and expenses of a separate  trustee or co-trustee to be paid pursuant to Section
8.10(d).

                  TRUSTEE FEE RATE: With respect to each Mortgage Loan,  0.0045%
per annum.

                  UNAFFILIATED  SELLER'S  AGREEMENT:  The Unaffiliated  Seller's
Agreement,  dated as of the date hereof,  among the Unaffiliated  Seller and the
Depositor  relating  to the sale of the  Mortgage  Loans  from the  Unaffiliated
Seller to the Depositor.

                  UNPAID INTEREST  AMOUNTS:  As of any Distribution Date and any
Class of  Certificates,  the sum of (a) the excess of (i) the sum of the Accrued
Certificate  Interest  Distribution  Amount for such  Distribution  Date and any
portion of such  Accrued  Certificate  Interest  Distribution  Amount from prior
Distribution  Dates remaining unpaid over (ii) the


                                       38
<PAGE>


amount in respect of interest on such Class of Certificates actually distributed
on the preceding  Distribution  Date and (b) 30 days' interest on such excess at
the applicable Pass-Through Rate (to the extent permitted by applicable law).

                  UNPAID  REALIZED  LOSS  AMOUNT:  With  respect to any Class of
Subordinated  Certificates and as to any Distribution Date, is the excess of (i)
Applied  Realized  Loss  Amounts with respect to such Class over (ii) the sum of
all  distributions  in reduction of such  Applied  Realized  Loss Amounts on all
previous  Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates  in respect of any Unpaid  Realized Loss Amount will not be applied
to reduce the Class Certificate Balance of such Class.

                  UPPER TIER REGULAR  INTEREST:  As described in the Preliminary
Statement.

                  UPPER TIER REMIC:  As described in the Preliminary Statement.

                  U.S.  PERSON:  Shall  mean (i) a citizen  or  resident  of the
United States;  (ii) a corporation  (or entity treated as a corporation  for tax
purposes)  created or  organized  in the United  States or under the laws of the
United States or of any state thereof, including, for this purpose, the District
of Columbia;  (iii) a partnership  (or entity  treated as a partnership  for tax
purposes)  organized in the United States or under the laws of the United States
or of any state thereof,  including,  for this purpose, the District of Columbia
(unless provided otherwise by future Treasury regulations); (iv) an estate whose
income is  includible  in gross  income for United  States  income tax  purposes
regardless of its source; or (v) 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 U.S. Persons have authority to control all substantial  decisions of
the trust.  Notwithstanding  the last clause of the preceding  sentence,  to the
extent provided in Treasury  regulations,  certain trusts in existence on August
20, 1996, and treated as U.S.  Persons prior to such date, may elect to continue
to be U.S. Persons.

                  VOTING RIGHTS:  The portion of the voting rights of all of the
Certificates  which  is  allocated  to  any  Certificate.  As  of  any  date  of
determination,  (a) 1% of all Voting  Rights  shall be  allocated to the Class X
Certificates,  if any (such Voting  Rights to be allocated  among the holders of
Certificates of each such Class in accordance with their  respective  Percentage
Interests),  (b) 1% of all  Voting  Rights  shall be  allocated  to the  Class P
Certificates,  if any, and (c) the  remaining  Voting  Rights shall be allocated
among  Holders of the  remaining  Classes of  Certificates  in proportion to the
Certificate Balances of their respective Certificates on such date.

                  WAC  CAP:  With  respect  to  the  Mortgage  Loans  as of  any
Distribution  Date, the product of (i) the weighted  average of the Adjusted Net
Mortgage  Rates then in effect on the beginning of the related Due Period on the
Mortgage  Loans,  minus the Premium Rate, and (ii) a fraction,  the numerator of
which is 30 and the  denominator  of which is the  actual  number of days in the
Interest Accrual Period related to such Distribution Date.




                                       39
<PAGE>


                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

         Section 2.01      CONVEYANCE OF MORTGAGE LOANS.

                  (a)  The  Depositor,   concurrently  with  the  execution  and
delivery  hereof,  hereby  sells,  transfers,  assigns,  sets over and otherwise
conveys  to the  Trustee  for the  benefit  of the  Certificateholders,  without
recourse, all the right, title and interest of the Depositor in and to the Trust
Fund,  other  than  any  Subsequent  Mortgage  Loans,  which  will  be so  sold,
transferred,  assigned, set-over and conveyed on the related Subsequent Transfer
Date.

                  (b) In  connection  with the transfer and  assignment  of each
Mortgage Loan, the  Unaffiliated  Seller has delivered or caused to be delivered
to the Trustee for the benefit of the Certificateholders the following documents
or  instruments  with respect to each  Mortgage  Loan so assigned (to the extent
such  documents  or  instruments  are  required to be  delivered  by the related
Originator under each Mortgage Loan Purchase Agreement):

                  (i)  the  original   Mortgage  Note  bearing  all  intervening
         endorsements  evidencing  a  complete  chain  of  assignment  from  the
         originator  to the related  Originator,  endorsed  "Pay to the order of
         _________,  without  recourse"  and  signed in the name of the  related
         Originator  by an  authorized  officer.  To the extent that there is no
         room  on  the  face  of  the  Mortgage  Notes  for  endorsements,   the
         endorsement may be contained on an allonge,  if state law so allows and
         the Trustee is so advised by the related  Originator  that state law so
         allows. If the Mortgage Loan was acquired by an Originator in a merger,
         the endorsement must be by "[related  Originator],  successor by merger
         to  [name of  predecessor]".  If the  Mortgage  Loan  was  acquired  or
         originated by the related Originator while doing business under another
         name, the endorsement must be by "[related Originator],  formerly known
         as [previous name]";

                  (ii) the original of any guarantee executed in connection with
         the Mortgage Note;

                  (iii)  the  original   Mortgage  with  evidence  of  recording
         thereon. If in connection with any Mortgage Loan, the original Mortgage
         with evidence of recording  thereon can not be delivered on or prior to
         the  related  Delivery  Date  because  of a delay  caused by the public
         recording office where such Mortgage has been delivered for recordation
         or because such Mortgage has been lost or because such public recording
         office  retains  the  original  recorded  Mortgage,  then  the  related
         Originator,  as  required  by the terms of the  related  Mortgage  Loan
         Purchase  Agreement,  will be  required  to  deliver  to the  Trustee a
         photocopy of such Mortgage and (i) the original  recorded Mortgage or a
         copy of such Mortgage certified by such public recording office to be a
         true and complete copy of the original  recorded Mortgage promptly upon
         receipt thereof by the related  Originator (but in any event within 360
         days from the related Delivery Date); or (ii) in the case of a Mortgage
         where a public recording office retains the original  recorded Mortgage
         or in the case where a Mortgage is lost after  recordation  in a public
         recording  office,  a copy of such  Mortgage  certified  by such public
         recording


                                       40
<PAGE>


         office  to be a  true  and  complete  copy  of  the  original  recorded
         Mortgage;

                  (iv)   the   originals   of  all   assumption,   modification,
         consolidation  or  extension  agreements,  if  any,  with  evidence  of
         recording thereon;

                  (v) the original Assignment of Mortgage for each Mortgage Loan
         endorsed in blank, in form and substance acceptable for recording;

                  (vi) the originals of all intervening assignments of mortgage,
         evidencing a complete  chain of assignment  from the  originator to the
         related  Originator,  with evidence of recording thereon or if any such
         intervening  assignment  has not  been  returned  from  the  applicable
         recording  office or has been lost or if such public  recording  office
         retains the original recorded assignments of mortgage;

                  (vii) the original or duplicate  lender's title policy and all
         riders thereto or, if such original is unavailable,  either an original
         title  binder or an  original or copy of the title  commitment,  and if
         copies then certified to be true and complete by the title company; and

                  (viii) the security agreement,  chattel mortgage or equivalent
         document executed in connection with the Mortgage, if any.

         From time to time, the Servicer shall forward to the Trustee additional
original documents, additional documents evidencing an assumption, modification,
consolidation  or  extension of a Mortgage  Loan  approved by the  Servicer,  in
accordance with the terms of this Agreement. All such mortgage documents held by
the Trustee as to each Mortgage Loan shall constitute the "CUSTODIAL FILE".

         On or prior to the related Delivery Date, the Unaffiliated Seller shall
deliver,  or cause the related Originator to deliver, to the Trustee Assignments
of Mortgages,  in blank, for each Mortgage Loan. If an Assignment of Mortgage is
required to be recorded pursuant to the terms hereof, the Trustee shall promptly
forward such  Assignments  of Mortgage to the Servicer for  recording.  No later
than thirty (30) Business Days  following the date of receipt by the Servicer of
the recording information for a Mortgage,  the Servicer shall promptly submit or
cause to be submitted for recording,  at the expense of the Unaffiliated  Seller
(the Unaffiliated Seller to seek reimbursement from the related Originator under
the  applicable  Mortgage Loan Purchase  Agreement)  in the  appropriate  public
office for real property  records,  each  Assignment of Mortgage  referred to in
Section 2.01(b)(v).  Notwithstanding the foregoing,  however, for administrative
convenience  and  facilitation  of servicing and to reduce  closing  costs,  the
Assignment  of Mortgage  shall not be required to be completed and submitted for
recording  with respect to any Mortgage Loan (other than any Mortgage Loan where
the Mortgaged  Property is located in any state where recordation is required by
any Rating  Agency to obtain the  initial  ratings  on the  Certificates,  which
states as of the date hereof,  are Florida and  Maryland)  until the earliest to
occur  of  (i)  direction  by  Class  A  Certificate  Insurer  or  (ii)  upon  a
determination  by the Servicer that recordation is necessary for the enforcement
of rights under,  or  satisfaction  or assignment of, the related  Mortgage,  at
which  time,  the  Servicer  shall  record any such


                                       41
<PAGE>


Assignment of Mortgage in accordance with the terms hereof. If any Assignment of
Mortgage is required to be recorded  pursuant to the terms hereof,  the Mortgage
shall be assigned from the related Originator,  to "Deutsche Bank National Trust
Company,  as trustee  under the  Pooling  and  Servicing  Agreement  dated as of
November 1, 2002,  Morgan  Stanley ABS Capital I Inc.  Trust  2002-HE3."  In the
event  that any such  assignment  is lost or  returned  unrecorded  because of a
defect therein,  the Unaffiliated  Seller shall cause the related  Originator to
promptly  prepare a  substitute  assignment  to cure such defect and  thereafter
cause each such  assignment to be duly recorded.  In the event the  Unaffiliated
Seller does not pay or otherwise reimburse the Servicer for any of the foregoing
costs of  recording  any such  Assignment  of Mortgage,  the  Servicer  shall be
entitled  to be  reimbursed  from the Trust Fund from  amounts on deposit in the
Collection  Account.  In the event the related Originator fails to reimburse the
Unaffiliated  Seller for the recording  costs described  above,  upon receipt of
written  direction from the  Unaffiliated  Seller,  the Trustee shall assign its
rights under the applicable Mortgage Loan Purchase Agreement solely with respect
to payment of such expenses to the Unaffiliated Seller.

                  On or prior to the Closing Date, the Unaffiliated Seller shall
deliver  to the  Trustee  a copy of the Data  Tape  Information  in  electronic,
machine readable medium in a form mutually acceptable to the Trustee. Within ten
days of the Closing Date,  the  Unaffiliated  Seller shall deliver a copy of the
complete Mortgage Loan Schedule to the Trustee.

                  In the  event  that  such  original  or copy  of any  document
submitted for recordation to the appropriate  public  recording office is not so
delivered to the Trustee within 90 days following the related Delivery Date, and
in the event that the  Originator  does not cure such failure  within 30 days of
discovery or receipt of written notification of such failure from the Depositor,
the Trustee or the Class A  Certificate  Insurer,  the Trustee  shall notify the
related  Originator  to  repurchase  the Mortgage  Loan  pursuant to the related
Mortgage Loan Purchase Agreement, upon the request of the Depositor, the Trustee
or the Class A Certificate  Insurer,  at the Repurchase  Price and in the manner
specified in Section 2.03. The foregoing repurchase provision shall not apply in
the event that the related  Originator  cannot  deliver such original or copy of
any document  submitted for  recordation  to the  appropriate  public  recording
office within the specified period due to a delay caused by the recording office
in the  applicable  jurisdiction;  PROVIDED  that the related  Originator  shall
instead be required to deliver a recording  receipt of such recording office or,
if such  recording  receipt is not  available,  an  officer's  certificate  of a
servicing  officer of the  Originator  confirming  that such  document  has been
accepted for recording.

                  (c) Purchase and Sale of Subsequent Mortgage Loans.

                  (i) Subject to the satisfaction of the conditions set forth in
         paragraph  (ii) below,  and upon the Trustee's  receipt of a Subsequent
         Transfer   Agreement   executed  by  all  other  parties  thereto,   in
         consideration  of the  Trustee's  delivery  on the  related  Subsequent
         Transfer  Dates  to or upon  the  order  of the  Depositor  of all or a
         portion  of the  balance  of  funds  in the  Pre-Funding  Account,  the
         Depositor shall on any Subsequent Transfer Date sell, transfer, assign,
         set over and convey to the  Trustee  without  recourse  but  subject to
         terms and  provisions of this  Agreement,  all of the right,  title and
         interest of the  Depositor  in and to the  Subsequent  Mortgage  Loans,
         including  the  outstanding



                                       42
<PAGE>


         principal  of and  interest  due on such  Subsequent  Mortgage   Loans,
         and all other related assets  included or to be included  in  the Trust
         Fund with respect thereto.

                  The amount released from the Pre-Funding  Account with respect
         to a transfer of Subsequent Mortgage Loans shall be one-hundred percent
         (100%) of the  aggregate  Stated  Principal  Balances as of the related
         Subsequent   Cut-off  Date  of  the   Subsequent   Mortgage   Loans  so
         transferred.

                  (ii) The Subsequent  Mortgage Loans and the other property and
         rights  related  thereto  described  in  paragraph  (a) above  shall be
         transferred   by  the  Depositor  to  the  Trust  Fund  only  upon  the
         satisfaction  of each of the  following  conditions  on or prior to the
         related Subsequent Transfer Date:

                         (a) the  Unaffiliated  Seller  shall have  provided the
                  Depositor,  the Trustee,  the Rating  Agencies and the Class A
                  Certificate Insurer with a timely Addition Notice, which shall
                  include a  Mortgage  Loan  Schedule,  listing  the  Subsequent
                  Mortgage  Loans and shall have provided any other  information
                  reasonably  requested by any of the foregoing  with respect to
                  the Subsequent Mortgage Loans;

                         (b) the Servicer shall have deposited in the Collection
                  Account all  collections  of (x)  principal  in respect of the
                  Subsequent  Mortgage  Loans received and due after the related
                  Subsequent Cut-off Date and (y) interest due on the Subsequent
                  Mortgage Loans after the related Subsequent Cut-off Date;

                         (c)  as  of  each   Subsequent   Transfer   Date,   the
                  Unaffiliated  Seller  was  not  insolvent  nor  will  be  made
                  insolvent  by such  transfer  nor is the  Unaffiliated  Seller
                  aware of any pending insolvency;

                         (d) such  addition  will not  result  in a  "prohibited
                  transaction"  (as  defined  in the REMIC  Provisions)  for any
                  REMIC  held by the  Trust  Fund,  and will not cause any REMIC
                  held by the  Trust  Fund to cease to  qualify  as a REMIC,  as
                  evidenced  by an  Opinion  of  Counsel  with  respect  to such
                  matters  (which  may be a blanket  opinion  dated the  Closing
                  Date);

                         (e) the Pre-Funding Period shall not have terminated;

                         (f) the Unaffiliated Seller shall have delivered to the
                  Trustee an executed Assignment and Recognition  Agreement with
                  respect to each  related  Originator  of  Subsequent  Mortgage
                  Loans  to be  added  to the  Trust  Fund  on  such  Subsequent
                  Transfer Date;

                         (g) the Unaffiliated Seller shall have delivered to the
                  Trustee an Officer's  Certificate  confirming the satisfaction
                  of each condition  precedent specified in this paragraph (ii),
                  and the Opinion of Counsel referenced in clause (d); and

                                       43
<PAGE>

                         (h) the  Unaffiliated  Seller and the  Depositor  shall
                  have delivered to the Trustee an executed copy of a Subsequent
                  Transfer  Agreement,  substantially  in the form of  Exhibit L
                  hereto.

                  (iii)  The  obligation  of the  Trust  Fund  to  purchase  the
         Subsequent  Mortgage Loans on a Subsequent  Transfer Date is subject to
         the  requirements  that,  following  the  purchase  of such  Subsequent
         Mortgage Loans, and with respect to the entire mortgage loan pool:

                         (a) no more than 3.40% may be second liens;

                         (b) no more  than  30.00%  may be Fixed  Rate  Mortgage
                  Loans;

                         (c) the weighted  average original term to maturity may
                  not exceed 360 months;

                         (d) the weighted  average gross  Mortgage Rate must not
                  be less than 8.45%, or more than 9.05%;

                         (e) the  weighted  average LTV must not exceed  83.00%,
                  and no more than 47.00% of the Mortgage Loans may have LTVs in
                  excess of 80%;

                         (f)  no  Mortgage  Loan  may  have a  Stated  Principal
                  Balance  in excess of  $1,000,000  as of the  related  Cut-off
                  Date;

                         (g) at least  85.00% of the  Mortgage  Loans  must have
                  prepayment penalties;

                         (h)  the   weighted   average   Gross  Margin  for  the
                  Adjustable Rate Mortgage Loans must be at least 6.40%;

                         (i) the weighted average credit score (FICO score) must
                  be at least  605,  and  none of the  Mortgage  Loans  may have
                  credit scores below 500; and

                         (j) no Mortgage Loan  originated on or after October 1,
                  2002  will be  secured  by  property  located  in the State of
                  Georgia.

                  Any of the above requirements may be waived or modified in any
         respect  with the  consent of the Class A  Certificate  Insurer and the
         Rating Agencies.

                  (iv) In  connection  with the transfer and  assignment  of the
         Subsequent  Mortgage Loans, the  Unaffiliated  Seller shall satisfy the
         document delivery requirements set forth in Section 2.01(b).

                  Section 2.02  ACCEPTANCE BY THE TRUSTEE OF THE MORTGAGE LOANS.

                  The Trustee shall acknowledge,  on each Delivery Date, receipt
of the  documents  identified in the Initial  Certification  in the form annexed
hereto as Exhibit F, and declares that it holds and will hold such documents and
the other documents  delivered to it pursuant to Section 2.01, and that it


                                       44
<PAGE>


holds or will hold such other assets as are included in the Trust Fund, in trust
for the exclusive  use and benefit of all present and future  Certificateholders
and the Class A  Certificate  Insurer.  The  Trustee  acknowledges  that it will
maintain  possession of the related  Mortgage  Notes in the State of California,
unless  otherwise  permitted by the Rating  Agencies and the Class A Certificate
Insurer.

                  In connection  with each  Delivery,  the Trustee shall deliver
via facsimile  (with original to follow the next Business Day) to the Depositor,
the  Unaffiliated  Seller  and  the  Class  A  Certificate  Insurer  an  Initial
Certification  on or prior to the related Delivery Date,  certifying  receipt of
the related Mortgage Notes and Assignments of Mortgage for each related Mortgage
Loan. The Trustee shall not be  responsible to verify the validity,  sufficiency
or genuineness of any document in any Custodial File.

                  Within 120 days after the related  Delivery  Date, the Trustee
shall  ascertain  that all  documents  required  to be reviewed by it are in its
possession,  and shall deliver to the Depositor, the Unaffiliated Seller and the
Class A Certificate Insurer a Final Certification to the effect that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically  identified in such certification
as an  exception  and not  covered  by such  certification):  (i) all  documents
required to be delivered to it are in its  possession;  (ii) such documents have
been reviewed by it and appear regular on their face and relate to such Mortgage
Loan; (iii) based on its examination and only as to the foregoing documents, the
information  set forth in items (1), (2) and (18) of the Mortgage  Loan Schedule
and  items  (1),  (9) and  (17) of the Data  Tape  Information  respecting  such
Mortgage  Loan is  correct;  and (iv) each  Mortgage  Note has been  endorsed as
provided in Section 2.01 of this Agreement. The Trustee shall not be responsible
to verify the  validity,  sufficiency  or  genuineness  of any  document  in any
Custodial File. Upon receipt of such Final Certification,  if the Depositor, the
Unaffiliated  Seller  or the Class A  Certificate  Insurer  determines  that any
noncompliance  identified  by the  Trustee  is a breach of a  representation  or
warranty  relating to such Mortgage Loan , such party shall give written  notice
to the Trustee thereof.

                  The  Trustee  shall  retain  possession  and  custody  of each
Custodial  File in accordance  with and subject to the terms and  conditions set
forth  herein.  The Servicer  shall  promptly  deliver to the Trustee,  upon the
execution  or  receipt  thereof,  the  originals  of  such  other  documents  or
instruments  constituting  the Custodial File as come into the possession of the
Servicer from time to time.

         Section  2.03   REPRESENTATIONS,   WARRANTIES   AND  COVENANTS  OF  THE
UNAFFILIATED SELLER AND THE SERVICER.

         (a) The Servicer  hereby makes the  representations  and warranties set
forth in Schedules II and IIA hereto to the Depositor,  the Unaffiliated Seller,
the Class A Certificate  Insurer and the Trustee,  as of the Closing  Date,  and
with respect to Subsequent Mortgage Loans, as of the related Subsequent Transfer
Date.

                                       45
<PAGE>


         (b) CDC Mortgage  Capital  Inc.,  in its  capacity as the  Unaffiliated
Seller,  hereby makes the  representations  and warranties set forth in Schedule
III hereto to the Depositor, the Trustee and the Class A Certificate Insurer, as
of the Closing Date.

         (c) It is  understood  and agreed by the Servicer and the  Unaffiliated
Seller that the  representations  and warranties set forth in Section 2.03 shall
survive the transfer of the Mortgage Loans to the Trust Fund, and shall inure to
the  benefit of the Trust Fund  notwithstanding  any  restrictive  or  qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the examination or
failure to examine any Mortgage  File.  Upon  discovery by any of the Depositor,
the Unaffiliated  Seller,  the Class A Certificate  Insurer,  the Trustee or the
Servicer  of a  breach  by the  Unaffiliated  Seller  of  any  of the  foregoing
representations  or any of the  representations  and warranties made pursuant to
Sections  3.01(f)  and  (h) of the  Unaffiliated  Seller's  Agreement  or by any
Originator of the  representations  and warranties  made pursuant to the related
Assignment and Recognition  Agreement,  the party  discovering such breach shall
give prompt written notice to the others.

         (d) Within 90 days of the earlier of either  discovery  by or notice to
the Unaffiliated  Seller of any breach of a representation or warranty set forth
in Section 3.01(f) or (h) of the Unaffiliated Seller's Agreement that materially
and  adversely  affects the value of the  Mortgage  Loans or the interest of the
Trustee, the Class A Certificate Insurer or the Certificateholders  therein, the
Unaffiliated  Seller  shall  use its best  efforts  to cure  such  breach in all
material  respects  and, if such breach  cannot be  remedied,  the  Unaffiliated
Seller shall, (i) if such 90 day period expires prior to the second  anniversary
of the related Delivery Date,  remove such Mortgage Loan from the Trust Fund and
substitute in its place a Substitute Mortgage Loan, in the manner and subject to
the conditions set forth in this Section 2,03; or (ii)  repurchase such Mortgage
Loan at the Repurchase  Price;  PROVIDED,  HOWEVER,  that any such  substitution
pursuant to (i) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel  required by Section  2.05,  if any, and a Request for
Release  substantially  in the form of Exhibit K, and the Mortgage  File for any
such Substitute Mortgage Loan

         With respect to any Substitute Mortgage Loan or Loans, the Unaffiliated
Seller  shall  deliver to the Trustee for the benefit of the  Certificateholders
the Mortgage Note,  the Mortgage,  the related  Assignment of the Mortgage,  and
such other  documents and  agreements as are required by Section 2.01,  with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01. No
substitution   is  permitted  to  be  made  in  any  calendar  month  after  the
Determination  Date for such  month.  Scheduled  Payments  due with  respect  to
Substitute Mortgage Loans in the Due Period of substitution shall not be part of
the  Trust  Fund and will be  retained  by the  related  Originator  on the next
succeeding Distribution Date. For the Due Period of substitution,  distributions
to  Certificateholders  will  include  the  monthly  payment  due on any Deleted
Mortgage Loan for such Due Period and thereafter the related Originator shall be
entitled to retain all  amounts  received  in respect of such  Deleted  Mortgage
Loan.

         For any month in which the Unaffiliated  Seller substitutes one or more
Substitute  Mortgage Loans for one or more Deleted  Mortgage Loans, the Servicer
will determine the amount (if any) by which the aggregate  principal  balance of
all such  Substitute  Mortgage Loans as of the date of substitution is less than
the aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly


                                       46
<PAGE>

payments due in the Due Period of substitution).  The Unaffiliated  Seller shall
deposit the amount of such shortage (the "SUBSTITUTION ADJUSTMENT AMOUNT") plus,
an amount equal to the  aggregate of any  unreimbursed  Advances and accrued and
unpaid  Servicing  Fees with  respect to such  Deleted  Mortgage  Loans into the
Collection Account on or before the Remittance Date for the Distribution Date in
the month  succeeding the calendar month during which the related  Mortgage Loan
became required to be purchased or replaced hereunder.

         Within 90 days of the earlier of either  discovery  by or notice to the
Servicer of any breach of a representation or warranty set forth on Schedule IIA
hereto that materially and adversely  affects the value of the Mortgage Loans or
the  interest  of  the  Trustee,   the  Class  A  Certificate   Insurer  or  the
Certificateholders  therein, the Servicer shall use its best efforts to promptly
cure such breach in all material  respects  and, if such defect or breach cannot
be remedied,  the Servicer  shall,  at the  Depositor's  option,  purchase  such
Mortgage Loan at the Repurchase Price.

         Upon discovery that any document does not comply with the  requirements
set forth in clauses (i) through (iv) of the  Trustee's  review of the Custodial
Files  pursuant  to Section  2.02 or receipt of written  notice of a breach of a
representation  and  warranty or written  notice  that a Mortgage  Loan does not
constitute a "qualified  mortgage"  within the meaning of Section  860G(a)(3) of
the Code, the Trustee shall in turn promptly  notify the  applicable  Originator
(with  a  copy  to the  Servicer,  the  Class  A  Certificate  Insurer  and  the
Unaffiliated  Seller) in writing of such non  compliance  or breach and  request
that the related  Originator  cure such non compliance or breach within the time
period set forth in the applicable  Mortgage Loan Purchase Agreement (but in any
event,  within 60 days from the date the related  Originator is notified of such
non compliance or breach) and if the related  Originator  does not cure such non
compliance or breach in all material  respects  during such period,  the Trustee
shall notify such  Originator  to  repurchase  such Mortgage Loan from the Trust
Fund at the Repurchase  Price,  and such repurchase must occur no later than the
90th day following the Trustee's original notice of such noncompliance or breach
if such  noncompliance or breach is a failure of the Mortgage Loan to constitute
a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code.

         (e) Upon  delivery  of the Final  Certification  with  respect  to each
Mortgage Loan, the Trustee will notify the related  Originator within 5 Business
Days of such delivery of any missing  documents  from the Custodial  File and if
the related  Originator does not deliver such missing  documents  within 60 days
from the date the  related  Originator  is  notified  of such  noncompliance  or
breach,  the Trustee shall notify such  Originator  to repurchase  such Mortgage
Loan from the Trust Fund at the Repurchase Price.

         (f) Based solely on information received with respect to any Substitute
Mortgage  Loan  from the  Unaffiliated  Seller  or the  related  Originator,  as
applicable,  the Servicer  shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted  Mortgage Loan and the  substitution  of the  Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended  Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or
Loans shall be subject to the terms of this  Agreement in all respects,  and the
Unaffiliated Seller shall be deemed to have made with respect to such Substitute
Mortgage Loan or Loans, as of the date of substitution,  the representations and
warranties  made  pursuant  to  Sections  3.01(f)  and  (h) of the  Unaffiliated
Seller's Agreement with respect to such Mortgage


                                       47
<PAGE>

Loan. Upon any such  substitution  and the deposit to the Collection  Account of
the amount required to be deposited therein in connection with such substitution
as described in the following paragraph,  the Trustee shall release the Mortgage
File relating to such Deleted  Mortgage Loan to the  Unaffiliated  Seller or the
related  Originator,  as  applicable,  and  shall  execute  and  deliver  at the
Unaffiliated  Seller's or related Originator's  direction,  as applicable,  such
instruments  of transfer  or  assignment  prepared  by such party,  in each case
without recourse, as shall be necessary to vest title in the Unaffiliated Seller
or the  related  Originator,  or its  designee,  as  applicable,  the  Trustee's
interest in any Deleted  Mortgage Loan  substituted for pursuant to this Section
2.03.

         (g)  In  the  event  that  the  Unaffiliated   Seller  or  the  related
Originator,  as  applicable,   shall  have  repurchased  a  Mortgage  Loan,  the
Repurchase Price therefor shall be deposited in the Collection  Account pursuant
to Section 3.10 on or before the Remittance  Date for the  Distribution  Date in
the month  following  the month  during  which  the  Unaffiliated  Seller or the
related Originator,  as applicable,  became obligated hereunder to repurchase or
replace such Mortgage Loan and upon such deposit of the  Repurchase  Price,  the
delivery  of the Opinion of Counsel  required  by Section  2.05 and receipt of a
Request for Release in the form of Exhibit K hereto,  the Trustee  shall release
the related  Custodial File to such Person as directed by the Servicer,  and the
Trustee shall execute and deliver at such Person's direction such instruments of
transfer or assignment  prepared by such Person,  in each case without recourse,
as shall be necessary to transfer  title from the Trustee.  It is understood and
agreed  that  the  obligation  under  this  Agreement  of any  Person  to  cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and is
continuing shall constitute the sole remedy against such Persons respecting such
breach available to Certificateholders,  the Depositor, the Unaffiliated Seller,
the Class A  Certificate  Insurer or the Trustee on their  behalf.  In the event
such required  repurchase or replacement  does not occur, the Trustee shall take
such actions as directed upon written  direction from the Depositor or the Class
A Certificate Insurer and the provision of reasonable indemnity  satisfactory to
the Trustee in accordance with Sections 6.03 and 8.02.

         (h) If the  Unaffiliated  Seller is required to repurchase or replace a
Mortgage  Loan  pursuant  to the terms  hereof,  upon  receipt by the Trustee of
written direction from the Unaffiliated Seller and either the related Repurchase
Price or Substitute  Mortgage Loan, as  applicable,  the Trustee shall assign to
the  Unaffiliated  Seller its rights under the related  Mortgage  Loan  Purchase
Agreement solely with respect to such Mortgage Loan by an assignment in form and
substance mutually satisfactory to the Unaffiliated Seller and the Trustee.

         (i) The  representations  and warranties  made pursuant to this Section
2.03 shall survive delivery of the respective Custodial Files to the Trustee.

         Section 2.04 THE DEPOSITOR AND THE MORTGAGE LOANS.

         The Depositor hereby  represents and warrants to the Trustee and to the
Class A  Certificate  Insurer with respect to each  Mortgage Loan as of the date
hereof or such other date set forth herein that as of the related Delivery Date,
and  following  the  transfer of the  Mortgage  Loans to it by the  Unaffiliated
Seller,  the  Depositor  had good title to the  Mortgage  Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.

                                       48
<PAGE>


         The Depositor hereby assigns,  transfers and conveys to the Trustee all
of its rights with  respect to the  Initial  Mortgage  Loans and shall,  on each
subsequent  Transfer  Date,  convey all of its right,  title and  interest  with
respect to the related subsequent Mortgage Loans.

         Section  2.05  DELIVERY  OF  OPINION  OF  COUNSEL  IN  CONNECTION  WITH
SUBSTITUTIONS AND NON-QUALIFIED MORTGAGES.

         Notwithstanding   any  contrary   provision  of  this   Agreement,   no
substitution  pursuant to Section 2.03 shall be made more than 30 days after the
related  Delivery Date unless the Unaffiliated  Seller  delivers,  or causes the
related  Originator  to  deliver,  as  applicable,  to the Trustee an Opinion of
Counsel, at the expense of the Unaffiliated Seller or the related Originator, as
applicable,  addressed to the Trustee, to the effect that such substitution will
not (i) result in the imposition of the tax on "prohibited  transactions" on the
Trust Fund or  contributions  after the  Startup  Date,  as defined in  Sections
860F(a)(2) and 860G(d) of the Code, respectively or (ii) cause the Trust Fund to
fail to qualify as a REMIC at any time that any Certificates are outstanding.

         Section 2.06 EXECUTION AND DELIVERY OF CERTIFICATES.

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and,  concurrently  with such  transfer  and  assignment,  has executed and
delivered to or upon the order of the Depositor,  the Certificates in authorized
denominations  evidencing  directly or  indirectly  the entire  ownership of the
Trust Fund.  The Trustee  agrees to hold the Trust Fund and  exercise the rights
referred  to above for the  benefit of all  present  and  future  Holders of the
Certificates, and for the benefit of the Class A Certificate Insurer.

         Section 2.07 REMIC MATTERS.

         The  Preliminary  Statement  sets forth the  designations  for  federal
income tax purposes of all  interests  created  hereby.  The  "Startup  Day" for
purposes of the REMIC Provisions shall be the Closing Date. The "latest possible
maturity date" is March 25, 2033, which is the sixth Distribution Date following
the latest Mortgage Loan maturity date.

         Section 2.08 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

         The Depositor hereby represents, warrants and covenants to the Trustee,
the Servicer and to the Class A Certificate  Insurer and the that as of the date
of this Agreement or as of such date specifically provided herein:

         (a) The Depositor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware;

         (b) The Depositor  has the corporate  power and authority to convey the
Mortgage  Loans and to  execute,  deliver  and  perform,  and to enter  into and
consummate the transactions contemplated by, this Agreement;

         (c) This Agreement has been duly and validly  authorized,  executed and
delivered by the Depositor,  all requisite  corporate  action having been taken,
and, assuming the


                                       49
<PAGE>

due  authorization,  execution and delivery  hereof by the other parties hereto,
constitutes  or will  constitute the legal,  valid and binding  agreement of the
Depositor,  enforceable  against the  Depositor  in  accordance  with its terms,
except  as  such   enforcement   may  be  limited  by  bankruptcy,   insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
rights of creditors generally,  and by general equity principles  (regardless of
whether such enforcement is considered in a proceeding in equity or at law);

         (d) No consent, approval,  authorization or order of or registration or
filing with, or notice to, any  governmental  authority or court is required for
the execution,  delivery and  performance of or compliance by the Depositor with
this Agreement or the  consummation by the Depositor of any of the  transactions
contemplated hereby, except as have been made on or prior to the Closing Date;

         (e)  None  of  the  execution  and  delivery  of  this  Agreement,  the
consummation  of  the  transactions  contemplated  hereby  or  thereby,  or  the
fulfillment of or compliance  with the terms and  conditions of this  Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes  or will  constitute  a  default  or  results  or will  result in an
acceleration  under (A) the  charter or bylaws of the  Depositor,  or (B) of any
term, condition or provision of any material indenture,  deed of trust, contract
or  other  agreement  or  instrument  to  which  the  Depositor  or  any  of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will  result in a  violation  of any law,  rule,  regulation,  order,
judgment or decree  applicable  to the  Depositor  of any court or  governmental
authority having  jurisdiction over the Depositor or its subsidiaries;  or (iii)
results in the creation or imposition of any lien,  charge or encumbrance  which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;

         (f) There are no  actions,  suits or  proceedings  before or against or
investigations of, the Depositor pending,  or to the knowledge of the Depositor,
threatened,  before any court,  administrative agency or other tribunal,  and no
notice of any such action, which, in the Depositor's reasonable judgment,  might
materially  and  adversely  affect  the  performance  by  the  Depositor  of its
obligations  under this  Agreement,  or the validity or  enforceability  of this
Agreement;

         (g) The Depositor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental  agency that may materially and adversely affect its performance
hereunder; and

         (h)  Immediately  prior to the transfer and assignment by the Depositor
to the Trustee,  the Depositor had, or, with respect to the subsequent  Mortgage
Loans,  will have,  good  title to, and was,  or will be, the sole owner of each
Mortgage Loan,  free of any interest of any other Person,  and the Depositor has
transferred,  or shall transfer,  all right, title and interest in each Mortgage
Loan to the Trustee.  The transfer of the Mortgage  Note and the Mortgage as and
in the manner  contemplated by this Agreement is sufficient  either (i) fully to
transfer to the Trustee, for the benefit of the  Certificateholders  and for the
benefit of the Class A Certificate  Insurer,  all right,  title, and interest of
the  Depositor  thereto  as note  holder and  mortgagee  or (ii) to grant to the
Trustee,  for the benefit of the  Certificateholders  and for the benefit of the
Class A Certificate  Insurer, the security interest referred to in Section 10.04
hereof.

                                       50
<PAGE>


         It is understood  and agreed that the  representations,  warranties and
covenants  set  forth  in  this  Section  2.08  shall  survive  delivery  of the
respective Custodial Files to the Trustee or to a custodian, as the case may be,
and shall inure to the benefit of the Trustee.

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         Section 3.01 SERVICER TO SERVICE MORTGAGE LOANS.

         (a) For and on behalf of the  Certificateholders and for the benefit of
the Class A Certificate  Insurer,  the Servicer shall service and administer the
Mortgage Loans 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  Subservicer  or  any
     Affiliate  of the  Servicer  or any  Subservicer  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 Subservicer's right to receive  compensation
     for its services hereunder or with respect to any particular transaction.

         To the extent consistent with the foregoing, the Servicer shall seek to
maximize  the timely and  complete  recovery of  principal  and  interest on the
Mortgage Notes. 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 Subservicers 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  Subservicer  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
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. 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


                                       51
<PAGE>

under any standard hazard insurance policy. Subject to Section 3.15, the Trustee
shall  execute,  at the  written  request of the  Servicer,  and  furnish to the
Servicer and any  Subservicer  such documents as are necessary or appropriate to
enable  the  Servicer  or any  Subservicer  to carry  out  their  servicing  and
administrative duties hereunder,  and the Trustee hereby grants to the Servicer,
and this  Agreement  shall  constitute,  a power of  attorney  to carry out such
duties including a power of attorney to take title to Mortgaged Properties after
foreclosure on behalf of the Trustee. The Trustee shall execute a separate power
of attorney in favor of the Servicer for the  purposes  described  herein to the
extent  necessary  or  desirable  to enable the  Servicer  to perform its duties
hereunder.  The Trustee  shall not be liable for the actions of the  Servicer or
any Subservicers under such powers of attorney.

