--------------------------------------------------------------------------------
                        RESIDENTIAL FUNDING CORPORATION,
                               as Master Servicer



                RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.,
                                  as Depositor



                                       and



                               JPMORGAN CHASE BANK
                               as Grantor Trustee



                             ______________________

                               SERVICING AGREEMENT
                           Dated as of March 28, 2003
                             ______________________



                                   Home Loans

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



<PAGE>

<TABLE>
<CAPTION>


                                TABLE OF CONTENTS

                                                                                          Page

                                    ARTICLE I

Definitions
<S>             <C>                                                                         <C>
        Section 1.01. Definitions............................................................1
        Section 1.02. Other Definitional Provisions..........................................2
        Section 1.03. Interest Calculations..................................................2

                                   ARTICLE II

Representations and Warranties
        Section 2.01. Representations and Warranties Regarding the Master Servicer...........3
        Section 2.02. Reserved...............................................................3
        Section 2.03. Enforcement of Representations and Warranties..........................4

                                   ARTICLE III

Administration and Servicing
of Home Loans
        Section 3.01. The Master Servicer....................................................6
        Section 3.02. Collection of Certain Home Loan Payments...............................8
        Section  3.03.Withdrawals from the Custodial Account................................11
        Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses.........12
        Section 3.05. Modification Agreements; Release or Substitution of Lien..............13
        Section 3.06. Trust Estate; Related Documents.......................................14
        Section 3.07. Realization Upon Defaulted Home Loans; Loss Mitigation................15
        Section 3.08. Depositor and Grantor Trustee to Cooperate............................17
        Section 3.09. Servicing Compensation; Payment of Certain Expenses by
                      Master Servicer.......................................................18

        Section 3.10. Annual Statement as to Compliance.....................................18
        Section 3.11. Annual Servicing Report...............................................18
        Section 3.12. Access to Certain Documentation and Information Regarding
                       the Home Loans.......................................................19
        Section 3.13. Maintenance of Certain Servicing Insurance Policies...................19
        Section 3.14. Information Required by the Internal Revenue Service and
                       Reports of Foreclosures and Abandonments of Mortgaged Property.......19
        Section 3.15. Optional Repurchase of Defaulted Home Loans...........................20
        Section 4.01. Statements to Grantor Trust Certificateholder.........................21
        Section 4.02. Tax Reporting.........................................................24
        Section 4.03. Reserved..............................................................24
        Section 4.04. Exchange Act Reporting................................................24
        Section 5.01. Reserved..............................................................25


                                              i

<PAGE>




                                   ARTICLE VI

The Master Servicer
        Section 6.01. Liability of the Master Servicer......................................26
        Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of,
                      the Master Servicer...................................................26
        Section 6.03. Limitation on Liability of the Master Servicer and Others.............26
        Section 6.04. Master Servicer Not to Resign.........................................27
        Section 6.05. Delegation of Duties..................................................27

                                   ARTICLE VII

Default
        Section 7.01. Servicing Default.....................................................30
        Section 7.02. Grantor Trustee to Act; Appointment of Successor......................32
        Section 7.03. Notification to Grantor Trust Certificateholder.......................33

                                  ARTICLE VIII

Miscellaneous Provisions
        Section 8.01. Amendment.............................................................34
        SECTION 8.02. GOVERNING LAW.........................................................34
        Section 8.03. Notices...............................................................34
        Section 8.04. Severability of Provisions............................................34
        Section 8.05. Third-Party Beneficiaries.............................................35
        Section 8.06. Counterparts..........................................................35
        Section 8.07. Effect of Headings and Table of Contents..............................35
        Section 8.08. Termination Upon Purchase by the Master Servicer or Liquidation
                       of All Home Loans; Partial Redemption................................35
        Section 8.09. Certain Matters Affecting the Grantor Trustee.........................36
        Section 8.10. Reserved..............................................................36


EXHIBIT A - HOME LOAN SCHEDULE      A-1
EXHIBIT B - POWER OF ATTORNEY       B-1
EXHIBIT C - FORM OF REQUEST FOR RELEASE ...................................................C-1
EXHIBIT D-FORM OF FORM 10-K CERTIFICATE....................................................D-1

</TABLE>

                                       ii

<PAGE>




               This is a  Servicing  Agreement,  dated as of March 28, 2003 (the
"Servicing  Agreement"),  among  Residential  Funding  Corporation  (the "Master
Servicer"),   the  Residential   Funding  Mortgage   Securities  II,  Inc.  (the
"Depositor") and JPMorgan Chase Bank (the "Grantor Trustee").


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


               WHEREAS,  pursuant  to  the  terms  of  the  Home  Loan  Purchase
Agreement, Residential Funding Corporation (in its capacity as Seller) will sell
to the  Depositor  the Home Loans  together  with the Related  Documents  on the
Closing Date;

               WHEREAS,  pursuant to the Grantor Trust Agreement,  the Depositor
will  transfer the Mortgage  Loans and all of its rights and remedies  under the
Home Loan Purchase  Agreement to the Grantor Trustee,  together with the Related
Documents on the Closing Date, in exchange for the Grantor Trust Certificate;

                 WHEREAS,  the Depositor will sell the Grantor Trust Certificate
to the Issuer on the Closing Date;

               WHEREAS,  pursuant to the terms of the Owner Trust Agreement, the
Issuer will issue and  transfer to or at the  direction  of the  Depositor,  the
Certificate;

               WHEREAS,  pursuant to the terms of the Indenture, the Issuer will
issue and transfer to or at the direction of the Depositor, the Notes; and

               WHEREAS,  pursuant to the terms of this Servicing Agreement,  the
Master  Servicer  will  service  the Home Loans  directly or through one or more
Subservicers.

               NOW,  THEREFORE,  in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

                                          ARTICLE I

                                         Definitions

               Section  1.01.  Definitions.  For all purposes of this  Servicing
Agreement,  except as otherwise  expressly provided herein or unless the context
otherwise  requires,  capitalized  terms not otherwise defined herein shall have
the meanings  assigned to such terms in the Definitions  contained in Appendix A
to the Indenture dated March 28, 2003 (the "Indenture"), between Home Loan Trust
2003-HI1,  as issuer,  and JPMorgan Chase Bank, as indenture  trustee,  which is
incorporated by reference herein.  All other capitalized terms used herein shall
have the meanings specified herein.




<PAGE>



               Section  1.02.  Other  Definitional  Provisions.  (a)  All  terms
defined in this Servicing Agreement shall have the defined meanings when used in
any  certificate  or other  document  made or delivered  pursuant  hereto unless
otherwise defined therein.

               (b) As used in this Servicing Agreement and in any certificate or
other document made or delivered  pursuant hereto or thereto,  accounting  terms
not defined in this  Servicing  Agreement  or in any such  certificate  or other
document,  and accounting terms partly defined in this Servicing Agreement or in
any such  certificate or other document,  to the extent not defined,  shall have
the  respective  meanings  given to them  under  generally  accepted  accounting
principles.  To the extent  that the  definitions  of  accounting  terms in this
Servicing   Agreement  or  in  any  such   certificate  or  other  document  are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.

               (c) The  words  "hereof,"  "herein,"  "hereunder"  and  words  of
similar  import  when  used in this  Servicing  Agreement  shall  refer  to this
Servicing  Agreement  as a whole  and not to any  particular  provision  of this
Servicing Agreement;  Section and Exhibit references contained in this Servicing
Agreement  are  references  to Sections  and  Exhibits  in or to this  Servicing
Agreement  unless  otherwise  specified;  and the term  "including"  shall  mean
"including without limitation".

               (d) The  definitions  contained in this  Servicing  Agreement are
applicable  to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.

               (e) Any agreement,  instrument or statute  defined or referred to
herein or in any  instrument or  certificate  delivered in  connection  herewith
means  such  agreement,  instrument  or  statute  as from time to time  amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all  attachments  thereto and  instruments  incorporated  therein;
references to a Person are also to its permitted successors and assigns.

               Section 1.03. Interest Calculations. All calculations of interest
hereunder  that are made in respect of the Loan  Balance of a Home Loan shall be
made in accordance  with the Mortgage Note. All  calculations of interest on the
Securities  (other  than the  Class A-1  Notes)  shall be made on the basis of a
30-day month and a year assumed to consist of 360 days.  Calculation of interest
on the Class A-1 Notes  shall be made on the basis of the actual  number of days
in the Interest  Accrual  Period and a year assumed to consist of 360 days.  The
calculation  of the  Servicing  Fee shall be made on the basis of a 30-day month
and a year  assumed  to  consist  of 360 days.  All  dollar  amounts  calculated
hereunder shall be rounded to the nearest penny with one-half of one penny being
rounded up.


                                              2

<PAGE>



                                   ARTICLE II

                         Representations and Warranties

               Section 2.01. Representations and Warranties Regarding the Master
Servicer.  The Master Servicer  represents and warrants to the Grantor  Trustee,
for  the  benefit  of the  Grantor  Trust  Certificateholder,  to the  Indenture
Trustee,  for the  benefit of the Issuer  and as  pledgee of the  Grantor  Trust
Certificate and to the Owner Trustee, on behalf of the Holder of the Owner Trust
Certificate, as of the Cut-off Date:

     (i) The Master Servicer is a corporation  duly organized,  validly existing
and in good  standing  under  the  laws of the  State  of  Delaware  and has the
corporate  power to own its assets and to transact  the  business in which it is
currently  engaged.  The Master  Servicer is duly  qualified to do business as a
foreign  corporation  and is in good standing in each  jurisdiction in which the
character of the business  transacted by it or properties  owned or leased by it
requires such  qualification and in which the failure to so qualify would have a
material  adverse  effect on the  business,  properties,  assets,  or  condition
(financial or other) of the Master Servicer;

     (ii) The Master  Servicer  has the power and  authority  to make,  execute,
deliver  and  perform  this  Servicing  Agreement  and  all of the  transactions
contemplated  under  this  Servicing  Agreement,  and has  taken  all  necessary
corporate  action to authorize the execution,  delivery and  performance of this
Servicing Agreement.  When executed and delivered, this Servicing Agreement will
constitute  the legal,  valid and  binding  obligation  of the  Master  Servicer
enforceable  in accordance  with its terms,  except as enforcement of such terms
may  be  limited  by  bankruptcy,  insolvency  or  similar  laws  affecting  the
enforcement of creditors'  rights generally and by the availability of equitable
remedies;

     (iii) The Master  Servicer  is not  required  to obtain the  consent of any
other  Person or any  consent,  license,  approval  or  authorization  from,  or
registration or declaration with, any governmental  authority,  bureau or agency
in  connection   with  the  execution,   delivery,   performance,   validity  or
enforceability of this Servicing  Agreement,  except for such consent,  license,
approval or  authorization,  or registration or declaration,  as shall have been
obtained or filed, as the case may be;

     (iv)  The  execution  and  delivery  of this  Servicing  Agreement  and the
performance of the transactions  contemplated hereby by the Master Servicer will
not violate any  provision  of any existing  law or  regulation  or any order or
decree of any court  applicable  to the Master  Servicer or any provision of the
Certificate of Incorporation  or Bylaws of the Master Servicer,  or constitute a
material breach of any mortgage, indenture, contract or other agreement to which
the Master Servicer is a party or by which the Master Servicer may be bound; and

     (v) No  litigation  or  administrative  proceeding  of or before any court,
tribunal or governmental body is currently  pending,  or to the knowledge of the
Master


                                              3

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        Servicer  threatened,   against  the  Master  Servicer  or  any  of  its
        properties  or with respect to this  Servicing  Agreement or the Grantor
        Trust  Certificate  which in the  opinion of the Master  Servicer  has a
        reasonable  likelihood of resulting in a material  adverse effect on the
        transactions contemplated by this Servicing Agreement.

               The foregoing  representations  and warranties  shall survive any
termination of the Master Servicer hereunder.

               Section 2.02. Reserved.

               Section 2.03. Enforcement of Representations and Warranties.  The
Master  Servicer,  on behalf of and  subject  to the  direction  of the  Grantor
Trustee, for the benefit of the Grantor Trust  Certificateholder,  shall enforce
the  representations  and  warranties  of the Seller  pursuant  to the Home Loan
Purchase Agreement.  Upon the discovery by the Seller, the Depositor, the Master
Servicer,  the  Grantor  Trustee,  or any  Custodian  of a breach  of any of the
representations  and warranties  made in the Home Loan Purchase  Agreement or of
the  existence  of a  Repurchase  Event,  in  respect  of any  Home  Loan  which
materially   and   adversely   affects  the   interests  of  the  Grantor  Trust
Certificateholder,  the party  discovering  such breach or existence  shall give
prompt written notice to the other parties.  The Master  Servicer shall promptly
notify the Seller of such breach or existence and request that,  pursuant to the
terms of the Home Loan  Purchase  Agreement,  the  Seller  either  (i) cure such
breach or Repurchase Event in all material respects within 45 days (with respect
to a breach of the representations and warranties contained in Section 3.1(a) of
the Home Loan Purchase  Agreement or Repurchase  Event) or 90 days (with respect
to a breach of the representations and warranties contained in Section 3.1(b) of
the Home Loan Purchase  Agreement) from the date the Seller was notified of such
breach or  Repurchase  Event or (ii) purchase such Home Loan at the price and in
the  manner  set forth in Section  3.1(c) of the Home Loan  Purchase  Agreement;
provided that the Seller shall,  subject to compliance  with all the  conditions
set forth in the Home Loan Purchase Agreement,  have the option to substitute an
Eligible  Substitute  Loan or Loans for such Home  Loan.  In the event  that the
Seller elects to substitute  one or more Eligible  Substitute  Loans pursuant to
Section 3.1(c) of the Home Loan Purchase Agreement,  the Seller shall deliver to
the Grantor Trustee, for the benefit of the Grantor Trust Certificateholder with
respect to such Eligible  Substitute  Loans,  the original  Mortgage  Note,  the
Mortgage,  and such other  documents and  agreements as are required by the Home
Loan Purchase Agreement.  Payments due with respect to Eligible Substitute Loans
in the month of substitution shall not be transferred to the Grantor Trustee and
will be retained by the Master  Servicer and remitted by the Master  Servicer to
the Seller on the next succeeding Payment Date provided a payment at least equal
to the applicable Monthly Payment has been received by the Grantor Trustee,  for
the benefit of the Grantor Trust Certificateholder, for such month in respect of
the Home Loan to be  removed.  The Master  Servicer  shall  amend or cause to be
amended the Home Loan  Schedule to reflect the removal of such Home Loan and the
substitution  of the Eligible  Substitute  Loans and the Master  Servicer  shall
promptly  deliver the amended  Home Loan  Schedule to the Grantor  Trustee,  the
Owner Trustee and the Indenture Trustee.

