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                    BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST

                                   Purchaser,





                          CENDANT MORTGAGE CORPORATION

                               Seller and Servicer





                                 PHH CORPORATION
                                    Guarantor





                              AMENDED AND RESTATED
                 MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT

                          dated as of December 11, 1998

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




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                                     TABLE OF CONTENTS

                                                                                                 Page
                                                                                                 ----
<S>            <C>                                                                               <C>
                                        ARTICLE I
                                       DEFINITIONS..................................................2

                                        ARTICLE II
               SALE OF ELIGIBLE LOANS; POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS;
                          CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS

Section 2.1    Sale of Eligible Loans; Possession of Mortgage Loan Files;
               Maintenance of Mortgage Loan Files..................................................22
Section 2.2    Determination of Purchase Price; Deposit by Seller..................................26
Section 2.3    Purchase Commitment Term............................................................26
Section 2.4    Books and Records; Transfers of Eligible Loans......................................26
Section 2.5    Custodial Agreement.................................................................27

                                       ARTICLE III
               REPRESENTATIONS AND WARRANTIES; COVENANTS; REMEDIES AND BREACH

Section 3.1    Representations and Warranties of The Company.......................................28
Section 3.2    Representations and Warranties Regarding Individual
               Mortgage Loans; Eligibility Representations.........................................31
Section 3.3    Remedies for Breach of Representations and Warranties...............................41
Section 3.4    Conditions to Closing...............................................................42
Section 3.5    Covenants of the Company............................................................42

                                       ARTICLE IV
                     ADMINISTRATION AND SERVICING OF ELIGIBLE LOANS

Section 4.1    The Company to Act as Servicer; Servicing and
               Administration of the Eligible Loans................................................43
Section 4.2    Sales and Securitizations...........................................................46
Section 4.3    Liquidation of Eligible Loans.......................................................48
Section 4.4    Collection of Eligible Loan Payments................................................49
Section 4.5    Establishment of, and Deposits to, Collection Account...............................49
Section 4.6    Permitted Withdrawals From Collection Account;
               Deposit into the Collateral Account.................................................50

                                       i

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<S>            <C>                                                                               <C>

Section 4.7    Establishment of, and Deposits to, Escrow Account...................................51
Section 4.8    Permitted Withdrawals From Escrow Account...........................................52
Section 4.9    Payment of Taxes, Insurance and Other Charges.......................................53
Section 4.10   Protection of Accounts..............................................................53
Section 4.11   Maintenance of Hazard Insurance.....................................................53
Section 4.12   Maintenance of Mortgage Impairment Insurance........................................55
Section 4.13   Maintenance of Fidelity Bond and Errors and Omissions
               Insurance...........................................................................56
Section 4.14   Inspections.........................................................................56
Section 4.15   Restoration of Mortgaged Property...................................................56
Section 4.16   Maintenance of PMI Policy; Claims...................................................57
Section 4.17   Title, Management and Disposition of REO Property...................................58
Section 4.18   Servicer Reports....................................................................59
Section 4.19   Real Estate Owned Reports...........................................................59
Section 4.20   Liquidation Reports.................................................................59
Section 4.21   Reports of Foreclosures and Abandonments of Mortgaged
               Property............................................................................59
Section 4.22   Servicer Advance Report.............................................................59
Section 4.23   Year 2000...........................................................................59
Section 4.24   Secondary Market Trading Report.....................................................60

                                    ARTICLE V
                               SERVICER ADVANCES

Section 5.1    Servicer Monthly Advances...........................................................60

                                   ARTICLE VI
                          GENERAL SERVICING PROCEDURES

Section 6.1    Transfers of Mortgaged Property.....................................................61
Section 6.2    Satisfaction of Mortgages and Release of
               Mortgage Loan Files.................................................................62
Section 6.3    Servicing Compensation..............................................................62
Section 6.4    Annual Statement as to Compliance...................................................62
Section 6.5    Annual Independent Public Accountants' Servicing Report.............................62
Section 6.6    Right to Examine Servicer Records...................................................63

                                   ARTICLE VII
                             REPURCHASE OBLIGATION

Section 7.1    Servicer's Repurchase Obligations...................................................63

                                       ii

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                                  ARTICLE VIII
                             SERVICER TO COOPERATE
<S>            <C>                                                                               <C>
Section 8.1    Provision of Information............................................................64

                                   ARTICLE IX
                                  THE SERVICER

Section 9.1    Indemnification of Third Party Claims...............................................65
Section 9.2    Corporate Existence of the Servicer.................................................65
Section 9.3    Limitation on Liability of Servicer and Others......................................65
Section 9.4    Limitation on Resignation and Assignment by the Servicer............................66
Section 9.5    Limitation on Assignment of Right...................................................66

                                    ARTICLE X
                                    DEFAULT

Section 10.1   Servicer Events of Default..........................................................67
Section 10.2   Waiver of Defaults..................................................................69

                                   ARTICLE XI
                                  TERMINATION

Section 11.1   Termination of Agreement............................................................70
Section 11.2   Termination of Purchase Obligations.................................................70
Section 11.3   Termination of Servicing With Respect to Any Eligible Loan..........................73

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

Section 12.1   Successor to Servicer...............................................................73
Section 12.2   Amendment...........................................................................74
Section 12.3   Governing Law.......................................................................75
Section 12.4   Duration of Agreement...............................................................75
Section 12.5   Notices.............................................................................75
Section 12.6   Severability of Provisions..........................................................76
Section 12.7   Relationship of Parties.............................................................76
Section 12.8   Execution; Successors and Assigns...................................................76
Section 12.9   Recordation of Assignments of Mortgage..............................................76
Section 12.10  Assignment by Purchaser.............................................................77
Section 12.11  Non-Petition Agreement..............................................................77
Section 12.12  Waiver of Offset....................................................................77
Section 12.13  Limited Recourse....................................................................77
Section 12.14  Limitation of Liability.............................................................77
Section 12.15  Binding Effect on Voting Group......................................................78

                                      iii

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                                  ARTICLE XIII
                           PHH CORPORATION GUARANTEE

<S>              <C>                                                                             <C>
Section 13.1     Guarantee of Servicer's Performance and Payment Obligations.......................78

                                   ARTICLE XIV
                                   ASSIGNMENT

Section 14.1     Assignment........................................................................80

                                       ARTICLE XV
                                     COMMITMENT FEE

Section 15.1     Commitment Fee....................................................................80

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                                       iv

<PAGE>

     AMENDED AND RESTATED MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT, dated
as of December 11, 1998 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Purchase Agreement"), between Bishop's Gate
Residential Mortgage Trust, a Delaware business trust, as Purchaser (the
"Purchaser"), Cendant Mortgage Corporation, a New Jersey corporation (the
"Company"), as Seller and Servicer (in its capacity as Seller hereunder, the
"Seller," and in its capacity as Servicer hereunder, the "Servicer") and PHH
Corporation, a Maryland corporation, as Guarantor of the Servicer's obligations.


                               W I T N E S S E T H

     WHEREAS, the Purchaser and the Seller have entered into that certain
Mortgage Loan Purchase and Servicing Agreement, dated as of May 21, 1998 (the
"Original Purchase Agreement"), and pursuant thereto the Purchaser has agreed to
purchase from the Seller and the Seller has agreed to sell to the Purchaser from
time to time mortgage loans constituting Eligible Loans; and

     WHEREAS, pursuant to the Original Purchase Agreement, the Purchaser and the
Company, as Seller and Servicer, have prescribed the manner of purchase of each
Eligible Loan and the management, control and servicing of the Eligible Loans,
including the method and manner by which the Servicer will arrange for the sale
and Securitization of each Eligible Loan; and

     WHEREAS, the Purchaser, the Seller and the Servicer desire to amend and
restate the Original Purchase Agreement in its entirety; and

     WHEREAS, pursuant to Section 12.2 of the Original Purchase Agreement, the
Purchaser, the Seller, the Required Banks, the Swap Counterparties, the holders
of a majority of the principal amount of all Series of Certificates and the
Servicer have provided their written consent to the amendment and restatement of
the Original Purchase Agreement, and written notice of such amendment has been
provided to each Rating Agency. In connection with the execution of this
Purchase Agreement, the Purchaser has received Rating Agency Confirmation.

     NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the Purchaser, the Seller, and the Servicer
agree as follows:


<PAGE>


                                    ARTICLE I

                                   DEFINITIONS

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

     Accepted Servicing Practices: The Servicer's Customary Servicing Procedures
and the servicing practices required by the Guidelines.

     Acquisition Date Accrued Interest: With respect to any Eligible Loan, the
amount of interest, if any, accrued and unpaid on the date of acquisition of
such Eligible Loan by the Purchaser.

     Administration Agreement: The Amended and Restated Administration
Agreement, dated as of the date hereof, between the Trust and the Administrator,
as the same may be at any time be amended, modified or supplemented.

     Administrator: Cendant Mortgage Corporation, as Administrator under the
Administration Agreement.

     Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities (including, without limitation, partnership interests), by contract
or otherwise and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

     Agency: Any of GNMA, FNMA or FHLMC, as applicable.

     Agency Custodial Agreement: The custodial agreement entered into with GNMA,
FNMA or FHLMC, as applicable, pursuant to which the Custodian will act as
document custodian for a pool or pools of mortgage loans to be formed to back
Agency Securities.

     Agency Securities: Securities backed by a pool or pools of mortgage loans
owned by the Issuer, which are issued and guaranteed by the applicable Agency.


                                       2
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     Agent: The Chase Manhattan Bank, as agent for the Liquidity Banks under the
Liquidity Agreement.

     Agreement or Purchase Agreement: This Amended and Restated Mortgage Loan
Purchase and Servicing Agreement and all amendments hereof and supplements
hereto, including as the context requires, any Transfer Supplement.

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

     Approved Seller/Servicer: An approved seller and servicer under the
Guidelines.

     Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect the
sale of the Mortgage to the Purchaser.

     Base Indenture: The Base Indenture, dated as of the date hereof, between
the Purchaser and the Indenture Trustee, as the same may be at any time amended,
modified or supplemented, exclusive of Supplements creating a new Series of
Notes.

     Base Trust Agreement: The Third Amended and Restated Trust Agreement, dated
as of the date hereof, between the Depositor and the Owner Trustee, as the same
may be at any time be amended, modified or supplemented.

     Best's: The meaning specified in Section 4.11 of this Agreement.

     BIF: The Bank Insurance Fund or any successor thereto.

     Business Day: Any day other than (i) Saturday and Sunday, or (ii) a day on
which banking institutions or foreign exchange markets in New York City are
authorized or required by law, regulation or executive order to be closed for
business.

     Calculation Agent: The Servicer.

     Certificates: The Variable Rate Residential Mortgage Loan Extendible Trust
Certificates, Series 1998-1, Variable Rate Residential Mortgage Loan Extendible
Trust


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Certificates, Series 1998-2 and any additional Series of certificates that may
be issued from time to time pursuant to the Base Trust Agreement and any
supplement thereto.

     Closing Date: The Closing Date specified in any Transfer Supplement, which
is the date as to which the sale of any Portfolio is designated to occur.

     Code: The Internal Revenue Code of 1986, as it may be amended from time to
time or any successor statute thereto, and applicable U.S. Department of the
Treasury regulations issued pursuant thereto.

     Collateral Account: A single, segregated trust account established and
maintained by the Collateral Agent pursuant to the terms of the Security
Agreement for the purposes described in Section 4.6 hereof.

     Collateral Agent: The First National Bank of Chicago, as collateral agent
for the Secured Parties under the Security Agreement or any successor to the
Collateral Agent under the Security Agreement.

     Collection Account: As to any Eligible Loan, any separate account or
accounts created and maintained pursuant to Section 4.5 of this Agreement for
the collection of all payments made on such Eligible Loan.

     Commercial Paper or Commercial Paper Notes: The short-term promissory notes
of the Trust issued pursuant to the Depositary Agreement.

     Commitment Fee: The meaning assigned to such term in Section 15.1 hereof.

     Company: The Company, as Seller and Servicer of the Eligible Loans
purchased by the Purchaser pursuant to the terms of this Agreement.

     Company Employees: The meaning specified in Section 4.13 hereof.

     Condemnation Proceeds: As to any Eligible Loan, all awards or settlements
in respect of a Mortgaged Property, whether permanent or temporary, partial or
entire, by exercise of the power of eminent domain or condemnation, to the
extent not required to be released to a Mortgagor in accordance with the terms
of the related Loan Documents.

     Conforming Loan: An Eligible Loan which conforms to the Guidelines of GNMA,
FNMA or FHLMC, as amended for the Seller.


                                       4
<PAGE>

     Controlling Majority: The Liquidity Banks and holders of the Notes holding
51% of the sum of the (i) the aggregate principal amount of all Series of Notes
outstanding, and (ii) Credits Outstanding (for purposes of this calculation, (i)
the Liquidity Banks percentage of the Controlling Majority shall equal the
Credits Outstanding divided by the sum of the (x) the aggregate principal amount
of all Series of Notes outstanding, and (y) the Credits Outstanding, and (ii)
the Noteholders' percentage of the Controlling Majority shall equal the
aggregate principal amount of all Series of Notes outstanding divided by the sum
of (x) the aggregate principal amount of all Series of Notes outstanding, and
(y) the Credits Outstanding). For the purposes of determining the Controlling
Majority, "Credits Outstanding" shall be determined without reference to clause
(3) of the definition thereof.

     CP Dealer: Lehman Commercial Paper Inc., J.P. Morgan Securities, Inc. and
BankAmerica Robertson Stephens, Inc., each as a Commercial Paper dealer pursuant
to the Program Documents.