         (b) Subject to Section 3.09(b) 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(b), and further as provided in Section 3.11.
Any cost  incurred by the Servicer or by  Subservicers  in effecting  the timely
payment of taxes and  assessments on a Mortgaged  Property shall not be added to
the unpaid principal balance of the related Mortgage Loan,  notwithstanding that
the terms of such Mortgage Loan so permit.

         (c)  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  4.01) 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 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 final,  temporary  or
proposed Treasury regulations promulgated thereunder) and (B) cause any REMIC 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,  or (iii)  except as provided in Section  3.07(a),  waive any
Prepayment Charges.

         (d)  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   SUBSERVICING   AGREEMENTS   BETWEEN  THE  SERVICER  AND
SUBSERVICERS.

         (a) Subject to the consent of the Class A Certificate  Insurer (so long
as no Class A Certificate Insurer Default has occurred and is continuing), which
consent  shall  not be  unreasonably  withheld,  the  Servicer  may  enter  into
Subservicing Agreements with Subservicers,  for the servicing and administration
of the Mortgage Loans.

         Unless otherwise  approved by the Class A Certificate  Insurer (so long
as no Class A Certificate Insurer Default has occurred and is continuing),  each
Subservicer shall be (i)


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<PAGE>


authorized  to  transact  business  in the state or states in which the  related
Mortgaged  Properties  it is to  service  are  situated,  if and  to the  extent
required by applicable law to enable the  Subservicer to perform its obligations
hereunder and under the Subservicing Agreement,  (ii) an institution approved as
a  mortgage  loan  originator  by  the  Federal  Housing  Administration  or  an
institution  that has deposit  accounts  insured by the FDIC and (iii) a Freddie
Mac or Fannie Mae approved mortgage servicer.  Each Subservicing  Agreement must
impose on the Subservicer 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 Subservicing  Agreement
and will be  familiar  with the terms  thereof.  The  terms of any  Subservicing
Agreement will not be inconsistent with any of the provisions of this Agreement.
The  Servicer and the  Subservicers  may enter into and make  amendments  to the
Subservicing   Agreements  or  enter  into  different   forms  of   Subservicing
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 Trustee,
without the consent of the  Trustee.  Any  variation  without the consent of the
Trustee from the  provisions  set forth in Section 3.08 relating to insurance or
priority  requirements of Subservicing  Accounts,  or credits and charges to the
Subservicing   Accounts  or  the  timing  and  amount  of   remittances  by  the
Subservicers to the Servicer,  are conclusively  deemed to be inconsistent  with
this  Agreement  and  therefore  prohibited.  The Servicer  shall deliver to the
Trustee,  the  Unaffiliated  Seller,  the Class A  Certificate  Insurer  and the
Depositor  copies  of  all  Subservicing  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 (except
as otherwise  provided in the last sentence of this paragraph),  for the benefit
of the Trustee,  shall enforce the  obligations  of each  Subservicer  under the
related Subservicing Agreement, including, without limitation, any obligation to
make  advances in respect of delinquent  payments as required by a  Subservicing
Agreement.   Such  enforcement,   including,   without  limitation,   the  legal
prosecution of claims,  termination of Subservicing 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.

         Section 3.03 SUCCESSOR SUBSERVICERS.

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

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<PAGE>


         Any  Subservicing  Agreement  shall  include  the  provision  that such
agreement may be immediately  terminated by the Depositor or the Trustee without
fee,  in  accordance  with the terms of this  Agreement,  in the event  that the
Servicer shall, for any reason, no longer be the Servicer (including termination
due to an Event of Default).

         Section 3.04 LIABILITY OF THE SERVICER.

         Notwithstanding  any Subservicing  Agreement,  any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer  or reference to actions taken  through a Subservicer  or otherwise,
the Servicer shall remain  obligated and primarily liable to the Trustee for the
servicing  and  administering  of the  Mortgage  Loans  in  accordance  with the
provisions of Section 3.01 without diminution of such obligation or liability by
virtue  of  such  Subservicing  Agreements  or  arrangements  or  by  virtue  of
indemnification  from the  Subservicer 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 Subservicer for  indemnification  of the Servicer by such Subservicer and
nothing  contained  in this  Agreement  shall be deemed to limit or modify  such
indemnification.

         Section 3.05 NO CONTRACTUAL  RELATIONSHIP  BETWEEN SUBSERVICERS AND THE
TRUSTEE.

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

         Section 3.06  ASSUMPTION OR TERMINATION OF  SUBSERVICING  AGREEMENTS BY
TRUSTEE.

         In the event the Servicer at any time shall for any reason no longer be
the Servicer (including by reason of the occurrence of a Event of Default),  the
Trustee or its designee shall thereupon assume all of the rights and obligations
of the Servicer  under each  Subservicing  Agreement  that the Servicer may have
entered into,  with copies thereof  provided to the Trustee prior to the Trustee
assuming such rights and obligations, unless the Trustee elects to terminate any
Subservicing Agreement in accordance with its terms as provided in Section 3.03.

         Upon such  assumption,  the  Trustee,  its  designee  or the  successor
servicer  shall be deemed,  subject to Section  3.03, to have assumed all of the
Servicer's interest therein and to have replaced the Servicer as a party to each
Subservicing  Agreement to the same extent as if each Subservicing Agreement had
been  assigned to the assuming  party,  except that (i) the  Servicer  shall not
thereby be relieved  of any  liability  or  obligations  under any  Subservicing
Agreement  that arose  before it ceased to be the  Servicer and (ii) none of the
Depositor, the


                                       54
<PAGE>

Trustee,  their  designees  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 Trustee, deliver
to the assuming  party all documents and records  relating to each  Subservicing
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  Subservicing
Agreements to the assuming party.

         Section   3.07   COLLECTION   OF  CERTAIN   MORTGAGE   LOAN   PAYMENTS;
ESTABLISHMENT OF CERTAIN ACCOUNTS.

         (a) 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 (i) waive any late payment  charge or, if  applicable,  any penalty
interest,  or (ii)  extend  the due dates for the  Scheduled  Payments  due on a
Mortgage  Note for a period  of not  greater  than 180 days;  PROVIDED  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  4.01 and in  accordance  with the  amortization
schedule of such  Mortgage Loan without  modification  thereof by reason of such
arrangements,  subject to Section  4.01(d)  pursuant to which the Servicer shall
not be required to make any such advances that are  Nonrecoverable P&I Advances.
Notwithstanding the foregoing,  the Servicer may not waive, in whole or in part,
a Prepayment Charge, except under the following  circumstances:  (i) such waiver
relates to a default  or a  reasonably  foreseeable  default  and would,  in the
reasonable judgment of the Servicer,  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  mortgage  loans similar to
the Mortgage Loans  (including  any waiver of a Prepayment  Charge in connection
with a  refinancing  of a  Mortgage  Loan  that is  related  to a  default  or a
reasonably  foreseeable  default),  and in no event  will the  Servicer  waive a
Prepayment  Charge in connection  with a refinancing  of a Mortgage Loan that is
not  related  to a  default  or a  reasonably  foreseeable  default,  (ii)  such
Prepayment  Charge is not permitted to be collected by  applicable  law or (iii)
the Servicer has not been  provided with  documentation  sufficient to establish
the  existence  of such  Prepayment  Charge  at the  time of such  waiver.  If a
Prepayment Charge is waived other than as permitted by the prior sentence,  then
the 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.

         (b) (i) (i) The Trustee shall establish and maintain the Excess Reserve
      Fund Account, on behalf of the Class X Certificateholders, to secure their
      limited


                                       55
<PAGE>


      recourse  obligation  to pay to the Floating Rate Certificateholders Basis
      Risk CarryForward Amounts.

         (ii) On each Distribution Date, the Trustee shall deposit the amount of
      any Basis Risk Payment and any  Interest  Rate Cap Payment made solely for
      the  benefit  of the  Class A  Certificateholders  for such  date into the
      Excess Reserve Fund Account.

         (c) (i) On  each  Distribution  Date  on  which  there  exists  a Basis
      Risk CarryForward  Amount on any Class of Certificates,  the Trustee shall
      (1)  withdraw  from the  Distribution  Account  and  deposit in the Excess
      Reserve Fund Account, as set forth in Section 4.02(a)(iii)(f),  the lesser
      of (a) the sum of (x) the Class X Distributable  Amount (without regard to
      the  reduction  in the  definition  thereof with respect to the Basis Risk
      CarryForward  Amount)  (to the extent  remaining  after the  distributions
      specified in Sections  4.02(a)(iii)(a)-(e))  and (y) the Interest Rate Cap
      Payment, if any, with respect to such Distribution Date, and (b) the Basis
      Risk  CarryForward  Amount and (2) withdraw  from the Excess  Reserve Fund
      Account amounts  necessary to pay to such Class or Classes of Certificates
      the Basis Risk  CarryForward  Amount.  Such payments shall be allocated to
      those  Classes  on a PRO RATA  basis  based  upon the amount of Basis Risk
      CarryForward  Amount  owed to each  such  Class  and  shall be paid in the
      priority set forth in Section 4.02(a)(iii)(g) hereof.

         (ii) The Trustee shall  account for the Excess  Reserve Fund Account as
      an  outside  reserve  fund  within  the  meaning  of  Treasury  regulation
      1.860G-2(h)  and not as an asset of any  REMIC  created  pursuant  to this
      Agreement.  The beneficial owner of the Excess Reserve Fund Account is the
      Class  X  Certificateholder.   For  all  federal  tax  purposes,   amounts
      transferred  by the Upper Tier REMIC to the Excess  Reserve  Fund  Account
      shall  be  treated  as  distributions  by  the  Trustee  to  the  Class  X
      Certificateholder.

         (iii) Any Basis Risk  CarryForward  Amounts  paid by the Trustee to the
      Floating Rate Certificateholders  shall be accounted for by the Trustee as
      amounts paid first to the Holders of the Class X  Certificate  and then to
      the  respective  Class  or  Classes  of  Floating  Rate  Certificates.  In
      addition,    the   Trustee   shall   account   for   the   Floating   Rate
      Certificateholders'  rights to receive payments of Basis Risk CarryForward
      Amounts as rights in a limited recourse interest rate cap contract written
      by  the  Class  X  Certificateholders   in  favor  of  the  Floating  Rate
      Certificateholders.

         (iv)  Notwithstanding  any provision  contained in this Agreement,  the
      Trustee shall not be required to make any payments from the Excess Reserve
      Fund Account except as expressly set forth in this Section 3.07(c).

         (d) The Trustee shall establish and maintain the  Distribution  Account
on behalf of the  Certificateholders.  The Trustee shall, promptly upon receipt,
deposit in the Distribution Account and retain therein the following:

         (i) the  aggregate  amount  remitted  by the  Servicer  to the  Trustee
      pursuant to Section 3.11;

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<PAGE>


         (ii) any amount  deposited by the Servicer  pursuant to Section 3.10 in
      connection with any losses on Permitted Investments; and

         (iii) any other amounts  deposited  hereunder  which are required to be
      deposited in the Distribution Account.

         In the event that the  Servicer  shall remit any amount not required to
be remitted,  it may at any time direct the Trustee in writing to withdraw  such
amount from the  Distribution  Account,  any  provision  herein to the  contrary
notwithstanding.  Such direction may be accomplished by delivering notice to the
Trustee  which  describes  the amounts  deposited  in error in the  Distribution
Account.  All funds deposited in the  Distribution  Account shall be held by the
Trustee in trust for the  Certificateholders  until disbursed in accordance with
this  Agreement or withdrawn in accordance  with Section 4.02. In no event shall
the Trustee incur liability for withdrawals from the Distribution Account at the
direction of the Servicer.

         (e) The Trustee shall establish and maintain the  Capitalized  Interest
Account, on behalf of the  Certificateholders.  On the Closing Date, the Trustee
shall deposit $604,785 to the Capitalized  Interest Account from the proceeds of
the sale of the Offered Certificates.  Withdrawals from the Capitalized Interest
Account shall be made in accordance  with Sections  4.02(c) and (d) hereof.  The
Trustee shall account for the Capitalized Interest Account as an outside reserve
fund within the meaning of Treasury  Regulation  1.860G-2(h) and not as an asset
of any REMIC created  pursuant to this  Agreement.  The beneficial  owner of the
Capitalized Interest Account shall be the Unaffiliated Seller.

         (f) The Trustee shall establish and maintain the  Pre-Funding  Account,
on behalf of the  Certificateholders.  On the Closing  Date,  the Trustee  shall
deposit  the  Initial  Pre-Funded  Amount to the  Pre-Funding  Account  from the
proceeds  of  the  sale  of  the  Offered  Certificates.  Withdrawals  from  the
Pre-Funding  Account shall be made in accordance  with Sections  4.02(e) and (f)
hereof.

         (g) The  Trustee  may invest the funds in the  Accounts  if directed in
writing  by the  Servicer,  with  respect  to the  Collection  Account  and  the
Distribution  Account  or by  the  Unaffiliated  Seller,  with  respect  to  the
Pre-Funding  Account  and the  Capitalized  Interest  Account in each  case,  in
Permitted  Investments,  which  directions  shall be in accordance  with Section
3.12.  Amounts  on  deposit  in the Excess  Reserve  Fund  Account  shall not be
invested.

         (h) The Servicer shall give prior written  notice to the Trustee,  each
Rating  Agency and the  Depositor of any proposed  change of the location of the
Collection Account.

         Section 3.08 SUBSERVICING ACCOUNTS.

         In those  cases  where a  Subservicer  is  servicing  a  Mortgage  Loan
pursuant  to a  Subservicing  Agreement,  the  Subservicer  will be  required to
establish and maintain one or more  accounts  (collectively,  the  "SUBSERVICING
ACCOUNT").  The  Subservicing  Account  shall be an  Eligible  Account and shall
otherwise be acceptable to the Servicer.  The  Subservicer  shall deposit in the
clearing  account  (which  account  must be an  Eligible  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


                                       57
<PAGE>

     after the  Subservicer's  receipt  thereof,  all proceeds of Mortgage Loans
     received by the Subservicer  less its servicing  compensation to the extent
     permitted by the Subservicing Agreement,  and shall thereafter deposit such
     amounts in the  Subservicing  Account,  in no event more than two  Business
     Days  after the  deposit  of such  funds  into the  clearing  account.  The
     Subservicer  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 Subservicing  Account.  For purposes of this Agreement,
     the  Servicer  shall be deemed to have  received  payments on the  Mortgage
     Loans when the Subservicer receives such payments.

         Section 3.09 COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS; ESCROW
ACCOUNTS.

         (a) The Servicer  shall ensure that each of the Mortgage Loans shall be
covered  by  a  paid-in-full,  life-of-the-loan  tax  service  contract  with  a
nationally  recognized provider acceptable to the Servicer (each, a "TAX SERVICE
CONTRACT").  Each Tax Service Contract shall be assigned to the Trustee,  or its
designee, at the Servicer's expense in the event that the Servicer is terminated
as Servicer of the related Mortgage Loan.

         (b) To the extent that the services described in this paragraph (b) are
not  otherwise  provided  pursuant to the Tax  Service  Contracts  described  in
paragraph (a) hereof,  the Servicer  undertakes to perform such  functions.  The
Servicer  shall  establish  and  maintain,   or  cause  to  be  established  and
maintained,  one or more  accounts  (the  "ESCROW  ACCOUNTS"),  which  shall  be
Eligible  Accounts.  The Servicer  shall deposit in the clearing  account (which
account must be an Eligible  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,  all collections from the Mortgagors (or related
advances  from  Subservicers)  for the  payment  of taxes,  assessments,  hazard
insurance  premiums  and  comparable  items for the  account  of the  Mortgagors
("ESCROW  PAYMENTS")  collected  on  account  of the  Mortgage  Loans  and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of such funds in the clearing  account,
for the purpose of effecting the payment of any such items as required under the
terms of this  Agreement.  Withdrawals  of amounts from an Escrow Account may be
made  only  to (i)  effect  payment  of  taxes,  assessments,  hazard  insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer to
the  extent  provided  in the  related  Subservicing  Agreement)  out of related
collections  for any advances  made  pursuant to Section  3.01 (with  respect to
taxes and  assessments)  and Section  3.13 (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  Escrow  Account;  (v)  clear  and  terminate  the  Escrow  Account  at  the
termination of the Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement or (vi) recover amounts  deposited in error.
As part of its servicing duties,  the Servicer or Subservicers  shall pay to the
Mortgagors  interest on funds in Escrow Accounts,  to the extent required by law
and,  to the extent  that  interest  earned on funds in the Escrow  Accounts  is
insufficient,  to pay such  interest  from its or their own funds,  without  any
reimbursement  therefor.  To the extent  that a Mortgage  does not  provide  for
Escrow Payments, the Servicer shall determine whether any such payments are made
by the Mortgagor in a manner and at a time that avoids the loss of the Mortgaged
Property  due to


                                       58
<PAGE>


a tax  sale  or  the  foreclosure  of a tax  lien.  The  Servicer  assumes  full
responsibility  for the  payment  of all such bills  within  such time and shall
effect  payments  of all such bills  irrespective  of the  Mortgagor's  faithful
performance  in the  payment of same or the making of the  Escrow  Payments  and
shall  make  advances  from its own funds to  effect  such  payments;  PROVIDED,
HOWEVER, that such advances are deemed to be Servicing Advances.

         Section 3.10 COLLECTION ACCOUNT.

         (a)  On  behalf  of the  Trustee,  the  Servicer  shall  establish  and
maintain,  or cause  to be  established  and  maintained,  one or more  Eligible
Accounts (such account or accounts, the "COLLECTION ACCOUNT"), held in trust for
the benefit of the Trustee. On behalf of the Trustee, the Servicer shall deposit
or cause to be  deposited  in the  clearing  account  (which  account must be an
Eligible  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  deposit  of such funds into the
clearing account, as and when received or as otherwise required  hereunder,  the
following  payments and  collections  received or made by it  subsequent  to the
related  Cut-off  Date  (other than in respect of  principal  or interest on the
related Mortgage Loans due on or before the related Cut-off Date, and except for
$159,227.93 in interest, which is being retained by the Unaffiliated Seller), or
payments  (other than Principal  Prepayments)  received by it on or prior to the
related 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;

         (iii) all Insurance  Proceeds to the extent such Insurance Proceeds are
      not to be applied to the restoration of the related Mortgaged  Property or
      released  to  the  related   Mortgagor  in  accordance  with  the  express
      requirements of law or in accordance with prudent and customary  servicing
      practices and Liquidation Proceeds;

         (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  3.13(a) in respect of any blanket policy
      deductibles;

         (vi) all  proceeds of any  Mortgage  Loan  repurchased  or purchased in
      accordance with this Agreement; and

         (vii) all Prepayment Charges collected by the Servicer.

         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,


                                       59
<PAGE>


payments in the nature of late payment  charges,  NSF fees,  reconveyance  fees,
assumption  fees and other similar fees and charges need not be deposited by the
Servicer in the Collection  Account and shall,  upon  collection,  belong to the
Servicer as additional  compensation for its servicing activities.  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)  Funds in the  Collection  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 and the  Depositor of the location of
the Collection Account maintained by it when established and prior to any change
thereof.

         Section 3.11 WITHDRAWALS FROM THE COLLECTION 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 4.01:

         (i) On or prior to the  Remittance  Date,  to remit to the  Trustee the
      Interest Remittance Amount and the Principal  Remittance Amount in respect
      of the related  Distribution  Date together with all amounts  representing
      Prepayment  Charges from the Mortgage  Loans  received  during the related
      Prepayment Period;

         (ii) 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  on Mortgage  Loans with  respect to
      which such P&I Advances  were made in  accordance  with the  provisions of
      Section 4.01;

         (iii) to pay the Servicer or any Subservicer  (a) any unpaid  Servicing
      Fees or (b) any  unreimbursed  Servicing  Advances  with  respect  to each
      Mortgage Loan, but only to the extent of any Late Collections, Liquidation
      Proceeds,  Insurance  Proceeds or other amounts as may be collected by the
      Servicer  from a  Mortgagor,  or otherwise  received  with respect to such
      Mortgage Loan (or the related REO Property);

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

         (v) to pay to the  Unaffiliated  Seller or the related  Originator,  as
      applicable,  with respect to each Mortgage Loan that has  previously  been
      purchased or replaced by the Unaffiliated  Seller or such  Originator,  as
      applicable,  pursuant  to this  Agreement,  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 or Servicing Advance
      previously  made which the Servicer has determined to be a  Nonrecoverable
      P&I Advance or  Nonrecoverable  Servicing  Advance in accordance  with the
      provisions of Section 4.01;

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<PAGE>


         (vii) to pay, or to reimburse  the Servicer for advances in respect of,
      expenses incurred in connection with any Mortgage Loan pursuant to Section
      3.15;

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

         (ix) to reimburse the Servicer, the Unaffiliated Seller, the Depositor,
      the Class A  Certificate  Insurer or the Trustee,  as the case may be, for
      expenses  reasonably  incurred  in respect of the breach or defect  giving
      rise to the purchase  obligation under Section 2.03 of this Agreement that
      were included in the Repurchase Price of the Mortgage Loan,  including any
      expenses arising out of the enforcement of the purchase  obligation to the
      extent not otherwise paid pursuant to the terms hereof;

         (x) to withdraw  any amounts  deposited  in the  Collection  Account in
      error; and

         (xi) to clear and terminate the Collection  Account upon termination of
      this Agreement.

         (b) 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  (a)(ii),  (iii), (v), (vi),  (vii),  (viii) and (ix)
above.  The Servicer shall provide written  notification  to the Trustee,  on or
prior to the next succeeding  Remittance  Date, upon making any withdrawals from
the Collection Account pursuant to subclause (a)(vii) above.

         Section 3.12 INVESTMENT OF FUNDS IN THE ACCOUNT.

         (a) The Servicer may direct the  investment of funds in the  Collection
Account and may direct the Trustee to invest funds in the Distribution  Account,
and the  Unaffiliated  Seller may direct the  Trustee to invest the funds in the
Pre-Funding Account and the Capitalized Interest Account (each of such Accounts,
for purposes of this Section  3.12,  an  "INVESTMENT  ACCOUNT"),  in one or more
Permitted  Investments  bearing  interest or sold at a discount,  and  maturing,
unless  payable on demand 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.  All such investment  directions shall be in writing
and if the Trustee  does not receive  such written  instructions  no  investment
shall be made. 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  Trustee.  The  Trustee  shall  be  entitled  to sole
possession  (except  with respect to  investment  direction of funds held in the
related  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 Trustee or its agent,  together
with any document of transfer  necessary to transfer title to such investment to
the Trustee. In the event amounts on deposit in an Investment Account are at any
time invested in a Permitted Investment payable on demand, the Trustee may:

                         (x)  consistent  with any notice  required  to be given
                              thereunder, demand that payment thereon be made on
                              the last day such Permitted Investment may


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<PAGE>

                              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  that
                              such Permitted  Investment  would not constitute a
                              Permitted   Investment   in   respect   of   funds
                              thereafter on deposit in the Investment Account.

                         (b)  (i)  All  income  and  gain   realized   from  the
                  investment of funds  deposited in the  Collection  Account and
                  the Distribution 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 the manner set forth in Section 3.11 in
                  the case of  income  in the  Collection  Account,  and on each
                  Distribution   Date,  the  Trustee  shall  withdraw  from  the
                  Distribution Account, and remit to the Servicer all amounts in
                  respect of such income and gain in the  Distribution  Account.
                  Whether   in  regard  to  the   Collection   Account   or  the
                  Distribution  Account,  the  Servicer  shall  deposit  in  the
                  Collection Account or the Distribution 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.

                         (ii) All income and gain realized  from the  investment
                  of  funds  deposited  in  the  Pre-Funding   Account  and  the
                  Capitalized  Interest  Account  held  by or on  behalf  of the
                  Unaffiliated  Seller  shall  be  retained  in such  Investment
                  Account,  subject to  withdrawal  as provided in Section 4.02.
                  Whether   in  regard  to  the   Pre-Funding   Account  or  the
                  Capitalized  Interest Account,  the Unaffiliated  Seller shall
                  deposit in the Pre-Funding Account or the Capitalized Interest
                  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) 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 shall take such action as may be appropriate
to  enforce  such  payment  or   performance,   including  the  institution  and
prosecution of appropriate proceedings.  The Trustee shall not be liable for the
amount of any loss  incurred in respect of any  investment or lack of investment
of funds held in any Investment  Account or the Distribution  Account if made in
accordance with this Section 3.12.

                  Section 3.13  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 least of (i) the current
principal  balance of such  Mortgage  Loan,  (ii) 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 and (iii) the maximum  insurable  value of
the improvements which are a part of such Mortgaged Property, 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

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<PAGE>

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,  plus accrued
interest at the Mortgage Rate and related Servicing Advances.  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.  Any cost  incurred  by the  Servicer in
maintaining  any such  insurance  shall  not,  for the  purpose  of  calculating
distributions to the Trustee,  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 (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  3.13,  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 3.13,
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  claims under any such blanket  policy in a timely fashion in accordance
with the terms of such policy.

                  (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

                                       63
<PAGE>

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 provide the Trustee with copies of any such  insurance  policies
and fidelity  bond.  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.  The Servicer  shall
also cause each  Subservicer to maintain a policy of insurance  covering  errors
and omissions and a fidelity bond which would meet such requirements.

                  Section 3.14  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, has a credit risk rating at
least  equal  to  that  of  the  original  Mortgagor.  In  connection  with  any
assumption,   modification  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,  or a new policy meeting the  requirements  of this Section is obtained.
Any fee collected by the Servicer in respect of an assumption or substitution of
liability  agreement  will 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 Scheduled Payment) may be amended or modified, except as otherwise
required  pursuant to the terms  thereof.  The Servicer shall notify the Trustee
that  any such  substitution,  modification  or  assumption  agreement  has been
completed  by  forwarding   to  the  Trustee  the  executed   original  of  such
substitution  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.

                                       64
<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 3.14, 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 3.15 REALIZATION UPON DEFAULTED MORTGAGE LOANS.

                  The  Servicer  shall  use its best  efforts,  consistent  with
customary servicing practices as described in Section 3.01, to foreclose upon or
otherwise  comparably convert (which may include an acquisition of REO Property)
the ownership of properties securing such of the Mortgage Loans 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,  and which are not
released  from this  Agreement  pursuant  to any  other  provision  hereof.  The
Servicer  shall use reasonable  efforts to realize upon such defaulted  Mortgage
Loans in such manner as will  maximize the receipt of principal  and interest by
the Trustee,  taking into account, among other things, the timing of foreclosure
proceedings.  The  foregoing is subject to the  provisions  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 sole  discretion  (i) that such
restoration  will  increase  the net  proceeds  of  liquidation  of the  related
Mortgage Loan to the Trustee,  after  reimbursement to itself for such expenses,
and  (ii)  that  such  expenses  will be  recoverable  by the  Servicer  through
Insurance Proceeds or Liquidation  Proceeds from the related Mortgaged Property,
as contemplated in Section 3.11. The Servicer shall be responsible for all other
costs and expenses  incurred by it in any such proceedings;  PROVIDED,  HOWEVER,
that it shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 3.11.

                  The proceeds of any liquidation or REO Disposition, as well as
any  recovery  resulting  from a partial  collection  of  Insurance  Proceeds or
Liquidation Proceeds or any income from an REO Property,  will be applied in the
following order of priority: first, to reimburse the Servicer or any Subservicer
for any related  unreimbursed  Servicing  Advances,  pursuant to Section 3.11 or
3.17;  second,  to  reimburse  the  Servicer  for any related  unreimbursed  P&I
Advances, pursuant to Section 3.11; third, to accrued and unpaid interest on the
Mortgage Loan or REO Imputed Interest,  at the Mortgage Rate, to the date of the
liquidation or REO Disposition,  or to the Due Date prior to the Remittance Date
on  which  such  amounts  are to be  distributed  if not  in  connection  with a
liquidation or REO  Disposition;  and fourth,  as a recovery of principal of the
Mortgage  Loan.  If the amount of the  recovery so allocated to interest is less
than a full recovery thereof,  that amount will be allocated as follows:  first,
to unpaid  Servicing Fees; and second,  as interest at the Mortgage Rate (net of
the  Servicing  Fee Rate).  The portion of the  recovery so  allocated to unpaid
Servicing Fees shall be reimbursed to the Servicer or any  Subservicer  pursuant
to Section  3.11 or 3.17.  The portions of the recovery so allocated to interest
at the  Mortgage  Rate (net of the  Servicing  Fee Rate) and to principal of the
Mortgage Loan shall be applied as follows:  first,  to reimburse the Servicer or
any Subservicer for any related  unreimbursed  Servicing  Advances in accordance
with Section 3.11 or 3.17,  and second,

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<PAGE>

to the Trustee in accordance with the provisions of Section 4.02, subject to the
last paragraph of Section 3.17 with respect to certain excess recoveries from an
REO Disposition.

                  Notwithstanding  anything to the contrary contained herein, in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in
the event the Servicer has received actual notice of, or has actual knowledge of
the  presence  of,  hazardous  or toxic  substances  or  wastes  on the  related
Mortgaged  Property,  or if the Trustee otherwise  requests,  the Servicer shall
cause an  environmental  inspection or review of such  Mortgaged  Property to be
conducted by a qualified  inspector.  Upon  completion  of the  inspection,  the
Servicer  shall  promptly  provide  the  Trustee  with a  written  report of the
environmental inspection.

                  After  reviewing  the  environmental  inspection  report,  the
Servicer shall determine how to proceed with respect to the Mortgaged  Property.
In the  event  (a)  the  environmental  inspection  report  indicates  that  the
Mortgaged  Property is contaminated  by hazardous or toxic  substances or wastes
and (b) the Servicer  determines to proceed with  foreclosure or acceptance of a
deed in lieu of foreclosure, the Servicer shall be reimbursed for all reasonable
costs  associated  with  such  foreclosure  or  acceptance  of a deed in lieu of
foreclosure and any related  environmental  clean-up costs, as applicable,  from
the  related  Liquidation   Proceeds,   or  if  the  Liquidation   Proceeds  are
insufficient to fully reimburse the Servicer,  the Servicer shall be entitled to
be reimbursed  from amounts in the Collection  Account  pursuant to Section 3.11
hereof. In the event the Servicer  determines not to proceed with foreclosure or
acceptance of a deed in lieu of  foreclosure,  the Servicer  shall be reimbursed
from general  collections  for all  Servicing  Advances made with respect to the
related Mortgaged  Property from the Collection Account pursuant to Section 3.11
hereof.

                  Section 3.16 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,  within five (5)
Business  Days of the  payment in full,  notify the  Trustee by a  certification
(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 Custodial File. Upon receipt of such certification and request,  the Trustee
shall promptly  release the related  Custodial File to the Servicer  within five
(5) Business  Days. No expenses  incurred in connection  with any  instrument of
satisfaction  or deed of  reconveyance  shall be  chargeable  to the  Collection
Account.

                  (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 Trustee shall,  upon
request of the Servicer  and delivery to the Trustee,  of a Request for Release,
release the related  Custodial 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  and the  Servicer  shall  retain the
Mortgage File in trust for the benefit of the Trustee.  Such Request for Release
shall  obligate  the  Servicer  to  return  each and every  document  previously
requested  from the Custodial  File to the Trustee when the need therefor by the
Servicer no longer exists,  unless the Mortgage Loan has been liquidated and the
Liquidation

                                       66
<PAGE>

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 to the Trustee a certificate of a Servicing Officer  certifying as
to 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,  a copy of the Request for Release of  Documents  shall be released by
the Trustee to the Servicer or its designee.

                  Upon written certification of a Servicing Officer, the Trustee
shall  execute and deliver to the  Servicer  any court  pleadings,  requests for
trustee's sale or other  documents  reasonably  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,  or shall  exercise  and  deliver to the  Servicer  a power of  attorney
sufficient  to authorize  the Servicer to execute such  documents on its behalf.
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  3.17  TITLE,  CONSERVATION  AND  DISPOSITION  OF  REO
PROPERTY.

                  (a) This Section shall apply only to REO  Properties  acquired
for the account of the Trustee and shall not apply to any REO Property  relating
to a Mortgage Loan which was purchased or repurchased  from the Trustee pursuant
to any  provision  hereof.  In the event that title to any such REO  Property is
acquired, the deed or certificate of sale shall be issued to the Servicer, or to
its nominee, on behalf of the Trustee.

                  (b) The Servicer shall manage,  conserve,  protect and operate
each  REO  Property  for the  Trustee  solely  for  the  purpose  of its  prompt
disposition  and sale. The Servicer,  either itself or through an agent selected
by the Servicer, shall manage, conserve, protect and operate the REO Property in
the  same  manner  that it  manages,  conserves,  protects  and  operates  other
foreclosed  property  for its own  account,  and in the same manner that similar
property in the same locality as the REO Property is managed. The Servicer shall
attempt  to sell the same (and may  temporarily  rent the same for a period  not
greater  than one year,  except as otherwise  provided  below) on such terms and
conditions as the Servicer deems to be in the best interest of the Trustee.  The
Servicer shall notify the Trustee from time to time as to the status of each REO
Property.

                  (c) The Servicer  shall use its best efforts to dispose of the
REO  Property as soon as possible  (subject to the  Trustee's  right to veto any
proposed  sale of REO  Property)  and

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shall sell such REO  Property in any event  within one year after title has been
taken to such  REO  Property,  unless  the  Servicer  determines,  and  gives an
appropriate  notice  to the  Trustee  to such  effect,  that a longer  period is
necessary for the orderly  liquidation of such REO Property.  If a period longer
than one year is permitted under the foregoing sentence and is necessary to sell
any REO  Property,  the Servicer  shall report  monthly to the Trustee as to the
progress  being  made in selling  such REO  Property.  Notwithstanding  its veto
rights, the Trustee has no obligation with respect to REO dispositions.

                  (d) [Reserved].

                  (e) The Servicer shall  segregate and hold all funds collected
and received in connection  with the operation of any REO Property  separate and
apart from its own funds and general  assets and shall deposit such funds in the
Collection Account.

                  (f) The Servicer  shall  deposit net of  reimbursement  to the
Servicer for any related  outstanding  Servicing  Advances and unpaid  Servicing
Fees provided in Section 3.11 hereof, or cause to be deposited, on a daily basis
in the Collection  Account all revenues received with respect to the related REO
Property and shall withdraw  therefrom funds necessary for the proper operation,
management and maintenance of the REO Property.

                  (g) The Servicer,  upon an REO Disposition,  shall be entitled
to reimbursement for any related unreimbursed  Servicing Advances as well as any
unpaid  Servicing  Fees  from  proceeds  received  in  connection  with  the REO
Disposition, as further provided in Section 3.11.

                  (h) Any net  proceeds  which are in  excess of the  applicable
Stated  Principal  Balance plus all unpaid REO Imputed  Interest thereon through
the date of the REO Disposition  shall be retained by the Servicer as additional
servicing compensation.

                  (i) The  Servicer  shall use its  reasonable  best  efforts to
sell, or cause the  Subservicer  to sell,  any REO Property as soon as possible,
but in no event later than the  conclusion of the third  calendar year beginning
after the year of its  acquisition by the REMIC unless (i) the Servicer  applies
for an extension of such period from the Internal  Revenue  Service  pursuant to
the  REMIC  Provisions  and Code  Section  856(e)(3),  in which  event  such REO
Property  shall be sold  within the  applicable  extension  period,  or (ii) the
Servicer  obtains  for the  Trustee  an  Opinion of  Counsel,  addressed  to the
Depositor,  the Trustee and the Servicer,  to the effect that the holding by the
REMIC of such REO  Property  subsequent  to such  period  will not result in the
imposition of taxes on "prohibited  transactions"  as defined in Section 860F of
the Code or cause  the  REMIC to fail to  qualify  as a REMIC  under  the  REMIC
Provisions or  comparable  provisions  of relevant  state laws at any time.  The
Servicer shall manage,  conserve,  protect and operate each REO Property for the
Trustee  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) or result in the receipt by
the REMIC 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 Section  860G(a)(1) of the Code.  Pursuant to
its efforts to sell such REO  Property,  the  Servicer  shall  either  itself or
through an agent selected by the Servicer protect and conserve such REO

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Property in the same manner and to such extent as is  customary  in the locality
where such REO  Property is located and may,  incident to its  conservation  and
protection of the interests of the Trustee on behalf of the  Certificateholders,
rent the same,  or any part  thereof,  as the  Servicer  deems to be in the best
interest of the Trustee on behalf of the Certificateholders for the period prior
to the sale of such REO Property;  PROVIDED,  HOWEVER, that any rent received or
accrued  with  respect  to such REO  Property  qualifies  as  "rents  from  real
property" as defined in Section 856(d) of the Code.

                  Section 3.18 NOTIFICATION OF ADJUSTMENTS.

                  With  respect  to each  Adjustable  Rate  Mortgage  Loan,  the
Servicer shall adjust the Mortgage Rate on the related  Interest Rate Adjustment
Date and shall  adjust the  Scheduled  Payment on the related  mortgage  payment
adjustment  date,  if  applicable,   in  compliance  with  the  requirements  of
applicable  law and the related  Mortgage and Mortgage  Note. The Servicer shall
execute and deliver any and all necessary  notices required under applicable law
and the terms of the related  Mortgage Note and Mortgage  regarding the Mortgage
Rate and  Scheduled  Payment  adjustments.  The Servicer  shall  promptly,  upon
written  request  therefor,  deliver to the Trustee such  notifications  and any
additional  applicable  data regarding such  adjustments and the methods used to
calculate and implement such adjustments.  Upon the discovery by the Servicer or
the receipt of notice from the Trustee  that the Servicer has failed to adjust a
Mortgage Rate or Scheduled  Payment in accordance  with the terms of the related
Mortgage Note, the Servicer shall deposit in the Collection Account from its own
funds the amount of any interest loss caused as such interest loss occurs.

                  Section 3.19 ACCESS TO CERTAIN  DOCUMENTATION  AND INFORMATION
REGARDING THE MORTGAGE LOANS.