               It is understood  and agreed that the obligation of the Seller to
cure such breach or purchase or substitute for such Home Loan as to which such a
breach  has  occurred  and  is  continuing  shall  constitute  the  sole  remedy
respecting such breach available to the Grantor Trustee against the Seller. Upon
receipt of the Repurchase  Price, or upon completion of such  substitution,  the
Master


                                              4

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Servicer  shall notify the Custodian  and then the  Custodian  shall deliver the
Mortgage Files to the Master Servicer,  together with all relevant  endorsements
and assignments  prepared by the Master Servicer which the Grantor Trustee shall
execute.




                                              5

<PAGE>



                                         ARTICLE III

                          Administration and Servicing
                                        of Home Loans

               Section 3.01. The Master Servicer.  (a) The Master Servicer shall
service  and  administer  the Home  Loans in  accordance  with the terms of this
Servicing  Agreement,  following such  procedures as it would employ in its good
faith business  judgment and which are normal and usual in its general  mortgage
servicing activities,  and shall have full power and authority,  acting alone or
through  a  subservicer,  to do any and  all  things  in  connection  with  such
servicing and administration which it may deem necessary or desirable,  it being
understood,  however,  that  the  Master  Servicer  shall  at all  times  remain
responsible  to the  Depositor,  the Grantor  Trustee,  on behalf of the Grantor
Trust  Certificateholder,  the Owner Trustee on behalf of the Certificateholders
and the Indenture  Trustee on behalf of the  Noteholders  for the performance of
its  duties and  obligations  hereunder  in  accordance  with the terms  hereof.
Without  limiting the  generality of the  foregoing,  the Master  Servicer shall
continue,  and is hereby  authorized  and  empowered  by the  Depositor  and the
Grantor Trustee, to execute and deliver, on behalf of itself, the Depositor, the
Grantor  Trustee or any of them,  any and all  instruments  of  satisfaction  or
cancellation,  or of partial  or full  release  or  discharge,  or of consent to
modification in connection with a proposed  conveyance,  or of assignment of any
Mortgage and Mortgage Note in connection  with the repurchase of a Home Loan and
all other comparable instruments with respect to the Home Loans and with respect
to the Mortgaged Properties, or with respect to the modification or re-recording
of a Mortgage for the purpose of correcting the Mortgage,  the  subordination of
the lien of the  Mortgage  in favor of a public  utility  company or  government
agency or unit with  powers of eminent  domain,  the taking of a deed in lieu of
foreclosure,  the  commencement,   prosecution  or  completion  of  judicial  or
non-judicial   foreclosure,   the  acquisition  of  any  property   acquired  by
foreclosure or deed in lieu of  foreclosure,  or the  management,  marketing and
conveyance  of  any  property  acquired  by  foreclosure  or  deed  in  lieu  of
foreclosure.   The  Depositor,   the  Grantor  Trustee  and  the  Custodian,  as
applicable,  shall  furnish the Master  Servicer with any powers of attorney and
other documents  necessary or appropriate to enable the Master Servicer to carry
out its servicing and administrative duties hereunder.  In addition,  the Master
Servicer may, at its own discretion and on behalf of the Grantor Trustee, obtain
credit  information in the form of a Credit Score from a credit  repository.  On
the Closing Date,  the Grantor  Trustee  shall deliver to the Master  Servicer a
limited power of attorney substantially in the form of Exhibit B hereto.

               If the  Mortgage  relating  to a Home  Loan  did not  have a lien
senior to the Home Loan on the  related  Mortgaged  Property  as of the  Cut-off
Date, then the Master Servicer, in such capacity, may not consent to the placing
of a lien senior to that of the Mortgage on the related Mortgaged  Property.  If
the  Mortgage  relating to a Home Loan had a lien senior to the Home Loan on the
related Mortgaged Property as of the Cut-off Date, then the Master Servicer,  in
such capacity, may consent to the refinancing of the prior senior lien, provided
that the following requirements are met:

                       (i) (A) the  Mortgagor's  debt-to-income  ratio resulting
        from such refinancing is less than the original  debt-to-income ratio as
        set forth on the Mortgage Loan Schedule;  provided,  however, that in no
        instance shall the resulting Combined  Loan-to-Value  Ratio of such Home
        Loan be higher than that permitted by the Program Guide; or


                                              6

<PAGE>



                       (B) the resulting  Combined  Loan-to-Value  Ratio of such
        Home Loan is no higher than the  Combined  Loan-to-Value  Ratio prior to
        such refinancing; provided, however, if such refinanced mortgage loan is
        a "rate and term" mortgage loan (meaning, the Mortgagor does not receive
        any cash from the  refinancing),  the Combined  Loan-to-Value  Ratio may
        increase  to the extent of either (a) the  reasonable  closing  costs of
        such  refinancing  or (b)  any  decrease  in the  value  of the  related
        Mortgaged  Property,  if the Mortgagor is in good standing as defined by
        the Program Guide;

                (ii) the interest  rate,  or, in the case of an adjustable  rate
        existing senior lien, the maximum interest rate, for the loan evidencing
        the refinanced senior lien is no more than 2.0% higher than the interest
        rate or the  maximum  interest  rate,  as the case  may be,  on the loan
        evidencing  the existing  senior lien  immediately  prior to the date of
        such  refinancing;  provided,  however  (a) if the loan  evidencing  the
        existing  senior lien prior to the date of refinancing has an adjustable
        rate and the loan  evidencing  the  refinanced  senior  lien has a fixed
        rate,  then  the  current  interest  rate  on the  loan  evidencing  the
        refinanced  senior lien may be up to 2.0%  higher than the  then-current
        loan rate of the loan evidencing the existing senior lien and (b) if the
        loan   evidencing  the  existing  senior  lien  prior  to  the  date  of
        refinancing  has a fixed  rate and the loan  evidencing  the  refinanced
        senior lien has an adjustable  rate,  then the maximum  interest rate on
        the loan  evidencing  the  refinanced  senior lien shall be less than or
        equal to (x) the  interest  rate on the  loan  evidencing  the  existing
        senior lien prior to the date of refinancing plus (y) 2.0%; and

                (iii) the loan  evidencing  the  refinanced  senior  lien is not
        subject to negative amortization.

               The  relationship of the Master Servicer (and of any successor to
the Master Servicer as servicer under this Servicing Agreement) to the Depositor
under this  Servicing  Agreement  is  intended  by the  parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.

               (b) The  Master  Servicer  may  continue  in effect  Subservicing
Agreements  entered into by Residential  Funding and  Subservicers  prior to the
execution  and  delivery  of  this  Servicing  Agreement,  and  may  enter  into
Subservicing  Agreements with Subservicers for the servicing and  administration
of certain of the Home Loans.  Each Subservicer of a Home Loan shall be entitled
to receive and retain, as provided in the related Subservicing  Agreement and in
Section 3.02, the related Subservicing Fee from payments of interest received on
such Home Loan after  payment of all  amounts  required  to be  remitted  to the
Master Servicer in respect of such Home Loan. For any Home Loan not subject to a
Subservicing  Agreement,  the Master  Servicer  shall be entitled to receive and
retain  an amount  equal to the  Subservicing  Fee from  payments  of  interest.
References  in this  Servicing  Agreement to actions taken or to be taken by the
Master Servicer in servicing the Home Loans include actions taken or to be taken
by a Subservicer on behalf of the Master Servicer.  Each Subservicing  Agreement
will be upon  such  terms  and  conditions  as are not  inconsistent  with  this
Servicing  Agreement and as the Master Servicer and the Subservicer have agreed.
With the  approval  of the Master  Servicer,  a  Subservicer  may  delegate  its
servicing  obligations  to third-party  servicers,  but such  Subservicers  will
remain obligated under the related Subservicing Agreements.  The Master Servicer
and the  Subservicer  may enter  into  amendments  to the  related  Subservicing
Agreements;


                                              7

<PAGE>



provided, however, that any such amendments shall not cause the Home Loans to be
serviced in a manner that would be  materially  inconsistent  with the standards
set forth in this Servicing Agreement.  The Master Servicer shall be entitled to
terminate any Subservicing Agreement in accordance with the terms and conditions
thereof  and  without  any  limitation  by virtue of this  Servicing  Agreement;
provided,  however,  that  in the  event  of  termination  of  any  Subservicing
Agreement by the Master Servicer or the  Subservicer,  the Master Servicer shall
either act as  servicer of the  related  Home Loan or enter into a  Subservicing
Agreement with a successor  Subservicer  which will be bound by the terms of the
related Subservicing  Agreement.  The Master Servicer shall be entitled to enter
into any agreement with a Subservicer for indemnification of the Master Servicer
and nothing  contained in this Servicing  Agreement  shall be deemed to limit or
modify such indemnification.

               In the event  that the  rights,  duties  and  obligations  of the
Master Servicer are terminated  hereunder,  any successor to the Master Servicer
in its sole discretion may, to the extent permitted by applicable law, terminate
the existing Subservicing  Agreement with any Subservicer in accordance with the
terms of the applicable  Subservicing  Agreement or assume the terminated Master
Servicer's  rights and obligations under such  subservicing  arrangements  which
termination or assumption will not violate the terms of such arrangements.

               As  part  of  its  servicing  activities  hereunder,  the  Master
Servicer  shall use  reasonable  efforts  to  enforce  the  obligations  of each
Subservicer  under the related  Subservicing  Agreement,  to the extent that the
non-performance of any such obligation would have a material adverse effect on a
Home  Loan.  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 Master  Servicer  would  employ in its good faith
business  judgment  and  which are  normal  and  usual in its  general  mortgage
servicing  activities.   The  Master  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  Home Loan or
(ii) from a specific  recovery of costs,  expenses or attorneys fees against the
party against whom such enforcement is directed.

               Section 3.02.  Collection of Certain Home Loan Payments.  (a) The
Master Servicer shall make reasonable efforts to collect all payments called for
under the terms and provisions of the Home Loans,  and shall, to the extent such
procedures  shall be  consistent  with this  Servicing  Agreement  and generally
consistent with any related insurance policy,  follow such collection procedures
as it would employ in its good faith business  judgment and which are normal and
usual  in  its  general  mortgage  servicing  activities.  Consistent  with  the
foregoing,  and without  limiting the  generality of the  foregoing,  the Master
Servicer may in its discretion waive any late payment charge,  prepayment charge
or penalty  interest or other fees which may be collected in the ordinary course
of servicing  such Home Loan.  The Master  Servicer may also extend the Due Date
for payment due on a Home Loan in accordance  with the Program Guide,  provided,
however,  that the Master Servicer shall first determine that any such waiver or
extension  will not impair  the  coverage  of any  related  insurance  policy or
materially  adversely  affect  the  lien  of the  related  Mortgage  (except  as
described  below)  or the  interests  of the  Grantor  Trust  Certificateholder.
Consistent with the terms of this Servicing  Agreement,  the Master Servicer may
also:


                                              8

<PAGE>



               (i) waive, modify or vary any term of any Home Loan;

               (ii) consent to the  postponement  of strict  compliance with any
               such term or in any manner grant indulgence to any Mortgagor;

               (iii)  arrange  with a  Mortgagor  a schedule  for the payment of
               principal and interest due and unpaid;

               (iv) forgive any portion of the amounts  contractually owed under
               the Home Loan;

               (v)  capitalize  past due  amounts  owed  under  the Home Loan by
               adding any amounts in arrearage to the existing principal balance
               of the Home  Loan (a  "Capitalization  Workout")  of  which  will
               result in an increased Monthly Payment amount, provided that: (A)
               the amount  added to the existing  principal  balance of the Home
               Loan (the  "Capitalized  Amount")  shall be no greater  than five
               times the Mortgagor's current Monthly Payment amount; and (B) the
               Master  Servicer  shall not enter into a  Capitalization  Workout
               unless the Combined Loan-to-Value Ratio of the Home Loan prior to
               the  Capitalization   Workout  equals  or  exceeds  80%  and  the
               Mortgagor has qualified for the Capitalization  Workout under the
               Master Servicer's servicing guidelines;

               (vi) reset the due date for the Home Loan, or any  combination of
               the foregoing;

if  in  the  Master   Servicer's   determination   such  waiver,   modification,
postponement or indulgence, arrangement or other action referred to above is not
materially adverse to the interests of the Grantor Trust  Certificateholder  and
is generally  consistent  with the Master  Servicer's  policies  with respect to
mortgage loans similar to those in the Home Loan Pool  (meaning,  mortgage loans
used for home improvement or debt consolidation);  provided,  however,  that the
Master Servicer may not modify or permit any Subservicer to modify any Home Loan
(including  without limitation any modification that would change the Loan Rate,
forgive the payment of any principal or interest  (unless in connection with the
liquidation  of the related Home Loan) or extend the final maturity date of such
Home Loan) unless such Home Loan is in default or, in the judgment of the Master
Servicer,  such  default is  reasonably  foreseeable.  The general  terms of any
waiver, modification, postponement or indulgence with respect to any of the Home
Loans will be included in the  Servicing  Certificate,  and such Home Loans will
not be considered  "delinquent"  for the purposes of the Basic Documents so long
as  the  Mortgagor  complies  with  the  terms  of  such  waiver,  modification,
postponement or indulgence.

