<PAGE>



================================================================================

                       MORGAN STANLEY ABS CAPITAL I INC.,

                                  as Depositor,

                            FAIRBANKS CAPITAL CORP.,

                                  as Servicer,

                           CDC MORTGAGE CAPITAL INC.,

                             as Unaffiliated Seller,

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY,

                                   as Trustee,

                         POOLING AND SERVICING AGREEMENT

                            Dated as of March 1, 2003

                       CDC MORTGAGE CAPITAL TRUST 2003-HE1

                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2003-HE1



================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                            <C>
ARTICLE I DEFINITIONS.............................................................................................5

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES..........................................42

     Section 2.01     Conveyance of Mortgage Loans...............................................................42
     Section 2.02     Acceptance by the Trustee of the Mortgage Loans............................................47
     Section 2.03     Representations, Warranties nd Covenants of the Unaffiliated Seller and the Servicer.......48
     Section 2.04     The Depositor and the Mortgage Loans.......................................................51
     Section 2.05     Delivery of Opinion of Counsel in Connection with Substitutions and
                      Non-Qualified Mortgages....................................................................51
     Section 2.06     Execution and Delivery of Certificates.....................................................51
     Section 2.07     REMIC Matters..............................................................................51
     Section 2.08     Representations and Warranties of the Depositor............................................52

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................53
     Section 3.01     Servicer to Service Mortgage Loans.........................................................53
     Section 3.02     Subservicing Agreements Between the Servicer and Subservicers..............................55
     Section 3.03     Successor Subservicers.....................................................................56
     Section 3.04     Liability of the Servicer..................................................................56
     Section 3.05     No Contractual Relationship Between Subservicers and the Trustee...........................56
     Section 3.06     Assumption or Termination of Subservicing Agreements by Trustee............................57
     Section 3.07     Collection of Certain Mortgage Loan Payments; Establishment of Certain Accounts............57
     Section 3.08     Subservicing Accounts......................................................................60
     Section 3.09     Collection of Taxes, Assessments and Similar Items; Escrow Accounts........................60
     Section 3.10     Collection Account.........................................................................61
     Section 3.11     Withdrawals from the Collection Account....................................................62
     Section 3.12     Investment of Funds in the Account.........................................................63
     Section 3.13     Maintenance of Hazard Insurance and Errors and Omissions and Fidelity Coverage.............65
     Section 3.14     Enforcement of Due-On-Sale Clauses Assumption Agreements...................................66
     Section 3.15     Realization Upon Defaulted Mortgage Loans..................................................67
     Section 3.16     Release of Mortgage Files..................................................................69
     Section 3.17     Title, Conservation and Disposition of REO Property........................................70
     Section 3.18     Notification of Adjustments................................................................71
     Section 3.19     Access to Certain Documentation and Information Regarding the Mortgage Loans...............72
     Section 3.20     Documents, Records and Funds in Possession of the Servicer to be Held for the Trustee......72
     Section 3.21     Servicing Compensation.....................................................................72
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                            <C>
     Section 3.22     Annual Statement as to Compliance..........................................................73
     Section 3.23     Annual Independent Public Accountants' Servicing Statement; Financial Statements...........73
     Section 3.24     Trustee to Act as Servicer.................................................................74
     Section 3.25     Compensating Interest......................................................................74
     Section 3.26     Credit Reporting; Gramm-Leach-Bliley Act...................................................74
     Section 3.27     Advance Facilities.........................................................................75
     Section 3.28.    Servicer Performance Evaluations...........................................................76

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER............................................................78

     Section 4.01     Advances...................................................................................78
     Section 4.02     Priorities of Distribution.................................................................79
     Section 4.03     Monthly Statements to Certificateholders...................................................83
     Section 4.04     Certain Matters Relating to the Determination of LIBOR.....................................87
     Section 4.05     The Class A-1 Insurance Policy.............................................................87
     Section 4.06     Effect of Payments by the Class A-1 Certificate Insurer; Subrogation.......................89

ARTICLE V THE CERTIFICATES.......................................................................................89

     Section 5.01     The Certificates...........................................................................89
     Section 5.02     Certificate Register; Registration of Transfer and Exchange of Certificates................90
     Section 5.03     Mutilated, Destroyed, Lost or Stolen Certificates..........................................95
     Section 5.04     Persons Deemed Owners......................................................................95
     Section 5.05     Access to List of Certificateholders' Names and Addresses..................................95
     Section 5.06     Maintenance of Office or Agency............................................................96
     Section 5.07     Rights of the Class A-1 Certificate Insurer to Exercise Rights of Class A-1
                      Certificateholders.........................................................................96
     Section 5.08     Trustee To Act Solely with Consent of the Class A-1 Certificate Insurer....................97
     Section 5.09     Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Class A-1 Certificate
                      Insurer....................................................................................97
     Section 5.10     Class A-1 Certificate Insurer Default......................................................97

ARTICLE VI THE DEPOSITOR AND THE SERVICER........................................................................98

     Section 6.01     Respective Liabilities of the Depositor and the Servicer...................................98
     Section 6.02     Merger or Consolidation of the Depositor or the Servicer...................................98
     Section 6.03     Limitation on Liability of the Depositor, the Servicer and Others..........................98
     Section 6.04     Limitation on Resignation of the Servicer.................................................100
     Section 6.05     Additional Indemnification by the Servicer; Third Party Claims............................100

ARTICLE VII DEFAULT.............................................................................................100

     Section 7.01     Events of Default.........................................................................100
     Section 7.02     Trustee to Act; Appointment of Successor..................................................102
     Section 7.03     Notification to Certificateholders........................................................103
</TABLE>


                                       ii
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                            <C>
ARTICLE VIII CONCERNING THE TRUSTEE.............................................................................104

     Section 8.01     Duties of the Trustee.....................................................................104
     Section 8.02     Certain Matters Affecting the Trustee.....................................................105
     Section 8.03     Trustee Not Liable for Certificates or Mortgage Loans.....................................106
     Section 8.04     Trustee May Own Certificates..............................................................106
     Section 8.05     Trustee's Fees and Expenses...............................................................106
     Section 8.06     Eligibility Requirements for the Trustee..................................................107
     Section 8.07     Resignation and Removal of the Trustee....................................................107
     Section 8.08     Successor Trustee.........................................................................108
     Section 8.09     Merger or Consolidation of the Trustee....................................................108
     Section 8.10     Appointment of Co-Trustee or Separate Trustee.............................................108
     Section 8.11     Tax Matters...............................................................................110
     Section 8.12     Periodic Filings..........................................................................112
     Section 8.13     Tax Classification of Certain Accounts....................................................114
     Section 8.14     Cap Agreement.............................................................................114

ARTICLE IX TERMINATION..........................................................................................114

     Section 9.01     Termination upon Liquidation or Purchase of the Mortgage Loans............................114
     Section 9.02     Final Distribution on the Certificates....................................................115
     Section 9.03     Additional Termination Requirements.......................................................116

ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................116

     Section 10.01    Amendment.................................................................................116
     Section 10.02    Recordation of Agreement; Counterparts....................................................118
     Section 10.03    Governing Law.............................................................................119
     Section 10.04    Intention of Parties......................................................................119
     Section 10.05    Notices...................................................................................119
     Section 10.06    Severability of Provisions................................................................120
     Section 10.07    Assignment................................................................................120
     Section 10.08    Limitation on Rights of Certificateholders................................................121
     Section 10.09    Inspection and Audit Rights...............................................................121
     Section 10.10    Certificates Nonassessable and Fully Paid.................................................122
     Section 10.11    The Class A-1 Certificate Insurer Default.................................................122
     Section 10.12    Third Party Beneficiary...................................................................122
     Section 10.13    Waiver of Jury Trial........................................................................1
</TABLE>


SCHEDULES
---------

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


                                      iii
<PAGE>

EXHIBITS
--------

Exhibit A         Form of Class A-1, Class A-2 Class M-1, Class M-2, Class
                  M-3, Class B-1 and Class B-2 Certificate
Exhibit B         [Reserved]
Exhibit C         Form of Class P Certificate
Exhibit D         Form of Class R Certificate
Exhibit E         Form of Class X Certificate
Exhibit F         Form of Initial Certification of Trustee
Exhibit G         Form of Final Certification of Trustee
Exhibit H         Form of Transfer Affidavit
Exhibit I         Form of Transferor Certificate
Exhibit J         Form of Rule 144A Letter
Exhibit K         Form of Request for Release
Exhibit L         Form of Subsequent Transfer Agreement
Exhibit M         Depositor Certification
Exhibit N         Trustee/Servicer Certification
Exhibit O         Performance Standards


                                       iv

<PAGE>

         THIS POOLING AND SERVICING AGREEMENT, dated as of March 1, 2003, among
MORGAN STANLEY ABS CAPITAL I INC., a Delaware corporation, as depositor (the
"Depositor"), FAIRBANKS CAPITAL CORP., a Utah corporation, as servicer (the
"Servicer"), CDC MORTGAGE CAPITAL INC., a New York corporation, as unaffiliated
seller (the "Unaffiliated Seller") and DEUTSCHE BANK NATIONAL TRUST COMPANY, a
national banking association, as trustee (the "Trustee"),

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

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

                              PRELIMINARY STATEMENT

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

         The Upper Tier REMIC shall hold as assets the several classes of
uncertificated Lower Tier Regular Interests, set out below. Each such Lower Tier
Regular Interest is hereby designated as a regular interest in the Lower Tier
REMIC. Class LT-A-1, Class LT-A-2, Class LT-M-1, Class LT-M-2, Class LT-M-3,
Class LT-B-1 and Class LT-B-2 are hereby designated the LT Accretion Directed
Classes. The Class P Certificate represents beneficial ownership of the
Prepayment Charges, which portion of the Trust Fund shall be treated as a
grantor trust.

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

<TABLE>
<CAPTION>

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

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

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

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

Class LT-M-3                    (1)        1/2 of the                    Class M-3           August 25, 2033
                                           Corresponding Class
                                           initial principal
                                           balance

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

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

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

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

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


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

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

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

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


                                       2
<PAGE>

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

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

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

<TABLE>
<CAPTION>

    UPPER TIER CLASS         UPPER TIER         INITIAL UPPER TIER                               LATEST POSSIBLE
      DESIGNATION           INTEREST RATE        PRINCIPAL AMOUNT       CORRESPONDING CLASS       MATURITY DATE
      -----------           -------------        ----------------       -------------------       -------------
<S>                        <C>                   <C>                        <C>                   <C>
   Class A-1                     (1)               $200,000,000             Class A-1(10)         August 25, 2033
   Class A-2                     (2)               $335,060,000             Class A-2(10)         August 25, 2033
   Class M-1                     (3)               $ 39,635,000             Class M-1(10)         August 25, 2033
   Class M-2                     (4)               $ 36,331,000             Class M-2(10)         August 25, 2033
   Class M-3                     (5)               $  9,578,000             Class M-3(10)         August 25, 2033
   Class B-1                     (6)               $ 18,166,000             Class B-1(10)         August 25, 2033
   Class B-2                     (7)               $ 11,230,000             Class B-2(10)         August 25, 2033
   Class X                       (8)                   (8)                  Class X               August 25, 2033
   Class UT-R                    (9)                                        Class R
</TABLE>

                                       3
<PAGE>

(1)  The Class A-1 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 0.330% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 0.660% and (ii) the
     WAC Cap.

(2)  The Class A-2 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 0.370% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 0.740% and (ii) the
     WAC Cap.

(3)  The Class M-1 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 0.900% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 1.350%, and (ii)
     the WAC Cap.

(4)  The Class M-2 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 1.950% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 2.925%, and (ii)
     the WAC Cap.

(5)  The Class M-3 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 2.200% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 3.300%, and (ii)
     the WAC Cap.

(6)  The Class B-1 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 3.750% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 5.625%, and (ii)
     the WAC Cap.

(7)  The Class B-2 will bear interest during each Interest Accrual Period at a
     per annum rate equal to (a) on or prior to the Optional Termination Date,
     the lesser of (i) LIBOR plus 3.750% and (ii) the WAC Cap and (b) after the
     Optional Termination Date, the lesser of (i) LIBOR plus 5.625%, and (ii)
     the WAC Cap.

(8)  The Class X has an initial principal balance of $10,569,006, but it will
     not accrue interest on such balance but will accrue interest on a notional
     principal balance. As of any Distribution Date, the Class X shall have a
     notional principal balance equal to the Pool Stated Principal Balance as of
     the first day of the related Interest Accrual Period. With respect to any
     Interest Accrual Period, the Class X shall bear interest at a rate equal to
     the excess, if any, of the WAC Cap over the product of (i) 2 and (ii) the
     weighted average Pass-Through Rate of the Lower Tier Regular Interests,
     where each LT Accretion Directed Class is subject to a cap and a floor
     equal to the Pass-Through Rate on its Corresponding Class, and the
     LT-Accrual Class is subject to a cap of zero. With respect to any
     Distribution Date, interest that so accrues on the notional principal
     balance of the Class X shall be deferred in an amount equal to any increase
     in the Subordinated Amount on such Distribution Date. Such deferred
     interest shall not itself bear interest.

                                       4
<PAGE>

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

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

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

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

Book-Entry Certificates............    All Classes of Certificates other than
                                       the Physical Certificates.

Subordinated Certificates..........    Class M-1, Class M-2, Class M-3, Class
                                       B-1 and Class B-2 Certificates.

Delay Certificates.................    None.

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

Floating Rate Certificates.........    Class A-1, Class A-2 and Subordinated
                                       Certificates.

LIBOR Certificates.................    Class A-1, Class A-2 and Subordinated
                                       Certificates.

Non-Delay Certificates.............    Class A-1, Class A-2, Class X and
                                       Subordinated Certificates.

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

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

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

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

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

                                       5
<PAGE>

                                       Class R Certificates.

Residual Certificates..............    Class R Certificates.


                                    ARTICLE I

                                   DEFINITIONS

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

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

         Accepted Servicing Practices: With respect to any Mortgage Loan, those
mortgage servicing practices set forth in Section 3.01 of this Agreement.

         Account: Any of the Capitalized Interest Account, the Collection
Account, the Distribution Account, any Escrow Account, the Excess Reserve Fund
Account, the Class A-1 Insurance Payment Account or the Pre-Funding Account.
Each Account shall be an Eligible Account.

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

         Addition Notice: A written notice from the Unaffiliated Seller to the
Trustee, the Rating Agencies and the Class A-1 Certificate Insurer that the
Unaffiliated Seller desires to make a Subsequent Transfer.

         Adjustable Rate Mortgage Loan: A Mortgage Loan bearing interest at an
adjustable rate.

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

         Adjusted Net Mortgage Rate: As to each Mortgage Loan and at any time,
the per annum rate equal to the Mortgage Rate less the Expense Fee Rate.

         Adjustment Date: As to any Adjustable Rate Mortgage Loan, the first Due
Date on which the related Mortgage Rate adjusts as set forth in the related
Mortgage Note and each

                                       6
<PAGE>

Due Date thereafter on which the Mortgage Rate adjusts as set forth in the
related Mortgage Note.

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

         Advance Facility: As defined in Section 3.27.

         Advance Facility Trustee: As defined in Section 3.27.

         Advance Reimbursement Amount: As defined in Section 3.27.

         Advancing Person: As defined in Section 3.27.

         Aegis: Aegis Mortgage Corporation, a Delaware corporation.

         Aegis Assignment Agreement: The Assignment and Recognition Agreement,
dated as of March 28, 2003, by and among the Unaffiliated Seller, the Depositor
and Aegis, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and Aegis in connection with any Subsequent
Transfer of Aegis Mortgage Loans.

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

         Aegis Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of December 1, 2002, as amended to date, by and between the
Unaffiliated Seller and Aegis.

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

         Agreement: This Pooling and Servicing Agreement and all amendments or
supplements hereto.

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

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

                                       7
<PAGE>

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

         Assignment and Recognition Agreement: The IFC Assignment Agreement, the
Novelle Assignment Agreement, the Encore Assignment Agreement, the Chapel
Mortgage Assignment Agreement, the People's Choice Assignment Agreement, the
Aegis Assignment Agreement, the SIB Mortgage Assignment Agreement or the NC
Capital Assignment Agreement, as applicable.

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

         Average Net Proceeds: As defined in Exhibit M hereto.

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

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

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

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

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

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

         BNC Assignment Agreement: The Assignment and Recognition Agreement,
dated as of March 28, 2003, by and among the Unaffiliated Seller, the Depositor
and BNC, and

                                       8
<PAGE>

each other Assignment and Recognition Agreement by and among the Unaffiliated
Seller, the Depositor and BNC in connection with any Subsequent Transfer of BNC
Mortgage Loans.

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

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

         Book-Entry Certificates: As specified in the Preliminary Statement.

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

         Cap Agreement: The interest rate cap agreement dated March 27, 2003
with the Cap Provider, as "Party A" thereunder, and the Unaffiliated Seller, as
"Party B" thereunder, or any replacement thereof.

         Cap Provider: Morgan Stanley Capital Services Inc., a Delaware
corporation, and any successor thereto.

         Capitalized Interest Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(e) in the name of the Trustee
for the benefit of the Offered Certificateholders and designated "Deutsche Bank
National Trust Company, in trust for registered holders of CDC Mortgage Capital
Trust 2003-HE1, Mortgage Pass-Through Certificates, Series 2003-HE1".

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

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

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

                                       9
<PAGE>

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

         Certificate Register: The register maintained pursuant to Section 5.02.

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

         Certification: As defined in Section 8.12(b).

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

         Chapel Mortgage Assignment Agreement: The Assignment and Recognition
Agreement, dated as of March 28, 2003, by and among the Unaffiliated Seller, the
Depositor and Chapel Mortgage, and each other Assignment and Recognition
Agreement by and among the Unaffiliated Seller, the Depositor and Chapel
Mortgage in connection with any Subsequent Transfer of Chapel Mortgage Mortgage
Loans.

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

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

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

         Class A Certificates: The Class A-1 Certificates and the Class A-2
Certificates.

         Class A Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the aggregate Class Certificate Balance of the Class A-1
and Class A-2 Certificates immediately prior to such Distribution Date over (ii)
the lesser of (A) the product of 62.00% of the Current Maximum Amount and (B)
the Current Maximum Amount minus $3,302,846.

                                       10
<PAGE>

         Class A-1 Certificate Insurer: Financial Security Assurance Inc., a
monoline stock insurance company organized and created under the laws of the
State of New York, and any successors thereto.

         Class A-1 Certificate Insurer Default: The existence and continuance of
any of the following:

         (a) the Class A-1 Certificate Insurer shall have failed to make a
     required payment when due under the Class A-1 Insurance Policy;

         (b) the Class A-1 Certificate Insurer shall have (i) filed a petition
     or commenced any case or proceeding under any provision or chapter of the
     United States Bankruptcy Code, the New York State Insurance Law or any
     other similar federal or state law relating to insolvency, bankruptcy,
     rehabilitation, liquidation, or reorganization, (ii) made a general
     assignment for the benefit of its creditors or (iii) had an order for
     relief entered against it under the United States Bankruptcy Code, the New
     York State Insurance Law or any other similar federal or state law relating
     to insolvency, bankruptcy, rehabilitation, liquidation, or reorganization
     that is final and nonappealable; or

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

         Class A-1 Certificates: All Certificates bearing the class designation
of "Class A-1 Certificates".

         Class A-1 Deficiency: With respect to any Distribution Date and the
Class A-1 Certificates, an amount equal to the sum of:

         (i) the Class A-1 Interest Deficit Amount; plus

         (ii) the Class A-1 Principal Parity Amount, if any, for such
     Distribution Date.

         Class A-1 Insurance Payment Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 4.05(c) in the name of
the Trustee for the benefit of the Class A-1 Certificateholders and the Class
A-1 Certificate Insurer, and designated "Deutsche Bank National Trust Company,
in trust for Financial Security Assurance Inc. and the registered holders of CDC
Mortgage Capital Trust 2003-HE1, Mortgage Pass-Through Certificates, Series
2003-HE1."

         Class A-1 Insurance Policy: The Financial Guaranty Insurance Policy No.
51398-N, and all endorsements thereto dated the Closing Date, issued by the
Class A-1 Certificate Insurer for the benefit of the Class A-1
Certificateholders.

                                       11
<PAGE>

         Class A-1 Interest Deficit Amount: With respect to any Distribution
Date and the Class A-1 Certificates, the product of (i) the Interest Deficit
Amount and (ii) a fraction, the numerator of which is the outstanding Class
Certificate Balance of the Class A-1 Certificates on such Distribution Date, and
the denominator of which is the outstanding Class Certificate Balance of the
Class A-1 and Class A-2 Certificates on such Distribution Date, in each case,
without taking into account any reduction of principal on such Certificates on
such Distribution Date.

         Class A-1 Principal Parity Amount: With respect to any Distribution
Date, the product of (i) the Principal Parity Deficit and (ii) a fraction, the
numerator of which is the initial Class Certificate Balance of the Class A-1
Certificates, and the denominator of which is the initial aggregate Class
Certificate Balance of the Class A-1 and Class A-2 Certificates.

         Class A-2 Certificates: All Certificates bearing the class designation
of "Class A-2 Certificates".

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

         Class B-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balance of the Class A-1 and Class A-2 Certificates (after taking
into account distribution of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class Certificate Balance of the Class M-1
Certificates (after taking into account distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), (C) the Class Certificate
Balance of the Class M-2 Certificates (after taking into account distribution of
the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the
Class Certificate Balance of the Class M-3 Certificates (after taking into
account distribution of the Class M-3 Principal Distribution Amount on such
Distribution Date), and (E) the Class Certificate Balance of the Class B-1
Certificates immediately prior to such Distribution Date over (ii) the lesser of
(A) 93.40% of the Current Maximum Amount and (B) the Current Maximum Amount
minus approximately $3,302,846.

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

         Class B-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balance of the Class A-1 and Class A-2 Certificates (after taking
into account distribution of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class Certificate Balance of the Class M-1
Certificates (after taking into account distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), (C) the Class Certificate
Balance of the Class M-2 Certificates (after taking into account distribution of
the Class M-2 Principal Distribution Amount on such Distribution Date), (D) the
Class Certificate Balance of the Class M-3 Certificates (after taking into
account distribution of the Class M-3 Principal Distribution Amount on such
Distribution Date), (E) the Class Certificate Balance of the Class B-1
Certificates (after taking into account distribution of the Class B-1 Principal
Distribution Amount

                                       12
<PAGE>

on such Distribution Date), and (F) the Class Certificate Balance of the Class
B-2 Certificates immediately prior to such Distribution Date over (ii) the
lesser of (A) 96.80% of the Current Maximum Amount and (B) the Current Maximum
Amount minus approximately $3,302,846.

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

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

         Class M-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), and (B) the Class Certificate Balance of the Class M-1 Certificates
immediately prior to such Distribution Date over (ii) the lesser of (A) 74.00%
of the Current Maximum Amount and (B) the Current Maximum Amount minus
approximately $3,302,846.

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

         Class M-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A-1 and Class A-2 Certificates (after taking
into account distribution of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class Certificate Balance of the Class M-1
Certificates (after taking into account distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), and (C) the Class Certificate
Balance of the Class M-2 Certificates immediately prior to such Distribution
Date over (ii) the lesser of (A) 85.00% of the Current Maximum Amount and (B)
the Current Maximum Amount minus approximately $3,302,846.

         Class M-3 Certificates: All Certificates bearing the class designation
of "Class M-3 Certificates".

         Class M-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A-1 and Class A-2 Certificates (after taking
into account distribution of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class Certificate Balance of the Class M-1
Certificates (after taking into account distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), (C) the Class Certificate
Balance of the Class M-2 Certificates (after taking into account distribution of
the Class M-2 Principal Distribution Amount on such Distribution Date), and (D)
the Class Certificate Balance of the Class M-3 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 87.90% of the Current Maximum
Amount and (B) the Current Maximum Amount minus approximately $3,302,846.

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

                                       13
<PAGE>

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

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

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

         Closing Date: March 28, 2003.

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

         Collection Account: As defined in Section 3.10(a).

         Compensating Interest: For any Distribution Date, the lesser of (a) the
Prepayment Interest Shortfall, if any, for the Distribution Date, and (b) the
Servicing Fee payable to the Servicer for the portion of the related Prepayment
Period occurring in the calendar month prior to such Distribution Date.

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

         Consent Procedures: As defined in Section 3.27.

         Corporate Trust Office: The designated office of the Trustee in the
State of California at which at any particular time its corporate trust business
with respect to this Agreement is administered, which office at the date of the
execution of this Agreement is located at 1761 East St. Andrew Place, Santa Ana,
California 92705, Attn: Trust Administration-DC03M1, facsimile no. (714)
247-6478 and which is the address to which notices to and correspondence with
the Trustee should be directed.

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

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

                                       14
<PAGE>

      LOWER TIER            UPPER TIER             CORRESPONDING
   CLASS DESIGNATION         INTEREST               CERTIFICATE
   -----------------         --------               -----------
     Class LT-M-2           Class M-2                Class M-2
     Class LT-M-3           Class M-3                Class M-3
     Class LT-B-1           Class B-1                Class B-1
     Class LT-B-2           Class B-2                Class B-2

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

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

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

         Cut-off Date: With respect to the Initial Mortgage Loans, March 1,
2003, and with respect to each Subsequent Mortgage Loan, the related Subsequent
Cut-off Date.

         Cut-off Date Pool Principal Balance: The aggregate Stated Principal
Balances of all Mortgage Loans as of the Cut-off Date.

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

         Data Tape Information: The information provided by the Unaffiliated
Seller as of March 1, 2003 to the Depositor setting forth the following
information with respect to each Mortgage Loan: (1) the Mortgagor's name; (2) as
to each Mortgage Loan, the Scheduled Principal Balance as of the Cut-off Date;
(3) the Mortgage Rate Cap; (4) the Index; (5) a code indicating whether the
Mortgaged Property is owner-occupied; (6) the type of Mortgaged Property; (7)
the first date on which the Monthly Payment was due on the Mortgage Loan and, if
such date is not consistent with the Due Date currently in effect, such Due
Date; (8) the "paid through date" based on payments received from the related
Mortgagor; (9) the original principal amount of the Mortgage Loan; (10) with
respect to Adjustable Rate Mortgage Loans, the Maximum Mortgage Rate; (11) the
type of Mortgage Loan (i.e., fixed or adjustable); (12) a code indicating the
purpose of the loan (i.e., purchase, rate and term refinance, equity take-out
refinance); (13) a code indicating the documentation style (i.e., full, asset
verification, income verification and no documentation); (14) the credit risk
score (FICO score); (15) the loan credit

                                       15
<PAGE>

grade classification (as described in the Underwriting Guidelines); (16) with
respect to each Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17)
the Mortgage Rate at origination; (18) with respect to each Adjustable Rate
Mortgage Loan, the first Adjustment Date immediately following the Cut-off Date;
(19) the Value of the Mortgaged Property; (20) a code indicating the type of
Prepayment Charges applicable to such Mortgage Loan, if any; and (21) with
respect to each Adjustable Rate Mortgage Loan, the Periodic Mortgage Rate Cap.
With respect to the Mortgage Loans in the aggregate, the Data Tape Information
shall set forth the following information, as of the Cut-off Date: (1) the
number of Mortgage Loans; (2) the current aggregate outstanding principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans.

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

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

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

         Delay Certificates: As specified in the Preliminary Statement.

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

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

         Delinquent: A mortgage loan is "Delinquent" if any monthly payment due
on a due date is not made by the close of business on the next scheduled due
date for that mortgage loan (including all Mortgage Loans in foreclosure,
Mortgage Loans in respect of REO Properties and Mortgage Loans for which the
related Mortgagor has declared bankruptcy). A mortgage loan is "30 days
Delinquent" if the monthly payment has not been received by the close of
business on the corresponding day of the month immediately succeeding the month
in which that monthly payment was due or, if there was no corresponding date
(e.g., as when a 30-day month

                                       16
<PAGE>

follows a 31-day month in which the payment was due on the 31st day of that
month), then on the last day of that immediately preceding month; and similarly
for "60 days Delinquent" and "90 days Delinquent," etc.

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

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

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

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

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

         Determination Date: With respect to each Remittance Date, the Business
Day immediately preceding such Remittance Date.

         Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(d) in the name of the Trustee
for the benefit of the Certificateholders and designated "Deutsche Bank National
Trust Company, in trust for registered holders of CDC Mortgage Capital Trust
2003-HE1, Mortgage Pass-Through Certificates, Series 2003-HE1".

         Distribution Date: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such day is not a Business Day, the
next succeeding Business Day, commencing in April 2003.

         Document Exception Report: The report attached to Exhibit G hereto.

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

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

         Eligible Account: Either (i) a demand account maintained with an
Eligible Institution or (ii) a trust account or accounts maintained with a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity or (iii) any other account

                                       17
<PAGE>

acceptable to each Rating Agency. Eligible Accounts may bear interest, and may
include, if otherwise qualified under this definition, accounts maintained with
the Trustee.