     Credit-Adjusted Price: The hypothetical sales price (expressed as a
percentage of par), as determined in good faith by the Calculation Agent, as of
each date of a Partial Termination occurring with respect to a Delinquent or
Defaulted Loan equal to the price that a Reference Mortgage Loan would be sold
to a Qualified Purchaser.

     Credits Outstanding: As of the close of business on any day, (i) the
aggregate principal amount of outstanding Commercial Paper, plus (ii) the
aggregate principal amount of outstanding Loans, minus (iii) funds allocable to
Commercial Paper and Loans outstanding then on deposit in the Collateral
Account, except to the extent that such funds are then subject to any writ,
order, stay, judgment, warrant of attachment or execution or similar process.

     Custodian: The First National Bank of Chicago, in its capacity as Custodian
under the Custodial Agreement, or any successor Custodian under the Custodial
Agreement.

     Customary Servicing Procedures: Procedures (including collection
procedures) that the Servicer customarily employs and exercises in servicing and
administering mortgage loans for its own account and arranging for the sale and
Securitization of mortgage loans and which are in accordance with accepted
mortgage servicing practices of prudent lending institutions in the jurisdiction
in which the Mortgaged Property is situated for properties of a similar type.

     Defaulted Loan: Any Eligible Loan where (i) the obligor thereon has failed
to make a required payment for 90 days or more after the Due Date of such
required payment,


                                       5
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or (ii) such Eligible Loan is a Delinquent Loan for which the Servicer has not
made a Servicer Advance and the Servicer has delivered a certificate pursuant to
Section 5.1 hereof, or (iii) any other event has occurred which gives the holder
the right to accelerate payment and/or take steps to foreclose on the mortgage
securing the Eligible Loan under the Eligible Loan documentation.

     Delinquent Loan: Any Eligible Loan which has a payment which is 30 days or
more past its Due Date.

     Depositary: First Chicago Trust Company of New York, in its capacity as
Depositary under the Depositary Agreement, or any successor Depositary under the
Depositary Agreement.

     Depositary Agreement: The Amended and Restated Depositary Agreement dated
as of December 11, 1998 entered into by the Trust and the Depositary, as the
same may at any time be amended, modified or supplemented.

     Depositor: Cendant Mortgage Corporation.

     Determination Date: With respect to a Due Period, the 16th day (or if such
day is not a Business Day, the Business Day immediately succeeding such day) of
the calendar month following such Due Period.

     Due Date: The first day of the month in which the related Monthly Payment
is due on an Eligible Loan, exclusive of any days of grace.

     Due Period: With respect to each Payment Date, the period commencing on the
first day of the month preceding the month of the Payment Date and ending on the
last day of the month preceding the month in which the Payment Date occurred.

     Early Amortization Event: With respect to each Series, if any of the
following shall have occurred prior to the applicable Final Scheduled
Distribution Date: (i) a Termination Event, (ii) the Trust's commitment to
purchase Mortgage Loans has terminated prior to the Final Scheduled Distribution
Date of any Series of Certificates, (iii) an Indenture Event of Default, (iv) a
Liquidity Agreement Event of Default (v) an Interest Rate Swap Termination
Event, (vi) an Interest Rate Swap Event of Default.

     Eligible Investments: Investments which mature no later than the next
following Payment Date in the following:(i) obligations issued by, or the full
and timely


                                       6
<PAGE>

payment of principal of and interest on which is fully guaranteed by, the United
States of America or any agency or instrumentality thereof (which agency or
instrumentality is backed by the full faith and credit of the United States of
America), (ii) commercial paper (other than the Commercial Paper) rated (at the
time of purchase) at least "A-l" by S&P, "P-1" by Moody's and, if rated by
Fitch, "F1," (iii) certificates of deposit, other deposits or bankers'
acceptances issued by or established with commercial banks having short-term
deposit ratings (at the time of purchase) of at least "A-l" by S&P, "P-1" by
Moody's and, if rated by Fitch, "F1," (iv) repurchase agreements involving any
of the Eligible Investments described in clauses (i) through (iii) hereof so
long as the other party to the repurchase agreement has short-term unsecured
debt obligations or short-term deposits rated (at the time of purchase) at least
"A-l" by S&P, "P-1" by Moody's and, if rated by Fitch, "F1," and (v) if approved
in writing by Moody's, direct obligations of any money market fund or other
similar investment company all of whose investments consist of obligations
described in the foregoing clauses of this definition and that is rated "AAm" by
S&P, "Aam" by Moody's and, if rated by Fitch, "AA/V1+" or higher. In addition,
any such Eligible Investment shall not have an "r" highlighter affixed to its
rating, and its term shall have a predetermined fixed dollar amount of principal
due at maturity that cannot vary or change. Interest on any Eligible Investment
shall be tied to a single interest rate index plus a single fixed spread, if
any, and move proportionately with that index.

     Eligible Loan: Conforming Loans and Jumbo Loans that satisfy the
Eligibility Criteria and the Portfolio Criteria. An Eligible Loan includes,
without limitation, the Mortgage Loan File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, VA
Guaranty Proceeds, REO Disposition Proceeds and all other rights, benefits,
proceeds and obligations arising from or in connection with such Eligible Loan.

     Eligibility Criteria: In connection with the Purchaser's purchase of
mortgage loans on any day, the mortgage loans acquired on such day must satisfy
the following criteria: (i) each mortgage loan must be either a Conforming Loan
or a Jumbo Loan, (ii) each mortgage loan must have been originated or purchased
by the Seller in accordance with its then-current origination or acquisition
underwriting practices within 60 days prior to the acquisition thereof by the
Purchaser, (iii) the aggregate Initial Purchase Price of all mortgage loans
secured by properties located in California and acquired on such day may not
exceed 30% of the aggregate Initial Purchase Price of all mortgage loans
acquired on such day, (iv) the aggregate Initial Purchase Price of all mortgage
loans secured by properties located in any state other than California and
acquired on such day may not exceed 15% of the aggregate Initial Purchase Price
of all mortgage loans acquired on such day, (v) the aggregate Initial Purchase
Price of all mortgage loans guaranteed by either the Federal Housing Authority
or




                                       7
<PAGE>

the Veterans Administration and acquired on such day may not exceed 30% of the
aggregate Initial Purchase Price of all mortgage loans acquired on such day,
(vi) the aggregate Initial Purchase Price of all Jumbo Loans acquired on such
day may not exceed 35% of the aggregate Initial Purchase Price of all mortgage
loans acquired on such day and (vii) each mortgage loan may not be made to a
borrower that is generally referred to as "sub-prime borrower." In addition, the
representations and warranties made by the Seller in this Agreement must be true
and correct in all material respects on such day.

     Eligibility Representations: The representations and warranties made by the
Seller with respect to each mortgage loan, set forth in Section 3.2 herein.

     Equivalent Security: With respect to a mortgage loan, a mortgage-backed
security issued by FHLMC, FNMA or GNMA having a term to final maturity equal to
the remaining term to maturity of such mortgage loan and an interest or
pass-through rate equal to the interest rate on such mortgage loan (net of
servicing fees).

     Equivalent Security Price: With respect to a mortgage loan, the price
(expressed as a percentage of the principal amount) of the Equivalent Security
for such mortgage loan. The price of an Equivalent Security shall be determined
by the Servicer on any date by reference to an independent market price
reference such as Telerate.

     Errors and Omissions Insurance Policy: An errors and omissions insurance
policy or policies to be maintained by the Servicer pursuant to Section 4.13
hereof.

     Escrow Account: As to any Eligible Loan, any separate account or accounts
created and maintained pursuant to Section 4.7 hereof.

     Escrow Payments: With respect to any Eligible Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, and any other payments required by the Mortgagee to be escrowed by the
Mortgagee pursuant to the Mortgage or any other related document.

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

     FHA: The Federal Housing Administration, an agency within the United States
Department of Housing and Urban Development, or any successor thereto and
including the Federal Housing Commissioner and the Secretary of Housing and
Urban Development where appropriate under the FHA Regulations.


                                       8
<PAGE>


     FHA Approved Mortgagee: A corporation or institution approved as a
mortgagee by the FHA under the Act and applicable FHA Regulations, and eligible
to own and service mortgage loans such as the FHA Loans.

     FHA Loan: An Eligible Loan which is the subject of an FHA Mortgage
Insurance Contract.

     FHA Mortgage Insurance: Mortgage insurance authorized under Sections
203(b), 213, 221(d)(2), 222, and 235 of the Act and provided by the FHA.

     FHA Mortgage Insurance Contract: The contractual obligation of the FHA
respecting the insurance of an Eligible Loan.

     FHA Regulations: Regulations promulgated by HUD under the Federal Housing
Administration Act, codified in 24 Code of Federal Regulations, and other HUD
issuances relating to FHA Loans, including the related handbooks, circulars,
notices and mortgagee letters.

     FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
thereto.

     FHLMC Guides: The Federal Home Loan Mortgage Corporation Sellers' Guide and
the Federal Home Loan Mortgage Corporation Servicers' Guide and all amendments
or additions thereto.

     FICO Score: A statistical credit score obtained by many mortgage lenders in
connection with a loan application to help assess a borrower's creditworthiness.
A FICO score is generated by models developed by a third party and made
available to lenders through three national credit bureaus. The FICO score is
based on a borrower's historical credit data, including, among other things,
payment history, delinquencies on accounts, levels of outstanding indebtedness,
length of credit history, types of credit and bankruptcy experience.

     Fidelity Bond: A fidelity bond to be maintained by the Servicer pursuant to
Section 4.13 hereof.

     Final Scheduled Distribution Date: With respect to any Series of
Certificates, the final scheduled distribution date set forth in the applicable
Series Trust Agreement

                                       9
<PAGE>


Supplement, as modified in the manner set forth in Section 3.4(b), 3.4(c) or
3.4(d) of the Base Trust Agreement.

     Fitch: Fitch IBCA Inc., or any successor thereto.

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

     FNMA Guides: The FNMA Selling and Servicing Guides and all amendments or
additions thereto.

     GNMA: The Government National Mortgage Association, or any successor
thereto.

     GNMA Guides: The GNMA Handbooks 5500.1 and 5500.2 and all amendments or
additions thereto.

     Guarantee: The full, unconditional and irrevocable guarantee of the
Servicer's performance and payment obligations, set forth in Article XIII
hereof.

     Guarantor: PHH Corporation, a Maryland corporation.

     Guidelines: The GNMA Guides, the FNMA Guides and the FHLMC Guides, as such
Guides have been amended from time to time with respect to the Seller.

     HUD: The Department of Housing and Urban Development, or any federal agency
or official thereof which may from time to time succeed to the functions thereof
with regard to FHA Mortgage Insurance. The term "HUD," for purposes of this
Agreement, is also deemed to include subdivisions thereof such as the FHA and
GNMA.

     Indenture: The Base Indenture, together with all Supplements thereto, as
the same may be at any time amended, modified or supplemented.

     Indenture Event of Default: An event of default set forth in the Indenture.

     Indenture Trustee: The Bank of New York, not in its individual capacity but
solely as Indenture Trustee under the Indenture, or any successor Indenture
Trustee as provided in the Indenture.



                                       10
<PAGE>

     Initial Purchase Price: The sum of the Original Principal Purchase Price of
an Eligible Loan plus the Acquisition Date Accrued Interest.

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

     Insured Amount: The meaning specified in Section 4.10 of this Agreement.

     Interest Rate Swaps: The amended and restated interest rate swap
agreements, each dated as of the date hereof, and any other interest rate swap
agreement entered into, between the Trust and each Swap Counterparty separately
or any substitute interest rate swaps entered into pursuant to the provisions of
the Interest Rate Swaps.

     Interest Rate Swap Event of Default: An event of default under an Interest
Rate Swap.

     Interest Rate Swap Termination Event: A termination event under an Interest
Rate Swap.

     Jumbo Loan: A mortgage loan which substantially conforms to the Guidelines
except (i) the principal amount thereof may exceed the principal amount of a
loan which conforms to the Guidelines, and (ii) for other specified exceptions
to the Guidelines which are consistent with the Seller's Jumbo Loan underwriting
standards. Jumbo Loans will not include mortgage loans made to borrowers that
are generally referred to as "sub-prime" borrowers.

     Jumbo Price Spread: With respect to Jumbo Loans, the reduction in
Equivalent Security Price, as agreed to by the Seller, the Purchaser and the
Agent.

     Liquidation Proceeds: All amounts received and retained in connection with
the liquidation of Defaulted Loans.

     Liquidity Agreement: The Amended and Restated Liquidity Agreement, dated as
of the date hereof, among the Purchaser, the Liquidity Banks and the Agent.

     Liquidity Agreement Event of Default: An event of default as set forth in
the Liquidity Agreement.




                                       11
<PAGE>


     Liquidity Banks: The banks or other financial institutions which are
parties to the Liquidity Agreement.

     Loan: Loan made by Liquidity Banks pursuant to the Liquidity Agreement.

     Loan Documents: The documents listed in Section 2.1 of this Agreement.

     Loan Termination Date: Each day on which a deposit is made into the
Collateral Account in respect of Terminated Loans.

     Loan-to-Value Ratio or LTV: With respect to any Eligible Loan, the ratio
expressed as a percentage of the Scheduled Principal Balance of the Eligible
Loan as of the date of origination (unless otherwise indicated) to the lesser of
(i) the Appraised Value of the Mortgaged Property, and (ii) if the Eligible Loan
was made to finance the acquisition of the related Mortgaged Property, the
purchase price of the Mortgaged Property.

     Mark to Market Price: With respect to a mortgage loan, (i) the Mark to
Market Price of a Conforming Loan shall be the Equivalent Security Price
multiplied by the unpaid principal amount of such Conforming Loan and (ii) the
Mark to Market Price of a Jumbo Loan shall be the Equivalent Security Price
reduced by the Jumbo Price Spread multiplied by the unpaid principal amount of
such Jumbo Loan.