               (b) The Master  Servicer  shall  establish a  Custodial  Account,
which shall be an Eligible Account in which the Master Servicer shall deposit or
cause to be  deposited  any amounts  representing  payments and  collections  in
respect of the Home Loans  received by it  subsequent to the Cut-off Date (other
than in respect of the payments  referred to in the following  paragraph) within
one  Business Day  following  receipt  thereof (or  otherwise on or prior to the
Closing Date), including the following payments and collections received or made
by it (without duplication):



                                              9

<PAGE>



                       (i) all  payments  of  principal  or interest on the Home
        Loans received by the Master  Servicer from the respective  Subservicer,
        net of any portion of the interest  thereof  retained by the Subservicer
        as Subservicing Fees;

                       (ii) the  aggregate  Repurchase  Price of the Home  Loans
        purchased by the Master Servicer pursuant to Section 3.15;

                       (iii)  Net  Liquidation   Proceeds  net  of  any  related
        Foreclosure Profit;

                       (iv) all  proceeds of any Home Loans  repurchased  by the
        Seller   pursuant  to  the  Home  Loan  Purchase   Agreement,   and  all
        Substitution  Adjustment  Amounts required to be deposited in connection
        with the  substitution  of an Eligible  Substitute  Loan pursuant to the
        Home Loan Purchase Agreement;

                       (v)  Insurance  Proceeds,   other  than  Net  Liquidation
        Proceeds,  resulting from any insurance policy maintained on a Mortgaged
        Property; and

                       (vi) amounts  required to be paid by the Master  Servicer
        pursuant to Sections 3.04 and 8.08 and any  prepayments  or  collections
        constituting prepayment charges.

provided,  however,  that with  respect to each  Collection  Period,  the Master
Servicer  shall be permitted  to retain from  payments in respect of interest on
the Home  Loans,  the  Master  Servicing  Fee for such  Collection  Period.  The
foregoing  requirements   respecting  deposits  to  the  Custodial  Account  are
exclusive,  it being  understood  that,  without  limiting the generality of the
foregoing, the Master Servicer need not deposit in the Custodial Account amounts
representing  Foreclosure  Profits,  fees (including annual fees) or late charge
penalties  payable by  Mortgagors  (such  amounts to be retained  as  additional
servicing  compensation  in  accordance  with Section 3.09  hereof),  or amounts
received by the Master  Servicer for the accounts of Mortgagors for  application
towards the payment of taxes, insurance premiums, assessments and similar items.
In the event any amount not required to be deposited in the Custodial Account is
so deposited,  the Master Servicer may at any time withdraw such amount from the
Custodial  Account,  any provision herein to the contrary  notwithstanding.  The
Custodial  Account  may  contain  funds that  belong to one or more trust  funds
created for the notes or  certificates  of other  series and may  contain  other
funds  respecting  payments  on other  mortgage  loans  belonging  to the Master
Servicer  or   serviced   or  master   serviced  by  it  on  behalf  of  others.
Notwithstanding  such  commingling  of funds,  the  Master  Servicer  shall keep
records that  accurately  reflect the funds on deposit in the Custodial  Account
that have been  identified  by it as being  attributable  to the Home  Loans and
shall hold all collections in the Custodial Account to the extent they represent
collections   on  the  Home  Loans  for  the  benefit  of  the   Grantor   Trust
Certificateholder, as its interests may appear. The Master Servicer shall retain
all Foreclosure Profits as additional servicing compensation.

        The Master Servicer may cause the institution  maintaining the Custodial
Account to invest any funds in the  Custodial  Account in Permitted  Investments
(including obligations of the Master Servicer or any of its Affiliates,  if such
obligations otherwise qualify as Permitted Investments),  which shall mature not
later than the Business Day  preceding the next Payment Date and which shall not
be sold or disposed of prior to its  maturity.  Except as  provided  above,  all
income and gain


                                       10

<PAGE>



realized  from any such  investment  shall  inure to the  benefit  of the Master
Servicer and shall be subject to its  withdrawal or order from time to time. The
amount of any losses  incurred  in respect of the  principal  amount of any such
investments  shall be deposited in the Custodial  Account by the Master Servicer
out of its own funds immediately as realized.

        (c) The Master Servicer will require each  Subservicer to hold all funds
constituting  collections on the Home Loans,  pending  remittance thereof to the
Master Servicer, in one or more accounts meeting the requirements of an Eligible
Account, and invested in Permitted Investments.

        Section 3.03.Withdrawals from the Custodial Account. The Master Servicer
shall, from time to time as provided herein, make withdrawals from the Custodial
Account  of  amounts  on  deposit  therein  pursuant  to  Section  3.02 that are
attributable to the Home Loans for the following purposes:

                       (i) to deposit in the Grantor Trust Certificate  Account,
        on the Business Day prior to each Payment  Date,  an amount equal to the
        Interest   Collections   and  Principal   Collections   required  to  be
        distributed  on such  Payment  Date  and  any  payments  or  collections
        constituting  prepayment  charges received during the related Prepayment
        Period;

                       (ii) to the extent deposited to the Custodial Account, to
        reimburse itself or the related Subservicer for previously  unreimbursed
        expenses incurred in maintaining  individual insurance policies pursuant
        to Section 3.04, or Liquidation Expenses,  paid pursuant to Section 3.07
        or  otherwise  reimbursable  pursuant  to the  terms  of this  Servicing
        Agreement  (to the extent not payable  pursuant to Section  3.09),  such
        withdrawal  right being limited to amounts  received on particular  Home
        Loans  (other  than any  Repurchase  Price  in  respect  thereof)  which
        represent  late  recoveries of the payments for which such advances were
        made,  or from  related  Liquidation  Proceeds  or the  proceeds  of the
        purchase of such Home Loan;

                       (iii) to pay to itself out of each  payment  received  on
        account of interest on a Home Loan as  contemplated  by Section 3.09, an
        amount  equal to the  related  Master  Servicing  Fee (to the extent not
        retained  pursuant to Section 3.02),  and to pay to any  Subservicer any
        Subservicing Fees not previously withheld by the Subservicer;

                       (iv) to the extent deposited in the Custodial  Account to
        pay to itself as  additional  servicing  compensation  any  interest  or
        investment income earned on funds deposited in the Custodial Account and
        the Grantor  Trust  Certificate  Account that it is entitled to withdraw
        pursuant to Sections 3.02(b);

                       (v) to the extent deposited in the Custodial Account,  to
        pay to itself  as  additional  servicing  compensation  any  Foreclosure
        Profits;

                       (vi) to pay to itself or the Seller,  with respect to any
        Home  Loan or  property  acquired  in  respect  thereof  that  has  been
        purchased or otherwise transferred to the Seller, the Master Servicer or
        other entity, all amounts received thereon and not required to be


                                       11

<PAGE>



          distributed to the Grantor Trust  Certificateholder  as of the date on
          which the related Purchase Price or Repurchase Price is determined;

                       (vii) to clear and terminate  the Custodial  Account upon
        the termination of this Agreement; and

                       (viii)to  withdraw  any  other  amount  deposited  in the
        Custodial Account that was not required to be deposited therein pursuant
        to Section 3.02.

        Since, in connection with withdrawals  pursuant to clauses (ii),  (iii),
(v)  and  (vi),  the  Master  Servicer's   entitlement  thereto  is  limited  to
collections or other  recoveries on the related Home Loan,  the Master  Servicer
shall keep and maintain separate accounting,  on a Home Loan by Home Loan basis,
for the purpose of justifying any withdrawal from the Custodial Account pursuant
to  such  clauses.   Notwithstanding  any  other  provision  of  this  Servicing
Agreement,  the Master  Servicer  shall be entitled to reimburse  itself for any
previously  unreimbursed expenses incurred pursuant to Section 3.07 or otherwise
reimbursable  pursuant to the terms of this Servicing  Agreement that the Master
Servicer determines to be otherwise  nonrecoverable  (except with respect to any
Home Loan as to which the Repurchase  Price has been paid),  by withdrawal  from
the Custodial  Account of amounts on deposit  therein  attributable  to the Home
Loans on any Business Day prior to the Payment Date  succeeding the date of such
determination.

        Section  3.04.  Maintenance  of Hazard  Insurance;  Property  Protection
Expenses.  The Master  Servicer  shall cause to be maintained for each Home Loan
hazard insurance naming the Master Servicer or related Subservicer as loss payee
thereunder  providing  extended coverage in an amount which is at least equal to
at  least  100%  of  the  insurable  value  of  the   improvements   (guaranteed
replacement)  or the sum of the unpaid  principal  balance of the first mortgage
loan and the Home Loan  amount.  The  Master  Servicer  shall  also  cause to be
maintained  on  property  acquired  upon   foreclosure,   or  deed  in  lieu  of
foreclosure,  of any Home Loan,  fire  insurance  with  extended  coverage in an
amount which is at least equal to the amount  necessary to avoid the application
of any  coinsurance  clause  contained in the related hazard  insurance  policy.
Amounts  collected by the Master  Servicer  under any such policies  (other than
amounts to be  applied to the  restoration  or repair of the  related  Mortgaged
Property  or property  thus  acquired or amounts  released to the  Mortgagor  in
accordance with the Master  Servicer's  normal  servicing  procedures)  shall be
deposited in the Custodial  Account to the extent called for by Section 3.02. In
cases in which any Mortgaged  Property is located at any time during the life of
a Home Loan in a federally  designated  flood area,  the hazard  insurance to be
maintained  for the related  Home Loan shall  include  flood  insurance  (to the
extent  available).  All such flood  insurance  shall be in amounts equal to the
lesser of (i) the amount  required to  compensate  for any loss or damage to the
Mortgaged  Property on a replacement  cost basis 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). The Master Servicer shall be under
no  obligation  to  require  that any  Mortgagor  maintain  earthquake  or other
additional  insurance  and shall be under no  obligation  itself to maintain any
such additional  insurance on property acquired in respect of a Home Loan, 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 Master  Servicer
shall obtain and maintain a blanket policy  consistent with its general mortgage
servicing activities insuring against hazard losses on all


                                       12

<PAGE>



of the Home  Loans,  it shall  conclusively  be  deemed  to have  satisfied  its
obligations  as set forth in the first  sentence of this Section  3.04, it being
understood and agreed that such blanket policy may contain a deductible  clause,
in which case the Master  Servicer shall, in the event that there shall not have
been maintained on the related  Mortgaged  Property a policy  complying with the
first sentence of this Section 3.04 and there shall have been a loss which would
have been covered by such policy,  deposit in the  Custodial  Account the amount
not  otherwise  payable  under the  blanket  policy  because of such  deductible
clause.  Any  such  deposit  by the  Master  Servicer  shall be made on the last
Business Day of the  Collection  Period in the month in which payments under any
such policy would have been  deposited in the Custodial  Account.  In connection
with its activities as servicer of the Home Loans, the Master Servicer agrees to
present,  on behalf of itself,  the  Depositor and the Grantor  Trustee,  claims
under any such blanket policy.

        Section 3.05. Modification Agreements;  Release or Substitution of Lien.
(a) The Master Servicer or the related Subservicer, as the case may be, shall be
entitled  to  (A)  execute  assumption  agreements,   modification   agreements,
substitution  agreements,  and instruments of satisfaction or cancellation or of
partial or full release or discharge, or any other document contemplated by this
Servicing  Agreement and other  comparable  instruments with respect to the Home
Loans and with respect to the Mortgaged Properties subject to the Mortgages (and
the  Depositor  and the Grantor  Trustee  each shall  promptly  execute any such
documents on request of the Master  Servicer) and (B) approve the granting of an
easement thereon in favor of another Person, any alteration or demolition of the
related  Mortgaged  Property or other  similar  matters,  in each case if it has
determined, exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Home Loan,  that the security for, and
the timely and full  collectability  of,  such Home Loan would not be  adversely
affected  thereby.  A partial  release  pursuant to this  Section  3.05 shall be
permitted only if the Combined Loan-to-Value Ratio for such Home Loan after such
partial release does not exceed the Combined  Loan-to-Value  Ratio for such Home
Loan as of the Cut-off  Date.  Any fee  collected by the Master  Servicer or the
related  Subservicer  for processing such request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.

        (b) The Master  Servicer may enter into an agreement with a Mortgagor to
release  the  lien  on the  Mortgaged  Property  relating  to a Home  Loan  (the
"Existing  Lien"),  if at the time of such agreement the Home Loan is current in
payment of principal and interest, under any of the following circumstances:

                (i) in any case in which, simultaneously with the release of the
        Existing  Lien,  the  Mortgagor  executes  and  delivers  to the  Master
        Servicer a Mortgage on a substitute  Mortgaged  Property,  provided that
        the Combined  Loan-to-Value  Ratio of the Home Loan (calculated based on
        the Appraised Value of the substitute Mortgaged Property) is not greater
        than the Combined  Loan-to-Value  Ratio prior to releasing  the Existing
        Lien;

                (ii) in any case in which,  simultaneously  with the  release of
        the Existing  Lien,  the  Mortgagor  executes and delivers to the Master
        Servicer a Mortgage on a substitute  Mortgaged Property,  provided that:
        (A) the Combined  Loan-to-Value Ratio of the Home Loan (calculated based
        on the  Appraised  Value of the  substitute  Mortgaged  Property) is not
        greater  than  the  lesser  of (1)  125%  and (2)  105% of the  Combined
        Loan-to-Value  Ratio prior to releasing the Existing  Lien;  and (B) the
        Master Servicer determines that at least two


                                       13

<PAGE>



        appropriate  compensating factors are present  (compensating factors may
        include, without limitation, an increase in the Mortgagor's monthly cash
        flow after debt service,  the Mortgagor's  debt-to-income  ratio has not
        increased since  origination,  or an increase in the Mortgagor's  credit
        score); or

                (iii)  in any  case in  which,  at the  time of  release  of the
        Existing Lien, the Mortgagor does not provide the Master Servicer with a
        Mortgage on a substitute  Mortgaged Property (any Home Loan that becomes
        and remains unsecured in accordance with this subsection,  an "Unsecured
        Loan"),  provided that: (A) the Mortgagor,  in addition to being current
        in payment of  principal  and  interest  on the  related  Home Loan,  is
        current in payment of  principal  and interest on any loan senior to the
        Home Loan; (B) the Mortgagor's Credit Score, as determined by the Master
        Servicer at the time of the  request  for  release of lien,  is not less
        than 640; (C) the Mortgagor  makes a cash  contribution  in reduction of
        the outstanding  principal  balance of the Home Loan,  which may include
        any net proceeds from the sale of the original  Mortgaged  Property,  of
        not less than 20% of the unpaid principal  balance of the Home Loan; and
        (D) the Mortgagor signs a  reaffirmation  agreement  acknowledging  that
        they must continue to pay in  accordance  with the terms of the original
        Mortgage Note.

                (iv) If the above  conditions  (iii)(A) through (iii)(D) are not
        met,  the Master  Servicer  may still enter into an agreement to release
        the Existing  Lien,  provided  that:  (A) the Master  Servicer shall not
        permit the release of an Existing Lien under this clause (iv) as to more
        than 200 Home  Loans in any  calendar  year;  (B) at no time  shall  the
        aggregate  Principal  Balance of  Unsecured  Loans exceed 5% of the then
        Pool  Balance;  (C) the Mortgagor  agrees to an automatic  debit payment
        plan;  and (D) the Master  Servicer  shall provide notice to each Rating
        Agency that has requested notice of such releases.