                  The  Servicer  shall  provide,  or cause  the  Subservicer  to
provide,  to the Depositor,  the  Unaffiliated  Seller,  the Class A Certificate
Insurer,  the Trustee,  the OTS or the FDIC and the  examiners  and  supervisory
agents thereof access to the  documentation  regarding the Mortgage Loans in its
possession.  Such  access  shall be  afforded  without  charge,  but  only  upon
reasonable  and prior written  request and during normal  business  hours at the
offices  of the  Servicer  or any  Subservicer.  Nothing in this  Section  shall
derogate  from the  obligation of any such party to observe any  applicable  law
prohibiting  disclosure of information  regarding the Mortgagors and the failure
of any such party to provide  access as provided in this  Section as a result of
such obligation shall not constitute a breach of this Section.

                  Section 3.20 DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF THE
SERVICER TO BE HELD FOR THE TRUSTEE.

                  The Servicer  shall account fully to the Trustee for any funds
received by the  Servicer or which  otherwise  are  collected by the Servicer as
Liquidation  Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All
Mortgage  Files and funds  collected  or held by, or under the  control  of, the
Servicer  in respect of any  Mortgage  Loans,  whether  from the  collection  of
principal and interest payments or from Liquidation Proceeds,  including but not
limited to, any funds on deposit in the Collection Account, shall be held by the
Servicer  for and on behalf of the  Trustee and shall be and remain the sole and
exclusive property of the Trustee,  subject to the

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applicable provisions of this Agreement.  The Servicer also agrees that it shall
not create,  incur or subject any Mortgage  File or any funds that are deposited
in any Account,  or any funds that otherwise are or may become due or payable to
the  Trustee  for the  benefit of the  Certificateholders,  to any claim,  lien,
security interest,  judgment, levy, writ of attachment or other encumbrance,  or
assert by legal  action or  otherwise  any claim or right of setoff  against any
Mortgage File or any funds collected on, or in connection with, a Mortgage Loan,
except,  however,  that the  Servicer  shall be  entitled to set off against and
deduct from any such funds any amounts  that are properly due and payable to the
Servicer under this Agreement.

                  Section 3.21 SERVICING COMPENSATION.

                  (a) As compensation for its activities hereunder, the Servicer
shall,  with respect to each Mortgage  Loan, be entitled to retain from deposits
to the Collection Account and from Liquidation Proceeds,  Insurance Proceeds and
REO Proceeds  related to such Mortgage  Loan,  the Servicing Fee with respect to
each  Mortgage  Loan  (less  any  portion  of  such  amounts   retained  by  any
Subservicer).  In  addition,  the Servicer  shall be entitled to recover  unpaid
Servicing  Fees out of  related  late  collections  to the extent  permitted  in
Section 3.11.  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  Subservicer
pursuant to a Subservicing Agreement entered into under Section 3.02.

                  (b)  Additional   servicing   compensation   in  the  form  of
assumption or modification  fees, late payment charges,  NSF fees,  reconveyance
fees and other similar fees and charges (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 the  Distribution
Account, as additional servicing  compensation,  interest or other income earned
on deposits therein.

                  (c)  The  Servicer  shall  be  required  to pay  all  expenses
incurred by it in connection with its servicing  activities hereunder (including
payment of premiums  for any  blanket  policy  insuring  against  hazard  losses
pursuant to Section  3.13,  servicing  compensation  of the  Subservicer  to the
extent not retained by it and the fees and expenses of  independent  accountants
and any  agents  appointed  by the  Servicer),  and  shall  not be  entitled  to
reimbursement therefor except as specifically provided in Section 3.11.

                  Section 3.22 ANNUAL STATEMENT AS TO COMPLIANCE.

                  The  Servicer  will  deliver or cause to be  delivered  to the
Depositor, the Rating Agencies, the Unaffiliated Seller, the Class A Certificate
Insurer, and the Trustee on or before March 1 of each calendar year,  commencing
in 2003, an Officers'  Certificate  stating, as to each signatory thereof,  that
(i) a review of the  activities of the Servicer  during the  preceding  calendar
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 officers and the
nature and status thereof.

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                  Section 3.23 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS'  SERVICING
STATEMENT; FINANCIAL STATEMENTS.

                  Not later than March 1st of each calendar  year  commencing in
2003, the Servicer, at its expense,  shall cause a nationally recognized firm of
independent  certified  public  accountants  to  furnish to the  Depositor,  the
Unaffiliated  Seller, the Class A Certificate  Insurer,  the Rating Agencies and
the Trustee 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
Subservicers,  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 Subservicers.

                  Section 3.24 TRUSTEE TO ACT AS SERVICER.

                  In the event that the Servicer  shall for any reason no longer
be the Servicer  hereunder  (including  by reason of an Event of  Default),  the
Trustee  or  its  successor  shall  thereupon  assume  all  of  the  rights  and
obligations  of the  Servicer  hereunder  arising  thereafter  (except  that the
Trustee  shall not be (i) liable for losses of the Servicer  pursuant to Section
3.10 or any  acts or  omissions  of the  predecessor  Servicer  hereunder,  (ii)
obligated to make Advances if it is prohibited  from doing so by applicable law,
(iii)  obligated to effectuate  repurchases or  substitutions  of Mortgage Loans
hereunder, including but not limited to repurchases or substitutions pursuant to
Section 2.03, (iv) responsible for expenses of the Servicer  pursuant to Section
2.03 or (v)  deemed  to have  made any  representations  and  warranties  of the
Servicer hereunder). Any such assumption shall be subject to Section 7.02.

                  Every  subservicing  agreement  entered  into by the  Servicer
shall contain a provision giving the successor  Servicer the option to terminate
such agreement in the event a successor Servicer is appointed.

                  If the Servicer shall for any reason no longer be the Servicer
(including  by  reason  of any  Event of  Default),  the  Trustee  (or any other
successor Servicer) may, at its option, succeed to any rights and obligations of
the  Servicer  under any  subservicing  agreement in  accordance  with the terms
thereof;  PROVIDED that the Trustee (or any other successor  Servicer) shall not
incur  any  liability  or have any  obligations  in its  capacity  as  successor
Servicer  under a  subservicing  agreement  arising  prior  to the  date of such
succession  unless it expressly  elects to succeed to the rights and obligations
of the Servicer  thereunder;  and the Servicer  shall not thereby be relieved of
any liability or obligations  under the subservicing  agreement arising prior to
the date of such succession.

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                  The Servicer  shall,  upon request of the Trustee,  but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to each  subservicing  agreement  (if any) and the Mortgage  Loans then
being serviced  thereunder and an accounting of amounts collected held by it and
otherwise use its best efforts to effect the orderly and  efficient  transfer of
the subservicing agreement to the assuming party.

                  Section 3.25 COMPENSATING INTEREST.

                  The  Servicer  shall remit to the  Trustee on each  Remittance
Date an amount  from its own  funds  equal to the  lesser of (a) the  Prepayment
Interest  Shortfall,  if any, for such  Remittance  Date,  and (b) the amount of
one-half of the Servicing Fee payable to the Servicer for such Remittance Date.

                  Section  3.26  CREDIT   REPORTING;   GRAMM-LEACH-BLILEY   ACT.

                  (a) The  Servicer  agrees to  accurately  and fully report its
borrower  credit files with  respect to the  Mortgage  Loans to all three credit
repositories in a timely manner.

                  (b)  The   Servicer   shall   comply   with  Title  V  of  the
Gramm-Leach-Bliley  Act of  1999  and  all  applicable  regulations  promulgated
thereunder,  relating to the Mortgage Loans and the related  borrowers and shall
provide all required notices thereunder.

                  Section 3.27 ADVANCE FACILITIES.

                  With the prior  written  consent  of the  Class A  Certificate
Insurer,  the Servicer is hereby  authorized  to enter into a financing or other
facility (an "ADVANCE FACILITY") under which (l) the Servicer sells,  assigns or
pledges to another  Person (an "ADVANCING  PERSON") the Servicer's  rights under
this Agreement to be reimbursed for any Advances and/or (2) an Advancing  Person
agrees to fund some or all P&I  Advances or  Servicing  Advances  required to be
made by the Servicer  pursuant to this Agreement;  PROVIDED,  HOWEVER,  that the
Class A Certificate Insurer hereby consents to JP Morgan Chase Bank, pursuant to
that certain 8/02 Fairbanks  Capital Corp. Senior Secured Credit Agreement dated
as of August 1, 2002 by and among Fairbanks,  as borrower,  JPMorgan Chase Bank,
as  administrative  agent,  collateral  agent and a lender and the other lenders
party thereto (the "JPMORGAN CREDIT AGREEMENT");  PROVIDED,  FURTHER,  that such
consent is  conditioned  upon  receipt by the Class A  Certificate  Insurer of a
letter from  JPMorgan  Chase Bank and the  Servicer  to the Class A  Certificate
Insurer  within eight  Business  Days of the Closing Date, in form and substance
satisfactory  to the Class A Certificate  Insurer,  and  thereafter  the Class A
Certificate  Insurer shall have seven  Business Days  following  receipt of such
letter  to  confirm  or  withdraw  such  consent  (collectively,   the  "CONSENT
PROCEDURES").  Except as provided in the preceding  sentence,  no consent of any
party is  required  before the  Servicer  may enter  into an  Advance  Facility.
Notwithstanding  the existence of any Advance  Facility under which an Advancing
Person agrees to fund P&I Advances and/or  Servicing  Advances on the Servicer's
behalf,  the Servicer shall remain obligated  pursuant to this Agreement to make
P&I  Advances  and  Servicing  Advances  pursuant  to and as  required  by  this
Agreement,  and  shall not be  relieved  of such  obligations  by virtue of such
Advance Facility.

                  Reimbursement amounts ("ADVANCE  REIMBURSEMENT AMOUNTS") shall
consist solely of amounts in respect of P&I Advances and/or  Servicing  Advances
made  with  respect  to

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the Mortgage Loans for which the Servicer would be permitted to reimburse itself
in accordance  with this  Agreement,  assuming the Servicer had made the related
P&I Advance(s) and/or Servicing Advance(s).

                  The  Servicer  shall  maintain  and  provide to any  successor
Servicer a detailed  accounting on a loan-by-loan  basis as to amounts  advanced
by,  pledged or  assigned  to,  and  reimbursed  to any  Advancing  Person.  The
successor Servicer shall be entitled to rely on any such information provided by
the predecessor Servicer, and the successor Servicer shall not be liable for any
errors in such information.

                  An Advancing Person who purchases or receives an assignment or
pledge  of the  rights  to be  reimbursed  for  P&I  Advances  and/or  Servicing
Advances,  and/or whose obligations  hereunder are limited to the funding of P&I
Advances  and/or  Servicing  Advances shall not be required to meet the criteria
for qualification of a subservicer set forth in this Agreement.

                  The  documentation  establishing  any Advance  Facility  shall
require  that Advance  Reimbursement  Amounts  distributed  with respect to each
Mortgage Loan be allocated to outstanding unreimbursed P&I Advances or Servicing
Advances  (as the case may be) made  with  respect  to that  Mortgage  Loan on a
"first-in,  first out" (FIFO) basis. Such  documentation  shall also require the
Servicer to provide to the related Advancing Person or its designee loan-by-loan
information  with respect to each Advance  Reimbursement  Amount  distributed to
such  Advancing  Person or to a  trustee  or  custodian  (an  "ADVANCE  FACILITY
TRUSTEE") on each  Distribution  Date, to enable the Advancing Person or Advance
Facility  Trustee  to make the FIFO  allocation  of each  Advance  Reimbursement
Amount with respect to each Mortgage Loan. The Servicer shall remain entitled to
be  reimbursed  pursuant to the  Advance  Facility  by the  Advancing  Person or
Advance Facility  Trustee for all P&I Advances and Servicing  Advances funded by
the Servicer to the extent the related rights to be reimbursed therefor have not
been sold, assigned or pledged to an Advancing Person.

                  Any  amendment to this Section 3.27 or to any other  provision
of this Agreement that may be necessary or appropriate to effect the terms of an
Advance  Facility  as  described  generally  in  this  Section  3.27,  including
amendments to add provisions  relating to a successor  Servicer,  may be entered
into by the Trustee,  the Depositor,  the  Unaffiliated  Seller and the Servicer
without the consent of any Certificateholder,  but with the consent of the Class
A  Certificate  Insurer,  notwithstanding  anything  to  the  contrary  in  this
Agreement. Prior to entering into an Advance Facility, the Servicer shall notify
the lender under such  facility in writing  that:  (a) the Advances  financed by
and/or  pledged  to  the  lender  are  obligations  owed  to the  Servicer  on a
non-recourse  basis payable only from the cash flows and proceeds received under
this Agreement for  reimbursement  of such Advances only to the extent  provided
herein,  and the  Trustee  is not  otherwise  obligated  or  liable to repay any
Advances  financed by the  lender;  (b) the  Servicer  will be  responsible  for
remitting to the lender the applicable  amounts collected by it as reimbursement
for Advances funded by the lender,  subject to the  restrictions  and priorities
created in this Agreement;  (c) the Trustee shall not have any responsibility to
track or monitor the  administration  of the financing  arrangement  between the
Servicer  and  the  lender;  (d) if the  Servicer  is  replaced  by a  successor
servicer,  the lender shall continue to be entitled to receive reimbursements as
provided  in clause (a) above but shall have no further  right to make  advances
with  respect  to the  transaction  subject to this  Agreement;  and (e) (i) the
pledge, if any, of

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Servicer's  rights to the lender under the facility conveys no rights (such as a
right to fees  after  the  removal  of the  Servicer  or the  right to  become a
substitute  servicer)  under this  Agreement,  or against  the Trust  Fund,  any
investor in or guarantor of  securities  issued  hereunder,  or any person other
than the Servicer,  (ii) the Servicer is only pledging assets and rights that it
owns and any  purported  pledge of any assets or rights that are not property of
the  Servicer  shall be of force and effect and will not be deemed to create any
additional  rights or assets of either the lender or the  Servicer and (iii) the
lender  shall  take such  steps as are  reasonably  necessary  to  confirm  to a
successor  servicer that it has no rights in any collateral due or payable on or
after  the date of  servicing  transfer  other  than the  Servicer's  rights  to
reimbursement of Advances (to be repaid pursuant to the terms of this Agreement)
for Advances made prior to such servicing transfer.

                  Section 3.28.     SERVICER PERFORMANCE EVALUATIONS.

                  Within  60 days  after the  reporting  by the  Trustee  in its
monthly  statement  pursuant to Section 4.03 of a Cumulative  Loss Percentage or
the  percentage of Mortgage  Loans 60 days  Delinquent or more which,  in either
case, would cause a Servicer Trigger to be in effect, the Depositor shall select
and notify the Trustee of such  selection  for  engagement by the Trust Fund, at
the  expense of the  Servicer,  a  nationally  recognized  independent  auditor,
approved in writing by the Class A Certificate  Insurer and the Rating  Agencies
unless such Rating Agencies  specifically  waive such approval rights (PROVIDED,
HOWEVER, that if the Trustee does not receive the written approval of any Rating
Agency within 20 days of the selection of an  independent  auditor,  such Rating
Agency  will be  deemed to have  approved  of such  auditor),  to  evaluate  the
performance of the Servicer. Such engagement shall require the auditor to select
a  statistical  sample of  Delinquent  Mortgage  Loans  (comprising a percentage
(determined by the independent auditor in its sole discretion,  which percentage
shall not  exceed  50%) of all  Delinquent  Mortgage  Loans by unpaid  principal
balance  as of the  date the  Servicer  Trigger  occurred)  and to  examine  the
Servicer's  servicing  practices with respect to such Mortgage Loans (including,
without limitation,  examining payment histories,  documentation relating to the
Servicer's  contacts with the related Mortgagors and documents  contained in the
related  Servicing  File) for the period of 24 months prior to such  examination
or, with respect to an examination  taking place within 24 months of the Closing
Date,  the period  beginning  on the Closing Date and ending on the date of such
examination.  Such  engagement  shall also  require the auditor to compare  such
servicing  practices of the Servicer with respect to the selected Mortgage Loans
to the  Performance  Standards set forth on Exhibit O hereto and to evaluate the
Servicer's  compliance with the Performance  Standards.  The evaluation  process
described  above in this  Section  3.28 is  referred  to herein  as a  "SERVICER
PERFORMANCE  EVALUATION"  and is subject in all  respects to the approval of the
Class A Certificate  Insurer and the Rating  Agencies.  In the  engagement,  the
auditor  shall be required to deliver  the results of its  Servicer  Performance
Evaluation to the Trustee,  the Depositor,  the Class A Certificate  Insurer and
the Rating  Agencies  and the Trustee  shall  report such  Servicer  Performance
Evaluation  results to  Certificateholders  by forwarding a copy of such results
upon written request therefor.

                  After  receipt  by the  Class A  Certificate  Insurer  and the
Certificateholders of the results of the Servicer Performance  Evaluation (or in
any case, notwithstanding the lack of receipt of such results, within 60 days of
the  occurrence  of  the  Servicer  Trigger),  if  either  the  Holders  of  the
Certificates  entitled to 51% or more of the Voting Rights or (regardless of the
results of such Servicer Performance Evaluation) the Class A Certificate Insurer
requests in

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writing to the Trustee to terminate  Fairbanks as Servicer under this Agreement,
Fairbanks  shall be removed as  Servicer  pursuant  to Section  7.01.  If such a
written  request  is made to the  Trustee,  Fairbanks  will  be  deemed  to have
"failed"  the  Servicer  Performance  Evaluation  and an Event of Default  under
Section 7.01(i) shall be deemed to have occurred.

                  At their  option,  the Class A  Certificate  Insurer  and each
Rating Agency shall have the right to review all of the information  provided to
the independent auditor in connection with a Servicer Performance  Evaluation so
as to allow the Class A  Certificate  Insurer or such Rating  Agency to evaluate
the Servicer's compliance with the Performance Standards.

                  The Servicer shall  cooperate with all reasonable  requests of
the Trustee,  the independent  auditor,  the Class A Certificate Insurer and the
Rating Agencies in connection with a Servicer Performance Evaluation, including,
without   limitation,   making  available  to  the  auditor  payment  histories,
documentation  relating to the Servicer's  contacts with the related  Mortgagors
and documents  contained in the Servicing File. The Servicer shall pay all costs
and expenses of the independent  auditor,  the Class A Certificate  Insurer, the
Trustee or any Rating  Agency  (including  the costs of the Class A  Certificate
Insurer  or any  Rating  Agency  review  pursuant  to the  foregoing  paragraph)
associated with a Servicer Performance Evaluation.

                  Notwithstanding  anything to the  contrary  set forth  herein,
this Section 3.28 shall only be applicable for so long as Fairbanks is acting as
Servicer hereunder.

                                   ARTICLE IV

                                DISTRIBUTIONS AND
                            ADVANCES BY THE SERVICER

                  Section 4.01 ADVANCES.

                  (a) The amount of P&I  Advances to be made by the Servicer for
any Remittance Date shall equal, subject to Section 4.01(c), the sum of (i) with
respect to the Mortgage Loans, the aggregate amount of Scheduled  Payments (with
each interest portion thereof net of the related  Servicing Fee), due during the
Due  Period  immediately  preceding  such  Remittance  Date in  respect  of such
Mortgage Loans,  which  Scheduled  Payments were not received as of the close of
business on the last Business Day of the immediately  preceding Due Period, plus
(ii) with respect to each REO Property,  which REO Property was acquired  during
or prior to the related  Prepayment  Period and as to which such REO Property an
REO Disposition did not occur during the related  Prepayment  Period,  an amount
equal to the  excess,  if any, of the  Scheduled  Payments  (with each  interest
portion  thereof net of the related  Servicing  Fee) that would have been due on
the  related  Due Date in respect of the related  Mortgage  Loans,  over the net
income  from  such  REO  Property  transferred  to the  Collection  Account  for
distribution on such Remittance Date.

                  (b) On the  Remittance  Date,  the  Servicer  shall  remit  in
immediately  available  funds to the  Trustee 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  Remittance  Date either (i) from its own funds,
(ii) from the Collection Account, to the extent of funds held therein

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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 4.01, used by the 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 the
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
Servicer's  records and  replaced by the  Servicer by deposit in the  Collection
Account on or before any future Remittance Date to the extent required.

                  (c) The  obligation  of the 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 coverage under 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 the
Servicer if such P&I Advance or Servicing  Advance would, if made,  constitute a
Nonrecoverable P&I Advance or Nonrecoverable  Advance.  The determination by the
Servicer  that it has made a  Nonrecoverable  P&I  Advance  or a  Nonrecoverable
Advance or that any proposed P&I Advance or Servicing  Advance,  if made,  would
constitute  a   Nonrecoverable   P&I  Advance  or  a   Nonrecoverable   Advance,
respectively,  shall be evidenced by an  Officers'  Certificate  of the Servicer
delivered to the Trustee.

                  (e) Except as otherwise provided herein, the Servicer shall be
entitled to reimbursement pursuant to Section 3.11 hereof for Servicing Advances
from recoveries from the related Mortgagor or from all Liquidation  Proceeds and
other  payments or recoveries  (including  Insurance  Proceeds and  Condemnation
Proceeds) with respect to the related Mortgage Loan.

                  Section 4.02 PRIORITIES OF DISTRIBUTION.

                  (a) On each  Distribution  Date,  the  Trustee  will  make the
disbursements  and  transfers  from amounts then on deposit in the  Distribution
Account in the following order of priority:

                  (i) (x) from the  Interest  Amount  Available,  to the Class A
         Certificate  Insurer, the Premium Amount and to the Trustee the Trustee
         Fee, in each case for such  Distribution  Date;  to the holders of each
         Class of Certificates, in the following order of priority:

                         (y) from the remaining Interest Amount Available,  plus
         in the case of clause (a) below,  the  related  portion of any  Insured
         Payment,

                         (a)  to  the   Class  A   Certificates,   the   Accrued
                  Certificate  Interest  Distribution  Amount for such Class and
                  any  Unpaid   Interest   Amounts   for  such  Class  for  such
                  Distribution Date, as described in Section 4.02(a);

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<PAGE>

                         (b) to the Class A Certificate  Insurer,  the amount of
                  any  Reimbursement  Amount  then  owing to it on  account of a
                  prior   drawing   relating   to   interest   on  the  Class  A
                  Certificates;

                         (c)  to  the  Class  M-1   Certificates,   the  Accrued
                  Certificate  Interest  Distribution  Amount  for such Class on
                  such Distribution Date;

                         (d)  to  the  Class  M-2   Certificates,   the  Accrued
                  Certificate  Interest  Distribution  Amount  for such Class on
                  such Distribution Date;

                         (e)  to  the  Class  B-1   Certificates,   the  Accrued
                  Certificate  Interest  Distribution  Amount  for such Class on
                  such Distribution Date;

                         (f)  to  the  Class  B-2   Certificates,   the  Accrued
                  Certificate  Interest  Distribution  Amount  for such Class on
                  such Distribution Date;

                  (ii) (A) on each  Distribution  Date (1) before  the  Stepdown
         Date or (2) with respect to which a Trigger Event is in effect,  to the
         holders of the related  Class or Classes of Offered  Certificates  then
         entitled to  distributions  of principal  as set forth below,  from the
         amounts  remaining on deposit in the Distribution  Account after making
         distributions  pursuant  to clause  (i) above,  an amount  equal to the
         Principal Distribution Amount in the following order of priority:

                         (a)  to the  Class  A  Certificates,  until  the  Class
                  Certificate Balance thereof is reduced to zero;

                         (b) to the Class A Certificate  Insurer,  the amount of
                  any  Reimbursement  Amount  then  owing to it on  account of a
                  prior   drawing   relating  to   principal   on  the  Class  A
                  Certificates; and

                         (c) sequentially to the Class M-1, Class M-2, Class B-1
                  and  Class  B-2  Certificates,   in  that  order,   until  the
                  respective Class Certificate Balances are reduced to zero;

                  (B) on each  Distribution  Date (1) on and after the  Stepdown
         Date  and (2) as long  as a  Trigger  Event  is not in  effect,  to the
         holders of the related  Class or Classes of Offered  Certificates  then
         entitled to  distribution  of  principal,  from  amounts  remaining  on
         deposit in the Distribution Account after making distributions pursuant
         to clause  (i)  above,  an  amount  equal  to,  in the  aggregate,  the
         Principal  Distribution  Amount in the  following  amounts and order of
         priority:

                         (a) the lesser of (x) the Principal Distribution Amount
                  and (y) the Class A Principal Distribution Amount to the Class
                  A Certificates, until the Class Certificate Balance thereof is
                  reduced to zero;

                         (b) the lesser of (x) the  excess of (i) the  Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A Certificateholders  in clause (ii)(B)(a) above and (y)
                  the amount of any Reimbursement Amount then owing to

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<PAGE>

                  the Class A Certificate  Insurer on account of a prior drawing
                  relating to principal on the Class A Certificates;

                         (c) the lesser of (x) the  excess of (i) the  Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A  Certificateholders  in clause (ii)(B)(a) above and to
                  the Class A Certificate Insurer in clause (ii)(B)(b) above and
                  (y) the Class M-1 Principal  Distribution  Amount to the Class
                  M-1  Certificateholders,  until the Class Certificate  Balance
                  thereof has been reduced to zero;

                         (d) the lesser of (x) the  excess of (i) the  Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A  Certificateholders  in clause (ii)(B)(a) above and to
                  the Class A Certificate Insurer in clause (ii)(B)(b) above and
                  to the Class M-1  Certificates in clause  (ii)(B)(c) above and
                  (y) the Class M-2 Principal  Distribution  Amount to the Class
                  M-2  Certificateholders,  until the Class Certificate  Balance
                  thereof has been reduced to zero;

                         (e) the lesser of (x) the  excess of (i) the  Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A Certificateholders  in clause (ii)(B)(a) above, to the
                  Class A Certificate Insurer in clause (ii)(B)(b) above, to the
                  Class M-1  Certificates in clause  (ii)(B)(c) above and to the
                  Class M-2 Certificates in clause  (ii)(B)(d) above and (y) the
                  Class  B-1  Principal  Distribution  Amount  to the  Class B-1
                  Certificateholders,   until  the  Class  Certificate   Balance
                  thereof has been reduced to zero;

                         (f) the lesser of (x) the  excess of (i) the  Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A Certificateholders  in clause (ii)(B)(a) above, to the
                  Class A Certificate Insurer in clause (ii)(B)(b) above, to the
                  Class M-1  Certificates  in clause  (ii)(B)(c)  above,  to the
                  Class M-2  Certificates in clause  (ii)(B)(d) above and to the
                  Class B-1 Certificates in clause  (ii)(B)(e) above and (y) the
                  Class  B-2  Principal  Distribution  Amount  to the  Class B-2
                  Certificateholders,   until  the  Class  Certificate   Balance
                  thereof has been reduced to zero;

                  (iii) any amount remaining in the  Distribution  Account after
         the  distributions in clauses (i) and (ii) above,  plus as specifically
         indicated  below,  from  amounts on deposit in the Excess  Reserve Fund
         Account, shall be distributed in the following order of priority:

                         (a) to the Class A Certificate  Insurer,  to the extent
                  of any remaining Reimbursement Amount then owing to it;

                         (b) to the holders of the Class M-1  Certificates,  any
                  Unpaid Interest Amounts for such Class;

                         (c) to the holders of the Class M-1  Certificates,  any
                  Unpaid Realized Loss Amount for such Class;

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<PAGE>

                         (d) to the holders of the Class M-2  Certificates,  any
                  Unpaid Interest Amounts for such Class;

                         (e) to the holders of the Class M-2  Certificates,  any
                  Unpaid Realized Loss Amount for such Class;

                         (f) to the holders of the Class B-1  Certificates,  any
                  Unpaid Interest Amounts for such Class;

                         (g) to the holders of the Class B-1  Certificates,  any
                  Unpaid Realized Loss Amount for such Class;

                         (h) to the holders of the Class B-2  Certificates,  any
                  Unpaid Interest Amounts for such Class;

                         (i) to the holders of the Class B-2  Certificates,  any
                  Unpaid Realized Loss Amount for such Class;

                         (j) to the Excess  Reserve Fund Account,  the amount of
                  any Basis Risk Payment for such Distribution Date;

                         (k) from amounts on deposit in the Excess  Reserve Fund
                  Account,  not including any Interest Rate Cap Payment included
                  in  that   account,   an  amount   equal  to  any  Basis  Risk
                  CarryForward   Amount  with  respect  to  any  Floating   Rate
                  Certificate  for such  Distribution  Date to the Floating Rate
                  Certificates  in the same order and priority in which  Accrued
                  Certificate  Interest  Distribution  Amount is allocated among
                  those Classes of Certificates;

                         (l) from any  Interest  Rate Cap  Payment on deposit in
                  the  Excess   Reserve   Fund  Account  with  respect  to  that
                  distribution  date,  an amount  equal to any unpaid  remaining
                  Basis Risk  CarryForward  Amount  with  respect to the Class A
                  Certificates for that  Distribution  Date (after giving effect
                  to distributions  pursuant to clause (k) above) to the Class A
                  Certificates; and

                         (m) to the  holders  of the Class P  Certificates,  the
                  outstanding  principal  balance  thereof,  if any,  and to the
                  holders  of the Class X  Certificates,  the  remainder  of the
                  Class X  Distributable  Amount  not  distributed  pursuant  to
                  Sections  4.02(a)(iii)(a)-(k)  (to the extent stated in clause
                  (i) of the  definition  of Class X  Distributable  Amount,  as
                  interest,  and to the  extent  stated  in  clause  (ii) of the
                  definition of Class X Distributable Amount, as principal); and

                  (iv) to the holders of the Class R Certificates, any remaining
         amount.

                  (b)  On  each  Distribution  Date,  all  amounts  representing
Prepayment   Charges  from  the  Mortgage  Loans  received  during  the  related
Prepayment   Period  will  be   distributed  to  the  holders  of  the  Class  P
Certificates.

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<PAGE>

                  (c) On the  December  2002,  January  2003 and  February  2003
Distribution  Dates,  the Trustee shall transfer from the  Capitalized  Interest
Account to the Distribution  Account the Capitalized  Interest  Requirement,  if
any, for such Distribution Date.

                  (d)  On the  Distribution  Date  following  either  the  final
Subsequent  Transfer Date or February 24, 2003  whichever  date is earlier,  any
amounts  remaining  in the  Capitalized  Interest  Account  and all  Pre-Funding
Earnings in the Pre-Funding Account,  after taking into account the transfers in
respect of the Distribution Date described in clause (c) above, shall be paid by
the Trustee to the Unaffiliated Seller.

                  (e) On each Subsequent  Transfer Date, the Unaffiliated Seller
shall instruct in writing the Trustee to withdraw from the  Pre-Funding  Account
an amount equal to 100% of the  aggregate  Stated  Principal  Balances as of the
related  Subsequent  Cut-off Date of the  Subsequent  Mortgage Loans sold to the
Trust Fund on such  Subsequent  Transfer Date and pay such amount to or upon the
order of the Unaffiliated  Seller upon  satisfaction of the conditions set forth
in Section  2.01(c)  hereof  with  respect to such  transfer.  The  Trustee  may
conclusively rely on such written instructions from the Unaffiliated Seller.

                  (f)  If  the  Pre-Funding  Amount  (exclusive  of  Pre-Funding
Earnings)  has been  reduced to  $100,000  or less by the close of  business  on
January 1, 2003 then, on the January 25, 2003  Distribution  Date,  after giving
effect to any  reductions in the  Pre-Funding  Amount on such date,  the Trustee
shall  withdraw  from the  Pre-Funding  Account on such date and  deposit in the
Distribution Account the amount on deposit in the Pre-Funding Account other than
any Pre-Funding Earnings; if the Pre-Funding Amount has not been reduced to zero
by the close of business on February 24, 2003,  the Trustee shall  withdraw from
the  Pre-Funding  Account  the  amount  on  deposit  therein,   other  than  the
Pre-Funding  Earnings,  and  deposit  such  amount  on  the  February  25,  2003
Distribution Date into the Distribution Account. Each amount so deposited to the
Distribution  Account pursuant to the preceding sentence shall be distributed to
the Holders of the Offered Certificates, PRO RATA, based on their relative Class
Certificate  Balances  immediately prior to the related  Distribution Date, as a
separate payment of principal, on the related Distribution Date.

                  (g) On any  Distribution  Date,  any Relief Act Shortfalls and
Net Prepayment  Interest Shortfalls for such Distribution Date will be allocated
as a reduction in the following order:

                  (1) First,  to the amount of  interest  payable to the Class X
Certificates; and

                  (2)  Second,   PRO  RATA,   as  a  reduction  of  the  Accrued
         Certificate  Interest  Distribution  Amount for the Class A, Class M-1,
         Class M-2, Class B-1 and Class B-2 Certificates, based on the amount of
         interest to which such classes would otherwise be entitled.

                  Section 4.03 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

                  (a) Not later than each  Distribution  Date, the Trustee shall
make  available to each  Certificateholder,  the Servicer,  the  Depositor,  the
Unaffiliated  Seller,  the Class A

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<PAGE>

Certificate Insurer  and  each Rating  Agency a  statement  setting  forth  with
respect to the related distribution:

                  (i) the amount  thereof  allocable  to  principal,  separately
         identifying  the  aggregate  amount of any  Principal  Prepayments  and
         Liquidation Proceeds included therein;

                  (ii) the amount  thereof  allocable  to  interest,  any Unpaid
         Interest Amounts included in such distribution and any remaining Unpaid
         Interest  Amounts after giving effect to such  distribution,  any Basis
         Risk  CarryForward  Amount for such Distribution Date and the amount of
         all Basis Risk  CarryForward  Amount  covered by  withdrawals  from the
         Excess Reserve Fund Account on such Distribution Date;

                  (iii) if the  distribution  to the  Holders  of such  Class of
         Certificates  is less than the full amount that would be  distributable
         to such Holders if there were sufficient funds available therefor,  the
         amount of the shortfall and the allocation thereof as between principal
         and interest,  including any Basis Risk CarryForward Amount not covered
         by amounts in the Excess Reserve Fund Account;

                  (iv)  the  Class   Certificate   Balance   of  each  Class  of
         Certificates  after giving effect to the  distribution  of principal on
         such Distribution Date;

                  (v) the  Pool  Stated  Principal  Balance  for  the  following
         Distribution Date;

                  (vi) the amount of the  Servicing  Fees paid to or retained by
         the Servicer or Subservicer (with respect to the  Subservicers,  in the
         aggregate) with respect to such Distribution Date;

                  (vii)  the   Pass-Through   Rate  for  each   such   Class  of
         Certificates with respect to such Distribution Date;

                  (viii) the amount of Advances  included in the distribution on
         such Distribution Date and the aggregate amount of Advances reported by
         the  servicer  as  outstanding  as of the  close  of  business  on such
         Distribution Date;

                  (ix) the number and aggregate  Scheduled Principal Balances of
         Mortgage  Loans (1) as to which the Scheduled  Payment is delinquent 31
         to 60 days, 61 to 90 days and 91 or more days, (2) that have become REO
         Property,  (3) that are in foreclosure  and (4) that are in bankruptcy,
         in each case as of the close of  business on the last  Business  Day of
         the immediately preceding month;

                  (x) with  respect  to any  Mortgage  Loan  that  became an REO
         Property  during the  preceding  calendar  month,  the loan  number and
         Stated  Principal  Balance  of such  Mortgage  Loan as of the  close of
         business on the Determination Date preceding such Distribution Date and
         the date of acquisition thereof;

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<PAGE>

                  (xi)  the  total  number  and  principal  balance  of any  REO
         Properties (and market value, if available) as of the close of business
         on the Determination Date preceding such Distribution Date;

                  (xii)  whether a Trigger  Event has occurred and is continuing
         (including  the  calculation  of thereof and the aggregate  outstanding
         balance of all 60+ Day Delinquent Loans);

                  (xiii)  the  amount on  deposit  in the  Excess  Reserve  Fund
         Account  (after giving  effect to  distributions  on such  Distribution
         Date);

                  (xiv) the  aggregate  amount of Applied  Realized Loss Amounts
         incurred  during the preceding  calendar  month and  aggregate  Applied
         Realized Loss Amounts through such Distribution Date;

                  (xv) the amount of any Net  Monthly  Excess  Cash Flow on such
         Distribution Date and the allocation thereof to the  Certificateholders
         with respect to Applied Realized Losses and Unpaid Interest Amounts;

                  (xvi)  the  Subordinated  Amount  and  Required   Subordinated
         Amount;

                  (xvii)  the  Interest   Remittance   Amount,   the   Principal
         Remittance Amount and the Prepayment  Charges remitted by Servicer with
         respect to that Distribution Date;

                  (xviii) the  Pre-Funded  Amount as of the end of the prior Due
         Period;

                  (xix)  the  amount  of  any   principal   prepayment   on  the
         Certificates  resulting  from the  application  of  unused  Pre-Funding
         Account moneys;

                  (xx) the Class A Deficiency Amount and the Insured Payment for
         such Distribution Date;

                  (xxi)  the  Reimbursement  Amount  immediately  prior  to such
         Distribution  Date,  and the  amount  of any  payments  to the  Class A
         Certificate Insurer on account thereof on such Distribution Date; and

                  (xxii)  the  Interest  Rate  Cap  Payment,  if any,  for  such
         Distribution Date.

                  (b) The  Trustee's  responsibility  for  providing  the  above
statement  is  limited  to the  availability,  timeliness  and  accuracy  of the
information  derived  from the  Servicer  or,  in the case of the  Reimbursement
Amount, from the Class A Certificate Insurer. The Trustee will provide the above
statement  via the  Trustee's  internet  website,  except that the Trustee shall
deliver a hard copy of such statement to the Class A Certificate Insurer on each
Distribution   Date.  The  Trustee's   website  will  initially  be  located  at
HTTP://WWW.CORPORATETRUST.DB.COM  and  assistance  in using the  website  can be
obtained by calling the Trustee's investor  relations desk at 1-800-735-7777.  A
paper copy of the statement will also be made available upon request.

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<PAGE>

                  (c) Within a  reasonable  period of time after the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at any
time during the calendar year was a  Certificateholder,  a statement  containing
the  information  set forth in clauses  (a)(i),  (a)(ii)  and  (a)(vii)  of this
Section 4.03  aggregated  for such calendar year or applicable  portion  thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall  be  deemed  to have  been  satisfied  to the  extent  that  substantially
comparable  information  shall  be  provided  by  the  Trustee  pursuant  to any
requirements of the Code as from time to time in effect.