     Material Adverse Effect: A material adverse effect on (a) the business,
assets, operations, prospects or condition, financial or otherwise, of the
Purchaser, (b) the ability of any of the Purchaser, the Seller, the Servicer or
the Guarantor to perform any of its obligations under this Mortgage Loan
Purchase and Servicing Agreement or any of the other Program Documents.

     Monthly Payment: The scheduled monthly payment of principal and interest on
an Eligible Loan.

     Monthly Servicer Advance Report: The meaning specified in Section 4.22
hereof.

     Moody's: Moody's Investors Service, Inc., and any successors thereto.

     Mortgage: The mortgage, deed of trust or other instrument securing a
Mortgage Note, which creates a lien on an estate in fee simple in real property
securing the Mortgage Note.



                                       12
<PAGE>


     Mortgage Impairment Insurance Policy: A mortgage impairment or blanket
hazard insurance policy as described in Section 4.12 hereof.

     Mortgage Interest Rate: The annualized regular rate of interest borne on a
Mortgage Note.

     Mortgage Loan File: The items pertaining to each Eligible Loan referred to
in Section 2.1 hereof, and any additional documents required to be added to the
Mortgage Loan File pursuant to this Agreement.

     Mortgage Loan Schedule: A schedule of Eligible Loans annexed to the
Transfer Supplement and delivered to the Purchaser on the related Closing Date,
such schedule setting forth the following information with respect to each
Eligible Loan: (1) the identifying number for the Eligible Loan; (2) the
Mortgagor's name; (3) the street address of the Mortgaged Property including the
state code; (4) a code indicating whether the Mortgaged Property is a one family
residence or a 2-4 family residence; (5) the months to maturity from the Closing
Date based on the amortization schedule for such Eligible Loan; (6) the
Loan-to-Value Ratio at the Closing Date; (7) the Mortgage Interest Rate; (8) the
stated maturity date; (9) the amount of the Monthly Payment; (10) the original
principal balance; (11) the PMI Policy certificate number, if any; (12) the
Qualified Insurer, if any; (13) the type of loan (FHA, VA, Conforming, Jumbo);
(14) payment type (fixed rate or adjustable rate); and (15) purchase price. With
respect to any Portfolio in the aggregate, the Mortgage Loan Schedule shall set
forth the following information, as of the related Closing Date: (1) the number
of Eligible Loans; (2) the current aggregate outstanding principal balance of
the Eligible Loans; (3) the weighted average Mortgage Interest Rate of the
Eligible Loans; and (4) the weighted average maturity of the Eligible Loans.

     Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.

     Mortgagee: The lender on a Mortgage Note.

     Mortgaged Property: The real property securing repayment of the debt
evidenced by a Mortgage Note.

     Mortgagor: The obligor on a Mortgage Note.


                                       13
<PAGE>


     Notes: The Variable Rate Residential Mortgage Loan Medium-Term Notes,
Series 1998-2, and any additional Series of notes issued pursuant to the Base
Indenture and any Supplement.

     Officer's Certificate: A certificate signed by the Chairman of the Board
and Chief Executive Officer, the President, any Executive Vice President or any
Senior Vice President or of the Seller or the Servicer, as applicable, and
delivered to the Purchaser as required by this Agreement.

     Opinion of Counsel: A written opinion of counsel, who may be an employee of
the Seller or the Servicer, as applicable, in a form reasonably acceptable to
the Purchaser.

     Original Principal Purchase Price: With respect to each mortgage loan, the
Mark to Market Price at the close of business on the second Business Day
immediately preceding the Closing Date of the sale of such mortgage loan by the
Seller to the Purchaser.

     Outstanding Purchase Price: With respect to any Eligible Loan and any date
of determination, (i) the Initial Purchase Price of such mortgage loan less (ii)
the amount of any payments received by the Purchaser and deposited in the
Collateral Account in respect of Acquisition Date Accrued Interest, less (iii)
the product of (x) the aggregate of all previous principal payments made on such
mortgage loan and deposited into the Collateral Account on or prior to such date
of determination, and (y) the related Purchase Price Adjustment Factor;
provided, however, the Outstanding Purchase Price of a mortgage loan (other than
a Terminated Loan) shall only be reduced on a Payment Date and the Outstanding
Purchase Price of a Terminated Loan shall be reduced on the related Loan
Termination Date; provided further, that solely for calculating a Partial
Termination Payment with respect to a Terminated Loan which is sold by the
Servicer on behalf of the Purchaser to a third party, the Outstanding Purchase
Price shall be deemed to exclude the product of (i) Retained Payment with
respect to such Terminated Loan, and (ii) the Purchase Price Adjustment Factor;
provided further that after any Loan Termination Date the Outstanding Purchase
Price of a Terminated Loan shall be zero except that the Outstanding Purchase
Price of a Terminated Loan which is sold by the Servicer on behalf of the
Purchaser to a third party shall be the amount of the Retained Payment.

     Owner Trustee: First Union Trust Company National Association acting, not
in its individual capacity, but solely on behalf of the Purchaser as owner
trustee under the Base Trust Agreement.




                                       14
<PAGE>


     Partial Termination Payment: An amount, which may be positive or negative,
calculated with respect to each Terminated Loan (I) which is sold by the Trust
to a third party or securitized equal to the product of (i) the unpaid principal
balance of the Eligible Loan to which the loan termination relates and (ii) the
difference between (x) the Purchase Price Adjustment Factor for such Eligible
Loan and (y) (A) if the loan termination occurs with respect to a non-Delinquent
or non-Defaulted Loan, the sales price (expressed as a percentage of par) of the
Eligible Loan to which the loan termination relates (which sales price in the
case of a bundled whole loan sale or a Securitization shall equal the sales
price for the related bundle of loans or Securitization) or (B) if the loan
termination occurs with respect to a Delinquent or Defaulted Loan, the
Credit-Adjusted Price or (II) which results from a prepayment in full of such
Eligible Loan equal to the product of (x) the related Purchase Price Adjustment
Factor less 100% and (y) the principal payments that were deposited in the
Collateral Account on such date.

     Payment Date: The 20th day (or if such day is not a Business Day, the
immediately succeeding Business Day) of any month.

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

     PHH Corporation: A Maryland corporation.

     PMI Policy: A policy of primary mortgage guaranty insurance issued by a
Qualified Insurer, as required by this Agreement with respect to certain
Eligible Loans.

     Pooling Date: With respect to any Terminated Loan sold by the Servicer on
behalf of the Purchaser to a third party, the date on which the pool in which
such Terminated Loan is included is cut by the Servicer.

     Portfolio: An Eligible Loan or pool of Eligible Loans sold to the Purchaser
on a given day pursuant to the terms hereof and the applicable Transfer
Supplement.

     Portfolio Aging Limitations: With respect to the age of the Eligible Loans
owned by the Purchaser on any day, the following limitations shall apply:

     (i) the aggregate Outstanding Purchase Price of Eligible Loans acquired by
the Purchaser more than three (3) months prior to such day may not exceed 30% of
the then-current Program Size; (ii) the aggregate Outstanding Purchase Price of
Eligible Loans


                                       15
<PAGE>



acquired by the Purchaser more than six (6) months prior to such day may not
exceed 5% of the then-current Program Size; and (iii) the Purchaser must
securitize or sell each Eligible Loan acquired by it within one (1) year of the
date of acquisition; provided, however, that, subject to Rating Agency
Confirmation, the Controlling Majority with the consent of the Required Banks
and the Required Certificateholders may waive any of the requirements of clauses
(i) and (ii) above.

     Portfolio Criteria: On any day, after giving effect to the Purchaser's
purchase and sale of mortgage loans on such day, the mortgage loans owned by the
Purchaser in the aggregate must satisfy the following criteria: (i) the
aggregate Outstanding Purchase Price of mortgage loans secured by property in
California may not on such date exceed 30% of the then-current Program Size;
(ii) the aggregate Outstanding Purchase Price of mortgage loans secured by
property in a single state other than California may not on such date exceed 15%
of the then current Program Size; (iii) the aggregate Outstanding Purchase Price
of mortgage loans insured or guaranteed by either the FHA or VA may not on such
date exceed 30% of the then-current Program Size; (iv) the aggregate Outstanding
Purchase Price of Jumbo Loans may not on such date exceed 35% of the
then-current Program Size; (v) the mortgage loans owned by the Trust must have a
weighted average FICO Score of at least 675; and (vi) the weighted average loan
to value ratio of the mortgage loans owned by the Trust must not on such date
exceed 85%.

     Principal Prepayment: Any payment or other recovery of principal made on an
Eligible Loan which is received in advance of its scheduled Due Date, including
any prepayment penalty or premium thereon, 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.

     Program Documents: The Liquidity Agreement, the Indenture, the Security
Agreement, the Custodial Agreement, the Mortgage Loan Purchase and Servicing
Agreement, the Guarantee, the Trust Agreement, the Depositary Agreement, the
Interest Rate Swaps, the Commercial Paper Dealer Agreement, the Administration
Agreement and the Note Purchase Agreements and the Certificate

     Program Size: The sum of the Series Program Sizes, as such limit may be
increased or decreased in accordance with the Program Documents.

     Purchase Price Adjustment Factor: With respect to any Eligible Loan, the
Original Principal Purchase Price of such Eligible Loan expressed as a
percentage of par.




                                       16
<PAGE>


     Purchaser or Trust: Bishop's Gate Residential Mortgage Trust, a Delaware
business trust.

     Qualified Depository: Any depository the accounts of which are insured by
the FDIC through the BIF or the SAIF and the debt obligations of which are rated
"A2" and "Aa" or better by Moody's and S&P, respectively or such depository as
shall be acceptable to Moody's and S&P, as applicable.

     Qualified Insurer: A mortgage guaranty insurance company duly authorized
and licensed where required by law to transact mortgage guaranty insurance
business and approved as an insurer by FHLMC, FNMA or GNMA.

     Qualified Purchaser: A leading purchaser in the market for mortgage loans
having the highest credit standing which satisfy all the criteria that the
Calculation Agent would apply generally at such time in determining whether to
offer or make an extension of credit thereto.

     Rated Bidder: Shall have the meaning set forth in Section 11.3.

     Rating Agency: S&P, Moody's and Fitch.

     Rating Agency Confirmation: A written confirmation from each Rating Agency
that the proposed action will not cause the reduction or withdrawal of their
respective then current ratings on any outstanding Series of Certificates, any
outstanding Series of Notes or any outstanding Commercial Paper.

     Reconciliation Date: The first and fifteenth day of each calendar month
(or, if such day is not a Business Day, the next following Business Day).

     Reference Mortgage Loan: A hypothetical mortgage loan used by the
Calculation Agent for the purposes of determining the Credit-Adjusted Price
which is otherwise identical to the Delinquent or Defaulted Loan in all
respects, including interest rate, principal balance, cash flows and all other
payment characteristics except that such mortgage loan is not a Delinquent or
Defaulted Loan.

     Remarketing Agent: Lehman Brothers Inc., a Delaware corporation, or any
successor thereto as remarketing agent for all Series of Certificates, pursuant
to a mutually acceptable remarketing agent agreement.



                                       17
<PAGE>


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

     REO Disposition Proceeds: All amounts received with respect to an REO
Disposition (net of costs related thereto) pursuant to Section 4.17 hereof.

     REO Property: A Mortgaged Property acquired by the Servicer on behalf of
the Purchaser through foreclosure or by deed in lieu of foreclosure, as
described in Section 4.17 hereof.

     Repurchase Price: With respect to any mortgage loan that is repurchased by
the Seller or Servicer in accordance with Sections 3.3, 6.2 and 7.1 hereof, the
Outstanding Purchase Price of such loan plus accrued interest through the date
of repurchase.

     Required Banks: Liquidity Banks having an aggregate principal amount of
outstanding Liquidity Loans and available commitments under the Liquidity
Agreement equal to 51% of the aggregate principal amount of outstanding
Liquidity Loans and available commitments for all Liquidity Banks.

     Required Certificateholders: A majority in principal amount of all Series
of Certificates, voting together as a class.

     Required Noteholders: A majority in principal amount of all Series of
Notes, voting together as a single class.

     Reserve Fund: The segregated trust account established and maintained by
the Collateral Agent for the benefit of the Secured Parties and the holders of
all Series of Certificates, as set forth in Section 5.05 of the Security
Agreement.

     Reserve Fund Available Amount: On any day, the amount on deposit in the
Reserve Fund as of such day.

     Retained Payment: With respect to any Terminated Loan sold by the Servicer
on behalf of the Purchaser to a third party or securitized, the sum of (A) with
respect to any such Terminated Loan which has a Pooling Date prior to the 15th
day of the month, the amount of principal payments which are scheduled to be
received by the Purchaser in the month in which the Loan Termination Date for
such Terminated Loan occurs and (B) the amount of Principal Prepayments not
deposited into the Collateral Account and received by the Purchaser prior to the
Pooling Date where the next Reconciliation Date occurs prior to such Pooling
Date.



                                       18
<PAGE>


     SAIF: The Savings Association Insurance Fund, or any successor thereto.

     Scheduled Principal Balance: With respect to any Eligible Loan, as of any
date of determination, the original principal balance thereof, reduced by the
principal portion of all Monthly Payments then due on or before such date of
determination, whether or not received.

     Secured Parties: The Swap Counterparties, the Liquidity Banks, the Agent,
the holders of all Series of Notes, the Indenture Trustee and the holders of the
Commercial Paper.

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

     Securities or Securitization Securities: Any note, bond or pass-through
certificate that is, directly or indirectly, secured by or represents an
interest in any Eligible Loan or pool of Eligible Loans.

     Securitization or Securitized: A transaction in which any Eligible Loan or
pool of Eligible Loans designated by the Purchaser is financed through or sold
to a Securitization Vehicle, which vehicle issues Securities in the capital
markets.