         Eligible Institution: A federal or state chartered depository
institution or trust company, which (x) with respect to any Eligible Account,
the amounts on deposit in which will be held for less than 30 days, the
commercial paper, short term debt obligations, or other short-term deposits of
which are rated at least "F1" by Fitch, "P-1" by Moody's, and either "A-1+" or
"A-1", if the amounts on deposit represent less than 20% of the initial par
value of the securities, are not intended to be used as credit enhancement and
are to be held for less than 30 days, by Standard & Poor's (or a comparable
rating if another Rating Agency is specified by the Depositor by written notice
to the Servicer and the Trustee) or (y) with respect to any Eligible Account,
the amounts on deposit in which will be held for no more than 365 days, the
long-term unsecured debt obligations of which are rated at least "A" by Fitch,
"A" by Standard & Poor's and "A2" by Moody's (or a comparable rating if another
Rating Agency is specified by the Depositor by written notice to the Servicer
and the Trustee).

         Encore: Encore Credit Corporation, a California corporation.

         Encore Assignment Agreement: The Assignment and Recognition Agreement,
dated as of March 28, 2003, by and among the Unaffiliated Seller, the Depositor
and Encore, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and Encore in connection with any Subsequent
Transfer of Encore Mortgage Loans.

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

         Encore Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of December 1, 2002, as amended to date, by and between the
Unaffiliated Seller and Encore.

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

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

         ERISA-Restricted Certificate: As specified in the Preliminary
Statement.

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

         Escrow Payments: As defined in Section 3.09(b) of this Agreement.

         Event of Default: As defined in Section 7.01.

                                       18
<PAGE>

         Excess Reserve Fund Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Sections 3.07(b) and 3.07(c) in the name
of the Trustee for the benefit of the Offered Certificateholders and designated
"Deutsche Bank National Trust Company, in trust for registered holders of CDC
Mortgage Capital Trust 2003-HE1, Mortgage Pass-Through Certificates, Series
2003-HE1".

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

         Expense Fees: As to each Mortgage Loan, the sum of the Servicing Fee
and the Trustee Fee.

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

         Extra Principal Distribution Amount: As of any Distribution Date, the
lesser of (x) the related Total Monthly Excess Spread for such Distribution Date
and (y) the Subordination Deficiency for such Distribution Date.

         Fairbanks: Fairbanks Capital Corp. or any successor thereto.

         Fannie Mae: The Federal National Mortgage Association, or any successor
thereto.

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

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

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

         Final Certification: A certification submitted by the Trustee in
substantially the form of Exhibit G hereto.

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

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

                                       19
<PAGE>

                                                        FINAL SCHEDULED
                                                       DISTRIBUTION DATE
                                                       -----------------
Class A-1 Certificates.............................     August 25, 2033
Class A-2 Certificates.............................     August 25, 2033
Class M-1 Certificates.............................     August 25, 2033
Class M-2 Certificates.............................     August 25, 2033
Class M-3 Certificates.............................     August 25, 2033
Class B-1 Certificates.............................     August 25, 2033
Class B-2 Certificates.............................     August 25, 2033
Class X Certificates...............................     August 25, 2033
Class P Certificates...............................     August 25, 2033
Class R Certificates...............................     August 25, 2033

         Fitch: Fitch, Inc. If Fitch is designated as a Rating Agency in the
Preliminary Statement, for purposes of Section 10.05(b) the address for notices
to Fitch shall be Fitch, Inc., One State St. Plaza, New York, New York 10004,
Attention: Residential Mortgage Surveillance Group - Morgan Stanley ABS Capital
I Inc. 2003-HE1, or such other address as Fitch may hereafter furnish to the
Depositor and the Servicer.

         Fixed Rate Mortgage Loan: A Mortgage Loan bearing interest at a fixed
rate.

         Floating Rate Certificates: As specified in the Preliminary Statement.

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

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

         High Cost Loan: A Mortgage Loan classified as (a) a "high cost" loan
under the Home Ownership and Equity Protection Act of 1994 or (b) a "high cost,"
"threshold," "covered", "predatory" or similar loan under any other applicable
state, federal or local law.

         IFC: IMPAC Funding Corporation, a California corporation.

         IFC Assignment Agreement: The Assignment and Recognition Agreement,
dated as of March 28, 2003, by and among the Unaffiliated Seller, the Depositor
and IFC, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and IFC in connection with any Subsequent
Transfer of IFC Mortgage Loans.

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

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

                                       20
<PAGE>

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

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

         Initial Cut-off Date: March 1, 2003.

         Initial Mortgage Loans: The Mortgage Loans delivered by the Depositor
on the Startup Date.

         Initial Pre-Funded Amount: The amount of $119,511,189.

         Insurance and Indemnity Agreement: The Insurance and Indemnity
Agreement dated as of March 1, 2003 among the Class A-1 Certificate Insurer, the
Servicer and the Unaffiliated Seller, as such agreement may be amended or
supplemented in accordance with the provisions thereof.

         Insured Payment: With respect to any Distribution Date, the Class A-1
Deficiency for that Distribution Date.

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

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

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

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

         Interest Deficit Amount: With respect to any Distribution Date, the
excess of (i) the Accrued Certificate Interest Distribution Amount for the Class
A-1 Certificates and the Class A-2 Certificates on such Distribution Date, over
(ii) an amount equal to the Interest Amount Available less the Premium Amount
and the Trustee Fee, in each case, for such Distribution Date.

         Interest Rate Adjustment Date: With respect to each Adjustable Rate
Mortgage Loan, the date, specified in the related Mortgage Note and the Mortgage
Loan Schedule, on which the Mortgage Rate is adjusted.

                                       21
<PAGE>

         Interest Rate Cap Payment: Beginning on the first Distribution Date and
continuing through the 19 Distribution Dates thereafter, the amount, if any,
equal to the product of (a) the number of basis points by which LIBOR exceeds
7.50% (up to a maximum excess of 100 basis points) and (b) the amount set forth
on the notional balance and multiplier schedule attached to the Cap Agreement as
applicable to that Distribution Date, based on an "actual/360" accrual.

         Interest Remittance Amount: With respect to any Remittance Date, the
sum, without duplication, of:

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

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

         (iii) the interest component of all Substitution Adjustment Amounts and
     Repurchase Prices received by the Servicer during the related Due Period;

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

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

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

         Investment Account: As defined in Section 3.12(a).

         JPMorgan Credit Agreement: As defined in Section 3.27.

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

         Late Payment Rate: Has the meaning ascribed thereto in the Insurance
and Indemnity Agreement.

         LIBOR: With respect to any Interest Accrual Period for the LIBOR
Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of

                                       22
<PAGE>

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

         LIBOR Certificates: As specified in the Preliminary Statement.

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

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

         Liquidation Event: With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from coverage under this Agreement by reason of its being purchased,
sold or replaced pursuant to or as contemplated by this Agreement. With respect
to any REO Property, either of the following events: (i) a Final Recovery
Determination is made as to such REO Property; or (ii) such REO Property is
removed from coverage under this Agreement by reason of its being purchased
pursuant to this Agreement.

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

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

         London Business Day: Any day on which dealings in deposits of United
States dollars are transacted in the London interbank market.

         Loss Trigger Event: With respect to any Distribution Date, the event
that is in effect if the aggregate amount of Realized Losses incurred since the
related Cut-off Date through

                                       23
<PAGE>

the last day of the related Prepayment Period divided by the Maximum Pool
Principal Balance exceeds the applicable percentage as follows with respect to
such Distribution Date: (a) 3.10% for the Distribution Dates occurring from
April 2005 to March 2006; (b) 4.10% for the Distribution Dates occurring from
April 2006 to March 2007; (c) 4.75% for Distribution Dates occurring from April
2007 to March 2008; and (d) 5.35% for Distribution Dates occurring in April 2008
and thereafter.

         Lower Tier Regular Interest: As described in the Preliminary Statement.

         Lower Tier REMIC: As described in the Preliminary Statement

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

         Maximum Pool Principal Balance: The aggregate Stated Principal Balances
of all Initial Mortgage Loans as of the Initial Cut-off Date plus the Initial
Pre-Funded Amount.

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

         Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.03.

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

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

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

         Mortgage Loan Purchase Agreement: The IFC Purchase Agreement, the
Novelle Purchase Agreement, the Encore Purchase Agreement, the BNC Purchase
Agreement, the Chapel Mortgage Purchase Agreement, the People's Choice Purchase
Agreement, the Aegis Purchase Agreement, the SIB Mortgage Purchase Agreement and
the NC Capital Purchase Agreement, as applicable.

         Mortgage Loans: An individual Mortgage Loan which is the subject of
this Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on the Mortgage Loan Schedule, which Mortgage Loan includes,
without limitation, the

                                       24
<PAGE>

Mortgage File, the Scheduled Payments, Principal Prepayments, Liquidation
Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition proceeds,
and all other rights, benefits, proceeds and obligations arising from or in
connection with such Mortgage Loan, excluding replaced or repurchased Mortgage
Loans. As applicable, "Mortgage Loan" shall be deemed to refer to REO Property.

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

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

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

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

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

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

         NC Capital: NC Capital Corporation, a Delaware corporation.

         NC Capital Assignment Agreement: The Assignment and Recognition
Agreement, dated as of March 28, 2003, by and among the Unaffiliated Seller, the
Depositor and NC Capital, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and NC Capital in connection
with any Subsequent Transfer of NC Capital Mortgage Loans.

                                       25
<PAGE>

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

         NC Capital Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of February 24, 2003, as amended to date, by and
between the Unaffiliated Seller and NC Capital.

         Net Monthly Excess Cash Flow: For any Distribution Date the amount
remaining for distribution pursuant to subsection 4.02(a)(iii) (before giving
effect to distributions pursuant to such subsection).

         Net Prepayment Interest Shortfall: For any Distribution Date, the
amount by which the sum of the Prepayment Interest Shortfalls exceeds the sum of
the Compensating Interest payments made on such Distribution Date.

         NIM Closing Date: On or about March 28, 2003.

         NIMs Trust: CDC Mortgage Capital Inc. NIM Trust 2003-HE1N, a Delaware
business trust.

         Non-Delay Certificates: As specified in the Preliminary Statement.

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

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

         Notice of Final Distribution: The notice to be provided pursuant to
Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.

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

         Novelle Assignment Agreement: The Assignment and Recognition Agreement,
dated as of March 28, 2003, by and among the Unaffiliated Seller, the Depositor
and Novelle, and each other Assignment and Recognition Agreement by and among
the Unaffiliated Seller,


                                       26
<PAGE>

the Depositor and Novelle in connection with any Subsequent Transfer of Novelle
Mortgage Loans.

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

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

         Offered Certificates: As specified in the Preliminary Statement.

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

         Opinion of Counsel: A written opinion of counsel, who may be in-house
counsel for the Servicer or the Subservicer, reasonably acceptable to the
Trustee and to the Class A-1 Certificate Insurer, provided that any Opinion of
Counsel relating to (a) qualification of the Mortgage Loans in a REMIC or (b)
compliance with the REMIC Provisions, must be (unless otherwise stated in such
Opinion of Counsel) an opinion of counsel who (i) is in fact independent of the
Servicer of the Mortgage Loans, (ii) does not have any material direct or
indirect financial interest in the Servicer of the Mortgage Loans or in an
affiliate of either and (iii) is not connected with the Servicer of the Mortgage
Loans as an officer, employee, director or person performing similar functions.

         Optional Termination Date: means:

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

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

         Originator: The party that originated or acquired a Mortgage Loan and,
more specifically, (i) with respect to any IFC Mortgage Loan, IFC, (ii) with
respect to any Novelle Mortgage Loan, Novelle, (iii) with respect to any Encore
Mortgage Loan, Encore, (iv) with respect to any BNC Mortgage Loan, BNC, (v) with
respect to any Chapel Mortgage Loan, Chapel Mortgage, (vi) with respect to any
People's Choice Mortgage Loan, People's Choice,

                                       27
<PAGE>

(vii) with respect to any Aegis Mortgage Loan, Aegis, (viii) with respect to any
SIB Mortgage Loan, SIB Mortgage and (ix) with respect to any NC Capital Mortgage
Loan, NC Capital.

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

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

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

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

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

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

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

         Pass-Through Margin: With respect to each Class of Regular
Certificates, on or prior to the Optional Termination Date the following
percentages: Class A-1 Certificates, 0.330%, Class A-2 Certificates, 0.370%,
Class M-1 Certificates, 0.900%, Class M-2 Certificates, 1.950%, Class M-3
Certificates, 2.200%, Class B-1 Certificates, 3.750% and Class B-2 Certificates,
3.750%. Commencing on the first Distribution Date after the Optional Termination
Date, the Pass-Through Margins shall increase to: Class A-1 Certificates,
0.660%, Class A-2 Certificates 0.740%, Class M-1 Certificates, 1.350%, Class M-2
Certificates, 2.925%, Class M-3 Certificates, 3.300%, Class B-1 Certificates,
5.625% and Class B-2 Certificates, 5.625%.

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

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

         People's Choice Assignment Agreement: The Assignment and Recognition
Agreement, dated as of March 28, 2003, as amended to date, by and among the
Unaffiliated

                                       28
<PAGE>

Seller, the Depositor and People's Choice, and each other Assignment and
Recognition Agreement by and among the Unaffiliated Seller, the Depositor and
People's Choice in connection with any Subsequent Transfer of People's Choice
Mortgage Loans.

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

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

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

         Performance Standards: The servicing performance standards set forth on
Exhibit O hereto.

         Periodic Mortgage Rate Cap: With respect to an Adjustable Rate Mortgage
Loan, the periodic limit on each Mortgage Rate adjustment as set forth in the
related Mortgage Note.

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

         (i) direct obligations of, or obligations fully guaranteed as to timely
     payment of principal and interest by, the United States or any agency or
     instrumentality thereof, provided such obligations are backed by the full
     faith and credit of the United States;

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

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

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

         (v) commercial paper (including both non-interest-bearing discount
     obligations and interest-bearing obligations payable on demand or on a
     specified date not

                                       29
<PAGE>

     more than 30 days after the date of acquisition thereof) that is rated by
     each Rating Agency that rates such securities in its highest short-term
     unsecured debt rating available at the time of such investment;

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

         (vii) if previously confirmed in writing to the Trustee and to the
     Class A-1 Certificate Insurer, any other demand, money market or time
     deposit, or any other obligation, security or investment, as may be
     acceptable to the Rating Agencies as a permitted investment of funds
     backing "Aaa" or "AAA" rated securities;

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

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

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

         Physical Certificates: As specified in the Preliminary Statement.

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

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<PAGE>

         Preference Amount: Any amounts distributed in respect of the Class A-1
Certificates which are recovered from any Holder of a Class A-1 Certificate as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code or other similar law in accordance with a final, nonappealable
order of a court having competent jurisdiction and which have not theretofore
been repaid to such Holder.

         Preference Claim: As defined in Section 4.05(f) hereof.

         Pre-Funding Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the Trustee
for the benefit of the Certificateholders, and designated "Deutsche Bank
National Trust Company, in trust for registered holders of CDC Mortgage Capital
Trust 2003-HE1, Mortgage Pass-Through Certificates, Series 2003-HE1".

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

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

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

         Premium Amount: The product of the Premium Rate and the Certificate
Balance of the Class A-1 Certificates immediately prior to such Distribution
Date.

         Premium Rate: The rate at which the "Premium" is determined as
described in the letter dated March 28, 2003 between the Unaffiliated Seller and
the Class A-1 Certificate Insurer (a copy of which shall be provided by the
Unaffiliated Seller to the Trustee).

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

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

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

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<PAGE>

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

         Principal Parity Deficit: With respect to any Distribution Date, the
excess of (i) the aggregate Class Certificate Balances of the Class A-1 and
Class A-2 Certificates on that Distribution Date, after taking into account any
reduction (other than, with respect to the Class A-1 Certificates, reductions
due to payments from the Class A-1 Certificate Insurance Policy on that
Distribution Date), of those Class Certificate Balances on that Distribution
Date, less the excess of (a) any Principal Parity Deficits for all prior
distribution dates over (b) any Class A-1 Principal Parity Amounts for all prior
Distribution Dates over (ii) the Current Maximum Amount for that Distribution
Date. For the first Distribution Date, the Principal Parity Deficit will equal
zero.

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

         Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

         Principal Remittance Amount: With respect to any Remittance Date, the
sum, without duplication, of:

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

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

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

         (iv) the principal component of all Substitution Adjustment Amounts and
     Repurchase Prices received by the Servicer during the related Due Period;
     and

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

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

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<PAGE>

         Private Certificates: As specified in the Preliminary Statement.

         Prospectus Supplement: The Prospectus Supplement, dated March 24, 2003,
relating to the Offered Certificates.

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

         PUD: Planned Unit Development.

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

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

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

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

         Reference Bank: As defined in Section 4.04.

         Regular Certificates: As specified in the Preliminary Statement.

         Reimbursement Amount: As of any Distribution Date, the sum of (a)(i)
all Insured Payments previously received by the Trustee and all Preference
Amounts previously paid by the Class A-1 Certificate Insurer and in each case
not previously repaid to the Class A-1 Certificate Insurer pursuant to Sections
6.05(a)(ii) hereof plus (ii) interest accrued on each such Insured Payment and
Preference Amounts not previously repaid calculated at the Late Payment Rate
from the date the Trustee received the related Insured Payment or Preference
Amounts were

                                       33
<PAGE>

paid by the Class A-1 Certificate Insurer and (b)(i) any amounts then due and
owing to the Class A-1 Certificate Insurer under the Insurance and Indemnity
Agreement (excluding the Premium Amount due on such Distribution Date), as
certified to the Trustee by the Class A-1 Certificate Insurer plus (ii) interest
on such amounts at the rate specified in the Insurance and Indemnity Agreement.
The Class A-1 Certificate Insurer shall notify the Trustee and the Unaffiliated
Seller of the amount of any Reimbursement Amount.

         Relief Act Interest Shortfall: With respect to any Distribution Date
and any Mortgage Loan, any reduction in the amount of interest collectible on
such Mortgage Loan for the most recently ended Due Period as a result of the
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended,
and similar state laws.

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

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

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

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

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

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

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

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

         Repurchase Price: With respect to any Mortgage Loan, an amount equal to
the sum of (i) the unpaid principal balance of such Mortgage Loan as of the date
of repurchase and (ii) (x) if such Mortgage Loan is being repurchased by the
Unaffiliated Seller or the Servicer, the sum of (A) interest on such unpaid
principal balance of such Mortgage Loan at the Mortgage Rate from the last date
through which interest has been paid and distributed to the Trustee to the last
day of the month in which such repurchase occurs, (B) all unreimbursed P&I
Advances and Servicing Advances, (C) all unpaid Servicing Fees and (D) all
expenses reasonably incurred by the Servicer, the Trustee, the Class A-1
Certificate Insurer or the Unaffiliated Seller, as the case

                                       34
<PAGE>

may be, in respect of a breach or defect, including, without limitation,
expenses arising out of any such party's enforcement of the Originator's
repurchase obligation, to the extent not included in (B), or (y) if such
Mortgage Loan is being repurchased by the related Originator, all other amounts
payable by such Originator in accordance with the terms of the related Mortgage
Loan Purchase Agreement.

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

         Residual Certificates: As specified in the Preliminary Statement.

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

         Rule 144A Letter: As defined in Section 5.02(b).

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

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

         SEC: As defined in Section 8.12(a).

                                       35
<PAGE>

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

         Senior Enhancement Percentage: With respect to any Distribution Date,
the percentage obtained by dividing (x) the sum of (i) the aggregate Class
Certificate Balance of the Subordinated Certificates and (ii) the Subordinated
Amount (in each case after taking into account the distributions of the
Principal Distribution Amount for such Distribution Date) by (y) the Current
Maximum Amount for that Distribution Date.

         Senior Specified Enhancement Percentage: As of any date of
determination, 38.00%.

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

         Servicer Evaluation Termination: Any termination of the Servicer
pursuant to the provisions of Section 3.28.

         Servicer Performance Evaluation: The evaluation described in Section
3.28.

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

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

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

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

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

                                       36
<PAGE>

month. Such fee shall be payable monthly, and shall be pro rated for any portion
of a month during which the Mortgage Loan is serviced by the Servicer under this
Agreement. The Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation Proceeds and
proceeds received with respect to REO Properties, to the extent permitted by
Section 3.11) of such Monthly Payment collected by the Servicer, or as otherwise
provided under Section 3.11.

         Servicing Fee Rate: With respect to each Mortgage Loan, 0.50% per
annum.

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

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

         Servicing Transfer Date: With respect to each Mortgage Loan, the date
on which Fairbanks commenced servicing such Mortgage Loan, as set forth on the
Mortgage Loan Schedule.

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

         SIB Mortgage Assignment Agreement: The Assignment and Recognition
Agreement, dated as of March 28, 2003, by and among the Unaffiliated Seller, the
Depositor and SIB Mortgage, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and SIB Mortgage in
connection with any Subsequent Transfer of SIB Mortgage Mortgage Loans.

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

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

         Similar Law: As defined in Section 5.02(b).

         Specified Subordinated Amount: With respect to any Distribution Date
prior to the Stepdown Date, an amount equal to 1.60% of the Maximum Pool
Principal Balance; and with respect to any Distribution Date on and after the
Stepdown Date, an amount equal to 3.20% of the Current Maximum Amount for that
Distribution Date subject to a minimum amount equal to 0.50% of the Maximum Pool
Principal Balance; provided, however, that if, on any Distribution Date, a
Delinquency Trigger Event has occurred, the Specified Subordinated Amount shall
not

                                       37
<PAGE>

be reduced to the applicable percentage of the Current Maximum Amount, but
instead remain the same as the prior period's Specified Subordinated Amount
until the distribution date on which a Delinquency Trigger Event is no longer
occurring; provided, further, that if, on any Distribution Date, a Loss Trigger
Event exists, the Specified Subordinated Amount shall equal 2.10% of the Maximum
Pool Principal Balance until the Distribution Date on which a Loss Trigger Event
no longer exists. When the Class Certificate Balance of each Class of Offered
Certificates has been reduced to zero, the Specified Subordinated Amount shall
thereafter equal zero.

         Standard & Poor's: Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, Inc. If Standard & Poor's is designated as a Rating
Agency in the Preliminary Statement, for purposes of Section 10.05(b) the
address for notices to Standard & Poor's shall be Standard & Poor's, 55 Water,
New York, New York 10041, Attention: Residential Mortgage Surveillance Group -
Morgan Stanley ABS Capital I Inc. 2003-HE1, or such other address as Standard &
Poor's may hereafter furnish to the Depositor and the Servicer.

         Startup Day: For each REMIC created hereunder, the Closing Date.

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

         Stepdown Date: The later to occur of (i) the earlier to occur of (a)
the Distribution Date in April 2006 and (b) the Distribution Date on which the
aggregate Class Certificate Balances of the Class A-1 and Class A-2 Certificates
are reduced to zero and (ii) the first Distribution Date on which the Senior
Enhancement Percentage (calculated for this purpose only after taking into
account scheduled and unscheduled payments of principal on the Mortgage Loans on
the last day of the related Due Period but prior to any applications of
Principal Distribution Amount to the Offered Certificates on the applicable
Distribution Date) is greater than or equal to the Senior Specified Enhancement
Percentage.

         Subordinated Amount: As of any Distribution Date, the excess, if any,
of (a) the Current Maximum Amount for that Distribution Date on such
Distribution Date over (b) the aggregate of the Class Certificate Balances of
the Class A-1, Class A-2 and Subordinated Certificates as of such Distribution
Date (after giving effect to the payment of the Principal Remittance Amount on
such Certificates on such Distribution Date).

         Subordinated Certificates: As specified in the Preliminary Statement.

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

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<PAGE>

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

         Subservicer: As defined in Section 3.02(a).

         Subservicing Account: As defined in Section 3.08.

         Subservicing Agreement: As defined in Section 3.02 hereof.

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

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

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

         Subsequent Transfer Agreement: A subsequent transfer agreement in
substantially the form of Exhibit L.

         Subsequent Transfer Date: The Business Day on which a Subsequent
Transfer occurs.

         Substitute Mortgage Loan: A Mortgage Loan substituted by the
Unaffiliated Seller or an Originator for a Deleted Mortgage Loan in accordance
with the terms of this Agreement or the related Mortgage Loan Purchase
Agreement, which must, on the date of such substitution, as confirmed in a
Request for Release, substantially in the form of Exhibit K, (i) have a Stated
Principal Balance, after deduction of the principal portion of the Scheduled
Payment due in the month of substitution, not in excess of, and not more than
10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
be accruing interest at a rate no lower than and not more than 1% per annum
higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio
no higher than that of the Deleted Mortgage Loan; (iv) have a remaining term to
maturity no greater than (and not more than one year less than that of) the
Deleted Mortgage Loan; and (v) comply with each representation and warranty set
forth in Sections 3.01(f), 3.01(h) and 3.03 of the Unaffiliated Seller's
Agreement and each representation and warranty set forth in the applicable
Mortgage Loan Purchase Agreement.

         Substitution Adjustment Amount: The meaning ascribed to such term
pursuant to Section 2.03.

         Tax Service Contract: As defined in Section 3.09(a).

                                       39
<PAGE>

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

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

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

         Transfer Affidavit: As defined in section 5.02(b).

         Transferor Certificate: As defined in Section 5.02(b).

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

         Trust Fund: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest and principal received on or with respect
thereto after the related Cut-off Date, other than such amounts which were due
on the Mortgage Loans on or before the related Cut-off Date; (ii) each Account,
and all amounts deposited therein pursuant to the applicable provisions of this
Agreement; (iii) property that secured a Mortgage Loan and has been acquired by
foreclosure, deed-in-lieu of foreclosure or otherwise; (iv) all rights of the
Depositor against the Unaffiliated Seller under the Unaffiliated Seller's
Agreement; (v) all rights of the Depositor against each Originator under the
related Assignment and Recognition Agreement and the related Mortgage Loan
Purchase Agreement; (vi) the Class A-1 Insurance Policy; (vii) the Cap
Agreement, solely for the benefit of the Class A-1 and Class A-2
Certificateholders; and (viii) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing.

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

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

         Trustee Fee Rate: With respect to each Mortgage Loan, 0.0045% per
annum.

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

                                       40
<PAGE>

         Unpaid Interest Amounts: As of any Distribution Date and any Class of
Certificates, the sum of (a) the excess of (i) the sum of the Accrued
Certificate Interest Distribution Amount for such Distribution Date and any
portion of such Accrued Certificate Interest Distribution Amount from prior
Distribution Dates remaining unpaid over (ii) the amount in respect of interest
on such Class of Certificates actually distributed on that Distribution Date and
(b) 30 days' interest on such excess at the applicable Pass-Through Rate (to the
extent permitted by applicable law).

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

         Upper Tier Regular Interest: As described in the Preliminary Statement.

         Upper Tier REMIC: As described in the Preliminary Statement.

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

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

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

                                       41
<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

         Section 2.01 Conveyance of Mortgage Loans.

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

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

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

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

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

                                       42
<PAGE>

     office, a copy of such Mortgage certified by such public recording office
     to be a true and complete copy of the original recorded Mortgage;

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

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

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

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

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

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

         On or prior to the related Delivery Date, the Unaffiliated Seller shall
deliver, or cause the related Originator to deliver, to the Trustee Assignments
of Mortgages, in blank, for each Mortgage Loan. If an Assignment of Mortgage is
required to be recorded pursuant to the terms hereof, the Trustee shall promptly
forward such Assignments of Mortgage to the Servicer for recording. No later
than thirty (30) Business Days following the date of receipt by the Servicer of
the recording information for a Mortgage, the Servicer shall promptly submit or
cause to be submitted for recording, at the expense of the Unaffiliated Seller
(the Unaffiliated Seller to seek reimbursement from the related Originator under
the applicable Mortgage Loan Purchase Agreement) in the appropriate public
office for real property records, each Assignment of Mortgage referred to in
Section 2.01(b)(v). Notwithstanding the foregoing, however, for administrative
convenience and facilitation of servicing and to reduce closing costs, the
Assignment of Mortgage shall not be required to be completed and submitted for
recording with respect to any Mortgage Loan (other than any Mortgage Loan where
the Mortgaged Property is located in any state where recordation is required by
any Rating Agency to obtain the initial ratings on the Certificates, which
states as of the date hereof, are Florida and Maryland) until the earliest to
occur of (i) direction by Class A-1 Certificate Insurer or (ii) upon a
determination by the Servicer that recordation is necessary for the enforcement
of rights under, or satisfaction or assignment of, the related Mortgage, at
which time, the Servicer shall record any such

                                       43
<PAGE>

Assignment of Mortgage in accordance with the terms hereof. If any Assignment of
Mortgage is required to be recorded pursuant to the terms hereof, the Mortgage
shall be assigned from the related Originator, to "Deutsche Bank National Trust
Company, as trustee under the Pooling and Servicing Agreement dated as of March
1, 2003, Morgan Stanley ABS Capital I Inc. Trust 2003-HE1." In the event that
any such assignment is lost or returned unrecorded because of a defect therein,
the Unaffiliated Seller shall cause the related Originator to promptly prepare a
substitute assignment to cure such defect and thereafter cause each such
assignment to be duly recorded. In the event the Unaffiliated Seller does not
pay or otherwise reimburse the Servicer for any of the foregoing costs of
recording any such Assignment of Mortgage, the Servicer shall be entitled to be
reimbursed from the Trust Fund from amounts on deposit in the Collection
Account. In the event the related Originator fails to reimburse the Unaffiliated
Seller for the recording costs described above, upon receipt of written
direction from the Unaffiliated Seller, the Trustee shall assign its rights
under the applicable Mortgage Loan Purchase Agreement solely with respect to
payment of such expenses to the Unaffiliated Seller.