        In connection  with any Unsecured  Loan, the Master Servicer may require
the Mortgagor to enter into an agreement  under which:  (i) the Loan Rate may be
increased  effective until a substitute  Mortgage meeting the criteria under (i)
or (ii) above is  provided;  or (ii) any other  provision  may be made which the
Master  Servicer  considers to be appropriate.  Thereafter,  the Master Servicer
shall determine in its discretion whether to accept any proposed Mortgage on any
substitute  Mortgaged  Property  as security  for the Home Loan,  and the Master
Servicer may require the Mortgagor to agree to any further  conditions which the
Master  Servicer  considers  appropriate in connection  with such  substitution,
which may include a  reduction  of the Loan Rate (but not below the Loan Rate in
effect  at the  Closing  Date).  Any  Home  Loan  as to  which a  Mortgage  on a
substitute  Mortgaged  Property  is provided in  accordance  with the  preceding
sentence shall no longer be deemed to be an Unsecured Loan.

        Section 3.06. Trust Estate; Related Documents.  (a) When required by the
provisions of this  Servicing  Agreement,  the Depositor or the Grantor  Trustee
shall  execute  instruments  to release  property  from the terms of the Grantor
Trust Agreement or Custodial Agreement, as applicable, or convey the Depositor's
or  the  Grantor  Trustee's  interest  in  the  same,  in  a  manner  and  under
circumstances  which are not inconsistent  with the provisions of this Servicing
Agreement.  No party relying upon an instrument executed by the Depositor or the
Grantor Trustee as provided in this


                                       14

<PAGE>



Section  3.06  shall  be bound  to  ascertain  the  Depositor's  or the  Grantor
Trustee's  authority,  inquire into the satisfaction of any conditions precedent
or see to the application of any monies.

        (b) If from  time to time  the  Master  Servicer  shall  deliver  to the
Custodian copies of any written assurance,  assumption agreement or substitution
agreement or other similar  agreement  pursuant to Section  3.05,  the Custodian
shall check that each of such documents purports to be an original executed copy
(or a copy of the original  executed  document if the original executed copy has
been  submitted for recording and has not yet been  returned)  and, if so, shall
file such  documents,  and upon receipt of the original  executed  copy from the
applicable  recording  office or  receipt  of a copy  thereof  certified  by the
applicable  recording  office shall file such originals or certified copies with
the Related Documents. If any such documents submitted by the Master Servicer do
not meet the above qualifications,  such documents shall promptly be returned by
the  Custodian  to  the  Master  Servicer  pursuant  to  the  related  Custodial
Agreement,  with a  direction  to the Master  Servicer  to forward  the  correct
documentation.

        (c) Upon receipt of a Request for Release from the Master  Servicer,  to
the  effect  that a Home  Loan has  been the  subject  of a final  payment  or a
prepayment  in full  and the  related  Home  Loan has  been  terminated  or that
substantially all Liquidation  Proceeds which have been determined by the Master
Servicer  in  its  reasonable  judgment  to be  finally  recoverable  have  been
recovered,  and upon  deposit to the  Custodial  Account  of such final  monthly
payment,  prepayment in full  together  with accrued and unpaid  interest to the
date of such  payment  with  respect  to  such  Home  Loan  or,  if  applicable,
Liquidation Proceeds, the Custodian shall promptly release the Related Documents
to the Master Servicer  pursuant to the related Custodial  Agreement,  which the
Grantor Trustee shall execute,  along with such documents as the Master Servicer
or the Mortgagor may request to evidence satisfaction and discharge of such Home
Loan,  upon  request  of the  Master  Servicer.  If from  time  to  time  and as
appropriate  for the  servicing  or  foreclosure  of any Home  Loan,  the Master
Servicer requests the Custodian to release the Related Documents and delivers to
the  Custodian a trust  receipt  reasonably  satisfactory  to the  Custodian and
signed by a Responsible  Officer of the Master  Servicer,  the  Custodian  shall
release the Related  Documents  to the Master  Servicer  pursuant to the related
Custodial  Agreement.  If such Home Loans shall be liquidated  and the Custodian
receives a certificate  from the Master Servicer as provided  above,  then, upon
request of the Master Servicer, the Custodian shall release the trust receipt to
the Master Servicer pursuant to the related Custodial Agreement.

        Section 3.07.  Realization  Upon Defaulted Home Loans;  Loss Mitigation.
With respect to such of the Home Loans as come into and continue in default, the
Master  Servicer  will  decide  whether  to (i)  foreclose  upon  the  Mortgaged
Properties securing such Home Loans, (ii) write off the unpaid principal balance
of the Home Loans as bad debt,  (iii) take a deed in lieu of  foreclosure,  (iv)
accept a short sale (a payoff of the Home Loan for an amount less than the total
amount  contractually  owed in  order  to  facilitate  a sale  of the  Mortgaged
Property by the  Mortgagor) or permit a short  refinancing (a payoff of the Home
Loan for an amount  less than the total  amount  contractually  owed in order to
facilitate refinancing transactions by the Mortgagor not involving a sale of the
Mortgaged  Property),  (v)  arrange  for  a  repayment  plan,  (vi)  agree  to a
modification  in  accordance  with this  Servicing  Agreement,  or (vii) take an
unsecured  note,  in  connection  with a  negotiated  release of the lien of the
Mortgage in order to facilitate a settlement  with the  Mortgagor;  in each case
subject  to the  rights of any  related  first  lien  holder;  provided  that in
connection with the foregoing if the Master


                                       15

<PAGE>



Servicer  has actual  knowledge  that any  Mortgaged  Property  is  affected  by
hazardous  or toxic  wastes  or  substances  and that  the  acquisition  of such
Mortgaged  Property  would  not be  commercially  reasonable,  then  the  Master
Servicer will not cause the Depositor or the Grantor Trustee to acquire title to
such Mortgaged  Property in a foreclosure or similar  proceeding.  In connection
with such decision,  the Master Servicer shall follow such practices (including,
in the case of any default on a related  senior  mortgage loan, the advancing of
funds to  correct  such  default  if  deemed  to be  appropriate  by the  Master
Servicer) and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general  mortgage  servicing  activities and as shall be
required or permitted by the Program  Guide;  provided that the Master  Servicer
shall not be liable in any respect hereunder if the Master Servicer is acting in
connection  with any such  foreclosure  or  attempted  foreclosure  which is not
completed or other conversion in a manner that is consistent with the provisions
of this  Servicing  Agreement.  The foregoing is subject to the proviso that the
Master Servicer shall not be required to expend its own funds in connection with
any foreclosure or attempted  foreclosure  which is not completed or towards the
correction of any default on a related  senior  mortgage loan or  restoration of
any property unless it shall determine that such  expenditure  will increase Net
Liquidation  Proceeds.  In the event of a  determination  by the Master Servicer
that any such expenditure previously made pursuant to this Section 3.07 will not
be  reimbursable  from Net  Liquidation  Proceeds,  the Master Servicer shall be
entitled to reimbursement of its funds so expended pursuant to Section 3.03.

        Notwithstanding any provision of this Servicing  Agreement,  a Home Loan
may be deemed to be finally  liquidated if substantially all amounts expected by
the Master Servicer to be received in connection with the related defaulted Home
Loan have been received;  provided, however, the Master Servicer shall treat any
Home Loan that is 180 days or more delinquent as having been finally liquidated.
Any subsequent collections with respect to any such Home Loan shall be deposited
to the  Custodial  Account.  For  purposes  of  determining  the  amount  of any
Liquidation  Proceeds or Insurance Proceeds,  or other unscheduled  collections,
the Master Servicer may take into account minimal amounts of additional receipts
expected  to be  received  or  any  estimated  additional  liquidation  expenses
expected to be incurred in connection with the related defaulted Home Loan.

        In the  event  that  title to any  Mortgaged  Property  is  acquired  in
foreclosure or by deed in lieu of  foreclosure,  the deed or certificate of sale
shall be issued to the Grantor Trustee, who shall hold the same on behalf of the
Grantor Trust  Certificateholder.  Notwithstanding any such acquisition of title
and cancellation of the related Home Loan, such Mortgaged Property shall (except
as otherwise  expressly provided herein) be considered to be an outstanding Home
Loan held as an asset of the  Grantor  Trust  until  such time as such  property
shall be sold.

        Any proceeds  from the purchase or  repurchase of any Home Loan pursuant
to the terms of this Servicing Agreement  (including without limitation Sections
2.03 and 3.15) will be applied in the following order of priority: first, to the
Master Servicer or the related Subservicer, all Servicing Fees payable therefrom
to the Payment  Date on which such  amounts are to be  deposited  in the Grantor
Trust Certificate Account;  second, as Interest Collections,  accrued and unpaid
interest on the related  Home Loan,  at the Net Loan Rate to the Payment Date on
which such amounts are to be deposited in the Grantor Trust Certificate Account;
and third, as Principal Collections, as a recovery of principal on the Home Loan
on which such amounts are to be  deposited  into the Grantor  Trust  Certificate
Account.


                                       16

<PAGE>



        Liquidation  Proceeds  with  respect to a  Liquidated  Home Loan will be
applied in the  following  order of priority:  first,  to  reimburse  the Master
Servicer or the related Subservicer in accordance with this Section 3.07 for any
Liquidation Expenses; second, to the Master Servicer or the related Subservicer,
all unpaid  Servicing Fees through the date of receipt of the final  Liquidation
Proceeds;  third,  as Principal  Collections,  as a recovery of principal on the
Home Loan,  up to an amount  equal to the Loan  Balance of the related Home Loan
immediately  prior to the date it became a  Liquidated  Home  Loan;  fourth,  as
Interest  Collections,  accrued and unpaid  interest on the related Home Loan at
the Net Loan Rate through the date of receipt of the final Liquidation Proceeds;
and fifth, to Foreclosure Profits.

        Proceeds  and  other  recoveries  from a Home  Loan  after it  becomes a
Liquidated Home Loan will be applied in the following order of priority:  first,
to reimburse the Master  Servicer or the related  Subservicer in accordance with
this Section  3.07 for any expenses  previously  unreimbursed  from  Liquidation
Proceeds  or  otherwise;   second,   to  the  Master  Servicer  or  the  related
Subservicer,  all unpaid  Servicing  Fees  payable  thereto  through the date of
receipt of the proceeds  previously  unreimbursed  from Liquidation  Proceeds or
otherwise;  third, as Interest Collections,  up to an amount equal to the sum of
(a) the Loan Balance of the related Home Loan  immediately  prior to the date it
became a Liquidated  Home Loan,  less any Net  Liquidation  Proceeds  previously
received  with respect to such Home Loan and applied as a recovery of principal,
and (b)  accrued and unpaid  interest  on the related  Home Loan at the Net Loan
Rate through the date of receipt of the  proceeds;  and fourth,  to  Foreclosure
Profits.

        Section 3.08.  Depositor and Grantor Trustee to Cooperate.  On or before
each Payment Date,  the Master  Servicer will notify the Grantor  Trustee or the
Custodian, with a copy to the Depositor, of the termination of or the payment in
full and the  termination  of any Home  Loan  during  the  preceding  Collection
Period.  Upon receipt of payment in full,  the Master  Servicer is authorized to
execute,  pursuant  to the  authorization  contained  in  Section  3.01,  if the
assignments  of Mortgage  have been  recorded  if  required  under the Home Loan
Purchase  Agreement,   an  instrument  of  satisfaction  regarding  the  related
Mortgage,  which  instrument  of  satisfaction  shall be  recorded by the Master
Servicer if required by applicable  law and be delivered to the Person  entitled
thereto.  It is understood  and agreed that any expenses  incurred in connection
with such  instrument  of  satisfaction  or transfer  shall be  reimbursed  from
amounts deposited in the Custodial Account. From time to time and as appropriate
for the servicing or foreclosure  of any Home Loan,  the Grantor  Trustee or the
Custodian shall, upon request of the Master Servicer and delivery to the Grantor
Trustee or Custodian,  with a copy to the  Depositor,  of a Request for Release,
signed by a  Servicing  Officer,  release or cause to be  released  the  related
Mortgage File to the Master  Servicer and the  Depositor or the Grantor  Trustee
shall  promptly  execute  such  documents,  in the forms  provided by the Master
Servicer,  as shall be necessary for the prosecution of any such  proceedings or
the taking of other  servicing  actions.  Such trust receipt shall  obligate the
Master  Servicer  to return  the  Mortgage  File to the  Grantor  Trustee or the
Custodian  (as  specified in such  receipt) when the need therefor by the Master
Servicer no longer  exists  unless the Home Loan shall be  liquidated,  in which
case,  upon  receipt of a  certificate  of a Servicing  Officer  similar to that
hereinabove  specified,  the  trust  receipt  shall be  released  to the  Master
Servicer.

        In order to facilitate the foreclosure of the Mortgage securing any Home
Loan that is in default following  recordation of the assignments of Mortgage in
accordance with the provisions of


                                       17

<PAGE>



the Home Loan Purchase Agreement, the Grantor Trustee or the Depositor shall, if
so requested in writing by the Master Servicer,  promptly execute an appropriate
assignment in the form provided by the Master  Servicer to assign such Home Loan
for the purpose of collection to the Master Servicer (any such assignment  shall
unambiguously  indicate  that the  assignment  is for the purpose of  collection
only),  and, upon such  assignment,  such assignee for collection will thereupon
bring all required  actions in its own name and  otherwise  enforce the terms of
the Home Loan and deposit or credit the Net Liquidation  Proceeds,  exclusive of
Foreclosure Profits,  received with respect thereto in the Custodial Account. In
the event that all delinquent  payments due under any such Home Loan are paid by
the Mortgagor and any other defaults are cured, then the assignee for collection
shall  promptly  reassign  such Home Loan to the Grantor  Trustee and return all
Related  Documents  to the  place  where  the  related  Mortgage  File was being
maintained.

        Section 3.09.  Servicing  Compensation;  Payment of Certain  Expenses by
Master  Servicer.  The Master  Servicer  shall be entitled to receive the Master
Servicing Fee in accordance with Sections 3.02 and 3.03 as compensation  for its
services in  connection  with  servicing  the Home Loans.  Moreover,  additional
servicing compensation in the form of late payment charges, investment income on
amounts in the Custodial Account and the Grantor Trust  Certificate  Account and
other  receipts  not  required  to be  deposited  in the  Custodial  Account  as
specified in Section 3.02 shall be retained by the Master  Servicer.  The Master
Servicer shall be required to pay all expenses incurred by it in connection with
its activities  hereunder  (including payment of all other fees and expenses not
expressly  stated  hereunder  to  be  for  the  account  of  the  Grantor  Trust
Certificateholder,  including,  without limitation, the fees and expenses of the
Owner Trustee,  Grantor Trustee,  Indenture Trustee and any Custodian) and shall
not be entitled to reimbursement therefor.