     Securitization Vehicle: FHLMC, FNMA, GNMA or any trust, partnership,
corporation, limited liability corporation, limited liability partnership or
other state law entity that is created for the principal purpose of owning or
holding an Eligible Loan or Eligible Loans which are the subject of a
Securitization.

     Security Agreement: The Security Agreement dated as of the date hereof,
among the Purchaser, the Agent, the Indenture Trustee and the Collateral Agent.

     Seller: Cendant Mortgage Corporation, a New Jersey corporation.

     Series: Shall mean (x) any Series of Notes, (y) the Commercial Paper and
Liquidity Loans (such Commercial Paper and Liquidity Loans taken together as one
Series), or (z) any Series of Certificates, as the context may require.

     Series Program Size: Shall mean, with respect to each Series of Notes, the
amount set forth in the Series Supplement for such Series of Notes (including,
without limitation, the amount of Certificates required to be issued in
connection therewith) and, with


                                       19
<PAGE>


respect to the Series of Liquidity Loans and Commercial Paper, $[1,546,400,000]
(as such size may be increased or decreased in accordance with the Program
Documents).

     Series Trust Agreement Supplement: With respect to each Series of
Certificates, the related supplement to the Base Trust Agreement.

     Servicer: Cendant Mortgage Corporation, a New Jersey corporation, or any
successor Servicer as provided herein.

     Servicer Event of Default: Any one of the conditions or circumstances
enumerated in Section 10.1.

     Servicer Monthly Advance: Amounts advanced by the Servicer in respect of
Delinquent Loans pursuant to Section 5.1 of this Agreement.

     Servicer Report: The meaning specified in Section 4.18 hereof.

     Servicing Advances: All customary, reasonable and necessary "out of pocket"
costs and expenses other than Servicer Monthly Advances (including reasonable
attorneys' fees and disbursements) incurred in the performance by the Servicer
in connection with a default or other unanticipated occurrence with respect to
an Eligible Loan owned by the Purchaser (and not including the performance of
its ordinary and customary activities as Servicer), including, but not limited
to, the cost of (a) the preservation, restoration and protection of the
Mortgaged Property, (b) any enforcement or judicial proceedings, including
foreclosures, (c) the management and liquidation of any REO Property and (d) any
advances of taxes and insurance premiums made pursuant to Section 4.9 hereof as
a consequence of the default by the Mortgagor on its obligation to pay such
amounts.

     Servicing Fee: With respect to the services provided by the Servicer
pursuant to this Agreement, an annual servicing fee of 3/8 of 1% on the average
monthly balance of Eligible Loans held by the Purchaser during such month plus
the excess fee, if any, pursuant to Section 5.03(b)(xi) of the Security
Agreement.

     S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, or any successor thereto.

     Supplement: A supplement to the Base Indenture with respect to any Series
of Notes.



                                       20
<PAGE>


     Swap Counterparty: Each of The Bank of Nova Scotia, NationsBank, N.A.,
Barclay's Bank or any other swap counterparty which is a commercial bank or
financial institutions having short-term credit ratings of "A-1+" and "P-1" from
S&P and Moody's and "F1+," if rated by Fitch, and long-term credit ratings of at
least "AA-" and "Aa3" from S&P and Moody's and "AA-," if rated by Fitch .

     Terminated Loan: Each Eligible Loan which is (1) sold or Securitized or (2)
prepaid in full.

     Termination Event: The meaning specified in Section 11.2 of this Agreement.

     Termination Event Auction: Shall have the meaning set forth in Section
11.2.

     Transfer Supplement: The document pursuant to which each Eligible Loan or
Eligible Loans are sold by the Seller to the Purchaser, a form of which is
attached hereto as Exhibit A.

     VA: The U.S. Department of Veterans Affairs, an agency of the United States
of America, or any successor thereto including the Secretary of Veterans
Affairs.

     VA Approved Lender: Those lenders which are approved by the VA to act as a
lender in connection with the origination of VA Loans.

     VA Guaranty Proceeds: The proceeds of any payment of a VA Loan Guaranty
Certificate.

     VA Loan: An Eligible Loan which is the subject of a VA Loan Guaranty
Certificate as evidenced by a VA Loan Guaranty Certificate, or an Eligible Loan
which is a vendee loan sold by the VA.

     VA Loan Guaranty Certificate: The obligation of the United States to pay a
specific percentage of an Eligible Loan (subject to a maximum amount) upon
default of the Mortgagor pursuant to the Servicemen's Readjustment Act, as
amended.

     VA Regulations: Regulations promulgated by the U.S. Department of Veterans
Affairs pursuant to the Servicemen's Readjustment Act, as amended, codified in
38 Code of Federal Regulations, and other VA issuances relating to VA Loans,
including related handbooks, circulars and notices.




                                       21
<PAGE>


     Voting Group: The meaning specified in Section 12.4 of this Agreement.

     Wet Funded Loan: A mortgage loan that is originated by the Seller and
purchased by the Purchaser, prior to the delivery of the Mortgage Note to the
Custodian.

     Wet Funded Loan Limitation: On any day, if the ratings of PHH Corporation
are below BBB+ or Baa1, the aggregate Outstanding Purchase Price of Wet Funded
Loans may not exceed 30% of the then-current Program Size.


                                   ARTICLE II

              SALE OF ELIGIBLE LOANS; POSSESSION OF MORTGAGE FILES;
                     BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
                              DELIVERY OF DOCUMENTS

     Section 1.1 Sale of Eligible Loans; Possession of Mortgage Loan Files;
Maintenance of Mortgage Loan Files.

     (1) (i) From time to time, pursuant to any Transfer Supplement, the Seller
may sell, transfer, assign, set over and convey to the Purchaser, without
recourse, but subject to the terms of this Agreement, all the right, title and
interest (not including servicing rights with respect to the Eligible Loans,
which shall be retained by the Seller subject to and in accordance with this
Agreement) of the Seller in and to any Eligible Loans, including Wet Funded
Loans, originated by the Seller; provided, however, the Purchaser shall not at
any time be required to purchase Eligible Loans having an aggregate Outstanding
Purchase Price greater than the then-current Program Size; provided, further,
that mortgage loans transferred on each Closing Date must satisfy the
Eligibility Criteria. The Seller shall provide a notice to the Purchaser, the
Indenture Trustee, the Agent, the Collateral Agent and the Swap Counterparties
not later then 4:00 p.m., New York City time, one Business Day prior to the
execution of any Transfer Supplement of its intention to sell a Portfolio to the
Purchaser pursuant to a Transfer Supplement. In such notice, the Seller shall
inform the Purchaser of the aggregate principal balance of the Eligible Loans
that it intends to sell on such date. The subject Portfolio shall be sold by the
Seller to the Purchaser as described in Section 2.2 hereof. Each Transfer
Supplement shall be executed by the Seller and the Purchaser at the time of the
sale of the subject Portfolio. Notwithstanding the foregoing, the Purchaser and
the Seller each acknowledge and agree that, subject to and in accordance with
this Agreement, the Seller is the owner of the servicing rights with respect to
the Eligible Loans, and the Seller is responsible for all servicing duties.


                                       22
<PAGE>



     (ii) Upon execution of any Transfer Supplement by the Company and the Trust
and receipt of the purchase price therefor, the Company hereby sells, assigns,
transfers, sets over and conveys to the Trust all right, title and interest of
the Company in, to and under each mortgage loan identified on the such Transfer
Supplement. It is intended that the transfer, assignment and conveyance herein
contemplated constitute a sale of the mortgage loans, conveying good title
thereto free and clear of any Liens, by the Company to the Trust and that the
mortgage loans not be part of the Company's estate in the event of insolvency.
In the event that the mortgage loans are held to be property of the Company or
if for any other reason the Transfer Supplement is held or deemed to create a
security interest in the mortgage loans, the parties intend that the Company
shall be deemed to have granted, and shall have granted, to the Trust a first
priority perfected security interest in the mortgage loans and all Collateral
related thereto now existing or hereafter arising for the purpose of securing
the rights of the Trust under this Agreement, and that this Agreement and the
Transfer Supplement shall each constitute a security agreement under applicable
law.

     (2) Pursuant to Section 2.5, as soon as practicable but in any event on or
before the date which is 21 days after any sale of Eligible Loans to the
Purchaser, the Seller shall deliver each Mortgage Note, including Mortgage Notes
on Wet Funded Loans (subject to the Wet Funded Loan Limitation), to the
Custodian as agent of the Collateral Agent. The Seller shall deliver the related
Loan Documents to the Servicer and the contents of each Mortgage Loan File shall
be held in trust by the Servicer for the benefit of the Purchaser. The
possession of each Mortgage Loan File by the Servicer is at the will of the
Purchaser for the sole purpose of servicing the related Eligible Loan and such
retention and possession by the Servicer is in a custodial capacity only. Upon
the sale of the Eligible Loans, the ownership of each Mortgage Note, the related
Mortgage and the related Mortgage Loan File shall vest immediately in the
Purchaser, and the ownership of all records and documents with respect to the
related Eligible Loan prepared by or which come into the possession of the
Servicer shall vest immediately in the Purchaser and shall be retained and
maintained by the Servicer, in trust, at the will of the Purchaser and the
Collateral Agent and only in such custodial capacity. Each Mortgage Loan File
and the Servicer's books and records shall each be marked appropriately to
reflect clearly the sale of the related Eligible Loans to the




                                       23
<PAGE>

Purchaser. The Custodian shall only release its custody of the contents of any
Mortgage Loan File in its possession accordance with the Custodial Agreement.

     The Mortgage Loan File shall consist of the following documents
(constituting, collectively, the "Loan Documents") and such other documents as
Purchaser may require from time to time:

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

          (2) the original Mortgage with evidence of recording thereon. If in
     connection with any Eligible Loan, the Seller cannot deliver or cause to be
     delivered the original Mortgage with evidence of recording thereon on or
     prior to the Closing 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, the Seller shall deliver or cause to be
     delivered to the Servicer, a photocopy of such Mortgage, together with (i)
     in the case of a delay caused by the public recording office, an officer's
     certificate of the Seller stating that such Mortgage has been dispatched to
     the appropriate public recording office for recordation and that 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 will be promptly delivered to the Servicer upon receipt
     thereof by the Seller; or (ii) in the case of a Mortgage where a public
     recording office retains the original recorded Mortgage or in the case
     where a Mortgage is lost after recordation in a public recording office, a
     copy of such Mortgage certified by such public recording office to be a
     true and complete copy of the original recorded Mortgage;

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

          (4) any original duly executed Assignment of Mortgage for each
     Eligible Loan, in form and substance acceptable for recording, and all
     interim assignments with evidence of recording thereon, if any; if the
     Eligible Loan was acquired by the Seller in a merger, any Assignment of
     Mortgage must be made by "[Seller], successor by merger to [name of
     predecessor]." If the Eligible Loan was acquired or originated by the
     Seller




                                       24
<PAGE>

     while doing business under another name, any Assignment of Mortgage must be
     by "[Seller], formerly known as [previous name]." If the Eligible Loan was
     acquired by the Seller as receiver for another entity, any Assignment of
     Mortgage must be by "[Seller], receiver for [name of entity in
     receivership]." Any Assignment of Mortgage must be duly recorded only if
     recordation is either necessary under applicable law to perfect or on
     direction of the Purchaser as provided in this Agreement. If any Assignment
     of Mortgage is to be recorded, the Mortgage shall be assigned to the
     Servicer as Custodian. If any Assignment of Mortgage is not to be recorded,
     such Assignment of Mortgage shall be delivered in blank;

          (5) the originals of all intervening assignments of mortgage 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, the Seller shall deliver or cause to be delivered to the
     Servicer, a photocopy of such intervening assignment, together with (i) in
     the case of a delay caused by the public recording office, an officer's
     certificate of the Seller stating that such intervening assignment of
     mortgage has been dispatched to the appropriate public recording office for
     recordation and that such original recorded intervening assignment of
     mortgage or a copy of such intervening assignment of mortgage certified by
     the appropriate public recording office to be a true and complete copy of
     the original recorded intervening assignment of mortgage will be promptly
     delivered to the Servicer upon receipt thereof by the Seller; or (ii) in
     the case of an intervening assignment where a public recording office
     retains the original recorded intervening assignment or in a case where an
     intervening assignment is lost after recordation in a public recording
     office, a copy of such intervening assignment certified by such public
     recording office to be a true and complete copy of the original recorded
     intervening assignment;

          (6) if available, the original mortgagee title insurance policy or
     attorney's opinion of title and abstract of title, or if the policy has not
     yet been issued, (a) the irrevocable written commitment, interim binder or
     marked up binder for a title insurance policy issued by the title insurance
     company dated and certified as of the date the Eligible Loan was funded, or
     (b) a copy of the applicable escrow instructions indicating the name of the
     title company with, in either case, a statement by the title insurance
     company or closing attorney on such binder or commitment or escrow
     instructions that



                                       25
<PAGE>

     the priority of the lien on the related Mortgage during the period between
     the date of the funding of the related Eligible Loan and the date of the
     related title policy is insured;

          (7) the original of any security agreement, chattel mortgage or
     equivalent document executed in connection with the Mortgage;

          (8) the original of any primary mortgage insurance policy (if any);
     and

          (9) if the Eligible Loans are sold to the Agencies, the originals of
     other documents, forms, releases, certifications and papers required by the
     applicable Agency Custodial Agreement.

     (3) On the date hereof and on the date of each other increase in the
then-current Program Size, the Seller shall deposit an amount into the Reserve
Fund from the proceeds of the sale of the Eligible Loans to the Purchaser so
that the amount on deposit in the Reserve Fund equals 0.60% of the then-current
Program Size.

