Mortgage
                                                                     Selling And
                                                                       Servicing
                                                                        Contract

FannieMae
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Fannie Mae Mortgage Selling and Servicing Contract


This contract for selling and servicing  mortgages  (the  "Contract") is between
the  Mortgage  Lender (the  "Lender")  that signs this  document and the Federal
National Mortgage  Association  ("Fannie Mae", "we", "our", "us"), a corporation
organized and existing under the laws of the United States.

                              I General Information

This section contains  important basic information about the Contract,  which we
are permitted to enter into under authority of Title III of the National Housing
Act (12 U.S.C.  1716,  et.  seq.),  which is also known as the Federal  National
Mortgage Association Charter Act.

         A. Purpose of Contract

The purpose of this Contract is:

     - to  establish  the  Lender  as  an   approved  seller  of  mortgages  and
     participation interests to us;

     - to provide the terms and conditions of the sales;

     - to  establish  the Lender as an approved  servicer of  mortgages  we have
     purchased or in which we have purchased a participation interest; and

     - to provide the terms and conditions of servicing.

         B. Consideration

In  consideration  of the purpose of this Contract and of all the provisions and
mutual  promises  contained  in it,  the Lender and Fannie Mae agree to all that
this Contract contains.

         C. Our Guides

We issue Fannie Mae's Guides to Lenders (our  "Guides")  and furnish them to the
Lender. These Guides are:

     - Selling;

     - Servicing; and

     - Multifamily.

Whenever  there is a  reference  to the  Guides in this  Contract,  it means the
Guides as they exist now and as they may be amended or  supplemented in writing.
We  may  amend  or  supplement  them,  at our  sole  discretion,  by  furnishing
amendments or supplementary matter to the Lender.

The term "Guides" also includes  anything that, in whole or in part,  supersedes
or is substituted for the Guides.

         D. Important Definitions

Anywhere the words that appear below are used in this  Contract,  the  following
definitions apply:
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1.  "Mortgage"--A  loan,  evidenced  by a note,  bond  or  other  instrument  of
indebtedness.  The loan is secured by a mortgage,  deed of trust, deed to secure
debt or other  instrument  of  security  that  applies to  property.  "Mortgage"
includes such instruments of indebtedness and security, together with

     - the evidence of title;

     - the chattel mortgage or security agreement and financing statement; and

     - all other documents, instruments and papers pertaining to the loan.

2. "FHA/VA  Mortgage"--A  mortgage  insured or guaranteed in whole or in part by
the Federal Housing Administration or Veterans Administration.

3.  "Conventional  Mortgage"--A  mortgage other than an FHA/VA  mortgage,  which
Fannie  Mae is  authorized  to  purchase  under the  Federal  National  Mortgage
Association Charter Act.

4.  "Property"  or "Mortgaged  Property"--The  property that is now subject to a
mortgage,  or was  subject  to  such  mortgage,  where  the  mortgage  has  been
foreclosed  or  possession or title to the property has been taken by Fannie Mae
or on our behalf.

5.  "Participation   Interest"  or  "Participation  Interest  in  Mortgages"--An
undivided  interest in  mortgages,  specified  in the  applicable  participation
certificate  that is evidence of such interest.  A  "participation  interest" or
"participation  interest in mortgages" consists of a specified percentage of the
principal (and a like  percentage of all rights and benefits of the mortgagee or
equivalent party under such mortgage) together with a specified yield on it.

                     II Eligibility Requirements For Lenders

For us to purchase  mortgages  or  participation  interests  from a Lender,  the
Lender must meet the eligibility requirements specified in this section.

         A. General Requirements

These are the general  requirements  the Lender must meet to be eligible to sell
mortgages or participation interests or service mortgages for us:

1. Meet  Fannie  Mae  Standards.  The Lender  must have as two of its  principal
business purposes:

     - making mortgages of the type that we will purchase entirely or purchase a
     participation interest in under this Contract; and

     - servicing such mortgages.

In addition, the Lender, in our judgment, must have at all times the capacity to
originate and sell to us mortgages  and  participation  interests  that meet our
purchase standards and the standards generally imposed by private  institutional
mortgage  investors,  and must at all times have the  capacity  to service  such
mortgages for us under those standards.

2. Have Qualified Staff and Adequate Facilities.  The Lender must, at all times,
have  employees  who are well  trained and  qualified  to perform the  functions
required of the Lender under this Contract.
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In addition,  the Lender must maintain  facilities  that are adequate to perform
its functions under this Contract.

3. Maintain  Fidelity Bonds and Errors and Omissions  Coverage.  The Lender must
maintain,  at its  own  expense,  a  fidelity  bond  and  errors  and  omissions
insurance, as required by our Guides.

4. Report  Basic  Changes.  The Lender must notify us promptly in writing of any
changes that occur in its principal purpose, activities, staffing or facilities.

         B. Ownership and Status of Lender

When we approve a Lender, one of the major considerations is the information the
Lender has provided about the eligibility,  qualifications  and financial status
of the Lender and its owners.

Consequently, the Lender must give us immediate notice of a change in its status
or ownership, including any:

     - sale or transfer of a majority interest in it;

     - merger;

     - consolidation; or

     - change in legal structure.

         C. Finances

In order to remain an approved Lender under this Contract,  the Lender must meet
our current net worth  requirements.  These  requirements  are  contained in our
Guides.

The required net worth must be  maintained  in the form of assets  acceptable to
us.

The Lender must give us a copy of its annual financial  statements and any other
related information that we may require.

         D. Access to Lender's Records

The Lender  agrees to permit our  employees  or  designated  representatives  to
examine or audit  records or accounts  relating to  mortgages  or  participation
interests  sold or serviced  under this  Contract.  All records  relative to the
Lender's continued  eligibility to sell or service mortgages under this Contract
may also be  examined or audited.  Any  examination  or audit made on our behalf
will be  conducted  during  regular  business  hours  unless the  Lender  agrees
otherwise.