                  (d) Not later than the Determination  Date, the Servicer shall
furnish to the Trustee a monthly  remittance  advice  statement  containing such
information  as shall be  reasonably  requested  by the  Trustee to provide  the
reports  required by Section 4.03(a) as to the  accompanying  remittance and the
period  ending  on the  close  of  business  on  the  last  Business  Day of the
immediately preceding month.

                  The Servicer  shall furnish to the Trustee an individual  loan
accounting  report,  as of the last  Business  Day of each  month,  to  document
Mortgage  Loan  payment  activity on an  individual  Mortgage  Loan basis.  With
respect to each month, the  corresponding  individual loan accounting report (in
electronic  format)  shall be  received by the Trustee no later than the related
Determination Date, which report shall contain the following:

                  (i) with respect to each Scheduled Payment, the amount of such
         remittance  allocable to principal  (including a separate  breakdown of
         any Principal  Prepayment,  including the date of such prepayment,  and
         any prepayment  penalties or premiums,  along with a detailed report of
         interest on principal  prepayment  amounts  remitted in accordance with
         Section 3.25);

                  (ii) with  respect to each  Scheduled  Payment,  the amount of
         such remittance allocable to interest and assumption fees;

                  (iii) the amount of  servicing  compensation  received  by the
         Servicer during the prior distribution period;

                  (iv) the individual and aggregate Stated Principal  Balance of
         the Mortgage Loans;

                  (v) the individual and aggregate  Scheduled Principal Balances
         of the Mortgage Loans;

                  (vi) the aggregate of any expenses  reimbursed to the Servicer
         during the prior distribution period pursuant to Section 3.05; and

                  (vii) the number and aggregate Scheduled Principal Balances of
         Mortgage Loans (a) as to which the Scheduled  Payment is delinquent (1)
         31 to 60 days,  (2) 61 to 90 days  and (3) 91 days or  more;  (b) as to
         which foreclosure has commenced;  (c) as to which REO Property has been
         acquired and (d) that are in bankruptcy.

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<PAGE>

                  Section 4.04 CERTAIN MATTERS RELATING TO THE  DETERMINATION OF
LIBOR.

                  Until  all of the  LIBOR  Certificates  are paid in full,  the
Trustee will at all times retain at least four  Reference  Banks for the purpose
of  determining  LIBOR with respect to each  Interest  Determination  Date.  The
Servicer  initially shall designate the Reference  Banks.  Each "REFERENCE BANK"
shall be a leading bank engaged in  transactions  in Eurodollar  deposits in the
international  Eurocurrency  market,  shall not control, be controlled by, or be
under common control with,  the Trustee and shall have an  established  place of
business in London.  If any such Reference Bank should be unwilling or unable to
act as such or if the Servicer  should  terminate its  appointment  as Reference
Bank,  the Servicer  shall  promptly  appoint or cause to be  appointed  another
Reference  Bank.  The Trustee shall have no liability or  responsibility  to any
Person for (i) the selection of any Reference  Bank for purposes of  determining
LIBOR or (ii) any  inability  to retain at least four  Reference  Banks which is
caused by circumstances beyond its reasonable control.

                  The Pass-Through Rate for each Class of LIBOR Certificates for
each  Interest  Accrual  Period shall be determined by the Trustee on each LIBOR
Determination  Date so long as the LIBOR  Certificates  are  outstanding  on the
basis of LIBOR and the respective formulae appearing in footnotes  corresponding
to the LIBOR  Certificates  in the table  relating  to the  Certificates  in the
Preliminary   Statement.   The  Trustee   shall  not  have  any   liability   or
responsibility  to  any  Person  for  its  inability,   following  a  good-faith
reasonable effort, to obtain quotations from the Reference Banks or to determine
the arithmetic mean referred to in the definition of LIBOR,  all as provided for
in this Section 4.04 and the definition of LIBOR. The establishment of LIBOR and
each Pass-Through  Rate for the LIBOR  Certificates by the Trustee shall (in the
absence of manifest error) be final,  conclusive and binding upon each Holder of
a Certificate and the Trustee.

                  Section 4.05 THE CLASS A INSURANCE POLICY.

                  (a) Within two (2) days  following each  Remittance  Date, the
Trustee shall determine with respect to the immediately  following  Distribution
Date,  the  amount  to be  on  deposit  in  the  Distribution  Account  on  such
Distribution  Date as a result of the (i) Servicer's  remittance of the Interest
Remittance Amount and the Principal  Remittance Amount on the related Remittance
Date,  and  (ii)  any  transfers  to the  Distribution  Account  made  from  the
Capitalized  Interest  Account and/or the Pre-Funding  Account  relating to such
Distribution  Date pursuant to Section 4.02 hereof,  excluding the amount of any
Insured Payment.

                  (b) If on any Distribution Date there is a Class A Deficiency,
the  Trustee  shall  complete  a Notice in the form of  Exhibit A to the Class A
Insurance  Policy and submit such notice to the Class A  Certificate  Insurer no
later than 12:00 noon New York City time on the second  Business  Day  preceding
such  Distribution  Date as a claim for an Insured Payment in an amount equal to
such Class A Deficiency.

                  (c) The Trustee shall  establish a separate  Eligible  Account
for the  benefit  of  Holders  of the  Class  A  Certificates  and  the  Class A
Certificate  Insurer  referred  to  herein  as the  "Class A  Insurance  Payment
Account" over which the Trustee shall have  exclusive  control and sole right of
withdrawal.  The Trustee  shall  deposit  upon receipt any amount paid under the
Class

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A Insurance  Policy in the Insurance  Payment Account and distribute such amount
only for  purposes of payment to the Class A  Certificateholders  of the Class A
Insured Amount and such amount may not be applied to satisfy any costs, expenses
or  liabilities  of the  Servicer,  the Trustee or the Trust Fund.  Amounts paid
under the Class A  Insurance  Policy,  to the  extent  needed to pay the Class A
Insured Amount shall be transferred to the  Distribution  Account on the related
Distribution  Date  and  disbursed  by  the  Class  A  Trustee  to the  Class  A
Certificateholders  in  accordance  with Section 4.02. 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  other  distributions  to the  Class A
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A Certificates to
be paid from funds  transferred from the Class A Insurance Payment Account shall
be noted as provided in paragraph (d) below in the  Certificate  Register and in
the statement to be furnished to Holders of the Class A Certificates pursuant to
Section 4.03(a).  Funds held in the Class A Insurance  Payment Account shall not
be invested. Any funds remaining in the Class A Insurance Payment Account on the
first Business Day following a Distribution  Date shall be returned to the Class
A  Certificate  Insurer  pursuant  to the  written  instructions  of the Class A
Certificate Insurer by the end of such Business Day.

                  (d) The Trustee  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 Class A Insurance Policy. The Class A 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 Trustee.

                  (e) In the event that the  Trustee  has  received a  certified
copy of an order of the  appropriate  court that any  Insured  Payment  has been
voided in whole or in part as a preference  payment under applicable  bankruptcy
law, the Trustee shall so notify the Class A Certificate  Insurer,  shall comply
with the  provisions  of the Class A Insurance  Policy to obtain  payment by the
Class A Certificate  Insurer of such voided Insured  Payment,  and shall, at the
time it provides notice to the Class A Certificate  Insurer,  notify, by mail to
the Class A Certificateholders  of the affected  Certificates that, in the event
any Class A  Certificateholder's  Insured Payment is so recovered,  such Class A
Certificateholder  will be entitled to payment pursuant to the Class A Insurance
Policy, a copy of which shall be made available through the Trustee, the Class A
Certificate  Insurer or the Class A Certificate  Insurer's fiscal agent, if any,
and the Trustee shall  furnish to the Class A Certificate  Insurer or its fiscal
agent,  if any, its records  evidencing the payments which have been made by the
Trustee and  subsequently  recovered  from the Class A  Certificateholders,  and
dates on which such payments were made.

                  (f) The Trustee shall promptly  notify the Class A Certificate
Insurer  of any  proceeding  or  the  institution  of any  action,  of  which  a
Responsible  Officer of the Trustee has actual knowledge,  seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "PREFERENCE  CLAIM") of any distribution  made with respect to
the Class A  Certificates.  Each Class A  Certificateholder,  by its purchase of
Class A  Certificates,  the  Servicer  and the Trustee  agree that,  the Class A
Certificate  Insurer (so long as no Class A Certificate  Insurer Default exists)
may at  any  time  during  the  continuation  of any  proceeding  relating  to a
Preference  Claim  direct  all  matters  relating  to  such

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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,  supersedes or performance bond pending any such appeal. In addition and
without  limitation of the foregoing,  the Class A Certificate  Insurer shall be
subrogated to, and each Class A Certificateholder,  the Trustee hereby delegates
and assigns to the Class A Certificate  Insurer, to the fullest extent permitted
by law, the rights the Trustee and each Class A Certificateholder in the conduct
of any such Preference Claim, including,  without limitation,  all rights of any
party to any  adversary  proceeding  or action  with  respect to any court order
issued in connection with any such Preference Claim.

                  (g)  The  Trustee  shall,  upon  retirement  of  the  Class  A
Certificates,  furnish  to the  Class A  Certificate  Insurer  a notice  of such
retirement,  and, upon retirement of the Class A Certificates and the expiration
of the term of the Class A  Insurance  Policy,  surrender  the Class A Insurance
Policy to the Class A Certificate Insurer for cancellation.

                  Section  4.06 EFFECT OF  PAYMENTS  BY THE CLASS A  CERTIFICATE
INSURER; SUBROGATION.

                  Anything herein to the contrary  notwithstanding,  any payment
with respect to principal  of or interest on the Class A  Certificates  which is
made with moneys received  pursuant to the terms of the Class A Insurance Policy
shall not be considered payment of the Class A Certificates from the Trust Fund.
The Depositor, the Servicer and the Trustee 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 Class A Certificate  Insurer,  the Depositor,
the  Servicer,  the Trustee or the  Certificate  Registrar (a) to the extent the
Class A Certificate Insurer makes payments,  directly or indirectly,  on account
of principal of or interest on the Class A  Certificates  to the Holders of such
Class A Certificates,  the Class A Certificate  Insurer will be fully subrogated
to, and each Class A  Certificateholder,  the  Servicer  and the Trustee  hereby
delegate and assign to the Class A Certificate  Insurer,  to the fullest  extent
permitted  by law,  the rights of such  Holders to receive  such  principal  and
interest from the Trust Fund, including,  without limitation, any amounts due to
the Class A  Certificateholders  in respect of securities law violations arising
from  the  offer  and  sale of the  Class A  Certificates,  and (b) the  Class A
Certificate  Insurer  shall be paid such  amounts  from the  sources  and in the
manner  provided  herein for the payment of such  amounts and as provided in the
Insurance and Indemnity Agreement.  The Trustee and the Servicer shall cooperate
in all respects with any reasonable  request by the Class A Certificate  Insurer
for action to preserve or enforce the Class A  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.

                                   ARTICLE V

                                THE CERTIFICATES

                  Section 5.01 THE CERTIFICATES.

                  The Certificates  shall be substantially in the forms attached
hereto as exhibits.  The  Certificates  shall be issuable in registered form, in
the minimum denominations, integral multiples in excess thereof (except that one
Certificate  in each Class may be issued in a different  amount which must be in
excess of the applicable minimum  denomination) and aggregate  denominations per
Class set forth in the Preliminary Statement.

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<PAGE>

                  The Depositor hereby directs the Trustee to register the Class
X and the Class P Certificates initially to "CDC Mortgage Capital Inc." and then
on the Closing  Date as follows:  "Deutsche  Bank  National  Trust  Company,  as
Indenture  Trustee on behalf of the Noteholders of the CDC Mortgage Capital Inc.
NIM Trust  2002-HE3N",  and to deliver such Class X and Class P Certificates  on
the NIM Closing Date to Deutsche Bank National Trust Company,  as trustee of the
NIM Trust.

                  Subject to Section 9.02  respecting the final  distribution on
the Certificates, on each Distribution Date the Trustee shall make distributions
to each  Certificateholder  of record on the preceding Record Date either (x) by
wire transfer in immediately  available funds to the account of such holder at a
bank or other entity having appropriate  facilities therefor, if such Holder has
so notified the Trustee at least five Business Days prior to the related  Record
Date or (y) by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register.

                  The  Certificates  shall be  executed  by manual or  facsimile
signature  on behalf  of the  Trustee  by an  authorized  officer.  Certificates
bearing the manual or facsimile  signatures of individuals who were, at the time
such signatures were affixed,  authorized to sign on behalf of the Trustee shall
bind the  Trustee,  notwithstanding  that such  individuals  or any of them have
ceased to be so  authorized  prior to the  countersignature  and delivery of any
such  Certificates or did not hold such offices at the date of such Certificate.
No  Certificate  shall be entitled to any benefit  under this  Agreement,  or be
valid for any purpose,  unless countersigned by the Trustee by manual signature,
and such countersignature upon any Certificate shall be conclusive evidence, and
the only evidence,  that such  Certificate  has been duly executed and delivered
hereunder.  All Certificates shall be dated the date of their  countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be issued
at the direction of the Depositor, or any affiliate thereof.

                  The Depositor shall provide,  or cause to be provided,  to the
Trustee  on a  continuous  basis,  an  adequate  inventory  of  Certificates  to
facilitate transfers.

                  Section 5.02  CERTIFICATE  REGISTER;  REGISTRATION OF TRANSFER
AND EXCHANGE OF CERTIFICATES.

                  (a) The Trustee shall  maintain,  or cause to be maintained in
accordance  with the provisions of Section 5.06, a Certificate  Register for the
Trust Fund in which,  subject to the provisions of subsections (b) and (c) below
and to such  reasonable  regulations  as it may  prescribe,  the  Trustee  shall
provide for the  registration of Certificates  and of transfers and exchanges of
Certificates as herein provided.  Upon surrender for registration of transfer of
any  Certificate,  the Trustee  shall  execute and  deliver,  in the name of the
designated  transferee or transferees,  one or more new Certificates of the same
Class and aggregate Percentage Interest.

                  At the  option  of a  Certificateholder,  Certificates  may be
exchanged for other  Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest upon surrender of the
Certificates  to be exchanged  at the office or agency of the Trustee.  Whenever
any  Certificates  are so surrendered  for exchange,  the Trustee shall execute,
authenticate,  and deliver the Certificates which the  Certificateholder  making
the

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<PAGE>

exchange is entitled to receive.  Every Certificate presented or surrendered for
registration  of  transfer  or  exchange  shall  be  accompanied  by  a  written
instrument of transfer in form  satisfactory to the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.

                  No service charge to the Certificateholders  shall be made for
any registration of transfer or exchange of  Certificates,  but 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 may be required.

                  All  Certificates  surrendered for registration of transfer or
exchange  shall be  cancelled  and  subsequently  destroyed  by the  Trustee  in
accordance with the Trustee's customary procedures.

                  (b) No transfer of a Private  Certificate shall be made unless
such transfer is made pursuant to an effective  registration statement under the
Securities Act and any applicable  state  securities  laws or is exempt from the
registration  requirements under said Act and such state securities laws. Except
with respect to the transfer of the Class X and Class P Certificates to the NIMs
Trust  on the  Closing  Date,  in the  event  that a  transfer  is to be made in
reliance upon an exemption  from the  Securities  Act and such laws, in order to
assure  compliance with the Securities Act and such laws, the  Certificateholder
desiring to effect  such  transfer  shall  certify to the Trustee in writing the
facts  surrounding the transfer in substantially the form set forth in Exhibit I
(the  "TRANSFEROR  CERTIFICATE")  and either (i) there shall be delivered to the
Trustee a letter in substantially the form of Exhibit J (the "RULE 144A LETTER")
or (ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made without  registration under
the  Securities  Act.  The  Depositor  shall  provide to any Holder of a Private
Certificate  and any  prospective  transferee  designated  by any  such  Holder,
information  regarding the related  Certificates and the Mortgage Loans and such
other  information as shall be necessary to satisfy the condition to eligibility
set  forth in Rule  144A(d)(4)  for  transfer  of any such  Certificate  without
registration  thereof  under the  Securities  Act  pursuant to the  registration
exemption  provided by Rule 144A. The Trustee and the Servicer  shall  cooperate
with the  Depositor in providing  the Rule 144A  information  referenced  in the
preceding  sentence,  including  providing  to the  Depositor  such  information
regarding the  Certificates,  the Mortgage Loans and other matters regarding the
Trust Fund as the  Depositor  shall  reasonably  request to meet its  obligation
under the preceding sentence.  Each Holder of a Private Certificate  desiring to
effect such transfer shall,  and does hereby agree to, indemnify the Trustee and
the  Depositor  and the Servicer  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.

                  Except with respect to the transfer of the Class X and Class P
Certificates  to  the  NIMs  Trust  on  the  Closing  Date,  no  transfer  of an
ERISA-Restricted  Certificate  shall  be made  unless  the  Trustee  shall  have
received either (i) a representation letter from the transferee in substantially
the form of Exhibit  J), to the effect that such  transferee  is not an employee
benefit plan or  arrangement  subject to Section 406 of ERISA, a plan subject to
Section 4975 of the Code or a plan  subject to any  Federal,  state or local law
("SIMILAR LAW") materially  similar to the foregoing  provisions of ERISA or the
Code,  nor a person acting on behalf of any such plan or  arrangement  nor using
the assets of any such plan or arrangement  to effect such transfer,  or (ii) if

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<PAGE>

the  ERISA-Restricted  Certificate  is a Class X  Certificate  that has been the
subject of an ERISA-Qualifying  Underwriting,  and the purchaser is an insurance
company,  a  representation  that the purchaser is an insurance  company that is
purchasing  such  Certificates  with funds  contained in an  "insurance  company
general  account"  (as  such  term is  defined  in  Section  V(e) of  Prohibited
Transaction  Class  Exemption  95-60  ("PTCE  95-60") and that the  purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60.
For purposes of the  preceding  sentence,  with  respect to an  ERISA-Restricted
Certificate that is not a Private  Certificate,  in the event the representation
letter   referred  to  in  the  preceding   sentence  is  not  furnished,   such
representation  shall  be  deemed  to  have  been  made  to the  Trustee  by the
transferee's    (including   an   initial   acquiror's)    acceptance   of   the
ERISA-Restricted   Certificates.  In  the  event  that  such  representation  is
violated, such attempted transfer or acquisition shall be void and of no effect.

                  To the extent permitted under  applicable law (including,  but
not limited to,  ERISA),  the Trustee  shall be under no liability to any Person
for any registration of transfer of any ERISA-Restricted  Certificate that is in
fact not  permitted  by this  Section  5.02(b) or for making any payments due on
such  Certificate  to the Holder thereof or taking any other action with respect
to such Holder under the  provisions  of this  Agreement so long as the transfer
was registered by the Trustee in accordance with the foregoing requirements.

                  (c) 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 be bound by the following  provisions,
and the rights of each Person  acquiring  any  Ownership  Interest in a Residual
Certificate are expressly subject to the following provisions:

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

                  (ii) No Ownership  Interest in a Residual  Certificate  may be
         registered  on the  Closing  Date or  thereafter  transferred,  and the
         Trustee  shall not register  the  Transfer of any Residual  Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee  under  subparagraph  (b) above,  the  Trustee  shall have been
         furnished  with an affidavit (a  "TRANSFER  AFFIDAVIT")  of the initial
         owner or the proposed transferee in the form attached hereto as Exhibit
         H.

                  (iii) Each Person holding or acquiring any Ownership  Interest
         in a  Residual  Certificate  shall  agree  (A)  to  obtain  a  Transfer
         Affidavit  from any  other  Person  to whom  such  Person  attempts  to
         Transfer  its  Ownership  Interest  in a Residual  Certificate,  (B) to
         obtain a Transfer  Affidavit  from any  Person for whom such  Person is
         acting as nominee,  trustee or agent in connection with any Transfer of
         a Residual Certificate, (C) not to Transfer its Ownership Interest in a
         Residual  Certificate or to cause the Transfer of an Ownership Interest
         in a  Residual  Certificate  to  any  other  Person  if it  has  actual
         knowledge  that such Person (i) is not a Permitted  Transferee  or that
         such  Transfer  Affidavit  is false,  (ii) if such  transfer is for the
         purpose of impeding the  assessment or  collection of tax,  (iii) if it
         has actual  knowledge  or reason to know that the  proposed  transferee
         would be  unwilling or unable to pay taxes  attributed  to the Residual
         Certificate

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<PAGE>

         or (iv) if it has actual  knowledge or reason to know that the proposed
         transferee will not honor the  restrictions on subsequent  transfers of
         the Residual  Certificate  set forth in this section 5.02(c) and in the
         Transfer  Affidavit,  (D) to conduct a reasonable  investigation of the
         financial  condition  of  the  proposed  transferee  and  transfer  its
         Ownership Interest in the Residual  Certificate only if, as a result of
         such  investigation,  it  concludes  that the proposed  transferee  has
         historically  paid its debts as they came due and will  continue to pay
         its debts as they come due in the future,  and (E) not to cause  income
         from  its  Ownership   Interest  in  a  Residual   Certificate   to  be
         attributable to a foreign permanent establishment or fixed base (within
         the  meaning  of an  applicable  income  tax  treaty)  of the Person or
         another U.S. taxpayer.

                  (iv) Any  attempted  or  purported  Transfer of any  Ownership
         Interest in a Residual  Certificate  in violation of the  provisions of
         this Section  5.02(c) shall be absolutely  null and void and shall vest
         no rights in the  purported  Transferee.  If any  purported  transferee
         shall  become a Holder of a Residual  Certificate  in  violation of the
         provisions of this Section 5.02(c),  then the last preceding  Permitted
         Transferee   shall  be  restored  to  all  rights  as  Holder   thereof
         retroactive  to the date of  registration  of Transfer of such Residual
         Certificate.  The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual  Certificate that is in fact
         not permitted by Section 5.02(b) and this Section 5.02(c) or for making
         any payments due on such  Certificate  to the Holder  thereof or taking
         any other action with respect to such Holder  under the  provisions  of
         this Agreement so long as the Transfer was registered  after receipt of
         the related  Transfer  Affidavit,  Transferor  Certificate and the Rule
         144A Letter. The Trustee shall be entitled but not obligated to recover
         from  any  Holder  of a  Residual  Certificate  that  was in fact not a
         Permitted  Transferee  at the  time it  became  a  Holder  or,  at such
         subsequent  time as it became  other than a Permitted  Transferee,  all
         payments  made on such  Residual  Certificate  at and after either such
         time.  Any such  payments so recovered by the Trustee shall be paid and
         delivered by the Trustee to the last preceding Permitted  Transferee of
         such Certificate.

                  (v)  The  Depositor   shall  use  its  best  efforts  to  make
         available,  upon  receipt  of written  request  from the  Trustee,  all
         information  necessary to compute any tax imposed under Section 860E(e)
         of the Code as a result of a Transfer  of an  Ownership  Interest  in a
         Residual Certificate to any Holder who is not a Permitted Transferee.

                  The  restrictions  on Transfers of a Residual  Certificate set
forth in this Section 5.02(c) shall cease to apply (and the applicable  portions
of the  legend  on a  Residual  Certificate  may be  deleted)  with  respect  to
Transfers  occurring  after  delivery  to the  Trustee of an Opinion of Counsel,
which Opinion of Counsel shall not be an expense of the Trust Fund, the Trustee,
the Unaffiliated  Seller or the Servicer,  to the effect that the elimination of
such  restrictions  will not cause the transfer to be disregarded under Treasury
Regulation  1.860E-1(c),  cause the Trust Fund hereunder to fail to qualify as a
REMIC at any  time  that the  Certificates  are  outstanding  or  result  in the
imposition of any tax on the Trust Fund, a Certificateholder  or another Person.
Each  Person  holding  or  acquiring  any  Ownership   Interest  in  a  Residual
Certificate  hereby consents to any amendment of this Agreement which,  based on
an Opinion of Counsel furnished to the Trustee,  is reasonably  necessary (a) to
ensure that the record  ownership of, or any beneficial  interest in, a Residual
Certificate is not transferred,  directly or indirectly, to a Person that is not
a

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Permitted  Transferee and (b) to provide for a means to compel the Transfer of a
Residual  Certificate  which  is  held  by a  Person  that  is  not a  Permitted
Transferee to a Holder that is a Permitted Transferee.

         (d) The  preparation  and  delivery of all  certificates  and  opinions
referred to above in this Section 5.02 in connection  with transfer  shall be at
the expense of the parties to such transfers.

         (e) Except as provided below, the Book-Entry  Certificates shall at all
times remain  registered in the name of the Depository or its nominee and at all
times:  (i)  registration  of the  Certificates  may not be  transferred  by the
Trustee  except  to  another  Depository;  (ii) the  Depository  shall  maintain
book-entry  records with respect to the  Certificate  Owners and with respect to
ownership and transfers of such  Book-Entry  Certificates;  (iii)  ownership and
transfers of  registration  of the Book-Entry  Certificates  on the books of the
Depository shall be governed by applicable rules  established by the Depository;
(iv) the  Depository  may  collect  its usual and  customary  fees,  charges and
expenses from its Depository  Participants;  (v) the Trustee shall deal with the
Depository,   Depository   Participants  and  indirect  participating  firms  as
representatives  of the Certificate  Owners of the Book-Entry  Certificates  for
purposes of exercising the rights of holders under this Agreement,  and requests
and directions for and votes of such  representatives  shall not be deemed to be
inconsistent if they are made with respect to different  Certificate Owners; and
(vi) the  Trustee  may  rely  and  shall be  fully  protected  in  relying  upon
information   furnished  by  the  Depository  with  respect  to  its  Depository
Participants  and  furnished  by the  Depository  Participants  with  respect to
indirect  participating  firms and persons  shown on the books of such  indirect
participating firms as direct or indirect Certificate Owners.

                  All transfers by Certificate Owners of 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   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.

                  If (x) (i) the Depository or the Depositor advises the Trustee
in  writing  that  the  Depository  is no  longer  willing  or able to  properly
discharge  its  responsibilities  as  Depository,  and (ii) the  Trustee  or the
Depositor is unable to locate a qualified  successor,  (y) the  Depositor at its
option advises the Trustee in writing that it elects to terminate the book-entry
system  through  the  Depository  or (z)  after  the  occurrence  of an Event of
Default, Certificate Owners representing at least 51% of the Certificate Balance
of the Book-Entry  Certificates  together  advise the Trustee and the Depository
through  the  Depository  Participants  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 Trustee shall notify all Certificate Owners, through
the Depository,  of the occurrence of any such event and of the  availability of
definitive,  fully-registered  Certificates  (the "DEFINITIVE  Certificates") to
Certificate  Owners  requesting  the same.  Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the instructions
from the  Depository  for  registration,  the Trustee shall issue the Definitive
Certificates.  Neither the  Servicer,  the  Depositor  nor the Trustee  shall be
liable for any delay in delivery of such  instruction and each may  conclusively
rely on, and shall be protected in relying on, such instructions.  The Depositor
shall  provide  the  Trustee  with an  adequate  inventory  of  certificates

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<PAGE>

to  facilitate  the issuance and transfer of Definitive  Certificates.  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  Trustee,  to the  extent  applicable  with  respect  to  such
Definitive  Certificates  and the  Trustee  shall  recognize  the Holders of the
Definitive  Certificates as  Certificateholders  hereunder;  PROVIDED,  that the
Trustee shall not by virtue of its assumption of such obligations  become liable
to any party for any act or failure to act of the Depository.

                  Section   5.03   MUTILATED,    DESTROYED,   LOST   OR   STOLEN
CERTIFICATES.

                  If  (a)  any  mutilated  Certificate  is  surrendered  to  the
Trustee,   or  the  Trustee  receives   evidence  to  its  satisfaction  of  the
destruction,  loss or theft of any Certificate and (b) there is delivered to the
Depositor,  the Servicer,  the Class A Certificate  Insurer and the Trustee such
security or indemnity as may be required by them to hold each of them  harmless,
then,  in the absence of notice to the Trustee  that such  Certificate  has been
acquired by a bona fide  purchaser,  the Trustee shall execute,  countersign and
deliver,  in exchange for or in lieu of any such mutilated,  destroyed,  lost or
stolen  Certificate,  a new  Certificate  of like  Class,  tenor and  Percentage
Interest.  In  connection  with the issuance of any new  Certificate  under this
Section 5.03,  the Trustee 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)  connected
therewith.  Any  replacement  Certificate  issued  pursuant to this Section 5.03
shall  constitute  complete  and  indefeasible  evidence  of  ownership,  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  Servicer,  the  Trustee,  the  Depositor,   the  Class  A
Certificate  Insurer and any agent of the Servicer,  the Depositor,  the Class A
Certificate  Insurer  or the  Trustee  may  treat the  Person in whose  name any
Certificate  is registered as the owner of such  Certificate  for the purpose of
receiving distributions as provided in this Agreement and for all other purposes
whatsoever,  and neither the Servicer,  the Trustee, the Depositor,  the Class A
Certificate  Insurer nor any agent of the Servicer,  the Depositor,  the Class A
Certificate  Insurer  or the  Trustee  shall be  affected  by any  notice to the
contrary.

                  Section 5.05 ACCESS TO LIST OF  CERTIFICATEHOLDERS'  NAMES AND
ADDRESSES.

                  If  three  or  more   Certificateholders   (a)  request   such
information in writing from the Trustee, (b) state that such  Certificateholders
desire to communicate with other Certificateholders with respect to their rights
under this  Agreement or under the  Certificates,  and (c) provide a copy of the
communication  which  such  Certificateholders  propose to  transmit,  or if the
Depositor  or  Servicer  shall  request  such  information  in writing  from the
Trustee,  then the Trustee shall,  within ten Business Days after the receipt of
such request,  provide the Depositor, the Servicer or such Certificateholders at
such recipients' expense the most recent list of the  Certificateholders of such
Trust   Fund  held  by  the   Trustee,   if  any.   The   Depositor   and  every
Certificateholder,  by  receiving  and  holding a  Certificate,  agree  that the
Trustee shall not be held

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accountable by reason of the  disclosure of any such  information as to the list
of the  Certificateholders  hereunder,  regardless of the source from which such
information was derived.

                  Section 5.06 MAINTENANCE OF OFFICE OR AGENCY.

                  The Trustee  will  maintain or cause to be  maintained  at its
expense  an office or  offices  or agency  or  agencies  in New York City  where
Certificates  may be surrendered for  registration of transfer or exchange.  The
Trustee initially  designates the offices of its agent for such purposes located
at c/o DTC Transfer Agent Services, 55 Water Street, Jeanette Park Entrance, New
York,  New York  10041.  The  Trustee  will give  prompt  written  notice to the
Certificateholders of any change in such location of any such office or agency.

                  Section  5.07  RIGHTS OF THE CLASS A  CERTIFICATE  INSURER  TO
EXERCISE RIGHTS OF CLASS A CERTIFICATEHOLDERS.

                  By   accepting   its  Class  A   Certificate,   each  Class  A
Certificateholder  agrees  that  unless a Class A  Certificate  Insurer  Default
exists,  the  Class A  Certificate  Insurer  shall be  deemed  to be the Class A
Certificateholders  for all purposes  (other than with respect to the receipt of
payment on the Class A  Certificates)  and shall have the right to exercise  all
rights of the Class A  Certificateholders  under  this  Agreement  and under the
Class  A   Certificates   without   any   further   consent   of  the   Class  A
Certificateholders, including, without limitation:

                  (a) the right to require the Unaffiliated Seller to repurchase
Mortgage  Loans  pursuant to Section 2.03 hereof to the extent set forth in such
Section;

                  (b) the right to give  notices of breach or to  terminate  the
rights and  obligations  of the  Servicer as servicer  pursuant to Section  7.01
hereof;

                  (c) the right to direct the actions of the Trustee  during the
continuance  of a Servicer  default  pursuant  to Sections  3.24,  7.01 and 7.02
hereof;

                  (d) the right to  institute  proceedings  against the Servicer
pursuant to Section 7.01 hereof;

                  (e) the right to direct  the  Trustee to  investigate  certain
matters pursuant to Sections 8.01 and 8.02 hereof;

                  (f) the right to remove the Trustee  pursuant to Section  8.07
hereof; and

                  (g)  any  rights  or  remedies  expressly  given  the  Class A
Certificateholders.

                  In addition,  each  Certificateholder  agrees that, subject to
Section 10.11,  unless a Class A Certificate  Insurer Default exists, the rights
specifically  enumerated  above may only be exercised by the  Certificateholders
with the prior written consent of the Class A Certificate Insurer.

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                  Section 5.08 TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CLASS A
CERTIFICATE INSURER.

                  Unless  a Class A  Certificate  Insurer  Default  exists,  the
Trustee shall not, without the Class A Certificate  Insurer's  consent or unless
directed by the Class A Certificate Insurer:

                  (a)  terminate the rights and  obligations  of the Servicer as
Servicer pursuant to Section 7.01 hereof;

                  (b) agree to any  amendment  pursuant to Section 10.01 hereof;
or

                  (c) undertake any litigation.

                  The Class A  Certificate  Insurer  may,  in writing and in its
sole  discretion  renounce all or any of its rights under this  Agreement or any
requirement  for the Class A  Certificate  Insurer's  consent  for any period of
time.

                  Section 5.09 MORTGAGE LOANS,  TRUST FUND AND ACCOUNTS HELD FOR
BENEFIT OF THE CLASS A CERTIFICATE INSURER.

                  (a) The  Trustee  shall hold the Trust Fund and the  Custodial
Files for the  benefit  of the  Certificateholders  and the Class A  Certificate
Insurer and all  references  in this  Agreement and in the  Certificates  to the
benefit of Holders of the  Certificates  shall be deemed to include  the Class A
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Class A Certificate Insurer for action to preserve
or enforce the Class A  Certificate  Insurer's  rights or  interests  under this
Agreement  and the Class A  Certificates  unless,  as stated  in an  Opinion  of
Counsel  addressed  to the Trustee  and the Class A  Certificate  Insurer,  such
action  is  adverse  to the  interests  of the  Class  A  Certificateholders  or
diminishes the rights of the Class A  Certificateholders  or imposes  additional
burdens or restrictions on the Class A Certificateholders.

                  (b) The Servicer hereby  acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Class A Certificate Insurer, and all references in this Agreement
to the benefit of or actions on behalf of the Certificateholders shall be deemed
to include the Class A Certificate Insurer.

                  Section 5.10 CLASS A CERTIFICATE INSURER DEFAULT.

                  Notwithstanding anything elsewhere in this Agreement or in the
Certificates to the contrary,  if a Class A Certificate  Insurer Default exists,
or if and to the  extent  the Class A  Certificate  Insurer  has  delivered  its
written  renunciation of all of its rights under this Agreement,  all provisions
of this Agreement  which (a) permit the Class A Certificate  Insurer to exercise
rights  of the Class A  Certificateholders,  (b)  restrict  the  ability  of the
Certificateholders,  the  Servicer  or the Trustee to act without the consent or
approval of the Class A Certificate  Insurer,  (c) provide that a particular act
or thing must be acceptable to the Class A Certificate  Insurer,  (d) permit the
Class A  Certificate  Insurer to direct (or otherwise to require) the actions of
the Trustee, the Servicer or the Certificateholders, (e) provide that any action
or omission  taken with the consent,  approval or  authorization  of the Class A
Certificate Insurer shall be authorized

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hereunder  or shall not subject the party taking or omitting to take such action
to any liability  hereunder or (f) which have a similar  effect,  shall be of no
further  force and effect and the Trustee  shall  administer  the Trust Fund and
perform its obligations  hereunder  solely for the benefit of the Holders of the
Certificates.  Nothing in the foregoing sentence,  nor any action taken pursuant
thereto or in compliance therewith, shall be deemed to have released the Class A
Certificate Insurer from any obligation or liability it may have to any party or
to  the  Class  A  Certificateholders  hereunder,  under  any  other  agreement,
instrument or document  (including,  without  limitation,  the Class A Insurance
Policy) or under applicable law.

ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

                  Section 6.01  RESPECTIVE  LIABILITIES OF THE DEPOSITOR AND THE
SERVICER.

                  The  Depositor  and  the  Servicer  shall  each be  liable  in
accordance  herewith  only to the  extent of the  obligations  specifically  and
respectively imposed upon and undertaken by them herein.

                  Section 6.02 MERGER OR  CONSOLIDATION  OF THE DEPOSITOR OR THE
SERVICER.

                  The  Depositor  and the Servicer will each keep in full effect
its existence,  rights and franchises as a corporation or federal  savings bank,
as the case may be, under the laws of the United States or under the laws of one
of the states thereof and will each 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,  or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

                  Any Person into which the  Depositor  or the  Servicer  may be
merged or consolidated, or any Person resulting from any merger or consolidation
to  which  the  Depositor  or the  Servicer  shall  be a  party,  or any  person
succeeding  to the  business  of the  Depositor  or the  Servicer,  shall be the
successor  of the  Depositor  or the  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 the Servicer shall
be qualified to sell mortgage loans to, and to service  mortgage loans on behalf
of, Fannie Mae or FHLMC.

                  Section 6.03  LIMITATION  ON LIABILITY OF THE  DEPOSITOR,  THE
SERVICER AND OTHERS.

                  Neither the  Depositor,  the Servicer,  the Trustee nor any of
their  respective  directors,  officers,  employees or agents shall be under any
liability to 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,  the Servicer,  the Trustee or any such Person  against any breach of
representations  or warranties  made by it herein or protect the Depositor,  the
Servicer,  the  Trustee  or any such  Person  from  any  liability  which  would
otherwise  be imposed by  reasons  of  willful  misfeasance,  bad faith or gross
negligence  (or with respect to the Servicer or the Trustee,  negligence) in the
performance  of duties or by reason of reckless  disregard  of  obligations  and
duties hereunder.