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

         In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Trustee within 90 days following the related Delivery Date, and in the event
that the Originator does not cure such failure within 30 days of discovery or
receipt of written notification of such failure from the Depositor, the Trustee
or the Class A-1 Certificate Insurer, the Trustee shall notify the related
Originator to repurchase the Mortgage Loan pursuant to the related Mortgage Loan
Purchase Agreement, upon the request of the Depositor, the Trustee or the Class
A-1 Certificate Insurer, at the Repurchase Price and in the manner specified in
Section 2.03. The foregoing repurchase provision shall not apply in the event
that the related Originator cannot deliver such original or copy of any document
submitted for recordation to the appropriate public recording office within the
specified period due to a delay caused by the recording office in the applicable
jurisdiction; provided that the related Originator shall instead be required to
deliver a recording receipt of such recording office or, if such recording
receipt is not available, an officer's certificate of a servicing officer of the
Originator confirming that such document has been accepted for recording.

         (c) Purchase and Sale of Subsequent Mortgage Loans.

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

                                       44
<PAGE>

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

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

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

               (a) the Unaffiliated Seller shall have provided the Depositor,
         the Trustee, the Rating Agencies and the Class A-1 Certificate Insurer
         with a timely Addition Notice, which shall include a Mortgage Loan
         Schedule, listing the Subsequent Mortgage Loans and shall have provided
         any other information reasonably requested by any of the foregoing with
         respect to the Subsequent Mortgage Loans;

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

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

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

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

               (f) the Unaffiliated Seller shall have delivered to the Trustee
         an executed Assignment and Recognition Agreement with respect to each
         related Originator of Subsequent Mortgage Loans to be added to the
         Trust Fund on such Subsequent Transfer Date (which Assignment and
         Recognition Agreement shall include a representation and warranty from
         the related Originator that none of the Subsequent Mortgage Loans are
         High Cost Loans, none of the Subsequent Mortgage Loans are covered by
         the Home Ownership and Equity Protection Act of 1994 and none of the
         Subsequent Mortgage Loans is in violation of any comparable state law);

                                       45
<PAGE>

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

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

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

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

               (b) no more than 32.00% and no less than 28.00% may be Fixed Rate
         Mortgage Loans;

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

               (d) the weighted average gross Mortgage Rate must not be less
         than 7.95%, or more than 8.20%;

               (e) the weighted average LTV must not exceed 82.00%, and no more
         than 48.00% of the Mortgage Loans may have LTVs in excess of 80%;

               (f) no Mortgage Loan may have a Stated Principal Balance in
         excess of $1,000,000 as of the related Cut-off Date; (g) at least
         85.00% of the Mortgage Loans must have prepayment penalties;

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

               (h) the weighted average Gross Margin for the Adjustable Rate
         Mortgage Loans must be at least 6.39%;

               (i) the weighted average credit score (FICO score) must be at
         least 615, and none of the Mortgage Loans may have credit scores below
         500; and

               (j) no Mortgage Loan originated on or after October 1, 2002 but
         on or before March 10, 2003 will be secured by property located in the
         State of Georgia.

         Any of the requirements set forth in clauses (ii) and (iii) above may
be waived or modified in any respect with the consent of the Class A-1
Certificate Insurer and the Rating Agencies.

                                       46
<PAGE>

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

         Section 2.02 Acceptance by the Trustee of the Mortgage Loans.

         The Trustee shall acknowledge, on each Delivery Date, receipt of the
documents identified in the Initial Certification in the form annexed hereto as
Exhibit F, and declares that it holds and will hold such documents and the other
documents delivered to it pursuant to Section 2.01, and that it holds or will
hold such other assets as are included in the Trust Fund, in trust for the
exclusive use and benefit of all present and future Certificateholders and the
Class A-1 Certificate Insurer. The Trustee acknowledges that it will maintain
possession of the related Mortgage Notes in the State of California, unless
otherwise permitted by the Rating Agencies and the Class A-1 Certificate
Insurer.

         In connection with each Delivery, the Trustee shall deliver via
facsimile (with original to follow the next Business Day) to the Depositor, the
Unaffiliated Seller, the Servicer and the Class A-1 Certificate Insurer an
Initial Certification on or prior to the related Delivery Date, certifying
receipt of the related Mortgage Notes and Assignments of Mortgage for each
related Mortgage Loan. The Trustee shall not be responsible to verify the
validity, sufficiency or genuineness of any document in any Custodial File.

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

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

                                       47
<PAGE>

         Section 2.03 Representations, Warranties and Covenants of the
Unaffiliated Seller and the Servicer.

         (a) The Servicer hereby makes the representations and warranties set
forth in Schedules II and IIA hereto to the Depositor, the Unaffiliated Seller,
the Class A-1 Certificate Insurer and the Trustee, as of the Closing Date, and
with respect to Subsequent Mortgage Loans, as of the related Subsequent Transfer
Date; provided, however, that the representations and warranties set forth in
Schedule IIA shall only apply to those Mortgage Loans which were being serviced
by the Servicer pursuant to the Interim Servicing Agreement, dated as of October
29, 2002, between the Unaffiliated Seller and the Servicer immediately prior to
becoming a Mortgage Loan hereunder.

         (b) CDC Mortgage Capital Inc., in its capacity as the Unaffiliated
Seller, hereby makes the representations and warranties set forth in Schedule
III hereto to the Depositor, the Trustee and the Class A-1 Certificate Insurer,
as of the Closing Date.

         (c) It is understood and agreed by the Servicer and the Unaffiliated
Seller that the representations and warranties set forth in Section 2.03 shall
survive the transfer of the Mortgage Loans to the Trust Fund, and shall inure to
the benefit of the Trust Fund notwithstanding any restrictive or qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the examination or
failure to examine any Mortgage File. Upon discovery by any of the Depositor,
the Unaffiliated Seller, the Class A-1 Certificate Insurer, the Trustee or the
Servicer of a breach by the Unaffiliated Seller of any of the foregoing
representations or any of the representations and warranties made pursuant to
Sections 3.01(f), 3.01(h) or 3.03 of the Unaffiliated Seller's Agreement or by
any Originator of the representations and warranties made pursuant to the
related Assignment and Recognition Agreement, the party discovering such breach
shall give prompt written notice to the others.

         (d) Within 90 days of the earlier of either discovery by or notice to
the Unaffiliated Seller of any breach of a representation or warranty set forth
in Section 3.01(f), 3.01(h) or 3.03 of the Unaffiliated Seller's Agreement that
materially and adversely affects the value of the Mortgage Loans or the interest
of the Trustee, the Class A-1 Certificate Insurer or the Certificateholders
therein, the Unaffiliated Seller shall use its best efforts to cure such breach
in all material respects and, if such breach cannot be remedied, the
Unaffiliated Seller shall, (i) if such 90-day period expires prior to the second
anniversary of the related Delivery Date, remove such Mortgage Loan from the
Trust Fund and substitute in its place a Substitute Mortgage Loan, in the manner
and subject to the conditions set forth in this Section 2,03; or (ii) repurchase
such Mortgage Loan at the Repurchase Price; provided, however, that any such
substitution pursuant to (i) above shall not be effected prior to the delivery
to the Trustee of the Opinion of Counsel required by Section 2.05, if any, and a
Request for Release substantially in the form of Exhibit K, and the Mortgage
File for any such Substitute Mortgage Loan.

         With respect to any Substitute Mortgage Loan or Loans, the Unaffiliated
Seller shall deliver to the Trustee for the benefit of the Certificateholders
the Mortgage Note, the Mortgage, the related Assignment of the Mortgage, and
such other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01. No
substitution is permitted to be made in any calendar month after

                                       48
<PAGE>

the Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the Due Period of substitution shall not be part of
the Trust Fund and will be retained by the related Originator on the next
succeeding Distribution Date. For the Due Period of substitution, distributions
to Certificateholders will include the monthly payment due on any Deleted
Mortgage Loan for such Due Period and thereafter the related Originator shall be
entitled to retain all amounts received in respect of such Deleted Mortgage
Loan.

         For any month in which the Unaffiliated Seller substitutes one or more
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (if any) by which the aggregate principal balance of
all such Substitute Mortgage Loans as of the date of substitution is less than
the aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly payments due in
the Due Period of substitution). The Unaffiliated Seller shall deposit the
amount of such shortage (the "Substitution Adjustment Amount") plus, an amount
equal to the aggregate of any unreimbursed Advances and accrued and unpaid
Servicing Fees with respect to such Deleted Mortgage Loans into the Collection
Account on or before the Remittance Date for the Distribution Date in the month
succeeding the calendar month during which the related Mortgage Loan became
required to be purchased or replaced hereunder.

         Within 90 days of the earlier of either discovery by or notice to the
Servicer of any breach of a representation or warranty set forth on Schedule IIA
hereto that materially and adversely affects the value of the Mortgage Loans or
the interest of the Trustee, the Class A-1 Certificate Insurer or the
Certificateholders therein, the Servicer shall use its best efforts to promptly
cure such breach in all material respects and, if such defect or breach cannot
be remedied, the Servicer shall, at the Depositor's option, purchase such
Mortgage Loan at the Repurchase Price.

         Upon discovery that any document does not comply with the requirements
set forth in clauses (i) through (iv) of the Trustee's review of the Custodial
Files pursuant to Section 2.02 or receipt of written notice of a breach of a
representation and warranty or written notice that a Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the Trustee shall in turn promptly notify the applicable Originator
(with a copy to the Servicer, the Class A-1 Certificate Insurer and the
Unaffiliated Seller) in writing of such non compliance or breach and request
that the related Originator cure such non compliance or breach within the time
period set forth in the applicable Mortgage Loan Purchase Agreement (but in any
event, within 60 days from the date the related Originator is notified of such
non compliance or breach) and if the related Originator does not cure such non
compliance or breach in all material respects during such period, the Trustee
shall notify such Originator to repurchase such Mortgage Loan from the Trust
Fund at the Repurchase Price, and such repurchase must occur no later than the
90th day following the Trustee's original notice of such noncompliance or breach
if such noncompliance or breach is a failure of the Mortgage Loan to constitute
a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code.

         (e) Upon delivery of the Final Certification with respect to each
Mortgage Loan, the Trustee will notify the related Originator within 5 Business
Days of such delivery of any missing documents from the Custodial File and if
the related Originator does not deliver such missing documents within 60 days
from the date the related Originator is notified of such

                                       49
<PAGE>

noncompliance or breach, the Trustee shall notify such Originator to repurchase
such Mortgage Loan from the Trust Fund at the Repurchase Price.

         (f) Based solely on information received with respect to any Substitute
Mortgage Loan from the Unaffiliated Seller or the related Originator, as
applicable, the Servicer shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted Mortgage Loan and the substitution of the Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects, and the
Unaffiliated Seller shall be deemed to have made with respect to such Substitute
Mortgage Loan or Loans, as of the date of substitution, the representations and
warranties made pursuant to Sections 3.01(f), 3.01(h) and 3.03 of the
Unaffiliated Seller's Agreement with respect to such Mortgage Loan. Upon any
such substitution and the deposit to the Collection Account of the amount
required to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall release the Mortgage
File relating to such Deleted Mortgage Loan to the Unaffiliated Seller or the
related Originator, as applicable, and shall execute and deliver at the
Unaffiliated Seller's or related Originator's direction, as applicable, such
instruments of transfer or assignment prepared by such party, in each case
without recourse, as shall be necessary to vest title in the Unaffiliated Seller
or the related Originator, or its designee, as applicable, the Trustee's
interest in any Deleted Mortgage Loan substituted for pursuant to this Section
2.03.

         (g) In the event that the Unaffiliated Seller, the Servicer or the
related Originator, as applicable, shall have repurchased a Mortgage Loan, the
Repurchase Price therefor shall be deposited in the Collection Account pursuant
to Section 3.10 on or before the Remittance Date for the Distribution Date in
the month following the month during which the Unaffiliated Seller, the Servicer
or the related Originator, as applicable, became obligated hereunder to
repurchase or replace such Mortgage Loan and upon such deposit of the Repurchase
Price, the delivery of the Opinion of Counsel required by Section 2.05 and
receipt of a Request for Release in the form of Exhibit K hereto, the Trustee
shall release the related Custodial File to such Person as directed by the
Servicer, and the Trustee shall execute and deliver at such Person's direction
such instruments of transfer or assignment prepared by such Person, in each case
without recourse, as shall be necessary to transfer title from the Trustee. It
is understood and agreed that the obligation under this Agreement of any Person
to cure, repurchase or replace any Mortgage Loan as to which a breach has
occurred and is continuing shall constitute the sole remedy against such Persons
respecting such breach available to Certificateholders, the Depositor, the
Unaffiliated Seller, the Class A-1 Certificate Insurer or the Trustee on their
behalf. In the event such required repurchase or replacement does not occur, the
Trustee shall take such actions as directed upon written direction from the
Depositor or the Class A-1 Certificate Insurer and the provision of reasonable
indemnity satisfactory to the Trustee in accordance with Sections 6.03 and 8.02.

         (h) If the Unaffiliated Seller is required to repurchase or replace a
Mortgage Loan pursuant to the terms hereof, upon receipt by the Trustee of
written direction from the Unaffiliated Seller and either the related Repurchase
Price or Substitute Mortgage Loan, as applicable, the Trustee shall assign to
the Unaffiliated Seller its rights under the related Mortgage

                                       50
<PAGE>

Loan Purchase Agreement solely with respect to such Mortgage Loan by an
assignment in form and substance mutually satisfactory to the Unaffiliated
Seller and the Trustee.

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

         Section 2.04 The Depositor and the Mortgage Loans.

         The Depositor hereby represents and warrants to the Trustee and to the
Class A-1 Certificate Insurer with respect to each Mortgage Loan as of the date
hereof or such other date set forth herein that as of the related Delivery Date,
and following the transfer of the Mortgage Loans to it by the Unaffiliated
Seller, the Depositor had good title to the Mortgage Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.

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

         Section 2.05 Delivery of Opinion of Counsel in Connection with
Substitutions and Non-Qualified Mortgages.

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

         Section 2.06 Execution and Delivery of Certificates.

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates, and for the benefit of the Class A-1 Certificate Insurer.

         Section 2.07 REMIC Matters.

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

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<PAGE>

         Section 2.08 Representations and Warranties of the Depositor.

         The Depositor hereby represents, warrants and covenants to the Trustee,
the Servicer and to the Class A-1 Certificate Insurer and the that as of the
date of this Agreement or as of such date specifically provided herein:

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

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

         (c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Depositor, enforceable against the Depositor in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);

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

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

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

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<PAGE>

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

         (h) Immediately prior to the transfer and assignment by the Depositor
to the Trustee, the Depositor had, or, with respect to the subsequent Mortgage
Loans, will have, good title to, and was, or will be, the sole owner of each
Mortgage Loan, free of any interest of any other Person, and the Depositor has
transferred, or shall transfer, all right, title and interest in each Mortgage
Loan to the Trustee. The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i) fully to
transfer to the Trustee, for the benefit of the Certificateholders and for the
benefit of the Class A-1 Certificate Insurer, all right, title, and interest of
the Depositor thereto as note holder and mortgagee or (ii) to grant to the
Trustee, for the benefit of the Certificateholders and for the benefit of the
Class A-1 Certificate Insurer, the security interest referred to in Section
10.04 hereof.

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

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         Section 3.01 Servicer to Service Mortgage Loans.

         (a) For and on behalf of the Certificateholders and for the benefit of
the Class A-1 Certificate Insurer, the Servicer shall service and administer the
Mortgage Loans in accordance with the terms of this Agreement and the respective
Mortgage Loans and, to the extent consistent with such terms, in the same manner
in which it services and administers similar mortgage loans for its own
portfolio, giving due consideration to customary and usual standards of practice
of mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:

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

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

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

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

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

                                       53
<PAGE>

to the above-described servicing standards and the terms of this Agreement and
of the respective Mortgage Loans, the Servicer shall have full power and
authority, acting alone or through Subservicers as provided in Section 3.02, to
do or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer in its own name or in the name of a
Subservicer is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment in accordance with the servicing
standards set forth above, to execute and deliver any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and the
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Trustee. The Servicer shall service and administer the Mortgage Loans in
accordance with applicable state and federal law and shall provide to the
Mortgagors any reports required to be provided to them thereby. The Servicer
shall also comply in the performance of this Agreement with all reasonable rules
and requirements of each insurer under any standard hazard insurance policy.
Subject to Section 3.15, the Trustee shall execute, at the written request of
the Servicer, and furnish to the Servicer and any Subservicer such documents as
are necessary or appropriate to enable the Servicer or any Subservicer to carry
out their servicing and administrative duties hereunder, and the Trustee hereby
grants to the Servicer, and this Agreement shall constitute, a power of attorney
to carry out such duties including a power of attorney to take title to
Mortgaged Properties after foreclosure on behalf of the Trustee. The Trustee
shall execute a separate power of attorney in favor of the Servicer for the
purposes described herein to the extent necessary or desirable to enable the
Servicer to perform its duties hereunder. The Trustee shall not be liable for
the actions of the Servicer or any Subservicers under such powers of attorney.

         (b) Subject to Section 3.09(b) hereof, in accordance with the standards
of the preceding paragraph, the Servicer shall advance or cause to be advanced
funds as necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be Servicing
Advances reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.09(b), and further as provided in Section 3.11.
Any cost incurred by the Servicer or by Subservicers in effecting the timely
payment of taxes and assessments on a Mortgaged Property shall not be added to
the unpaid principal balance of the related Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so permit.

         (c) Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not (i) permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan or (ii) permit any modification, waiver or amendment of any term
of any Mortgage Loan that would both (A) effect an exchange or reissuance of
such Mortgage Loan under Section 1001 of the Code (or final, temporary or
proposed Treasury regulations promulgated thereunder) and (B) cause any REMIC to
fail to qualify as a REMIC under the Code or the imposition of any tax on
"prohibited transactions" or "contributions after the startup

                                       54
<PAGE>

date" under the REMIC Provisions, or (iii) except as provided in Section
3.07(a), waive any Prepayment Charges.

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

         Section 3.02 Subservicing Agreements Between the Servicer and
Subservicers.

         (a) Subject to the consent of the Class A-1 Certificate Insurer (so
long as no Class A-1 Certificate Insurer Default has occurred and is
continuing), which consent shall not be unreasonably withheld, the Servicer may
enter into Subservicing Agreements with Subservicers, for the servicing and
administration of the Mortgage Loans.

         Unless otherwise approved by the Class A-1 Certificate Insurer (so long
as no Class A-1 Certificate Insurer Default has occurred and is continuing),
each Subservicer shall be (i) authorized to transact business in the state or
states in which the related Mortgaged Properties it is to service are situated,
if and to the extent required by applicable law to enable the Subservicer to
perform its obligations hereunder and under the Subservicing Agreement, (ii) an
institution approved as a mortgage loan originator by the Federal Housing
Administration or an institution that has deposit accounts insured by the FDIC
and (iii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Subservicing Agreement must impose on the Subservicer requirements conforming to
the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer will
examine each Subservicing Agreement and will be familiar with the terms thereof.
The terms of any Subservicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Subservicers may enter into
and make amendments to the Subservicing Agreements or enter into different forms
of Subservicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Trustee, without the consent of the Trustee. Any variation
without the consent of the Trustee from the provisions set forth in Section 3.08
relating to insurance or priority requirements of Subservicing Accounts, or
credits and charges to the Subservicing Accounts or the timing and amount of
remittances by the Subservicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Trustee, the Unaffiliated Seller, the Class A-1 Certificate
Insurer and the Depositor copies of all Subservicing Agreements, and any
amendments or modifications thereof, promptly upon the Servicer's execution and
delivery of such instruments.

         (b) As part of its servicing activities hereunder, the Servicer (except
as otherwise provided in the last sentence of this paragraph), for the benefit
of the Trustee, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement, including, without limitation, any obligation to
make advances in respect of delinquent payments as required by a Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as

                                       55
<PAGE>

the Servicer, in its good faith business judgment, would require were it the
owner of the related Mortgage Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement, to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Mortgage Loans
or (ii) from a specific recovery of costs, expenses or attorneys' fees against
the party against whom such enforcement is directed.

         Section 3.03 Successor Subservicers.

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

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

         Section 3.04 Liability of the Servicer.

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

         Section 3.05 No Contractual Relationship Between Subservicers and the
Trustee.

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

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<PAGE>

         Section 3.06 Assumption or Termination of Subservicing Agreements by
Trustee.

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

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

         The Servicer at its expense shall, upon request of the Trustee, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by or on behalf of it, and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.

         Section 3.07 Collection of Certain Mortgage Loan Payments;
Establishment of Certain Accounts.

         (a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any applicable insurance policies, follow such collection
procedures as it would follow with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account. Consistent with the foregoing, the
Servicer may (i) waive any late payment charge or, if applicable, any penalty
interest, or (ii) extend the due dates for the Scheduled Payments due on a
Mortgage Note for a period of not greater than 180 days; provided that any
extension pursuant to clause (ii) above shall not affect the amortization
schedule of any Mortgage Loan for purposes of any computation hereunder, except
as provided below. In the event of any such arrangement pursuant to clause (ii)
above, the Servicer shall make timely advances on such Mortgage Loan during such
extension pursuant to Section 4.01 and in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by reason of such
arrangements, subject to Section 4.01(d) pursuant to which the Servicer shall
not be required to make any such advances that are Nonrecoverable P&I Advances.
Notwithstanding the foregoing, the Servicer may not waive, in whole or in part,
a Prepayment Charge, except under the following circumstances: (i) such waiver
relates to a default or a reasonably foreseeable default and would, in the
reasonable judgment of the Servicer, maximize recovery of total proceeds taking
into account the value of such Prepayment Charge and the related Mortgage Loan,
and doing so is standard and customary

                                       57
<PAGE>

in servicing mortgage loans similar to the Mortgage Loans (including any waiver
of a Prepayment Charge in connection with a refinancing of a Mortgage Loan that
is related to a default or a reasonably foreseeable default), and in no event
will the Servicer waive a Prepayment Charge in connection with a refinancing of
a Mortgage Loan that is not related to a default or a reasonably foreseeable
default, (ii) such Prepayment Charge is not permitted to be collected by
applicable law or (iii) the Servicer has not been provided with documentation
sufficient to establish the existence of such Prepayment Charge at the time of
such waiver. If a Prepayment Charge is waived other than as permitted by the
prior sentence, then the Servicer is required to pay the amount of such waived
Prepayment Charge, for the benefit of the Holders of the Class P Certificates,
by depositing such amount into the Collection Account together with and at the
time that the amount prepaid on the related Mortgage Loan is required to be
deposited into the Collection Account.

         (b) (i) The Trustee shall establish and maintain the Excess Reserve
     Fund Account, on behalf of the Class X Certificateholders, to secure their
     limited recourse obligation to pay to the Floating Rate Certificateholders
     Basis Risk CarryForward Amounts.

         (ii) On each Distribution Date, the Trustee shall deposit the amount of
     any Basis Risk Payment and any Interest Rate Cap Payment made solely for
     the benefit of the Class A-1 and Class A-2 Certificateholders for such date
     into the Excess Reserve Fund Account.

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

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

         (iii) Any Basis Risk CarryForward Amounts paid by the Trustee to the
     Floating Rate Certificateholders shall be accounted for by the Trustee as
     amounts paid first to the Holders of the Class X Certificate and then to
     the respective Class or Classes

                                       58
<PAGE>

     of Floating Rate Certificates. In addition, the Trustee shall account for
     the Floating Rate Certificateholders' rights to receive payments of Basis
     Risk CarryForward Amounts as rights in a limited recourse interest rate cap
     contract written by the Class X Certificateholders in favor of the Floating
     Rate Certificateholders.

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

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

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

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

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

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

         (e) The Trustee shall establish and maintain the Capitalized Interest
Account, on behalf of the Certificateholders. On the Closing Date, the Trustee
shall deposit $585,051.00 to the Capitalized Interest Account from the proceeds
of the sale of the Offered Certificates. Withdrawals from the Capitalized
Interest Account shall be made in accordance with Sections 4.02(c) and (d)
hereof. The Trustee shall account for the Capitalized Interest Account as an
outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h) and
not as an asset of any REMIC created pursuant to this Agreement. The beneficial
owner of the Capitalized Interest Account shall be the Unaffiliated Seller.

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

         (g) The Trustee may invest the funds in the Accounts if directed in
writing by the Servicer, with respect to the Collection Account and the
Distribution Account or by the

                                       59
<PAGE>

Unaffiliated Seller, with respect to the Pre-Funding Account and the Capitalized
Interest Account in each case, in Permitted Investments, which directions shall
be in accordance with Section 3.12. Amounts on deposit in the Excess Reserve
Fund Account shall not be invested.

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

         Section 3.08 Subservicing Accounts.

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

         Section 3.09 Collection of Taxes, Assessments and Similar Items; Escrow
Accounts.

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

         (b) To the extent that the services described in this paragraph (b) are
not otherwise provided pursuant to the Tax Service Contracts described in
paragraph (a) hereof, the Servicer undertakes to perform such functions. The
Servicer shall establish and maintain, or cause to be established and
maintained, one or more accounts (the "Escrow Accounts"), which shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible Account) in which it customarily deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, all collections from the Mortgagors (or related
advances from Subservicers) for the payment of taxes, assessments, hazard
insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") collected on account of the Mortgage Loans and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of

                                       60
<PAGE>

such funds in the clearing account, for the purpose of effecting the payment of
any such items as required under the terms of this Agreement. Withdrawals of
amounts from an Escrow Account may be made only to (i) effect payment of taxes,
assessments, hazard insurance premiums, and comparable items; (ii) reimburse the
Servicer (or a Subservicer to the extent provided in the related Subservicing
Agreement) out of related collections for any advances made pursuant to Section
3.01 (with respect to taxes and assessments) and Section 3.13 (with respect to
hazard insurance); (iii) refund to Mortgagors any sums as may be determined to
be overages; (iv) pay interest, if required and as described below, to
Mortgagors on balances in the Escrow Account, and the Servicer shall be entitled
to withdraw from the Escrow Account any interest earned and not required to be
paid to Mortgagors; (v) clear and terminate the Escrow Account at the
termination of the Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement or (vi) recover amounts deposited in error.
As part of its servicing duties, the Servicer or Subservicers shall pay to the
Mortgagors interest on funds in Escrow Accounts, to the extent required by law
and, to the extent that interest earned on funds in the Escrow Accounts is
insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. To the extent that a Mortgage does not provide for
Escrow Payments, the Servicer shall determine whether any such payments are made
by the Mortgagor in a manner and at a time that avoids the loss of the Mortgaged
Property due to a tax sale or the foreclosure of a tax lien. The Servicer
assumes full responsibility for the payment of all such bills within such time
and shall effect payments of all such bills irrespective of the Mortgagor's
faithful performance in the payment of same or the making of the Escrow Payments
and shall make advances from its own funds to effect such payments; provided,
however, that such advances are deemed to be Servicing Advances.

         Section 3.10 Collection Account.

         (a) On behalf of the Trustee, the Servicer shall establish and
maintain, or cause to be established and maintained, one or more Eligible
Accounts (such account or accounts, the "Collection Account"), held in trust for
the benefit of the Trustee. On behalf of the Trustee, the Servicer shall deposit
or cause to be deposited in the clearing account (which account must be an
Eligible Account) in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the deposit of such funds into the
clearing account, as and when received or as otherwise required hereunder, the
following payments and collections received or made by it subsequent to the
related Cut-off Date (other than in respect of principal or interest on the
related Mortgage Loans due on or before the related Cut-off Date, and except for
$172,215.36 in interest, which is being retained by the Unaffiliated Seller), or
payments (other than Principal Prepayments) received by it on or prior to the
related Cut-off Date but allocable to a Due Period subsequent thereto:

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

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

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

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

         (v) any amounts required to be deposited by the Servicer pursuant to
     the second paragraph of Section 3.13(a) in respect of any blanket policy
     deductibles;

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

         (vii) all Prepayment Charges collected by the Servicer.

         The foregoing requirements for deposit in the Collection Accounts shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges, NSF
fees, reconveyance fees, assumption fees and other similar fees and charges need
not be deposited by the Servicer in the Collection Account and shall, upon
collection, belong to the Servicer as additional compensation for its servicing
activities. In the event the Servicer shall deposit in the Collection Account
any amount not required to be deposited therein, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.

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

         Section 3.11 Withdrawals from the Collection Account.