                III Sale of Mortgages and Participation Interests

This section  contains the basic rules  governing  our purchase of mortgages and
participation interests.
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         A. What Governs Purchases

Purchases of mortgages and participation interests will be governed by:

     - our written commitment to purchase;

     - our Guides,  including  all  amendments  in effect on the day we make our
     written commitment; and

     - this Contract.

         B. What We Purchase

The  mortgages  or  participation  interests  that we  purchase  must  meet  the
requirements found in our Guides on the day we make our written commitment.

         C. Lender's Obligation To Purchase Fannie Mae Stock

If our Guides require,  the Lender will promptly  purchase our common stock each
time it delivers a mortgage or participation interest to us. The amount of stock
to be purchased and the procedures for buying it are also found in our Guides.

         D. Fannie Mae Haws No Obligation to Purchase

The fact that we have  signed  this  Contract  does not mean that we must make a
commitment to purchase any mortgage or participation interest from the Lender.

                IV Sale of Mortgages and Participation Interests
                             -- Lender's Warranties

The Lender makes certain warranties to us.

These warranties:

     - apply to each mortgage sold to us in its entirety;

     - apply to each mortgage in which a participation interest is sold to us;

     - are made as of the date transfer is made to us;

     - continue after the purchase of the mortgage or participation interest;

     - continue after payment by us of the purchase price to the Lender; and

     - are for our benefit as well as the benefit of our successors and assigns.

Warranties may be waived, but only by us in writing.

         A. Specific Warranties

Following are the specific warranties made by the Lender.

1. Mortgage  Meets  Requirements.  The mortgage  conforms to all the  applicable
requirements in our Guides and this Contract.

2. Lender  Authorized  To Do Business.  The Lender and any other party that held
the  mortgage  were,  at all times  during  which the holder held the  mortgage,
authorized  to  transact  business  in the  jurisdiction  where the  property is
located.
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However,  if the  Lender  or any other  party  that  held the  mortgage  was not
authorized  to do business in the  jurisdiction  where the  property is located,
then the warranty is made that none of the following activities of the Lender or
other parties constituted doing business in that jurisdiction:

     - lending the mortgage funds;

     - acquiring the mortgage;

     - holding the mortgage; or

     - transferring  the mortgage in whole or to the  extent of a  participation
     interest.

3.  Lender Has Full Right To Sell And  Assign.  The Lender is the sole owner and
holder of the mortgage  and has full right and  authority to sell and assign it,
or a  participation  interest in it, to us. In addition,  the Lender's  right to
sell or assign is not subject to any other  party's  interest or to an agreement
with any other party.

4. Lender's Lien on Property. The mortgage, whether represented by the Lender as
the first  lien or as the second  lien,  is a valid and  subsisting  lien on the
property described in it.

If the mortgage is  represented by the Lender as the first lien, the property is
free and clear of all  encumbrances and liens having priority over it except for
liens for real estate taxes, and liens for special assessments, that are not yet
due and payable.

If the mortgage is represented by the Lender as the second lien, the property is
free and clear of all  encumbrances and liens having priority over it except for
one  property  recorded  first  mortgage  lien,  real estate  taxes and liens of
special assessments not yet due and payable.

Any security agreement,  chattel mortgage or equivalent document that is related
to the  mortgage  and that is held by the Lender or  delivered to us, is a valid
and  subsisting  lien on the property  described in such  document,  of the same
priority as the mortgage.

The Lender has full right and  authority to sell or assign each lien to us or to
an extent that is proportionate to our participation interest.

5.  Documents  Are  Valid  And  Enforceable.   The  mortgage  and  any  security
agreements,  chattel mortgages, or equivalent documents relating to it have been
properly  signed,  are  valid,  and  their  terms  may be  enforced  by us,  our
successors and assigns,  subject only to bankruptcy laws, Soldiers' and Sailors'
Relief Acts,  laws  relating to  administering  decedents'  estate,  and general
principles of equity.

6.  Property  Not  Subject  To  Liens.  The  Property  is free and  clear of all
mechanics' liens,  materialmen's  liens or similar types of liens.  There are no
rights  outstanding  that could result in any of such liens being imposed on the
property.

This warranty is not made if the Lender  furnishes us with title  insurance that
gives us substantially the same protection as this warranty.
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7. Title Insurance.  There is a mortgage title insurance  policy, or other title
evidence  acceptable to us, on the property.  The title insurance policy is on a
current  ALTA form (or other  generally  acceptable  form) issued by a generally
acceptable insurance company.

The title  insurance  insures (or the other title  evidence  protects) us or the
Lender  and its  successors  and  assigns,  as  holding  a lien of the  priority
warranted in "4. Lender's Lien on Property."

8. Modification or Subordination of Mortgage. The Lender has not done any of the
following:

     - materially modified the mortgage;

     - satisfied or cancelled the mortgage in whole or in part;

     - subordinated  the mortgage in whole or in part,  unless it is represented
     to us as a second mortgage;

     - released the property in whole or in part from the mortgage lien; or

     - signed any release,  cancellation,  modification  or  satisfaction of the
     mortgage.

This warranty is not made if any of the things just mentioned have been done but
have been expressly  brought to our attention in a letter before we make payment
to the Lender. The letter must be acknowledged by us in writing.

9. Mortgage In Good Standing.  There are no defaults under the mortgage, and all
of the following that have become due and payable have been paid or an escrow of
funds sufficient to pay them has been established:

     - taxes;

     - government assessments;

     - insurance premiums;

     - water, sewer and municipal charges;

     - leasehold payments; or

     - ground rents.