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The Depositor and any director,  officer, employee or agent of the Depositor may
rely in good faith on any document of any kind PRIMA FACIE properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Servicer,  the Trustee and any director,  officer,  employee or agent of the
Depositor,  the Servicer or the Trustee shall be  indemnified  by the Trust Fund
and held harmless against any loss,  liability or expense incurred in connection
with any audit,  controversy or judicial  proceeding  relating to a governmental
taxing  authority  or  any  legal  action  relating  to  this  Agreement  or the
Certificates  (including,  as to the  Trustee,  the  undertaking  of  actions as
directed by the Unaffiliated  Seller or the Class A Certificate Insurer pursuant
to Section 2.03),  other than any loss,  liability or expense incurred by reason
of willful  misfeasance,  bad faith or gross  negligence (or with respect to the
Servicer or the Trustee,  negligence)  in the  performance  of their  respective
duties  hereunder  or by  reason  of  reckless  disregard  of  their  respective
obligations  and  duties  hereunder.  The  Depositor  shall  not  be  under  any
obligation  to appear  in,  prosecute  or defend  any legal  action  that is not
incidental  to its  respective  duties  hereunder  and which in its  opinion may
involve it in any expense or liability;  PROVIDED,  HOWEVER,  that the Depositor
may in its  discretion  undertake  any such  action (or  direct  the  Trustee to
undertake  any such  actions  pursuant to Section 2.03 hereof for the benefit of
the  Certificateholders)  that it may deem  necessary or desirable in respect of
this  Agreement and the rights and duties of the parties hereto and interests of
the  Trustee and the  Certificateholders  hereunder.  In such  event,  the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses,  costs and  liabilities of the Trust Fund, and the Depositor  shall be
entitled to be reimbursed therefor out of the Collection Account.

                  Neither the  Servicer  nor any of the  officers,  employees or
agents  of the  Servicer  shall be under any  liability  to the  Trustee  or the
Depositor for any action taken or for  refraining  from the taking of any action
in good faith pursuant to this Agreement; PROVIDED, HOWEVER, that this provision
shall  not  protect  the  Servicer  or any such  person  against  any  breach of
warranties or representations made herein, or failure to perform its obligations
in compliance  with the terms of this  Agreement,  or any liability  which would
otherwise be imposed by reason of any breach of the terms and conditions of this
Agreement.  The Servicer and any officer,  employee or agent of the Servicer may
rely in good faith on any document of any kind PRIMA FACIE properly executed and
submitted by any Person respecting any matters arising  hereunder.  The Servicer
shall not be under any  obligation  to appear in,  prosecute or defend any legal
action which is not  incidental  to its duties to service the Mortgage  Loans in
accordance  with this  Agreement  and which in its opinion may involve it in any
expenses or liability;  PROVIDED,  HOWEVER,  that the Servicer may undertake any
such  action  which  it may deem  necessary  or  desirable  in  respect  to this
Agreement and the rights and duties of the parties  hereto.  In such event,  the
legal  expenses and costs of such action and any liability  resulting  therefrom
shall be expenses,  costs and  liabilities  of the Trust Fund,  and the Servicer
shall be entitled to be reimbursed  therefor out of the Collection  Account.  In
the event the Servicer agrees, at the request of the Depositor, to act on behalf
of the Depositor in any  litigation  relating to the  origination  of a Mortgage
Loan,  the  Depositor  shall pay all  expenses  associated  with the defense and
management of such claim (without reimbursement from the Trust Fund).

                  Section 6.04 LIMITATION ON RESIGNATION OF THE SERVICER.

                  The  Servicer  shall not assign this  Agreement or resign from
the  obligations and duties hereby imposed on it except by mutual consent of the
Servicer,  the  Depositor  and the

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Trustee  or upon the  determination  that its  duties  hereunder  are no  longer
permissible  under  applicable  law and such  incapacity  cannot be cured by the
Servicer.  Any such  determination  permitting  the  resignation of the Servicer
shall be  evidenced  by an Opinion of Counsel to such  effect  delivered  to the
Depositor  and the  Trustee  which  Opinion  of  Counsel  shall  be in form  and
substance acceptable to the Depositor and the Trustee. No such resignation shall
become   effective   until  a  successor   shall  have  assumed  the  Servicer's
responsibilities and obligations hereunder.

                  Section 6.05 ADDITIONAL INDEMNIFICATION BY THE SERVICER; THIRD
PARTY CLAIMS.

                  The Servicer shall indemnify the Depositor,  the  Unaffiliated
Seller  and the  Trustee  and hold them  harmless  against  any and all  claims,
losses, damages, penalties,  fines, forfeitures,  reasonable and necessary legal
fees and related costs,  judgments,  and any other costs, fees and expenses that
any of them may sustain in any way related to any breach by the Servicer, of any
of its  representations  and  warranties  referred to in Section  2.03(a) or the
failure of the Servicer to perform its duties and service the Mortgage  Loans in
compliance  with the terms of this  Agreement.  The Servicer  immediately  shall
notify the Depositor, the Unaffiliated Seller and the Trustee if a claim is made
by a third  party  with  respect to any such  breach or failure by the  Servicer
under this  Agreement,  assume (with the prior written consent of the Depositor,
the  Unaffiliated  Seller and the Trustee) the defense of any such claim and pay
all expenses in connection  therewith,  including  reasonable  counsel fees, and
promptly pay,  discharge and satisfy any judgment or decree which may be entered
against it or the Depositor,  the Unaffiliated  Seller or the Trustee in respect
of such  claim;  PROVIDED,  that if it is  determined  that the  Servicer is not
obligated to indemnify such parties in accordance  with this Section 6.05,  each
such party (or the Trust Fund,  if  applicable)  shall  promptly  reimburse  the
Servicer in connection with each of the foregoing payments made to such party by
the Servicer.

                                  ARTICLE VII

                                     DEFAULT

                  Section 7.01 EVENTS OF DEFAULT.

                  "EVENT OF DEFAULT", wherever used herein, means any one of the
following events:

                  (a) any  failure by the  Servicer  to remit to the Trustee any
payment  required to be made under the terms of 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 the Servicer by the Depositor,  by the Class A Certificate  Insurer or by the
Trustee or to the Trustee by Certificateholders  evidencing percentage interests
of at least 25% in the Certificates; or

                  (b)  failure  on the part of the  Servicer  duly to observe or
perform in any material  respect any other of the covenants or agreements on the
part of the Servicer set forth in this Agreement which continues  unremedied for
a period of forty-five days (except that such number of days shall be fifteen in
the case of a failure to pay any premium for any insurance policy required to be
maintained  under  this  Agreement)  after the  earlier of (i) the date on which

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written  notice of such failure,  requiring the same to be remedied,  shall have
been given to the Servicer by the Depositor, by the Class A Certificate Insurer,
or by the  Trustee,  or to the  Trustee by  Certificateholders  of  Certificates
evidencing  percentage  interests of at least 25% in the  Certificates  and (ii)
actual knowledge of such failure by a Servicing Officer of the Servicer; or

                  (c) a decree  or order of a court  or  agency  or  supervisory
authority  having  jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency,  bankruptcy,  readjustment of debt, marshalling
of assets and  liabilities  or similar  proceedings,  or for the  winding-up  or
liquidation  of its affairs,  shall have been  entered  against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for a
period of sixty days; or

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

                  (e) the 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

                  (f) if Fairbanks is no longer acting as Servicer,  any failure
by the Servicer of the Servicer Trigger; or

                  (g) any failure of the Servicer to make any P&I Advance on any
Remittance  Date required to be made from its own funds pursuant to Section 4.01
which  continues  unremedied  for one Business  Day  immediately  following  the
Remittance Date; or

                  (h) a  breach  of  any  representation  and  warranty  of  the
Servicer referred to in Section 2.03(a),  which materially and adversely affects
the interests of the  Certificateholders  and which  continues  unremedied for a
period of thirty days after the date upon which written notice of such breach is
given to the Servicer by the Trustee, by the Class A Certificate  Insurer, or by
the Depositor, or to the Trustee by Certificateholders  entitled to at least 25%
of the Voting Rights in the Certificates or;

                  (i)  for so long as  Fairbanks  is  acting  as  Servicer,  the
occurrence of a Servicer Evaluation Termination.

                  If (i) an Event of Default  described  in clauses  (a) through
(h) of this Section 7.01 shall occur,  then, and in each and every such case, so
long as such Event of Default shall not have been remedied,  the Trustee may, or
at the direction of the Class A Certificate  Insurer,  or of Holders  holding at
least  51% of the  Voting  Rights,  the  Trustee  shall,  or (ii) if an Event of
Default  described  in clause (i) of this  Section  7.01 shall  occur,  then the
Trustee shall,  by notice in writing to the Servicer (with a copy to each Rating
Agency),  terminate all of the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof,  other than
its rights as a Certificateholder hereunder; PROVIDED, HOWEVER, that the Trustee
shall not be required to give written  notice to the Servicer of the  occurrence
of an Event of Default

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<PAGE>

described  in clauses (b) through  (i) of this  Section  7.01 unless and until a
Responsible  Officer of the Trustee has actual  knowledge of the  occurrence  of
such an Event of  Default.  On and after the  receipt  by the  Servicer  of such
written notice, all authority and power of the Servicer hereunder,  whether with
respect to the Mortgage  Loans or otherwise,  shall pass to and be vested in the
Trustee.  The Trustee  shall make any P&I Advance  which the Servicer  failed to
make subject to Section  4.01,  whether or not the  obligations  of the Servicer
have been terminated pursuant to this Section.  The Trustee is hereby authorized
and  empowered  to  execute  and  deliver,   on  behalf  of  the  Servicer,   as
attorney-in-fact or otherwise, 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. Unless expressly provided in such written notice, no such termination
shall affect any  obligation  of the  Servicer to pay amounts  owed  pursuant to
Article VIII. The Servicer agrees to cooperate with the Trustee in effecting the
termination of the Servicer's responsibilities and rights hereunder,  including,
without limitation,  the transfer to the Trustee of all cash amounts which shall
at the time be credited to the  Collection  Account,  or  thereafter be received
with respect to the Mortgage Loans.

                  Notwithstanding  any  termination  of  the  activities  of the
Servicer hereunder,  the Servicer shall be entitled to receive,  out of any late
collection of a Scheduled  Payment on a Mortgage Loan which was due prior to the
notice  terminating such Servicer's rights and obligations as Servicer hereunder
and received  after such notice,  that  portion  thereof to which such  Servicer
would have been entitled pursuant to Section 3.11, and any other amounts payable
to  such  Servicer  hereunder  the  entitlement  to  which  arose  prior  to the
termination of its activities  hereunder in accordance  with Section 3.11 and in
the time period specified in Section 3.11.

                  Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

                  On and  after  the  time the  Servicer  receives  a notice  of
termination  pursuant to Section 3.24 or Section 7.01, the Trustee shall, unless
the Class A  Certificate  Insurer  shall  have  named an  alternative  successor
Servicer  and given  written  notice  thereof to the Trustee of at least 30 days
prior to the  effective  date of the transfer of  servicing  to such  successor,
subject to and to the extent  provided in Section  3.05, be the successor to the
Servicer in its capacity as servicer under this  Agreement and the  transactions
set  forth  or   provided   for   herein   and  shall  be  subject  to  all  the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and  provisions  hereof and applicable law including the obligation
to make P&I  Advances  or  Servicing  Advances  pursuant  to  Section  4.01.  As
compensation  therefor,  the Trustee shall be entitled to all funds  relating to
the Mortgage  Loans that the Servicer  would have been entitled to charge to the
Collection Account or Distribution  Account if the Servicer had continued to act
hereunder  including,  if the  Servicer was  receiving  the  Servicing  Fee, the
Servicing Fee and the income on  investments  or gain related to the  Collection
Account and Distribution Account.

                  Notwithstanding  the foregoing,  if the Trustee has become the
successor to the Servicer in accordance  with Section 7.01,  the Trustee may, if
it shall be unwilling to so act, or shall, if it is prohibited by applicable law
from making P&I Advances and Servicing  Advances  pursuant to Section 4.01 or if
it is  otherwise  unable to so act,  appoint,  or petition a court of  competent
jurisdiction to appoint, any established mortgage loan servicing institution the

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appointment  of which does not adversely  affect the then current  rating of the
Certificates by each Rating Agency,  as the successor to the Servicer  hereunder
in the  assumption  of  all or any  part  of  the  responsibilities,  duties  or
liabilities of the Servicer hereunder. Any successor to the Servicer shall be an
institution  which is a Fannie Mae and FHLMC  approved  seller/servicer  in good
standing,  which has a net worth of at least  $30,000,000,  which is  willing to
service the Mortgage  Loans and which executes and delivers to the Depositor and
the Trustee an agreement accepting such delegation and assignment, containing an
assumption  by such  Person of the  rights,  powers,  duties,  responsibilities,
obligations  and  liabilities  of the Servicer  (other than  liabilities  of the
Servicer  under Section 6.03 incurred prior to termination of the Servicer under
Section  7.01),  with  like  effect  as if  originally  named as a party to this
Agreement;  PROVIDED that each Rating Agency acknowledges that its rating of the
Certificates in effect  immediately prior to such assignment and delegation will
not be  qualified or reduced,  as a result of such  assignment  and  delegation.
Pending  appointment  of a successor  to the  Servicer  hereunder,  the Trustee,
unless  the  Trustee is  prohibited  by law from so  acting,  shall,  subject to
Section 3.05, act in such capacity as hereinabove  provided.  In connection with
such appointment and assumption,  the Trustee 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 the  Servicing  Fee  Rate  and  amounts  paid  to the  Servicer  from
investments.  The Trustee and such successor shall take such action,  consistent
with this  Agreement,  as shall be necessary to effectuate any such  succession.
Neither the Trustee nor any other  successor  servicer  shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making,  any
distribution  hereunder or any portion thereof or any failure to perform, or any
delay in performing,  any duties or responsibilities  hereunder,  in either case
caused by the failure of the  Servicer  to deliver or  provide,  or any delay in
delivering or providing, any cash, information, documents or records to it.

                  Any successor to the Servicer as servicer shall give notice to
the  Mortgagors  of such  change of servicer  and shall,  during the term of its
service as servicer,  maintain in force the policy or policies that the Servicer
is required to maintain pursuant to Section 6.05.

                  Section 7.03 NOTIFICATION TO CERTIFICATEHOLDERS.

                  (a) Upon any  termination  of or appointment of a successor to
the  Servicer,   the  Trustee  shall  give  prompt  written  notice  thereof  to
Certificateholders, the Class A Certificate Insurer, the Unaffiliated Seller and
to each Rating Agency.

                  (b)  Within  60 days  after  the  occurrence  of any  Event of
Default, the Trustee shall transmit by mail to all Certificateholders, the Class
A Certificate  Insurer, the Unaffiliated Seller and each Rating Agency notice of
each such Event of Default hereunder known to the Trustee,  unless such Event of
Default shall have been cured or waived.

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                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

          Section 8.01 DUTIES OF THE TRUSTEE.

          The Trustee,  before the  occurrence  of an Event of Default and after
the curing of all Events of Default that may have occurred,  shall  undertake to
perform such duties and only such duties as are  specifically  set forth in this
Agreement.  In case an Event of Default has  occurred and remains  uncured,  the
Trustee  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.

          The   Trustee,   upon  receipt  of  all   resolutions,   certificates,
statements,  opinions, reports, documents, orders or other instruments furnished
to the Trustee that are  specifically  required to be furnished  pursuant to any
provision of this Agreement shall examine them to determine  whether they are in
the form required by this  Agreement.  The Trustee shall not be responsible  for
the  accuracy or content of any  resolution,  certificate,  statement,  opinion,
report, document, order, or other instrument.

          No  provision  of this  Agreement  shall be  construed  to relieve the
Trustee from liability for its own negligent  action,  its own negligent failure
to act or its own willful misconduct.

          Unless an Event of Default  known to the Trustee has  occurred  and is
continuing,

          (a)  the duties and  obligations  of the Trustee  shall be  determined
solely by the express  provisions  of this  Agreement,  the Trustee shall not be
liable except for the performance of the duties and obligations specifically set
forth in this Agreement,  no implied covenants or obligations shall be read into
this Agreement against the Trustee, and the Trustee 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  and
conforming to the requirements of this Agreement which it believed in good faith
to be  genuine  and  to  have  been  duly  executed  by the  proper  authorities
respecting any matters arising hereunder;

          (b)  the Trustee  shall not be liable for an error of judgment made in
good faith by a  Responsible  Officer or  Responsible  Officers of the  Trustee,
unless it is finally proven that the Trustee was negligent in  ascertaining  the
pertinent facts; and

          (c)  the Trustee shall not be 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 Class A  Certificate  Insurer,  or of Holders of  Certificates
evidencing  not less than 25% of the Voting Rights of  Certificates  relating to
the  time,  method,  and  place of  conducting  any  proceeding  for any  remedy
available to the Trustee,  or exercising  any trust or power  conferred upon the
Trustee under this Agreement.

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          Section 8.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.

          Except as otherwise provided in Section 8.01:

          (a)  the Trustee may request and rely upon and shall be  protected  in
acting or refraining  from acting upon any  resolution,  Officer's  Certificate,
certificate  of  auditors  or  any  other  certificate,  statement,  instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper  party or parties and the  Trustee  shall have no  responsibility  to
ascertain  or confirm  the  genuineness  of any  signature  of any such party or
parties;

          (b)  the Trustee  may  consult  with  counsel,  financial  advisers or
accountants  and  the  advice  of  any  such  counsel,   financial  advisers  or
accountants 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;

          (c)  the Trustee shall not be 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;

          (d)  the Trustee shall not 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 so to do by the Class A  Certificate
Insurer,  or by  Holders  of  Certificates  evidencing  not less than 25% of the
Voting Rights allocated to each Class of Certificates;

          (e)  the Trustee may execute any of the trusts or powers  hereunder or
perform  any  duties   hereunder  either  directly  or  by  or  through  agents,
accountants  or  attorneys  and the  Trustee  shall not be  responsible  for any
misconduct  or negligence  on the part of any agents,  accountants  or attorneys
appointed with due care by it hereunder;

          (f)  the Trustee shall not be required to risk or expend its own funds
or otherwise  incur any  financial  liability in the  performance  of any of its
duties or in the  exercise of any of its rights or powers  hereunder if it shall
have  reasonable  grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it;

          (g)  the Trustee shall not be liable for any loss on any investment of
funds  pursuant  to this  Agreement  (other  than as  issuer  of the  investment
security);

          (h)  the Trustee shall not be deemed to have  knowledge of an Event of
Default until a Responsible  Officer of the Trustee shall have received  written
notice thereof; and

          (i)  the Trustee  shall be under no  obligation to exercise any of the
trusts, rights 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 this  Agreement,
unless such  Certificateholders  shall have  offered to the  Trustee


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reasonable security or indemnity  satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred therein or thereby.

          Section 8.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.

          The recitals  contained herein and in the Certificates  shall be taken
as the statements of the Depositor and the Trustee assumes no responsibility for
their  correctness.  The Trustee makes no  representations as to the validity or
sufficiency of this Agreement or of the  Certificates or of any Mortgage Loan or
related  document  other  than  with  respect  to the  Trustee's  execution  and
countersignature  of the Certificates.  The Trustee shall not be accountable for
the use or application by the Depositor or the Servicer of any funds paid to the
Depositor or the  Servicer in respect of the  Mortgage  Loans or deposited in or
withdrawn from the Collection Account by the Depositor or the Servicer.

          The Trustee shall have no  responsibility  for filing or recording any
financing  or  continuation  statement  in any  public  office at any time or to
otherwise  perfect or maintain the  perfection of any security  interest or lien
granted to it  hereunder  (unless  the Trustee  shall have become the  successor
Servicer).

          The Trustee executes the  Certificates not in its individual  capacity
but  solely as  Trustee of the Trust  Fund  created  by this  Agreement,  in the
exercise  of the  powers  and  authority  conferred  and  vested  in it by  this
Agreement.  Each of the  undertakings  and  agreements  made on the  part of the
Trustee on behalf of the Trust Fund in the Certificates is made and intended not
as a personal  undertaking  or agreement by the Trustee but is made and intended
for the purpose of binding only the Trust Fund.

          Section 8.04 TRUSTEE MAY OWN CERTIFICATES.

          The Trustee in its  individual  or any other  capacity  may become the
owner or pledgee  of  Certificates  with the same  rights as it would have if it
were not the Trustee.

          Section 8.05 TRUSTEE'S FEES AND EXPENSES.

          (a)  As  compensation  for its activities  under this  Agreement,  the
Trustee may withdraw from the Distribution Account on each Distribution Date the
Trustee Fee for the  Distribution  Date. The Trustee and any director,  officer,
employee,  or agent of the Trustee shall be indemnified by the Servicer  against
any loss, liability, or expense (including reasonable attorney's fees) resulting
from  any  failure  by the  Servicer  to  perform  its  obligations  under  this
Agreement. This indemnity shall survive the termination of this Agreement or the
resignation or removal of the Trustee under this Agreement.

          The Trustee shall not be entitled to payment or reimbursement from the
Unaffiliated  Seller for any routine ongoing expenses incurred by the Trustee in
the ordinary course of its duties as Trustee,  Registrar,  or paying agent under
this Agreement or for any other expenses,  including  indemnification  payments,
except as set forth herein.

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          Section 8.06 ELIGIBILITY REQUIREMENTS FOR THE TRUSTEE.

          The  Trustee  hereunder  shall  at  all  times  be  a  corporation  or
association organized and doing business under the laws of a 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,  subject
to supervision  or  examination by federal or state  authority and with a credit
rating  which  would not cause  either of the Rating  Agencies  to reduce  their
respective  then current  ratings of the  Certificates  (or having provided such
security  from  time  to time as is  sufficient  to  avoid  such  reduction)  as
evidenced in writing by each Rating Agency.  If such  corporation or association
publishes  reports of  condition  at least  annually,  pursuant to law or to the
requirements of the aforesaid  supervising or examining authority,  then for the
purposes  of  this  Section  8.06  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  condition so  published.  In
case at any time the Trustee shall cease to be eligible in accordance  with this
Section 8.06,  the Trustee shall resign  immediately  in the manner and with the
effect  specified in Section 8.07. The entity serving as Trustee may have normal
banking and trust  relationships  with the Depositor  and its  affiliates or the
Servicer and its affiliates;  PROVIDED,  HOWEVER,  that such entity cannot be an
affiliate of the Depositor,  the Unaffiliated  Seller or the Servicer other than
the Trustee in its role as successor to the Servicer.

          Section 8.07 RESIGNATION AND REMOVAL OF THE TRUSTEE.

          The Trustee may at any time resign and be  discharged  from the trusts
hereby created by giving  written  notice of  resignation to the Depositor,  the
Servicer,  the Class A Certificate Insurer, the Unaffiliated Seller, each Rating
Agency not less than 60 days before the date  specified  in such  notice,  when,
subject to Section 8.08, such resignation is to take effect, and acceptance by a
successor trustee in accordance with Section 8.08 meeting the qualifications set
forth in Section 8.06. If no successor trustee meeting such qualifications shall
have been so appointed  and have accepted  appointment  within 30 days after the
giving of such notice or  resignation,  the  resigning  Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.

          If at any time the Trustee  shall  cease to be eligible in  accordance
with Section 8.06 and shall fail to resign after written  request thereto by the
Depositor,  or if at any time the Trustee shall become  incapable of acting,  or
shall be adjudged as bankrupt or  insolvent,  or a receiver of the Trustee or of
its property  shall be  appointed,  or any public  officer  shall take charge or
control  of the  Trustee  or of its  property  or  affairs  for the  purpose  of
rehabilitation, conservation or liquidation, or a tax is imposed with respect to
the Trust  Fund by any state in which the  Trustee  or the Trust Fund is located
and the  imposition  of such  tax  would  be  avoided  by the  appointment  of a
different trustee, then the Depositor or the Servicer may remove the Trustee and
appoint a successor  trustee  reasonably  acceptable  to the Class A Certificate
Insurer  by  written  instrument,  in  triplicate,  one copy of  which  shall be
delivered to the Trustee, one copy to the Servicer and one copy to the successor
trustee.

          The  Class  A  Certificate  Insurer  or the  Holders  of  Certificates
entitled to at least 51% of the Voting Rights may at any time remove the Trustee
and  appoint a  successor  trustee  by written  instrument  or  instruments,  in
triplicate,  signed by such Holders or their  attorneys-in-fact

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duly  authorized,  one complete set of which shall be delivered by the successor
Trustee to the  Servicer,  one  complete  set to the  Trustee so removed and one
complete set to the successor so appointed.  The successor  trustee shall notify
each Rating Agency of any removal of the Trustee.

          Any  resignation  or  removal  of the  Trustee  and  appointment  of a
successor  trustee  pursuant to this Section 8.07 shall  become  effective  upon
acceptance of appointment by the successor trustee as provided in Section 8.08.

          Section 8.08 SUCCESSOR TRUSTEE.

          Any  successor  trustee  appointed  as provided in Section  8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and  the  Servicer  an  instrument  accepting  such  appointment  hereunder  and
thereupon the  resignation  or removal of the  predecessor  trustee shall become
effective  and  such  successor  trustee,  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 herein.  The Depositor,  the Class A Certificate  Insurer,  the
Servicer and the predecessor  trustee 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 all such  rights,
powers, duties, and obligations.

          No  successor  trustee  shall accept  appointment  as provided in this
Section  8.08 unless at the time of its  acceptance,  the  successor  trustee is
eligible under Section 8.06 and its  appointment  does not adversely  affect the
then current rating of the Certificates.

          Upon  acceptance of appointment by a successor  trustee as provided in
this Section  8.08,  the Depositor  shall mail notice of the  succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice  within 10 days after  acceptance  of  appointment  by the successor
trustee,  the  successor  trustee  shall  cause such  notice to be mailed at the
expense of the Depositor.

          Section 8.09 MERGER OR CONSOLIDATION OF THE TRUSTEE.

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

          Section 8.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

          Notwithstanding  any other provisions of this Agreement,  at any time,
for the purpose of meeting any legal  requirements of any  jurisdiction in which
any part of the Trust Fund or property  securing  any  Mortgage  Note may at the
time be located,  the Servicer  and the Trustee  acting  jointly  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 the
Trust Fund, and

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<PAGE>


to vest in such Person or Persons,  in such  capacity and for the benefit of the
Certificateholders,  such title to the Trust Fund or any part thereof, whichever
is applicable,  and,  subject to the other provisions of this Section 8.10, such
powers, duties,  obligations,  rights and trusts as the Servicer and the Trustee
may  consider  appropriate.  If the  Servicer  shall  not  have  joined  in such
appointment  within 15 days after the receipt by it of a request to do so, or in
the case an Event of Default shall have occurred and be continuing,  the Trustee
alone shall have the power to make such  appointment.  No co-trustee or separate
trustee  hereunder  shall be  required  to meet the  terms of  eligibility  as a
successor trustee under Section 8.06 and no notice to  Certificateholders of the
appointment  of any  co-trustee  or separate  trustee  shall be  required  under
Section 8.08.

          Every separate  trustee and co-trustee  shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

          (a)  To the  extent  necessary  to  effectuate  the  purposes  of this
Section 8.10, all rights,  powers,  duties and obligations  conferred or imposed
upon the Trustee,  except for the obligation of the Trustee under this Agreement
to advance funds on behalf of the  Servicer,  shall be conferred or imposed upon
and  exercised  or  performed  by the  Trustee  and  such  separate  trustee  or
co-trustee jointly (it being understood that such separate trustee or co-trustee
is not  authorized to act separately  without the Trustee  joining in such act),
except  to the  extent  that  under  any law of any  jurisdiction  in which  any
particular act or acts are to be performed  (whether as Trustee  hereunder or as
successor  to the  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 the applicable  Trust
Fund or any portion  thereof in any such  jurisdiction)  shall be exercised  and
performed  singly by such  separate  trustee  or  co-trustee,  but solely at the
direction of the Trustee;

          (b)  No trustee  hereunder shall be held personally  liable because of
any act or omission of any other trustee  hereunder and such  appointment  shall
not,  and  shall not be deemed  to,  constitute  any such  separate  trustee  or
co-trustee as agent of the Trustee;

          (c)  The Trustee may at any time accept the  resignation  of or remove
any separate trustee or co-trustee; and

          (d)  The  Trustee,  and not the  Servicer,  shall  be  liable  for the
payment of reasonable  compensation and expenses to any such separate trustee or
co-trustee  from the Trustee  Fee  payable to the  Trustee on each  Distribution
Date.

          Any notice,  request or other  writing  given to the Trustee  shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and 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 trusts 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  and indemnity to, the
Trustee.  Every  such  instrument  shall be filed  with the  Trustee  and a copy
thereof given to the Servicer and the Depositor.

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<PAGE>


          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.

          Section 8.11 TAX MATTERS.

          As set forth in the Preliminary Statement, the assets within the Trust
Fund for  which any  REMIC  election  is to be made  shall  constitute,  and the
conduct  of  matters  relating  to such  assets  shall  be  consistent  with the
treatment  of such assets as, a REMIC.  To this end, the Trustee  covenants  and
agrees to act as agent (and the Trustee is hereby  appointed to act as agent) on
behalf of any REMIC created hereunder, and that in such capacity it shall:

          (a)  prepare and file in a timely manner,  a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted by
the Internal  Revenue  Service)  and prepare and file with the Internal  Revenue
Service and applicable state or local tax authorities  income tax or information
returns  for each  taxable  year  with  respect  to any REMIC  described  in the
Preliminary  Statement  containing such  information and at the times and in the
manner as may be required  by the Code or state or local tax laws,  regulations,
or rules,  and  furnish  to  Certificateholders  the  schedules,  statements  or
information at such times and in such manner as may be required thereby;

          (b)  within thirty days of the Closing  Date,  furnish to the Internal
Revenue  Service on Form 8811 or as otherwise  may be required by the Code,  the
name, title, address, and telephone number of the person that the holders of the
Certificates  may contact for tax information  relating  thereto,  together with
such  additional  information  as may be required by such Form,  and update such
information at the time or times in the manner required by the Code;

          (c)  make an election  that each of the Lower Tier REMIC and the Upper
Tier REMIC be treated as a REMIC on the federal tax return for its first taxable
year (and, if necessary, under applicable state law);

          (d)  prepare and forward to the Certificateholders and to the Internal
Revenue  Service  and, if  necessary,  state tax  authorities,  all  information
returns  and reports as and when  required to be provided to them in  accordance
with the REMIC  Provisions,  including  the  calculation  of any original  issue
discount  using  the  Prepayment   Assumption  (as  defined  in  the  Prospectus
Supplement);

          (e)  provide information  necessary for the computation of tax imposed
on the  transfer of a Residual  Certificate  to a Person that is not a Permitted
Transferee,  or an agent  (including a broker,  nominee or other middleman) of a
Non-Permitted  Transferee,  or a  pass-through  entity in which a  Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and  furnishing  such  information  may be charged to the Person liable for such
tax);

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<PAGE>


          (f)  to the extent that they are under its  control,  conduct  matters
relating to such assets at all times that any Certificates are outstanding so as
to maintain the status as a REMIC under the REMIC Provisions;

          (g)  not  knowingly or  intentionally  take any action or omit to take
any action that would  cause the  termination  of the REMIC  status of any REMIC
created hereunder;

          (h)  pay,  from the sources  specified  in the last  paragraph of this
Section  8.11,  the amount of any  federal or state  tax,  including  prohibited
transaction  taxes as described  below,  imposed on any REMIC created  hereunder
before its  termination  when and as the same shall be due and payable (but such
obligation  shall not prevent the Trustee or any other  appropriate  Person from
contesting  any such tax in  appropriate  proceedings  and shall not prevent the
Trustee from  withholding  payment of such tax, if permitted by law, pending the
outcome of such proceedings);

          (i)  cause federal,  state or local income tax or information  returns
to be signed by the Trustee or such other person as may be required to sign such
returns by the Code or state or local laws, regulations or rules;

          (j)  maintain  records  relating  to  each  REMIC  created  hereunder,
including the income,  expenses,  assets, and liabilities  thereof on a calendar
year basis and on the accrual method of accounting and the fair market value and
adjusted basis of the assets  determined at such intervals as may be required by
the Code,  as may be  necessary  to prepare the  foregoing  returns,  schedules,
statements or information; and

          (k)  as and when  necessary  and  appropriate,  represent  each  REMIC
created hereunder in any administrative or judicial  proceedings  relating to an
examination  or  audit  by  any  governmental   taxing  authority,   request  an
administrative  adjustment  as  to  any  taxable  year  of  each  REMIC  created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations  relating to any tax item of any REMIC created
hereunder,  and  otherwise  act on behalf of the  REMIC in  relation  to any tax
matter or controversy involving it.

          The Trustee  shall treat the rights of the Class P  Certificateholders
to  Prepayment  Charges as the  beneficial  ownership  of interests in a grantor
trust,  and not as an  obligation of any REMIC  created  hereunder,  for federal
income tax purposes.

          To enable the Trustee to perform its duties under this Agreement,  the
Depositor  shall  provide to the Trustee  within ten days after the Closing Date
all  information or data that the Trustee  requests in writing and determines to
be  relevant  for tax  purposes to the  valuations  and  offering  prices of the
Certificates,  including the price, yield, prepayment assumption,  and projected
cash flows of the Certificates and the Mortgage Loans.  Moreover,  the Depositor
shall provide  information to the Trustee  concerning the value to each Class of
Certificates  of the right to receive Basis Risk  CarryForward  Amounts from the
Excess  Reserve Fund Account.  Thereafter,  the  Depositor  shall provide to the
Trustee  promptly upon written  request  therefor any additional  information or
data that the Trustee may, from time to time,  reasonably  request to enable the
Trustee  to perform  its  duties  under this  Agreement.  The  Depositor  hereby

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indemnifies  the  Trustee  for any  losses,  liabilities,  damages,  claims,  or
expenses  of the  Trustee  arising  from any  errors or  miscalculations  of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

          If 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  contribution  to the REMIC after the Startup Day  pursuant to
Section 860G(d) of the Code, or any other tax is imposed,  including any minimum
tax imposed on the REMIC  pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for herein, the tax
shall be paid by (i) the  Trustee  if such tax  arises  out of or  results  from
negligence of the Trustee in the  performance  of any of its  obligations  under
this  Agreement,  (ii) the  Servicer if such tax arises out of or results from a
breach by the Servicer of any of its obligations under this Agreement, (iii) the
Unaffiliated  Seller  shall pay if such tax arises  out of or  results  from the
Unaffiliated  Seller's  obligation  to  repurchase a Mortgage  Loan  pursuant to
Section 2.03, or (iv) in all other cases, or if the Trustee, the Servicer or the
Unaffiliated  Seller fails to honor its obligations  under the preceding clauses
(i) or (ii), any such tax will be paid with amounts  otherwise to be distributed
to the Certificateholders, as provided in Section 4.02(a).

          Section 8.12 PERIODIC FILINGS.

          (a)  The Trustee and the Servicer shall reasonably  cooperate with the
Depositor in connection with the Trust's  satisfying the reporting  requirements
under the Securities Exchange Act of 1934, as amended. The Trustee shall prepare
on behalf of the Trust any Forms 8-K and 10-K  customary for similar  securities
as required by the Exchange Act and the Rules and  Regulations of the Securities
and Exchange Commission (the "SEC") thereunder,  and the Trustee shall file (via
the SEC's  Electronic  Data Gathering and Retrieval  System) such Forms with the
SEC on behalf of the  Depositor.  The  Depositor  hereby grants to the Trustee a
limited power of attorney to execute and file each such Form 8-K but only to the
extent no  accompanying  certification  is required to be filed on behalf of the
Depositor. Such power of attorney shall continue until either the earlier of (i)
receipt by the Trustee from the Depositor of written  termination  of such power
of attorney and (ii) the  termination of the Trust.  The Depositor shall execute
the Form 10-Ks.  The Trustee shall have no liability with respect to any failure
to properly prepare or file such periodic reports  resulting from or relating to
the Trustee's  inability or failure to obtain any information not resulting from
its own negligence or willful misconduct.

          (b)  Each Form 8-K shall be filed by the  Trustee  with the SEC within
15 days after each  Distribution  Date,  including a Form 8-K with a copy of the
statement to the  Certificateholders  for such  Distribution  Date as an exhibit
thereto.  Prior to March  30th of each  year  (or  such  earlier  date as may be
required by the  Exchange  Act and the Rules and  Regulations  of the SEC),  the
Trustee shall file a Form 10-K, in substance.  as required by applicable  law or
the SEC's staff  interpretations.  Such Form 10-K shall  include as exhibits the
Servicer's  annual  statement of compliance  described  under Section 3.22 (upon
which the Trustee may rely) and the accountant's  report described under Section
3.23, in each case to the extent they have been timely delivered to the Trustee.
If they are not so timely delivered, the Trustee shall file an amended Form 10-K
including  such  documents  as  exhibits  reasonably  promptly  after  they  are

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delivered to the Trustee.  The Form 10-K shall also include a  certification  in
the form  attached  hereto as Exhibit M (the  "CERTIFICATION"),  which  shall be
signed by the senior officer of the Depositor in charge of  securitization.  The
Trustee  shall prepare and deliver each Form 10-K to the Depositor for execution
no later than March 20th (or if such day is not a Business Day, the  immediately
preceding  Business Day) of each year.  The Depositor  shall return the executed
Form 10-K to the  Trustee for filing no later than March 25th (or if such day is
not a Business Day, the immediately preceding Business Day) of each year.