         (a) The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.01:

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

         (ii) to reimburse the Servicer for unreimbursed P&I Advances, but only
     to the extent of amounts received which represent Late Collections (net of
     the related Servicing Fees) of Monthly Payments on Mortgage Loans with
     respect to which such P&I Advances were made in accordance with the
     provisions of Section 4.01;

         (iii) to pay the Servicer or any Subservicer (a) any unpaid Servicing
     Fees or (b) any unreimbursed Servicing Advances with respect to each
     Mortgage Loan, but only to

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<PAGE>

     the extent of any Late Collections or other amounts as may be collected by
     the Servicer from the related Mortgagor, or otherwise received with respect
     to such Mortgage Loan (or the related REO Property);

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

         (v) to pay to the Unaffiliated Seller, the Servicer or the related
     Originator, as applicable, with respect to each Mortgage Loan that has
     previously been purchased or replaced by the Unaffiliated Seller, the
     Servicer or such Originator, as applicable, pursuant to this Agreement, all
     amounts received thereon subsequent to the date of purchase or
     substitution, as the case may be;

         (vi) to reimburse the Servicer for any P&I Advance or Servicing Advance
     previously made which the Servicer has determined to be a Nonrecoverable
     P&I Advance or Nonrecoverable Servicing Advance in accordance with the
     provisions of Section 4.01;

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

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

         (ix) to reimburse the Servicer, the Unaffiliated Seller, the Depositor,
     the Class A-1 Certificate Insurer or the Trustee, as the case may be, for
     expenses reasonably incurred in respect of the breach or defect giving rise
     to the purchase obligation under Section 2.03 of this Agreement that were
     included in the Repurchase Price of the Mortgage Loan, including any
     expenses arising out of the enforcement of the purchase obligation to the
     extent not otherwise paid pursuant to the terms hereof;

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

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

         (b) The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (a)(ii), (iii), (v), (vi), (vii), (viii) and (ix)
above. The Servicer shall provide written notification to the Trustee, on or
prior to the next succeeding Remittance Date, upon making any withdrawals from
the Collection Account pursuant to subclause (a)(vii) above.

         Section 3.12 Investment of Funds in the Account.

         (a) The Servicer may direct the investment of funds in the Collection
Account and may direct the Trustee to invest funds in the Distribution Account,
and the Unaffiliated

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Seller may direct the Trustee to invest the funds in the Pre-Funding Account and
the Capitalized Interest Account (each of such Accounts, for purposes of this
Section 3.12, an "Investment Account"), in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand
no later than the Business Day immediately preceding the date on which such
funds are required to be withdrawn from such account pursuant to this Agreement.
All such investment directions shall be in writing and if the Trustee does not
receive such written instructions no investment shall be made. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trustee. The Trustee shall be entitled to sole possession (except with respect
to investment direction of funds held in the related Account and any income and
gain realized thereon) over each such investment, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent, together with any document of transfer necessary to
transfer title to such investment to the Trustee. In the event amounts on
deposit in an Investment Account are at any time invested in a Permitted
Investment payable on demand, the Trustee may:

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

         (y)   demand payment of all amounts due thereunder that such Permitted
               Investment would not constitute a Permitted Investment in respect
               of funds thereafter on deposit in the Investment Account.

         (b) (i) All income and gain realized from the investment of funds
     deposited in the Collection Account and the Distribution Account held by or
     on behalf of the Servicer, shall be for the benefit of the Servicer and
     shall be subject to its withdrawal in the manner set forth in Section 3.11
     in the case of income in the Collection Account, and on each Distribution
     Date, the Trustee shall withdraw from the Distribution Account, and remit
     to the Servicer all amounts in respect of such income and gain in the
     Distribution Account. Whether in regard to the Collection Account or the
     Distribution Account, the Servicer shall deposit in the Collection Account
     or the Distribution Account, as applicable, the amount of any loss of
     principal incurred in respect of any such Permitted Investment directed by
     the Servicer made with funds in such accounts immediately upon realization
     of such loss.

         (ii) All income and gain realized from the investment of funds
     deposited in the Pre-Funding Account and the Capitalized Interest Account
     held by or on behalf of the Unaffiliated Seller shall be retained in such
     Investment Account, subject to withdrawal as provided in Section 4.02.
     Whether in regard to the Pre-Funding Account or the Capitalized Interest
     Account, the Unaffiliated Seller shall deposit in the Pre-Funding Account
     or the Capitalized Interest Account, as applicable, the amount of any loss
     of principal incurred in respect of any such Permitted Investment made with
     funds in such accounts immediately upon realization of such loss.

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<PAGE>

         (c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings. The Trustee shall not be liable for the amount of any
loss incurred in respect of any investment or lack of investment of funds held
in any Investment Account or the Distribution Account if made in accordance with
this Section 3.12.

         (d) The Trustee or its Affiliates are permitted to receive additional
compensation that could be deemed to be in the Trustee's economic self-interest
for (i) serving as investment adviser, administrator, shareholder, servicing
agent, custodian or sub-custodian with respect to certain of the Permitted
Investments, (ii) using Affiliates to effect transactions in certain Permitted
Investments and (iii) effecting transactions in certain Permitted Investments.
Such compensation shall not be considered an amount that is reimbursable or
payable pursuant to this Agreement.

         Section 3.13 Maintenance of Hazard Insurance and Errors and Omissions
and Fidelity Coverage.

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

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<PAGE>

Such flood insurance shall be in an amount equal to the lesser of (i) the unpaid
principal balance of the related Mortgage Loan and (ii) the maximum amount of
such insurance available for the related Mortgaged Property under the national
flood insurance program (assuming that the area in which such Mortgaged Property
is located is participating in such program).

         In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
(or such other rating that is comparable to such rating) insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first two sentences of this
Section 3.13, it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property or REO Property
a policy complying with the first two sentences of this Section 3.13, and there
shall have been one or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Trustee claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.

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

         Section 3.14 Enforcement of Due-On-Sale Clauses Assumption Agreements.

         The Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not be required to take such action if, in its sole business
judgment, the Servicer believes it is not in the best interests of the Trust
Fund and shall not exercise any such rights if prohibited by law from doing so.
If the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause or if any of the

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<PAGE>

other conditions set forth in the proviso to the preceding sentence apply, the
Servicer will enter into an assumption and modification agreement from or with
the person to whom such property has been conveyed or is proposed to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. The Servicer is also authorized to enter into a substitution of
liability agreement with such person, pursuant to which the original Mortgagor
is released from liability and such person is substituted as the Mortgagor and
becomes liable under the Mortgage Note, provided that no such substitution shall
be effective unless such person satisfies the underwriting criteria of the
Servicer, has a credit risk rating at least equal to that of the original
Mortgagor. In connection with any assumption, modification or substitution, the
Servicer shall apply such underwriting standards and follow such practices and
procedures as shall be normal and usual in its general mortgage servicing
activities and as it applies to other mortgage loans owned solely by it. The
Servicer shall not take or enter into any assumption and modification agreement,
however, unless (to the extent practicable in the circumstances) it shall have
received confirmation, in writing, of the continued effectiveness of any
applicable hazard insurance policy, or a new policy meeting the requirements of
this Section is obtained. Any fee collected by the Servicer in respect of an
assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation. In connection with any such
assumption, no material term of the Mortgage Note (including, but not limited
to, the related Mortgage Rate and the amount of the Scheduled Payment) may be
amended or modified, except as otherwise required pursuant to the terms thereof.
The Servicer shall notify the Trustee that any such substitution, modification
or assumption agreement has been completed by forwarding to the Trustee the
executed original of such substitution or assumption agreement, which document
shall be added to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof.

         Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.14, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.

         Section 3.15 Realization Upon Defaulted Mortgage Loans.

         The Servicer shall use its best efforts, consistent with customary
servicing practices as described in Section 3.01, to foreclose upon or otherwise
comparably convert (which may include an acquisition of REO Property) the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07, and which are not
released from this Agreement pursuant to any other provision hereof. The
Servicer shall use reasonable efforts to realize upon such defaulted Mortgage
Loans in such manner as will maximize the receipt of principal and interest by
the Trustee, taking into account, among other things, the timing of foreclosure
proceedings. The foregoing is subject to the provisions that, in any case in
which Mortgaged Property shall have suffered damage from an uninsured

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<PAGE>

cause, the Servicer shall not be required to expend its own funds toward the
restoration of such property unless it shall determine in its sole discretion
(i) that such restoration will increase the net proceeds of liquidation of the
related Mortgage Loan to the Trustee, after reimbursement to itself for such
expenses, and (ii) that such expenses will be recoverable by the Servicer
through Insurance Proceeds or Liquidation Proceeds from the related Mortgaged
Property, as contemplated in Section 3.11. The Servicer shall be responsible for
all other costs and expenses incurred by it in any such proceedings; provided,
however, that it shall be entitled to reimbursement thereof from the related
property, as contemplated in Section 3.11.

         The proceeds of any liquidation or REO Disposition, as well as any
recovery resulting from a partial collection of Insurance Proceeds or
Liquidation Proceeds or any income from an REO Property, will be applied in the
following order of priority: first, to reimburse the Servicer or any Subservicer
for any related unreimbursed Servicing Advances, pursuant to Section 3.11 or
3.17; second, to reimburse the Servicer for any related unreimbursed P&I
Advances, pursuant to Section 3.11; third, to accrued and unpaid interest on the
Mortgage Loan or REO Imputed Interest, at the Mortgage Rate, to the date of the
liquidation or REO Disposition, or to the Due Date prior to the Remittance Date
on which such amounts are to be distributed if not in connection with a
liquidation or REO Disposition; and fourth, as a recovery of principal of the
Mortgage Loan. If the amount of the recovery so allocated to interest is less
than a full recovery thereof, that amount will be allocated as follows: first,
to unpaid Servicing Fees; and second, as interest at the Mortgage Rate (net of
the Servicing Fee Rate). The portion of the recovery so allocated to unpaid
Servicing Fees shall be reimbursed to the Servicer or any Subservicer pursuant
to Section 3.11 or 3.17. The portions of the recovery so allocated to interest
at the Mortgage Rate (net of the Servicing Fee Rate) and to principal of the
Mortgage Loan shall be applied as follows: first, to reimburse the Servicer or
any Subservicer for any related unreimbursed Servicing Advances in accordance
with Section 3.11 or 3.17, and second, to the Trustee in accordance with the
provisions of Section 4.02, subject to the last paragraph of Section 3.17 with
respect to certain excess recoveries from an REO Disposition.

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

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

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deed in lieu of foreclosure, the Servicer shall be reimbursed from general
collections for all Servicing Advances made with respect to the related
Mortgaged Property from the Collection Account pursuant to Section 3.11 hereof.

         Section 3.16 Release of Mortgage Files.

         (a) Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will, within five (5) Business
Days of the payment in full, notify the Trustee by a certification (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Custodial File. Upon receipt of such certification and request, the Trustee
shall promptly release the related Custodial File to the Servicer within five
(5) Business Days. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account.

         (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Servicer and delivery to the Trustee, of a Request for Release,
release the related Custodial File to the Servicer, and the Trustee shall, at
the direction of the Servicer, execute such documents as shall be necessary to
the prosecution of any such proceedings and the Servicer shall retain the
Mortgage File in trust for the benefit of the Trustee. Such Request for Release
shall obligate the Servicer to return each and every document previously
requested from the Custodial File to the Trustee when the need therefor by the
Servicer no longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the Servicer has delivered to the Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release of Documents shall be
released by the Trustee to the Servicer or its designee.

         Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Servicer any court pleadings, requests for trustee's
sale or other documents reasonably necessary to the foreclosure or trustee's
sale in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note or Mortgage or otherwise available at law or in equity, or shall
exercise and deliver to the Servicer a power of attorney sufficient to authorize
the Servicer to execute such documents on its behalf. Each such certification
shall include a request that such pleadings

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<PAGE>

or documents be executed by the Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Trustee will not invalidate or otherwise affect the lien of the Mortgage,
except for the termination of such a lien upon completion of the foreclosure or
trustee's sale.

         Section 3.17 Title, Conservation and Disposition of REO Property.

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

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

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

         (d) [Reserved].

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

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

         (g) The Servicer, upon an REO Disposition, shall be entitled to
reimbursement for any related unreimbursed P&I Advances and Servicing Advances
as well as

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<PAGE>

any unpaid Servicing Fees from proceeds received in connection with the REO
Disposition, as further provided in Section 3.11.

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

         (i) The Servicer shall use its reasonable best efforts to sell, or
cause the Subservicer to sell, any REO Property as soon as possible, but in no
event later than the conclusion of the third calendar year beginning after the
year of its acquisition by the REMIC unless (i) the Servicer applies for an
extension of such period from the Internal Revenue Service pursuant to the REMIC
Provisions and Code Section 856(e)(3), in which event such REO Property shall be
sold within the applicable extension period, or (ii) the Servicer obtains for
the Trustee an Opinion of Counsel, addressed to the Depositor, the Trustee and
the Servicer, to the effect that the holding by the REMIC of such REO Property
subsequent to such period will not result in the imposition of taxes on
"prohibited transactions" as defined in Section 860F of the Code or cause the
REMIC to fail to qualify as a REMIC under the REMIC Provisions or comparable
provisions of relevant state laws at any time. The Servicer shall manage,
conserve, protect and operate each REO Property for the Trustee solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) or result in the receipt by the REMIC of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code or
any "net income from foreclosure property" which is subject to taxation under
Section 860G(a)(1) of the Code. Pursuant to its efforts to sell such REO
Property, the Servicer shall either itself or through an agent selected by the
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Trustee
on behalf of the Certificateholders, rent the same, or any part thereof, as the
Servicer deems to be in the best interest of the Trustee on behalf of the
Certificateholders for the period prior to the sale of such REO Property;
provided, however, that any rent received or accrued with respect to such REO
Property qualifies as "rents from real property" as defined in Section 856(d) of
the Code.

         Section 3.18 Notification of Adjustments.

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

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deposit in the Collection Account from its own funds the amount of any interest
loss caused as such interest loss occurs.

         Section 3.19 Access to Certain Documentation and Information Regarding
the Mortgage Loans.

         The Servicer shall provide, or cause the Subservicer to provide, to the
Depositor, the Unaffiliated Seller, the Class A-1 Certificate Insurer, the
Trustee, the OTS or the FDIC and the examiners and supervisory agents thereof
access to the documentation regarding the Mortgage Loans in its possession. Such
access shall be afforded without charge, but only upon reasonable and prior
written request and during normal business hours at the offices of the Servicer
or any Subservicer. Nothing in this Section shall derogate from the obligation
of any such party to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of any such party to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.

         Section 3.20 Documents, Records and Funds in Possession of the Servicer
to be Held for the Trustee.

         The Servicer shall account fully to the Trustee for any funds received
by the Servicer or which otherwise are collected by the Servicer as Liquidation
Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All Mortgage
Files and funds collected or held by, or under the control of, the Servicer in
respect of any Mortgage Loans, whether from the collection of principal and
interest payments or from Liquidation Proceeds, including but not limited to,
any funds on deposit in the Collection Account, shall be held by the Servicer
for and on behalf of the Trustee and shall be and remain the sole and exclusive
property of the Trustee, subject to the applicable provisions of this Agreement.
The Servicer also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in any Account, or any funds that otherwise
are or may become due or payable to the Trustee for the benefit of the
Certificateholders, to any claim, lien, security interest, judgment, levy, writ
of attachment or other encumbrance, or assert by legal action or otherwise any
claim or right of setoff against any Mortgage File or any funds collected on, or
in connection with, a Mortgage Loan, except, however, that the Servicer shall be
entitled to set off against and deduct from any such funds any amounts that are
properly due and payable to the Servicer under this Agreement.

         Section 3.21 Servicing Compensation.

         (a) As compensation for its activities hereunder, the Servicer shall,
with respect to each Mortgage Loan, be entitled to retain from deposits to the
Collection Account and from Liquidation Proceeds, Insurance Proceeds and REO
Proceeds related to such Mortgage Loan, the Servicing Fee with respect to each
Mortgage Loan (less any portion of such amounts retained by any Subservicer). In
addition, the Servicer shall be entitled to recover unpaid Servicing Fees out of
related late collections to the extent permitted in Section 3.11. The right to
receive the Servicing Fee may not be transferred in whole or in part except in
connection with the transfer of all of the Servicer's responsibilities and
obligations under this Agreement; provided, however, that the Servicer may pay
from the Servicing Fee any amounts due to a Subservicer pursuant to a
Subservicing Agreement entered into under Section 3.02.

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<PAGE>

         (b) Additional servicing compensation in the form of assumption or
modification fees, late payment charges, NSF fees, reconveyance fees and other
similar fees and charges (other than Prepayment Charges) shall be retained by
the Servicer only to the extent such fees or charges are received by the
Servicer. The Servicer shall also be entitled pursuant to Section 3.11(a)(iv) to
withdraw from the Collection Account and the Distribution Account, as additional
servicing compensation, interest or other income earned on deposits therein.

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

         Section 3.22 Annual Statement as to Compliance.

         The Servicer will deliver or cause to be delivered to the Depositor,
the Rating Agencies, the Unaffiliated Seller, the Class A-1 Certificate Insurer,
and the Trustee on or before March 1 of each calendar year, commencing in 2004,
an Officers' Certificate stating, as to each signatory thereof, that (i) a
review of the activities of the Servicer during the preceding calendar year and
of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof.

         Section 3.23 Annual Independent Public Accountants' Servicing
Statement; Financial Statements.

         Not later than March 1st of each calendar year commencing in 2004, the
Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Depositor, the
Unaffiliated Seller, the Class A-1 Certificate Insurer, the Rating Agencies and
the Trustee a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed fiscal year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Subservicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Subservicers.

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         Section 3.24 Trustee to Act as Servicer.

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

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

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

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

         Section 3.25 Compensating Interest.

         The Servicer shall remit to the Trustee on each Remittance Date an
amount from its own funds equal to the Compensating Interest for the related
Distribution Date.

         Section 3.26 Credit Reporting; Gramm-Leach-Bliley Act.

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

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

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<PAGE>

         Section 3.27 Advance Facilities.

         With the prior written consent of the Class A-1 Certificate Insurer,
the Servicer is hereby authorized to enter into a financing or other facility
(an "Advance Facility") under which (l) the Servicer sells, assigns or pledges
to another Person (an "Advancing Person") the Servicer's rights under this
Agreement to be reimbursed for any Advances and/or (2) an Advancing Person
agrees to fund some or all P&I Advances or Servicing Advances required to be
made by the Servicer pursuant to this Agreement; provided, however, that the
Class A-1 Certificate Insurer hereby consents to JPMorgan Chase Bank, pursuant
to that certain 8/02 Fairbanks Capital Corp. Senior Secured Credit Agreement
dated as of August 1, 2002 by and among Fairbanks, as borrower, JPMorgan Chase
Bank, as administrative agent, collateral agent and a lender and the other
lenders party thereto (the "JPMorgan Credit Agreement"). Except as provided in
the preceding sentence, no consent of any party is required before the Servicer
may enter into an Advance Facility. Notwithstanding the existence of any Advance
Facility under which an Advancing Person agrees to fund P&I Advances and/or
Servicing Advances on the Servicer's behalf, the Servicer shall remain obligated
pursuant to this Agreement to make P&I Advances and Servicing Advances pursuant
to and as required by this Agreement, and shall not be relieved of such
obligations by virtue of such Advance Facility.

         Reimbursement amounts ("Advance Reimbursement Amounts") shall consist
solely of amounts in respect of P&I Advances and/or Servicing Advances made with
respect to the Mortgage Loans for which the Servicer would be permitted to
reimburse itself in accordance with this Agreement, assuming the Servicer had
made the related P&I Advance(s) and/or Servicing Advance(s).

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

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

         The documentation establishing any Advance Facility shall require that
Advance Reimbursement Amounts distributed with respect to each Mortgage Loan be
allocated to outstanding unreimbursed P&I Advances or Servicing Advances (as the
case may be) made with respect to that Mortgage Loan on a "first-in, first out"
(FIFO) basis. Such documentation shall also require the Servicer to provide to
the related Advancing Person or its designee loan-by-loan information with
respect to each Advance Reimbursement Amount distributed to such Advancing
Person or to a trustee or custodian (an "Advance Facility Trustee") on each
Distribution Date, to enable the Advancing Person or Advance Facility Trustee to
make the FIFO allocation of each Advance Reimbursement Amount with respect to
each Mortgage Loan. The Servicer shall remain entitled to be reimbursed pursuant
to the Advance Facility by the Advancing Person or Advance Facility Trustee for
all P&I Advances and Servicing Advances

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<PAGE>

funded by the Servicer to the extent the related rights to be reimbursed
therefor have not been sold, assigned or pledged to an Advancing Person.

         Any amendment to this Section 3.27 or to any other provision of this
Agreement that may be necessary or appropriate to effect the terms of an Advance
Facility as described generally in this Section 3.27, including amendments to
add provisions relating to a successor Servicer, may be entered into by the
Trustee, the Depositor, the Unaffiliated Seller and the Servicer without the
consent of any Certificateholder, but with the consent of the Class A-1
Certificate Insurer, notwithstanding anything to the contrary in this Agreement.
Prior to entering into an Advance Facility, the Servicer shall notify the lender
under such facility in writing that: (a) the Advances financed by and/or pledged
to the lender are obligations owed to the Servicer on a non-recourse basis
payable only from the cash flows and proceeds received under this Agreement for
reimbursement of such Advances only to the extent provided herein, and the
Trustee is not otherwise obligated or liable to repay any Advances financed by
the lender; (b) the Servicer will be responsible for remitting to the lender the
applicable amounts collected by it as reimbursement for Advances funded by the
lender, subject to the restrictions and priorities created in this Agreement;
(c) the Trustee shall not have any responsibility to track or monitor the
administration of the financing arrangement between the Servicer and the lender;
(d) if the Servicer is replaced by a successor servicer, the lender shall
continue to be entitled to receive reimbursements as provided in clause (a)
above but shall have no further right to make advances with respect to the
transaction subject to this Agreement; and (e) (i) the pledge, if any, of
Servicer's rights to the lender under the facility conveys no rights (such as a
right to fees after the removal of the Servicer or the right to become a
substitute servicer) under this Agreement, or against the Trust Fund, any
investor in or guarantor of securities issued hereunder, or any person other
than the Servicer, (ii) the Servicer is only pledging assets and rights that it
owns and any purported pledge of any assets or rights that are not property of
the Servicer shall be of force and effect and will not be deemed to create any
additional rights or assets of either the lender or the Servicer and (iii) the
lender shall take such steps as are reasonably necessary to confirm to a
successor servicer that it has no rights in any collateral due or payable on or
after the date of servicing transfer other than the Servicer's rights to
reimbursement of Advances (to be repaid pursuant to the terms of this Agreement)
for Advances made prior to such servicing transfer.

         Section 3.28. Servicer Performance Evaluations.

         Within 30 days after the reporting by the Trustee in its monthly
statement pursuant to Section 4.03 of a Cumulative Loss Percentage or the
percentage of Mortgage Loans 60 days Delinquent or more which, in either case,
would cause a Servicer Trigger to be in effect, the Depositor shall select and
notify the Trustee of such selection for engagement by the Trust Fund, at the
expense of the Servicer, a nationally recognized independent auditor, approved
in writing by the Class A-1 Certificate Insurer and the Rating Agencies unless
such Rating Agencies specifically waive such approval rights (provided, however,
that if the Trustee does not receive the written approval of any Rating Agency
within 20 days of the selection of an independent auditor, such Rating Agency
will be deemed to have approved of such auditor), to evaluate the performance of
the Servicer. Such engagement shall require the auditor to select a statistical
sample of Delinquent Mortgage Loans (comprising a percentage (determined by the
independent auditor in its sole discretion, which percentage shall not exceed
50%) of all Delinquent Mortgage Loans by unpaid principal balance as of the date
the Servicer Trigger

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<PAGE>

occurred) and to examine the Servicer's servicing practices with respect to such
Mortgage Loans (including, without limitation, examining payment histories,
documentation relating to the Servicer's contacts with the related Mortgagors
and documents contained in the related Servicing File) for the period of 24
months prior to such examination or, with respect to an examination taking place
within 24 months of the Closing Date, the period beginning on the Closing Date
and ending on the date of such examination. Such engagement shall also require
the auditor to compare such servicing practices of the Servicer with respect to
the selected Mortgage Loans to the Performance Standards set forth on Exhibit O
hereto and to evaluate the Servicer's compliance with the Performance Standards.
The evaluation process described above in this Section 3.28 is referred to
herein as a "Servicer Performance Evaluation" and is subject in all respects to
the approval of the Class A-1 Certificate Insurer and the Rating Agencies. In
the engagement, the auditor shall be required to deliver the results of its
Servicer Performance Evaluation to the Trustee, the Depositor, the Class A-1
Certificate Insurer and the Rating Agencies, within 30 days of the commencement
of the Servicer Performance Evaluation, and the Trustee shall report such
Servicer Performance Evaluation results to Certificateholders by forwarding a
copy of such results upon written request therefor.

         Within 30 days after receipt by the Class A-1 Certificate Insurer and
the Certificateholders of the results of the Servicer Performance Evaluation (or
in any case, notwithstanding the lack of receipt of such results, within 60 days
of the occurrence of the Servicer Trigger), if either the Holders of the
Certificates entitled to 51% or more of the Voting Rights or (regardless of the
results of such Servicer Performance Evaluation) the Class A-1 Certificate
Insurer requests in writing to the Trustee to terminate Fairbanks as Servicer
under this Agreement, Fairbanks shall be removed as Servicer pursuant to Section
7.01. If such a written request is made to the Trustee, Fairbanks will be deemed
to have "failed" the Servicer Performance Evaluation and an Event of Default
under Section 7.01(i) shall be deemed to have occurred.

         At their option, the Class A-1 Certificate Insurer and each Rating
Agency shall have the right to review all of the information provided to the
independent auditor in connection with a Servicer Performance Evaluation so as
to allow the Class A-1 Certificate Insurer or such Rating Agency to evaluate the
Servicer's compliance with the Performance Standards.

         The Servicer shall cooperate with all reasonable requests of the
Trustee, the independent auditor, the Class A-1 Certificate Insurer and the
Rating Agencies in connection with a Servicer Performance Evaluation, including,
without limitation, making available to the auditor payment histories,
documentation relating to the Servicer's contacts with the related Mortgagors
and documents contained in the Servicing File. The Servicer shall pay all costs
and expenses of the independent auditor, the Class A-1 Certificate Insurer, the
Trustee or any Rating Agency (including the costs of the Class A-1 Certificate
Insurer or any Rating Agency review pursuant to the foregoing paragraph)
associated with a Servicer Performance Evaluation.

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

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<PAGE>

                                   ARTICLE IV

                                DISTRIBUTIONS AND
                            ADVANCES BY THE SERVICER

         Section 4.01 Advances.

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

         (b) On the Remittance Date, the Servicer shall remit in immediately
available funds to the Trustee an amount equal to the aggregate amount of P&I
Advances, if any, to be made in respect of the Mortgage Loans and REO Properties
for the related Remittance Date either (i) from its own funds, (ii) from the
Collection Account, to the extent of funds held therein for future distribution
(in which case, it will cause to be made an appropriate entry in the records of
Collection Account that Amounts Held For Future Distribution have been, as
permitted by this Section 4.01, used by the Servicer in discharge of any such
P&I Advance) or (iii) in the form of any combination of (i) and (ii) aggregating
the total amount of P&I Advances to be made by the Servicer with respect to the
Mortgage Loans and REO Properties. Any Amounts Held For Future Distribution and
so used shall be appropriately reflected in the Servicer's records and replaced
by the Servicer by deposit in the Collection Account on or before any future
Remittance Date to the extent required.

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

         (d) Notwithstanding anything herein to the contrary, no P&I Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
P&I Advance or Servicing Advance would, if made, constitute a Nonrecoverable P&I
Advance or Nonrecoverable Advance. The determination by the Servicer that it has
made a Nonrecoverable P&I Advance or a Nonrecoverable Advance or that any
proposed P&I Advance or Servicing Advance, if made, would constitute a
Nonrecoverable P&I Advance or a Nonrecoverable

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<PAGE>

Advance, respectively, shall be evidenced by an Officers' Certificate of the
Servicer delivered to the Trustee. Further, the Servicer shall not be required
to advance Relief Act Interest Shortfalls.

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

         Section 4.02 Priorities of Distribution.