        Section 3.10. Annual Statement as to Compliance. (a) The Master Servicer
will deliver to the Depositor,  the Grantor  Trustee,  the Owner Trustee and the
Indenture Trustee on or before March 31 of each year,  beginning March 31, 2004,
an  Officer's  Certificate  stating that (i) a review of the  activities  of the
Master Servicer during the preceding  calendar year and of its performance under
servicing  agreements,  including this  Servicing  Agreement has been made under
such officer's  supervision  and (ii) to the best of such  officer's  knowledge,
based on such review,  the Master Servicer has complied in all material respects
with the minimum servicing standards set forth in the Uniform Single Attestation
Program for Mortgage  Bankers and has fulfilled all of its material  obligations
in all material  respects  throughout  such year, or, if there has been material
noncompliance  with such servicing  standards or a default in the fulfillment in
all  material  respects  of any  such  obligation  relating  to  this  Servicing
Agreement,  such statement shall include a description of such  noncompliance or
specify  each such  default,  as the case may be,  known to such officer and the
nature and status thereof.

        (b) The Master  Servicer  shall  deliver to the  Depositor,  the Grantor
Trustee,  the Indenture  Trustee and the Owner  Trustee,  promptly  after having
obtained  knowledge  thereof,  but in no event  later  than five  Business  Days
thereafter,  written  notice by means of an Officer's  Certificate  of any event
which  with the  giving of notice or the lapse of time or both,  would  become a
Servicing Default.

        Section 3.11.  Annual  Servicing  Report.  On or before March 31 of each
year, beginning March 31, 2004, the Master Servicer at its expense shall cause a
firm of nationally recognized


                                       18

<PAGE>



independent public accountants (who may also render other services to the Master
Servicer) to furnish a report to the Depositor,  the Grantor Trustee,  the Owner
Trustee,  the Indenture Trustee and each Rating Agency stating its opinion that,
on  the  basis  of an  examination  conducted  by  such  firm  substantially  in
accordance  with standards  established  by the American  Institute of Certified
Public  Accountants,  the  assertions  made  pursuant to Section 3.10  regarding
compliance with the minimum servicing  standards set forth in the Uniform Single
Attestation  Program for Mortgage Bankers during the preceding calendar year are
fairly stated in all material  respects,  subject to such  exceptions  and other
qualifications  that,  in the opinion of such firm,  such  accounting  standards
require it to report.  In rendering  such  statement,  such firm may rely, as to
matters  relating to the direct  servicing  of such Home Loans by  Subservicers,
upon  comparable  statements for  examinations  conducted by independent  public
accountants  substantially  in  accordance  with  standards  established  by the
American Institute of Certified Public Accountants  (rendered within one year of
such statement) with respect to such Subservicers.

        Section 3.12. Access to Certain  Documentation and Information Regarding
the Home Loans. Whenever required by statute or regulation,  the Master Servicer
shall provide to any Securityholder  upon reasonable request (or a regulator for
a  Securityholder),  the Grantor  Trustee,  the Owner  Trustee or the  Indenture
Trustee,  reasonable access to the  documentation  regarding the Home Loans such
access being afforded without charge but only upon reasonable request and during
normal  business  hours at the offices of the Master  Servicer.  Nothing in this
Section  3.12 shall  derogate  from the  obligation  of the Master  Servicer  to
observe any applicable law prohibiting  disclosure of information  regarding the
Mortgagors and the failure of the Master  Servicer to provide access as provided
in this  Section  3.12 as a result of such  obligation  shall not  constitute  a
breach of this Section 3.12.

        Section 3.13.  Maintenance of Certain Servicing Insurance Policies.  The
Master  Servicer  shall  during the term of its service as servicer  maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer  hereunder and (ii) a fidelity
bond in respect  of its  officers,  employees  or  agents.  Each such  policy or
policies and bond shall be at least equal to the coverage that would be required
by FNMA or FHLMC,  whichever is greater,  for Persons  performing  servicing for
loans similar to the Home Loans purchased by such entity.

        Section 3.14.  Information  Required by the Internal Revenue Service and
Reports of  Foreclosures  and  Abandonments  of Mortgaged  Property.  The Master
Servicer  shall  prepare and deliver all federal and state  information  reports
when and as required by all  applicable  state and federal  income tax laws.  In
particular,  with respect to the requirement  under Section 6050J of the Code to
the effect  that the  Master  Servicer  or  Subservicer  shall  make  reports of
foreclosures and abandonments of any mortgaged  property for each year beginning
in 2004, the Master Servicer or Subservicer  shall file reports relating to each
instance  occurring  during  the  previous  calendar  year in which  the  Master
Servicer (i) on behalf of the  Depositor,  acquires an interest in any Mortgaged
Property through  foreclosure or other comparable  conversion in full or partial
satisfaction  of a Home  Loan,  or (ii)  knows or has  reason  to know  that any
Mortgaged  Property has been abandoned.  The reports from the Master Servicer or
Subservicer  shall be in form and  substance  sufficient  to meet the  reporting
requirements  imposed by Section  6050J and Section 6050H  (reports  relating to
mortgage interest received) of the Code.


                                       19

<PAGE>



        Section   3.15.   Optional   Repurchase   of   Defaulted   Home   Loans.
Notwithstanding  any  provision  in  Section  3.07 to the  contrary,  the Master
Servicer, at its option and in its sole discretion, may repurchase any Home Loan
delinquent in payment for a period of 90 days or longer for a price equal to the
Repurchase Price; provided, that any such Home Loan that becomes 90 days or more
delinquent  during  any  given  Calendar  Quarter  shall  only be  eligible  for
repurchase  pursuant to this  Section  during the period  beginning on the first
Business  Day of the  following  Calendar  Quarter,  and  ending at the close of
business on the second-to-last  Business Day of such following Calendar Quarter;
and provided  further,  that such Home Loan is 90 days or more delinquent at the
time of  repurchase.  Such  option  if not  exercised  shall not  thereafter  be
reinstated  as to any Home Loan,  unless the  delinquency  is cured and the Home
Loan  thereafter  again  becomes  delinquent  in payment by 90 days or more in a
subsequent Calendar Quarter.


                                       20

<PAGE>



                                   ARTICLE IV

                              Servicing Certificate

        Section 4.01.  Statements to Grantor Trust  Certificateholder.  (a) With
respect  to each  Payment  Date,  on the  Business  Day  following  the  related
Determination  Date, the Master  Servicer shall forward to the Grantor  Trustee,
any Grantor Trust  Certificateholder,  the Owner Trustee, the Certificate Paying
Agent, the Class B Trustee and the Indenture Trustee,  and the Indenture Trustee
pursuant to Section 3.26 of the Indenture shall cause to be forwarded by mail or
otherwise  make  available  electronically  at  www.jpmorgan.com/absmbs  to each
Certificateholder, Noteholder, the Depositor and each Rating Agency, a statement
setting forth the following information (the "Servicing  Certificate") as to the
Notes and Certificates, to the extent applicable:

                (i)  the  aggregate  amount  of (a)  Interest  Collections,  (b)
        Principal Collections and (c) Substitution Adjustment Amounts;

                (ii)  the  amount  of  such  distribution  as  principal  to the
        Noteholders;

                (iii)  the  amount  of  such  distribution  as  interest  to the
        Noteholders,  separately  stating  the  portion  thereof  in  respect of
        overdue accrued interest;

                (iv) the number and Pool Balance of the Home Loans as of the end
        of the related Collection Period;

                (v) the number and aggregate  Loan Balances of Home Loans (a) as
        to which the Monthly  Payment is Delinquent  for 30-59 days,  60-89 days
        and 90 or more days,  respectively,  (b) that are  foreclosed,  (c) that
        have become REO, and (d) that have been finally  liquidated due to being
        180 days or more  delinquent,  in each case as of the end of the related
        Collection Period; provided,  however, that such information will not be
        provided on the statements relating to the first Payment Date;

                (vi) the weighted  average Loan Rate for the related  Collection
        Period;

                (vii) the aggregate Liquidation Loss Amounts with respect to the
        related   Collection   Period,   the  amount  of  any  Liquidation  Loss
        Distribution Amounts with respect to the Notes, and the aggregate of the
        Liquidation  Loss Amounts from all Collection  Periods to date expressed
        as  dollars  and as a  percentage  of the  aggregate  Cut-off  Date Loan
        Balance;

                (viii)the  aggregate  Excess Loss  Amounts  with  respect to the
        related  Collection  Period and the aggregate of the Excess Loss Amounts
        from all Collection Periods to date;

                (ix) the aggregate  Special  Hazard Losses and Fraud Losses with
        respect to the related  Collection  Period and the  aggregate of each of
        such losses from all Collection Periods to date;



                                       21

<PAGE>



                (x) the Note  Balance  of the  Notes,  the  Component  Principal
        Balance of the B Component and the Certificate  Principal Balance of the
        Certificates  after giving  effect to the  distribution  of principal on
        such Payment Date;

                (xi) the  aggregate  Servicing  Fees for the related  Collection
        Period;

                (xii) the Outstanding Reserve Amount, the Special Hazard Amount,
        the  Fraud  Loss  Amount  and  the  Reserve  Amount  Target  immediately
        following such Payment Date;

                (xiii)(a) the number and principal amount of release  agreements
        pursuant to Section  3.05(b)(iv)  entered into during the calendar  year
        and since the Closing Date, stated  separately,  for the Home Loans and,
        the aggregate  outstanding  principal amount of such release  agreements
        expressed as a percentage of the Pool Balance with information  provided
        separately  with respect to all  Unsecured  Loans and (b) the number and
        principal  amount  of   Capitalization   Workouts  pursuant  to  Section
        3.02(a)(v) entered into since the Closing Date;

                (xiv)  the  aggregate   amount   recovered  during  the  related
        Collection  Period  consisting of all subsequent  recoveries on any Home
        Loan that was 180 days or more delinquent;

                (xv) the Net Monthly  Excess  Cash Flow for the related  Payment
        Date,  and the  aggregate  unpaid  Accrued  Note  Interest  and  Accrued
        Component  Interest  with  respect  to each  Class  of  Notes  and the B
        Component,  respectively,  for such Payment  Date and all prior  Payment
        Dates;

                (xvi)(a) the amount of such  distribution to the Holders of each
        Security  applied to reduce  the Note  Principal  Balance  or  Component
        Principal  Balance  thereof,  and (b) the aggregate  amount  included in
        clause (a) representing Principal Prepayments;

                (xviiithe  amount of such  distribution to Holders of each Class
        of Notes and the B Component allocable to interest;

                (xix)if the distribution to the Holders of any Class of Notes or
        the B Component 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;

                (xx) the Reserve Amount Target and  Outstanding  Reserve Amount,
        in each case  after  giving  effect to the  amounts  distributed  on the
        related Payment Date; and

                (xxi)the occurrence of the Credit Support Depletion Date.

        In the case of information  furnished pursuant to clauses (ii) and (iii)
above,  the amounts shall be expressed as an aggregate dollar amount per Note or
Certificate, as applicable, with a $1,000 denomination.



                                       22

<PAGE>



        (b) In addition,  with respect to each Payment Date, on the Business Day
following the related  Determination  Date, the Master Servicer shall forward to
the Rating Agencies the following  information for each  Capitalization  Workout
entered into during the related Collection Period:

                (i) the original Home Loan amount;

                (ii) the Home Loan amount after the Capitalization Workout;

                (iii)the original Monthly Payment amount;

                (iv)  the  Monthly  Payment  amount  after  the   Capitalization
Workout;

                (v) the  Capitalized  Amount as defined  in  Section  3.02(a)(v)
herein;

                (vi)   the   Combined   Loan-to-Value   Ratio   prior   to   the
Capitalization Workout;

     (vii)the Combined Loan-to-Value Ratio after the Capitalization Workout; and

                (viiiif  an  appraisal  was  used in  determining  the  Combined
        Loan-to-Value  Ratio  referred to in (vii)  above,  the type and date of
        appraisal.

        The Master  Servicer  shall also  forward to the Grantor  Trustee or the
Indenture  Trustee any other  information  reasonably  requested  by the Grantor
Trustee or the Indenture  Trustee  necessary to make  distributions  pursuant to
Section 4.02 of the Grantor Trust Agreement or Section 3.05 of the Indenture, as
applicable.  Prior to the close of business on the Business Day next  succeeding
each  Determination  Date, the Master Servicer shall furnish a written statement
to the Grantor Trustee,  the Certificate  Paying Agent and the Indenture Trustee
setting forth the aggregate  amounts required to be withdrawn from the Custodial
Account and deposited into the Grantor Trust Certificate Account on the Business
Day  preceding  the  related   Payment  Date  pursuant  to  Section  3.03.   The
determination  by the Master  Servicer of such amounts shall,  in the absence of
obvious error, be presumptively  deemed to be correct for all purposes hereunder
and the Grantor  Trustee,  the Owner Trustee and the Indenture  Trustee shall be
protected  in  relying  upon  the  same   without  any   independent   check  or
verification.  In addition,  upon the Depositor's  written  request,  the Master
Servicer  shall  promptly  furnish  information   reasonably  requested  by  the
Depositor  that is  reasonably  available  to the Master  Servicer to enable the
Depositor to perform its federal and state income tax reporting obligations.

        The Master  Servicer shall provide the Grantor Trustee and the Indenture
Trustee with the notice of anticipated  final  distribution on the Grantor Trust
Certificate,  as and when required  under  Section  4.02(b) of the Grantor Trust
Agreement.

        The Master  Servicer  shall provide the Grantor  Trustee any  reasonably
requested  information,  including any  information  required in connection with
Section  6.13  of the  Grantor  Trust  Agreement  and  4.02  of  this  Servicing
Agreement.