1O.  Advances.  The Lender has not made or knowingly  received from others,  any
direct or indirect  advance of funds in connection with the loan  transaction on
behalf of the borrower except as provided in our Guides.  This warranty does not
cover payment of interest from the earlier of:

     - the date of the mortgage note; or

     - the date on which the mortgage proceeds were disbursed to

     - the date one month before the first installment of principal and interest
     on the mortgage is due.
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11.  Property  Conforms To Zoning  Laws.  The Lender has no  knowledge  that any
improvement  to the  property is in violation  of any  applicable  zoning law or
regulation.

12. Property Intact. The property is not damaged by fire, wind or other cause of
loss. There are no proceedings  pending for the partial or total condemnation of
the property.

13.  Improvements.  Any improvements that are included in the appraised value of
the  property  are  totally  within  the  property's   boundaries  and  building
restriction  lines.  No  improvements  on  adjoining  property  encroach  on the
mortgaged  property  unless FHA or VA  regulations  or our Guides permit such an
encroachment.

14.  Mortgage Not Usurious.  The mortgage is not usurious and either meets or is
exempt from any usury laws or regulations.

15.  Compliance With Consumer  Protection Laws. The Lender has complied with any
applicable federal or state laws,  regulations or other requirements on consumer
credit, equal credit opportunity and truth-in-lending.

16.  Property  Is Insured.  A casualty  insurance  policy on the  property is in
effect. It is written by a generally  acceptable  insurance company and provides
fire and extended  coverages for an amount at least equal to the amount required
by our Guides.

A flood insurance policy is in effect on the property if any part of it is in an
area listed in the Federal Register by the Federal  Emergency  Management Agency
as an area with special flood hazards, and if insurance is available.  The flood
insurance is written by a generally acceptable insurance company,  meets current
guidelines  of the  Federal  Insurance  Administration,  and is for an amount at
least equal to the amount required by our Guides.

The Lender will make sure the  required  insurance is  maintained  as long as it
services the mortgage. Any policy mentioned in this warranty contains a standard
mortgage  clause that names us or the Lender and its  successors  and assigns as
mortgagee.

17. Mortgage Is Acceptable Investment. The Lender knows of nothing involving the
mortgage,  the property,  the mortgagor or the mortgagor's  credit standing that
can reasonably be expected to:

     - cause  private  institutional  investors  to regard  the  mortgage  as an
     unacceptable investment;

     - cause the mortgage to become delinquent; or

     - adversely affect the mortgage's value or marketability.

18. Mortgage  Insurance or Guaranty In Force. If the Lender  represents that the
mortgage is insured or guaranteed under the National Housing Act as amended,  or
under the  Servicemen's  Readjustment  Act of 1944 as amended,  or by a contract
with a mortgage insurance  company,  the insurance or guaranty is in full force.
In addition,  the Lender has complied with all applicable provisions and related
regulations of the Act, or the insurance contract, that covers the mortgage.

19. Adjustable Mortgages. If the mortgage provides that the interest rate or the
principal  balance  of the  mortgage  may be  adjusted,  all of the terms of the
mortgage may be enforced by us, our successors and assigns.
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These  adjustments  will not affect the  priority of the lien  warranted  in "4.
Lender's Lien on Property."

2O. Participation  Information Is Correct. All the information and statements in
any  participation  certificate  that the Lender  delivers  to us are  complete,
correct and true.

         B. Consequences of Untrue Warranties -- Repurchase

We may require the Lender to  repurchase  a mortgage or  participation  interest
sold  to  us  if  any  warranty  made  by  the  Lender  about  the  mortgage  or
participation  interest is untrue  (whether the warranty is in this  Contract or
was made at our specific request).

We may require  repurchase whether or not the Lender had actual knowledge of the
untruth. We may also enforce any other available remedy.

The Lender must pay us the  repurchase  price within 3O days of our demand.  The
repurchase  price, as provided in our Guides,  will not be adjusted  because the
Lender paid us fees or charges or subscribed to our capital stock.

         C. Consequences of Untrue Warranties -- Termination of Contract

While untrue  warranties about a particular  mortgage or participation  interest
may be  the  basis  for  requiring  repurchase  of the  particular  mortgage  or
participation interest, there can be additional consequences. They may also give
rise to responsibilities  of the Lender under "D.  Indemnification For Breach of
Warranty;  Holding Us  Harmless."  In addition,  untrue  warranties  can,  under
certain  circumstances,  be treated as a breach of contract that could result in
the withdrawal of our approval of a Lender and the  termination of this Contract
(details are contained in Sections VIII and IX).

         D. Indemnification for Breach of Warranty; Holding Us Harmless

If there is a breach  of  warranty  under  this  Contract,  the  Lender,  at our
request,  will  indemnify  us and hold us harmless  against any related  losses,
damages, judgments or legal expenses.

                              V Servicing Mortgages

This section  contains the basic rules governing the servicing of mortgages that
we purchase, or in which we purchase a participation interest.

         A. Servicing Duties of the Lender

The servicing duties of the Lender are:

1. Scope of Duties.  The Lender  will  diligently  perform  all duties  that are
necessary or incident to the servicing of:

     - all  mortgages it is  servicing  for us on the date this  Contract  takes
     effect; and

     - all other  mortgages  that the Lender is required to service by the terms
     of this Contract or any other existing or future  agreement  between us and
     the Lender:
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2. Mortgages To Be Serviced.  Any mortgage we have purchased from the Lender, or
in which we have  purchased a  participation  interest from the Lender,  will be
serviced by the Lender for us according to the terms of this Contract, unless:

     - the mortgage is not within any category of those that are required by our
     Guide to be serviced; or

     - we give the Lender written  notification or consent that a mortgage to be
     purchased by us will not be serviced by the Lender.

3. Service According To Guides. Any mortgage serviced under this Contract, which
we own or in which we have purchased a participation  interest, must be serviced
by the Lender  according to the  provisions  in our Guides that are in effect on
the date of this Contract or as amended in the future.  This is true  regardless
of when:

     - the mortgage was originated;

     - the mortgage or a participation interest in it was transferred to us; or

     - the Lender began servicing the mortgage.