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

         (i) (x) from the Interest Amount Available, to the Class A-1
     Certificate Insurer, the Premium Amount and to the Trustee the Trustee Fee,
     in each case for such Distribution Date; to the holders of each Class of
     Certificates, in the following order of priority:

               (y) from the remaining Interest Amount Available,

               (a) to the Class A-1 and Class A-2 Certificates, pro rata, the
         Accrued Certificate Interest Distribution Amount for each such Class
         and any Unpaid Interest Amounts for such Class for each such
         Distribution Date; provided, that any shortfall in the remaining
         Interest Amount Available to pay the Accrued Certificate Interest
         Distribution Amount for the Class A-1 Certificates shall be paid from
         the related portion of any Insured Payment;

               (b) to the Class A-1 Certificate Insurer, the amount of any
         Reimbursement Amount then owing to it on account of a prior drawing
         relating to interest on the Class A-1 Certificates;

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

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

               (e) to the Class M-3 Certificates, the Accrued Certificate
         Interest Distribution Amount for such Class on such Distribution Date;

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

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

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<PAGE>

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

               (a) to the Class A-1 and Class A-2 Certificates, pro rata, until
         the Class Certificate Balance of each such Class is reduced to zero;

               (b) to the Class A-1 Certificate Insurer, the amount of any
         Reimbursement Amount then owing to it on account of a prior drawing
         relating to principal on the Class A-1 Certificates; and

               (c) sequentially to the Class M-1, Class M-2, Class M-3, Class
         B-1 and Class B-2 Certificates, in that order, until the respective
         Class Certificate Balances are reduced to zero;

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

               (a) the lesser of (x) the Principal Distribution Amount and (y)
         the Class A Principal Distribution Amount to the Class A-1 and Class
         A-2 Certificates, pro rata, until the Class Certificate Balance of each
         such class is reduced to zero;

               (b) the lesser of (x) the excess of (i) the Principal
         Distribution Amount over (ii) the amount distributed to the Class A-1
         and Class A-2 Certificateholders in clause (ii)(B)(a) above and (y) the
         amount of any Reimbursement Amount then owing to the Class A-1
         Certificate Insurer on account of a prior drawing relating to principal
         on the Class A-1 Certificates to the Class A-Certificate Insurer;

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

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

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<PAGE>

         Certificateholders, until the Class Certificate Balance thereof has
         been reduced to zero;

               (e) the lesser of (x) the excess of (i) the Principal
         Distribution Amount over (ii) the amount distributed to the Class A
         Certificateholders in clause (ii)(B)(a) above, to the Class A-1
         Certificate Insurer in clause (ii)(B)(b) above, to the Class M-1
         Certificates in clause (ii)(B)(c) above and to the Class M-2
         Certificates in clause (ii)(B)(d) above and (y) the Class M-3 Principal
         Distribution Amount to the Class M-3 Certificateholders, until the
         Class Certificate Balance thereof has been reduced to zero;

               (f) the lesser of (x) the excess of (i) the Principal
         Distribution Amount over (ii) the amount distributed to the Class A
         Certificateholders in clause (ii)(B)(a) above, to the Class A-1
         Certificate Insurer in clause (ii)(B)(b) above, to the Class M-1
         Certificates in clause (ii)(B)(c) above, to the Class M-2 Certificates
         in clause (ii)(B)(d) above to the Class M-3 Certificates in clause
         (ii)(B)(e) above and (y) the Class B-1 Principal Distribution Amount to
         the Class B-1 Certificateholders, until the Class Certificate Balance
         thereof has been reduced to zero;

               (g) the lesser of (x) the excess of (i) the Principal
         Distribution Amount over (ii) the amount distributed to the Class A
         Certificateholders in clause (ii)(B)(a) above, to the Class A-1
         Certificate Insurer in clause (ii)(B)(b) above, to the Class M-1
         Certificates in clause (ii)(B)(c) above, to the Class M-2 Certificates
         in clause (ii)(B)(d) above, to the Class M-3 Certificates in clause
         (ii)(B)(e) above and to the Class B-1 Certificates in clause (ii)(B)(f)
         above and (y) the Class B-2 Principal Distribution Amount to the Class
         B-2 Certificateholders, until the Class Certificate Balance thereof has
         been reduced to zero;

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

               (a) to the Class A-1 Certificate Insurer, to the extent of any
         remaining Reimbursement Amount then owing to it;

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

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

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

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

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               (f) to the holders of the Class M-3 Certificates, any Unpaid
         Interest Amounts for such Class;

               (g) to the holders of the Class M-3 Certificates, any Unpaid
         Realized Loss Amount for such Class;

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

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

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

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

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

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

               (n) from any Interest Rate Cap Payment on deposit in the Excess
         Reserve Fund Account with respect to that distribution date, an amount
         equal to any unpaid remaining Basis Risk CarryForward Amount with
         respect to the Class A-1 and Class A-2 Certificates for that
         Distribution Date (after giving effect to distributions pursuant to
         clause (m) above) to the Class A-1 and Class A-2 Certificates; and

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

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

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

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         (c) On the April 2003, May 2003 and June 2003 Distribution Dates, the
Trustee shall transfer from the Capitalized Interest Account to the Distribution
Account the Capitalized Interest Requirement, if any, for such Distribution
Date.

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

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

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

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

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

         (2) Second, pro rata, as a reduction of the Accrued Certificate
     Interest Distribution Amount for the Class A-1, Class A-2 Class M-1, Class
     M-2, Class M-3, Class B-1 and Class B-2 Certificates, based on the amount
     of interest to which such classes would otherwise be entitled.

         Section 4.03 Monthly Statements to Certificateholders.

         (a) Not later than each Distribution Date, the Trustee shall make
available to each Certificateholder, the Servicer, the Depositor, the
Unaffiliated Seller, the Class A-1

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

         (xvi) the Subordinated Amount and Required Subordinated Amount;

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

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

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

         (xx) the Class A-1 Deficiency Amount and the Insured Payment for such
     Distribution Date;

         (xxi) the Reimbursement Amount immediately prior to such Distribution
     Date, and the amount of any payments to the Class A-1 Certificate Insurer
     on account thereof on such Distribution Date; and

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

         (b) The Trustee's responsibility for providing the above statement is
limited to the availability, timeliness and accuracy of the information derived
from the Servicer pursuant to 4.03(d) below or, in the case of the Reimbursement
Amount, from the Class A-1 Certificate Insurer. The Trustee will provide the
above statement via the Trustee's internet website, except that the Trustee
shall deliver a hard copy of such statement to the Class A-1 Certificate Insurer
on each Distribution Date. The Trustee's website will initially be located at
https://www.corporatetrust.db.com and assistance in using the website can be
obtained by calling the Trustee's investor relations desk at 1-800-735-7777. A
paper copy of the statement will also be made available upon request.

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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         Section 4.04 Certain Matters Relating to the Determination of LIBOR.

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

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

         Section 4.05 The Class A-1 Insurance Policy.

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

         (b) If on any Distribution Date there is a Class A-1 Deficiency, the
Trustee shall complete a Notice in the form of Exhibit A to the Class A-1
Insurance Policy and submit such notice to the Class A-1 Certificate Insurer no
later than 12:00 noon New York City time on the second Business Day preceding
such Distribution Date as a claim for an Insured Payment in an amount equal to
such Class A-1 Deficiency.

         (c) The Trustee shall establish a separate Eligible Account for the
benefit of Holders of the Class A Certificates and the Class A-1 Certificate
Insurer referred to herein as the "Class A-1 Insurance Payment Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit upon receipt any amount paid under the Class

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<PAGE>

A-1 Insurance Policy in the Insurance Payment Account and distribute such amount
only for purposes of payment to the Class A-1 Certificateholders of the Class
A-1 Insured Amount and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Trustee or the Trust Fund. Amounts
paid under the Class A-1 Insurance Policy, to the extent needed to pay the Class
A-1 Insured Amount shall be transferred to the Distribution Account on the
related Distribution Date and disbursed by the Class A-1 Trustee to the Class
A-1 Certificateholders in accordance with Section 4.02. It shall not be
necessary for such payments to be made by checks or wire transfers separate from
the checks or wire transfers used to pay other distributions to the Class A-1
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A-1 Certificates
to be paid from funds transferred from the Class A-1 Insurance Payment Account
shall be noted as provided in paragraph (d) below in the Certificate Register
and in the statement to be furnished to Holders of the Class A-1 Certificates
pursuant to Section 4.03(a). Funds held in the Class A-1 Insurance Payment
Account shall not be invested. Any funds remaining in the Class A-1 Insurance
Payment Account on the first Business Day following a Distribution Date shall be
returned to the Class A-1 Certificate Insurer pursuant to the written
instructions of the Class A-1 Certificate Insurer by the end of such Business
Day.

         (d) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Class A-1 Certificate from
moneys received under the Class A-1 Insurance Policy. The Class A-1 Certificate
Insurer shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior notice to the Trustee.

         (e) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any Insured Payment has been voided in whole
or in part as a preference payment under applicable bankruptcy law, the Trustee
shall so notify the Class A-1 Certificate Insurer, shall comply with the
provisions of the Class A-1 Insurance Policy to obtain payment by the Class A-1
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Class A-1 Certificate Insurer, notify, by mail to the
Class A-1 Certificateholders of the affected Certificates that, in the event any
Class A-1 Certificateholder's Insured Payment is so recovered, such Class A-1
Certificateholder will be entitled to payment pursuant to the Class A-1
Insurance Policy, a copy of which shall be made available through the Trustee,
the Class A-1 Certificate Insurer or the Class A-1 Certificate Insurer's fiscal
agent, if any, and the Trustee shall furnish to the Class A-1 Certificate
Insurer or its fiscal agent, if any, its records evidencing the payments which
have been made by the Trustee and subsequently recovered from the Class A-1
Certificateholders, and dates on which such payments were made.

         (f) The Trustee shall promptly notify the Class A-1 Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A-1 Certificates. Each Class A-1 Certificateholder, by its purchase of
Class A-1 Certificates, the Servicer and the Trustee agree that the Class A-1
Certificate Insurer (so long as no Class A-1 Certificate Insurer Default exists)
may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to such

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<PAGE>

Preference Claim and (ii) the posting of any surety, supersedes or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Class A-1 Certificate Insurer shall be subrogated to, and each
Class A-1 Certificateholder, the Trustee hereby delegates and assigns to the
Class A-1 Certificate Insurer, to the fullest extent permitted by law, the
rights the Trustee and each Class A-1 Certificateholder in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
any adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.

         (g) The Trustee shall, upon retirement of the Class A-1 Certificates,
furnish to the Class A-1 Certificate Insurer a notice of such retirement, and,
upon retirement of the Class A-1 Certificates and the expiration of the term of
the Class A-1 Insurance Policy, surrender the Class A-1 Insurance Policy to the
Class A-1 Certificate Insurer for cancellation.

         Section 4.06 Effect of Payments by the Class A-1 Certificate Insurer;
Subrogation.

         Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Class A-1 Certificates which is made
with moneys received pursuant to the terms of the Class A-1 Insurance Policy
shall not be considered payment of the Class A-1 Certificates from the Trust
Fund. The Depositor, the Servicer and the Trustee acknowledge, and each Holder
by its acceptance of a Class A-1 Certificate agrees, that without the need for
any further action on the part of the Class A-1 Certificate Insurer, the
Depositor, the Servicer, the Trustee or the Certificate Registrar (a) to the
extent the Class A-1 Certificate Insurer makes payments, directly or indirectly,
on account of principal of or interest on the Class A-1 Certificates to the
Holders of such Class A-1 Certificates, the Class A-1 Certificate Insurer will
be fully subrogated to, and each Class A-1 Certificateholder, the Servicer and
the Trustee hereby delegate and assign to the Class A-1 Certificate Insurer, to
the fullest extent permitted by law, the rights of such Holders to receive such
principal and interest from the Trust Fund, including, without limitation, any
amounts due to the Class A-1 Certificateholders in respect of securities law
violations arising from the offer and sale of the Class A-1 Certificates, and
(b) the Class A-1 Certificate Insurer shall be paid such amounts from the
sources and in the manner provided herein for the payment of such amounts and as
provided in the Insurance and Indemnity Agreement. The Trustee and the Servicer
shall cooperate in all respects with any reasonable request by the Class A-1
Certificate Insurer for action to preserve or enforce the Class A-1 Certificate
Insurer's rights or interests under this Agreement without limiting the rights
or affecting the interests of the Holders as otherwise set forth herein.

                                    ARTICLE V

                                THE CERTIFICATES

         Section 5.01 The Certificates.

         The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the minimum
denominations, integral multiples in excess thereof (except that one Certificate
in each Class may be issued in a different

                                       89
<PAGE>

amount which must be in excess of the applicable minimum denomination) and
aggregate denominations per Class set forth in the Preliminary Statement.

         The Depositor hereby directs the Trustee to register the Class X and
the Class P Certificates initially to "CDC Mortgage Capital Inc." and then on
the Closing Date as follows: "Deutsche Bank National Trust Company, as Indenture
Trustee on behalf of the Noteholders of the CDC Mortgage Capital Inc. NIM Trust
2003-HE1N", and to deliver such Class X and Class P Certificates on the NIM
Closing Date to Deutsche Bank National Trust Company, as trustee of the NIM
Trust.

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

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

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

         Section 5.02 Certificate Register; Registration of Transfer and
Exchange of Certificates.

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

         At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate

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<PAGE>

Percentage Interest upon surrender of the Certificates to be exchanged at the
office or agency of the Trustee. Whenever any Certificates are so surrendered
for exchange, the Trustee shall execute, authenticate, and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the holder thereof or his attorney
duly authorized in writing.

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

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

         (b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws. Except
with respect to the transfer of the Class X and Class P Certificates to the NIMs
Trust on the Closing Date, in the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and such laws, in order to
assure compliance with the Securities Act and such laws, the Certificateholder
desiring to effect such transfer shall certify to the Trustee in writing the
facts surrounding the transfer in substantially the form set forth in Exhibit I
(the "Transferor Certificate") and either (i) there shall be delivered to the
Trustee a letter in substantially the form of Exhibit J (the "Rule 144A Letter")
or (ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made without registration under
the Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Servicer shall cooperate
with the Depositor in providing the Rule 144A information referenced in the
preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Depositor and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

         Except with respect to the transfer of the Class X and Class P
Certificates to the NIMs Trust on the Closing Date, no transfer of an
ERISA-Restricted Certificate shall be made unless the Trustee shall have
received either (i) a representation letter from the transferee in substantially
the form of Exhibit J, to the effect that such transferee is not an employee
benefit plan or arrangement subject to Section 406 of ERISA, a plan subject to
Section 4975 of the Code

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or a plan subject to any Federal, state or local law ("Similar Law") materially
similar to the foregoing provisions of ERISA or the Code, nor a person acting on
behalf of any such plan or arrangement nor using the assets of any such plan or
arrangement to effect such transfer, or (ii) if the ERISA-Restricted Certificate
is a Class X Certificate that has been the subject of an ERISA-Qualifying
Underwriting, and the purchaser is an insurance company, a representation that
the purchaser is an insurance company that is purchasing such Certificates with
funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") and that the purchase and holding of such Certificates are covered under
Sections I and III of PTCE 95-60. For purposes of the preceding sentence, with
respect to an ERISA-Restricted Certificate that is not a Private Certificate, in
the event the representation letter referred to in the preceding sentence is not
furnished, such representation shall be deemed to have been made to the Trustee
by the transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. In the event that such representation is
violated, such attempted transfer or acquisition shall be void and of no effect.

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

         (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

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

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

         (iii) Each Person holding or acquiring any Ownership Interest in a
     Residual Certificate shall agree (A) to obtain a Transfer Affidavit from
     any other Person to whom such Person attempts to Transfer its Ownership
     Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit from
     any Person for whom such Person is acting as nominee, trustee or agent in
     connection with any Transfer of a Residual Certificate, (C) not to Transfer
     its Ownership Interest in a Residual Certificate or to cause the Transfer
     of an Ownership Interest in a Residual Certificate to any other Person if
     it has actual knowledge that such Person (i) is not a Permitted Transferee
     or that such Transfer

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

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

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

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

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any amendment of this Agreement which, based on an Opinion of Counsel furnished
to the Trustee, is reasonably necessary (a) to ensure that the record ownership
of, or any beneficial interest in, a Residual Certificate is not transferred,
directly or indirectly, to a Person that is not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a Permitted Transferee to a Holder that is a
Permitted Transferee.

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

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

         All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Certificate Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive,
fully-registered Certificates (the "Definitive Certificates") to Certificate
Owners requesting the same. Upon surrender to the Trustee of the related Class
of Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither

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the Servicer, the Depositor nor the Trustee shall be liable for any delay in
delivery of such instruction and each may conclusively rely on, and shall be
protected in relying on, such instructions. The Depositor shall provide the
Trustee with an adequate inventory of certificates to facilitate the issuance
and transfer of Definitive Certificates. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder; provided, that the Trustee shall
not by virtue of its assumption of such obligations become liable to any party
for any act or failure to act of the Depository.

         Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Depositor, the Servicer,
the Class A-1 Certificate Insurer and the Trustee such security or indemnity as
may be required by them to hold each of them harmless, then, in the absence of
notice to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, countersign and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, tenor and Percentage Interest. In connection with the
issuance of any new Certificate under this Section 5.03, the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith. Any replacement
Certificate issued pursuant to this Section 5.03 shall constitute complete and
indefeasible evidence of ownership, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.

         Section 5.04 Persons Deemed Owners.

         The Servicer, the Trustee, the Depositor, the Class A-1 Certificate
Insurer and any agent of the Servicer, the Depositor, the Class A-1 Certificate
Insurer or the Trustee may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions as provided in this Agreement and for all other purposes
whatsoever, and neither the Servicer, the Trustee, the Depositor, the Class A-1
Certificate Insurer nor any agent of the Servicer, the Depositor, the Class A-1
Certificate Insurer or the Trustee shall be affected by any notice to the
contrary.

         Section 5.05 Access to List of Certificateholders' Names and Addresses.

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Servicer or such Certificateholders at
such recipients' expense the most recent list of the

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Certificateholders of such Trust Fund held by the Trustee, if any. The Depositor
and every Certificateholder, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any
such information as to the list of the Certificateholders hereunder, regardless
of the source from which such information was derived.

         Section 5.06 Maintenance of Office or Agency.

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

         Section 5.07 Rights of the Class A-1 Certificate Insurer to Exercise
Rights of Class A-1 Certificateholders.

         By accepting its Class A-1 Certificate, each Class A-1
Certificateholder agrees that unless a Class A-1 Certificate Insurer Default
exists, the Class A-1 Certificate Insurer shall be deemed to be the Class A-1
Certificateholders for all purposes (other than with respect to the receipt of
payment on the Class A-1 Certificates) and shall have the right to exercise all
rights of the Class A-1 Certificateholders under this Agreement and under the
Class A-1 Certificates without any further consent of the Class A-1
Certificateholders, including, without limitation:

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

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

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

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

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

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

         (g) any rights or remedies expressly given the Class A-1
Certificateholders.

         In addition, each Certificateholder agrees that, subject to Section
10.11, unless a Class A-1 Certificate Insurer Default exists, the rights
specifically enumerated above may only be exercised by the Certificateholders
with the prior written consent of the Class A-1 Certificate Insurer.

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         Section 5.08 Trustee To Act Solely with Consent of the Class A-1
Certificate Insurer.

         Unless a Class A-1 Certificate Insurer Default exists, the Trustee
shall not, without the Class A-1 Certificate Insurer's consent or unless
directed by the Class A-1 Certificate Insurer:

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

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

         (c) undertake any litigation.

         The Class A-1 Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under this Agreement or any
requirement for the Class A-1 Certificate Insurer's consent for any period of
time.

         Section 5.09 Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Class A-1 Certificate Insurer.

         (a) The Trustee shall hold the Trust Fund and the Custodial Files for
the benefit of the Certificateholders and the Class A-1 Certificate Insurer and
all references in this Agreement and in the Certificates to the benefit of
Holders of the Certificates shall be deemed to include the Class A-1 Certificate
Insurer. The Trustee shall cooperate in all reasonable respects with any
reasonable request by the Class A-1 Certificate Insurer for action to preserve
or enforce the Class A-1 Certificate Insurer's rights or interests under this
Agreement and the Class A-1 Certificates unless, as stated in an Opinion of
Counsel addressed to the Trustee and the Class A-1 Certificate Insurer, such
action is adverse to the interests of the Class A-1 Certificateholders or
diminishes the rights of the Class A-1 Certificateholders or imposes additional
burdens or restrictions on the Class A-1 Certificateholders.

         (b) The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Certificateholders and for the benefit
of the Class A-1 Certificate Insurer, and all references in this Agreement to
the benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Class A-1 Certificate Insurer.

         Section 5.10 Class A-1 Certificate Insurer Default.

         Notwithstanding anything elsewhere in this Agreement or in the
Certificates to the contrary, if a Class A-1 Certificate Insurer Default exists,
or if and to the extent the Class A-1 Certificate Insurer has delivered its
written renunciation of all of its rights under this Agreement, all provisions
of this Agreement which (a) permit the Class A-1 Certificate Insurer to exercise
rights of the Class A-1 Certificateholders, (b) restrict the ability of the
Certificateholders, the Servicer or the Trustee to act without the consent or
approval of the Class A-1 Certificate Insurer, (c) provide that a particular act
or thing must be acceptable to the Class A-1 Certificate Insurer, (d) permit the
Class A-1 Certificate Insurer to direct (or otherwise to require) the actions of
the Trustee, the Servicer or the Certificateholders, (e) provide that any action
or omission

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taken with the consent, approval or authorization of the Class A-1 Certificate
Insurer shall be authorized hereunder or shall not subject the party taking or
omitting to take such action to any liability hereunder or (f) which have a
similar effect, shall be of no further force and effect and the Trustee shall
administer the Trust Fund and perform its obligations hereunder solely for the
benefit of the Holders of the Certificates. Nothing in the foregoing sentence,
nor any action taken pursuant thereto or in compliance therewith, shall be
deemed to have released the Class A-1 Certificate Insurer from any obligation or
liability it may have to any party or to the Class A-1 Certificateholders
hereunder, under any other agreement, instrument or document (including, without
limitation, the Class A-1 Insurance Policy) or under applicable law.

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

         Section 6.01 Respective Liabilities of the Depositor and the Servicer.

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

         Section 6.02 Merger or Consolidation of the Depositor or the Servicer.

         The Depositor and the Servicer will each keep in full effect its
existence, rights and franchises as a corporation or federal savings bank, as
the case may be, under the laws of the United States or under the laws of one of
the states thereof and will each obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

         Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
the successor or surviving Person to the Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, Fannie Mae or
FHLMC.

         Section 6.03 Limitation on Liability of the Depositor, the Servicer and
Others.

         Neither the Depositor, the Servicer, the Trustee nor any of their
respective directors, officers, employees or agents shall be under any liability
to the Certificateholders for any action taken or for refraining from the taking
of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the
Depositor, the Servicer, the Trustee or any such Person against any breach of
representations or warranties made by it herein or protect the Depositor, the
Servicer, the Trustee or any such Person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or gross
negligence (or with respect to the Servicer or the Trustee, negligence) in the

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performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor and any director, officer, employee or agent of
the Depositor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Depositor, the Servicer, the Trustee and any director, officer,
employee or agent of the Depositor, the Servicer or the Trustee shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Certificates (including, as to the Trustee,
the undertaking of actions as directed by the Unaffiliated Seller or the Class
A-1 Certificate Insurer pursuant to Section 2.03), other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence (or with respect to the Servicer or the Trustee, negligence) in
the performance of their respective duties hereunder or by reason of reckless
disregard of their respective obligations and duties hereunder. The Depositor
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its respective duties hereunder and which in
its opinion may involve it in any expense or liability; provided, however, that
the Depositor may in its discretion undertake any such action (or direct the
Trustee to undertake any such actions pursuant to Section 2.03 hereof for the
benefit of the Certificateholders) that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
interests of the Trustee and the Certificateholders hereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor shall be entitled to be reimbursed therefor out of the Collection
Account.

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

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         Section 6.04 Limitation on Resignation of the Servicer.

         The Servicer shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Depositor and the Trustee or upon the determination that its
duties hereunder are no longer permissible under applicable law and such
incapacity cannot be cured by the Servicer. Any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered to the Depositor and the Trustee which Opinion of Counsel
shall be in form and substance acceptable to the Depositor and the Trustee. No
such resignation shall become effective until a successor shall have assumed the
Servicer's responsibilities and obligations hereunder.

         Section 6.05 Additional Indemnification by the Servicer; Third Party
Claims.

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

                                   ARTICLE VII

                                     DEFAULT

         Section 7.01 Events of Default.

         "Event of Default", wherever used herein, means any one of the
following events:

         (a) any failure by the Servicer to remit to the Trustee any payment
required to be made under the terms of this Agreement which continues unremedied
for a period of one Business Day after the date upon which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Depositor, by the Class A-1 Certificate Insurer or by the
Trustee or to the Trustee by Certificateholders evidencing percentage interests
of at least 25% in the Certificates; or

         (b) failure on the part of the Servicer duly to observe or perform in
any material respect any other of the covenants or agreements on the part of the
Servicer set forth in

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this Agreement which continues unremedied for a period of forty-five days
(except that such number of days shall be fifteen in the case of a failure to
pay any premium for any insurance policy required to be maintained under this
Agreement) after the earlier of (i) the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Depositor, by the Class A-1 Certificate Insurer, or by the
Trustee, or to the Trustee by Certificateholders of Certificates evidencing
percentage interests of at least 25% in the Certificates and (ii) actual
knowledge of such failure by a Servicing Officer of the Servicer; or

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

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

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

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

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

         (h) a breach of any representation and warranty of the Servicer
referred to in Section 2.03(a), which materially and adversely affects the
interests of the Certificateholders and which continues unremedied for a period
of thirty days after the earlier of (i) the date upon which written notice of
such breach is given to the Servicer by the Trustee or the Depositor, or to the
Servicer, the Depositor and the Trustee by any Certificateholders entitled to at
least 25% of the Voting Rights in the Certificates or by the Class A-1
Certificate Insurer and (ii) actual knowledge of such breach by a Servicing
Officer of the Servicer;

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

         If (i) an Event of Default described in clauses (a) through (h) of this
Section 7.01 shall occur, then, and in each and every such case, so long as such
Event of Default shall not have been remedied, the Trustee may, or at the
direction of the Class A-1 Certificate Insurer, or of Holders holding at least
51% of the Voting Rights, the Trustee shall, or (ii) if an Event of

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Default described in clause (i) of this Section 7.01 shall occur, then the
Trustee shall, by notice in writing to the Servicer (with a copy to each Rating
Agency), terminate all of the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, other than
its rights as a Certificateholder hereunder; provided, however, that the Trustee
shall not be required to give written notice to the Servicer of the occurrence
of an Event of Default described in clauses (b) through (i) of this Section 7.01
unless and until a Responsible Officer of the Trustee has actual knowledge of
the occurrence of such an Event of Default. On and after the receipt by the
Servicer of such written notice, all authority and power of the Servicer
hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass
to and be vested in the Trustee. The Trustee shall make any P&I Advance which
the Servicer failed to make subject to Section 4.01, whether or not the
obligations of the Servicer have been terminated pursuant to this Section. The
Trustee is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Servicer to pay
amounts owed pursuant to Article VIII. The Servicer agrees to cooperate with the
Trustee in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the Trustee of
all cash amounts which shall at the time be credited to the Collection Account,
or thereafter be received with respect to the Mortgage Loans.

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

         Section 7.02 Trustee to Act; Appointment of Successor.

         On and after the time the Servicer receives a notice of termination
pursuant to Section 3.24 or Section 7.01, the Trustee shall, unless the Class
A-1 Certificate Insurer shall have named an alternative successor Servicer and
given written notice thereof to the Trustee of at least 30 days prior to the
effective date of the transfer of servicing to such successor, subject to and to
the extent provided in Section 3.05, be the successor to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof and applicable law including the obligation to make P&I Advances or
Servicing Advances pursuant to Section 4.01. As compensation therefor, the
Trustee shall be entitled to all funds relating to the Mortgage Loans that the
Servicer would have been entitled to charge to the Collection Account or
Distribution Account if the Servicer had continued to act hereunder including,
if the Servicer was receiving the Servicing Fee, the Servicing Fee and the
income on investments or gain related to the Collection Account and Distribution
Account.

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         Notwithstanding the foregoing, if the Trustee has become the successor
to the Servicer in accordance with Section 7.01, the Trustee may, if it shall be
unwilling to so act, or shall, if it is prohibited by applicable law from making
P&I Advances and Servicing Advances pursuant to Section 4.01 or if it is
otherwise unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment of which does not adversely affect the then current rating of the
Certificates by each Rating Agency, as the successor to the Servicer hereunder
in the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer hereunder. Any successor to the Servicer shall be an
institution which is a Fannie Mae and FHLMC approved seller/servicer in good
standing, which has a net worth of at least $30,000,000, which is willing to
service the Mortgage Loans and which executes and delivers to the Depositor and
the Trustee an agreement accepting such delegation and assignment, containing an
assumption by such Person of the rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer (other than liabilities of the
Servicer under Section 6.03 incurred prior to termination of the Servicer under
Section 7.01), with like effect as if originally named as a party to this
Agreement; provided that each Rating Agency acknowledges that its rating of the
Certificates in effect immediately prior to such assignment and delegation will
not be qualified or reduced, as a result of such assignment and delegation.
Pending appointment of a successor to the Servicer hereunder, the Trustee,
unless the Trustee is prohibited by law from so acting, shall, subject to
Section 3.05, act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of the Servicing Fee Rate and amounts paid to the Servicer from
investments. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor servicer shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof or any failure to perform, or any
delay in performing, any duties or responsibilities hereunder, in either case
caused by the failure of the Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.

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

         Section 7.03 Notification to Certificateholders.

         (a) Upon any termination of or appointment of a successor to the
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders, the Class A-1 Certificate Insurer, the Unaffiliated Seller
and to each Rating Agency.

         (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders, the Class A-1
Certificate Insurer, the Unaffiliated Seller and each Rating Agency notice of
each such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.

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                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

         Section 8.01 Duties of the Trustee.

         The Trustee, before the occurrence of an Event of Default and after the
curing of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

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

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

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

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

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

         (c) the Trustee shall not be liable with respect to any action taken,
suffered, or omitted to be taken by it in good faith in accordance with the
direction of the Class A-1 Certificate Insurer, or of Holders of Certificates
evidencing not less than 25% of the Voting Rights of Certificates relating to
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Agreement.