     (4) It is the intention of this Agreement that each conveyance of the
Seller's right, title and interest in and to the Eligible Loans (not including
servicing rights with respect to the Eligible Loans, which shall be retained by
the Seller) pursuant to this Agreement shall constitute a purchase and sale and
not a loan.

        Section 1.2 Determination of Purchase Price; Deposit by Seller.

     (1) Upon notice from the Seller to the Purchaser of the prospective sale of
a Portfolio by the Seller to the Purchaser under Section 2.1 hereof, the Seller
shall submit to the Purchaser (i) a Mortgage Loan Schedule and (ii) the Closing
Date for the sale of the Portfolio. The Seller shall not choose a preliminary
Closing Date which is less than one Business Day from the date that the
Purchaser receives the items specified in the preceding sentence. Not later than
8 a.m. on the Closing Date, the Seller shall notify the Purchaser of its
calculation of the Original Principal Purchase Price and the Initial Purchase
Price for the Portfolio. If the Purchaser does not agree with such calculation
or the sale does not close for any other reason, the Closing Date for the
Portfolio shall be rescheduled to a later date, at its option, by the Seller.
The Purchaser and the Seller shall use their best efforts to close the sale of
any Portfolio on any such Closing Date. The Purchaser shall pay to the Seller
the Initial Purchase Price of any Eligible Loans purchased by it hereunder in
immediately




                                       26
<PAGE>

available funds not later than 2:00 p.m., New York City time, on the Closing
Date. Each mortgage loan must satisfy the Eligibility Criteria and the
Eligibility Representations.

     (2) With respect to any Eligible Loan which will not have a scheduled
interest payment due on the first day of the month following the month in which
the Closing Date occurs for the purchase of such Eligible Loan (the "Closing
Month"), the Seller will deposit in the Collateral Account on the Closing Date
an amount equal to interest on the principal amount of such Eligible Loan for
the number of days remaining from and including the Closing Date to and
including the last day of the Closing Month at the contract rate for such
Eligible Loan.

     Section 1.3 Purchase Commitment Term.

     Subject to the terms and conditions of the Program Documents, the
commitment of the Purchaser under this Agreement shall expire on the termination
of this agreement, in accordance with Section 11.1 herein.

     Section 1.4 Books and Records; Transfers of Eligible Loans.

     From and after each related Closing Date, all rights arising with respect
to the Eligible Loans sold (not including servicing rights with respect to the
Eligible Loans, which shall be retained by the Seller) pursuant to any Transfer
Supplement including but not limited to all funds received on or in connection
with the Eligible Loans, shall be received and held by the Servicer in trust for
the benefit of the Purchaser. Pursuant to the Custodial Agreement, the Custodian
shall hold all of the Mortgage Notes as described in such Custodial Agreement.

     The sale of each Eligible Loan shall be reflected on the Seller's balance
sheet and other financial statements as a sale of assets by the Seller. The
Seller intends to treat the transfer of any Eligible Loans to the Purchaser
pursuant to this Agreement as a sale for accounting and tax purposes with
respect to the Seller. The Servicer shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Eligible Loan which
shall be marked clearly to reflect the ownership of each Eligible Loan by the
Purchaser. In particular, the Servicer shall maintain in its possession,
available for inspection by the Purchaser, the Collateral Agent, the Indenture
Trustee (acting at the written direction of the Required Noteholders), the Agent
or their respective designees, evidence of compliance with applicable laws,
rules and regulations. To the extent that original documents are not required
for purposes of realization of Liquidation Proceeds, Insurance Proceeds, VA




                                       27
<PAGE>

Guaranty Proceeds, FHA Proceeds or Securitization proceeds, documents maintained
by the Servicer may be in the form of microfilm or microfiche or such other
reliable means of recreating original documents, including but not limited to,
optical imagery techniques so long as the Servicer complies with the
requirements of the Guidelines.

     The Servicer shall maintain with respect to each Eligible Loan and shall
make available for inspection, upon reasonable advance notice, at the offices of
the Servicer during normal business hours by the Purchaser, the Collateral
Agent, the Indenture Trustee (acting at the written direction of the Required
Noteholders), the Agent, the Remarketing Agent, any CP Dealer or their
respective designees the related Mortgage Loan File during the time the
Purchaser retains ownership of an Eligible Loan and thereafter in accordance
with applicable laws and regulations.

     Section 1.5 Custodial Agreement.

     Pursuant to the Custodial Agreement delivered to the Purchaser in
connection with the Original Purchase Agreement, the Seller shall, from time to
time in connection with each purchase of Eligible Loans pursuant to the terms of
this Agreement, deliver to the Custodian, on or before the date which is 21 days
after the related Closing Date, the Mortgage Note with respect to each Eligible
Loan transferred. The Custodian shall hold all Mortgage Notes in trust for the
Purchaser as agent for the Collateral Agent.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES;
                         COVENANTS; REMEDIES AND BREACH

     Section 1.6 Representations and Warranties of The Company.

     The Company, as Seller and Servicer, represents and warrants to the
Purchaser (and for the benefit of the Collateral Agent) that as of each
applicable Closing Date and as of the date of the sale or Securitization of each
Eligible Loan:

     (1) Due Organization and Authority. The Company is duly organized, validly
existing and in good standing under the laws of New Jersey 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 where a Mortgaged Property is
located if required to conduct business of the type conducted by it, and in any
event the Company is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of any Eligible




                                       28
<PAGE>

Loan sold hereunder and the servicing of any such Eligible Loan in accordance
with the terms of this Agreement and any Transfer Supplement; the Company has
the full power and authority to execute and deliver this Agreement and any
Transfer Supplement and to perform its obligations in accordance herewith and
therewith; the execution, delivery and performance of this Agreement and any
Transfer Supplement by the Company and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Company; all requisite corporate action has been taken by the Company to make
this Agreement and any Transfer Supplement valid and binding upon the Company in
accordance with its terms; this Agreement and any Transfer Supplement each
evidences the valid, binding and enforceable obligation of the Company, except
that (i) the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

     (2) Ordinary Course of Business. The consummation of the transactions
contemplated by this Agreement are in the ordinary course of business of the
Company, and the transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Company pursuant to this Agreement are not subject to the
bulk transfer or any similar statutory provisions in effect in any applicable
jurisdiction.

     (3) No Conflicts. Neither the execution and delivery of this Agreement or
any Transfer Supplement, the acquisition of Eligible Loans by the Company, the
sale of Eligible Loans to the Purchaser or the transactions contemplated hereby
or thereby, nor the fulfillment of or compliance with the terms and conditions
of this Agreement or any Transfer Supplement, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Company's charter or
by-laws or any material agreement or instrument to which the Company is now a
party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation in any
material respect of any applicable law, rule, regulation, order, judgment or
decree to which the Company or its property is subject, or impair the ability of
the Purchaser to realize on the Eligible Loans in any material respect, or
impair the value of the Eligible Loans in any material respect, or impair in any
material respect the ability of the Purchaser to realize the full mortgage
insurance benefits (i) of the FHA Mortgage Insurance Contract with respect to
FHA Loans; (ii) of the VA Loan Guaranty Certificate with respect to VA Loans; or
(iii) other insurance benefits accruing pursuant to this Agreement, including
but not limited to any PMI Policy.

     (4) Ability to Service. The Company is an Approved Seller/Servicer of
Eligible Loans for at least two of FNMA, FHLMC and GNMA with the facilities,


                                       29
<PAGE>

procedures, and experienced personnel necessary for the servicing of Eligible
Loans. The Company is in good standing to sell mortgage loans to and service
mortgage loans for at least two of FNMA, FHLMC and GNMA, and no event has
occurred, including but not limited to a change in insurance coverage, which
would make the Company unable to comply with the eligibility requirements in all
material respects of at least of two of FNMA, FHLMC and GNMA or which would
require notification to FNMA, FHLMC or GNMA. As of the Closing Date the Company
is an FHA Approved Mortgagee and a VA Approved Lender and has the facilities,
procedures, and experienced personnel necessary for the servicing of mortgage
loans of the same type as the Eligible Loans. As of the Closing Date, the
Company is in good standing to service mortgage loans for FHA and VA, and no
event has occurred, including but not limited to a change in insurance coverage,
which would make the Company unable to comply with FHA or VA eligibility
requirements in all material respects, or which would require notification to
either the FHA or VA.

     (5) Reasonable Servicing Fee. The Servicer acknowledges and agrees that the
Servicing Fee represents reasonable compensation for performing such services as
compensation for the servicing and administration and arranging for the sale or
Securitization of the Eligible Loans pursuant to this Agreement and shall be
treated by the Servicer, for accounting and tax purposes, as compensation for
the servicing and administration of the Eligible Loans pursuant to this
Agreement.

     (6) No Litigation Pending. There is no action, suit, proceeding or
investigation pending or to its knowledge threatened against the Company 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 Company, or in any material impairment of the right or ability of
the Company to carry on its business substantially as now conducted, or in any
material liability on the part of the Company, or which would draw into question
the validity of this Agreement or any Transfer Supplement or the Eligible Loans
or of any action taken or to be taken in connection with the obligations of the
Company contemplated herein, or which would be likely to impair materially the
ability of the Company to perform under the terms of this Agreement or any
Transfer Supplement.

     (7) No Consent Required. No consent, approval, authorization or order of
any court or governmental agency or body including, without limitation, HUD, FHA
or VA, is required for the execution, delivery and performance by the Company of
or compliance by it with this Agreement or any Transfer Supplement or the sale
of the Eligible Loans, or if required, such approval has been obtained.



                                       30
<PAGE>

     (8) Selection Process. Any Portfolio of mortgage loans sold pursuant to a
Transfer Supplement was selected from mortgage loans originated by the Seller or
purchased by the Seller from third parties and are Eligible Loans which satisfy
the Eligibility Representations and any selection process employed by it was not
made in a manner so as to materially adversely affect the interest of the
Purchaser.

     (9) No Untrue Information. Neither this Agreement, any Transfer Supplement
nor any statement, report or other document prepared by the Seller or to be
prepared by the Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact relating to the Seller or the Eligible Loans or omits to state a fact
necessary to make the statements herein or therein not materially misleading.

     (10) Financial Statements. The Company has delivered to the Purchaser
consolidated financial statements of PHH Corporation as to its last three
complete fiscal years and any later quarter ended more than 60 days prior to the
execution of this Agreement. All such financial statements fairly present the
pertinent results of operations and changes in financial position at the end of
each such period of PHH Corporation and its subsidiaries and have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth in the notes thereto. There
has been no change in the business, operations, financial condition, properties
or assets of the Company since the date of PHH Corporation's most recently
provided financial statements that would have a material adverse effect on its
ability to perform its obligations under this Agreement.

     (11) No Brokers' Fees. The Seller has not dealt with any broker, investment
banker, agent or other Person that may be entitled to any commission or
compensation in connection with the sale of any Eligible Loans to the Purchaser.

     (12) Fair Consideration. The consideration received by the Seller upon the
sale of the Eligible Loans under this Agreement constitutes fair consideration
and reasonably equivalent value for the Eligible Loans.

     (13) Ability to Perform. The Company does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement in all material respects. The Company is solvent and
the sale of the Eligible Loans is not undertaken to hinder, delay or defraud any
of the Company's creditors.



                                       31
<PAGE>

     (14) Sale Treatment. The Seller has determined that the disposition of the
Eligible Loans pursuant to this Agreement will be afforded sale treatment for
accounting and tax purposes.

     (15) Computer Systems. The computer systems utilized by the Servicer in the
performance of its servicing activities hereunder will be capable of properly
performing any calculations and recordkeeping functions with respect to the
Eligible Loans on and after January 1, 2000.

     Section 1.7 Representations and Warranties Regarding Individual Mortgage
Loans; Eligibility Representations.

     As to each Eligible Loan sold in each Portfolio, the Seller hereby
represents and warrants to the Purchaser that as of each applicable Closing Date
and (excluding Section 3.2(d) hereof) as of the date of the Securitization or
sale of each Eligible Loan:

     (1) Eligibility of Mortgage Loans. The mortgage loan is an Eligible Loan.

     (2) Eligible Loans as Described. The information set forth in the Mortgage
Loan Schedule attached to the applicable Transfer Supplement is complete, true
and correct in all material respects.

     (3) Valid First Lien. The Mortgage is a valid first lien on the Mortgaged
Property. The Mortgaged Property is free and clear of all prior liens and
encumbrances and no rights or condition may exist that could give rise to such
liens, except for liens for real estate taxes and special assessments not yet
due and payable. The Mortgage is a legal, valid and binding obligation of the
related borrower, enforceable according to its terms and conditions, except that
(i) the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought, and
free from any right of set-off, counterclaim or other claim or defense. No part
of the Mortgaged Property has been released from the Mortgage. The terms of the
Mortgage have not in any material manner been modified, amended or in any way
waived or changed, except as stated in a written modification agreement that is
acceptable to and delivered to the Seller and Servicer.

     Any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Eligible Loan establishes and creates a
valid, subsisting and enforceable first lien and first priority security
interest on the property


                                       32
<PAGE>

described therein and the Seller has full right to sell and assign the same to
the Purchaser. The Mortgaged Property was not, as of the date of origination of
the Eligible Loan, subject to a mortgage, deed of trust, deed to secure debt, or
other security instrument creating a lien senior to the lien of the Mortgage.

     (4) Ownership. The Seller is the sole owner of record and holder of the
Eligible Loan. The Eligible Loan is not assigned or pledged, and the Seller has
good and marketable title thereto, and has full right to transfer and sell the
Eligible Loan to the Purchaser free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Eligible Loan pursuant
to the related Transfer Supplement.

     (5) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in Section 3.2(c) above.

     (6) Conformance with Underwriting Standards. The Eligible Loan was
underwritten in accordance with (i) the Seller's underwriting standards in
effect on the date of origination of such Eligible Loan, and (ii) the
Guidelines.