The Lender will also follow other  reasonable  instructions  we give it and must
strictly follow accepted industry standards when servicing a mortgage for us.

4. Service At Lender's Own Expense.  The cost of servicing  will be the Lender's
unless our Guides expressly provide otherwise.

5. Special Responsibilities In Foreclosures.  Among the other duties that may be
assigned to the Lender  through our special  instructions  or under the terms of
our Guides is the responsibility to manage and appropriately dispose of property
when a mortgage it is servicing  for us has been  foreclosed,  or  possession or
title has been taken by us or on our behalf.

The Lender must manage and dispose of the property according to the terms of the
mortgage and our Guides.

6. Service Until Need Ends.  The Lender must service each mortgage  continuously
from the date its servicing duties begin until:

     - the mortgage's principal and interest have been paid in full;

     - the mortgage has been  liquidated  and the  mortgaged  property  properly
     disposed of (if the Lender is required to do these things); or

     - the Lender's  servicing duties are terminated  according to Section IX of
     this Contract.

         B. Compensation

The Lender's compensation for servicing mortgages,  including the management and
disposal of properties, under this Contract is specified in our Guides.

We may change the Lender's  compensation  by  modifying  our Guides at any time.
However,  such a change  will not affect  mortgages  that we have  purchased  or
committed to purchase before the date of the change.
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         C. Ownership of Records

All mortgage  records  reasonably  required to document or properly  service any
mortgage we own in its  entirety  are our  property  at all times.  This is true
whether or not the Lender developed or originated them.

The following are considered mortgage records:

     - all mortgage documents;

     - tax receipts;

     - insurance policies;

     - insurance premium receipts;

     - ledger sheets;

     - payment records;

     - insurance claim files and correspondence;

     - foreclosure files and correspondence;

     - current and historical data files; and

     - all other papers and records.

1. Lender As Custodian.  The mortgage  records belong to us. The Lender can have
possession  of the mortgage  records only with our  approval,  and the Lender is
acting as our custodian.  This is true whether the Lender  receives the mortgage
records from an outside source or prepares them itself.

2. Delivery.  When we ask for any mortgage  records in writing,  the Lender will
deliver  them to us or someone we  choose.  The Lender  must also send us a list
that identifies each mortgage,  and must give us other information we request to
identify the mortgages delivered.

We will not be required to sign or deliver any trust receipts  before the Lender
delivers the mortgage records we have requested.

If we ask the Lender in writing for  reproductions  of any mortgage  records the
Lender  microfilmed or condensed,  the Lender will reproduce them promptly at no
cost to us or the party to whom we want them delivered.

3. Joint ownership.  If we own a participation interest in a mortgage, the other
owners and we own the mortgage records jointly. For these mortgages,  the Lender
possesses the mortgage records as a custodian for the joint owners.

If we ask for copies of the mortgage records and servicing information about any
such  mortgages,  the Lender  will  furnish  them.  Or, if we need any  mortgage
records for legal evidence or other purposes, the Lender will release them to us
for a reasonable time.
<PAGE>
         D. Agreement to Indemnify and Hold Harmless

The Lender will indemnify us and hold us harmless  against all losses,  damages,
or legal  expenses  that  result  from its  failure  in any way to  perform  its
services  and duties in  connection  with  servicing  mortgages  or  managing or
disposing of property according to this Contract or our Guides.

If any private entity or  governmental  agency sues us, makes a claim against us
or starts a  proceeding  against us based on the  Lender's  acts or omissions in
servicing  mortgages  or  managing  or  disposing  of  property,   the  Lender's
obligation to indemnify  and hold us harmless must be met  regardless of whether
the suit, claim or proceeding has merit or not.

The Lender's  obligation  does not apply,  however,  if during a suit,  claim or
proceeding,  we give the Lender express written  instructions and as a result of
the  Lender  following  them we  suffer  losses,  damages,  judgments  or  legal
expenses.

         E. Ownership of Our Stock

If our Guides  require,  the Lender will  continuously  own our common  stock in
connection  with all mortgages it services  under this  Contract.  The amount of
stock to be owned will be established by our Guides as they were in existence on
the date the Lender started servicing the applicable mortgages.

                  Vl Assignment, Consideration And Continuance

This section describes our requirements  covering  assignment of,  consideration
for and continuance of this Contract.

         A. Assignment

Because the relationships created by this Contract are personal,  the Lender may
not, without our prior written approval, assign:

     - this  Contract   under   any   circumstances,   either   voluntarily   or
     involuntarily, by operation of law, or otherwise; or

     - its responsibility for servicing  individual mortgages we own or in which
     we have a  participation  interest.  (See Section VII of this  Contract for
     required procedures governing assignments of servicing).

         B. Limited Value of Contract to Lender

The Lender acknowledges that it has paid us no monetary consideration for making
it an  approved  mortgage  seller  or  servicer,  except an  application  fee to
reimburse us for the expenses of reviewing its application.

The Lender also agrees that, except for the purchase of mortgages, the servicing
of mortgages, or any fee for the termination of this Contract, this Contract has
no value to the Lender.

         C. Requirements for Continuance

The  Lender's  right to continue  selling  and  servicing  mortgages  under this
Contract depends on, among other things,  its continuing to meet the eligibility
requirements in Section II of this Contract.
<PAGE>
                        Vll Assigning Mortgage Servicing

The Lender may not assign its  responsibility  for  servicing all or any part of
the mortgages  that it is servicing  for us without first  obtaining our written
consent.

Any Lender to which servicing is assigned must:

     - be acceptable to us; and

     - sign a Mortgage Selling and Servicing Contract with us.