          (c)  Notwithstanding  that the  Certification  is to be  signed  by an
officer of the  Depositor,  a  Responsible  Officer of the Trustee  shall sign a
certification,  in the form attached  hereto as Exhibit N for the benefit of the
Depositor  and its  officers,  directors  and  Affiliates  in respect of items 1
through 3 thereof of the  Certification  (PROVIDED,  HOWEVER,  that the  Trustee
shall not  undertake  an  analysis  of the  accountant's  report  attached as an
exhibit  to the Form  10-K),  and a  Servicing  Officer of the  Servicer  who is
responsible  for the servicing and  administration  of the Mortgage  Loans shall
sign a certification in the form attached hereto as Exhibit N for the benefit of
the  Depositor,  the  Trustee  and  their  respective  officers,  directors  and
Affiliates  in  respect  of  items  4  and 5 of  the  Certification.  Each  such
certification   shall  be  delivered  to  the  Depositor  and  the  Trustee  (as
applicable),  no later  than  March  10th of each  year (or if such day is not a
Business Day, the  immediately  preceding  Business Day) and the Depositor shall
deliver the Certification to be filed to the Trustee no later than March 20th of
each  year (or if such day is not a  Business  Day,  the  immediately  preceding
Business  Day).  In the event that prior to the filing  date of the Form 10-K in
March of each  year,  the  Trustee  or the  Servicer  has  actual  knowledge  of
information material to the Certification,  that party shall promptly notify the
Depositor and each of the other parties signing the certifications. In addition,
(i) the  Trustee  shall  indemnify  and  hold  harmless  the  Depositor  and its
officers,  directors  and  Affiliates  from and  against  any  losses,  damages,
penalties,  fines, forfeitures,  reasonable and necessary legal fees and related
costs,  judgments and other costs and expenses  arising out of or based upon any
breach of the Trustee's  obligations under this Section 8.12(c) or the Trustee's
negligence, bad faith or willful misconduct in connection therewith and (ii) the
Servicer shall indemnify and hold harmless the Depositor,  the Trustee and their
respective  officers,  directors  and  Affiliates  from and  against any losses,
damages, penalties, fines, forfeitures,  reasonable and necessary legal fees and
related  costs,  judgments and other costs and expenses  arising out of or based
upon any breach of the Servicer's  obligations under this Section 8.12(c) or the
Servicer's negligence,  bad faith or willful misconduct in connection therewith.
If the  indemnification  provided for herein is unavailable or  insufficient  to
hold harmless the indemnified  party,  then (i) the Trustee agrees in connection
with a breach of the  Trustee's  obligations  under this Section  8.12(c) or the
Trustee's  negligence,  bad faith or willful misconduct in connection  therewith
that it shall  contribute  to the amount paid or payable by the  Depositor  as a
result of the losses,  claims,  damages or  liabilities of the Depositor in such
proportion as is  appropriate  to reflect the relative fault of the Depositor on
the one hand and the Trustee on the other and (ii) the  Servicer  agrees that it
shall  contribute  to the amount  paid or payable  by the  Depositor  and/or the
Trustee  as a result  of the  losses,  claims,  damages  or  liabilities  of the
Depositor and/or the Trustee in such proportion as is appropriate to reflect the
relative  fault of the Depositor or the Trustee,  as the case may be, on the one
hand and the Servicer on the other in connection with a breach of the Servicer's
obligations under this Section 8.12(c) or the Servicer's  negligence,  bad faith
or willful misconduct in connection therewith.

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          (d)  Upon any filing with the Securities and Exchange Commission,  the
Trustee shall promptly  deliver to the Depositor and the  Unaffiliated  Seller a
copy of any such executed report, statement or information.

          (e)  Prior to  January  30 of the first  year in which the  Trustee is
able to do so under  applicable  law,  the Trustee  shall,  in  accordance  with
applicable  law,  file a Form 15D  Suspension  Notification  with respect to the
Trust Fund in a timely manner.

          Section 8.13 TAX CLASSIFICATION OF CERTAIN ACCOUNTS.

          For federal  income tax  purposes,  the Trustee shall treat the Excess
Reserve Fund Account as an outside reserve fund,  within the meaning of Treasury
Regulation  ss.  1.860G-2(h),  that is  beneficially  owned by the holder of the
Class X  Certificate.  The  Trustee  shall  treat the rights  that each Class of
Certificates has to receive payments of Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account as rights to receive payments under an interest rate
cap contract  written by the Class X  Certificateholder  in favor of each Class.
Accordingly,  each  Class of  Certificates  (excluding  the Class X, Class P and
Class R  Certificates)  will  comprise  two  components  - an Upper Tier Regular
Interest and an interest in a notional  principal  contract.  The Trustee  shall
allocate the issue price for a Class of Certificates between such two components
for purposes of determining  the issue price of the Upper Tier Regular  Interest
component based on information received from the Depositor.

          Section  8.14 CAP  AGREEMENT.  The  Trustee is hereby  authorized  and
directed  to execute  and  deliver  the Cap  Agreement  and to  acknowledge  the
provisions thereof.

                                   ARTICLE IX

                                   TERMINATION

          Section 9.01  TERMINATION UPON LIQUIDATION OR PURCHASE OF THE MORTGAGE
LOANS.

          Subject to Section 9.03, the obligations and  responsibilities  of the
Depositor, the Servicer and the Trustee created hereby with respect to the Trust
Fund  shall  terminate  upon the  earlier of (a) the  purchase,  on or after the
applicable   Optional   Termination  Date,  by  the  Servicer  or  the  Class  X
Certificateholders of all Mortgage Loans (and REO Properties) at the price equal
to the sum of (i) 100% of the Stated  Principal  Balance of each  Mortgage  Loan
(other  than in respect  of REO  Property)  plus one  month's  accrued  interest
thereon at the applicable  Adjusted Mortgage Rate and (ii) the lesser of (x) the
appraised  value  of  any  REO  Property  as  determined  by the  higher  of two
appraisals  completed by two independent  appraisers selected by the Servicer at
the  expense  of the  Servicer  and (y) the  Stated  Principal  Balance  of each
Mortgage Loan related to any REO Property,  in each case plus accrued and unpaid
interest thereon at the applicable  Adjusted Net Mortgage Rate and (b) the later
of (i) the maturity or other  liquidation (or any Advance with respect  thereto)
of the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO  Property and (ii) the  distribution  to  Certificateholders  of all amounts
required to be distributed to them pursuant to this Agreement. In no event shall
the trusts  created hereby  continue  beyond the expiration of 21 years from the
death of the survivor of the

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descendants  of Joseph P. Kennedy,  the late  Ambassador of the United States to
the Court of St. James's, living on the date hereof.

          No such purchase will be permitted  without the consent of the Class A
Certificate  Insurer,  unless no draw on the Class A Insurance  Policy  would be
made or unreimbursed on the final Distribution Date.

          Section 9.02 FINAL DISTRIBUTION ON THE CERTIFICATES.

          If on any Determination  Date, the Servicer  determines that there are
no  Outstanding  Mortgage  Loans and no other  funds or assets in the Trust Fund
other than the funds in the  Collection  Account,  the Servicer shall direct the
Trustee promptly to send a Notice of Final Distribution each  Certificateholder.
If the Servicer or the Class X  Certificateholder  elects to terminate the Trust
Fund  pursuant to clause (a) of Section 9.01, at least 20 days prior to the date
the   Notice  of  Final   Distribution   is  to  be   mailed  to  the   affected
Certificateholders  such  electing  party  shall  notify the  Depositor  and the
Trustee of the date the  Servicer  or the Class X  Certificateholder  intends to
terminate the Trust Fund and of the applicable  repurchase price of the Mortgage
Loans and REO Properties.

          A Notice of Final  Distribution,  specifying the Distribution  Date on
which  Certificateholders  may surrender their  Certificates  for payment of the
final  distribution and cancellation,  shall be given promptly by the Trustee by
letter to Certificateholders  mailed not earlier than the 10th day and not later
than  the  15th  day of the  month  next  preceding  the  month  of  such  final
distribution.  Any such  Notice  of Final  Distribution  shall  specify  (a) the
Distribution Date upon which final distribution on the Certificates will be made
upon   presentation   and  surrender  of  Certificates  at  the  office  therein
designated,  (b) the amount of such final distribution,  (c) the location of the
office or agency at which such  presentation and surrender must be made, and (d)
that the Record  Date  otherwise  applicable  to such  Distribution  Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified.  The Trustee will give such Notice
of Final  Distribution  to each  Rating  Agency at the time such Notice of Final
Distribution is given to Certificateholders.

          In the event such Notice of Final  Distribution is given, the Servicer
shall  cause all funds in the  Collection  Account to be remitted to the Trustee
for  deposit  in the  Distribution  Account  on the  Business  Day  prior to the
applicable  Distribution  Date in an amount equal to the final  distribution  in
respect of the  Certificates.  Upon such final deposit with respect to the Trust
Fund and the  receipt by the  Trustee of a Request  for  Release  therefor,  the
Trustee  shall  promptly  release to the  Servicer the  Custodial  Files for the
Mortgage Loans.

          Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in each case on
the final  Distribution  Date and in the order set  forth in  Section  4.02,  in
proportion  to  their   respective   Percentage   Interests,   with  respect  to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates  (except the Class X Certificate),  the Certificate Balance
thereof plus for each such Class and the Class X  Certificate  accrued  interest
thereon  in the  case  of an  interest-bearing  Certificate  and  (ii) as to the
Residual  Certificates,  the  amount,  if any,  which  remains on deposit

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in the  Distribution  Account  (other than the amounts  retained to meet claims)
after application pursuant to clause (i) above.

          In the event that any affected  Certificateholders shall not surrender
Certificates for cancellation  within six months after the date specified in the
above mentioned  written notice,  the Trustee shall give a second written notice
to  the  remaining   Certificateholders  to  surrender  their  Certificates  for
cancellation and receive the final distribution with respect thereto.  If within
six months after the second  notice all the  applicable  Certificates  shall not
have been surrendered for cancellation,  the Trustee may take appropriate steps,
or may appoint an agent to take  appropriate  steps,  to contact  the  remaining
Certificateholders  concerning  surrender  of their  Certificates,  and the cost
thereof  shall be paid out of the funds and other  assets which remain a part of
the Trust  Fund.  If within one year after the  second  notice all  Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be  entitled  to all  unclaimed  funds and other  assets of the Trust Fund
which remain subject hereto.

          Section 9.03 ADDITIONAL TERMINATION REQUIREMENTS.

          In the  event  the  Servicer  or the  Class  X  Certificateholder,  as
applicable,  exercises its purchase option with respect to the Mortgage Loans as
provided in Section 9.01, the Trust Fund shall be terminated in accordance  with
the following additional requirements, unless the Trustee has been supplied with
an  Opinion  of  Counsel,  at  the  expense  of the  Servicer  or  the  Class  X
Certificateholder,  as applicable, to the effect that the failure to comply with
the  requirements  of this Section 9.03 will not (i) result in the imposition of
taxes on "prohibited transactions" on either REMIC as defined in Section 860F of
the Code,  or (ii) cause  either the Lower Tier REMIC or the Upper Tier REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding:

          (a)  The Trustee shall sell all of the assets of the Trust Fund to the
Servicer or the Class X Certificateholder, as applicable, and, within 90 days of
such sale, shall distribute to the  Certificateholders the proceeds of such sale
in  complete  liquidation  of each of the Lower  Tier  REMIC and the Upper  Tier
REMIC.

          (b)  The Trustee shall attach a statement to the final federal  income
tax return  for each of the Lower  Tier  REMIC and the Upper Tier REMIC  stating
that pursuant to Treasury  Regulation ss. 1.860F-1,  the first day of the 90-day
liquidation  period for each such REMIC was the date on which the  Trustee  sold
the assets of the Trust Fund to the  Servicer or the Class X  Certificateholder,
as applicable.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

          Section 10.01 AMENDMENT.

          This  Agreement may be amended from time to time (x) by the Depositor,
the  Servicer  and the Trustee,  with the prior  written  consent of the Class A
Certificate  Insurer, (y) with the consent of the Unaffiliated Seller unless the
Trustee receives an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund)  stating that

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the amendment will not adversely affect the Unaffiliated Seller, but (z) without
the  consent  of any of the  Certificateholders  (i) to cure  any  ambiguity  or
mistake,  (ii) to correct any defective  provision  herein or to supplement  any
provision  herein which may be  inconsistent  with any other  provision  herein,
(iii) to add to the duties of the  Depositor  or the  Servicer,  (iv) to add any
other provisions with respect to matters or questions  arising  hereunder or (v)
to  modify,  alter,  amend,  add to or  rescind  any of the terms or  provisions
contained in this Agreement;  PROVIDED, that any action pursuant to clauses (iv)
or (v) above shall not, as evidenced by an Opinion of Counsel  (which Opinion of
Counsel  shall not be an expense of the  Trustee or the Trust  Fund),  adversely
affect in any  material  respect the  interests  of any  Certificateholder;  and
PROVIDED, FURTHER, that the amendment shall not be deemed to adversely affect in
any  material  respect the  interests  of the  Certificateholders  if the Person
requesting  the amendment  obtains a letter from each Rating Agency stating that
the  amendment  would  not  result  in  the  downgrading  or  withdrawal  of the
respective  ratings then assigned to the  Certificates;  it being understood and
agreed that any such letter in and of itself will not represent a  determination
as to the  materiality of any such amendment and will represent a  determination
only as to the credit issues affecting any such rating.

          In addition,  this Agreement may also be amended from time to time (x)
by the Trustee,  the Depositor and the Servicer,  with the prior written consent
of the Class A Certificate Insurer, and (y) with the consent of the Unaffiliated
Seller  unless the  Trustee  receives  an Opinion of Counsel  (which  Opinion of
Counsel  shall not be an expense of the Trustee or the Trust Fund)  stating that
the amendment will not adversely affect the Unaffiliated Seller, but (z) without
the consent of the Certificateholders, to modify, eliminate or add to any of its
provisions  to such extent as shall be  necessary or helpful to (i) maintain the
qualification  of the Lower Tier REMIC and the Upper Tier REMIC  under the Code,
(ii) avoid or minimize the risk of the  imposition  of any tax on the Lower Tier
REMIC or the Upper Tier REMIC  pursuant to the Code that would be a claim at any
time prior to the final  redemption of the Certificates or (iii) comply with any
other requirements of the Code; PROVIDED,  that the Trustee has been provided an
Opinion of Counsel,  which opinion  shall be an expense of the party  requesting
such opinion but in any case shall not be an expense of the Trustee or the Trust
Fund, to the effect that such action is necessary or helpful to, as  applicable,
(i)  maintain  such  qualification,  (ii)  avoid  or  minimize  the  risk of the
imposition of such a tax or (iii) comply with any such requirements of the Code.

          This  Agreement  may  also be  amended  from  time to time  (x) by the
Depositor,  the Servicer and the Trustee,  with the prior written consent of the
Class A Certificate  Insurer,  (y) with the consent of the  Unaffiliated  Seller
unless the  Trustee  receives  an Opinion of Counsel  (which  Opinion of Counsel
shall not be an  expense  of the  Trustee or the Trust  Fund)  stating  that the
amendment will not adversely affect the Unaffiliated  Seller, and (z), except as
set forth in  Section  3.27,  with the  consent of the  Holders of  Certificates
evidencing  Percentage Interests aggregating not less than 66-2/3% of each Class
of Certificates  (based on the aggregate  outstanding  principal balance of such
class at such time) affected  thereby,  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  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

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consent of the  Holders of  Certificates  of such Class  evidencing,  as to such
Class,  Percentage Interests  aggregating not less than 66-2/3%, or (iii) reduce
the aforesaid  percentages of Certificates  the Holders of which are required to
consent to any such  amendment,  without  the consent of the Holders of all such
Certificates then outstanding.

          Notwithstanding any contrary provision of this Agreement,  the Trustee
shall not consent to any amendment to this Agreement  unless it shall have first
received an Opinion of  Counsel,  which  opinion  shall not be an expense of the
Trustee or the Trust Fund, to the effect that such  amendment will not cause the
imposition of any tax on any REMIC or the  Certificateholders or cause any REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

          Notwithstanding  the foregoing  provisions of this Section 10.01, with
respect to any amendment that significantly modifies the permitted activities of
the  Trustee  or  the  Servicer,  any  Certificate  beneficially  owned  by  the
Depositor,  the Unaffiliated Seller or any of their respective  Affiliates shall
be deemed not to be outstanding  (and shall not be considered  when  determining
the percentage of  Certificateholders  consenting or when  calculating the total
number of  Certificates  entitled to consent) for purposes of determining if the
requisite  consents of  Certificateholders  under this  Section  10.01 have been
obtained.

          Promptly  after  the  execution  of any  amendment  to this  Agreement
requiring the consent of  Certificateholders,  the Trustee shall furnish written
notification   of  the   substance   or  a  copy  of  such   amendment  to  each
Certificateholder and each Rating Agency.

          It shall not be necessary for the consent of Certificateholders  under
this Section 10.01 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 may prescribe.

          Nothing in this  Agreement  shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund),  satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements  for amending  this  Agreement  have been complied  with;  and (ii)
either (A) the amendment does not adversely  affect in any material  respect the
interests  of any  Certificateholder  or (B) the  conclusion  set  forth  in the
immediately  preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

          Section 10.02 RECORDATION OF AGREEMENT; COUNTERPARTS.

          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 Servicer at its expense,  but only upon
receipt of an Opinion of Counsel to the effect that such recordation  materially
and beneficially affects the interests of the Certificateholders.

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          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 10.03 GOVERNING LAW.

          THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY
THE SUBSTANTIVE  LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE  PERFORMED  IN THE  STATE  OF NEW  YORK AND THE  OBLIGATIONS,  RIGHTS  AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

          Section 10.04 INTENTION OF PARTIES.

          It is the express intent of the parties hereto that the conveyance (i)
of the  Mortgage  Loans  by the  Depositor  and  (ii) of the  Trust  Fund by the
Depositor to the Trustee each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that,  notwithstanding the intent of the
parties,  such assets are held to be the property of the Depositor,  as the case
may be, or if for any other reason this  Agreement is held or deemed to create a
security interest in either such assets, then (i) this Agreement shall be deemed
to be a security  agreement within the meaning of the Uniform Commercial Code of
the State of New York and (ii) the  conveyances  provided for in this  Agreement
shall be deemed to be an assignment and a grant by the Depositor to the Trustee,
for the benefit of the Certificateholders,  of a security interest in all of the
assets transferred, whether now owned or hereafter acquired.

          The  Depositor  for the benefit of the  Certificateholders  and of the
Class A Certificate Insurer shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure  that,  if this  Agreement  were
deemed to create a security  interest in the Trust Fund, such security  interest
would be deemed to be a  perfected  security  interest of first  priority  under
applicable  law  and  will be  maintained  as such  throughout  the  term of the
Agreement.  The Depositor  shall arrange for filing any Uniform  Commercial Code
continuation  statements in  connection  with any security  interest  granted or
assigned to the Trustee for the benefit of the Certificateholders.

          Section 10.05 NOTICES.

          (a)  The Trustee shall use its best efforts to promptly provide notice
to each Rating  Agency  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 Event of Default that has not been cured;

          3.   The resignation or termination of the Servicer or the Trustee and
               the appointment of any successor;

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          4.   The  repurchase or  substitution  of Mortgage  Loans  pursuant to
               Section 2.03; and

          5.   The final payment to Certificateholders.

          (b)  In addition,  the Trustee shall  promptly  furnish to each Rating
Agency copies of the following:

          1.   Each report to Certificateholders described in Section 4.03; and

          2.   Any notice of a purchase of a Mortgage  Loan  pursuant to Section
               2.02, 2.03 or 3.11.

          All directions,  demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered to (a) in the case of the
Depositor  or the  Representative,  Morgan  Stanley ABS Capital I Inc. or Morgan
Stanley & Co. Incorporated,  1585 Broadway, New York, New York 10036, Attention:
Michelle Wilke, Esq., (b) in the case of the Servicer,  Fairbanks Capital Corp.,
3815 South West Temple, Salt Lake City, Utah 84165, Attention:  General Counsel,
or such other  address as may be hereafter  furnished  to the parties  hereto in
writing, (c) in the case of the Trustee to the Corporate Trust Office,  Deutsche
Bank National Trust Company,  1761 East St. Andrew Place, Santa Ana,  California
92705-4934, Attention: Trust Administration DC02M3, or such other address as the
Trustee  may  hereafter  furnish to the parties  hereto,  (d) in the case of the
Unaffiliated  Seller, CDC Mortgage Capital,  Inc., 9 West 57th Street, New York,
New  York  10019,  Attention  General  Counsel,  or such  other  address  as the
Unaffiliated Seller may hereafter furnish to the parties hereto, (e) in the case
of each of the Rating Agencies, the address specified therefor in the definition
corresponding  to the  name of such  Rating  Agency  and (f) in the  case of any
Originator,  the address  specified  therefor in the  applicable  Mortgage  Loan
Purchase  Agreement.  Notices to  Certificateholders  shall be deemed given when
mailed,  first class postage prepaid, to their respective addresses appearing in
the Certificate Register.

          Section 10.06 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 10.07 ASSIGNMENT.

          Notwithstanding  anything to the contrary contained herein,  except as
provided in Section  6.02,  this  Agreement  may not be assigned by the Servicer
without  the prior  written  consent  of the  Trustee,  the Class A  Certificate
Insurer and Depositor;  PROVIDED,  HOWEVER,  that,  subject to Section 3.27, the
Servicer may pledge or sell its interest in any  reimbursements for P&I Advances
or  Servicing  Advances  hereunder.  Notwithstanding  anything  to the  contrary
herein, the Servicer,  with the prior written consent of the Class A Certificate
Insurer,  may  pledge or  assign  as  collateral  all of its  rights,  title and
interest (but none of its obligations) under this

                                      117
<PAGE>


Agreement  to a lender  financing  the  purchase  of the  servicing  rights with
respect to the Mortgage Loans;  PROVIDED,  that such assignment shall not impair
any rights or claims that the Unaffiliated  Seller, the Depositor or the Trustee
may have against the Servicer;  PROVIDED,  FURTHER, that the Class A Certificate
Insurer  hereby  consents to the Servicer's  financing  pursuant to the JPMorgan
Credit Agreement, subject to the Consent Procedures.

          Section 10.08 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

          The death or incapacity of any Certificateholder  shall not operate to
terminate  this  Agreement  or  the  trust  created  hereby,  nor  entitle  such
Certificateholder's  legal  representative or heirs to claim an accounting or to
take any  action or  commence  any  proceeding  in any court for a  petition  or
winding  up of the  trust  created  hereby,  or  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 provided
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 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
party 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 or by  availing
itself of any  provisions  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 an Event of Default and of the continuance  thereof, as herein provided,  and
unless the Holders of  Certificates  evidencing  not less than 25% of the Voting
Rights evidenced by the Certificates, and the Class A Certificate Insurer, shall
also have made written request to 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 60 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 being
understood   and   intended,    and   being   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 whatever
by  virtue  or by  availing  itself  or  themselves  of any  provisions  of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the 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 common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every  Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

          Section 10.09 INSPECTION AND AUDIT RIGHTS.

          The Servicer agrees that, on reasonable  prior notice,  it will permit
any  representative  of the  Depositor,  the  Unaffiliated  Seller,  the Class A
Certificate Insurer or the

                                      118
<PAGE>


Trustee during the Servicer's normal business hours, to examine all the books of
account,  records,  reports  and other  papers of the  Servicer  relating to the
Mortgage Loans, to make copies and extracts therefrom, to cause such books to be
audited  by  independent  certified  public  accountants  selected  by the party
conducting  the  inspection  and to discuss its  affairs,  finances and accounts
relating to the Mortgage  Loans with its  officers,  employees  and  independent
public  accountants  (and by this provision the Servicer hereby  authorizes said
accountants  to discuss  with such  representative  such  affairs,  finances and
accounts),  all at such  reasonable  times  and as  often  as may be  reasonably
requested. Any out-of-pocket expense of the Servicer incident to the exercise by
the Depositor,  the Unaffiliated  Seller, the Class A Certificate Insurer or the
Trustee of any right under this Section 10.09 shall be borne by the Servicer.

          Section 10.10 CERTIFICATES NONASSESSABLE AND FULLY PAID.

          It is the intention of the Depositor that Certificateholders shall not
be personally  liable for  obligations of the Trust Fund,  that the interests in
the Trust Fund  represented by the Certificates  shall be nonassessable  for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

          Section 10.11 THE CLASS A CERTIFICATE INSURER DEFAULT.

          Any  right  conferred  to the  Class A  Certificate  Insurer  shall be
suspended  during  any  period in which a Class A  Certificate  Insurer  Default
exists.  At such time as the  Class A  Certificates  are no  longer  outstanding
hereunder,  and no amounts  owed to the Class A  Certificate  Insurer  hereunder
remain  unpaid,  the  Class  A  Certificate  Insurer's  rights  hereunder  shall
terminate.

          Section 10.12 THIRD PARTY BENEFICIARY.

          The parties agree that the Class A Certificate Insurer is intended and
shall have all rights of a third-party beneficiary of this Agreement.

          Section 10.13 WAIVER OF JURY TRIAL.

          EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, WAIVES (TO
THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
OF ANY DISPUTE  ARISING UNDER OR RELATING TO THIS  AGREEMENT AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

                                  * * * * * * *

                                      119
<PAGE>


          IN WITNESS  WHEREOF,  the  Depositor,  the Trustee,  the  Unaffiliated
Seller and the  Servicer  have caused  their names to be signed  hereto by their
respective officers thereunto duly authorized as of the day and year first above
written.

                                       MORGAN STANLEY ABS CAPITAL I INC.,
                                            as Depositor

                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                            solely as Trustee and not in its
                                            individual capacity


                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                       FAIRBANKS CAPITAL CORP.,
                                            as Servicer

                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                       CDC MORTGAGE CAPITAL INC.,
                                            as Unaffiliated Seller

                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:

<PAGE>



                                   SCHEDULE I

                             Mortgage Loan Schedule

          [See Exhibit A to the Unaffiliated Seller's Agreement, Tab 2]




                                       I-1

<PAGE>


                                   SCHEDULE II

                       CDC MORTGAGE CAPITAL TRUST 2002-HE3

                       Mortgage Pass-Through Certificates,
                                 Series 2002-HE3

                 REPRESENTATIONS AND WARRANTIES OF THE SERVICER

     (1)  The Servicer is a corporation duly organized,  validly existing and in
good  standing  under the laws of the State of Utah and is duly  authorized  and
qualified  to transact  any and all  business  contemplated  by this Pooling and
Servicing  Agreement  to be  conducted  by the  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 Pooling and Servicing Agreement;

     (2)  The Servicer has the full power and authority to service each Mortgage
Loan, and to execute,  deliver and perform, and to enter into and consummate the
transactions  contemplated by this Pooling and Servicing  Agreement and has duly
authorized  by all necessary  action on the part of the Servicer the  execution,
delivery and  performance  of this  Pooling and  Servicing  Agreement;  and this
Pooling and Servicing Agreement,  assuming the due authorization,  execution and
delivery  thereof by the other parties thereto,  constitutes a legal,  valid and
binding  obligation  of  the  Servicer,  enforceable  against  the  Servicer  in
accordance  with its  terms,  except to the extent  that (a) the  enforceability
thereof may be limited by bankruptcy, insolvency,  moratorium,  receivership and
other similar laws relating to creditors' rights generally and (b) the remedy of
specific  performance and injunctive and other forms of equitable  relief may be
subject to the  equitable  defenses  and to the  discretion  of the court before
which any proceeding therefor may be brought;

     (3)  The execution and delivery of this Pooling and Servicing  Agreement by
the Servicer, the servicing of the Mortgage Loans by the Servicer hereunder, the
consummation  by  the  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 the  Servicer  and will not (A) result in a
breach of any term or provision of the organizational  documents of the 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 the Servicer is a party or by which it may be bound,  or any
statute, order or regulation applicable to the Servicer of any court, regulatory
body,  administrative  agency or governmental body having  jurisdiction over the
Servicer;  and the  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 the Servicer's  knowledge,  would in the
future materially and adversely affect, (x) the ability of the

                                      II-1
<PAGE>


Servicer to perform its obligations  under this Pooling and Servicing  Agreement
or (y) the business,  operations,  financial condition,  properties or assets of
the Servicer taken as a whole;

     (4)  The Servicer is an approved  seller/servicer for Fannie Mae or Freddie
Mac in good standing and is a HUD approved mortgagee pursuant to Section 203 and
Section 211 of the National Housing Act;

     (5)  No  litigation  is pending  against the  Servicer  that is  reasonably
likely  to  materially  and  adversely   affect  the   execution,   delivery  or
enforceability  of this  Pooling and  Servicing  Agreement or the ability of the
Servicer  to  service  the  Mortgage  Loans  or to  perform  any  of  its  other
obligations hereunder in accordance with the terms hereof;

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

     (7)  The Servicer  represents  that its computer and other  systems used in
servicing  the  Mortgage  Loans  operate in a manner such that the  Servicer can
service the  Mortgage  Loans in  accordance  with the terms of this  Pooling and
Servicing Agreement.

                                      II-2
<PAGE>


                                  SCHEDULE IIA

             Further Representations and Warranties of the Servicer

          (1)  MORTGAGE LOAN SCHEDULE. With respect to each Mortgage Loan, as of
the  applicable  Cut-off Date,  each of (1) the last Due Date on which a payment
was actually applied to the outstanding principal balance of each Mortgage Loan;
(2) the Stated  Principal  Balance of each  Mortgage  Loan,  after  deduction of
payments of  principal  due and  collected on or before the  applicable  Cut-off
Date;  and (3) the  Servicing  Transfer  Date for each Mortgage Loan is true and
correct;

          (2)  PAYMENTS  CURRENT.  Unless  otherwise  indicated  on the  related
Mortgage Loan Schedule, with respect to each Mortgage Loan, no Scheduled Payment
is 30  days  or  more  Delinquent  nor  has  any  Payment  been  30 days or more
Delinquent at any time from and after the Servicing Transfer Date;

          (3)  ORIGINAL  TERMS  UNMODIFIED.  With respect to each Mortgage Loan,
the terms of the Mortgage  Note and  Mortgage  have not been  impaired,  waived,
altered or modified by the Servicer (or to its knowledge by any other Person) in
any respect from and after the Servicing Transfer Date;

          (4)  NO SATISFACTION OF MORTGAGE.  With respect to each Mortgage Loan,
since the related Servicing  Transfer Date, the Mortgage has not been satisfied,
cancelled, subordinated or rescinded by the Servicer (or to its knowledge by any
other  Person),  in whole or in part,  and the  Mortgaged  Property has not been
released  from the lien of the Mortgage by the Servicer (or to its  knowledge by
any other Person),  in whole or in part, nor has any instrument been executed by
the  Servicer (or to its  knowledge  by any other  Person) that would effect any
such release,  cancellation,  subordination  or  rescission.  From and after the
Servicing  Transfer  Date,  the Servicer has not waived the  performance  by the
Mortgagor of any action, if the Mortgagor's failure to perform such action would
cause the  Mortgage  Loan to be in  default,  nor has the  Servicer  waived  any
default resulting from any action or inaction by the Mortgagor;

          (5)  NO  DEFAULTS.  With  respect to each  Mortgage  Loan,  other than
payments due but not yet 30 days Delinquent, to the Servicer's knowledge,  there
is no  default,  breach,  violation  or event which  would  permit  acceleration
existing  under the Mortgage or the Mortgage  Note and no event which,  with the
passage of time or with notice and the  expiration  of any grace or cure period,
would  constitute  a default,  breach,  violation  or event which  would  permit
acceleration;

          (6)  MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION  PROCEEDINGS.  With
respect  to  each  Mortgage  Loan,  to the  Servicer's  knowledge,  there  is no
proceeding  pending or threatened for the total or partial  condemnation  of the
Mortgaged Property. To the Servicer's knowledge,  the related Mortgaged Property
is undamaged by waste,  fire,  earthquake or earth movement,  windstorm,  flood,
tornado or other  casualty  so as to affect  adversely  the value of the related
Mortgaged  Property as security for the  Mortgage  Loan or the use for which the
premises were intended and each related Mortgaged Property is in good repair;

                                     IIA-1
<PAGE>


          (7)  ESCROW  PAYMENTS/INTEREST RATE ADJUSTMENTS.  With respect to each
Mortgage Loan,  since the Servicing  Transfer Date, the servicing and collection
practices  used by the Servicer  with respect to such Mortgage Loan have been in
all respects in compliance with Accepted  Servicing  Practices,  applicable laws
and regulations, and have been in all respects legal and proper. With respect to
escrow  deposits and Escrow  Payments,  if any,  all such  deposits and payments
received by the Servicer are in the  possession of, or under the control of, the
Servicer  and there exist no  deficiencies  in  connection  therewith  for which
customary  arrangements  for  repayment  thereof have not been made.  All Escrow
Payments have been collected in full  compliance  with state and federal law and
the  provisions of the related  Mortgage  Note and Mortgage.  From and after the
Servicing  Transfer Date, all Mortgage Rate  adjustments (if any) have been made
in strict  compliance  with state and  federal  law and the terms of the related
Mortgage Note;

          (8)  OTHER  INSURANCE  POLICIES.  With respect to each Mortgage  Loan,
from and after the Servicing  Transfer  Date,  no action,  inaction or event has
occurred  and,  to the  Servicer's  knowledge,  no state of facts  exists or has
existed that has resulted or will result in the  exclusion  from,  denial of, or
defense to coverage  under any insurance  policy  related to such Mortgage Loan,
irrespective of the cause of such failure of coverage;

          (9)  NO VIOLATION OF ENVIRONMENTAL LAWS. With respect to each Mortgage
Loan,  to the  Servicer's  knowledge,  there is no pending  action or proceeding
directly  involving the related Mortgaged  Property in which compliance with any
environmental law, rule or regulation is an issue; to the Servicer's  knowledge,
there is no violation of any environmental  law, rule or regulation with respect
to the related Mortgaged Property; and

          (10) SOLDIERS'  AND SAILORS'  CIVIL  RELIEF ACT.  With respect to each
Mortgage  Loan, no Mortgagor has notified the Servicer,  and the Servicer has no
knowledge,  of any  relief  requested  or  allowed  to the  Mortgagor  under the
Soldiers'  and Sailors'  Civil Relief Act of 1940 or any similar  state or local
law.

                                     IIA-2
<PAGE>


                                  SCHEDULE III

(a)  DUE  ORGANIZATION AND AUTHORITY.  The Unaffiliated  Seller is a corporation
     duly organized, validly existing and in good standing under the laws of the
     state of New York and has all  licenses  necessary to carry on its business
     as now being  conducted and is licensed,  qualified and in good standing in
     each state  wherein it owns or leases any  material  properties  or where a
     Mortgaged Property is located,  if the laws of such state require licensing
     or  qualification in order to conduct business of the type conducted by the
     Unaffiliated  Seller,  and in  any  event  the  Unaffiliated  Seller  is in
     compliance  with the laws of any such  state to the extent  necessary;  the
     Unaffiliated Seller has the full corporate power, authority and legal right
     to execute  and  deliver  this  Agreement  and to perform  its  obligations
     hereunder; the execution, delivery and performance of this Agreement by the
     Unaffiliated  Seller and the consummation of the transactions  contemplated
     hereby  have been  duly and  validly  authorized;  this  Agreement  and all
     agreements  contemplated  hereby have been duly  executed and delivered and
     constitute the valid,  legal,  binding and  enforceable  obligations of the
     Unaffiliated Seller,  regardless of whether such enforcement is sought in a
     proceeding in equity or at law; and all requisite corporate action has been
     taken by the Unaffiliated  Seller to make this Agreement and all agreements
     contemplated  hereby  valid and  binding  upon the  Unaffiliated  Seller in
     accordance with their terms;

(b)  NO CONFLICTS.  Neither the execution  and delivery of this  Agreement,  the
     consummation of the transactions  contemplated  hereby, 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  Unaffiliated  Seller's  charter or by-laws or any legal
     restriction or any agreement or instrument to which the Unaffiliated 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,  except such  unfulfillment,
     non-compliance  or default or acceleration does not in the aggregate have a
     material adverse effect on the operation,  business, condition (business or
     otherwise)  of the  Unaffiliated  Seller or result in the  violation of any
     law, rule, regulation,  order, judgment or decree to which the Unaffiliated
     Seller or its property is subject,  except such  violation  does not in the
     aggregate  have a  material  adverse  effect  on the  operation,  business,
     condition  (business or otherwise) of the Unaffiliated  Seller or result in
     the creation or imposition of any lien,  charge or  encumbrance  that would
     have an adverse effect upon any of its properties  pursuant to the terms of
     any mortgage, contract, deed of trust or other instrument;

(c)  NO  LITIGATION   PENDING.   There  is  no  action,   suit,   proceeding  or
     investigation   pending  nor,  to  the  Unaffiliated   Seller's  knowledge,
     threatened   against   the   Unaffiliated   Seller,   before   any   court,
     administrative  agency or other  tribunal  asserting the invalidity of this
     Agreement,  seeking to prevent the  consummation of any of the transactions
     contemplated  by this Agreement or which,  either in any one instance or in
     the aggregate,  may result in any material  adverse change in the business,
     operations,  financial condition,  properties or assets of the Unaffiliated
     Seller,  or in any  material  impairment  of the  right or  ability  of the
     Unaffiliated  Seller  to  carry  on  its  business   substantially  as  now
     conducted, or which would draw into question the validity of this Agreement
     or of any action taken or to be taken in connection with the obligations of
     the Unaffiliated  Seller  contemplated  herein, or


                                     III-1
<PAGE>


     which would be likely to impair  materially the ability of the Unaffiliated
     Seller to perform under the terms of this Agreement;

(d)  NO CONSENT REQUIRED.  No consent,  approval,  authorization or order of, or
     registration or filing with, or notice to any court or governmental  agency
     or body  including  HUD, the FHA or the VA is required  for the  execution,
     delivery and performance by the Unaffiliated Seller of or compliance by the
     Unaffiliated  Seller  with  this  Agreement  or  the  consummation  of  the
     transactions  contemplated by this Agreement, or if required, such approval
     has been obtained prior to the Closing Date;

                                     III-2
<PAGE>


                                    EXHIBIT A

Unless this  Certificate  is presented by an  authorized  representative  of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer,  exchange,  or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

SOLELY FOR U.S.  FEDERAL  INCOME TAX  PURPOSES,  THIS  CERTIFICATE  REPRESENTS A
"REGULAR  INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE
TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE  INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER ASSETS.

Certificate No.                            :       [A-1/M-1-1/M-2-1/B-1-1/B-2-1]

Cut-off Date                               :       November 1, 2002

First Distribution Date                    :       December 26, 2002

Initial Certificate Balance of this
Certificate ("DENOMINATION")               :       A $537,817,000

                                                   M-1 $39,594,000

                                                   M-2 $36,294,000

                                                   B-1 $26,066,000

                                                   B-2 $10,229,000

Initial Certificate Balances of all
Certificates of this Class                 :       A $537,817,000

                                                   M-1 $39,594,000

                                                   M-2 $36,294,000

                                                   B-1 $26,066,000

                                                   B-2 $10,229,000

                                      A-1
<PAGE>


CUSIP                                      :       A 12506YAR0

                                                   M-1 12506YAS8

                                                   M-2 12506YAT6

                                                   B-1 12506YAU3

                                                   B-2 12506YAV1


                                      A-2
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3
             [Class A][Class M-1] [Class M-2][Class B-1][Class B-2]

          evidencing a percentage interest in the distributions allocable to the
          Certificates of the above-referenced Class.