     (7) Payments Current. As of the Closing Date, no payments due with respect
to the Eligible Loan are 30 days or more past their contractual due date.

     (8) No Mortgagor Bankruptcy; Delinquencies. To the best of the Seller's
knowledge and belief, no Mortgagor is the subject of a bankruptcy or similar
proceeding. All payments required to be made up to the Closing Date for each
Eligible Loan under the terms of the related Mortgage Note have been made. As of
the Closing date, no payment required under any such purchased Eligible Loan has
ever been delinquent more than 30 days.

     (9) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgages, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable. The
Seller has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or indirectly,
for the payment of any amount required under the Eligible Loan, except for



                                       33
<PAGE>

interest accruing from the date of the Mortgage Note or date of disbursement of
the Eligible Loan proceeds, whichever is greater, to the day which precedes by
one month the Due Date of the first installment of principal and interest.

     (10) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any material respect (i)
from the date of final endorsement of the Mortgage Note by HUD with respect to
FHA Loans, and (ii) from the date of origination with respect to VA Loans,
except by a written instrument which has been recorded, if necessary to protect
the interest of the Purchaser and which has been delivered to the Custodian. The
substance of any such waiver, alteration or modification has been approved by
the issuer of any related PMI Policy and the title insurer, to the extent
required by the policy, and by the FHA for the related FHA Loans, and the VA for
the related VA Loans, and its terms are reflected on the related Mortgage Loan
Schedule. No Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the issuer of any related
PMI Policy and the title insurer, to the extent required by the policy, and by
the FHA for the related FHA Loans, and the VA for the related VA Loans, and
which assumption agreement is part of the Mortgage Loan File delivered to the
Custodian and the terms of which are reflected in the related Mortgage Loan
Schedule.

     (11) No Defenses. The Eligible Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, or, with
respect to FHA Loans, impair the Purchaser's ability to collect full insurance
benefits under the FHA Mortgage Insurance Contract, without indemnity to HUD,
or, with respect to VA Loans, impair the Purchaser's ability to collect full
value under the VA Loan Guaranty Certificate upon the Mortgagor's default, or
subject to any right of rescission, set-off, counterclaim or defense, including
without limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto, and no
Mortgagor was a debtor in any state or federal bankruptcy or insolvency
proceeding at the time the Eligible Loan was originated.

     (12) Hazard Insurance. Pursuant to the terms of the Mortgage, all buildings
or other improvements upon the Mortgaged Property are insured by (i) an FHA
approved insurer with respect to each FHA Loan, (ii) a VA approved insurer with
respect to each VA Loan or (iii) a generally acceptable insurer against loss by
fire and extended coverage and coverage for such other hazards as are customary
in the area where the Mortgaged Property is located pursuant to insurance
policies conforming to the requirements of Section 4.11 hereof


                                       34
<PAGE>

and of FHA and VA, if applicable. If upon origination of the Eligible Loan, the
Mortgaged Property was in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) a flood insurance policy meeting the
requirements of the current guidelines of the Flood Insurance Administration is
in effect which policy conforms to the requirements of Section 4.11 hereof and
of FHA and VA, if applicable. All individual insurance policies contain a
standard mortgagee clause naming the Seller and its successors and assigns as
mortgagee, and all premiums thereon have been paid. The Mortgage obligates the
Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagor's
cost and expense, and on the Mortgagor's failure to do so, authorizes the holder
of the Mortgage to obtain and maintain such insurance at such Mortgagor's cost
and expense, and to seek reimbursement therefor from the Mortgagor. Where
required by state law or regulation, the Mortgagor has been given an opportunity
to choose the carrier of the required hazard insurance, provided the policy is
not a "master" or "blanket" hazard insurance policy covering the common
facilities of a planned unit development. The hazard insurance policy is the
valid and binding obligation of the insurer and is in full force and effect. The
Seller has not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity and
binding effect of either.

     (13) Compliance with Applicable Laws. Any applicable requirements of
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws and FHA Regulations and VA
Regulations applicable to the Eligible Loan have been complied with in all
material respects.

     (14) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
cancelled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. The Seller has not waived the
performance by the Mortgagor of any action, if the Mortgagor's failure to
perform such action would cause the Eligible Loan to be in default, nor has the
Seller waived any default resulting from any action or inaction by the
Mortgagor.

     (15) Location and Type of Mortgaged Property. The Mortgaged Property is
located in the state identified in the Mortgage Loan Schedule and consists of a
parcel of real property with a detached single family residence erected thereon,
or a two- to four-family dwelling, or an individual condominium unit, or an
individual unit in a planned unit development; provided, however, that any
condominium unit or planned unit development



                                       35
<PAGE>

shall conform with the applicable FHA and VA requirements regarding such
dwellings, if applicable, and no residence or dwelling is a mobile home or a
manufactured dwelling. To the best of the Seller's knowledge and belief, no
portion of the Mortgaged Property is used for commercial purposes.

     (16) Validity of Mortgage Documents. The Mortgage Note and the Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. All parties to the Mortgage Note and the Mortgage and any
other related agreement had legal capacity to enter into the Eligible Loan and
to execute and deliver the Mortgage Note and the Mortgage and any other related
agreement, and the Mortgage Note and the Mortgage have been duly and properly
executed by such parties. To the best of the Seller's knowledge and belief, the
documents, instruments and agreements submitted for loan underwriting were not
falsified and contain no untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the information
and statements therein not materially misleading. No fraud was committed in
connection with the origination of the Eligible Loan.

     (17) Full Disbursement of Proceeds. Each Eligible Loan has been closed and
its proceeds have been fully disbursed and there is no requirement for future
advances thereunder, and any and all requirements as to completion of any
on-site or off-site improvement and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing the Eligible Loan and the recording of the Mortgage were paid,
and the Mortgagor is not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage.

     (18) Doing Business. All parties which have had any interest in the
Eligible Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (1) in
compliance with any applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (2) organized under the laws of
such state, or (3) qualified to do business in such state, or (4) not required
to qualify to do business in such state.

     (19) LTV, PMI Policy. The original LTV of the Eligible Loan other than an
FHA Loan or a VA Loan either was not more than 80% or the excess over 80% is and
will be insured as to payment defaults by a PMI Policy until the LTV of such
Eligible Loan is reduced to 80%. All material provisions of such PMI Policy have
been and are being complied with, such policy is in full force and effect, and
all premiums due thereunder have



                                       36
<PAGE>

been paid. No action, inaction, or event has occurred and no state of facts
exists that has, or will result in the exclusion from, denial of, or defense to
coverage. Any Eligible Loan subject to a PMI Policy obligates the Mortgagor
thereunder to maintain the PMI Policy and to pay all premiums and charges in
connection therewith. The Mortgage Interest Rate for the Eligible Loan as set
forth on the Mortgage Loan Schedule is net of any such insurance premium.

     (20) Title Insurance. The Eligible Loan is covered by (i) an attorney's
opinion of title and abstract of title, the form and substance of which is
acceptable to mortgage lending institutions making mortgage loans in the area
where the Mortgaged Property is located; or (ii) an ALTA lender's title
insurance policy or other generally acceptable form of policy of insurance
acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or
FHLMC and qualified to do business in the jurisdiction where the Mortgaged
Property is located or if applicable; (iii) an attorney's opinion of title and
abstract of title, the form and substance of which is acceptable to the FHA with
respect to FHA Loans and the VA with respect to VA Loans; or (iv) an ALTA
lender's title insurance policy or other generally acceptable form of policy of
insurance acceptable to (a) the FHA with respect to the FHA Loans; and (b) the
VA with respect to the VA Loans, and each such title insurance policy is issued
by a title insurer acceptable to FHA or VA, as the case may be, and qualified to
do business in the jurisdiction where the Mortgaged Property is located,
insuring the Seller, its successors and assigns, as to the first priority lien
of the Mortgage in the original principal amount of the Eligible Loan, and
against any loss by reason of the invalidity or unenforceability of the lien.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress, and against encroachments by or upon the Mortgaged Property or any
interest therein. The Seller is the sole insured of such lender's title
insurance policy, and such lender's title insurance policy is in full force and
effect and will be in force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such lender's
title insurance policy, and no prior holder of the Mortgage, including the
Seller, has done, by act or omission, anything which would impair the coverage
of such lender's title insurance policy.

     (21) No Defaults. To the best of the Seller's knowledge and belief, there
is no default, breach, violation or event of 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 of acceleration, and neither the Seller nor
its predecessors have waived any default, breach, violation or event of
acceleration.



                                       37
<PAGE>

     (22) No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
related Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage.

     (23) Location of Improvements; No Encroachments. All improvements which
were considered in determining the Appraised Value of the Mortgaged Property lay
wholly within the boundaries and building restriction lines of the Mortgaged
Property and, to the best of the Seller's knowledge and belief, no improvements
on adjoining properties encroach upon the Mortgaged Property. No improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation.

     (24) Customary Provisions. The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial
foreclosure. Upon default by a Mortgagor on an Eligible Loan and foreclosure on,
or trustee's sale of, the Mortgaged Property pursuant to the proper procedures,
the holder of the Eligible Loan will be able to deliver good and marketable
title to the Mortgaged Property. There is no homestead or other exemption
available to a Mortgagor which would interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage.

     (25) Occupancy of the Mortgaged Property. As of the Closing Date, the
Mortgaged Property is lawfully occupied under applicable law. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the Eligible Loan, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities. All of the Mortgagors represented at the time of
origination of the related Eligible Loan that any such Mortgagor would occupy
the Mortgaged Property as the Mortgagor's primary residence.

     (26) Deeds of Trust. In the event that the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor.



                                       38
<PAGE>

     (27) Acceptable Investment. The Seller has no knowledge of any
circumstances or conditions with respect to the Mortgage, the Mortgaged
Property, the Mortgagor or the Mortgagor's credit-standing not reflected in the
representations set forth herein, or in the documents delivered to the Custodian
or in the Mortgage Loan File, that could reasonably be expected to cause private
institutional investors to regard the Eligible Loan as an unacceptable
investment or cause the Eligible Loan to become delinquent or materially
adversely affect the value or the marketability of the Eligible Loan.

     (28) Delivery of Mortgage Notes. With the exception of Wet Funded Loans,
the Mortgage Note endorsed in blank or to the Purchaser required to be delivered
for the Eligible Loan by the Seller under the Custodial Agreement has been
delivered to the Custodian on or prior to Closing Date. With respect to Wet
Funded Loans, the Mortgage Note will be delivered as soon as practicable, but in
no event later than 21 days from the Closing Date.

     (29) Transfer of Eligible Loans. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.

     (30) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Eligible Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder.

     (31) No Graduated Payments or Contingent Interests. The Eligible Loan is
not a graduated payment mortgage loan and does not have a shared appreciation or
other contingent interest feature.

     (32) Mortgaged Property Undamaged. There is no proceeding pending or, to
the best of the Seller's knowledge and belief, threatened for the total or
partial condemnation of the Mortgaged Property. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect materially adversely the value of the
Mortgaged Property as security for the Eligible Loan or the use for which the
premises were intended.

     (33) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The
origination and collection practices used with respect to the Eligible Loan have
been in accordance with Accepted Servicing Practices, and have been in
compliance in all material respects with applicable laws and regulations. With
respect to escrow deposits and Escrow


                                       39
<PAGE>

Payments, all such payments are in the possession of the Seller and there exist
no deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made or for which repayment is not provided for
in the Mortgage. All Escrow Payments have been collected in compliance with
applicable state and federal law. An escrow of funds is not prohibited by
applicable law and has been established in an amount sufficient to pay for each
applicable item which remains unpaid and which has been assessed but is not yet
due and payable. No escrow deposits or Escrow Payments or other charges or
payments due the Seller have been capitalized under the Mortgage or the Mortgage
Note. All interest rate adjustments in respect of Eligible Loans have been made
in strict compliance with state and federal law and the terms of the related
Mortgage and Mortgage Note.

     (34) Appraisal. The Mortgage Loan File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Eligible Loan application
by a qualified appraiser, duly appointed by or acceptable to the Seller, who had
no interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof; and whose compensation is not affected by the approval or
disapproval of the Eligible Loan, and the appraisal and appraiser both satisfy
the requirements of Title XI of the Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 and the regulations promulgated thereunder, all as in
effect on the date that the Eligible Loan was originated and the appraiser and
appraisal both satisfy requirements of the FHA or VA, if applicable.

     (35) Soldiers' and Sailors' Relief Act. The Mortgagor has not notified the
Seller and the Seller has no knowledge of any relief requested by the Mortgagor
under the Soldiers' and Sailors' Civil Relief Act of 1940.

     (36) Environmental Matters. To the best of the Seller's knowledge and
belief, the Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation. There is no pending action or proceeding
directly involving any Mortgaged Property of which the Seller is aware in which
compliance with any environmental law, rule or regulation is an issue; and, to
the best of the Seller's knowledge, nothing further remains to be done to
satisfy in full all requirements of each such law, rule or regulation consisting
of a prerequisite to use and enjoyment of said property.

     (37) No Construction Loans. No Eligible Loan (i) was made in connection
with the construction or rehabilitation of a Mortgaged Property which has not
been completed or (ii) provides for future advances of funds by the Seller which
have not yet been advanced or (iii) facilitates the trade-in or exchange of a
Mortgaged Property.


                                       40
<PAGE>

     (38) No Denial of Insurance. No action, inaction, or event has occurred and
no state of facts exists or has existed that has resulted or would result in the
exclusion from, denial of, or defense to coverage under any applicable PMI
Policy or bankruptcy bond, irrespective of the cause of such failure of
coverage. In connection with the placement of any such insurance, no commission,
fee, or other compensation has been or will be received by the Seller or any
designee of the Seller or any corporation in which the Seller or any officer,
director, or employee had a financial interest at the time of placement of such
insurance.