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         Section 8.02 Certain Matters Affecting the Trustee.

         Except as otherwise provided in Section 8.01:

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

         (b) the Trustee may consult with counsel, financial advisers or
accountants and the advice of any such counsel, financial advisers or
accountants and any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;

         (c) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement;

         (d) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing so to do by the Class A-1 Certificate
Insurer, or by Holders of Certificates evidencing not less than 25% of the
Voting Rights allocated to each Class of Certificates;

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

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

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

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

         (i) the Trustee shall be under no obligation to exercise any of the
trusts, rights or powers vested in it by this Agreement or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Certificateholders, pursuant to this Agreement,
unless such Certificateholders shall have offered to the Trustee

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

         Section 8.03 Trustee Not Liable for Certificates or Mortgage Loans.

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

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

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

         Section 8.04 Trustee May Own Certificates.

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

         Section 8.05 Trustee's Fees and Expenses.

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

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

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         Section 8.06 Eligibility Requirements for the Trustee.

         The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having provided such
security from time to time as is sufficient to avoid such reduction) as
evidenced in writing by each Rating Agency. If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.06 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with this
Section 8.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.07. The entity serving as Trustee may have normal
banking and trust relationships with the Depositor and its affiliates or the
Servicer and its affiliates; provided, however, that such entity cannot be an
affiliate of the Depositor, the Unaffiliated Seller or the Servicer other than
the Trustee in its role as successor to the Servicer.

         Section 8.07 Resignation and Removal of the Trustee.

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor, the
Servicer, the Class A-1 Certificate Insurer, the Unaffiliated Seller, each
Rating Agency not less than 60 days before the date specified in such notice,
when, subject to Section 8.08, such resignation is to take effect, and
acceptance by a successor trustee in accordance with Section 8.08 meeting the
qualifications set forth in Section 8.06. If no successor trustee meeting such
qualifications shall have been so appointed and have accepted appointment within
30 days after the giving of such notice or resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with Section 8.06 and shall fail to resign after written request thereto by the
Depositor, or if at any time the Trustee shall become incapable of acting, or
shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or a tax is imposed with respect to
the Trust Fund by any state in which the Trustee or the Trust Fund is located
and the imposition of such tax would be avoided by the appointment of a
different trustee, then the Depositor or the Servicer may remove the Trustee and
appoint a successor trustee reasonably acceptable to the Class A-1 Certificate
Insurer by written instrument, in triplicate, one copy of which shall be
delivered to the Trustee, one copy to the Servicer and one copy to the successor
trustee.

         The Class A-1 Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights may at any time remove the Trustee
and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by such Holders or their attorneys-in-fact

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<PAGE>

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

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

         Section 8.08 Successor Trustee.

         Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Class A-1 Certificate Insurer, the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties, and obligations.

         No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of its acceptance, the successor trustee is
eligible under Section 8.06 and its appointment does not adversely affect the
then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Depositor.

         Section 8.09 Merger or Consolidation of the Trustee.

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

         Section 8.10 Appointment of Co-Trustee or Separate Trustee.

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and

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to vest in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund or any part thereof, whichever
is applicable, and, subject to the other provisions of this Section 8.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider appropriate. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request to do so, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 8.08.

         Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

         (a) To the extent necessary to effectuate the purposes of this Section
8.10, all rights, powers, duties and obligations conferred or imposed upon the
Trustee, except for the obligation of the Trustee under this Agreement to
advance funds on behalf of the Servicer, shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular act or
acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the applicable Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the Trustee;

         (b) No trustee hereunder shall be held personally liable because of any
act or omission of any other trustee hereunder and such appointment shall not,
and shall not be deemed to, constitute any such separate trustee or co-trustee
as agent of the Trustee;

         (c) The Trustee may at any time accept the resignation of or remove any
separate trustee or co-trustee; and

         (d) The Trustee, and not the Servicer, shall be liable for the payment
of reasonable compensation and expenses to any such separate trustee or
co-trustee from the Trustee Fee payable to the Trustee on each Distribution
Date.

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

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

         Section 8.11 Tax Matters.

         As set forth in the Preliminary Statement, the assets within the Trust
Fund for which any REMIC election is to be made shall constitute, and the
conduct of matters relating to such assets shall be consistent with the
treatment of such assets as, a REMIC. To this end, the Trustee covenants and
agrees to act as agent (and the Trustee is hereby appointed to act as agent) on
behalf of any REMIC created hereunder, and that in such capacity it shall:

         (a) prepare and file in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted by
the Internal Revenue Service) and prepare and file with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to any REMIC described in the
Preliminary Statement containing such information and at the times and in the
manner as may be required by the Code or state or local tax laws, regulations,
or rules, and furnish to Certificateholders the schedules, statements or
information at such times and in such manner as may be required thereby;

         (b) within thirty days of the Closing Date, furnish to the Internal
Revenue Service on Form 8811 or as otherwise may be required by the Code, the
name, title, address, and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code;

         (c) make an election that each of the Lower Tier REMIC and the Upper
Tier REMIC be treated as a REMIC on the federal tax return for its first taxable
year (and, if necessary, under applicable state law);

         (d) prepare and forward to the Certificateholders and to the Internal
Revenue Service and, if necessary, state tax authorities, all information
returns and reports as and when required to be provided to them in accordance
with the REMIC Provisions, including the calculation of any original issue
discount using the Prepayment Assumption (as defined in the Prospectus
Supplement);

         (e) provide information necessary for the computation of tax imposed on
the transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and furnishing such information may be charged to the Person liable for such
tax);

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<PAGE>

         (f) to the extent that they are under its control, conduct matters
relating to such assets at all times that any Certificates are outstanding so as
to maintain the status as a REMIC under the REMIC Provisions;

         (g) not knowingly or intentionally take any action or omit to take any
action that would cause the termination of the REMIC status of any REMIC created
hereunder;

         (h) pay, from the sources specified in the last paragraph of this
Section 8.11, the amount of any federal or state tax, including prohibited
transaction taxes as described below, imposed on any REMIC created hereunder
before its termination when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings);

         (i) cause federal, state or local income tax or information returns to
be signed by the Trustee or such other person as may be required to sign such
returns by the Code or state or local laws, regulations or rules;

         (j) maintain records relating to each REMIC created hereunder,
including the income, expenses, assets, and liabilities thereof on a calendar
year basis and on the accrual method of accounting and the fair market value and
adjusted basis of the assets determined at such intervals as may be required by
the Code, as may be necessary to prepare the foregoing returns, schedules,
statements or information; and

         (k) as and when necessary and appropriate, represent each REMIC created
hereunder in any administrative or judicial proceedings relating to an
examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of each REMIC created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of any REMIC created
hereunder, and otherwise act on behalf of the REMIC in relation to any tax
matter or controversy involving it.

         The Trustee shall treat the rights of the Class P Certificateholders to
Prepayment Charges as the beneficial ownership of interests in a grantor trust,
and not as an obligation of any REMIC created hereunder, for federal income tax
purposes.

         To enable the Trustee to perform its duties under this Agreement, the
Depositor shall provide to the Trustee within ten days after the Closing Date
all information or data that the Trustee requests in writing and determines to
be relevant for tax purposes to the valuations and offering prices of the
Certificates, including the price, yield, prepayment assumption, and projected
cash flows of the Certificates and the Mortgage Loans. Moreover, the Depositor
shall provide information to the Trustee concerning the value to each Class of
Certificates of the right to receive Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account. Thereafter, the Depositor shall provide to the
Trustee promptly upon written request therefor any additional information or
data that the Trustee may, from time to time, reasonably request to enable the
Trustee to perform its duties under this Agreement. The Depositor hereby

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indemnifies the Trustee for any losses, liabilities, damages, claims, or
expenses of the Trustee arising from any errors or miscalculations of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

         If any tax is imposed on "prohibited transactions" of any REMIC created
hereunder as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of such REMIC as defined in Section 860G(c) of the Code,
on any contribution to the REMIC after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including any minimum tax
imposed on the REMIC pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for herein, the tax
shall be paid by (i) the Trustee if such tax arises out of or results from
negligence of the Trustee in the performance of any of its obligations under
this Agreement, (ii) the Servicer if such tax arises out of or results from a
breach by the Servicer of any of its obligations under this Agreement, (iii) the
Unaffiliated Seller shall pay if such tax arises out of or results from the
Unaffiliated Seller's obligation to repurchase a Mortgage Loan pursuant to
Section 2.03, or (iv) in all other cases, or if the Trustee, the Servicer or the
Unaffiliated Seller fails to honor its obligations under the preceding clauses
(i) or (ii), any such tax will be paid with amounts otherwise to be distributed
to the Certificateholders, as provided in Section 4.02(a).

         Section 8.12 Periodic Filings.

         (a) The Trustee and the Servicer shall reasonably cooperate with the
Depositor in connection with the Trust's satisfying the reporting requirements
under the Securities Exchange Act of 1934, as amended. The Trustee shall prepare
on behalf of the Trust any Forms 8-K and 10-K customary for similar securities
as required by the Exchange Act and the Rules and Regulations of the Securities
and Exchange Commission (the "SEC") thereunder, and the Trustee shall file (via
the SEC's Electronic Data Gathering and Retrieval System) such Forms with the
SEC on behalf of the Depositor. The Depositor hereby grants to the Trustee a
limited power of attorney to execute and file each such Form 8-K but only to the
extent no accompanying certification is required to be filed on behalf of the
Depositor. Such power of attorney shall continue until either the earlier of (i)
receipt by the Trustee from the Depositor of written termination of such power
of attorney and (ii) the termination of the Trust. The Depositor shall execute
the Form 10-Ks. The Trustee shall have no liability with respect to any failure
to properly prepare or file such periodic reports resulting from or relating to
the Trustee's inability or failure to obtain any information not resulting from
its own negligence or willful misconduct.

         (b) Each Form 8-K shall be filed by the Trustee with the SEC within 15
days after each Distribution Date, including a Form 8-K with a copy of the
statement to the Certificateholders for such Distribution Date as an exhibit
thereto. Prior to March 30th of each year (or such earlier date as may be
required by the Exchange Act and the Rules and Regulations of the SEC), the
Trustee shall file a Form 10-K, in substance. as required by applicable law or
the SEC's staff interpretations. Such Form 10-K shall include as exhibits the
Servicer's annual statement of compliance described under Section 3.22 (upon
which the Trustee may RELY) and the accountant's report described under Section
3.23, in each case to the extent they have been timely delivered to the Trustee.
If they are not so timely delivered, the Trustee shall file an amended Form 10-K
including such documents as exhibits reasonably promptly after they are

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delivered to the Trustee. The Form 10-K shall also include a certification in
the form attached hereto as Exhibit M (the "Certification"), which shall be
signed by the senior officer of the Depositor in charge of securitization. The
Trustee shall prepare and deliver each Form 10-K to the Depositor for execution
no later than March 20th (or if such day is not a Business Day, the immediately
preceding Business Day) of each year. The Depositor shall return the executed
Form 10-K to the Trustee for filing no later than March 25th (or if such day is
not a Business Day, the immediately preceding Business Day) of each year.

         (c) Notwithstanding that the Certification is to be signed by an
officer of the Depositor, a Responsible Officer of the Trustee shall sign a
certification, in the form attached hereto as Exhibit N for the benefit of the
Depositor and its officers, directors and Affiliates in respect of items 1
through 3 thereof of the Certification (provided, however, that the Trustee
shall not undertake an analysis of the accountant's report attached as an
exhibit to the Form 10-K), and a Servicing Officer of the Servicer who is
responsible for the servicing and administration of the Mortgage Loans shall
sign a certification in the form attached hereto as Exhibit N for the benefit of
the Depositor, the Trustee and their respective officers, directors and
Affiliates in respect of items 4 and 5 of the Certification. Each such
certification shall be delivered to the Depositor and the Trustee (as
applicable), no later than March 10th of each year (or if such day is not a
Business Day, the immediately preceding Business Day) and the Depositor shall
deliver the Certification to be filed to the Trustee no later than March 20th of
each year (or if such day is not a Business Day, the immediately preceding
Business Day). In the event that prior to the filing date of the Form 10-K in
March of each year, the Trustee or the Servicer has actual knowledge of
information material to the Certification, that party shall promptly notify the
Depositor and each of the other parties signing the certifications. In addition,
(i) the Trustee shall indemnify and hold harmless the Depositor and its
officers, directors and Affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments and other costs and expenses arising out of or based upon any
breach of the Trustee's obligations under this Section 8.12(c) or the Trustee's
negligence, bad faith or willful misconduct in connection therewith and (ii) the
Servicer shall indemnify and hold harmless the Depositor, the Trustee and their
respective officers, directors and Affiliates from and against any losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon any breach of the Servicer's obligations under this Section 8.12(c) or the
Servicer's negligence, bad faith or willful misconduct in connection therewith.
If the indemnification provided for herein is unavailable or insufficient to
hold harmless the indemnified party then (i) the Trustee agrees in connection
with a breach of the Trustee's obligations under this Section 8.12(c) or the
Trustee's negligence, bad faith or willful misconduct in connection therewith
that it shall contribute to the amount paid or payable by the Depositor as a
result of the losses, claims, damages or liabilities of the Depositor in such
proportion as is appropriate to reflect the relative fault of the Depositor on
the one hand and the Trustee on the other and (ii) the Servicer agrees that it
shall contribute to the amount paid or payable by the Depositor and/or the
Trustee as a result of the losses, claims, damages or liabilities of the
Depositor and/or the Trustee in such proportion as is appropriate to reflect the
relative fault of the Depositor and the Trustee, as the case may be, on the one
hand and the Servicer on the other in connection with a breach of the Servicer's
obligations under this Section 8.12(c) or the Servicer's negligence, bad faith
or willful misconduct in connection therewith.

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         (d) Upon any filing with the Securities and Exchange Commission, the
Trustee shall promptly deliver to the Depositor a copy of any such executed
report, statement or information.

         (e) Prior to January 30 of the first year in which the Trustee is able
to do so under applicable law, the Trustee shall, in accordance with applicable
law, file a Form 15D Suspension Notification with respect to the Trust Fund in a
timely manner.

         Section 8.13 Tax Classification of Certain Accounts.

         For federal income tax purposes, the Trustee shall treat the Excess
Reserve Fund Account as an outside reserve fund, within the meaning of Treasury
Regulation (Section) 1.860G-2(h), that is beneficially owned by the holder of
the Class X Certificate. The Trustee shall treat the rights that each Class of
Certificates has to receive payments of Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account as rights to receive payments under an interest rate
cap contract written by the Class X Certificateholder in favor of each Class.
Accordingly, each Class of Certificates (excluding the Class X, Class P and
Class R Certificates) will comprise two components - an Upper Tier Regular
Interest and an interest in a notional principal contract. The Trustee shall
allocate the issue price for a Class of Certificates between such two components
for purposes of determining the issue price of the Upper Tier Regular Interest
component based on information received from the Depositor.

         Section 8.14 Cap Agreement.

         The Trustee is hereby authorized and directed to execute and deliver
the Cap Agreement and to acknowledge the provisions thereof.

                                   ARTICLE IX

                                   TERMINATION

         Section 9.01 Termination upon Liquidation or Purchase of the Mortgage
Loans.

         Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Servicer and the Trustee created hereby with respect to the Trust
Fund shall terminate upon the earlier of (a) the purchase, on or after the
applicable Optional Termination Date, by the Servicer or the Class X
Certificateholders of all Mortgage Loans (and REO Properties) at the price equal
to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan
(other than in respect of REO Property) plus one month's accrued interest
thereon at the applicable Adjusted Mortgage Rate and (ii) the lesser of (x) the
appraised value of any REO Property as determined by the higher of two
appraisals completed by two independent appraisers selected by the Servicer at
the expense of the Servicer and (y) the Stated Principal Balance of each
Mortgage Loan related to any REO Property, in each case plus accrued and unpaid
interest thereon at the applicable Adjusted Net Mortgage Rate and (b) the later
of (i) the maturity or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO Property and (ii) the distribution to Certificateholders of all amounts
required to be distributed to them pursuant to this Agreement. In no event shall
the trusts created hereby continue beyond the expiration of 21 years from the
death of the survivor of the

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descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James's, living on the date hereof.

         No such purchase will be permitted without the consent of the Class A-1
Certificate Insurer, unless no draw on the Class A-1 Insurance Policy would be
made or unreimbursed on the final Distribution Date.

         Section 9.02 Final Distribution on the Certificates.

         If on any Determination Date, the Servicer determines that there are no
Outstanding Mortgage Loans and no other funds or assets in the Trust Fund other
than the funds in the Collection Account, the Servicer shall direct the Trustee
promptly to send a Notice of Final Distribution each Certificateholder. If the
Servicer or the Class X Certificateholder elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.01, at least 20 days prior to the date the
Notice of Final Distribution is to be mailed to the affected Certificateholders
such electing party shall notify the Depositor and the Trustee of the date the
Servicer or the Class X Certificateholder intends to terminate the Trust Fund
and of the applicable repurchase price of the Mortgage Loans and REO Properties.

         A Notice of Final Distribution, specifying the Distribution Date on
which Certificateholders may surrender their Certificates for payment of the
final distribution and cancellation, shall be given promptly by the Trustee by
letter to Certificateholders mailed not earlier than the 10th day and not later
than the 15th day of the month next preceding the month of such final
distribution. Any such Notice of Final Distribution shall specify (a) the
Distribution Date upon which final distribution on the Certificates will be made
upon presentation and surrender of Certificates at the office therein
designated, (b) the amount of such final distribution, (c) the location of the
office or agency at which such presentation and surrender must be made, and (d)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Trustee will give such Notice
of Final Distribution to each Rating Agency at the time such Notice of Final
Distribution is given to Certificateholders.

         In the event such Notice of Final Distribution is given, the Servicer
shall cause all funds in the Collection Account to be remitted to the Trustee
for deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Servicer the Custodial Files for the
Mortgage Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in each case on
the final Distribution Date and in the order set forth in Section 4.02, in
proportion to their respective Percentage Interests, with respect to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates (except the Class X Certificate), the Certificate Balance
thereof plus for each such Class and the Class X Certificate accrued interest
thereon in the case of an interest-bearing Certificate and (ii) as to the
Residual Certificates, the amount, if any, which remains on deposit

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in the Distribution Account (other than the amounts retained to meet claims)
after application pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets of the Trust Fund
which remain subject hereto.

         Section 9.03 Additional Termination Requirements.

         In the event the Servicer or the Class X Certificateholder, as
applicable, exercises its purchase option with respect to the Mortgage Loans as
provided in Section 9.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Servicer or the Class X
Certificateholder, as applicable, to the effect that the failure to comply with
the requirements of this Section 9.03 will not (i) result in the imposition of
taxes on "prohibited transactions" on either REMIC as defined in Section 860F of
the Code, or (ii) cause either the Lower Tier REMIC or the Upper Tier REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding:

         (a) The Trustee shall sell all of the assets of the Trust Fund to the
Servicer or the Class X Certificateholder, as applicable, and, within 90 days of
such sale, shall distribute to the Certificateholders the proceeds of such sale
in complete liquidation of each of the Lower Tier REMIC and the Upper Tier
REMIC.

         (b) The Trustee shall attach a statement to the final federal income
tax return for each of the Lower Tier REMIC and the Upper Tier REMIC stating
that pursuant to Treasury Regulation (Section) 1.860F-1, the first day of the
90-day liquidation period for each such REMIC was the date on which the Trustee
sold the assets of the Trust Fund to the Servicer or the Class X
Certificateholder, as applicable.

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

         Section 10.01 Amendment.

         This Agreement may be amended from time to time (x) by the Depositor,
the Servicer and the Trustee, with the prior written consent of the Class A-1
Certificate Insurer, (y) with the consent of the Unaffiliated Seller unless the
Trustee receives an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund) stating that

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the amendment will not adversely affect the Unaffiliated Seller, but (z) without
the consent of any of the Certificateholders (i) to cure any ambiguity or
mistake, (ii) to correct any defective provision herein or to supplement any
provision herein which may be inconsistent with any other provision herein,
(iii) to add to the duties of the Depositor or the Servicer, (iv) to add any
other provisions with respect to matters or questions arising hereunder or (v)
to modify, alter, amend, add to or rescind any of the terms or provisions
contained in this Agreement; provided, that any action pursuant to clauses (iv)
or (v) above shall not, as evidenced by an Opinion of Counsel (which Opinion of
Counsel shall not be an expense of the Trustee or the Trust Fund), adversely
affect in any material respect the interests of any Certificateholder; and
provided, further, that the amendment shall not be deemed to adversely affect in
any material respect the interests of the Certificateholders if the Person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Certificates; it being understood and
agreed that any such letter in and of itself will not represent a determination
as to the materiality of any such amendment and will represent a determination
only as to the credit issues affecting any such rating.

         In addition, this Agreement may also be amended from time to time (x)
by the Trustee, the Depositor and the Servicer, with the prior written consent
of the Class A-1 Certificate Insurer, and (y) with the consent of the
Unaffiliated Seller unless the Trustee receives an Opinion of Counsel (which
Opinion of Counsel shall not be an expense of the Trustee or the Trust Fund)
stating that the amendment will not adversely affect the Unaffiliated Seller,
but (z) without the consent of the Certificateholders, to modify, eliminate or
add to any of its provisions to such extent as shall be necessary or helpful to
(i) maintain the qualification of the Lower Tier REMIC and the Upper Tier REMIC
under the Code, (ii) avoid or minimize the risk of the imposition of any tax on
the Lower Tier REMIC or the Upper Tier REMIC pursuant to the Code that would be
a claim at any time prior to the final redemption of the Certificates or (iii)
comply with any other requirements of the Code; provided, that the Trustee has
been provided an Opinion of Counsel, which opinion shall be an expense of the
party requesting such opinion but in any case shall not be an expense of the
Trustee or the Trust Fund, to the effect that such action is necessary or
helpful to, as applicable, (i) maintain such qualification, (ii) avoid or
minimize the risk of the imposition of such a tax or (iii) comply with any such
requirements of the Code.

         This Agreement may also be amended from time to time (x) by the
Depositor, the Servicer and the Trustee, with the prior written consent of the
Class A-1 Certificate Insurer, (y) with the consent of the Unaffiliated Seller
unless the Trustee receives an Opinion of Counsel (which Opinion of Counsel
shall not be an expense of the Trustee or the Trust Fund) stating that the
amendment will not adversely affect the Unaffiliated Seller, and (z), except as
set forth in Section 3.27, with the consent of the Holders of Certificates
evidencing Percentage Interests aggregating not less than 66-2/3% of each Class
of Certificates (based on the aggregate outstanding principal balance of such
class at such time) affected thereby, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the

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consent of the Holders of Certificates of such Class evidencing, as to such
Class, Percentage Interests aggregating not less than 66-2/3%, or (iii) reduce
the aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC or the Certificateholders or cause any REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

         Notwithstanding the foregoing provisions of this Section 10.01, with
respect to any amendment that significantly modifies the permitted activities of
the Trustee or the Servicer, any Certificate beneficially owned by the
Depositor, the Unaffiliated Seller or any of their respective Affiliates shall
be deemed not to be outstanding (and shall not be considered when determining
the percentage of Certificateholders consenting or when calculating the total
number of Certificates entitled to consent) for purposes of determining if the
requisite consents of Certificateholders under this Section 10.01 have been
obtained.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section 10.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

         Section 10.02 Recordation of Agreement; Counterparts.

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at its expense, but only upon
receipt of an Opinion of Counsel to the effect that such recordation materially
and beneficially affects the interests of the Certificateholders.

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         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

         Section 10.03 Governing Law.

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         Section 10.04 Intention of Parties.

         It is the express intent of the parties hereto that the conveyance (i)
of the Mortgage Loans by the Depositor and (ii) of the Trust Fund by the
Depositor to the Trustee each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that, notwithstanding the intent of the
parties, such assets are held to be the property of the Depositor, as the case
may be, or if for any other reason this Agreement is held or deemed to create a
security interest in either such assets, then (i) this Agreement shall be deemed
to be a security agreement within the meaning of the Uniform Commercial Code of
the State of New York and (ii) the conveyances provided for in this Agreement
shall be deemed to be an assignment and a grant by the Depositor to the Trustee,
for the benefit of the Certificateholders, of a security interest in all of the
assets transferred, whether now owned or hereafter acquired.

         The Depositor for the benefit of the Certificateholders and of the
Class A-1 Certificate Insurer shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Trust Fund, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of the Agreement. The Depositor shall arrange for filing any Uniform Commercial
Code continuation statements in connection with any security interest granted or
assigned to the Trustee for the benefit of the Certificateholders.

         Section 10.05 Notices.

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:

         1. Any material change or amendment to this Agreement;

         2. The occurrence of any Event of Default that has not been cured;

         3. The resignation or termination of the Servicer or the Trustee and
the appointment of any successor;

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         4. The repurchase or substitution of Mortgage Loans pursuant to Section
2.03; and

         5. The final payment to Certificateholders.

         (b) In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:

         1. Each report to Certificateholders described in Section 4.03; and

         2. Any notice of a purchase of a Mortgage Loan pursuant to Section
2.02, 2.03 or 3.11.

         All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered to (a) in the case of the
Depositor or the Representative, Morgan Stanley ABS Capital I Inc. or Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention:
Michelle Wilke, Esq., (b) in the case of the Servicer, Fairbanks Capital Corp.,
3815 South West Temple, Salt Lake City, Utah 84165, Attention: General Counsel,
or such other address as may be hereafter furnished to the parties hereto in
writing, (c) in the case of the Trustee to the Corporate Trust Office, Deutsche
Bank National Trust Company, 1761 East St. Andrew Place, Santa Ana, California
92705-4934, Attention: Trust Administration DC03M1, or such other address as the
Trustee may hereafter furnish to the parties hereto, (d) in the case of the
Unaffiliated Seller, CDC Mortgage Capital, Inc., 9 West 57th Street, New York,
New York 10019, Attention General Counsel, or such other address as the
Unaffiliated Seller may hereafter furnish to the parties hereto, (e) in the case
of each of the Rating Agencies, the address specified therefor in the definition
corresponding to the name of such Rating Agency and (f) in the case of any
Originator, the address specified therefor in the applicable Mortgage Loan
Purchase Agreement. Notices to Certificateholders shall be deemed given when
mailed, first class postage prepaid, to their respective addresses appearing in
the Certificate Register.

         Section 10.06 Severability of Provisions.

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

         Section 10.07 Assignment.

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Servicer
without the prior written consent of the Trustee, the Class A-1 Certificate
Insurer and Depositor; provided, however, that, subject to Section 3.27, the
Servicer may pledge or sell its interest in any reimbursements for P&I Advances
or Servicing Advances hereunder. Notwithstanding anything to the contrary
herein, the Servicer, with the prior written consent of the Class A-1
Certificate Insurer, may pledge or assign as collateral all of its rights, title
and interest (but none of its obligations) under

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this Agreement to a lender financing the purchase of the servicing rights with
respect to the Mortgage Loans; provided, that such assignment shall not impair
any rights or claims that the Unaffiliated Seller, the Depositor or the Trustee
may have against the Servicer; provided, further, that the Class A-1 Certificate
Insurer hereby consents to the Servicer's financing pursuant to the JPMorgan
Credit Agreement, subject to the Consent Procedures.

         Section 10.08 Limitation on Rights of Certificateholders.

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates, and the Class A-1 Certificate Insurer,
shall also have made written request to the Trustee to institute such action,
suit or proceeding in its own name as Trustee hereunder and shall have offered
to the Trustee such reasonable indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, and the Trustee,
for 60 days after its receipt of such notice, request and offer of indemnity
shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Agreement, except in
the manner herein provided and for the common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

         Section 10.09 Inspection and Audit Rights.

         The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the Depositor, the Unaffiliated Seller, the Class A-1
Certificate Insurer or the

                                      121
<PAGE>

Trustee during the Servicer's normal business hours, to examine all the books of
account, records, reports and other papers of the Servicer relating to the
Mortgage Loans, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants selected by the party
conducting the inspection and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Servicer hereby authorizes said
accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense of the Servicer incident to the exercise by
the Depositor, the Unaffiliated Seller, the Class A-1 Certificate Insurer or the
Trustee of any right under this Section 10.09 shall be borne by the Servicer.

         Section 10.10 Certificates Nonassessable and Fully Paid.

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         Section 10.11 The Class A-1 Certificate Insurer Default.

         Any right conferred to the Class A-1 Certificate Insurer shall be
suspended during any period in which a Class A-1 Certificate Insurer Default
exists. At such time as the Class A-1 Certificates are no longer outstanding
hereunder, and no amounts owed to the Class A-1 Certificate Insurer hereunder
remain unpaid, the Class A-1 Certificate Insurer's rights hereunder shall
terminate.

         Section 10.12 Third Party Beneficiary.

         The parties agree that the Class A-1 Certificate Insurer is intended
and shall have all rights of a third-party beneficiary of this Agreement.




                                      122
<PAGE>

         Section 10.13 Waiver of Jury Trial.

         EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, WAIVES (TO
THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.


                                  * * * * * * *







<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Trustee, the Unaffiliated Seller
and the Servicer have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.