          Principal in respect of this Certificate is  distributable  monthly as
set forth herein.  Accordingly,  the Certificate Balance at any time may be less
than the  Certificate  Balance as set forth herein.  This  Certificate  does not
evidence an  obligation  of, or an  interest  in, and is not  guaranteed  by the
Depositor, the Unaffiliated Seller, any Originator,  the Servicer or the Trustee
referred  to  below  or  any  of  their  respective  affiliates.   Neither  this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

          This  certifies  that  CEDE  & CO.  is  the  registered  owner  of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the  "DEPOSITOR"),  Fairbanks  Capital Corp.,  as servicer
(the  "Servicer"),  CDC  Mortgage  Capital  Inc.,  as  unaffiliated  seller (the
"UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee (the
"TRUSTEE").  To the extent not defined herein, the capitalized terms used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

          Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

          This  Certificate  shall  not be  entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      A-3
<PAGE>


          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                             not in its individual capacity,
                                             but solely as Trustee



                                           By:
                                              ----------------------------------



Countersigned:

By:
   --------------------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      A-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3

          This  Certificate is one of a duly  authorized  issue of  Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE3  Mortgage   Pass-Through
Certificates,  Series 2002-HE3 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

          The Certificateholder,  by its acceptance of this Certificate,  agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

          This  Certificate  does not purport to  summarize  the  Agreement  and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

          Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such day is not a Business  Day,  the Business
Day immediately  following (the  "DISTRIBUTION  DATE"),  commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage  Interest  evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the  Class  to which  this  Certificate  belongs  on such  Distribution  Date
pursuant to the Agreement.  The Record Date applicable to each Distribution Date
is the Business Date immediately  preceding such  Distribution  Date,  PROVIDED,
HOWEVER, that for any Definitive Certificates, the Record Date shall be the last
Business Day of the month next preceding the month of such Distribution Date.

          Distributions  on this  Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes,  or such other location specified in the notice to  Certificateholders
of such final distribution.

          The Agreement permits,  with certain exceptions therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer, with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the

                                      A-5
<PAGE>


Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon  the  transfer  hereof  or in
exchange  therefor or in lieu hereof  whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

          As  provided  in the  Agreement  and  subject to  certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes,  accompanied by a written  instrument of transfer in form satisfactory
to the Trustee and the Certificate  Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing,  and thereupon one or more
new  Certificates of the same Class in authorized  denominations  and evidencing
the same aggregate  Percentage  Interest in the Trust Fund will be issued to the
designated transferee or transferees.

          The Certificates are issuable only as registered  Certificates without
coupons  in  denominations  specified  in  the  Agreement.  As  provided  in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

          No service charge will be made for any such  registration  of transfer
or exchange,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

          The Depositor,  the Servicer,  the  Unaffiliated  Seller,  the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

          On any  Distribution  Date on which  the  aggregate  Stated  Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period,  is
less than or equal to 10% of the Maximum Pool  Principal  Balance,  the Servicer
and/or the Class X  Certificateholders  will have the option to  repurchase,  in
whole,  from the  Trust  Fund all  remaining  Mortgage  Loans  and all  property
acquired in respect of the  Mortgage  Loans at a purchase  price  determined  as
provided in the Agreement.  The obligations and responsibilities  created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

          Any term used herein that is defined in the  Agreement  shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      A-6
<PAGE>


                                   ASSIGNMENT

          FOR VALUE  RECEIVED,  the undersigned  hereby  sell(s),  assign(s) and
transfer(s) unto
                 ---------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

          I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:

                             ---------------------------------------------------
                                    Signature by or on behalf of assignor

                                      A-7
<PAGE>


                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately  available funds to                                                ,
                                -----------------------------------------------
                                                                               ,
-------------------------------------------------------------------------------
for the account of                                                             ,
                   ------------------------------------------------------------
account number          , or, if mailed by check, to                           ,
               ---------                             --------------------------
Applicable statements should be mailed to                                      .
                                          -------------------------------------

          This  information is provided by                                     ,
                                           ------------------------------------
the assignee named above, or                                                   ,
                             --------------------------------------------------
as its agent.

                                      A-8
<PAGE>


                                    EXHIBIT B

                                   [Reserved]





                                      B-1
<PAGE>


                                    EXHIBIT C

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION  LETTER TO THE EFFECT
THAT SUCH  TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO THE TITLE I
EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED,  OF A PLAN SUBJECT
TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO  APPLICABLE  FEDERAL,  STATE OR
LOCAL LAW ("SIMILAR  LAW")  MATERIALLY  SIMILAR TO THE  FOREGOING  PROVISIONS OF
ERISA OR THE CODE,  OR A PERSON  INVESTING  ON BEHALF OF OR WITH PLAN  ASSETS OF
SUCH A PLAN, OR A REPRESENTATION OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO
THE CONTRARY HEREIN,  ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF
OF AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO TITLE I OF ERISA,  SECTION 4975 OF THE
CODE OR SIMILAR LAW WITHOUT THE REPRESENTATION  LETTER OR THE OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.

Certificate No.                              :                 1

Cut-off Date                                 :                 November 1, 2002

First Distribution Date                      :                 December 26, 2002

Percentage Interest of this Certificate
("DENOMINATION")                             :                 100%

Principal Balance                            :                 $[100.26]

CUSIP                                        :                 N/A

                                      C-1
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3

                                     Class P

          evidencing a percentage interest in the distributions allocable to the
          Certificates of the above-referenced Class.

          Distributions in respect of this Certificate are distributable monthly
as set forth herein.  This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor,  the  Unaffiliated  Seller,
the  Servicer  or the  Trustee  referred  to below  or any of  their  respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

          This certifies that __________________, is the registered owner of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the  "DEPOSITOR"),  Fairbanks  Capital Corp.,  as servicer
(the  "SERVICER"),  CDC  Mortgage  Capital  Inc.,  as  unaffiliated  seller (the
"UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee (the
"TRUSTEE").  To the extent not defined herein, the capitalized terms used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

          This  Certificate  does  not  have a  Pass-Through  Rate  and  will be
entitled  to  distributions  only to the extent set forth in the  Agreement.  In
addition,  any distribution of the proceeds of any remaining assets of the Trust
will be made only upon  presentment  and  surrender of this  Certificate  at the
offices  designated  by the  Trustee for such  purpose,  or the office or agency
maintained by the Trustee.

          No transfer of a  Certificate  of this Class shall be made unless such
disposition is exempt from the  registration  requirements of the Securities Act
of 1933, as amended (the "1933 ACT"),  and any applicable  state securities laws
or is made in  accordance  with the 1933 Act and such laws.  In the event of any
such transfer,  the Trustee shall require the transferor to execute a transferor
certificate  (in  substantially  the form  attached to the Pooling and Servicing
Agreement)  and  deliver  either  (i)  a  Rule  144A  Letter,   in  either  case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

          No  transfer of a  Certificate  of this Class shall be made unless the
Trustee shall have received a representation  letter from the transferee of such
Certificate, acceptable to and in


                                      C-2
<PAGE>


form  and  substance  satisfactory  to the  Trustee,  to the  effect  that  such
transferee  is not an  employee  benefit  plan  subject to Section 406 of ERISA,
Section  4975 of the Code or  Similar  Law,  or a person  acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee.

          Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

          This  Certificate  shall  not be  entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *


                                      C-3
<PAGE>


          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                             not in its individual capacity,
                                             but solely as Trustee



                                           By:
                                              ----------------------------------



Countersigned:

By:
   --------------------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      C-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3

          This  Certificate is one of a duly  authorized  issue of  Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE3  Mortgage   Pass-Through
Certificates,  Series 2002-HE3 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

          The Certificateholder,  by its acceptance of this Certificate,  agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

          This  Certificate  does not purport to  summarize  the  Agreement  and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

          Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each  month  or,  if such 25th day is not a  Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

          Distributions  on this  Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

          The Agreement permits,  with certain exceptions therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate and of any Certificate issued upon

                                      C-5
<PAGE>


the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

          As  provided  in the  Agreement  and  subject to  certain  limitations
therein  set forth,  the  transfer of this  Certificate  is  registrable  in the
Certificate  Register of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

          The Certificates are issuable only as registered  Certificates without
coupons  in  denominations  specified  in  the  Agreement.  As  provided  in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

          No service charge will be made for any such  registration  of transfer
or exchange,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

          The Depositor,  the Servicer,  the  Unaffiliated  Seller,  the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

          On any  Distribution  Date on which  the  aggregate  Stated  Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period,  is
less than or equal to 10% of the Maximum Pool  Principal  Balance,  the Servicer
and/or the Class X  Certificateholders  will have the option to  repurchase,  in
whole,  from the  Trust  Fund all  remaining  Mortgage  Loans  and all  property
acquired in respect of the  Mortgage  Loans at a purchase  price  determined  as
provided in the Agreement.  The obligations and responsibilities  created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

          Any term used herein that is defined in the  Agreement  shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      C-6
<PAGE>


                                   ASSIGNMENT

          FOR VALUE  RECEIVED,  the undersigned  hereby  sell(s),  assign(s) and
transfer(s) unto
                 ---------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

          I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:

                             ---------------------------------------------------
                                    Signature by or on behalf of assignor

                                      C-7
<PAGE>


                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately  available funds to                                                ,
                                -----------------------------------------------
                                                                               ,
-------------------------------------------------------------------------------
for the account of                                                             ,
                   ------------------------------------------------------------
account number          , or, if mailed by check, to                           ,
               ---------                             --------------------------
Applicable statements should be mailed to                                      .
                                          -------------------------------------

          This  information is provided by                                     ,
                                           ------------------------------------
the assignee named above, or                                                   ,
                             --------------------------------------------------
as its agent.

                                      C-8
<PAGE>


                                    EXHIBIT D

SOLELY FOR U.S.  FEDERAL  INCOME TAX  PURPOSES,  THIS  CERTIFICATE  REPRESENTS A
"RESIDUAL  INTEREST" IN A "REAL ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE
TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE  INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEREE  DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS (i)
TO A PERMITTED  TRANSFEREE  AND THE TRANSFER IS MADE IN COMPLIANCE  WITH SECTION
5.02(c) OF THE AGREEMENT, AND (ii) THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER
A  REPRESENTATION  LETTER TO THE EFFECT THAT SUCH  TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED,  OR A PLAN  SUBJECT  TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN. IN THE EVENT THAT SUCH REPRESENTATION IS VIOLATED,  OR ANY ATTEMPT IS MADE
TO TRANSFER  TO A PLAN OR  ARRANGEMENT  SUBJECT TO SECTION 406 OF ERISA,  A PLAN
SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT  TO  SIMILAR  LAW,  OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR  ARRANGEMENT  OR USING THE ASSETS OF
ANY SUCH PLAN OR ARRANGEMENT,  SUCH ATTEMPTED  TRANSFER OR ACQUISITION  SHALL BE
VOID AND OF NO EFFECT.

Certificate No.                              :                 1

Cut-off Date                                 :                 November 1, 2002

First Distribution Date                      :                 December 26, 2002
Percentage Interest of this

Certificate ("DENOMINATION")                 :                 100%

CUSIP                                        :                 N/A

                                      D-1
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3

                                     Class R

          evidencing a percentage interest in the distributions allocable to the
          Certificates of the above-referenced Class.

          Distributions in respect of this Certificate is distributable  monthly
as set forth herein.  This Class R Certificate has no Certificate Balance and is
not  entitled  to  distributions  in  respect of  principal  or  interest.  This
Certificate  does not evidence an  obligation  of, or an interest in, and is not
guaranteed  by the  Depositor,  the  Servicer,  the  Unaffiliated  Seller or the
Trustee  referred to below or any of their respective  affiliates.  Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

          This certifies that CDC Mortgage  Capital Inc. is the registered owner
of the Percentage  Interest specified above of any monthly  distributions due to
the Class R Certificates  pursuant to a Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the  "AGREEMENT")  among MORGAN STANLEY ABS
CAPITAL I INC., as depositor (the  "DEPOSITOR"),  Fairbanks  Capital  Corp.,  as
servicer (the  "SERVICER"),  CDC Mortgage  Capital Inc., as unaffiliated  seller
(the "UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee
(the "TRUSTEE").  To the extent not defined herein,  the capitalized  terms used
herein have the meanings  assigned in the Agreement.  This Certificate is issued
under and is subject to the terms,  provisions  and conditions of the Agreement,
to which  Agreement the Holder of this  Certificate  by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Any  distribution of the proceeds of any remaining assets of the Trust
Fund  will  be  made  only  upon  presentment  and  surrender  of  this  Class R
Certificate  at the offices  designated  by the Trustee for such purposes or the
office or agency maintained by the Trustee in California.

          No transfer of a Class R Certificate  shall be made unless the Trustee
shall  have  received  a  representation  letter  from  the  transferee  of such
Certificate,  acceptable  to and  in  form  and  substance  satisfactory  to the
Trustee,  to the effect that such transferee is not an employee  benefit plan or
arrangement  subject to Section 406 of ERISA, a plan or  arrangement  subject to
Section 4975 of the Code or a plan subject to Similar Law, or a person acting on
behalf of any such plan or arrangement  nor using the assets of any such plan or
arrangement to effect such transfer, which representation letter shall not be an
expense of the Trustee,  the Servicer or the Trust Fund.  In the event that such
representation  is  violated,  or any  attempt is made to  transfer to a plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code or a plan subject to Similar  Law, or a person  acting on behalf of any
such plan or  arrangement  or using the assets of any such plan or  arrangement,
such attempted transfer or acquisition shall be void and of no effect.

          Each  Holder  of this  Class R  Certificate  shall  be  deemed  by the
acceptance or acquisition  an Ownership  Interest in this Class R Certificate to
have  agreed to be bound by the  following  provisions,  and the  rights of each
Person acquiring any Ownership Interest in this

                                      D-2
<PAGE>


Class R Certificate are expressly subject to the following provisions:  (i) each
Person  holding or acquiring any Ownership  Interest in this Class R Certificate
shall be a Permitted  Transferee  and shall  promptly  notify the Trustee of any
change or  impending  change in its status as a  Permitted  Transferee,  (ii) no
Ownership  Interest in this Class R Certificate may be registered on the Closing
Date or thereafter transferred,  and the Trustee shall not register the Transfer
of this  Certificate  unless,  in  addition to the  certificates  required to be
delivered to the Trustee under  Section  5.02(b) of the  Agreement,  the Trustee
shall have been furnished with a Transfer  Affidavit of the initial owner or the
proposed  transferee in the form attached as Exhibit H to the  Agreement,  (iii)
each  Person  holding  or  acquiring  any  Ownership  Interest  in this  Class R
Certificate shall agree (A) to obtain a Transfer Affidavit from any other Person
to whom such Person  attempts to Transfer its  Ownership  Interest  this Class R
Certificate,  (B) to obtain a Transfer  Affidavit  from any Person for whom such
Person is acting as nominee, trustee or agent in connection with any Transfer of
this Class R Certificate and (C) not to Transfer the Ownership  Interest in this
Class R Certificate  or to cause the Transfer of the Ownership  Interest in this
Class R  Certificate  to any other Person if it has actual  knowledge  that such
Person  is not a  Permitted  Transferee  and (iv)  any  attempted  or  purported
Transfer of the Ownership  Interest in this Class R Certificate  in violation of
the provisions herein shall be absolutely null and void and shall vest no rights
in the purported Transferee.

                  Reference  is hereby  made to the further  provisions  of this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

                  This  Certificate  shall not be entitled to any benefit  under
the Agreement or be valid for any purpose unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      D-3
<PAGE>


                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee



                          By:
                             ---------------------------------------------------



Countersigned:

By:
   --------------------------------------------------
     Authorized Signatory of
     DEUTSCHE BANK NATIONAL TRUST COMPANY,
     not in its individual capacity,
     but solely as Trustee


                                      D-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE3

               Mortgage Pass-Through Certificates, Series 2002-HE3

                  This  Certificate  is  one  of  a  duly  authorized  issue  of
Certificates   designated  as  CDC  Mortgage  Capital  Trust  2002-HE3  Mortgage
Pass-Through  Certificates,  Series  2002-HE3  (herein  collectively  called the
"CERTIFICATES"),  and representing a beneficial  ownership interest in the Trust
Fund created by the Agreement.

                  The Certificateholder,  by its acceptance of this Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

                  This  Certificate  does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights,  benefits,  obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

                  Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each  month or, if such day is not a Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

                  Distributions  on  this  Certificate  shall  be  made  by wire
transfer of immediately available funds to the account of the Holder hereof at a
bank  or  other  entity  having  appropriate   facilities   therefor,   if  such
Certificateholder  shall have so  notified  the Trustee in writing at least five
Business Days prior to the related Record Date and such Certificateholder  shall
satisfy  the  conditions  to  receive  such  form of  payment  set  forth in the
Agreement,  or, if not,  by check  mailed by first  class mail to the address of
such  Certificateholder   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 offices  designated by the
Trustee for such  purposes  or such other  location  specified  in the notice to
Certificateholders of such final distribution.

                  The  Agreement   permits,   with  certain  exceptions  therein
provided,  the  amendment  thereof  and  the  modification  of  the  rights  and
obligations  of the Trustee and the rights of the  Certificateholders  under the
Agreement at any time by the parties thereto,  and Financial  Security Assurance
Inc.,  as  Class A  Certificate  Insurer  with the  consent  of the  Holders  of
Certificates  affected by such  amendment  evidencing  the requisite  Percentage
Interest,  as provided in the Agreement.  Any such consent by the Holder of this
Certificate  shall be conclusive  and binding on such Holder and upon all future
Holders of this  Certificate  and of any  Certificate  issued upon


                                      D-5
<PAGE>

the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

                  As   provided  in  the   Agreement   and  subject  to  certain
limitations  therein set forth,  the transfer of this Certificate is registrable
in the  Certificate  Register of the Trustee upon surrender of this  Certificate
for  registration of transfer at the offices  designated by the Trustee for such
purposes  or the  office or agency  maintained  by the  Trustee  in  California,
accompanied  by a written  instrument  of transfer in form  satisfactory  to the
Trustee and the Certificate Registrar duly executed by the holder hereof or such
holder's  attorney  duly  authorized  in writing,  and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

                  The Certificates are issuable only as registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

                  No service  charge will be made for any such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  The Depositor,  the Servicer,  the  Unaffiliated  Seller,  the
Class A  Certificate  Insurer  and the  Trustee and any agent of any of them may
treat the  Person in whose  name this  Certificate  is  registered  as the owner
hereof for all  purposes,  and no such party  shall be affected by any notice to
the contrary.

                  On  any  Distribution  Date  on  which  the  aggregate  Stated
Principal  Balance of the Mortgage  Loans, as of the last day of the related Due
Period, is less than or equal to 10% of the Maximum Pool Principal Balance,  the
Servicer  and/or  the  Class  X  Certificateholder   will  have  the  option  to
repurchase,  in whole, from the Trust Fund all remaining  Mortgage Loans and all
property  acquired  in  respect  of  the  Mortgage  Loans  at a  purchase  price
determined as provided in the Agreement.  The obligations  and  responsibilities
created by the  Agreement  will  terminate  as provided  in Section  9.01 of the
Agreement.

                  Any term used  herein that is defined in the  Agreement  shall
have the meaning  assigned in the Agreement,  and nothing herein shall be deemed
inconsistent with that meaning.


                                      D-6
<PAGE>


                                   ASSIGNMENT

          FOR VALUE  RECEIVED,  the undersigned  hereby  sell(s),  assign(s) and
transfer(s) unto
                 ---------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

          I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:

                             ---------------------------------------------------
                                    Signature by or on behalf of assignor


                                      D-7
<PAGE>


                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately  available funds to                                                ,
                                -----------------------------------------------
                                                                               ,
-------------------------------------------------------------------------------
for the account of                                                             ,
                   ------------------------------------------------------------
account number          , or, if mailed by check, to                           ,
               ---------                             --------------------------
Applicable statements should be mailed to                                      .
                                          -------------------------------------

          This  information is provided by                                     ,
                                           ------------------------------------
the assignee named above, or                                                   ,
                             --------------------------------------------------
as its agent.


                                      D-8
<PAGE>


                                    EXHIBIT E

SOLELY FOR U.S.  FEDERAL  INCOME TAX  PURPOSES,  THIS  CERTIFICATE  REPRESENTS A
"REGULAR  INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE
TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE  INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT  AS  PROVIDED  IN THE  POOLING  AND  SERVICING  AGREEMENT,  NEITHER  THIS
CERTIFICATE  NOR ANY INTEREST  HEREIN MAY BE  TRANSFERRED  UNLESS THE TRANSFEREE
DELIVERS  TO THE  TRUSTEE  A  REPRESENTATION  LETTER  TO THE  EFFECT  THAT  SUCH
TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT
INCOME  SECURITY ACT OF 1974,  AS AMENDED,  OR A PLAN SUBJECT TO SECTION 4975 OF
THE CODE,  OR A PLAN  SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN.  NOTWITHSTANDING  ANYTHING  ELSE TO THE  CONTRARY  HEREIN,  ANY  PURPORTED
TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN SUBJECT TO ERISA,  A
PLAN  SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN IN
VIOLATION OF THE TRANSFER  RESTRICTIONS  SET FORTH IN THE POOLING AND  SERVICING
AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                              :               1

Cut-off Date                                 :               November 1, 2002

First Distribution Date                      :               December 26, 2002
Percentage Interest of this

Certificate ("DENOMINATION")                 :               100%

CUSIP                                        :               N/A

                                      E-1
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE3
               Mortgage Pass-Through Certificates, Series 2002-HE3

                                     Class X

                  evidencing   a  percentage   interest  in  the   distributions
                  allocable to the Certificates of the above-referenced Class.

                  Distributions in respect of this Certificate are distributable
monthly as set forth herein.  This  Certificate  does not evidence an obligation
of, or an interest in, and is not guaranteed by the Depositor, the Servicer, the
Unaffiliated  Seller or the Trustee referred to below or any of their respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

                  This certifies that  _____________________,  is the registered
owner of the  Percentage  Interest  evidenced by this  Certificate  (obtained by
dividing  the   denomination  of  this  Certificate  by  the  aggregate  of  the
denominations  of all  Certificates  of the  Class  to  which  this  Certificate
belongs) in certain  monthly  distributions  pursuant to a Pooling and Servicing
Agreement dated as of the Cut-off Date specified above (the  "AGREEMENT")  among
MORGAN  STANLEY ABS CAPITAL I INC., as depositor  (the  "DEPOSITOR"),  Fairbanks
Capital  Corp.,  as servicer  (the  "SERVICER"),  CDC Mortgage  Capital Inc., as
unaffiliated seller (the "UNAFFILIATED SELLER") and Deutsche Bank National Trust
Company,  as trustee  (the  "TRUSTEE").  To the extent not defined  herein,  the
capitalized terms used herein have the meanings assigned in the Agreement.  This
Certificate  is  issued  under  and is  subject  to the  terms,  provisions  and
conditions of the Agreement,  to which Agreement the Holder of this  Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

                  This  Certificate  does  not  have a  Certificate  Balance  or
Pass-Through  Rate and will be entitled to distributions  only to the extent set
forth in the Agreement.  In addition,  any  distribution  of the proceeds of any
remaining  assets of the Trust will be made only upon  presentment and surrender
of this  Certificate at the offices  designated by the Trustee for such purposes
or the office or agency maintained by the Trustee.

                  No  transfer  of a  Certificate  of this  Class  shall be made
unless such  disposition  is exempt from the  registration  requirements  of the
Securities Act of 1933, as amended (the "1933 ACT"),  and any  applicable  state
securities laws or is made in accordance with the 1933 Act and such laws. In the
event of any such transfer,  the Trustee shall require the transferor to execute
a transferor  certificate (in substantially the form attached to the Pooling and
Servicing  Agreement) and deliver either (i) a Rule 144A Letter,  in either case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

                  No  transfer  of a  Certificate  of this  Class  shall be made
unless the Trustee shall have received either (i) a  representation  letter from
the  transferee  of such  Certificate,  acceptable



                                      E-2
<PAGE>

to and in form and  substance  satisfactory  to the Trustee,  to the effect that
such transferee is not an employee  benefit plan subject to Section 406 of ERISA
or Section 4975 of the Code or any materially  similar  provisions of applicable
Federal,  state or local law ("SIMILAR  LAW") or a person acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee, or (ii) if the Certificate has been the subject of an
ERISA-Qualifying  Underwriting,  and the  purchaser is an insurance  company,  a
representation  that the  purchaser is an insurance  company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such  term is  defined  in  Section  V(e) of  Prohibited  Transaction  Class
Exemption  95-60  ("PTCE  95-60"))  and that the  purchase  and  holding of such
Certificates are covered under Sections I and III of PTCE 95-60, or (iii) in the
case of a  Certificate  presented  for  registration  in the name of an employee
benefit plan subject to ERISA, or a plan or arrangement  subject to Section 4975
of the Code (or comparable  provisions of any  subsequent  enactments) or a plan
subject to Similar Law, or a trustee of any such plan or any other person acting
on behalf of any such plan or arrangement or using such plan's or  arrangement's
assets,  an Opinion of Counsel  satisfactory  to the Trustee  and the  Servicer,
which Opinion of Counsel shall not be an expense of the Trustee, the Servicer or
the Trust Fund,  addressed  to the  Trustee,  to the effect that the purchase or
holding  of such  Certificate  will not  result in the  assets of the Trust Fund
being  deemed to be "plan  assets"  and  subject to the  prohibited  transaction
provisions  of  ERISA  and the Code and will  not  subject  the  Trustee  or the
Servicer to any  obligation  in addition to those  expressly  undertaken in this
Agreement or to any liability.

                  Reference  is hereby  made to the further  provisions  of this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

                  This  Certificate  shall not be entitled to any benefit  under
the Agreement or be valid for any purpose unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *


                                      E-3
<PAGE>


                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated:

                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee



                       By:
                          ------------------------------------------------------



Countersigned:

By:
   --------------------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee


                                      E-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE3

               Mortgage Pass-Through Certificates, Series 2002-HE3

                  This  Certificate  is  one  of  a  duly  authorized  issue  of
Certificates   designated  as  CDC  Mortgage  Capital  Trust  2002-HE3  Mortgage
Pass-Through  Certificates,  Series  2002-HE3  (herein  collectively  called the
"CERTIFICATES"),  and representing a beneficial  ownership interest in the Trust
Fund created by the Agreement.

                  The Certificateholder,  by its acceptance of this Certificate,
agrees  that it will look  solely to the funds on  deposit  in the  Distribution
Account  for  payment  hereunder  and  that the  Trustee  is not  liable  to the
Certificateholders  for  any  amount  payable  under  this  Certificate  or  the
Agreement  or,  except as expressly  provided in the  Agreement,  subject to any
liability under the Agreement.

                  This  Certificate  does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights,  benefits,  obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

                  Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a  Business  Day,
the Business Day immediately following (the "DISTRIBUTION Date"),  commencing on
the first Distribution Date specified on the face hereof, to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
Record  Date in an  amount  equal  to the  product  of the  Percentage  Interest
evidenced  by this  Certificate  and the amount  required to be  distributed  to
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

                  Distributions  on  this  Certificate  shall  be  made  by wire
transfer of immediately available funds to the account of the Holder hereof at a
bank  or  other  entity  having  appropriate   facilities   therefor,   if  such
Certificateholder  shall have so  notified  the Trustee in writing at least five
Business Days prior to the related Record Date and such Certificateholder  shall
satisfy  the  conditions  to  receive  such  form of  payment  set  forth in the
Agreement,  or, if not,  by check  mailed by first  class mail to the address of
such  Certificateholder   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 offices  designated by the
Trustee for such  purposes  or such other  location  specified  in the notice to
Certificateholders of such final distribution.

                  The  Agreement   permits,   with  certain  exceptions  therein
provided,  the  amendment  thereof  and  the  modification  of  the  rights  and
obligations  of the Trustee and the rights of the  Certificateholders  under the
Agreement at any time by the parties thereto,  and Financial  Security Assurance
Inc.,  as  Class A  Certificate  Insurer  with the  consent  of the  Holders  of
Certificates  affected by such  amendment  evidencing  the requisite  Percentage
Interest,  as provided in the Agreement.  Any such consent by the Holder of this
Certificate  shall be conclusive  and binding on such Holder and upon all future
Holders of this  Certificate  and of any  Certificate  issued upon



                                      E-5
<PAGE>

the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

                  As   provided  in  the   Agreement   and  subject  to  certain
limitations  therein set forth,  the transfer of this Certificate is registrable
in the  Certificate  Register of the Trustee upon surrender of this  Certificate
for  registration of transfer at the offices  designated by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

                  The Certificates are issuable only as registered  Certificates
without coupons in denominations  specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

                  No service  charge will be made for any such  registration  of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  The Depositor,  the Servicer,  the  Unaffiliated  Seller,  the
Class A  Certificate  Insurer  and the  Trustee and any agent of any of them may
treat the  Person in whose  name this  Certificate  is  registered  as the owner
hereof for all  purposes,  and no such party  shall be affected by any notice to
the contrary.

                  On  any  Distribution  Date  on  which  the  aggregate  Stated
Principal  Balance of the Mortgage  Loans, as of the last day of the related Due
Period,  is less  than or equal to 10% of the  Maximum  Principal  Balance,  the
Servicer  and/or  the  Class  X  Certificateholders  will  have  the  option  to
repurchase,  in whole, from the Trust Fund all remaining  Mortgage Loans and all
property  acquired  in  respect  of  the  Mortgage  Loans  at a  purchase  price
determined as provided in the Agreement.  The obligations  and  responsibilities
created by the  Agreement  will  terminate  as provided  in Section  9.01 of the
Agreement.

                  Any term used  herein that is defined in the  Agreement  shall
have the meaning  assigned in the Agreement,  and nothing herein shall be deemed
inconsistent with that meaning.



                                      E-6
<PAGE>


                                   ASSIGNMENT

          FOR VALUE  RECEIVED,  the undersigned  hereby  sell(s),  assign(s) and
transfer(s) unto
                 ---------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

          I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:

                             ---------------------------------------------------
                                    Signature by or on behalf of assignor



                                      E-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately  available funds to                                                ,
                                -----------------------------------------------
                                                                               ,
-------------------------------------------------------------------------------
for the account of                                                             ,
                   ------------------------------------------------------------
account number          , or, if mailed by check, to                           ,
               ---------                             --------------------------
Applicable statements should be mailed to                                      .
                                          -------------------------------------

          This  information is provided by                                     ,
                                           ------------------------------------
the assignee named above, or                                                   ,
                             --------------------------------------------------
as its agent.



                                      E-8
<PAGE>

                                    EXHIBIT F

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

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

         Re:      Pooling and Servicing  Agreement  dated as of November 1, 2002
                  among  Morgan  Stanley  ABS  Capital  I  Inc.,  as  Depositor,
                  Fairbanks  Capital Corp.,  as Servicer,  CDC Mortgage  Capital
                  Inc., as Unaffiliated  Seller and Deutsche Bank National Trust
                  Company,  as  Trustee,   CDC  Mortgage  Capital  Trust  Series
                  2002-HE3

Gentlemen:

                  In accordance with Section 2.02 of the above-captioned Pooling
and  Servicing  Agreement  (the  "POOLING AND  SERVICING  AGREEMENT"),  for each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
listed in the attached schedule), it has received:

                  (i) the original  Mortgage  Note,  endorsed as provided in the
         following form: "Pay to the order of ________, without recourse"; and

                  (ii) a duly executed assignment of the Mortgage.

                  Based  on  its  review  and  examination  and  only  as to the
foregoing documents,  such documents appear regular on their face and related to
such Mortgage Loan.

                  The  Trustee  has  made  no  independent  examination  of  any
documents  contained  in each  Mortgage  File  beyond  the  review  specifically
required  in  the  Pooling  and  Servicing  Agreement.   The  Trustee  makes  no
representations as to: (i) the validity, legality,  sufficiency,  enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the  Mortgage  Loans  identified  on the  Mortgage  Loan  Schedule,  or (ii) the
collectability, insurability, perfection, priority, effectiveness or suitability
of any such Mortgage Loan.  Notwithstanding anything herein to the contrary, the
Trustee has made no determination and makes no representations as to whether (i)
any  endorsement is sufficient to transfer all right,  title and interest of the
party so endorsing,  as Noteholder or assignee thereof,  in and to that Mortgage
Note or (ii) any  assignment is in  recordable  form or sufficient to effect the
assignment of and transfer to the assignee thereof,  under the Mortgage to which
the assignment relates.


                                      F-1
<PAGE>


                  Capitalized  words and  phrases  used  herein  shall  have the
respective meanings assigned to them in the Pooling and Servicing Agreement.

                                     DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          as Trustee

                                     By:
                                        ----------------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------


                                      F-2
<PAGE>



                                    EXHIBIT G

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

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

                  Re:      Pooling and Servicing  Agreement dated as of November
                           1, 2002 among Morgan  Stanley ABS Capital I Inc.,  as
                           Depositor,  Fairbanks Capital Corp., as Servicer, CDC
                           Mortgage  Capital  Inc., as  Unaffiliated  Seller and
                           Deutsche Bank National Trust Company, as Trustee, CDC
                           Mortgage Capital Trust Series 2002-HE3

Gentlemen:

                  In accordance with Section 2.02 of the above-captioned Pooling
and  Servicing   Agreement   (the  "POOLING  AND  SERVICING   AGREEMENT"),   the
undersigned,  as Trustee,  hereby certifies that as to each Mortgage Loan listed
in the Mortgage  Loan  Schedule  (other than any  Mortgage  Loan paid in full or
listed on the attached Document Exception Report) it has received:

                  (i) The original Mortgage Note,  endorsed in the form provided
         in  Section  2.01 of the  Pooling  and  Servicing  Agreement,  with all
         intervening  endorsements  showing a complete chain of endorsement from
         the originator to the last endorsee.

                  (ii) The original recorded Mortgage.

                  (iii) A duly  executed  assignment of the Mortgage in the form
         provided in Section 2.01 of the Pooling and Servicing Agreement; or, if
         the  Unaffiliated  Seller has certified or the Trustee  otherwise knows
         that the related  Mortgage has not been  returned  from the  applicable
         recording  office, a copy of the assignment of the Mortgage  (excluding
         information to be provided by the recording office).

                  (iv) The original or duplicate original recorded assignment or
         assignments of the Mortgage showing a complete chain of assignment from
         the originator to the last endorsee.

                  (v) The  original or duplicate  lender's  title policy and all
         riders  thereto  or, if such  original  is  unavailable,  any one of an
         original  title binder,  either an original title



                                      G-1
<PAGE>

         binder or an  original or copy of the title  commitment,  and if copies
         then certified to be true and complete by the title company.

                  Based  on  its  review  and  examination  and  only  as to the
foregoing documents, (a) such documents appear regular on their face and related
to such Mortgage Loan, and (b) the  information  set forth in items (1), (2) and
(18) of the Mortgage  Loan Schedule and items (1), (9) and (17) of the Data Tape
Information accurately reflects information set forth in the Custodial File.

                  The  Trustee  has  made  no  independent  examination  of  any
documents  contained in each  Mortgage  File beyond the review of the  Custodial
File specifically  required in the Pooling and Servicing Agreement.  The Trustee
makes  no  representations  as to:  (i)  the  validity,  legality,  sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans  identified on the Mortgage Loan Schedule,  or
(ii) the collectability,  insurability,  perfection,  priority, effectiveness or
suitability of any such Mortgage Loan.  Notwithstanding  anything  herein to the
contrary,  the Trustee has made no determination and makes no representations as
to whether (i) any  endorsement  is sufficient to transfer all right,  title and
interest of the party so endorsing, as Noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or sufficient to
effect  the  assignment  of and  transfer  to the  assignee  thereof,  under the
Mortgage to which the assignment relates.

                  Capitalized  words and  phrases  used  herein  shall  have the
respective meanings assigned to them in the Pooling and Servicing Agreement.

                                     DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          as Trustee

                                     By:
                                        ----------------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------



                                      G-2
<PAGE>


                                    EXHIBIT H

                               TRANSFER AFFIDAVIT

                MORGAN STANLEY ABS CAPITAL I INC. Trust 2002-HE3,

                       Mortgage Pass-Through Certificates,

                                 Series 2002-HE3

STATE OF      )
              ) ss.:
COUNTY OF     )

                  The undersigned,  being first duly sworn,  deposes and says as
follows:

                  1. The undersigned is an officer of  ___________________,  the
proposed  Transferee  of an  Ownership  Interest in a Class R  Certificate  (the
"CERTIFICATE")  issued  pursuant to the Pooling and  Servicing  Agreement,  (the
"AGREEMENT"),  relating  to the  above-referenced  Series,  by and among  Morgan
Stanley ABS Capital I Inc., as depositor (the  "DEPOSITOR"),  Fairbanks  Capital
Corp.,  as servicer,  CDC Mortgage  Capital  Inc., as  unaffiliated  seller (the
"UNAFFILIATED  SELLER") and Deutsche Bank National  Trust  Company,  as Trustee.
Capitalized  terms used,  but not defined  herein or in Exhibit 1 hereto,  shall
have the meanings  ascribed to such terms in the  Agreement.  The Transferee has
authorized  the  undersigned  to make this affidavit on behalf of the Transferee
for the benefit of the Depositor and the Trustee.

                  2. The Transferee is not, as of the date hereof,  and will not
be, as of the date of the Transfer,  a  "disqualified  organization"  within the
meaning  of  Section  860E(e)(5)  of the  Internal  Revenue  Code of  1986.  The
Transferee will endeavor to remain other than a disqualified organization for so
long as it retains its Ownership Interest in the Certificate.

                  3. The Transferee has historically paid its debts as they came
due and will continue to pay its debts as they come due in the future.

                  4. The Transferee has no present knowledge or expectation that
it will be unable to pay any United States taxes owed by it or become  insolvent
or subject to a bankruptcy  proceeding  for so long as the  Certificate  remains
outstanding.

                  5. The Transferee has been advised of, and understands that as
the holder of a noneconomic  residual  interest it may incur tax  liabilities in
excess of any cash flows  generated by the interest.  The Transferee  intends to
pay such taxes associated with holding the Certificate as they become due.

                  6. The Transferee  will not cause income from the  Certificate
to be attributable to a foreign  permanent  establishment  or fixed base (within
the meaning of an  applicable  income tax treaty) of the  Transferee  or another
U.S. taxpayer.