                                       23

<PAGE>



        Section 4.02. Tax Reporting.  The Grantor Trustee shall furnish or cause
to be furnished to Holders of the Grantor  Trust  Certificate  and shall file or
cause to be filed with the Internal Revenue Service,  together with Form 1041 or
such other  form as may be  applicable,  such  information  with  respect to the
income  and  deductions  of the  Grantor  Trust at the time or times  and in the
manner required by the Code,  including such other customary factual information
as is available to the Grantor Trustee to enable Grantor Trust Certificateholder
to prepare its tax  returns,  including  information  required  with  respect to
computing the accrual of original issue and market discount. The parties to this
Servicing Agreement agree to perform their obligations  hereunder in a manner so
as to  maintain  the status of the Grantor  Trust as a grantor  trust under U.S.
federal  income tax law and to prevent the  imposition of any federal,  state or
local income,  prohibited transaction,  contribution or other tax on the Grantor
Trust to the extent that  maintaining  such status and  avoiding  such taxes are
reasonably  within the  control of such  parties and are  reasonably  within the
scope of their duties  under this  Servicing  Agreement.  It is  understood  and
agreed that the Master  Servicer shall make all tax filings  required under this
Section 4.02 and Section 6.13 of the Grantor Trust Agreement.

        Section 4.03. Reserved.

        Section 4.04.  Exchange Act Reporting.  The Master  Servicer  shall,  on
behalf of the Depositor and in respect of the Trust  Estate,  prepare,  sign and
cause to be filed with the Commission any periodic  reports required to be filed
under the  provisions of the Exchange Act, and the rules and  regulations of the
Commission  thereunder.  Neither the Master  Servicer nor the Indenture  Trustee
shall  have any  liability  with  respect to the  Master  Servicer's  failure to
properly prepare or file such periodic reports resulting from or relating to the
Master  Servicer's  inability or failure to obtain any information not resulting
from the Master Servicer's own negligence or willful  misconduct.  Any Form 10-K
filed with the  Commission in connection  with this Section 4.04 shall include a
certification, signed by the senior officer in charge of the servicing functions
of the Master  Servicer,  in the form attached as Exhibit D hereto or such other
form  as may  be  required  or  permitted  by the  Commission  (the  "Form  10-K
Certification"),  in  compliance  with Rule 13a-14 and 15d-14 under the Exchange
Act and any additional  directives of the  Commission.  This Section 4.04 may be
amended in accordance  with the provisions of this Servicing  Agreement  without
the consent of the Securityholders.





                                       24

<PAGE>



                                    ARTICLE V

                                    RESERVED

        Section 5.01. Reserved.


                                       25

<PAGE>



                                   ARTICLE VI

                               The Master Servicer

        Section  6.01.  Liability of the Master  Servicer.  The Master  Servicer
shall be liable in  accordance  herewith  only to the extent of the  obligations
specifically imposed upon and undertaken by the Master Servicer herein.

        Section  6.02.   Merger  or  Consolidation  of,  or  Assumption  of  the
Obligations  of,  the Master  Servicer.  Any  corporation  into which the Master
Servicer 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
Master Servicer shall be a party, or any corporation  succeeding to the business
of  the  Master  Servicer,  shall  be the  successor  of  the  Master  Servicer,
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.

        The Master  Servicer  may assign its rights and  delegate its duties and
obligations under this Servicing  Agreement;  provided that the Person accepting
such  assignment or  delegation  shall be a Person which is qualified to service
mortgage loans similar to those in the Home Loan Pool  (meaning,  mortgage loans
used for home improvement or debt consolidation),  is reasonably satisfactory to
the Grantor Trustee, the Indenture Trustee, the Owner Trustee and the Depositor,
is willing to service the Home Loans and  executes  and  delivers to the Grantor
Trustee  and the  Depositor  an  agreement,  in form  and  substance  reasonably
satisfactory  to the  Grantor  Trustee  and the  Depositor,  which  contains  an
assumption by such Person of the due and punctual  performance and observance of
each covenant and  condition to be performed or observed by the Master  Servicer
under this  Servicing  Agreement;  provided  further  that each Rating  Agency's
rating  of the  Securities  and the B Note in effect  immediately  prior to such
assignment  and  delegation  will not be qualified,  reduced,  or withdrawn as a
result of such  assignment  and  delegation  (as  evidenced  by a letter to such
effect from each Rating  Agency);  and provided  further that the Owner  Trustee
receives an Opinion of Counsel to the effect that such  assignment or delegation
shall not cause the Trust to be treated as a  corporation  for  federal or state
income tax purposes.

        Section 6.03. Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master Servicer shall be under any liability to the Depositor, the
Owner Trustee,  the Grantor  Trustee,  the Indenture Trusee or the Grantor Trust
Certificateholder  or any  Securityholder for any action taken or for refraining
from  the  taking  of any  action  in good  faith  pursuant  to  this  Servicing
Agreement,  provided,  however, that this provision shall not protect the Master
Servicer  or any such Person  against any  liability  which would  otherwise  be
imposed by reason of its willful  misfeasance,  bad faith or gross negligence in
the performance of its duties  hereunder or by reason of its reckless  disregard
of its obligations and duties hereunder. The Master Servicer and any director or
officer or  employee or agent of the Master  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 Master Servicer and any
director  or  officer  or  employee  or agent of the  Master  Servicer  shall be
indemnified  by the Depositor and held harmless  against any loss,  liability or
expense  incurred in connection with any legal action relating to this Servicing
Agreement, the Grantor Trust Certificate


                                       26

<PAGE>



or the Securities,  including any amount paid to the Owner Trustee,  the Grantor
Trustee or the Indenture  Trustee  pursuant to Section  6.06(b),  other than any
loss,  liability or expense incurred by reason of its willful  misfeasance,  bad
faith or gross  negligence  in the  performance  of its duties  hereunder  or by
reason of its reckless  disregard of its obligations and duties  hereunder.  The
Master  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
Home Loans in accordance with this Servicing Agreement, and which in its opinion
may involve it in any expense or liability;  provided,  however, that the Master
Servicer may in its sole discretion  undertake any such action which it may deem
necessary or desirable in respect of this  Servicing  Agreement,  and the rights
and duties of the parties  hereto and the interests of the  Securityholders.  In
such  event,  the  reasonable  legal  expenses  and costs of such action and any
liability  resulting  therefrom shall be expenses,  costs and liabilities of the
Master  Servicer  shall  be  entitled  to be  reimbursed  therefor.  The  Master
Servicer's  right to  indemnity or  reimbursement  pursuant to this Section 6.03
shall survive any resignation or termination of the Master Servicer  pursuant to
Section 6.04 or 7.01 with respect to any losses,  expenses, costs or liabilities
arising prior to such  resignation or  termination  (or arising from events that
occurred prior to such resignation or termination).

        Section 6.04.  Master Servicer Not to Resign.  Subject to the provisions
of Section 6.02, the Master  Servicer shall not resign from the  obligations and
duties hereby imposed on it except (i) upon  determination  that the performance
of  its  obligations  or  duties  hereunder  are  no  longer  permissible  under
applicable law or are in material  conflict by reason of applicable law with any
other activities  carried on by it or its subsidiaries or Affiliates,  the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master  Servicer or its  subsidiaries  or Affiliates at
the date of this Servicing  Agreement or (ii) upon satisfaction of the following
conditions:  (a) the Master  Servicer has  proposed a successor  servicer to the
Depositor,  the Grantor Trustee,  the Indenture Trustee and the Owner Trustee in
writing and such proposed  successor  servicer is  reasonably  acceptable to the
Depositor, the Grantor Trustee, the Indenture Trustee and the Owner Trustee; and
(b) each Rating  Agency shall have  delivered a letter to the  Depositor and the
Grantor Trustee prior to the appointment of the successor  servicer stating that
the proposed appointment of such successor servicer as Master Servicer hereunder
will not result in the reduction or withdrawal of the then current rating of the
Securities and the Class B Note; provided,  however, that no such resignation by
the Master Servicer shall become effective until such successor  servicer or, in
the case of (i)  above,  the  Grantor  Trustee  shall  have  assumed  the Master
Servicer's  responsibilities  and  obligations  hereunder or the Grantor Trustee
shall have designated a successor  servicer in accordance with Section 7.02. Any
such resignation shall not relieve the Master Servicer of responsibility for any
of the  obligations  specified  in Sections  7.01 and 7.02 as  obligations  that
survive  the  resignation  or  termination  of the  Master  Servicer.  Any  such
determination  permitting  the  resignation  of the  Master  Servicer  shall  be
evidenced  by an  Opinion of Counsel to such  effect  delivered  to the  Grantor
Trustee, the Indenture Trustee and the Owner Trustee.

        Section 6.05.  Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties  hereunder to any
Person,  including any of its  Affiliates,  who agrees to conduct such duties in
accordance  with  standards  comparable to those with which the Master  Servicer
complies  pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 6.04.


                                       27

<PAGE>



        Section 6.06. Master Servicer to Pay Grantor Trustee's,  Owner Trustee's
and  Indenture  Trustee's  Fees and  Expenses;  Indemnification.  (a) The Master
Servicer  covenants and agrees to pay to the Grantor Trustee,  the Owner Trustee
and the Indenture  Trustee and any co-trustee of the Grantor Trustee,  the Owner
Trustee or the Indenture Trustee from time to time, and the Grantor Trustee, the
Owner Trustee,  the Indenture  Trustee and any such co-trustee shall be entitled
to, reasonable  compensation (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust) for all services
rendered  by each of them in the  execution  of the  trusts  created  under  the
Grantor Trust Agreement,  the Owner Trust Agreement and the Indenture and in the
exercise and performance of any of the powers and duties under the Grantor Trust
Agreement,  the Owner Trust  Agreement or the Indenture,  as the case may be, of
the  Grantor  Trustee,   the  Owner  Trustee,  the  Indenture  Trustee  and  any
co-trustee,  and the Master Servicer will pay or reimburse the Grantor  Trustee,
the Owner Trustee, the Indenture Trustee and any co-trustee upon request for all
reasonable expenses,  disbursements and advances incurred or made by the Grantor
Trustee,  the  Owner  Trustee,  the  Indenture  Trustee  or  any  co-trustee  in
accordance  with any of the  provisions of this Servicing  Agreement  except any
such expense,  disbursement or advance as may arise from its negligence,  wilful
misfeasance or bad faith.

        (b) The Master  Servicer  agrees to indemnify the Grantor  Trustee,  the
Owner  Trustee and the Indenture  Trustee for, and to hold the Grantor  Trustee,
the  Owner  Trustee  and the  Indenture  Trustee,  as the case may be,  harmless
against, any loss,  liability or expense incurred without negligence,  bad faith
or willful  misconduct on the part of the Grantor Trustee,  the Owner Trustee or
the  Indenture  Trustee,  as the case may be,  arising out of, or in  connection
with, the acceptance and  administration  of the Issuer and the assets  thereof,
including the costs and expenses (including  reasonable legal fees and expenses)
of defending the Grantor Trustee, the Owner Trustee or the Indenture Trustee, as
the  case  may be,  against  any  claim  in  connection  with  the  exercise  or
performance of any of its powers or duties under any Basic Document  (including,
without limitation,  any claim against the Grantor Trustee, the Owner Trustee or
the  Indenture  Trustee  alleging a violation  of the  Homeownership  and Equity
Protection Act of 1994, as amended), provided that:

                       (i) with respect to any such claim,  the Grantor Trustee,
        the Owner  Trustee or the Indenture  Trustee,  as the case may be, shall
        have given the Master Servicer written notice thereof promptly after the
        Grantor Trustee, the Owner Trustee or the Indenture Trustee, as the case
        may be, shall have actual knowledge thereof;

                       (ii) while maintaining control over its own defense,  the
        Issuer, the Grantor Trustee, the Owner Trustee or the Indenture Trustee,
        as the case may be, shall  cooperate  and consult  fully with the Master
        Servicer in preparing such defense; and

                       (iii)   notwithstanding   anything   in  this   Servicing
        Agreement to the contrary,  the Master  Servicer shall not be liable for
        settlement of any claim by the Grantor Trustee, the Owner Trustee or the
        Indenture  Trustee,  as the case may be,  entered into without the prior
        consent of the Master Servicer.

No termination of this Servicing  Agreement shall affect the obligations created
by this Section 6.06 of the Master  Servicer to indemnify  the Grantor  Trustee,
the Owner Trustee and the  Indenture  Trustee  under the  conditions  and to the
extent set forth herein.


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<PAGE>




        Notwithstanding  the  foregoing,  the  indemnification  provided  by the
Master Servicer in this Section 6.06(b) shall not pertain to any loss, liability
or expense of the Grantor Trustee,  the Owner Trustee or the Indenture  Trustee,
including the costs and expenses of defending itself against any claim, incurred
in connection with any actions taken by the Grantor  Trustee,  the Owner Trustee
or  the   Indenture   Trustee   at  the   direction   of  the   Noteholders   or
Certificateholders,  as the case may be, pursuant to the terms of this Servicing
Agreement.




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<PAGE>



                                         ARTICLE VII

                                           Default

     Section  7.01.  Servicing  Default.  If any  one of  the  following  events
("Servicing Default") shall occur and be continuing:

                       (i) Any failure by the Master  Servicer to deposit in the
        Custodial Account,  Grantor Trust Certificate Account or Payment Account
        any  deposit  required  to be made  under  the  terms of this  Servicing
        Agreement which continues  unremedied for a period of five Business Days
        after the date upon which written notice of such failure shall have been
        given to the Master Servicer by the Depositor,  the Grantor Trustee, the
        Owner Trustee or the Indenture Trustee; or

                       (ii) Failure on the part of the Master  Servicer  duly to
        observe  or perform  in any  material  respect  any other  covenants  or
        agreements  of the  Master  Servicer  set  forth  in the  Grantor  Trust
        Agreement or in this Servicing  Agreement,  which failure, in each case,
        materially  and  adversely  affects the  interests of the Grantor  Trust
        Certificateholder, any Securityholder or any holder of the Class B Notes
        and which continues unremedied for a period of 45 days after the date on
        which written notice of such failure, requiring the same to be remedied,
        and stating that such notice is a "Notice of Default"  hereunder,  shall
        have been given to the Master  Servicer  by the  Depositor,  the Grantor
        Trustee, the Owner Trustee or the Indenture Trustee; or

                       (iii) The entry  against the Master  Servicer of a decree
        or  order  by  a  court  or  agency  or  supervisory   authority  having
        jurisdiction   in  the  premises  for  the  appointment  of  a  trustee,
        conservator, receiver or liquidator in any insolvency,  conservatorship,
        receivership,   readjustment   of  debt,   marshalling   of  assets  and
        liabilities or similar proceedings, or for the winding up or liquidation
        of its  affairs,  and  the  continuance  of any  such  decree  or  order
        undischarged  or unstayed  and in effect for a period of 60  consecutive
        days; or

                       (iv)  The  Master  Servicer  shall  voluntarily  go  into
        liquidation,  consent to the  appointment  of a  conservator,  receiver,
        liquidator or similar person in any  insolvency,  readjustment  of debt,
        marshalling  of assets  and  liabilities  or similar  proceedings  of or
        relating   to  the  Master   Servicer  or  of  or  relating  to  all  or
        substantially  all of its  property,  or a  decree  or order of a court,
        agency or supervisory  authority having jurisdiction in the premises for
        the appointment of a conservator, receiver, liquidator or similar person
        in any  insolvency,  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 Master Servicer and
        such decree or order shall have remained in force undischarged, unbonded
        or unstayed for a period of 60 days; or the Master  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.