                                          MORGAN STANLEY ABS CAPITAL I INC.,
                                            as Depositor


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


                                          DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                            solely as Trustee and not in its
                                            individual capacity


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


                                          FAIRBANKS CAPITAL CORP., as Servicer


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


                                          CDC MORTGAGE CAPITAL INC.,
                                            as Unaffiliated Seller


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:



                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


<PAGE>

                                   SCHEDULE I

                             Mortgage Loan Schedule

                        [On File at Dewey Ballantine LLP]





































                                       I-1
<PAGE>
                                   SCHEDULE II

                       CDC MORTGAGE CAPITAL TRUST 2003-HE1

                       Mortgage Pass-Through Certificates,
                                 Series 2003-HE1

                 Representations and Warranties of the Servicer
                 ----------------------------------------------

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

         (2) The Servicer has the full power and authority to service each
Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Pooling and Servicing Agreement
and has duly authorized by all necessary action on the part of the Servicer the
execution, delivery and performance of this Pooling and Servicing Agreement; and
this Pooling and Servicing Agreement, assuming the due authorization, execution
and delivery thereof by the other parties thereto, constitutes a legal, valid
and binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, receivership and
other similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought;

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

                                      II-1
<PAGE>

Servicer to perform its obligations under this Pooling and Servicing Agreement
or (y) the business, operations, financial condition, properties or assets of
the Servicer taken as a whole;

         (4) The Servicer is an approved seller/servicer for Fannie Mae or
Freddie Mac in good standing and is a HUD approved mortgagee pursuant to Section
203 and Section 211 of the National Housing Act;

         (5) No litigation is pending against the Servicer that is reasonably
likely to materially and adversely affect the execution, delivery or
enforceability of this Pooling and Servicing Agreement or the ability of the
Servicer to service the Mortgage Loans or to perform any of its other
obligations hereunder in accordance with the terms hereof;

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

         (7) The Servicer represents that its computer and other systems used in
servicing the Mortgage Loans operate in a manner such that the Servicer can
service the Mortgage Loans in accordance with the terms of this Pooling and
Servicing Agreement.



                                      II-2
<PAGE>
                                  SCHEDULE IIA

         Further Representations and Warranties of the Servicer

         (1) Mortgage Loan Schedule. With respect to each Mortgage Loan, as of
the applicable Cut-off Date, each of (1) the last Due Date on which a payment
was actually applied to the outstanding principal balance of each Mortgage Loan;
(2) the Stated Principal Balance of each Mortgage Loan, after deduction of
payments of principal due and collected on or before the applicable Cut-off
Date; and (3) the Servicing Transfer Date for each Mortgage Loan is true and
correct;

         (2) Payments Current. Unless otherwise indicated on the related
Mortgage Loan Schedule, with respect to each Mortgage Loan, no Scheduled Payment
is 30 days or more Delinquent nor has any Payment been 30 days or more
Delinquent at any time from and after the Servicing Transfer Date;

         (3) Original Terms Unmodified. With respect to each Mortgage Loan, the
terms of the Mortgage Note and Mortgage have not been impaired, waived, altered
or modified by the Servicer (or to its knowledge by any other Person) in any
respect from and after the Servicing Transfer Date;

         (4) No Satisfaction of Mortgage. With respect to each Mortgage Loan,
since the related Servicing Transfer Date, the Mortgage has not been satisfied,
cancelled, subordinated or rescinded by the Servicer (or to its knowledge by any
other Person), in whole or in part, and the Mortgaged Property has not been
released from the lien of the Mortgage by the Servicer (or to its knowledge by
any other Person), in whole or in part, nor has any instrument been executed by
the Servicer (or to its knowledge by any other Person) that would effect any
such release, cancellation, subordination or rescission. From and after the
Servicing Transfer Date, the Servicer has not waived the performance by the
Mortgagor of any action, if the Mortgagor's failure to perform such action would
cause the Mortgage Loan to be in default, nor has the Servicer waived any
default resulting from any action or inaction by the Mortgagor;

         (5) No Defaults. With respect to each Mortgage Loan, other than
payments due but not yet 30 days Delinquent, to the Servicer's knowledge, there
is no default, breach, violation or event which would permit acceleration
existing under the Mortgage or the Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event which would permit
acceleration;

         (6) Mortgaged Property Undamaged; No Condemnation Proceedings. With
respect to each Mortgage Loan, to the Servicer's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation of the
Mortgaged Property. To the Servicer's knowledge, the related Mortgaged Property
is undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the related
Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended and each related Mortgaged Property is in good repair;

                                     IIA-1
<PAGE>

         (7) Escrow Payments/Interest Rate Adjustments. With respect to each
Mortgage Loan, since the Servicing Transfer Date, the servicing and collection
practices used by the Servicer with respect to such Mortgage Loan have been in
all respects in compliance with Accepted Servicing Practices, applicable laws
and regulations, and have been in all respects legal and proper. With respect to
escrow deposits and Escrow Payments, if any, all such deposits and payments
received by the Servicer are in the possession of, or under the control of, the
Servicer and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made. All Escrow
Payments have been collected in full compliance with state and federal law and
the provisions of the related Mortgage Note and Mortgage. From and after the
Servicing Transfer Date, all Mortgage Rate adjustments (if any) have been made
in strict compliance with state and federal law and the terms of the related
Mortgage Note;

         (8) Other Insurance Policies. With respect to each Mortgage Loan, from
and after the Servicing Transfer Date, no action, inaction or event has occurred
and, to the Servicer's knowledge, no state of facts exists or has existed that
has resulted or will result in the exclusion from, denial of, or defense to
coverage under any insurance policy related to such Mortgage Loan, irrespective
of the cause of such failure of coverage;

         (9) No Violation of Environmental Laws. With respect to each Mortgage
Loan, to the Servicer's knowledge, there is no pending action or proceeding
directly involving the related Mortgaged Property in which compliance with any
environmental law, rule or regulation is an issue; to the Servicer's knowledge,
there is no violation of any environmental law, rule or regulation with respect
to the related Mortgaged Property; and

         (10) Soldiers' and Sailors' Civil Relief Act. With respect to each
Mortgage Loan, no Mortgagor has notified the Servicer, and the Servicer has no
knowledge, of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940 or any similar state or local
law.



                                     IIA-2
<PAGE>
                                  SCHEDULE III

(a)      Due Organization and Authority. The Unaffiliated Seller is a
         corporation duly organized, validly existing and in good standing under
         the laws of the state of New York and has all licenses necessary to
         carry on its business as now being conducted and is licensed, qualified
         and in good standing in each state wherein it owns or leases any
         material properties or where a Mortgaged Property is located, if the
         laws of such state require licensing or qualification in order to
         conduct business of the type conducted by the Unaffiliated Seller, and
         in any event the Unaffiliated Seller is in compliance with the laws of
         any such state to the extent necessary; the Unaffiliated Seller has the
         full corporate power, authority and legal right to execute and deliver
         this Agreement and to perform its obligations hereunder; the execution,
         delivery and performance of this Agreement by the Unaffiliated Seller
         and the consummation of the transactions contemplated hereby have been
         duly and validly authorized; this Agreement and all agreements
         contemplated hereby have been duly executed and delivered and
         constitute the valid, legal, binding and enforceable obligations of the
         Unaffiliated Seller, regardless of whether such enforcement is sought
         in a proceeding in equity or at law; and all requisite corporate action
         has been taken by the Unaffiliated Seller to make this Agreement and
         all agreements contemplated hereby valid and binding upon the
         Unaffiliated Seller in accordance with their terms;

(b)      No Conflicts. Neither the execution and delivery of this Agreement, the
         consummation of the transactions contemplated hereby, nor the
         fulfillment of or compliance with the terms and conditions of this
         Agreement, will conflict with or result in a breach of any of the
         terms, conditions or provisions of the Unaffiliated Seller's charter or
         by-laws or any legal restriction or any agreement or instrument to
         which the Unaffiliated Seller is now a party or by which it is bound,
         or constitute a default or result in an acceleration under any of the
         foregoing, except such unfulfillment, non-compliance or default or
         acceleration does not in the aggregate have a material adverse effect
         on the operation, business, condition (business or otherwise) of the
         Unaffiliated Seller or result in the violation of any law, rule,
         regulation, order, judgment or decree to which the Unaffiliated Seller
         or its property is subject, except such violation does not in the
         aggregate have a material adverse effect on the operation, business,
         condition (business or otherwise) of the Unaffiliated Seller or result
         in the creation or imposition of any lien, charge or encumbrance that
         would have an adverse effect upon any of its properties pursuant to the
         terms of any mortgage, contract, deed of trust or other instrument;

(c)      No Litigation Pending. There is no action, suit, proceeding or
         investigation pending nor, to the Unaffiliated Seller's knowledge,
         threatened against the Unaffiliated Seller, before any court,
         administrative agency or other tribunal asserting the invalidity of
         this Agreement, seeking to prevent the consummation of any of the
         transactions contemplated by this Agreement or which, either in any one
         instance or in the aggregate, may result in any material adverse change
         in the business, operations, financial condition, properties or assets
         of the Unaffiliated Seller, or in any material impairment of the right
         or ability of the Unaffiliated Seller to carry on its business
         substantially as now conducted, or which would draw into question the
         validity of this Agreement or of any action taken or to be taken in
         connection with the obligations of the Unaffiliated Seller contemplated
         herein, or

                                     III-1
<PAGE>

         which would be likely to impair materially the ability of the
         Unaffiliated Seller to perform under the terms of this Agreement;

(d)      No Consent Required. No consent, approval, authorization or order of,
         or registration or filing with, or notice to any court or governmental
         agency or body including HUD, the FHA or the VA is required for the
         execution, delivery and performance by the Unaffiliated Seller of or
         compliance by the Unaffiliated Seller with this Agreement or the
         consummation of the transactions contemplated by this Agreement, or if
         required, such approval has been obtained prior to the Closing Date;





                                     III-2
<PAGE>

                                    EXHIBIT A

Unless this Certificate is presented by an authorized representative of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER ASSETS.

Certificate No.                       :      [A-1-1/A-2-1/M-1-1/M-2-1/M-3-1/
                                             B-1-1/B-2-1]

Cut-off Date                          :      March 1, 2003

First Distribution Date               :      April 25, 2003

Initial Certificate Balance of this
Certificate ("Denomination")          :      A-1 $200,000,000

                                             A-2 $335,060,000

                                             M-1 $39,635,000

                                             M-2 $36,331,000

                                             M-3 $9,578,000

                                             B-1 $18,166,000

                                             B-2 $11,230,000

                                      A-1
<PAGE>

Initial Certificate Balances of all
Certificates of this Class            :      A-1 $200,000,000

                                             A-2 $335,060,000

                                             M-1 $39,635,000

                                             M-2 $36,331,000

                                             M-3 $9,578,000

                                             B-1 $18,166,000

                                             B-2 $11,230,000

CUSIP                                 :      A-1 12506YAW9

                                             A-2 12056YAX7

                                             M-1 12506YAY5

                                             M-2 12506YAZ2

                                             M-3 12506YBA6

                                             B-1 12506YBB4

                                             B-2 12506YBC2



                                      A-2
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1
           [Class A-1] [Class A-2] [Class M-1] [Class M-2] [Class M-3]
                             [Class B-1] [Class B-2]

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Unaffiliated Seller, any Originator, the Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

         This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "Depositor"), Fairbanks Capital Corp., as servicer
(the "Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.


                                      * * *

                                      A-3
<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                          DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                            not in its individual capacity, but
                                           solely as Trustee



                                          By:
                                             -----------------------------------



Countersigned:



By:
   -----------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee


                                      A-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through
Certificates, Series 2003-HE1 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the Class to which this Certificate belongs on such Distribution Date
pursuant to the Agreement. The Record Date applicable to each Distribution Date
is the Business Date immediately preceding such Distribution Date, provided,
however, that for any Definitive Certificates, the Record Date shall be the last
Business Day of the month next preceding the month of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes, or such other location specified in the notice to Certificateholders
of such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Class A-1
Certificate Insurer, with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the

                                      A-5
<PAGE>

Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Class A-1
Certificate Insurer and the Trustee and any agent of any of them may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholders will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.


                                      A-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________

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

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

--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:

                                      ------------------------------------------
                                        Signature by or on behalf of assignor





                                      A-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of_____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
Applicable statements should be mailed to______________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.



                                      A-8
<PAGE>

                                    EXHIBIT B

                                   [Reserved]















                                      B-1
<PAGE>
                                    EXHIBIT C

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT H TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE TITLE I EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OF A PLAN SUBJECT TO SECTION
4975 OF THE CODE OR A PLAN SUBJECT TO APPLICABLE FEDERAL, STATE OR LOCAL LAW
("SIMILAR LAW") MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE
CODE, OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A PLAN. IN
THE EVENT THAT SUCH REPRESENTATION IS VIOLATED, OR ANY ATTEMPT IS MADE TO
TRANSFER TO A PLAN OR ARRANGEMENT SUBJECT TO SECTION 406 OF ERISA, A PLAN
SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR ARRANGEMENT OR USING THE ASSETS OF
ANY SUCH PLAN OR ARRANGEMENT, SUCH ATTEMPTED TRANSFER OR ACQUISITION SHALL BE
VOID AND OF NO EFFECT.

Certificate No.                              :       1

Cut-off Date                                 :       March 1, 2003

First Distribution Date                      :       April 25, 2003

Percentage Interest of this Certificate
("Denomination")                             :       100%

Principal Balance                            :       $100

CUSIP                                        :       N/A

                                      C-1
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

                                     Class P

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate are distributable monthly
as set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Unaffiliated Seller,
the Servicer or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

         This certifies that __________________, is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "Depositor"), Fairbanks Capital Corp., as servicer
(the "Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         This Certificate does not have a Pass-Through Rate and will be entitled
to distributions only to the extent set forth in the Agreement. In addition, any
distribution of the proceeds of any remaining assets of the Trust will be made
only upon presentment and surrender of this Certificate at the offices
designated by the Trustee for such purpose, or the office or agency maintained
by the Trustee.

         No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Pooling and Servicing
Agreement) and deliver either (i) a Rule 144A Letter, in either case
substantially in the form attached to the Agreement, or (ii) a written Opinion
of Counsel to the Trustee that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from the
1933 Act or is being made pursuant to the 1933 Act, which Opinion of Counsel
shall be an expense of the transferor.

         No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received a representation letter from the transferee of such
Certificate, acceptable to and in

                                      C-2
<PAGE>

form and substance satisfactory to the Trustee, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA,
Section 4975 of the Code or Similar Law, or a person acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee, the Servicer or the Trust Fund. In the event that
such representation is violated, or any attempt is made to transfer to a plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code or a plan subject to Similar Law, or a person acting on behalf of any
such plan or arrangement or using the assets of any such plan or arrangement,
such attempted transfer or acquisition shall be void and of no effect.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.



                                      * * *





                                      C-3

<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          not in its individual capacity, but
                                          solely as Trustee


                                        By:
                                           -------------------------------------



Countersigned:



By:
   -------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee


                                      C-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through
Certificates, Series 2003-HE1 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Class A-1
Certificate Insurer with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon

                                      C-5
<PAGE>

the transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Class A-1
Certificate Insurer and the Trustee and any agent of any of them may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholders will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.


                                      C-6

<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________

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

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

--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

                  I (We) further direct the Trustee to issue a new Certificate
of a like denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:

                                      -----------------------------------------
                                        Signature by or on behalf of assignor


                                      C-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
Applicable statements should be mailed to______________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.


                                      C-8
<PAGE>

                                    EXHIBIT D

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS (i)
TO A PERMITTED TRANSFEREE AND THE TRANSFER IS MADE IN COMPLIANCE WITH SECTION
5.02(c) OF THE AGREEMENT, AND (ii) THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER
A REPRESENTATION LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO
MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN. IN THE EVENT THAT SUCH REPRESENTATION IS VIOLATED, OR ANY ATTEMPT IS MADE
TO TRANSFER TO A PLAN OR ARRANGEMENT SUBJECT TO SECTION 406 OF ERISA, A PLAN
SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR ARRANGEMENT OR USING THE ASSETS OF
ANY SUCH PLAN OR ARRANGEMENT, SUCH ATTEMPTED TRANSFER OR ACQUISITION SHALL BE
VOID AND OF NO EFFECT.

Certificate No.                              :            1

Cut-off Date                                 :            March 1, 2003

First Distribution Date                      :            April 25, 2003

Percentage Interest of this Certificate
("Denomination")                             :            100%

CUSIP                                        :            N/A

                                      D-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

                                     Class R

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate is distributable monthly
as set forth herein. This Class R Certificate has no Certificate Balance and is
not entitled to distributions in respect of principal or interest. This
Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Servicer, the Unaffiliated Seller or the
Trustee referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

         This certifies that CDC Mortgage Capital Inc. is the registered owner
of the Percentage Interest specified above of any monthly distributions due to
the Class R Certificates pursuant to a Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement") among MORGAN STANLEY ABS
CAPITAL I INC., as depositor (the "Depositor"), Fairbanks Capital Corp., as
servicer (the "Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller
(the "Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee
(the "Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class R
Certificate at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in California.

         No transfer of a Class R Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA, a plan or arrangement subject to
Section 4975 of the Code or a plan subject to Similar Law, or a person acting on
behalf of any such plan or arrangement nor using the assets of any such plan or
arrangement to effect such transfer, which representation letter shall not be an
expense of the Trustee, the Servicer or the Trust Fund. In the event that such
representation is violated, or any attempt is made to transfer to a plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code or a plan subject to Similar Law, or a person acting on behalf of any
such plan or arrangement or using the assets of any such plan or arrangement,
such attempted transfer or acquisition shall be void and of no effect.

         Each Holder of this Class R Certificate shall be deemed by the
acceptance or acquisition an Ownership Interest in this Class R Certificate to
have agreed to be bound by the following provisions, and the rights of each
Person acquiring any Ownership Interest in this


                                      D-2
<PAGE>

Class R Certificate are expressly subject to the following provisions: (i) each
Person holding or acquiring any Ownership Interest in this Class R Certificate
shall be a Permitted Transferee and shall promptly notify the Trustee of any
change or impending change in its status as a Permitted Transferee, (ii) no
Ownership Interest in this Class R Certificate may be registered on the Closing
Date or thereafter transferred, and the Trustee shall not register the Transfer
of this Certificate unless, in addition to the certificates required to be
delivered to the Trustee under Section 5.02(b) of the Agreement, the Trustee
shall have been furnished with a Transfer Affidavit of the initial owner or the
proposed transferee in the form attached as Exhibit H to the Agreement, (iii)
each Person holding or acquiring any Ownership Interest in this Class R
Certificate shall agree (A) to obtain a Transfer Affidavit from any other Person
to whom such Person attempts to Transfer its Ownership Interest this Class R
Certificate, (B) to obtain a Transfer Affidavit from any Person for whom such
Person is acting as nominee, trustee or agent in connection with any Transfer of
this Class R Certificate and (C) not to Transfer the Ownership Interest in this
Class R Certificate or to cause the Transfer of the Ownership Interest in this
Class R Certificate to any other Person if it has actual knowledge that such
Person is not a Permitted Transferee and (iv) any attempted or purported
Transfer of the Ownership Interest in this Class R Certificate in violation of
the provisions herein shall be absolutely null and void and shall vest no rights
in the purported Transferee.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.




                                      D-3
<PAGE>


         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          not in its individual capacity, but
                                          solely as Trustee


                                        By:
                                           -------------------------------------



Countersigned:



By:
   -------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee



                                      D-4
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through
Certificates, Series 2003-HE1 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the Class to which this Certificate belongs on such Distribution Date
pursuant to the Agreement. The Record Date applicable to each Distribution Date
is the last Business Day of the month next preceding the month of such
Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Class A-1
Certificate Insurer with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon

                                      D-5
<PAGE>

the transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in California, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Class A-1
Certificate Insurer and the Trustee and any agent of any of them may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholder will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.



                                      D-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________

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

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

--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

                  I (We) further direct the Trustee to issue a new Certificate
of a like denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

-------------------------------------------------------------------------------.

Dated:



                                       -----------------------------------------
                                         Signature by or on behalf of assignor



                                      D-7
<PAGE>


                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.



                                      D-8
<PAGE>

                                    EXHIBIT E

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT H TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT AS PROVIDED IN THE POOLING AND SERVICING AGREEMENT, NEITHER THIS
CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE
DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT SUCH
TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF
THE CODE, OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO
MATERIALLY SIMILAR PROVISIONS OF APPLICABLE FEDERAL, STATE OR LOCAL LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED
TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A
PLAN SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN IN
VIOLATION OF THE TRANSFER RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                              :            1

Cut-off Date                                 :            March 1, 2003

First Distribution Date                      :            April 25, 2003

Percentage Interest of this Certificate
("Denomination")                             :            100%

CUSIP                                        :            N/A


                                      E-1
<PAGE>


                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

                                     Class X

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate are distributable monthly
as set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Servicer, the
Unaffiliated Seller or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

         This certifies that _____________________, is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "Depositor"), Fairbanks Capital Corp., as servicer
(the "Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         This Certificate does not have a Certificate Balance or Pass-Through
Rate and will be entitled to distributions only to the extent set forth in the
Agreement. In addition, any distribution of the proceeds of any remaining assets
of the Trust will be made only upon presentment and surrender of this
Certificate at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee.

         No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Pooling and Servicing
Agreement) and deliver either (i) a Rule 144A Letter, in either case
substantially in the form attached to the Agreement, or (ii) a written Opinion
of Counsel to the Trustee that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from the
1933 Act or is being made pursuant to the 1933 Act, which Opinion of Counsel
shall be an expense of the transferor.

         No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable

                                      E-2
<PAGE>

to and in form and substance satisfactory to the Trustee, to the effect that
such transferee is not an employee benefit plan subject to Section 406 of ERISA
or Section 4975 of the Code or any materially similar provisions of applicable
Federal, state or local law ("Similar Law") or a person acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee, the Servicer or the Trust Fund or (ii) if the
Certificate has been the subject of an ERISA-Qualifying Underwriting, and the
purchaser is an insurance company, a representation that the purchaser is an
insurance company which is purchasing such Certificates with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificates are covered under Sections I and III
of PTCE 95-60. Notwithstanding anything else to the contrary herein, any
purported transfer of this certificate to an employee benefit plan subject to
ERISA, a plan subject to Section 4975 of the Code or a plan subject to similar
law, or a person acting on behalf of any such plan or using the assets of any
such plan in violation of the transfer restrictions set forth in the Pooling and
Servicing Agreement shall be void and of no effect.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.



                                      * * *








                                      E-3
<PAGE>
         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          not in its individual capacity, but
                                          solely as Trustee



                                        By:
                                           -------------------------------------



Countersigned:



By:
   -------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee



                                      E-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE1
               Mortgage Pass-Through Certificates, Series 2003-HE1

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through
Certificates, Series 2003-HE1 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Class A-1
Certificate Insurer with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon

                                      E-5
<PAGE>

the transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Class A-1
Certificate Insurer and the Trustee and any agent of any of them may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Principal Balance, the Servicer and/or
the Class X Certificateholders will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.




                                      E-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________

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

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

--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

-------------------------------------------------------------------------------.

Dated:



                                      -----------------------------------------
                                        Signature by or on behalf of assignor


<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.




                                      E-8
<PAGE>

                                    EXHIBIT F

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

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

         Re:   Pooling and Servicing Agreement dated as of March 1, 2003 among
               Morgan Stanley ABS Capital I Inc., as Depositor, Fairbanks
               Capital Corp., as Servicer, CDC Mortgage Capital Inc., as
               Unaffiliated Seller and Deutsche Bank National Trust Company, as
               Trustee, CDC Mortgage Capital Trust Series 2003-HE1

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), for each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan listed
in the attached schedule), it has received:

         (i) the original Mortgage Note, endorsed as provided in the following
     form: "Pay to the order of ________, without recourse"; and

         (ii) a duly executed assignment of the Mortgage.

         Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectibility,
insurability, perfection, priority, effectiveness or suitability of any such
Mortgage Loan. Notwithstanding anything herein to the contrary, the Trustee has
made no determination and makes no representations as to whether (i) any
endorsement is sufficient to transfer all right, title and interest of the party
so endorsing, as Noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or sufficient to effect the assignment
of and transfer to the assignee thereof, under the Mortgage to which the
assignment relates.


                                      F-1
<PAGE>

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.



                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          as Trustee



                                        By:
                                           -------------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------





                                      F-2

<PAGE>

                                    EXHIBIT G

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

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

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

         Re:   Pooling and Servicing Agreement dated as of March 1, 2003 among
               Morgan Stanley ABS Capital I Inc., as Depositor, Fairbanks
               Capital Corp., as Servicer, CDC Mortgage Capital Inc., as
               Unaffiliated Seller and Deutsche Bank National Trust Company, as
               Trustee, CDC Mortgage Capital Trust Series 2003-HE1

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached Document Exception Report) it has received:

         (i) The original Mortgage Note, endorsed in the form provided in
     Section 2.01 of the Pooling and Servicing Agreement, with all intervening
     endorsements showing a complete chain of endorsement from the originator to
     the last endorsee.

         (ii) The original recorded Mortgage.

         (iii) A duly executed assignment of the Mortgage in the form provided
     in Section 2.01 of the Pooling and Servicing Agreement; or, if the
     Unaffiliated Seller has certified or the Trustee otherwise knows that the
     related Mortgage has not been returned from the applicable recording
     office, a copy of the assignment of the Mortgage (excluding information to
     be provided by the recording office).

         (iv) The original or duplicate original recorded assignment or
     assignments of the Mortgage showing a complete chain of assignment from the
     originator to the last endorsee.

         (v) The original or duplicate lender's title policy and all riders
     thereto or, if such original is unavailable, any one of an original title



                                      G-1
<PAGE>

     binder, either an original title binder or an original or copy of the title
     commitment, and if copies then certified to be true and complete by the
     title company.

         Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (1), (2) and (18) of
the Mortgage Loan Schedule and items (1), (9) and (17) of the Data Tape
Information accurately reflects information set forth in the Custodial File.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review of the Custodial File
specifically required in the Pooling and Servicing Agreement. The Trustee makes
no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectibility, insurability, perfection, priority, effectiveness or
suitability of any such Mortgage Loan. Notwithstanding anything herein to the
contrary, the Trustee has made no determination and makes no representations as
to whether (i) any endorsement is sufficient to transfer all right, title and
interest of the party so endorsing, as Noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or sufficient to
effect the assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

               DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee



                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          as Trustee



                                        By:
                                           -------------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------




                                      G-2
<PAGE>

                                    EXHIBIT H

                               TRANSFER AFFIDAVIT

                MORGAN STANLEY ABS CAPITAL I INC. Trust 2003-HE1,
                       Mortgage Pass-Through Certificates,
                                 Series 2003-HE1

STATE OF                            )
                                    ) ss.:
COUNTY OF                           )


         The undersigned, being first duly sworn, deposes and says as follows:

         1. The undersigned is an officer of ___________________, the proposed
Transferee of an Ownership Interest in a Class R Certificate (the "Certificate")
issued pursuant to the Pooling and Servicing Agreement, (the "Agreement"),
relating to the above-referenced Series, by and among Morgan Stanley ABS Capital
I Inc., as depositor (the "Depositor"), Fairbanks Capital Corp., as servicer,
CDC Mortgage Capital Inc., as unaffiliated seller (the "Unaffiliated Seller")
and Deutsche Bank National Trust Company, as Trustee. Capitalized terms used,
but not defined herein or in Exhibit 1 hereto, shall have the meanings ascribed
to such terms in the Agreement. The Transferee has authorized the undersigned to
make this affidavit on behalf of the Transferee for the benefit of the Depositor
and the Trustee.

         2. The Transferee is not, as of the date hereof, and will not be, as of
the date of the Transfer, a "disqualified organization" within the meaning of
Section 860E(e)(5) of the Internal Revenue Code of 1986. The Transferee will
endeavor to remain other than a disqualified organization for so long as it
retains its Ownership Interest in the Certificate.

         3. The Transferee has historically paid its debts as they came due and
will continue to pay its debts as they come due in the future.

         4. The Transferee has no present knowledge or expectation that it will
be unable to pay any United States taxes owed by it or become insolvent or
subject to a bankruptcy proceeding for so long as the Certificate remains
outstanding.

         5. The Transferee has been advised of, and understands that as the
holder of a noneconomic residual interest it may incur tax liabilities in excess
of any cash flows generated by the interest. The Transferee intends to pay such
taxes associated with holding the Certificate as they become due.

         6. The Transferee will not cause income from the Certificate to be
attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

                                      H-1
<PAGE>

         (1)7. [A. Formula Test] The Transferee agrees that the present value of
the anticipated tax liabilities associated with holding the Certificate does not
exceed the sum of the present value of any consideration given to the Transferee
to acquire the Certificate, the present value of the expected future
distributions on the Certificate, and the present value of the anticipated tax
savings associated with holding the interest as the REMIC generates losses. The
Transferee agrees that it complied with U.S. Treasury Regulations Section
1.860E-1(c)(8) in making such representation.

         The Transferee agrees that it is not a foreign permanent establishment
or fixed base (within the meaning of an applicable income tax treaty) of the
Transferor or another U.S. taxpayer.