                                      H-1
<PAGE>

                  (1)7. [A. Formula Test] The Transferee agrees that the present
value of the anticipated tax liabilities associated with holding the Certificate
does not exceed the sum of the present value of any  consideration  given to the
Transferee to acquire the Certificate,  the present value of the expected future
distributions on the  Certificate,  and the present value of the anticipated tax
savings  associated with holding the interest as the REMIC generates losses. The
Transferee  agrees  that it  complied  with U.S.  Treasury  Regulations  Section
1.860E-1(c)(8) in making such representation.

                  The  Transferee  agrees  that  it is not a  foreign  permanent
establishment  or fixed  base(within  the  meaning of an  applicable  income tax
treaty) of the Transferor or another U.S. taxpayer.

                  [B. Asset Test] The  Transferee,  at the time of the transfer,
and at the close of the  Transferee's two fiscal years preceding the year of the
transfer,  had gross assets for financial  reporting  purposes in excess of $100
million and net assets in excess of $10 million  (excluding  any obligation of a
person related to the Transferee within the meaning of U.S. Treasury Regulations
Section 1.860E-1(c)(6)(ii) or any other asset if a principle purpose for holding
or acquiring  the other asset was to permit the  Transferee to satisfy the above
stated minimum asset requirements).

                  The  Transferee  is an "eligible  corporation,"  as defined in
U.S. Treasury Regulations Section  1.860E-1(c)(6)(i).  The Transferee agrees, in
connection  with  any  subsequent  transfer  of its  Ownership  Interest  in the
Certificate,  to  transfer  its  Ownership  Interest  only to another  "eligible
corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i),
and to honor the  restrictions  on subsequent  transfers of the  Certificate  by
transferring  its Ownership  Interest only in a transaction  that  satisfies the
requirements of U.S. Treasury Regulations Section 1.860E-1(c)(4)(i),  (ii) (iii)
and U.S. Treasury Regulations Section 1.860E-1(c)(5).

                  The  Transferee  determined  the  consideration  paid to it to
acquire the Certificate in good faith and based on reasonable market assumptions
(including,  but not limited to, borrowing and investment rates,  prepayment and
loss  assumptions,  expense and  reinvestment  assumptions,  tax rates and other
factors specific to the Transferee).

                  8. The  Transferee  is 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, or an
estate  or trust  whose  income  from  sources  without  the  United  States  is
includable  in gross  income  for United  States  federal  income  tax  purposes
regardless of its connection  with the conduct of a trade or business within the
United States.

                  9.  The  Transferee's   taxpayer   identification   number  is
____________.

-------------------
(1) Insert either section 7A or 7B.


                                      H-2
<PAGE>

                  10. The  Transferee  is not an employee  benefit  plan that is
subject to ERISA or a plan that is subject to Section 4975 of the Code,  and the
Transferee is not acting on behalf of or investing plan assets of such a plan.

                  11. The  Transferee  has  reviewed the  provisions  of Section
5.02(c)  of  the  Agreement  and  understands  the  legal  consequences  of  the
acquisition  of an Ownership  Interest in the  Certificate,  including,  without
limitation,   the  restrictions  on  subsequent  Transfers  and  the  provisions
regarding  voiding the Transfer and mandatory  sales.  The Transferee  expressly
agrees to be bound by and to abide by the  provisions of Section  5.02(c) of the
Agreement  and  the  restrictions  noted  on the  face of the  Certificate.  The
Transferee  understands and agrees that any breach of any of the representations
included herein shall render the Transfer to the Transferee  contemplated hereby
null and void.

                  12. The Transferee consents to any additional  restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a  reasonable  arrangement  to ensure that the  Certificate  will only be owned,
directly or indirectly, by a Transferee that is not a disqualified organization.

                  13. The  Transferee  will not  transfer  its  interest  in the
Certificate for the purpose of impeding the assessment or collection of any tax.

                  14. The Transferee will not transfer such  Certificate  unless
(i) it has received from any subsequent transferee an affidavit in substantially
the same form as this affidavit  containing the same  representations  set forth
herein,  and  (ii) as of the  time of the  transfer,  it does  not  have  actual
knowledge  that such  affidavit  is false.  The  Transferee  will  deliver  such
affidavit to the Trustee upon receipt.

                                     * * *


                                      H-3
<PAGE>


                  IN WITNESS WHEREOF,  the Transferee has caused this instrument
to be executed on its behalf,  pursuant to authority of its Board of  Directors,
by its duly  authorized  officer and its corporate seal to be hereunto  affixed,
duly attested, this __ day of ________, 20__.


                                     Print Name of Transferee

                                     By:
                                        ----------------------------------------
                                          Name:
                                          Title:
[Corporate Seal]

ATTEST:

-------------------------------------
[Assistant] Secretary

                  Personally  appeared  before  me the  above-named  __________,
known  or  proved  to me to be  the  same  person  who  executed  the  foregoing
instrument and to be the ___________ of the Transferee, and acknowledged that he
executed  the  same as his  free  act and  deed and the free act and deed of the
Transferee.

                  Subscribed and sworn before me this __ day of ________, 20__.




                                     -------------------------------------------
                                     NOTARY PUBLIC

                                     My Commission expires the __ day
                                     of _________, 20__


                                      H-4
<PAGE>


                                    EXHIBIT I

                         FORM OF TRANSFEROR CERTIFICATE

                                                                __________, 20__

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

                  Re:      CDC Mortgage Capital Trust, Series 2002-HE3, Mortgage
                           Pass-Through Certificates, Series 2002-HE3, Class ___

Ladies and Gentlemen:

                  In connection with our  disposition of the above  Certificates
we certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "ACT"), and are being disposed
by us in a transaction that is exempt from the registration  requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any  Certificates  from, any person,  or otherwise  approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other  action which would result in, a violation of Section 5 of the Act and
(c) to the  extent  we are  disposing  of a  Residual  Certificate,  we  have no
knowledge the Transferee is not a Permitted Transferee.

                                     Very truly yours,

                                     -------------------------------------------
                                     Print Name of Transferor

                                     By:
                                        ----------------------------------------
                                                   Authorized Officer


                                      I-1
<PAGE>


                                    EXHIBIT J

                            FORM OF RULE 144A LETTER

                                                              ____________, 20__

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

                  Re:      CDC Mortgage  Capital  Trust 2002,  Series  2002-HE3,
                           Mortgage Pass-Through Certificates,  Series 2002-HE3,
                           Class

Ladies and Gentlemen:

                  In connection with our  acquisition of the above  Certificates
we certify that (a) we understand that the Certificates are not being registered
under  the  Securities  Act of  1933,  as  amended  (the  "ACT"),  or any  state
securities laws and are being  transferred to us in a transaction that is exempt
from the  registration  requirements  of the Act and any such laws,  (b) we have
such  knowledge and  experience  in financial  and business  matters that we are
capable of evaluating the merits and risks of  investments in the  Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor  concerning the purchase of the  Certificates and all matters relating
thereto or any  additional  information  deemed  necessary  to our  decision  to
purchase  the  Certificates,  (d) we are not an  employee  benefit  plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or arrangement
nor using the assets of any such plan or arrangement to effect such  acquisition
or,  with  respect  to a Class X  Certificate  that has been the  subject  of an
ERISA-Qualifying  Underwriting,  the  purchaser is an insurance  company that is
purchasing  this  certificate  with funds  contained  in an  "insurance  company
general  account"  (as  such  term is  defined  in  Section  V(e) of  Prohibited
Transaction  Class  Exemption  95-60  ("PTCE  95-60") and that the  purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60,
(e) we have not,  nor has  anyone  acting on our  behalf  offered,  transferred,
pledged,  sold or otherwise  disposed of the  Certificates,  any interest in the
Certificates or any other similar  security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the



                                      J-1
<PAGE>

Certificates,  any interest in the  Certificates  or any other similar  security
from, or otherwise  approached or negotiated  with respect to the  Certificates,
any interest in the  Certificates or any other similar security with, any person
in any manner, or made any general  solicitation by means of general advertising
or in any other  manner,  or taken any other  action,  that would  constitute  a
distribution of the  Certificates  under the Securities Act or that would render
the  disposition of the  Certificates a violation of Section 5 of the Securities
Act or require  registration  pursuant thereto, nor will act, nor has authorized
or will  authorize  any  person  to act,  in such  manner  with  respect  to the
Certificates,  (f) to the extent that the  Certificate  transferred is a Class X
Certificate,  we are a  bankruptcy-remote  entity  and  (g) we are a  "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act and have  completed  either of the  forms of  certification  to that  effect
attached hereto as Annex 1 or Annex 2. We are aware that the sale to us is being
made in reliance on Rule 144A.  We are acquiring  the  Certificates  for our own
account or for resale  pursuant to Rule 144A and further,  understand  that such
Certificates  may be  resold,  pledged  or  transferred  only  (i)  to a  person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the  resale,  pledge or transfer is being made in reliance on Rule
144A,  or (ii)  pursuant  to  another  exemption  from  registration  under  the
Securities Act.

                                      J-2
<PAGE>


                              ANNEX 1 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

                  The undersigned  (the "BUYER") hereby  certifies as follows to
the  parties  listed  in the Rule  144A  Transferee  Certificate  to which  this
certification relates with respect to the Certificates described therein:

                  1. As indicated below, the undersigned is the President, Chief
Financial  Officer,  Senior Vice  President  or other  executive  officer of the
Buyer.

                  2. In connection  with purchases by the Buyer,  the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933, as amended  ("RULE  144A")  because (i) the Buyer owned
and/or invested on a discretionary  basis  $_________ in securities  (except for
the  excluded  securities  referred to below) as of the end of the Buyer's  most
recent fiscal year (such amount being  calculated  in accordance  with Rule 144A
and (ii) the Buyer satisfies the criteria in the category marked below.

                      ------- CORPORATION,  ETC.  The  Buyer  is  a  corporation
                              (other than a bank,  savings and loan  association
                              or similar institution),  Massachusetts or similar
                              business   trust,   partnership,   or   charitable
                              organization described in Section 501(c)(3) of the
                              Internal Revenue Code of 1986, as amended.

                      ------- BANK.  The Buyer (a) is a national bank or banking
                              institution organized under the laws of any State,
                              territory  or  the   District  of  Columbia,   the
                              business  of which is  substantially  confined  to
                              banking  and  is   supervised   by  the  State  or
                              territorial banking commission or similar official
                              or is a foreign  bank or  equivalent  institution,
                              and (b)  has an  audited  net  worth  of at  least
                              $25,000,000 as  demonstrated  in its latest annual
                              financial statements,  a copy of which is attached
                              hereto.

                      ------- SAVINGS  AND LOAN.  The Buyer (a) is a savings and
                              loan  association,  building and loan association,
                              cooperative bank, homestead association or similar
                              institution, which is supervised and examined by a
                              State or Federal authority having supervision over
                              any such  institutions or is a foreign savings and
                              loan association or equivalent institution and (b)
                              has an audited  net worth of at least  $25,000,000
                              as  demonstrated  in its latest  annual  financial
                              statements,  a copy of which is  attached  hereto.

                      ------- BROKER-DEALER.  The  Buyer is a dealer  registered
                              pursuant to Section 15 of the Securities  Exchange
                              Act of 1934.


                                      J-3
<PAGE>


                      ------- INSURANCE  COMPANY.  The  Buyer  is  an  insurance
                              company  whose  primary and  predominant  business
                              activity  is  the  writing  of  insurance  or  the
                              reinsuring  of  risks  underwritten  by  insurance
                              companies and which is subject to  supervision  by
                              the insurance  commissioner or a similar  official
                              or agency of a State, territory or the District of
                              Columbia.

                      ------- STATE  OR  LOCAL   PLAN.   The  Buyer  is  a  plan
                              established   and  maintained  by  a  State,   its
                              political   subdivisions,   or   any   agency   or
                              instrumentality  of the  State  or  its  political
                              subdivisions,  for the  benefit of its  employees.

                      ------- ERISA PLAN. The Buyer is an employee  benefit plan
                              within  the  meaning  of  Title I of the  Employee
                              Retirement Income Security Act of 1974.

                      ------- INVESTMENT  ADVISOR.  The  Buyer is an  investment
                              advisor  registered under the Investment  Advisors
                              Act of 1940.

                      ------- SMALL  BUSINESS  INVESTMENT  COMPANY.  Buyer  is a
                              small business  investment company licensed by the
                              U.S. Small Business  Administration  under Section
                              301(c) or (d) of the Small Business Investment Act
                              of 1958.

                      ------- BUSINESS DEVELOPMENT COMPANY.  Buyer is a business
                              development company as defined in Section  202 (a)
                              (22) of the Investment Advisors Act of 1940.


                  3. The term  "SECURITIES"  as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated  with the Buyer,  (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a  dealer,   (iii)   securities   issued  or  guaranteed  by  the  U.S.  or  any
instrumentality  thereof,  (iv) bank deposit notes and  certificates of deposit,
(v) loan participations,  (vi) repurchase agreements, (vii) securities owned but
subject  to a  repurchase  agreement  and  (viii)  currency,  interest  rate and
commodity swaps.

                  4.  For  purposes  of  determining  the  aggregate  amount  of
securities  owned and/or  invested on a  discretionary  basis by the Buyer,  the
Buyer used the cost of such  securities  to the Buyer and did not include any of
the  securities  referred to in the  preceding  paragraph,  except (i) where the
Buyer reports its securities  holdings in its financial  statements on the basis
of their market value, and (ii) no current  information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies,  the securities may be valued at market.  Further,  in determining such
aggregate amount,  the Buyer may have included  securities owned by subsidiaries
of the Buyer, but only if such  subsidiaries are consolidated  with the Buyer in
its  financial   statements  prepared  in  accordance  with  generally  accepted
accounting  principles and if the investments of such  subsidiaries  are managed
under the Buyer's direction.  However,  such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting  company  under the  Securities  Exchange Act of
1934, as amended.

                                      J-4
<PAGE>

                  5. The Buyer  acknowledges  that it is familiar with Rule 144A
and  understands  that  the  seller  to it  and  other  parties  related  to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.

                  6. Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions  herein.  Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification  as of the date of such purchase.  In addition,  if the Buyer is a
bank or  savings  and loan is  provided  above,  the Buyer  agrees  that it will
furnish to such parties updated annual financial  statements promptly after they
become available.


                                     Print Name of Transferor

                                     By:
                                        ----------------------------------------
                                          Name:
                                          Title:



                                     Date:
                                          --------------------------------------



                                   J-5
<PAGE>


                                                            ANNEX 2 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

          The  undersigned  (the  "BUYER")  hereby  certifies  as follows to the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification relates with respect to the Certificates described therein:

          1.   As indicated  below,  the  undersigned  is the  President,  Chief
Financial  Officer or Senior Vice  President  of the Buyer or, if the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933,  as amended  ("RULE  144A")  because Buyer is part of a
Family of  Investment  Companies (as defined  below),  is such an officer of the
Adviser.

          2.   In connection with purchases by Buyer,  the Buyer is a "qualified
institutional  buyer" as  defined in SEC Rule 144A  because  (i) the Buyer is an
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended and (ii) as marked  below,  the Buyer  alone,  or the Buyer's  Family of
Investment Companies,  owned at least $100,000,000 in securities (other than the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining  the amount of securities  owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was  used,  except  (i)  where the  Buyer or the  Buyer's  Family of  Investment
Companies  reports its  securities  holdings in its financial  statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those  securities  has been  published.  If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

          ____ The Buyer owned  $______ in  securities  (other than the excluded
               securities  referred to below) as of the end of the Buyer's  most
               recent  fiscal year (such amount being  calculated  in accordance
               with Rule 144A).

          ____ The Buyer is part of a Family of Investment Companies which owned
               in the  aggregate  $  ________  in  securities  (other  than  the
               excluded  securities  referred  to  below)  as of the  end of the
               Buyer's most recent fiscal year (such amount being  calculated in
               accordance with Rule 144A).

          3.   The term "FAMILY OF  INVESTMENT  COMPANIES"  as used herein means
two or more  registered  investment  companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned  subsidiaries  of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

          4.   The  term  "SECURITIES"  as used  herein  does  not  include  (i)
securities  of  issuers  that are  affiliated  with the Buyer or are part of the
Buyer's Family of Investment Companies,  (ii) securities issued or guaranteed by
the  U.S.  or  any  instrumentality   thereof,  (iii)  bank  deposit  notes  and
certificates of deposit,  (iv) loan participations,  (v) repurchase  agreements,

                                      J-6
<PAGE>


(vi) securities owned but subject to a repurchase  agreement and (vii) currency,
interest rate and commodity swaps.

          5.   The Buyer is  familiar  with Rule 144A and  understands  that the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification  relates are relying and will  continue to rely on the  statements
made  herein  because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

          6.   Until the date of purchase of the  Certificates,  the undersigned
will notify the parties listed in the Rule 144A Transferee  Certificate to which
this  certification  relates of any changes in the  information  and conclusions
herein.  Until such notice is given,  the Buyer's  purchase of the  Certificates
will constitute a reaffirmation  of this  certification by the undersigned as of
the date of such purchase.


                                 Print Name of Transferor

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:



                                 IF AN ADVISER:


                                  ----------------------------------------------
                                               Print Name of Buyer

                                  Date:
                                       -----------------------------------------

                                      J-7
<PAGE>


                                    EXHIBIT K

                               REQUEST FOR RELEASE
                                  (for Trustee)

To:  [Address]

          Re:

          In connection  with the  administration  of the Mortgage Loans held by
you as the Trustee on behalf of the Certificateholders,  we request the release,
and acknowledge  receipt,  of the (Custodial  File/[specify  documents]) for the
Mortgage Loan described below, for the reason indicated.

MORTGAGOR'S NAME, ADDRESS & ZIP CODE:

MORTGAGE LOAN NUMBER:

SEND CUSTODIAL FILE TO:

REASON FOR REQUESTING DOCUMENTS (CHECK ONE)

     ____ 1.        Mortgage Loan Paid in Full.  (The Company  hereby  certifies
               that all  amounts  received  in  connection  therewith  have been
               credited to the Collection Account as provided in the Pooling and
               Servicing Agreement.)

     ____ 2.        Mortgage Loan Repurchase  Pursuant to Subsection 2.03 of the
               Pooling and Servicing  Agreement.  (The Company hereby  certifies
               that the  repurchase  price has been  credited to the  Collection
               Account as provided in the Pooling and Servicing Agreement.)

     ____ 3.        Mortgage Loan Liquidated By _________________.  (The Company
               hereby  certifies  that all proceeds of  foreclosure,  insurance,
               condemnation or other  liquidation have been finally received and
               credited to the  Collection  Account  pursuant to the Pooling and
               Servicing Agreement.)

     ____ 4.        Mortgage Loan in Foreclosure.

     ____ 5.        Other (explain).

          If box 1, 2 or 3 above is checked, and if all or part of the Custodial
File was previously  released to us, please  release to us our previous  request
and  receipt  on file  with you,  as well as any  additional  documents  in your
possession relating to the specified Mortgage Loan.

                                      K-1
<PAGE>


          If box 4 or 5 above is  checked,  upon our  return of all of the above
documents to you as the Trustee,  please  acknowledge your receipt by signing in
the space indicated below, and returning this form.

                                            FAIRBANKS CAPITAL CORP.



                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:
                                               Date:

                                      K-2
<PAGE>


                                    EXHIBIT L

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

                       CDC MORTGAGE CAPITAL TRUST 2002-HE3

          Pursuant to separate Mortgage Loan Purchase Agreements,  BNC Mortgage,
Inc. ("BNC"), IMPAC Funding Corporation ("IFC"), People's Choice Home Loan, Inc.
("PEOPLE'S  CHOICE"),  Chapel  Mortgage  Corporation  ("CHAPEL  MORTGAGE"),  SIB
Mortgage Corp.  ("SIB  MORTGAGE"),  Fremont  Investment and Loan ("FREMONT") and
First NLC  Financial  Services,  LLC ("FIRST  NLC" and together  with BNC,  IFC,
Superior,  NC Capital,  SIB Mortgage and Fremont, the "ORIGINATORS") have agreed
to sell  to CDC  Mortgage  Capital  Inc.  (the  "UNAFFILIATED  SELLER")  certain
mortgage  loans (each, a "MORTGAGE  LOAN").  These Mortgage Loans may in turn be
sold by the  Unaffiliated  Seller  to MORGAN  STANLEY  ABS  CAPITAL I INC.  (the
"DEPOSITOR")  and then sold by the  Depositor to the CDC Mortgage  Capital Trust
2002-HE3  (the  "TRUST  FUND").  The Trust Fund was  established  pursuant  to a
Pooling and Servicing Agreement,  dated as of November 1, 2002 (the "POOLING AND
SERVICING  AGREEMENT") among the Unaffiliated  Seller, the Depositor,  Fairbanks
Capital  Corp.,  as Servicer (the  "SERVICER")  and Deutsche Bank National Trust
Company, as trustee (the "TRUSTEE"). The Pooling and Servicing Agreement permits
a  pre-funding  feature,  allowing  for the  acquisition  by the  Trust  Fund of
Subsequent  Mortgage Loans during the Pre-Funding  Period.  Representations  and
warranties  with respect to the Mortgage Loans have been made by the Originators
pursuant to separate Assignment and Recognition Agreements.

          Capitalized  terms  used  herein  and not  defined  herein  have their
respective meanings as set forth in the Pooling and Servicing Agreement.

          CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS.

          The  Unaffiliated  Seller  does  hereby  irrevocably  sell,  transfer,
assign, set over and otherwise convey to the Depositor, without recourse (except
as  otherwise  explicitly  provided  for  herein)  all of its  right,  title and
interest in and to the Subsequent  Mortgage Loans,  exclusive of the obligations
of the  Unaffiliated  Seller or any other Person with respect to the  Subsequent
Mortgage Loans but including  specifically,  without limitation,  the Mortgages,
the  Custodial  Files  and  all  other   documents,   materials  and  properties
appurtenant thereto and the Mortgage Notes, including all interest and principal
collected  by the  Unaffiliated  Seller  on or with  respect  to the  Subsequent
Mortgage Loans after the related Subsequent  Cut-off Date,  together with all of
its  right,  title and  interest  in and to the  proceeds  received  after  such
Subsequent  Cut-off  Date of any  related  insurance  policies  on behalf of the
Depositor.

          The Depositor does hereby irrevocably sell, transfer, assign, set over
and otherwise  convey to the Trust Fund,  without  recourse (except as otherwise
explicitly  provided for herein) all of its right,  title and interest in and to
the Subsequent Mortgage Loans,  exclusive of the obligations of the Depositor or
any other Person with respect to the  Subsequent  Mortgage  Loans but  including
specifically,  without  limitation,  the Mortgages,  the Custodial Files and all
other documents,  materials and properties  appurtenant thereto and the Mortgage
Notes,  including  all interest and  principal  collected by the Depositor on or
with  respect to the  Subsequent


                                      L-1
<PAGE>


Mortgage Loans after the related Subsequent  Cut-off Date,  together with all of
its  right,  title and  interest  in and to the  proceeds  received  after  such
Subsequent Cut-off Date of any related insurance policies on behalf of the Trust
Fund.

          The  expenses  and costs  relating to the  delivery of the  Subsequent
Mortgage Loans specified in this Subsequent  Transfer  Agreement and the Pooling
and Servicing Agreement shall be borne by the Unaffiliated Seller.

          The Unaffiliated Seller hereby affirms the representation and warranty
set forth in Sections  3.01(f) and (h) of the  Unaffiliated  Seller's  Agreement
with  respect  to the  Subsequent  Mortgage  Loans  as of the date  hereof.  The
Unaffiliated  Seller  hereby  delivers  notice  and  confirms  that  each of the
conditions set forth in Section  2.01(c) of the Pooling and Servicing  Agreement
are satisfied as of the date hereof.

          The Servicer  hereby  affirms the  representations  and warranties set
forth in Schedule IIA to the Pooling and Servicing Agreement with respect to the
Subsequent Mortgage Loans as of the date hereof.

          Additional terms of the sale are attached hereto as Attachment A.

          To the extent  permitted by applicable law, this  Subsequent  Transfer
Agreement, or a memorandum thereof if permitted under applicable law, is subject
to recordation in all  appropriate  public offices for real property  records in
all  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
Servicer at the Unaffiliated  Seller's expense,  but only when accompanied by an
opinion  of  counsel  to  the  effect  that  such  recordation   materially  and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.

          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,  without  giving
effect to the principles of conflicts of laws.

          This Agreement may be executed in one or more  counterparts and by the
different  parties  hereto on  separate  counterparts,  each of  which,  when so
executed, shall be deemed to be an original; such counterparts,  together, shall
constitute one and the same Agreement.

          All terms and  conditions of the Pooling and  Servicing  Agreement are
hereby ratified,  confirmed and incorporated herein; PROVIDED, that in the event
of any conflict the  provisions  of this  Subsequent  Transfer  Agreement  shall
control over the conflicting provisions of the Pooling and Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]


                                      L-2
<PAGE>


                                        CDC MORTGAGE CAPITAL INC.,
                                             as Unaffiliated Seller

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:




                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:


                                        MORGAN STANLEY ABS CAPITAL I INC.,
                                             as Depositor

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:


                                        FAIRBANKS CAPITAL CORP.,
                                             as Servicer

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:


                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                             as Trustee

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:




                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                      L-3
<PAGE>


                                    EXHIBIT M

                            FORM CERTIFICATION TO BE
                              PROVIDED TO DEPOSITOR

Re:  CDC Mortgage Capital Trust 2002-HE3
     MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2002-HE3

I, [identify the certifying individual], certify that:

     1.   I have reviewed  this annual  report on Form 10-K,  and all reports on
          Form 8-K containing distribution or servicing reports filed in respect
          of periods  included  in the year  covered by this annual  report,  of
          Morgan  Stanley ABS Capital I Inc. (the  "DEPOSITOR")  relating to the
          above-referenced trust and series of certificates;

     2.   Based on my knowledge,  the  information in these reports,  taken as a
          whole,  does not contain any untrue  statement  of a material  fact or
          omit to state a material fact necessary to make the  statements  made,
          in light of the  circumstances  under which such statements were made,
          not misleading as of the last day of the period covered by this annual
          report;

     3.   Based  on my  knowledge,  the  servicing  information  required  to be
          provided  to the  trustee  by  the  servicer  under  the  pooling  and
          servicing agreement is included in these reports;

     4.   I am  responsible  for  reviewing  the  activities  performed  by  the
          servicer under the pooling and servicing  agreement and based upon the
          review required under the pooling and servicing agreement,  and except
          as disclosed in the report, the servicer has fulfilled its obligations
          under the pooling and servicing agreement; and

     5.   I have disclosed to the servicer's  certified  public  accountants all
          significant  deficiencies  relating to the servicer's  compliance with
          the minimum servicing  standards in accordance with a review conducted
          in compliance with the Uniform Single Attestation Program for Mortgage
          Bankers or similar  standard as set forth in the pooling and servicing
          agreement.

Date:    _________________________

__________________________________
[Signature]
[Title]

                                      M-1
<PAGE>


                                    EXHIBIT N

                              Annual Certifications

Re:  CDC Mortgage Capital Trust 2002-HE3

     MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2002-HE3

I, [identify the certifying individual], certify to Morgan Stanley ABS Capital I
Inc.  and the Trustee,  if  applicable,  (the  "Depositor"),  and its  officers,
directors and affiliates,  and with the knowledge and intent that they will rely
upon this certification, that:

     1.   [To be certified by the Trustee] [I have reviewed the annual report on
          Form 10-K for the fiscal year], and all reports on Form 8-K containing
          distribution  date reports filed in respect of periods included in the
          year covered by that annual report,  of the Depositor  relating to the
          above-referenced trust;]

     2.   [To  be  certified  by  the  Trustee]  [Based  on  my  knowledge,  the
          information in these distribution date reports, taken as a whole, does
          not contain any untrue statement of a material fact or omit to state a
          material fact necessary to make the  statements  made, in light of the
          circumstances under which such statements were made, not misleading as
          of the last day of the period covered by that annual report;]

     3.   [To  be  certified  by  the  Trustee]  [Based  on  my  knowledge,  the
          distribution information required to be provided to the trustee by the
          servicer  under the pooling  and  servicing  agreement  is included in
          these distribution date reports;]

     4.   [To be certified by the Servicer] [I am responsible  for reviewing the
          activities  performed by the servicer  under the pooling and servicing
          agreement  and based upon the review  required  under the  pooling and
          servicing  agreement,  and  except as  disclosed  in the  report,  the
          servicer has fulfilled its obligations under the pooling and servicing
          agreement; and]

     5.   [To be certified by the Servicer] [I have  disclosed to the servicer's
          certified public accountants all significant  deficiencies relating to
          the  servicer's  compliance  with the minimum  servicing  standards in
          accordance  with a review  conducted  in  compliance  with the Uniform
          Single Attestation Program for Mortgage Bankers or similar standard as
          set forth in the pooling and servicing agreement.]

Date: ____________________________

__________________________________
[Signature]
[Title]

                                      N-1
<PAGE>


                                    EXHIBIT O


          These performance standards apply to all first lien Mortgage Loans and
REO Properties  subject to this  Agreement.  Only Mortgage  Loans  initiated for
foreclosure  and REO Properties  managed by the Servicer will be included in the
calculation of these performance standards.

          The  Servicer's  performance  shall be measured by the  benchmarks for
specified  performance  measurement  areas described in the following table (the
"Performance  Benchmarks").  Any failure of any component of such standards will
be given a sixty (60) day cure  period.  After giving  effect to the  applicable
grace  periods,  the  Servicer  shall  be  deemed  to have  failed  to meet  the
performance  standards upon: (x) the occurrence of the same five (5) Performance
Benchmarks  for three (3)  consecutive  months,  (y) the  occurrence of the same
three (3)  Performance  Benchmarks for six (6)  consecutive  months,  or (z) the
occurrence of the same one (1)  Performance  Benchmark for nine (9)  consecutive
months.

<TABLE>
<CAPTION>
                             PERFORMANCE BENCHMARKS
-------- ------------------------------------------------------------------------------------- -------------
<S>      <C>                                                                                   <C>
         BENCHMARK                                                                             STANDARD
-------- ------------------------------------------------------------------------------------- -------------

I.       Right Party Contacts (First 15 days of delinquency)                                      22.5%

         The Servicer will achieve an average daily Right Party Contact Rate for
         the month against all accounts in their first 15 days of delinquency.
-------- ------------------------------------------------------------------------------------- -------------
2.       Right Party Contacts (After the 15th day of delinquency but not in foreclosure)          18.75%

         The Servicer will achieve an average daily Right Party Contact Rate for
         the month  against all accounts  past the first 15 days of  delinquency
         but prior to foreclosure.
-------- ------------------------------------------------------------------------------------- -------------
3.        Promise to Pay                                                                          22.5%

         The Servicer  will achieve an average daily Promise to Pay on a minimum
         percentage of all loans 1 - 89 days delinquent.
-------- ------------------------------------------------------------------------------------- -------------
4.       Roll Rate (I to 29 days of delinquency - MBA method)                                     52.5%

         The  Servicer  shall  achieve a Roll Rate from  previous  month-end  to
         current month-end.
-------- ------------------------------------------------------------------------------------- -------------
5.       Roll Rate (30 to 59 days of delinquency - MBA method)                                     45%

         The  Servicer  shall  achieve a Roll Rate from  previous  month-end  to
         current month-end.
-------- ------------------------------------------------------------------------------------- -------------
6.       Roll Rate (60 to 89 days of delinquency - MBA method)                                     30%

         The  Servicer  shall  achieve a Roll Rate from  previous  month-end  to
         current month-end.
-------- ------------------------------------------------------------------------------------- -------------
</TABLE>

                                      O-1
<PAGE>


<TABLE>
<CAPTION>
-------- ------------------------------------------------------------------------------------- -------------
<S>      <C>                                                                                   <C>
         BENCHMARK                                                                             STANDARD
-------- ------------------------------------------------------------------------------------- -------------
7.       Abandonment Rate The Servicer will operate its customer service area to                   13.3%
         achieve  no more than a  maximum  Abandonment  Rate on  customer
         calls.
-------- ------------------------------------------------------------------------------------- -------------
8.       REO Sales                                                                                11.25%

         The  Servicer  will  sell a  minimum  percentage  of the  REO  Sellable
         Portfolio  on a monthly  basis and will  obtain a Total  Sales Price to
         Total  Reconciled  Market Value of at least 95%,  measured on a rolling
         three month average.
-------- ------------------------------------------------------------------------------------- -------------
9.       The Servicer will obtain a minimum Pre-Foreclosure Resolution Rate on a rolling           45%
         three month average.
-------- ------------------------------------------------------------------------------------- -------------
10.      Servicer will meet a minimum Foreclosure Timeline Percentage on a rolling three           120%
         month average basis.
-------- ------------------------------------------------------------------------------------- -------------
</TABLE>

                      DEFINITIONS FOR PERFORMANCE STANDARDS

          ABANDONMENT  RATE:  The  percentage  of  total  incoming  calls to the
customer service area which are not directed to the automated telephone response
system in which the  customer  terminates  the call prior to  connection  with a
customer service representative.

          FORECLOSURE TIMELINE: For any Mortgage Loan in foreclosure, the number
of days to foreclosure  from the date of the foreclosure  initiation;  provided,
that such  calculation  shall not include any unavoidable  delays resulting from
circumstances such as bankruptcy,  missing documents, workouts authorized by the
Seller,  contested actions,  service of process delays,  sheriff sale scheduling
delays,  court delays in entering  judgment or  scheduling  hearings,  and other
circumstances agreed to by the Seller as long as the Servicer (i) has documented
such delay in its system and (ii) has,  upon  request by the Seller,  provided a
report of such conditions,  detailing corrective actions taken, the date of such
actions and the  expected  resolution  date,  and  demonstrating  diligent  time
management to resolve such issues.

          FORECLOSURE  TIMELINE  PERCENTAGE:  For  all  Mortgage  Loans  with  a
completed  foreclosure sale during the preceding  month,  the average,  for each
such Mortgage  Loan,  of (i) the  Foreclosure  Timeline for such Mortgage  Loan,
divided by (ii) the  applicable  Freddie Mac standard in the  relevant  state at
such time.

          PRE-FORECLOSURE RESOLUTION: ANY OF THE FOLLOWING:

          o    Reinstatement  - means any defaulted  Mortgage Loan for which the
               related  Mortgagor  brings the Mortgage  Loan back to a status no
               more than sixty (60) days  delinquent  through a lump sum payment
               or otherwise consistent with the terms of the Agreement.

          o    Full payoff - means any defaulted  Mortgage Loan which is paid in
               full as defined in the Agreement.

                                      O-2
<PAGE>


          o    Cash for keys - means a  defaulted  Mortgage  Loan for  which the
               related Mortgagor  surrenders the property in exchange for a cash
               sum to enable foreclosure on a property with imperfect title.

          o    Shortfall  payoff-  means a defaulted  Mortgage  Loan for which a
               final payment in an amount less than the indebtedness  owed under
               the applicable Mortgage Note is made consistent with the terms of
               the  Agreement,  and such  payment is received by the Servicer in
               full satisfaction of such indebtedness.

          o    Deed-in-Lieu of Foreclosure - means a defaulted Mortgage Loan for
               which  title to the  related  Mortgaged  Property is taken by the
               Servicer  through deed in lieu of  foreclosure  and the resulting
               REO Property is to be liquidated consistent with the terms of the
               Agreement.

          o    Modification/Deferral  (subject to REMIC  restrictions) - means a
               defaulted  Mortgage Loan which is modified in a manner consistent
               with the Agreement  and for which the related  Mortgagor has made
               three (3) consecutive  payments consistent with the terms of such
               Mortgage Loan as so modified.

          o    Forbearance Plan - means a defaulted  Mortgage Loan for which the
               related   Mortgagor  has  made  payments  in  accordance  with  a
               forbearance plan entered into by such Mortgagor.

          o    Take-out  at  Foreclosure  Sale - means  the  Mortgaged  Property
               related  to a  defaulted  Mortgage  Loan that is  purchased  at a
               foreclosure  sale by a party other than the  Servicer in a manner
               consistent with the Agreement.

          PRE-FORECLOSURE  RESOLUTION  RATE:  [For  any  month,  the  percentage
equivalent  of a  fraction  (i) the  numerator  of which  equals  the  number of
Mortgage  Loans that were at least ninety (90) days past due at the beginning of
such month,  with  respect to which a  Pre-Foreclosure  Resolution  was achieved
during such month,  divided by (ii) the number of such resolved  Mortgage  Loans
plus the number of Mortgage Loans relating to Mortgaged  Properties  that become
REO Properties during such month.]

          PROMISE TO PAY: An agreement with an obligor to make at least one full
payment within thirty (30) days.

          RECONCILED  MARKET VALUE: The targeted sales price of an REO Property.
Reconciled  Market Value is established  following an analysis by the Servicer's
in-house  appraisers of competing  marketing plans and other market  conditions.
This analysis will include a review of the interior Broker Price Opinions (BPOs)
received from the listing agent and an outside  third party  real-estate  agent.
This set value never changes  throughout the servicing of the REO asset and will
be reflected in all reporting.

          REO SELLABLE PORTFOLIO:  The entire REO Property  portfolio,  less any
REO Property in eviction, redemption under contract or other situations in which
the Servicer  cannot pass  marketable  title.  The  Servicer  must have at least
twenty five (25) REO Properties listed with


                                      O-3
<PAGE>


an  average  list age of at least  ninety  (90)  days in order  for the  related
Performance Benchmark to be measured.

          RIGHT PARTY CONTACT RATE: A  person-to-person  contact with an obligor
(a signer of the Mortgage  Note),  or, where  applicable,  the  obligor's  legal
guardian or  attorney-in-fact  with respect to the loan, or other third party as
appointed by the Mortgagor.

          ROLL RATE:  Calculated as a three month rolling average  percentage of
loans,  based on unpaid  principal  balance,  that  remain in the same bucket or
improve their delinquency  status (including loans that pay off or are otherwise
liquidated) from previous month-end to current month-end.

          TOTAL  RECONCILED  MARKET  VALUE:  For any  month,  the sum of all the
Reconciled Market Values on all REO Property closings during such month.

          TOTAL SALES  PRICE:  For any month,  the sum of the sales price of all
REO Property  closings in such month,  less any Seller's closing  concessions in
which the sales price was inflated to reflect the concession amount.


                                      O-4