                                       30

<PAGE>



Then, and in every such case, so long as a Servicing Default shall not have been
remedied by the Master Servicer,  the Grantor  Trustee,  by notice then given in
writing to the Master  Servicer may terminate all of the rights and  obligations
of the Master Servicer as servicer under this Servicing Agreement other than its
right to receive  servicing  compensation  and expenses for  servicing  the Home
Loans hereunder during any period prior to the date of such termination, and the
Depositor,  the Grantor Trustee,  the Owner Trustee or the Indenture Trustee may
exercise any and all other remedies  available at law or equity. Any such notice
to the  Master  Servicer  shall  also be given  to each  Rating  Agency  and the
Depositor.  On or after the  receipt  by the  Master  Servicer  of such  written
notice,  all authority  and power of the Master  Servicer  under this  Servicing
Agreement,  whether  with  respect  to the  Securities  or  the  Home  Loans  or
otherwise,  shall pass to and be vested in the Grantor Trustee,  pursuant to and
under this Section 7.01; and, without limitation,  the Grantor Trustee is hereby
authorized  and  empowered  to  execute  and  deliver,  on behalf of the  Master
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 of each Home Loan and related  documents,
or otherwise.  The Master  Servicer agrees to cooperate with the Grantor Trustee
in effecting the  termination of the  responsibilities  and rights of the Master
Servicer hereunder,  including,  without limitation, the transfer to the Grantor
Trustee for the  administration  by it of all cash amounts  relating to the Home
Loans that shall at the time be held by the Master  Servicer and to be deposited
by it in the  Custodial  Account,  or that have  been  deposited  by the  Master
Servicer in the Custodial Account or thereafter  received by the Master Servicer
with respect to the Home Loans.  All reasonable  costs and expenses  (including,
but not limited to,  attorneys'  fees) incurred in connection with amending this
Servicing  Agreement to reflect such succession as Master  Servicer  pursuant to
this Section 7.01 shall be paid by the  predecessor  Master  Servicer (or if the
predecessor Master Servicer is the Grantor Trustee, the initial Master Servicer)
upon presentation of reasonable documentation of such costs and expenses.

        Notwithstanding any termination of the activities of the Master Servicer
hereunder,  the Master  Servicer  shall be entitled to receive,  out of any late
collection  of a  payment  on a Home  Loan  which  was due  prior to the  notice
terminating the Master Servicer's rights and obligations  hereunder and received
after such  notice,  that portion to which the Master  Servicer  would have been
entitled  pursuant to Sections 3.03 and 3.09 as well as its Master Servicing Fee
in  respect  thereof,  and any other  amounts  payable  to the  Master  Servicer
hereunder  the  entitlement  to  which  arose  prior to the  termination  of its
activities hereunder.

        Notwithstanding  the  foregoing,  a delay in or failure  of  performance
under  Section  7.01(i) or under Section  7.01(ii)  after the  applicable  grace
periods specified in such Sections,  shall not constitute a Servicing Default if
such delay or failure  could not be  prevented  by the  exercise  of  reasonable
diligence by the Master  Servicer and such delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or  sabotage,  epidemics,  landslides,  lightning,  fire,  hurricanes,
earthquakes,  floods or similar causes. The preceding sentence shall not relieve
the Master  Servicer  from using  reasonable  efforts to perform its  respective
obligations  in a timely manner in accordance  with the terms of this  Servicing
Agreement and the Master Servicer shall provide the Grantor Trustee, the Grantor
Trust Certificateholder, the Owner Trustee and the Indenture Trustee with notice
of such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Master Servicer shall immediately notify


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<PAGE>



the Grantor Trustee, the Depositor,  the Owner Trustee and the Indenture Trustee
in writing of any Servicing Default.

        Section 7.02. Grantor Trustee to Act;  Appointment of Successor.  (a) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section 7.01 or sends a notice  pursuant to Section 6.04, the Grantor Trustee
shall be the successor in all respects to the Master Servicer in its capacity as
servicer  under  this  Servicing  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 Master  Servicer  by the terms and
provisions hereof.  Nothing in this Servicing  Agreement or in the Grantor Trust
Agreement  shall be  construed  to permit or require the Grantor  Trustee to (i)
succeed to the  responsibilities,  duties and  liabilities of the initial Master
Servicer in its capacity as Seller under the Home Loan Purchase Agreement,  (ii)
be  responsible or  accountable  for any act or omission of the Master  Servicer
prior to the issuance of a notice of  termination  hereunder,  (iii)  require or
obligate the Grantor Trustee,  in its capacity as successor Master Servicer,  to
purchase,  repurchase or substitute  any Home Loan,  (iv) fund any losses on any
Permitted Investment directed by any other Master Servicer or (v) be responsible
for the representations  and warranties of the Master Servicer.  As compensation
therefor,  the Grantor  Trustee  shall be entitled to such  compensation  as the
Master  Servicer  would have been  entitled  to  hereunder  if no such notice of
termination  had been  given.  Notwithstanding  the  above,  (i) if the  Grantor
Trustee is unwilling to act as successor Master Servicer, or (ii) if the Grantor
Trustee is legally  unable so to act, the Grantor  Trustee may (in the situation
described  in clause (i)) or shall (in the  situation  described in clause (ii))
appoint or petition a court of competent jurisdiction to appoint any established
housing and home finance institution, bank or other mortgage loan or home equity
loan servicer  having a net worth of not less than  $10,000,000 as the successor
to the Master  Servicer  hereunder in the  assumption  of all or any part of the
responsibilities,  duties  or  liabilities  of the  Master  Servicer  hereunder;
provided that the  appointment  of any such successor  Master  Servicer will not
result in the qualification,  reduction or withdrawal of the ratings assigned to
the Securities and the Class B Notes by the Rating Agencies. Pending appointment
of a successor to the Master Servicer  hereunder,  unless the Grantor Trustee is
prohibited by law from so acting, the Grantor Trustee shall act in such capacity
as herein above provided.  In connection  with such  appointment and assumption,
the successor shall be entitled to receive  compensation out of payments on Home
Loans in an amount equal to the  compensation  which the Master  Servicer  would
otherwise have received pursuant to Section 3.09 (or such lesser compensation as
the Grantor  Trustee and such  successor  shall  agree).  The  appointment  of a
successor  Master  Servicer  shall not affect any  liability of the  predecessor
Master  Servicer which may have arisen under this Servicing  Agreement  prior to
its  termination  as  Master  Servicer  (including,   without  limitation,   the
obligation  to  purchase  Home  Loans  pursuant  to  Section  3.01,  to pay  any
deductible  under an insurance  policy  pursuant to Section 3.04 or to indemnify
the Grantor Trustee  pursuant to Section 6.06),  nor shall any successor  Master
Servicer be liable for any acts or omissions of the predecessor  Master Servicer
or for any  breach by such  Master  Servicer  of any of its  representations  or
warranties contained herein or in any related document or agreement. The Grantor
Trustee  and such  successor  shall  take  such  action,  consistent  with  this
Servicing Agreement, as shall be necessary to effectuate any such succession.

        (b) Any successor, including the Grantor Trustee, to the Master Servicer
as servicer  shall  during the term of its service as servicer  (i)  continue to
service  and  administer  the Home Loans for the  benefit of the  Grantor  Trust
Certificateholder and the Securityholders and (ii) maintain in


                                       32

<PAGE>



force a policy or policies of  insurance  covering  errors and  omissions in the
performance of its obligations as Master Servicer  hereunder and a fidelity bond
in  respect of its  officers,  employees  and  agents to the same  extent as the
Master Servicer is so required pursuant to Section 3.13.

        (c) Any successor Master Servicer,  including the Grantor Trustee, shall
not be deemed  in  default  or to have  breached  its  duties  hereunder  if the
predecessor  Master  Servicer shall fail to deliver any required  deposit to the
Custodial Account or otherwise cooperate with any required servicing transfer or
succession hereunder.

        Section 7.03. Notification to Grantor Trust Certificateholder.  Upon any
termination of or appointment of a successor to the Master Servicer  pursuant to
this Article VII or Section 6.04, the Grantor  Trustee shall give prompt written
notice  thereof to the Grantor Trust  Certificateholder,  the Depositor and each
Rating Agency.


                                       33

<PAGE>



                                  ARTICLE VIII

                            Miscellaneous Provisions

        Section 8.01.  Amendment.  This Servicing  Agreement may be amended from
time to time by the parties  hereto,  provided that any amendment be accompanied
by a letter from the Rating  Agencies that the amendment  will not result in the
downgrading  or withdrawal of the rating then assigned to the Securities and the
Class B Notes,  and the  consent  of the  Grantor  Trustee.  Promptly  after the
execution by the Master  Servicer,  the Depositor and the Grantor Trustee of any
amendment of this Servicing Agreement pursuant to this Section 8.01, the Grantor
Trustee shall provide the Custodian with written copies thereof.  Any failure of
the  Grantor  Trustee to mail such  notice,  or any defect  therein,  shall not,
however, in any way impair or affect the validity of any such amendment.

        SECTION 8.02. GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES  HEREUNDER  SHALL BE DETERMINED  IN ACCORDANCE  WITH
SUCH LAWS.

        Section 8.03. Notices. All demands, notices and communications hereunder
shall be in writing  and shall be deemed to have been duly  given if  personally
delivered at or mailed by certified mail,  return receipt  requested,  to (a) in
the case of the Master Servicer,  2255 North Ontario Street, Suite 400, Burbank,
California 91504-3120,  Attention: Addition Director - Bond Administration,  (b)
in the case of Moody's,  Home Mortgage Loan Monitoring  Group, 99 Church Street,
4th Floor,  New York, New York 10007,  (c) in the case of Standard & Poor's,  55
Water  Street - 41st Floor,  New York,  New York 10041,  Attention:  Residential
Mortgage  Surveillance  Group, (d) in the case of the Owner Trustee,  Wilmington
Trust  Company,  Rodney  Square  North,  1100 North Market  Street,  Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration,  (e) in the case
of the Depositor,  to Home Loan Trust  2003-HI1,  c/o Owner Trustee,  Wilmington
Trust  Company,  Rodney  Square  North,  1100 North Market  Street,  Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration,  (f) in the case
of the Grantor  Trustee,  JPMorgan Chase Bank, 4 New York Plaza,  6th Floor, New
York,  New  York,  10004,  Attention:  Institutional  Trust  Services/Structured
Finance  Services  - Home  Loan  Trust  2003-HI1  and  (g) in  the  case  of the
Underwriters c/o the  Representative,  at Bear,  Stearns & Co. Inc., 383 Madison
Avenue, New York, New York 10179; or, as to each party, at such other address as
shall be designated by such party in a written  notice to each other party.  Any
notice required or permitted to be mailed to a Securityholder  shall be given by
first class mail,  postage  prepaid,  at the address of such  Securityholder  as
shown in the Register.  Any notice so mailed within the time  prescribed in this
Servicing  Agreement  shall be  conclusively  presumed  to have been duly given,
whether or not the  Securityholder  receives  such  notice.  Any notice or other
document required to be delivered or mailed by the Grantor Trustee to any Rating
Agency  shall be given on a  reasonable  efforts  basis  and only as a matter of
courtesy and  accommodation  and the Grantor Trustee shall have no liability for
failure to delivery such notice or document to any Rating Agency.

        Section  8.04.  Severability  of  Provisions.  If any one or more of the
covenants, agreements,  provisions or terms of this Servicing Agreement shall be
for any  reason  whatsoever  held  invalid,  then  such  covenants,  agreements,
provisions or terms shall be deemed severable from the remaining


                                       34

<PAGE>



covenants, agreements, provisions or terms of this Servicing Agreement and shall
in no way affect the validity or  enforceability of the other provisions of this
Servicing Agreement or of the Grantor Trust Certificate or the Securities or the
rights of the Grantor Trust Certificateholder or the Securityholders thereof.

        Section 8.05. Third-Party  Beneficiaries.  This Servicing Agreement will
inure to the benefit of and be binding upon the parties  hereto,  the  Indenture
Trustee,  the Home Loan Trust 2003-HI1,  Securityholders,  the Owner Trustee and
their respective successors and permitted assigns.  Except as otherwise provided
in this Servicing  Agreement,  no other Person will have any right or obligation
hereunder.

        Section  8.06.  Counterparts.  This  instrument  may be  executed in any
number  of  counterparts,  each of which so  executed  shall be  deemed to be an
original,  but all such counterparts  shall together  constitute but one and the
same instrument.

        Section 8.07. Effect of Headings and Table of Contents.  The Article and
Section  headings herein and the Table of Contents are for convenience  only and
shall not affect the construction hereof.

        Section  8.08.  Termination  Upon  Purchase  by the Master  Servicer  or
Liquidation  of  All  Home  Loans;   Partial  Redemption.   (a)  The  respective
obligations and  responsibilities of the Master Servicer,  the Depositor and the
Grantor  Trustee created hereby shall terminate upon the last action required to
be  taken  by the  Grantor  Trustee  pursuant  to the  Grantor  Trust  Agreement
following the earlier of:

                (i) the final payment or other liquidation of the last Home Loan
        remaining in the Grantor Trust or, if such Grantor Trust is  terminated,
        remaining as the property of the Grantor Trust  Certificateholder as set
        forth in Section 8.11, or

                (ii) the  purchase  by the  Master  Servicer  from  the  Grantor
        Trustee of all Home Loans and all  property  acquired  in respect of any
        Home Loan at a price equal to the Termination Price.

The right of the Master  Servicer to purchase the assets of the Grantor  Trustee
pursuant to clause (ii) above on any Payment Date is  conditioned  upon the Pool
Balance (after applying payments received in the related  Collection  Period) as
of such Payment Date being less than ten percent of the aggregate of the Cut-off
Date Loan  Balances of the Home Loans.  If such right is exercised by the Master
Servicer,  the Master  Servicer shall deposit the Termination  Price  calculated
pursuant to clause (ii) above with the Grantor Trustee  pursuant to Section 4.01
of the  Grantor  Trust  Agreement  and,  upon the receipt of such  deposit,  the
Grantor  Trustee or Custodian  shall release to the Master  Servicer,  the files
pertaining to the Home Loans being purchased.