We may require that the Lender and  transferee  lender sign  documents  and take
other reasonable steps to perfect the assignment.

                            VlIl Breaches of Contract

The Lender's taking certain actions, or failing to take certain actions,  can be
treated  by us as a breach  of  contract.  A breach  of  contract  can lead to a
termination  of the Contract.  Termination  is provided for in detail in Section
IX.

         A. Specific Breaches of Contract

Breaches of this Contract include the following:

1.  Harm,  Damage,  Loss or  Untrue  Warranties.  It is a  breach  if any act or
omission of the Lender in connection  with the origination and sale to us of any
mortgage or participation  interest causes us harm, damage or loss. It is also a
breach if the Lender sells us any  mortgage or  participation  interest  knowing
that any of the mortgage  warranties are untrue (these  warranties are listed in
Section IV A).

2.  Failure To Comply With This  Contract  or our Guides.  It is a breach if the
Lender  does not comply  with this  Contract  or our Guides  through  any act or
omission, including, without limitation, the following:

     - failure to establish and maintain  accounts for our funds or  mortgagors'
     funds as required by our Guides;

     - use of our or  mortgagors'  funds in any manner other than that permitted
     by our Guides, including the Lender's failure to deposit all mortgage funds
     if, when, and to the extent required by our Guides;

     - failure to remit all funds due to us within the time periods  required by
     our Guides;

     - failure to make or ensure,  according to the  provisions of each mortgage
     or of applicable laws or regulations, proper and timely payment of all:

         -- taxes;

         -- assessments;

         -- leasehold payments;

         -- ground rents;
<PAGE>
         -- insurance premiums  (including  premiums of casualty,  liability and
         mortgage insurance and other forms of required insurance);

         -- required interest on escrow funds; and

         -- other  required  payments  with respect to any  mortgage  (including
         mortgaged property) serviced;

unless  the  Lender  is  relieved  of  these  responsibilities  by  the  express
provisions  of our  Guides,  or by our  written  instructions  that  relate to a
particular mortgage or property;

     - failure to renew or ensure  renewal of any required  insurance  policy on
     any mortgage (including mortgaged property) serviced under this Contract;

     - failure to maintain adequate and accurate accounting records and mortgage
     servicing records for the mortgages,  or to maintain proper  identification
     of  the  applicable  loan  files  and  mortgage   records  that  prove  our
     outstanding participation interests;

     - failure to submit adequate and accurate accounting and mortgage servicing
     reports within the time required by our Guides; or

     - failure to take  prompt  and  diligent  action  under  applicable  law or
     regulation  to  collect  past due sums on  mortgages,  or to take any other
     diligent  action  described  in our Guides that we  reasonably  require for
     mortgages in default.

3. Failure To Properly  Foreclose or  Liquidate.  Where a mortgage is in default
and the Lender is required or has decided to foreclose or liquidate  it, it is a
breach if the Lender fails to take prompt and diligent  action  consistent  with
applicable  law  or  regulations  to  foreclose  on or  otherwise  appropriately
liquidate  such  mortgage  and to perform all incident  actions.  It is a breach
whether or not the failure  results  from the acts or  omissions of an attorney,
trustee or other person or entity the Lender  chooses to effect  foreclosure  or
liquidation.

4. Failure To Properly Manage, Dispose of, or Effect Proper Conveyance of Title.
It is a breach if any mortgage  serviced under this Contract has been foreclosed
or the  possession  or title  to the  property  has  been  taken by us or on our
behalf,  or on  behalf  of  other  owners  of a  participation  interest  in the
mortgage, and the Lender:

     - fails to properly manage, dispose of or effect proper conveyance of title
     to the mortgaged property; or

     - fails to do the above in accordance with this Contract,  our Guides,  and
     any  pertinent  laws,  regulations,   or  mortgage  insurance  policies  or
     contracts.

5. Lender's  Financial Ability Impaired.  It is a breach if there is a change in
the Lender's  financial  status that, in our opinion,  materially  and adversely
affects the Lender's ability to satisfactorily service mortgages.

Changes of this type include:

     - the Lender's insolvency;

     - adjudication of the Lender as a bankrupt;
<PAGE>
     - appointment of a receiver for the Lender; or

     - the  Lender's  execution of a general  assignment  for the benefit of its
     creditors.

If any such change does take place:

     - no interest in this  Contract will be considered an asset or liability of
     the Lender or of its successors or assigns; and

     - no interest in this  Contract  will pass by  operation of law without our
     consent.

6.  Failure To obtain our Prior  Written  Consent.  It is a breach if the Lender
fails to obtain our prior written consent for:

     - a sale of the majority interest in the Lender; or

     - a change in its corporate status or structure.

7.  Failure To Comply With This  Contract  or our Guides.  It is a breach if the
Lender fails at any time to meet our standards for eligible  mortgage sellers or
servicers  so that,  in our opinion,  the  Lender's  ability to comply with this
Contract or our Guides is adversely affected.

8. Court Findings Against Lender or Principal Officers. It is a breach if:

     - a court of  competent  jurisdiction  finds  that the Lender or any of its
     principal officers has committed an act of civil fraud; or

     - the Lender or any of its principal  officers is convicted of any criminal
     act  related to the  Lender's  lending  or  mortgage  selling or  servicing
     activities  or  that,  in  our  opinion,  adversely  affects  the  Lender's
     reputation or our reputation or interests.

         B. Actions to Correct a Breach

If there is a breach of contract  by the Lender,  we will have the right to take
any  reasonable  action to have any breach  corrected  by the  Lender  before we
exercise  any  right we have to  terminate  this  Contract  in whole or in part;
however,  we are  not  required  to  try  to  have  a  breach  corrected  before
termination.

Any  forbearance  by us in  exercising  our right to terminate  this Contract in
whole or in part will not be a waiver  of any  present  or future  right we have
under this Contract to so terminate it.