     (39) Regarding the Mortgagor. The Mortgagor is one or more natural persons.

     (40) Condominiums/Planned Unit Developments. If the Mortgaged Property is a
condominium unit or a planned unit development (other than a de minimus planned
unit development) such condominium or planned unit development project meets
FHA, VA and GNMA eligibility requirements for sale to GNMA or is located in a
condominium or planned unit development project which has received FHA, VA and
GNMA project approval and the representations and warranties required by FHA, VA
and GNMA with respect to such condominium or planned unit development have been
made and remain true and correct in all material respects.

     (41) FHA Mortgage Insurance; VA Loan Guaranty. With respect to the FHA
Loans, the FHA Mortgage Insurance Contract is in full force and effect and there
exist no material impairments to full recovery without indemnity to HUD or the
FHA under FHA Mortgage Insurance. With respect to the VA Loans, the VA Loan
Guaranty Certificate is in full force and effect to the maximum extent stated
therein. All necessary steps have been taken to keep such guaranty or insurance
valid, binding and enforceable as of the Closing Date and each of such is the
binding, valid and enforceable obligation of the FHA and the VA, respectively,
to the full extent thereof, without surcharge, set-off or defense as of the
Closing Date.

     (42) HUD Form 92080. With respect to each FHA Loan, a HUD Form 92080 has
been duly executed and delivered to HUD.

     Section 1.8 Remedies for Breach of Representations and Warranties.

     It is understood and agreed that the representations and warranties set
forth in Sections 3.1 and 3.2 hereof shall survive the sale of the Eligible
Loans to the Purchaser and the delivery of the Loan Documents to the Servicer
and delivery of the Mortgage Notes to the


                                       41
<PAGE>

Custodian and shall inure to the benefit of the Purchaser notwithstanding any
restrictive or qualified endorsement on any Mortgage Note or Assignment of
Mortgage or the examination or failure to examine any Mortgage Loan File. Upon
discovery by either the Seller, the Servicer or the Purchaser of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the value of the Eligible Loans or the interest of the Purchaser (or
which materially and adversely affects the interest of the Purchaser in the
related Eligible Loan in the case of a representation and warranty relating to a
particular Eligible Loan), the party discovering such breach shall give prompt
written notice to the other, the Agent, the Indenture Trustee, the Collateral
Agent and the Swap Counterparties.

     Within 60 days of the earlier of either discovery by or notice to the
Seller of any breach of a representation or warranty set forth in Section 3.2
hereof which materially and adversely affects the value of any Eligible Loan,
the Seller shall use its best efforts promptly to cure such breach in all
material respects and, if such breach cannot be cured, or is not cured, within
such 60 day time period, the Seller shall repurchase such Eligible Loan at the
Repurchase Price. In the event that a breach shall involve any representation or
warranty set forth in Section 3.1 hereof, and such breach cannot be cured, or is
not cured, within 60 days of the earlier of either discovery by or notice to the
Seller of such breach, all of the Eligible Loans shall, at the Liquidity Banks'
option, be repurchased by the Seller at the Repurchase Price. Upon receipt of
the Repurchase Price by the Collateral Agent, the Purchaser and the Seller shall
arrange for the reassignment of the Eligible Loan or Eligible Loans to the
Seller and the delivery to the Seller of any documents held by the Custodian
relating to the reassigned Eligible Loan or Eligible Loans.

     In addition to such repurchase obligation, the Seller shall indemnify the
Purchaser and hold it harmless against any losses, damages, penalties, fines,
forfeitures, reasonable and necessary legal fees and related costs, judgments,
and other costs and expenses resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, a breach of the
representations and warranties contained in this Agreement. It is understood and
agreed that the obligations of the Seller set forth in this Section 3.3 to cure
or repurchase an Eligible Loan and to indemnify the Purchaser and constitute the
sole remedies of the Purchaser respecting a breach of the foregoing
representations and warranties.

     Section 1.9 Conditions to Closing.

     The obligation of the Purchaser to purchase the mortgage loans that are the
subject of any Transfer Supplement shall be subject to satisfaction of each of
the following conditions on or before the related Closing Date:



                                       42
<PAGE>

     (1) To the best of Seller's knowledge and belief, all of the
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of such Closing Date and no event
shall have occurred which, with notice or the passage of time, would constitute
a Servicer Event of Default under this Agreement; (1)

     (2) Seller shall have delivered and released to the Custodian all documents
required to be delivered to the Custodian pursuant to the Custodial Agreement;

     (3) No Termination Event shall have occurred and be continuing; and

     (4) All other material terms and conditions of this Agreement shall have
been satisfied.

     Section 1.10 Covenants of the Company.

     (1) Licenses. The Seller shall maintain its qualifications to do business
and all licenses necessary to perform its obligations hereunder.

     (2) Servicing Standards/Sales and Securitizations. The Servicer will
administer and service Eligible Loans, and arrange for the sale and
Securitization of Eligible Loans, in accordance with the terms of this
Agreement, the Mortgage Notes and Accepted Servicing Practices.

     (3) Delivery of Mortgage Note. The Seller shall deliver each Mortgage Note,
including Mortgage Notes on Wet Funded Loans, to the Custodian as soon as
practicable, but in any event within twenty-one days of the purchase and, if any
Mortgage Note is not delivered within twenty-one days of purchase, it shall be
repurchased on such twenty-first day by the Seller at the Repurchase Price.

     (4) Third Party Beneficiary. The Purchaser agrees that GNMA, FNMA and FHLMC
shall have all rights of a third party beneficiary in respect of this Agreement
and restates the representations, warranties and covenants as set forth herein
for the benefit of GNMA, FNMA and FHLMC.

     (5) Portfolio Criteria and Limitations. As of any date of determination,
the Eligible Loans, in the aggregate shall satisfy the Portfolio Criteria, the
Portfolio Aging Limitations and the Wet Funded Loan Limitation.

                                       43
<PAGE>

     (6) Changes in Origination and Underwriting Criteria. The Seller shall
inform each rating agency rating any outstanding Commercial Paper, any
outstanding Notes or any outstanding Certificates of any material changes (as
determined by the Seller) in its origination and underwriting practices and
guidelines with respect to the Mortgage Loans.

                                   ARTICLE IV

                 ADMINISTRATION AND SERVICING OF ELIGIBLE LOANS

     Section 1.11 The Company to Act as Servicer; Servicing and Administration
of the Eligible Loans.

     (1) The Company, as an independent contractor and owner of the servicing
rights to the Eligible Loans, shall diligently service and administer the
Eligible Loans, and shall comply with the Portfolio Criteria, Portfolio Aging
Limitations and Wet Funded Loan Limitation, and arrange for the sale and
Securitization of the Eligible Loans on behalf of the Purchaser and in the best
interest of and for the benefit of the Purchaser in accordance with applicable
law, the terms of this Agreement and the terms of the respective Eligible Loans,
with a view to the maximization of timely recovery of principal and interest on
the Mortgage Notes and in a manner which will realize for the Purchaser the
market value of any Securitization Securities with respect to any sales and
Securitizations of the Eligible Loans; provided, the Servicer shall arrange for
the sale or Securitization of all Eligible Loans (y) on or before the
termination of the Indenture and the Liquidity Agreement, and (z) upon the
occurrence of a Mortgage Loan Purchase Agreement Termination Event. The Servicer
shall arrange for the sale or Securitization of Eligible Loans (y) in an amount
such that the proceeds from such sale or Securitization are sufficient to pay
amounts due and owing on any outstanding Liquidity Loans, Series of Notes
(whether by maturity, optional redemption, or upon an Indenture Event of
Default) and Series of Certificates (whether by maturity, optional redemption,
or upon the occurrence of an Early Amortization Event) and (z) in an amount
equal to the notional amount of any expiring Interest Rate Swap to the extent
that a replacement Interest Rate Swap or Interest Rate Swaps have not been
obtained and are needed. In furtherance of and to the extent consistent with the
sale foregoing, except to the extent that this Agreement provides for a contrary
specific course of action, the Servicer will be required to service and
administer the Eligible Loans (y) in the same manner in which, and with the same
care, skill, prudence and diligence with which it services and administers
similar mortgage loans for other third-party portfolios, giving due
consideration to customary and usual standards of practice of prudent
institutional residential mortgage loan servicers used with respect to loans
comparable to the Eligible Loans, or (z) in the same manner in which, and with
the same care, skill, prudence and diligence with which, it services and




                                       44
<PAGE>

administers similar mortgage loans which it owns, whichever standard of care is
higher, and taking into account its other obligations under this Agreement, but
without regard to (i) any other relationship that Servicer, any sub-servicer or
any affiliate of the Servicer or any sub-servicer may have with the borrowers or
any affiliate of such borrowers; (ii) the ownership of any Certificate by
Servicer or any affiliate of either; (iii) the Servicer's obligations to make
Advances or to incur servicing expenses with respect to the Eligible Loans; (iv)
the Servicer's or any sub-servicer's right to receive compensation for its
services under this Agreement or with respect to any particular transaction; or
(v) the ownership, servicing or management for others by the Servicer or any
sub-servicer of any other mortgage loans or property. The Servicer shall
maintain its qualification to do business and all licences necessary to perform
its obligations hereunder.

     (2) During the Purchase Commitment Term, the Servicer shall be obligated to
service and administer the Eligible Loans. The Servicer may enter into
additional servicing or sub-servicing agreements with third parties with respect
to any of its respective obligations hereunder, provided that any such agreement
shall be consistent with the provisions of this Agreement and no sub-servicer
(or its agent or subcontractors) shall grant any modification, waiver or
amendment to any Eligible Loan without the approval of the Servicer.
Notwithstanding any servicing or sub-servicing agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and any Person acting as servicer or sub-servicer (or its agents or
subcontractors) or any reference to action taken through any Person acting as
servicer or sub-servicer or otherwise, the Servicer shall remain obligated and
primarily liable to the Purchaser for the servicing and administering of the
Eligible Loans and arranging for the sale and Securitization of the Eligible
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such servicing or sub-servicing
agreements or arrangements or by virtue of indemnification from any Person
acting as servicer or sub-servicer (or its agents or subcontractors) to the same
extent and under the same terms and conditions as if the Servicer alone were
engaging in such activities. In the event the Servicer is a sub-servicer, the
Purchaser shall be entitled to proceed directly against the Servicer as
sub-servicer to enforce the Servicer's obligations to the Purchaser.

     (3) Subject to the above-described servicing standards, the further
provisions of this Agreement, including but not limited to the Wet Funded Loan
Limitation, Portfolio Criteria and Portfolio Aging Limitation, and the terms of
the respective Eligible Loans, the Servicer shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration that it may deem necessary or desirable in
connection with the servicing and administration of the Eligible Loans. Without
limiting the generality of the foregoing, the Servicer is hereby


                                       45
<PAGE>

authorized and empowered to waive, modify or vary any term of any Eligible Loan
or consent to the postponement of compliance with any such term or in any manner
grant indulgence to any Mortgagor if in the Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Purchaser; provided, however, that the Servicer shall
not make any future advances to a Mortgagor with respect to an Eligible Loan and
(unless the Mortgagor is in default with respect to the Eligible Loan or such
default is, in the judgment of the Servicer, imminent) the Servicer shall not
permit any modification with respect to any Eligible Loan that would change the
Mortgage Interest Rate, defer or forgive the payment of principal or interest,
reduce or increase the outstanding principal balance (except for actual payments
of principal), release any collateral from the Eligible Loan or change the final
maturity date on such Eligible Loan. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered,
to execute and deliver on behalf of itself and the Purchaser all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Eligible Loans and with
respect to the Mortgaged Properties. If reasonably required by the Servicer, the
Purchaser shall furnish the Servicer with any powers of attorney, in recordable
form, and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement.

     Section 1.12 Sales and Securitizations.

     (1) Subject to the servicing standards described in Section 4.1, the
Servicer shall have full power and authority, acting alone, to do or cause to be
done any and all things in connection with such servicing and administration
that it may deem necessary and desirable in connection with arranging for the
Securitization of Conforming Loans and conducting sales of Jumbo Loans with
either FNMA, FHLMC, GNMA or other Securitization Vehicles or third party
purchasers. In connection with any Securitization of Eligible Loans, in the
event the Purchaser receives securities from the Securitization Vehicle in
exchange for the Eligible Loans subject to such Securitization ("Securitization
Securities"), the Servicer shall, on behalf of the Purchaser, arrange for the
sale of such Securitization Securities. The Servicer shall use its best efforts
to realize for the Purchaser the market value for the Securitization Securities
but shall have no liability to the Purchaser with respect to any Securitization
or Securitization Security provided that the Servicer arranges for such
Securitization or sale in good faith in accordance with the procedures utilized
by the Servicer in connection with any Securitization and Securitization
Securities held for its own account. The proceeds of sale of any Securitization
Security and the proceeds of sale of any whole loan will be remitted to the
Collateral Agent and will be deposited into the Collateral Account maintained by
the Collateral Agent on the day of receipt.



                                       46
<PAGE>

     (2) With respect to each Securitization or sale, as the case may be,
entered into by the Purchaser, Servicer agrees, with prior notice to the
Purchaser, the Agent, the Indenture Trustee, the Collateral Agent and the Swap
Counterparties:

          (1) To cooperate fully with the Purchaser, any prospective purchaser,
     any Securitization Vehicle or any party to any agreement executed in
     connection with such sale or Securitization, with respect to all reasonable
     requests and due diligence procedures and to use its best efforts to
     facilitate such sale or Securitization, as the case may be.