         [B. Asset Test] The Transferee, at the time of the transfer, and at the
close of the Transferee's two fiscal years preceding the year of the transfer,
had gross assets for financial reporting purposes in excess of $100 million and
net assets in excess of $10 million (excluding any obligation of a person
related to the Transferee within the meaning of U.S. Treasury Regulations
Section 1.860E-1(c)(6)(ii) or any other asset if a principle purpose for holding
or acquiring the other asset was to permit the Transferee to satisfy the above
stated minimum asset requirements).

         The Transferee is an "eligible corporation," as defined in U.S.
Treasury Regulations Section 1.860E-1(c)(6)(i). The Transferee agrees, in
connection with any subsequent transfer of its Ownership Interest in the
Certificate, to transfer its Ownership Interest only to another "eligible
corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i),
and to honor the restrictions on subsequent transfers of the Certificate by
transferring its Ownership Interest only in a transaction that satisfies the
requirements of U.S. Treasury Regulations Section 1.860E-1(c)(4)(i), (ii) (iii)
and U.S. Treasury Regulations Section 1.860E-1(c)(5).

         The Transferee determined the consideration paid to it to acquire the
Certificate in good faith and based on reasonable market assumptions (including,
but not limited to, borrowing and investment rates, prepayment and loss
assumptions, expense and reinvestment assumptions, tax rates and other factors
specific to the Transferee).

         8. The Transferee is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includable in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

         9. The Transferee's taxpayer identification number is ____________.


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

(1) Insert either section 7A or 7B.


                                      H-2
<PAGE>

         10. The Transferee is not an employee benefit plan that is subject to
ERISA or a plan that is subject to Section 4975 of the Code, and the Transferee
is not acting on behalf of or investing plan assets of such a plan.

         11. The Transferee has reviewed the provisions of Section 5.02(c) of
the Agreement and understands the legal consequences of the acquisition of an
Ownership Interest in the Certificate, including, without limitation, the
restrictions on subsequent Transfers and the provisions regarding voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by and
to abide by the provisions of Section 5.02(c) of the Agreement and the
restrictions noted on the face of the Certificate. The Transferee understands
and agrees that any breach of any of the representations included herein shall
render the Transfer to the Transferee contemplated hereby null and void.

         12. The Transferee consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Certificate will only be owned,
directly or indirectly, by a Transferee that is not a disqualified organization.

         13. The Transferee will not transfer its interest in the Certificate
for the purpose of impeding the assessment or collection of any tax.

         14. The Transferee will not transfer such Certificate unless (i) it has
received from any subsequent transferee an affidavit in substantially the same
form as this affidavit containing the same representations set forth herein, and
(ii) as of the time of the transfer, it does not have actual knowledge that such
affidavit is false. The Transferee will deliver such affidavit to the Trustee
upon receipt.



                                      * * *



                                      H-3
<PAGE>


         IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this __ day of ________, 20__.



                                           -------------------------------------
                                           Print Name of Transferee



                                           By:
                                              ----------------------------------
                                              Name:
                                              Title:

[Corporate Seal]

ATTEST:



---------------------
[Assistant] Secretary

         Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing instrument and to
be the ___________ of the Transferee, and acknowledged that he executed the same
as his free act and deed and the free act and deed of the Transferee.

         Subscribed and sworn before me this __ day of ________, 20__.





                                           -------------------------------------
                                           NOTARY PUBLIC

                                           My Commission expires the __ day
                                           of __________, 20__



                                      H-4
<PAGE>

                                    EXHIBIT I

                         FORM OF TRANSFEROR CERTIFICATE





                                                                __________, 20__




Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

         Re:   CDC Mortgage Capital Trust, Series 2003-HE1, Mortgage
               Pass-Through Certificates, Series 2003-HE1, Class ___

Ladies and Gentlemen:

         In connection with our disposition of the above Certificates we certify
that (a) we understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being disposed by us in
a transaction that is exempt from the registration requirements of the Act, (b)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act and (c)
to the extent we are disposing of a Residual Certificate, we have no knowledge
the Transferee is not a Permitted Transferee.



                                              Very truly yours,


                                              ----------------------------------
                                              Print Name of Transferor



                                              By:
                                                 -------------------------------
                                                         Authorized Officer



                                      I-1
<PAGE>

                                    EXHIBIT J

                            FORM OF RULE 144A LETTER





                                                              ____________, 20__




Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

         Re:   CDC Mortgage Capital Trust 2002, Series 2003-HE1, Mortgage
               Pass-Through Certificates, Series 2003-HE1, Class

Ladies and Gentlemen:

         In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or arrangement
nor using the assets of any such plan or arrangement to effect such acquisition
or, with respect to a Class X Certificate that has been the subject of an
ERISA-Qualifying Underwriting, the purchaser is an insurance company that is
purchasing this certificate with funds contained in an "insurance company
general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60") and that the purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60,
(e) we have not, nor has anyone acting on our behalf offered, transferred,
pledged, sold or otherwise disposed of the Certificates, any interest in the
Certificates or any other similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Certificates, any interest
in the Certificates or any other similar security from, or otherwise


                                      J-1

<PAGE>

approached or negotiated with respect to the Certificates, any interest in the
Certificates or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Certificates under the Securities Act or that would render the disposition of
the Certificates a violation of Section 5 of the Securities Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
(f) to the extent that the Certificate transferred is a Class X Certificate, we
are a bankruptcy-remote entity and (g) we are a "qualified institutional buyer"
as that term is defined in Rule 144A under the Securities Act and have completed
either of the forms of certification to that effect attached hereto as Annex 1
or Annex 2. We are aware that the sale to us is being made in reliance on Rule
144A. We are acquiring the Certificates for our own account or for resale
pursuant to Rule 144A and further, understand that such Certificates may be
resold, pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.





                                      J-2
<PAGE>

                              ANNEX 1 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.

         2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis $_________ in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.

         ________       Corporation, etc. The Buyer is a corporation (other than
                        a bank, savings and loan association or similar
                        institution), Massachusetts or similar business trust,
                        partnership, or charitable organization described in
                        Section 501(c)(3) of the Internal Revenue Code of 1986,
                        as amended.

         ________       Bank. The Buyer (a) is a national bank or banking
                        institution organized under the laws of any State,
                        territory or the District of Columbia, the business of
                        which is substantially confined to banking and is
                        supervised by the State or territorial banking
                        commission or similar official or is a foreign bank or
                        equivalent institution, and (b) has an audited net worth
                        of at least $25,000,000 as demonstrated in its latest
                        annual financial statements, a copy of which is attached
                        hereto.

         ________       Savings and Loan. The Buyer (a) is a savings and loan
                        association, building and loan association, cooperative
                        bank, homestead association or similar institution,
                        which is supervised and examined by a State or Federal
                        authority having supervision over any such institutions
                        or is a foreign savings and loan association or
                        equivalent institution and (b) has an audited net worth
                        of at least $25,000,000 as demonstrated in its latest
                        annual financial statements, a copy of which is attached
                        hereto.

         ________       Broker-dealer. The Buyer is a dealer registered pursuant
                        to Section 15 of the Securities Exchange Act of 1934.




                                      J-3
<PAGE>

         ________       Insurance Company. The Buyer is an insurance company
                        whose primary and predominant business activity is the
                        writing of insurance or the reinsuring of risks
                        underwritten by insurance companies and which is subject
                        to supervision by the insurance commissioner or a
                        similar official or agency of a State, territory or the
                        District of Columbia.

         ________       State or Local Plan. The Buyer is a plan established and
                        maintained by a State, its political subdivisions, or
                        any agency or instrumentality of the State or its
                        political subdivisions, for the benefit of its
                        employees.

         ________       ERISA Plan. The Buyer is an employee benefit plan within
                        the meaning of Title I of the Employee Retirement Income
                        Security Act of 1974.

         ________       Investment Advisor. The Buyer is an investment advisor
                        registered under the Investment Advisors Act of 1940.

         ________       Small Business Investment Company. Buyer is a small
                        business investment company licensed by the U.S. Small
                        Business Administration under Section 301(c) or (d) of
                        the Small Business Investment Act of 1958.

         ________       Business Development Company. Buyer is a business
                        development company as defined in Section 202(a)(22) of
                        the Investment Advisors Act of 1940.

         3. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer, (ii) securities that are part of
an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.

         4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.

                                      J-4
<PAGE>

         5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

         6. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.



                                       -----------------------------------------
                                       Print  Name of Transferor

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:



                                       Date:
                                           -------------------------------------



                                      J-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That are Registered Investment Companies]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.

         2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

         ________       The Buyer owned $______ in securities (other than the
                        excluded securities referred to below) as of the end of
                        the Buyer's most recent fiscal year (such amount being
                        calculated in accordance with Rule 144A).

         ________       The Buyer is part of a Family of Investment Companies
                        which owned in the aggregate $ ________ in securities
                        (other than the excluded securities referred to below)
                        as of the end of the Buyer's most recent fiscal year
                        (such amount being calculated in accordance with Rule
                        144A).

         3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

         4. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements,


                                      J-6
<PAGE>

(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

         5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

         6. Until the date of purchase of the Certificates, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.



                                       -----------------------------------------
                                       Print  Name of Transferor

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:




                                       IF AN ADVISER:




                                       -----------------------------------------
                                                  Print Name of Buyer



                                       Date:
                                           -------------------------------------


                                      J-7
<PAGE>

                                    EXHIBIT K

                               REQUEST FOR RELEASE
                                  (for Trustee)

To: [Address]

         Re:

         In connection with the administration of the Mortgage Loans held by you
as the Trustee on behalf of the Certificateholders, we request the release, and
acknowledge receipt, of the (Custodial File/[specify documents]) for the
Mortgage Loan described below, for the reason indicated.

Mortgagor's Name, Address & Zip Code:
------------------------------------


Mortgage Loan Number:
--------------------


Send Custodial File to:
----------------------


Reason for Requesting Documents (check one)

         ________       1. Mortgage Loan Paid in Full. (The Company hereby
                        certifies that all amounts received in connection
                        therewith have been credited to the Collection Account
                        as provided in the Pooling and Servicing Agreement.)

         ________       2. Mortgage Loan Repurchase Pursuant to Subsection 2.03
                        of the Pooling and Servicing Agreement. (The Company
                        hereby certifies that the repurchase price has been
                        credited to the Collection Account as provided in the
                        Pooling and Servicing Agreement.)]

         ________       3. Mortgage Loan Liquidated By _________________. (The
                        Company hereby certifies that all proceeds of
                        foreclosure, insurance, condemnation or other
                        liquidation have been finally received and credited to
                        the Collection Account pursuant to the Pooling and
                        Servicing Agreement.)

         ________       4. Mortgage Loan in Foreclosure.

         ________       5. Other (explain).

         If box 1, 2 or 3 above is checked, and if all or part of the Custodial
File was previously released to us, please release to us our previous request
and receipt on file with you, as well as any additional documents in your
possession relating to the specified Mortgage Loan.


                                      K-1
<PAGE>

         If box 4 or 5 above is checked, upon our return of all of the above
documents to you as the Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.

                                       FAIRBANKS CAPITAL CORP.



                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:
                                           Date:





                                      K-2
<PAGE>

                                    EXHIBIT L

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

                       CDC MORTGAGE CAPITAL TRUST 2003-HE1

         Pursuant to separate Mortgage Loan Purchase Agreements, IMPAC Funding
Corporation ("IFC") (and its affiliate, Novelle Financial Services, Inc.
("Novelle")), Encore Credit Corporation ("Encore"), BNC Mortgage, Inc. ("BNC"),
Chapel Mortgage Corporation ("Chapel Mortgage"), People's Choice Home Loan, Inc.
("People's Choice"), Aegis Mortgage Corporation ("Aegis"), SIB Mortgage Corp.
("SIB Mortgage"), and NC Capital Corporation ("NC Capital" and together with
IFC, Novelle, Encore, BNC, Chapel, People's Choice, Aegis SIB Mortgage and NC
Capital, the "Originators") have agreed to sell to CDC Mortgage Capital Inc.
(the "Unaffiliated Seller") certain mortgage loans (each, a "Mortgage Loan").
These Mortgage Loans may in turn be sold by the Unaffiliated Seller to MORGAN
STANLEY ABS CAPITAL I INC. (the "Depositor") and then sold by the Depositor to
the CDC Mortgage Capital Trust 2003-HE1 (the "Trust Fund"). The Trust Fund was
established pursuant to a Pooling and Servicing Agreement, dated as of March 1,
2003 (the "Pooling and Servicing Agreement") among the Unaffiliated Seller, the
Depositor, Fairbanks Capital Corp., as servicer (the "Servicer") and Deutsche
Bank National Trust Company, as trustee (the "Trustee"). The Pooling and
Servicing Agreement permits a pre-funding feature, allowing for the acquisition
by the Trust Fund of Subsequent Mortgage Loans during the Pre-Funding Period.
Representations and warranties with respect to the Mortgage Loans have been made
by the Originators pursuant to separate Assignment and Recognition Agreements.

         Capitalized terms used herein and not defined herein have their
respective meanings as set forth in the Pooling and Servicing Agreement.

         Conveyance of Subsequent Mortgage Loans.
         ---------------------------------------

         The Unaffiliated Seller does hereby irrevocably sell, transfer, assign,
set over and otherwise convey to the Depositor, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Unaffiliated Seller or any other Person with respect to the Subsequent Mortgage
Loans but including specifically, without limitation, the Mortgages, the
Custodial Files and all other documents, materials and properties appurtenant
thereto and the Mortgage Notes, including all interest and principal collected
by the Unaffiliated Seller on or with respect to the Subsequent Mortgage Loans
after the related Subsequent Cut-off Date, together with all of its right, title
and interest in and to the proceeds received after such Subsequent Cut-off Date
of any related insurance policies on behalf of the Depositor.

         The Depositor does hereby irrevocably sell, transfer, assign, set over
and otherwise convey to the Trust Fund, without recourse (except as otherwise
explicitly provided for herein) all of its right, title and interest in and to
the Subsequent Mortgage Loans, exclusive of the obligations of the Depositor or
any other Person with respect to the Subsequent Mortgage Loans but including
specifically, without limitation, the Mortgages, the Custodial Files and all
other documents, materials and properties appurtenant thereto and the Mortgage
Notes, including

                                      L-1
<PAGE>

all interest and principal collected by the Depositor on or with respect to the
Subsequent Mortgage Loans after the related Subsequent Cut -off Date, together
with all of its right, title and interest in and to the proceeds received after
such Subsequent Cut-off Date of any related insurance policies on behalf of the
Trust Fund.

         The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans specified in this Subsequent Transfer Agreement and the Pooling
and Servicing Agreement shall be borne by the Unaffiliated Seller.

         The Unaffiliated Seller hereby affirms the representation and warranty
set forth in Sections 3.01(f), 3.01(h) and 3.03 of the Unaffiliated Seller's
Agreement with respect to the Subsequent Mortgage Loans as of the date hereof.
The Unaffiliated Seller hereby delivers notice and confirms that each of the
conditions set forth in Section 2.01(c) of the Pooling and Servicing Agreement
are satisfied as of the date hereof.

         The Servicer hereby affirms the representations and warranties set
forth in Schedule IIA to the Pooling and Servicing Agreement with respect to the
Subsequent Mortgage Loans as of the date hereof.

         Additional terms of the sale are attached hereto as Attachment A.

         To the extent permitted by applicable law, this Subsequent Transfer
Agreement, or a memorandum thereof if permitted under applicable law, is subject
to recordation in all appropriate public offices for real property records in
all counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the Unaffiliated Seller's expense, but only when accompanied by an
opinion of counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.

         This Agreement shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to the principles of conflicts of laws.

         This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.

         All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified, confirmed and incorporated herein; provided, that in the event
of any conflict the provisions of this Subsequent Transfer Agreement shall
control over the conflicting provisions of the Pooling and Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]


                                      L-2

<PAGE>

                                       CDC MORTGAGE CAPITAL INC.,
                                         as Unaffiliated Seller



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       MORGAN STANLEY ABS CAPITAL I INC.,
                                         as Depositor



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       FAIRBANKS CAPITAL CORP.,
                                         as Servicer



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                         as Trustee



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:



                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                      L-3

<PAGE>

                                    EXHIBIT M

                           FORM OF CERTIFICATION TO BE
                              PROVIDED TO DEPOSITOR
                              ---------------------


Re:      CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through Certificates,
         Series 2003-HE1, issued pursuant to the Pooling and Servicing
         Agreement, dated as of November 1, 2002 (the "Pooling and Servicing
         Agreement"), among Morgan Stanley ABS Capital I Inc., as depositor (the
         "Depositor", CDC Mortgage Capital Inc., as unaffiliated seller,
         Deutsche Bank National Trust Company, as trustee (the "Trustee"), and
         Fairbanks Capital Corp., as servicer (the "Servicer").

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

         1.      I have reviewed this annual report on Form 10-K ("Annual
                 Report"), and all reports on Form 8-K containing distribution
                 or servicing reports (collectively with this Annual Report, the
                 "Reports") filed in respect of periods included in the year
                 covered by this Annual Report of the Depositor relating to the
                 above-referenced trust and series of certificates;

         2.      Based on my knowledge, the information in the Reports, taken as
                 a whole, does not contain any untrue statement of a material
                 fact or omit to state a material fact necessary to make the
                 statements made, in light of the circumstances under which such
                 statements were made, not misleading as of the last day of the
                 period covered by this Annual Report;

         3.      Based on my knowledge, the distribution or servicing
                 information required to be provided to the Trustee by the
                 Servicer under the Pooling and Servicing Agreement for
                 inclusion in the Reports is included in these Reports;

         4.      Based on my knowledge and upon the annual compliance statement
                 included in this Annual Report and required to be delivered to
                 the Trustee in accordance with the terms of the Pooling and
                 Servicing Agreement, and except as disclosed in the Reports,
                 the Servicer has fulfilled its obligations under the Pooling
                 and Servicing Agreement; and


                                      M-1

<PAGE>



         5.      The Reports disclose all significant deficiencies relating to
                 the Servicer's compliance with the minimum servicing standards
                 based upon the report provided by an independent public
                 accountant, after conducting a review in compliance with the
                 Uniform Single Attestation Program for Mortgage Bankers or
                 similar procedure, as set forth in the Pooling and Servicing
                 Agreement, that is included in the Reports.

In giving the certifications above, I have reasonably relied on information
provided to me by the following unaffiliated parties: the Trustee and the
Servicer.



Date:
     ------------------------------------

-----------------------------------------
[Signature]
[Title]



                                      M-2

<PAGE>

                                    EXHIBIT N

                              Annual Certifications

Re: CDC Mortgage Capital Trust 2003-HE1 Mortgage Pass-Through Certificates,
Series 2003-HE1, issued pursuant to the Pooling and Servicing Agreement, dated
as of November 1, 2002 (the "Pooling and Servicing Agreement"), among Morgan
Stanley ABS Capital I Inc., as depositor (the "Depositor," CDC Mortgage Capital
Inc., as unaffiliated seller (the "Unaffiliated Seller"), Deutsche Bank National
Trust Company, as trustee (the "Trustee"), and Fairbanks Capital Corp., as
servicer (the "Servicer").

I, [identify the certifying individual], certify to the Depositor and the
Trustee, if applicable, and its officers, directors and affiliates, and with the
knowledge and intent that they will rely upon this certification, that:


         1.      [To be certified by the Trustee] I have reviewed the annual
                 report on Form 10-K for the fiscal year 2003 (the "Annual
                 Report"), and all reports on Form 8-K containing distribution
                 date reports filed in respect of periods included in the year
                 covered by the Annual Report (collectively with this Annual
                 Report, the "Reports"), of the Depositor relating to the
                 above-referenced trust;

         2.      [To be certified by the Trustee] Based on my knowledge, the
                 information in the 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 the
                 Annual Report;

         3.      [To be certified by the Trustee] Based on my knowledge, the
                 distribution or servicing information required to be provided
                 to the Trustee by the Servicer under the Pooling and Servicing
                 Agreement for inclusion in the Reports is included in the
                 Reports;

         4.      [To be certified by the Servicer] I am responsible for
                 reviewing the activities performed by the Servicer under the
                 Pooling and Servicing Agreement during the calendar year
                 immediately preceding the date of this certificate (the
                 "Relevant Year"). Based upon the review required by the Pooling
                 and Servicing Agreement and except as disclosed in the annual
                 compliance statement or the accountant's statement provided
                 pursuant to section 3.23 of the Pooling and Servicing
                 Agreement, to the best of my knowledge, the Servicer has
                 fulfilled its obligations under the Pooling and Servicing
                 Agreement throughout the Relevant Year; and

         5.      [To be certified by the Servicer] All significant deficiencies
                 relating to the Servicer's compliance with the minimum
                 servicing standards for purposes of the report provided by an
                 independent public accountant, after conducting a review
                 conducted in compliance with the Uniform Single Attestation
                 Program for Mortgage Bankers or similar procedure, as set forth
                 in the Pooling and Servicing


                                      N-1

<PAGE>

                 Agreement, have been disclosed to such accountant and are
                 included in such reports.



Date:
     ------------------------------------

-----------------------------------------
[Signature]
[Title]




                                       N-2

<PAGE>

                                    EXHIBIT O


         These performance standards apply to all first lien Mortgage Loans and
REO Properties subject to this Agreement. Only Mortgage Loans initiated for
foreclosure and REO Properties managed by the Servicer will be included in the
calculation of these performance standards.

         The Servicer's performance shall be measured by the benchmarks for
specified performance measurement areas described in the following table (the
"Performance Benchmarks"). Any failure of any component of such standards will
be given a sixty (60) day cure period. After giving effect to the applicable
grace periods, the Servicer shall be deemed to have failed to meet the
performance standards upon: (x) the occurrence of the same five (5) Performance
Benchmarks for three (3) consecutive months, (y) the occurrence of the same
three (3) Performance Benchmarks for six (6) consecutive months, or (z) the
occurrence of the same one (1) Performance Benchmark for nine (9) consecutive
months.

                             PERFORMANCE BENCHMARKS

--------------------------------------------------------------------------------
         BENCHMARK                                                    STANDARD
--------------------------------------------------------------------------------
I.       Right Party Contacts (First 15 days of delinquency)            22.5%

         The Servicer will achieve an average daily Right Party
         Contact Rate for the month against all accounts in their
         first 15 days of delinquency.
--------------------------------------------------------------------------------
2.       Right Party Contacts (After the 15th day of delinquency        18.75%
         but not in foreclosure)

         The Servicer will achieve an average daily Right Party
         Contact Rate for the month against all accounts past the
         first 15 days of delinquency but prior to foreclosure.
--------------------------------------------------------------------------------
3.       Promise to Pay                                                 22.5%

         The Servicer will achieve an average daily Promise to
         Pay on a minimum percentage of all loans 1 - 89 days
         delinquent.
--------------------------------------------------------------------------------
4.       Roll Rate (I to 29 days of delinquency - MBA method)           52.5%

         The Servicer shall achieve a Roll Rate from previous
         month-end to current month-end.
--------------------------------------------------------------------------------
5.       Roll Rate (30 to 59 days of delinquency - MBA method)           45%

         The Servicer shall achieve a Roll Rate from previous
         month-end to current month-end.
--------------------------------------------------------------------------------
6.       Roll Rate (60 to 89 days of delinquency - MBA method)           30%

         The Servicer shall achieve a Roll Rate from previous
         month-end to current month-end.
--------------------------------------------------------------------------------


                               O-1
<PAGE>

--------------------------------------------------------------------------------
         BENCHMARK                                                    STANDARD
--------------------------------------------------------------------------------
7.       Abandonment Rate The Servicer will operate its customer        13.3%
         service area to achieve no more than a maximum
         Abandonment Rate on customer calls.
--------------------------------------------------------------------------------
8.       REO Sales                                                      11.25%

         The Servicer will sell a minimum percentage of the REO
         Sellable Portfolio on a monthly basis and will obtain a
         Total Sales Price to Total Reconciled Market Value of at
         least 95%, measured on a rolling three month average.
--------------------------------------------------------------------------------
9.       The Servicer will obtain a minimum Pre-Foreclosure              45%
         Resolution Rate on a rolling three month average.
--------------------------------------------------------------------------------
10.      Servicer will meet a minimum Foreclosure Timeline              120%
         Percentage on a rolling three month average basis.
--------------------------------------------------------------------------------

             DEFINITIONS FOR PERFORMANCE STANDARDS


         Abandonment Rate: The percentage of total incoming calls to the
customer service area which are not directed to the automated telephone response
system in which the customer terminates the call prior to connection with a
customer service representative.

         Foreclosure Timeline: For any Mortgage Loan in foreclosure, the number
of days to foreclosure from the date of the foreclosure initiation; provided,
that such calculation shall not include any unavoidable delays resulting from
circumstances such as bankruptcy, missing documents, workouts authorized by the
Seller, contested actions, service of process delays, sheriff sale scheduling
delays, court delays in entering judgment or scheduling hearings, and other
circumstances agreed to by the Seller as long as the Servicer (i) has documented
such delay in its system and (ii) has, upon request by the Seller, provided a
report of such conditions, detailing corrective actions taken, the date of such
actions and the expected resolution date, and demonstrating diligent time
management to resolve such issues.

         Foreclosure Timeline Percentage: For all Mortgage Loans with a
completed foreclosure sale during the preceding month, the average, for each
such Mortgage Loan, of (i) the Foreclosure Timeline for such Mortgage Loan,
divided by (ii) the applicable Freddie Mac standard in the relevant state at
such time.

         Pre-Foreclosure Resolution: Any of the following:
         o    Reinstatement - means any defaulted Mortgage Loan for which the
              related Mortgagor brings the Mortgage Loan back to a status no
              more than sixty (60) days delinquent through a lump sum payment or
              otherwise consistent with the terms of the Agreement.

         o    Full payoff - means any defaulted Mortgage Loan which is paid in
              full as defined in the Agreement.


                                      O-2

<PAGE>

         o    Cash for keys - means a defaulted Mortgage Loan for which the
              related Mortgagor surrenders the property in exchange for a cash
              sum to enable foreclosure on a property with imperfect title.

         o    Shortfall payoff- means a defaulted Mortgage Loan for which a
              final payment in an amount less than the indebtedness owed under
              the applicable Mortgage Note is made consistent with the terms of
              the Agreement, and such payment is received by the Servicer in
              full satisfaction of such indebtedness.

         o    Deed-in-Lieu of Foreclosure - means a defaulted Mortgage Loan for
              which title to the related Mortgaged Property is taken by the
              Servicer through deed in lieu of foreclosure and the resulting REO
              Property is to be liquidated consistent with the terms of the
              Agreement.

         o    Modification/Deferral (subject to REMIC restrictions) - means a
              defaulted Mortgage Loan which is modified in a manner consistent
              with the Agreement and for which the related Mortgagor has made
              three (3) consecutive payments consistent with the terms of such
              Mortgage Loan as so modified.

         o    Forbearance Plan - means a defaulted Mortgage Loan for which the
              related Mortgagor has made payments in accordance with a
              forbearance plan entered into by such Mortgagor.

         o    Take-out at Foreclosure Sale - means the Mortgaged Property
              related to a defaulted Mortgage Loan that is purchased at a
              foreclosure sale by a party other than the Servicer in a manner
              consistent with the Agreement.

         Pre-Foreclosure Resolution Rate: For any month, the percentage
equivalent of a fraction (i) the numerator of which equals the number of
Mortgage Loans that were at least ninety (90) days past due at the beginning of
such month, with respect to which a Pre-Foreclosure Resolution was achieved
during such month, divided by (ii) the number of such resolved Mortgage Loans
plus the number of Mortgage Loans relating to Mortgaged Properties that become
REO Properties during such month.

         Promise to Pay: An agreement with an obligor to make at least one full
payment within thirty (30) days.

         Reconciled Market Value: The targeted sales price of an REO Property.
Reconciled Market Value is established following an analysis by the Servicer's
in-house appraisers of competing marketing plans and other market conditions.
This analysis will include a review of the interior Broker Price Opinions (BPOs)
received from the listing agent and an outside third party real-estate agent.
This set value never changes throughout the servicing of the REO asset and will
be reflected in all reporting.

         REO Sellable Portfolio: The entire REO Property portfolio, less any REO
Property in eviction, redemption under contract or other situations in which the
Servicer cannot pass marketable title. The Servicer must have at least twenty
five (25) REO Properties listed with


                                      O-3

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an average list age of at least ninety (90) days in order for the related
Performance Benchmark to be measured.

         Right Party Contact Rate: A person-to-person contact with an obligor (a
signer of the Mortgage Note), or, where applicable, the obligor's legal guardian
or attorney-in-fact with respect to the loan, or other third party as appointed
by the Mortgagor.

         Roll Rate: Calculated as a three month rolling average percentage of
loans, based on unpaid principal balance, that remain in the same bucket or
improve their delinquency status (including loans that pay off or are otherwise
liquidated) from previous month-end to current month-end.

         Total Reconciled Market Value: For any month, the sum of all the
Reconciled Market Values on all REO Property closings during such month.

         Total Sales Price: For any month, the sum of the sales price of all REO
Property closings in such month, less any Seller's closing concessions in which
the sales price was inflated to reflect the concession amount.







                                      O-4