                           IX Termination of Contract

The reason why this Contract may be terminated and the ways in which this may be
done are outlined in this section.  When the Contract is terminated,  the entire
relationship  between the Lender and us ends (with certain  exceptions  that are
explained in this section).
<PAGE>
         A. Termination By Either Party of Mortgage Selling Arrangements

The provisions of this Contract  covering the sale of mortgages or participation
interests  under this Contract may be terminated by the Lender or by us, with or
without cause, by giving notice to the other party. Notice of termination may be
given at any time but must conform to Section XII of this Contract.

Termination  is effective  immediately  upon notice of  termination,  unless the
notice specifies later termination.

Termination will not affect any outstanding commitments we have made to purchase
mortgages or participation interests from the Lender. However, if the Lender has
breached this Contract, we may declare any or all outstanding commitments void.

         B.  Termination  by  Lender  of  Mortgage  Servicing  Arrangements  for
         Wholly-Owned Mortgages

The Lender may terminate the provisions of this Contract  covering the servicing
of  mortgages  we  entirely  own by giving us  notice at any time.  Notice  must
conform to Section XII of this Contract.

Termination  is  effective  the last day of the third  calendar  month after the
calendar month in which notice is given.

If the Lender  terminates this Contract in whole or in part, we will not pay the
Lender a termination fee.

         C.  Termination  by  Us  of  Servicing  Arrangements  for  Wholly-Owned
         Mortgages

We may terminate the  provisions of this Contract  covering the servicing  under
this Contract of any or all mortgages  that we entirely own. This may be done by
following the procedures outlined below.

1.  Termination  Without Cause.  We may terminate  servicing for any reason,  by
giving the Lender notice of the termination. If we do so, the provisions of this
Contract  covering the servicing of the affected  mortgages  will  automatically
terminate on the thirtieth  day following the day our notice is given.  Whenever
we do this (and the  termination  is not  because of any breach by the Lender as
described in Section IX C2) we will pay the Lender,  for each  mortgage on which
servicing is  terminated,  a lump-sum  termination  fee as provided in a. below.
However,  whenever we  terminate  solely in order to transfer  the  servicing to
another  Lender,  and there  has been no sale of our  interest  in the  affected
mortgages, the provisions of b. below will apply.

a.  Termination  Fee. The  termination  fee will be an amount equal to twice the
Lender's annualized servicing compensation,  at the rate of compensation that is
in effect for the mortgage as of the date of the  termination,  applied  against
the unpaid principal balance of the mortgage as of such date.

For purposes of determining the termination fee:

     - The Lender's servicing  compensation consists of the servicing fee at the
     Applicable Servicing Rate plus any previously agreed upon excess yield that
     the Lender is permitted to retain on the applicable mortgage.

     - "Applicable  Servicing  Rate" means the rate of the servicing fee for the
     servicing  of  the  mortgage,   expressed  as  an   annualized   fractional
     percentage.
<PAGE>
[Refer to  appropriate  sections  of our  Guides for more  detailed  information
regarding the computation of termination fees.]

b.  Termination To Effect  Transfer.  Whenever we terminate  servicing solely in
order to transfer  servicing of the mortgages to another  Lender,  and there has
been no sale of our interest in the mortgages, we will give the Lender notice of
the required transfer.  Within the 90-day period immediately  following the date
our notice is given,  the Lender may  arrange for the sale of the  servicing  to
another Fannie Mae-approved Lender in good standing that, in our judgment,  will
properly service the mortgages to be transferred. Within that 90-day period, the
Lender will give notice of any proposed  sale to us,  together  with all related
information.  The sale of servicing is conditioned upon our approval, which will
not be  unreasonably  withheld.  Any  resulting  transfer of  servicing  will be
completed not later than 60 days after our approval of the transfer; and

     - the Lender will be entitled to the proceeds of the sale of servicing, and
     will  bear all costs  and  expenses  related  to the sale and  transfer  of
     servicing;

     - the Lender will not pay us a transfer fee;

     - we will not pay the Lender a termination fee;

     - we may  require  the  purchaser  of the  servicing  to assume  any or all
     warranties  that were made to us in  connection  with the sale to us of the
     affected mortgages; and

     - the purchaser of the servicing will succeed to the Lender's  obligations,
     rights and servicing  compensation,  under the  provisions of this Contract
     covering the servicing of the affected  mortgages.  For all of the affected
     mortgages  that we  purchased  under a net-yield  contract,  the  servicing
     compensation  will include the specified  minimum  servicing  fee, plus the
     Lender's  share of that  portion of the yield which  exceeds the stated net
     yield, as provided under the commitment contract.

[Refer to  appropriate  sections  of our  Guides for more  detailed  information
regarding the computation of the Lender's servicing compensation.]

If at the end of the 90-day  period  following  our  notice,  the Lender has not
arranged to sell and transfer the servicing of the affected mortgages to another
Lender acceptable to us and given us the required notice, the provisions of this
Contract covering the servicing of the mortgages will automatically terminate on
the fifteenth day following the end of the 90-day  period,  and we will transfer
the servicing to a Lender of our choice. In such a case, we will pay the Lender,
for each mortgage on which  servicing is terminated,  a termination fee computed
as provided under a. above.  We will deduct from the termination fee paid to the
Lender a  transfer  fee that is the  greater  of  $500.00  or 1/100 of 1% of the
aggregate  unpaid  principal  balance of all of the affected  mortgages on which
servicing is transferred.

c  General  Criteria  For  Termination  Fees.  Notwithstanding  anything  to the
contrary in this Contract,  we may change the amount of termination  fee that we
pay, or other  provisions  of this Section IX C1, from time to time, by changing
the appropriate provisions of our Guides. However, such a change will not affect
mortgages that we have  purchased or that we have  committed to purchase  before
the date of the change.
<PAGE>
Our written tender of the  termination  fee to the Lender,  or its successors or
assigns,  is complete  compensation for each mortgage  serviced by the Lender on
which servicing is terminated. Any sums we owe the Lender for servicing prior to
the  termination  date are not included in the  termination  fee.  When we pay a
termination fee, the Lender will not be entitled to the proceeds for any sale of
the servicing involved.