        (b) The Master  Servicer,  at its expense,  shall prepare and deliver to
the Grantor Trustee for execution, at the time the Home Loans are to be released
to the Master Servicer, appropriate documents assigning each such Home Loan from
the Grantor  Trustee or the Depositor to the Master  Servicer or the appropriate
party.


                                       35

<PAGE>



        (c) The Master  Servicer  shall give the  Grantor  Trustee not less than
seven  Business  Days' prior  written  notice of the  Payment  Date on which the
Master Servicer  anticipates that the final distribution will be made to Grantor
Trust Certificateholder.  Notice of any termination,  specifying the anticipated
Final  Scheduled  Payment Date or other Payment Date (which shall be a date that
would   otherwise   be  a  Payment   Date)   upon   which  the   Grantor   Trust
Certificateholder  may surrender its Grantor  Trust  Certificate  to the Grantor
Trustee  (if  so  required  by the  terms  hereof)  for  payment  of  the  final
distribution and cancellation, shall be given promptly by the Master Servicer to
the Grantor Trustee specifying:

                (i) the  anticipated  Final  Scheduled  Payment  Date  or  other
        Payment Date upon which final payment of the Grantor  Trust  Certificate
        is  anticipated  to be made upon  presentation  and surrender of Grantor
        Trust Certificate at the office or agency of the Grantor Trustee therein
        designated; and

                (ii) the amount of any such final payment, if known.

        (d) In the event  that the  Grantor  Trust  Certificateholder  shall not
surrender its Grantor Trust Certificate for final payment and cancellation on or
before the Final Payment Date (if so required by the terms hereof),  the Grantor
Trustee  shall on such date  cause all funds in the  Grantor  Trust  Certificate
Account not distributed in final distribution to Grantor Trust Certificateholder
to be withdrawn  therefrom and deposited into a separate  escrow account for the
benefit of the Grantor Trust  Certificateholder,  and the Master  Servicer if it
exercised  its right to purchase  the assets of the  Grantor  Trust shall give a
second  written notice to the Grantor Trust  Certificateholder  to surrender its
Grantor Trust  Certificate for cancellation  and receive the final  distribution
with respect  thereto.  If within six months after the second notice the Grantor
Trust Certificate shall not have been surrendered for cancellation,  the Grantor
Trustee  shall take  appropriate  steps as directed by the Master  Servicer,  if
applicable, to contact the Grantor Trust Certificateholder  concerning surrender
of its Grantor  Trust  Certificate.  The costs and expenses of  maintaining  the
escrow  account and of contacting the Grantor Trust  Certificateholder  shall be
paid out of the assets which remain in the escrow account. If within nine months
after the  second  notice  the  Grantor  Trust  Certificate  shall not have been
surrendered  for  cancellation,  the  Grantor  Trustee  shall pay to the  Master
Servicer,  as applicable,  all amounts  distributable to the holders thereof and
the Master  Servicer,  shall  thereafter hold such amounts until  distributed to
such  holders.  No  interest  shall  accrue or be payable to the  Grantor  Trust
Certificateholder  on any  amount  held in the  escrow  account or by the Master
Servicer,  as a result  of the  Grantor  Trust  Certificateholder's  failure  to
surrender its Grantor Trust  Certificate for final payment thereof in accordance
with this Section 8.08(d),  and the Grantor Trust  Certificateholder  shall look
only to the Master Servicer for such payment.

        Section 8.09.  Certain Matters  Affecting the Grantor  Trustee.  For all
purposes of this Servicing Agreement, in the performance of any of its duties or
in the exercise of any of its powers  hereunder,  the Grantor  Trustee  shall be
subject to and  entitled  to the  benefits  of Article VI of the  Grantor  Trust
Agreement.

        Section 8.10. Reserved.



                                       36

<PAGE>



        Section 8.11.  Termination  by Grantor Trust  Certificateholder.  If the
Grantor Trust Certificateholder terminates the Grantor Trust Agreement, then the
Master  Servicer  shall  continue  to  service  the Home Loans  pursuant  to the
Servicing  Agreement,  solely  for  the  Grantor  Trust  Certificateholder,  the
Indenture  Trustee on behalf of the  Noteholders and the Owner Trustee on behalf
of the Certificateholders,  and such Holder shall have all rights of the Grantor
Trustee hereunder, until the Servicing Agreement is terminated.



                                       37

<PAGE>



        IN WITNESS  WHEREOF,  the Master  Servicer,  the Grantor Trustee and the
Depositor  have caused this  Servicing  Agreement  to be duly  executed by their
respective  officers or  representatives  all as of the day and year first above
written.

RESIDENTIAL FUNDING CORPORATION,
as Master Servicer

By:

Name: Julie Steinhagen
Title:   Director



RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.



By:
Name: Mark White
Title:   Vice President


JPMORGAN CHASE BANK, as Grantor Trustee


By:

Name: Mark McDermott
Title:   Vice President










<PAGE>



                                    EXHIBIT A
                               HOME LOAN SCHEDULE

                            (Available Upon Request)



<PAGE>



                                          EXHIBIT B
                                  LIMITED POWER OF ATTORNEY

KNOW ALL MEN BY THESE PREMISES:

        That JPMorgan  Chase Bank, as Grantor  Trustee (the "Grantor  Trustee"),
under   the   Grantor   Trust   Agreement   (the   "Grantor    Trustee")   among
_____________________________  and  the  Grantor  Trustee,  a  national  banking
association  organized and existing under the laws of the State of New York, and
having its principal office located at 450 West 33rd Street,  in the City of New
York in the State of New York, hath made, constituted and appointed, and does by
these presents make,  constitute and appoint Residential Funding Corporation,  a
corporation organized and existing under the laws of the State of Delaware,  its
true and  lawful  Attorney-in-Fact,  with  full  power  and  authority  to sign,
execute, acknowledge, deliver, file for record, and record any instrument on its
behalf  and to  perform  such  other  act or  acts  as  may be  customarily  and
reasonably  necessary and  appropriate  to effectuate  the following  enumerated
transactions  in  respect  of  any of the  mortgages  or  deeds  of  trust  (the
"Mortgages" and the "Deeds of Trust",  respectively)  creating a trust or second
lien or an estate in fee simple  interest in real property  securing a Home Loan
and  promissory  notes  secured  thereby  (the  "Mortgage  Notes") for which the
undersigned is acting as Grantor  Trustee for various  Securityholders  (whether
the  undersigned  is named  therein as  mortgagee or  beneficiary  or has become
mortgagee  by virtue of  Endorsement  of the  Mortgage  Note secured by any such
Mortgage  or Deed of Trust) and for which  Residential  Funding  Corporation  is
acting as master servicer pursuant to a Servicing  Agreement,  dated as of March
28,  2003 (the  "Servicing  Agreement").  This  appointment  shall apply only to
transactions  which the Grantor  Trustee is  authorized  to enter into under the
Grantor Trust Agreement,  but in no event shall apply to any transactions  other
than the following enumerated transactions only:

        1. The  modification  or  re-recording  of a Mortgage  or Deed of Trust,
where said  modification  or  re-recording  is for the purpose of correcting the
Mortgage or Deed of Trust to conform same to the original  intent of the parties
thereto or to correct  title errors  discovered  after such title  insurance was
issued and said  modification  or  re-recording,  in either  instance,  does not
adversely affect the lien of the Mortgage or Deed of Trust as insured.

        2. The  subordination  of the lien of a Mortgage  or Deed of Trust to an
easement in favor of a public  utility  company or a  government  agency or unit
with powers of eminent domain;  this section shall include,  without limitation,
the execution of partial  satisfactions/releases,  partial  reconveyances or the
execution of requests to trustees to accomplish same.

        3. With  respect to a Mortgage or Deed of Trust,  the  foreclosure,  the
taking  of a deed in lieu of  foreclosure,  or the  completion  of  judicial  or
non-judicial foreclosure or termination,  cancellation or rescission of any such
foreclosure, including, without limitation, any and all of the following acts:

               a.     The  substitution  of  trustee(s)  serving under a Deed of
                      Trust, in accordance with state law and the Deed of Trust;

               b. Statements of breach or non-performance;

               c. Notices of default;



<PAGE>




               d.     Cancellations/rescissions  of notices  of  default  and/or
                      notices of sale;

               e.     The taking of a deed in lieu of foreclosure; and

               f.     Such other documents and actions as may be necessary under
                      the terms of the  Mortgage,  Deed of Trust or state law to
                      expeditiously complete said transactions.

         4.    The conveyance of the properties to the mortgage insurer,  or the
               closing  of the  title to the  property  to be  acquired  as real
               estate owned, or conveyance of title to real estate owned.

        5.     The completion of loan assumption agreements.

        6.     The full  satisfaction/release  of a Mortgage or Deed of Trust or
               full  reconveyance upon payment and discharge of all sums secured
               thereby,  including,  without  limitation,  cancellation  of  the
               related Mortgage Note.

        7.     The  assignment  of any Mortgage or Deed of Trust and the related
               Mortgage Note, in connection with the repurchase of the Home Loan
               secured and evidenced  thereby  pursuant to the requirements of a
               Residential Funding Corporation Seller Contract.

        8.     The full  assignment  of a Mortgage or Deed of Trust upon payment
               and discharge of all sums secured thereby in conjunction with the
               refinancing   thereof,   including,   without   limitation,   the
               endorsement of the related Mortgage Note.

        9.     The  modification or re-recording of a Mortgage or Deed of Trust,
               where said modification or re-recording is for the purpose of any
               modification pursuant to Section 3.01 of the Servicing Agreement.

        10.    The  subordination  of the lien of a  Mortgage  or Deed of Trust,
               where said  subordination  is in connection with any modification
               pursuant  to Section  3.01 of the  Servicing  Agreement,  and the
               execution of partial  satisfactions/releases  in connection  with
               such same Section 3.01.

The undersigned gives said  Attorney-in-Fact full power and authority to execute
such instruments and to do and perform all and every act and thing necessary and
proper to carry into effect the power or powers granted by or under this Limited
Power of Attorney as fully as the undersigned might or could do, and hereby does
ratify and confirm to all that said Attorney-in-Fact  shall lawfully do or cause
to be done by authority hereof.





<PAGE>



Third  parties  without  actual  notice may rely upon the  exercise of the power
granted  under this Limited  Power of Attorney;  and may be satisfied  that this
Limited Power of Attorney  shall  continue in full force and effect has not been
revoked  unless an  instrument  of  revocation  has been made in  writing by the
undersigned.





                                                JPMORGAN  CHASE BANK, not in its
                                                individual capacity,  but solely
                                                as  Grantor  Trustee  under  the
                                                Grantor Trustee Agreement

_____________________________________           ____________________________

Name: ______________________________            Name: ______________________
Title: _______________________________          Title: ______________________




<PAGE>



STATE OF              )
                      SS.
COUNTY OF             )


        On this __ day of  _______________,  2003,  before  me the  undersigned,
Notary Public of said State, personally appeared _______________________________
personally  known to me to be duly  authorized  officers of JPMorgan  Chase Bank
that executed the within instrument and personally known to me to be the persons
who  executed  the within  instrument  on behalf of JPMorgan  Chase Bank therein
named,  and  acknowledged  to me such  JPMorgan  Chase Bank  executed the within
instrument pursuant to its by-laws.


                                            WITNESS my hand and official seal.


                                            _______________________________
                                            Notary Public in and for the
                                            State of ___________________



After recording, please mail to:
_____________________________
_____________________________
_____________________________
Attn:  ________________________





<PAGE>



                                          EXHIBIT C

                                 FORM OF REQUEST FOR RELEASE

DATE:
TO:
RE:            REQUEST FOR RELEASE OF DOCUMENTS

In connection with your administration of the Home Loans, we request the release
of the Mortgage File described below.

Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one)
        Home Loan     Prepaid in Full

                             Home Loan Repurchased

"We hereby  certify  that all amounts  received or to be received in  connection
with such  payments  which are required to be deposited  have been or will be so
deposited as provided in the Servicing Agreement."

_____________________________________
Residential Funding Corporation
Authorized Signature
******************************************************************
TO  CUSTODIAN/Grantor  TRUSTEE:  Please acknowledge this request,  and check off
documents  being  enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.

        Enclosed Documents: [ ]
        Promissory Note

        [ ]    Mortgage or Deed of Trust

        [ ]    Assignment(s) of Mortgage or

               Deed of Trust

        [ ]    Title Insurance Policy

        [ ]    Other: ___________________________

_________________



<PAGE>



Name
_________________
Title
_________________
Date





<PAGE>


                                    EXHIBIT D

                          FORM OF FORM 10-K CERTIFICATE

        I, [identify the certifying individual], certify that:

        1. I have  reviewed  the annual  report on Form 10-K for the fiscal year
[___], and all reports on Form 8-K containing  distribution or servicing reports
filed in respect of periods  included in the year covered by that annual report,
of the trust (the "Trust")  created  pursuant to the Amended and Restated  Owner
Trust  Agreement  dated  March 28, 2003 (the "Owner  Trust  Agreement")  between
Residential  Funding Mortgage Securities II, Inc. (the "Company") and Wilmington
Trust Company (the "Owner Trustee");

        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 that annual report;

        3. Based on my  knowledge,  the  servicing  information  required  to be
provided to the JPMorgan Chase Bank, as grantor trustee (the "Grantor  Trustee")
under the  Grantor  Trust  Agreement,  dated as of March 28,  2003  between  the
Company and the Grantor  Trustee (the "Grantor  Trust  Agreement") by the Master
Servicer  under  the  Servicing  Agreement,  dated as of March  28,  2003  among
Residential  Funding  Corporation,  the  Company and the  Grantor  Trustee  (the
"Servicing Agreement") is included in these reports;

        4. I am responsible for reviewing the activities performed by the Master
Servicer under the Servicing  Agreement and based upon the review required under
the  Servicing  Agreement,  and except as  disclosed  in the report,  the Master
Servicer has fulfilled its obligations under the Servicing Agreement; and

        5. I have disclosed to the Company's  certified  public  accountants all
significant  deficiencies  relating the Master  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 as set forth in
the Servicing Agreement.

Date:____________

_________________________________*
[Signature]
Name:
Title:

* - to be signed by the senior  officer in charge of the servicing  functions of
the Master Servicer.




<PAGE>