2. Termination With Cause. We may terminate if the Lender breaches any agreement
in this Contract, including, without limitation, any of those breaches listed in
Section  VIII A. This may be done by giving  the Lender  notice of  termination.
Notwithstanding  anything in this Contract to the contrary,  if we terminate for
breach, we may make it effective  immediately,  and we will not pay the Lender a
termination   fee  or  proceeds  from  any  sale  of  the  servicing   involved.
Furthermore,  we will  not pay a  servicing  termination  fee if a  mortgage  is
repurchased by the Lender because a warranty is untrue.

         D.  Termination by Us of Servicing  Arrangements for Mortgages in Which
         We have a Participation Interest

If the Lender  breaches  any  agreement  in this  Contract,  including,  without
limitation, any breach listed in Section VIII A, we may terminate the provisions
of this Contract  covering the servicing of any or all mortgages in which we own
a participation interest. This may be done by giving notice of termination. Such
termination  may be  effective  immediately,  and we will  not pay the  Lender a
termination fee.

1. Transfer of Lender's Powers. Upon termination,  we will automatically succeed
to all the Lender's rights in and responsibilities for servicing of the affected
mortgages.  We will also have the option to  exercise  all the  Lender's  powers
relating to these  mortgages,  and to  designate  any person or firm to exercise
those powers.  However,  exercise of the Lender's powers must be consistent with
the Lender's and our respective participation interests.

The mortgage  instruments for these mortgages and all related  mortgage  records
will be  delivered to us or a party we  designate.  The Lender will also deliver
necessary assignments, transfers and documents of authority.

2.  Transfer of Servicing.  If we terminate  the Lender's  servicing of any such
mortgages,  we are  authorized to transfer the servicing of the mortgages to new
servicers  and pay the new  servicers  a fee.  The fee will  apply to the  total
outstanding  principal  balance on each  mortgage,  including our  participation
interest in each  mortgage as well as the  participation  interest of the Lender
and of any other owner.

3. Liability For Fees. The Lender and all additional  owners of a  participation
interest will be liable for their respective shares of the servicing fee we pay.
They will also be liable for their  respective  shares of advances  that, in our
sole discretion,  are required.  Advances may be required for insurance,  taxes,
maintenance, improvements or other necessary outlays.

If the Lender or other owners fail to promptly  provide their share of funds for
advances, or for any other necessary expenses,  during any period, we may supply
the funds.  The fact that we do this does not release the Lender or other owners
from their  liability.  We may deduct any amount we advance the next time we owe
money to the Lender or other owners.
<PAGE>
         E. Rights of Termination Not Impaired

The exercise of a right of termination under any provision of this Contract will
not impair any further right of termination under another provision.

                X Continuance of Responsibilities or Liabilities

Responsibilities  or liabilities of the Lender that exist before the termination
of this Contract will  continue to exist after  termination  unless we expressly
release  the  Lender  from  any of them in  writing.  This is true  whether  the
Contract was terminated by the Lender or by us.

                  Xl Participation Interests-Special Provisions

This section contains special provisions that govern participation interests.

         A. After the Sale of a Participation Interest

Listed below are the consequences of the sale of a participation interest.

1.  Transfer of  Undivided  Interest.  When the Lender sells and conveys to us a
participation  interest  in one or  more  mortgages,  this is a  transfer  of an
undivided interest in each mortgage.

The sale and conveyance of the  participation  interest will have the same force
and effect as:

     - a separate  assignment of each  mortgage  executed and delivered to us by
     the Lender; and

     - a promissory note separately endorsed or transferred to us.

2. Assurance of our Legal Rights.  If federal or state laws or regulations  now,
or later, provide that the purchase of a participation  interest is an extension
of credit,  the Lender  will take  whatever  additional  steps we may require to
assure our legal rights as a purchaser of participation interests.

Such steps may include:

     - placing legends on promissory notes;

     - endorsing promissory notes in blank and delivering them to us; and

     - executing mortgage  assignments in a form acceptable to us and delivering
     them to us.

3. No  Partnership  or Joint  Venture.  Neither the  simultaneous  ownership  of
interests in one or more  mortgages nor any provision of this Contract will mean
that a partnership or joint venture exists between the Lender and us.

         B. Payments to Us

The Lender will make the following  payments to us, according to our Guides, for
mortgages in which both the Lender and we own an interest:

1.  Ratable  Sharing of  Principal.  The Lender will  ratably  share with us all
mortgage principal payments.
<PAGE>
2.  Participation  Share of Interest.  The Lender will pay us our  participation
share of interest payments up to:

     - an amount sufficient for us to earn our yield on each mortgage; plus

     - any amounts due us pursuant to this section.

         C. Enforcement of Due-On-Sale and Call Options

As required by our Guides,  the Lender will enforce the  due-on-sale  provisions
and call options in the mortgages it services for us.

         D. Repurchase Option

The Lender will have the option to repurchase our interest in a mortgage if:

     - the Lender is required by our Guides to enforce a due-on-sale clause of a
     mortgage in which the Lender and we own an interest; or

     - we elect to exercise a call option provision of such a mortgage.

If the Lender wishes to repurchase our interest in such a mortgage, it may do so
by:

     - giving us notice of its intention to repurchase; and

     - paying us an amount calculated according to the provisions of our Guides.

         E. Note Rate Increase, Foreclosure Expenses and Prepayment Charges.

The note  rate of a  mortgage  is  stated in the  participation  certificate  or
attached loan schedule.

1. Note Rate Increase. If, for any reason, there is an increase of the note rate
of a mortgage in which we hold a participation interest, the Lender will pay us,
according to our Guides,  a percentage of the increase  equal to the  percentage
represented by our participation  interest in the mortgage.  This amount will be
in addition to our yield on the mortgage.

2.  Foreclosure  Expenses.  The Lender will ratably share with us any reasonable
foreclosure and related expenses in connection with a mortgage in which we own a
participation interest.

3.  Prepayment  Charges.  The Lender will ratably  share with us any  prepayment
charges collected for mortgages in which we own a participation interest.

         F. Advances

The Lender will not make any  optional  or  voluntary  advances to the  borrower
under an open-end mortgage in which we own a participation interest.

         G. Assignment or Sale of Participation Interests

Participation interests may be assigned either by the Lender or us, as follows:
<PAGE>
1.  By Us.  Without the Lender's consent we may assign:

     - our participation interest in any mortgage; and

     - all rights in the mortgage we own under this  Contract or under any other
     instruments.

2. By Lender To  Transferee.  The Lender may sell or transfer all or part of any
participation  interest that it owns in any mortgage under this Contract  unless
expressly prohibited from doing so by our Guides.

This sale or transfer of  participation  interests is subject to the  conditions
below,  as well  as to our  Guides  as they  are in  effect  on the  date of our
commitment to purchase.

For every  sale or  transfer,  the  Lender  must  obtain  and  furnish us with a
properly executed instrument by which the transferee:

     - agrees to be bound by the terms of this Contract; and

     - acknowledges our rights and interests under this Contract with respect to
     the mortgage.

Our rights and interests that must be acknowledged include,  without limitation,
the right to assess a  servicing  fee  against  the owner of each  participation
interest if we:

     - assume the servicing of the mortgage; or

     - transfer  the  servicing  to a new  servicer  under  Section IX D of this
     Contract.

The sale or transfer of a participation  interest does not relieve the Lender of
any  responsibility  or liability under this Contract.  For example,  the Lender
continues to be liable for any fees and other  amounts  charged under Section IX
D3 of this Contract against the participation  interest that is transferred.  We
may collect these amounts from the Lender or from the transferee.

3. By Lender To Bank.  The Lender may be a member of, or be required to maintain
reserves  with a Federal Home Loan Bank or Federal  Reserve Bank. If so, and the
Lender transfers its participation interests in any mortgage under this Contract
to such a bank to secure one or more advances,  then the bank will not be deemed
to have assumed the mortgage warranties found in Section IV A.

Also,  such  a  transfer  to  the  bank  will  not  relieve  the  Lender  of any
responsibility or liability under this Contract.

                                   Xll Notice

Whenever  notice is required under this Contract,  it must be given as described
in this section.

         A. Notice of Termination

Any notice of termination given under this Contract must be:

     - in writing;
<PAGE>
     - delivered  in person or sent by  registered  or  certified  mail,  with a
     return receipt requested; and

     - addressed to the party to which notice is being given.

Delivery  and notice is given when we or the Lender mail or register  the notice
with any post office.

         B. Our Guides and Other Documents

Our Guides,  including any  amendments or  supplements,  and any other  notices,
demands or requests under this Contract or applicable law will be:

     - in writing;

     - delivered in person or mailed from any post office, substation, or letter
     box;

     - enclosed in a postage prepaid envelope; and

     - addressed to the Lender to which the matter is directed.

         C. Address

For purposes of notice, the following rules apply:

1. Our address is the address of our regional office given in this Contract.

2. The Lender's address is that of its principal place of business given in this
Contract. Any change of address must be given in writing.

                              XlIl Prior Agreements

This Contract  supersedes  any prior  agreements  between the Lender and us that
govern  selling or servicing of mortgages and  participation  interests to which
this Contract relates.

However,  this  section will not release the Lender from any  responsibility  or
liability under any prior agreements and understandings.

                        XIV Severability And Enforcement

If any  provision of this  Contract  conflicts  with  applicable  law, the other
provisions  of this  Contract  that can be carried out  without the  conflicting
provision will not be affected.

All rights and remedies under this Contract are distinct and cumulative not only
as to each other but as to any  rights or  remedies  afforded  by law or equity.
They may be exercised  together,  separately or  successively.  These rights and
remedies are for our benefit and that of our successors and assigns.

                                   XV Captions

This Contract's  captions and headings are for convenience only and are not part
of the Contract.
<PAGE>
                              XVI Scope of Contract

The  following  provisions  apply,  whether  or not they are  contrary  to other
provisions in this Contract.

         A. Restriction of Lender

We reserve the right to restrict the Lender's  sale or servicing of mortgages or
of  participation  interests to the type that the Lender and its employees  have
the experience and ability to originate, sell or service.

         B. Types of Mortgages Covered

This Contract covers only the sale of mortgages and participation  interests and
the servicing of mortgages, within the following categories:
<PAGE>
                            XVII Signatures And Date

By executing  this Contract,  the Lender and we agree to all of this  Contract's
terms and provisions. Both the Lender and we have signed and dated this Contract
below.

This Contract takes effect on the date we sign it.

     Lender:  Citizens Mortgage Service Company

     Address: Benjamin Fox Pavilion, Suite 825
              Jenkintown, Pennsylvania  19046

     By:      /s/ Robert Fishman, President
              -----------------------------
                  Robert Fishman
              (Authorized Signature)

                  Robert Fishman, President
                    (Type Name and Title)

     Date:    October 27, 1986


Federal National Mortgage Association

     Address: 51O Walnut Street
              16th Floor
              Philadelphia, PA 19106

     By:      /s/ Philip R. Nichols
              ---------------------
                  Philip R. Nichols
              (Authorized Signature)

              Philip R. Nichols, Vice President
                   (Type Name and Title)

     Date:    November 12, 1986