          (2) To execute, if the Company has agreed to continue as servicer with
     respect to the Eligible Loans sold or Securitized, all agreements executed
     in connection with such sale or Securitization that govern the servicing
     and administration of the Eligible Loans (and any agreements and other
     documents incidental thereto) as the Purchaser shall request, which
     governing documents, in the case of a Securitization, shall contain
     provisions customarily included in publicly issued or privately placed
     rated secondary mortgage market transactions with respect to like
     properties, or otherwise necessary to achieve the rating on the securities
     to be offered thereunder sought by the Purchaser and, in the case of a
     sale, shall contain servicing provisions that are substantially similar to
     those set forth herein.

          (3) At the direction of the Purchaser and in lieu of executing
     agreements as described in the preceding clause (ii), to consent to the
     assignment of the Purchaser's right to receive the benefits of the
     servicing provisions of this Agreement to a purchaser of any one or more of
     the Eligible Loans, or to a master servicer, in each case with such
     modifications to the servicing provisions hereof as shall be reasonably
     requested by the Purchaser, provided that the primary servicing
     responsibility shall be substantially similar to those set forth herein.

          (4) To restate as of each closing date of the sale or Securitization,
     as the case may be, the representations and warranties contained in Section
     3.1 hereof and to state for the benefit of the owners of the Eligible
     Loans, for the benefit of the Purchaser, that it has no knowledge, based on
     its activities as servicer hereunder, that any representations and
     warranties contained in Section 3.2 hereof (excluding Section 3.2(d)
     hereof) are untrue as of the date thereof or stating an event or
     circumstance that arose



                                       47
<PAGE>

     after the related Closing Date and that would cause such representation or
     warranty to be inaccurate in any material respect.

          (5) To deliver to the Purchaser for inclusion in any prospectus or
     other offering material such written information regarding the Seller and
     PHH Corporation, their respective financial condition, their mortgage loan
     origination and servicing experience, and their mortgage loan delinquency,
     foreclosure and loss experience as shall be reasonably requested by the
     Purchaser and to indemnify and hold harmless the Purchaser against any and
     all liabilities, losses and expenses arising under the Securities Act of
     1933 in connection with any material misstatement contained in such written
     information or any omission of a material fact the inclusion of which was
     necessary to make such written information not materially misleading.

          (6) To deliver to the Purchaser and to any Person designated by the
     Purchaser, such statements and audit letter of reputable, certified public
     accountants pertaining to the written information provided by the Servicer
     pursuant to clause (v) above as shall be reasonably requested by the
     Purchaser.

          (7) To deliver to the Purchaser, and to any Person designated by the
     Purchaser, such opinions of counsel as are customarily delivered by
     originators/servicers in connection with sales or Securitizations, as the
     case may be.

     Notwithstanding clause (ii) and clause (iii) of this Section 4.2(b), no
agreements, consents or modifications referred to therein shall contain any
provision that (A) reduces the servicing fee as to any mortgage loan or affects
the calculation of the servicing fee as to any mortgage loan in a manner that is
below the market standard and commercially unreasonable to the Servicer based on
customary practice or (B) affects the administration of Escrow Payments, in a
manner that is commercially unreasonable to the Servicer. In addition, in
connection with any sale, the Purchaser shall negotiate in good faith with any
prospective purchaser of the beneficial ownership of the mortgage loans to
incorporate into any agreement relating to the servicing of the mortgage loans
on behalf of such prospective purchaser servicing provisions that are similar to
those set forth herein and to the industry and market standard.

     All mortgage loans not sold or transferred pursuant to a sale or
Securitization shall continue to be serviced in accordance with the terms of
this Agreement.



                                       48
<PAGE>

     Section 1.13 Liquidation of Eligible Loans.

     In the event that any payment due under any Eligible Loan is not paid when
the payment becomes due and payable, by Servicer Advance or otherwise, or in the
event that the Mortgagor fails to perform any other covenant or obligation under
the Eligible Loan and such failure continues beyond any applicable grace period,
the Servicer shall take such action as (1) the Servicer would take under similar
circumstances with respect to a similar Eligible Loan held for its own account
for investment, (2) shall be consistent with Accepted Servicing Practices, (3)
the Servicer shall determine in accordance with Accepted Servicing Practices to
be in the best interest of the Purchaser, and (4) is consistent with the related
PMI Policy, if any; provided, however, any Defaulted Loan will be sold by the
Servicer on behalf of the Purchaser as soon as practicable after becoming a
Defaulted Loan.

     Section 1.14 Collection of Eligible Loan Payments.

     The Servicer shall proceed diligently, in accordance with Accepted
Servicing Practices, to collect all payments called for under the terms and
provisions of the Eligible Loans it is obligated to service hereunder and shall
follow such collection procedures as are consistent with this Purchase Agreement
(including without limitation, the servicing standards set forth in Section 4.1
hereof). The Servicer shall ascertain and estimate, in accordance with Accepted
Servicing Practices, Escrow Payments and all other charges that will become due
and payable with respect to the Eligible Loans and the Mortgaged Property, to
the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable. The Servicer shall
segregate and hold all payments received by it separate and apart from any of
its funds and general assets and in trust for the Secured Parties and shall
apply such payments as provided in Section 4.5 hereof. The accounts established
by the Servicer pursuant to this Article IV may include any number of
sub-accounts for convenience in administering the Eligible Loans.

     Section 1.15 Establishment of, and Deposits to, Collection Account.

     The Servicer shall establish a single, segregated trust account which shall
be designated as the Collection Account, which shall be held in trust in the
name of the Collateral Agent for the benefit of the Secured Parties, into which
the Servicer shall from time to time deposit, within two Business Days of the
receipt thereof, and retain therein, the following collections received by the
Servicer: (a) all payments on account of scheduled principal on the Eligible
Loans; (b) all payments on account of interest on the Eligible Loans (including
interest accrued on the Eligible Loans prior to the applicable Closing Date);
(c)


                                       49
<PAGE>

any Principal Prepayments; (d) all Liquidation Proceeds; (e) all Insurance
Proceeds including amounts required to be deposited pursuant to Section 4.11
(other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Accepted Servicing Practices as specified in Section 4.15
hereof), Section 4.12 and Section 4.16 hereof; (f) all Condemnation Proceeds
which are not applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with Section 4.15 hereof; (g) any amount
required to be deposited in the Collection Account pursuant to Section 3.3,
4.10, 6.2 or 7.1; (h) any amounts required to be deposited by the Servicer
pursuant to Section 4.11 hereof in connection with the deductible clause in any
blanket hazard insurance policy; (i) any amounts received with respect to or
related to any REO Property and all REO Disposition Proceeds pursuant to Section
4.17 hereof; and (j) any other amounts received with respect to or related to
the mortgage loan including but not limited to late payment charges and interest
paid on funds deposited in the Collection Account or Escrow Account, to the
extent permitted by applicable law. The Collection Account shall be established
with a Qualified Depository acceptable to the Purchaser. For so long as the
Security Agreement shall be in effect, the Collection Account shall be
maintained with the Collateral Agent. Any funds deposited in the Collection
Account shall at all times be fully insured to the full extent permitted under
applicable law. Any interest earnings on amounts on deposit from time to time in
the Collection Account shall be remitted to the Servicer in accordance with such
arrangements, as shall be agreed upon by the Servicer and the Collateral Agent.

     Section 1.16 Permitted Withdrawals From Collection Account; Deposit into
the Collateral Account.

     (1) In connection with any withdrawals of amounts deposited by the Servicer
into the Collection Account by mistake or overpayment or as otherwise required
to make adjustments to amounts deposited therein in accordance with ordinary and
normal servicing adjustments the Servicer shall provide the Collateral Agent
with a written request, including such information with respect to such
withdrawals as such Collateral Agent may reasonably request to justify such
withdrawal. Upon receipt of such request, the Collateral Agent shall direct the
Qualified Depository maintaining the Collection Account to make such withdrawal
from the Collection Account and deposit it with the Servicer; provided that if
such request is for an amount less than $10,000 and the aggregate amount
withdrawn from the Collection Account under this proviso in the current Due
Period is less than $50,000, such request may be honored by the Qualified
Depository upon a telephonic or electronic request and without direction from
the Collateral Agent.



                                       50
<PAGE>

     (2) Pursuant to the terms of the Security Agreement, the Collateral Agent
shall establish a single, segregated trust account which shall be designated as
the "Collateral Account," which shall be held in trust for the benefit of the
Secured Parties and over which the Collateral Agent shall have exclusive control
and the sole right of withdrawal. The proceeds of any sales and Securitizations,
the Repurchase Price of any Eligible Loans repurchased pursuant to Section 3.3,
6.2 or 7.1 and any other amounts payable in connection with the Seller's or
Servicer's repurchase of any Eligible Loan, repayments in full of Eligible Loans
and certain other amounts as more fully set forth in the Security Agreement,
shall be deposited directly into the Collateral Account on the same day of
receipt. Any and all funds at any time on deposit in, or otherwise to the credit
of, the Collateral Account shall be held in trust by the Collateral Agent for
the benefit of the Secured Parties.

     (3) The Servicer shall, on each Payment Date (or if such day is not a
Business Day the immediately following Business Day), request the Collateral
Agent to withdraw (i) all amounts deposited in the Collection Account as of the
close of business on the Determination Date (net of charges against or
withdrawals from the Collection Account pursuant to Section 4.6(d) hereof),
minus (ii) any amounts attributable to Monthly Payments collected but due on a
Due Date subsequent to the 15th day of the month of the Payment Date, which
amounts shall be remitted on the Payment Date next succeeding the Due Period for
such amounts and deposit such funds into the Collateral Account for application
pursuant to the terms of the Security Agreement and release funds in accordance
with the Servicer Report delivered to the Collateral Agent for such Payment
Date.

     (4) The Servicer shall, on the day of receipt of any principal prepayments
in full, request the Collateral Agent to withdraw funds representing such
principal prepayments from the Collection Account and deposit such funds in the
Collateral Account for application pursuant to the terms of the Security
Agreement.

     (5) The Servicer shall, from time to time, by delivery of a Monthly
Servicer Advance Report, request the Collateral Agent to withdraw funds from the
Collection Account to reimburse the Servicer for Monthly Servicer Advances
pursuant to Section 5.1 hereof, the Servicer's right to reimbursement pursuant
to this subclause (d) being limited to amounts received on the related Eligible
Loan which represent late payments of principal and/or interest respecting which
any such advance was made, it being understood that, in the case of any such
reimbursement, the Servicer's right thereto shall be prior to the rights of the
Purchaser, except that, where the Servicer is required to repurchase an Eligible
Loan pursuant to Sections 6.2 and 7.1 of this Purchase Agreement, the Servicer's
right to such reimbursement shall be subsequent to the payment to the Purchaser
of the Repurchase Price



                                       51
<PAGE>

pursuant to such Sections 6.2 and 7.1 and all other amounts required to be paid
to the Purchaser with respect to such Eligible Loan.

     Section 1.17 Establishment of, and Deposits to, Escrow Account.

     The Servicer shall segregate and hold all funds collected and received
pursuant to an Eligible Loan constituting Escrow Payments separate and apart
from any of its own funds and general assets and shall establish and maintain
one or more Escrow Accounts, in the form of time deposit or demand accounts, in
a manner which shall provide maximum available insurance thereunder. Funds
deposited in any Escrow Account may be invested by the Servicer which shall be
entitled to any investment income therefrom except as otherwise required by law.
Funds deposited in any Escrow Account may be drawn on by the Servicer in
accordance with Section 4.8 hereof.

     The Servicer shall deposit in such Escrow Account within two Business Days
and retain therein (a) all Escrow Payments collected on account of the Eligible
Loans, for the purpose of effecting timely payment of any such items as required
under the terms of this Agreement; and (b) all amounts representing Insurance
Proceeds or Condemnation Proceeds which are to be applied to the restoration or
repair of any Mortgaged Property.

     The Servicer shall make withdrawals from any Escrow Account only to effect
such payments as are required under this Agreement, as set forth in Section 4.8
hereof. To the extent required by law, the Servicer shall pay interest on
escrowed funds to the Mortgagor notwithstanding that such Escrow Account may be
non-interest bearing or that interest paid thereon is insufficient for such
purposes.

     Section 1.18 Permitted Withdrawals From Escrow Account.

     Withdrawals from any Escrow Account may be made by the Servicer only:

          (1) To effect timely payments of ground rents, taxes, assessments,
     water rates, mortgage insurance premiums, fire and hazard insurance
     premiums or other items constituting Escrow Payments for the related
     Mortgage;

          (2) To reimburse the Servicer for any Servicing Advances made by the
     Servicer pursuant to Section 4.9 hereof with respect to a related Eligible
     Loan, but only from amounts received on the related Eligible Loan which
     represent late collections of Escrow Payments thereunder;

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<PAGE>

          (3) To refund to any Mortgagor any funds found to be in excess of the
     amounts required under the terms of the related Eligible Loan;

          (4) For transfer to the Collection Account and application to reduce
     the principal balance of the Eligible Loan in accordance with the terms of
     the related Mortgage and Mortgage Note; (1)

          (5) For application to restoration or repair of the Mortgaged Property
     in accordance with the procedures outlined in Section 4.15 hereof; and

          (6) To pay to the Mortgagor, to the extent required by law, any
     interest paid on the funds deposited in the Escrow Account.

          Section 1.19 Payment of Taxes, Insurance and Other Charges.

     With respect to each Eligible Loan, the Servicer shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates,
sewer rents, and other charges which are or may become a lien upon the Mortgaged
Property and the status of PMI Policy premiums, if any, and fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage. To the extent that a
Mortgage does not provide for Escrow Payments, the Servicer shall determine that
any such payments are made by the Mortgagor at the time they first become due.
The Servicer assumes full responsibility for the timely payment of all such
bills and shall effect timely payment of all such charges irrespective of each
Mortgagor's faithful performance in the payment of an Eligible Loan or the
making of the Escrow Payments, and the Servicer shall make Servicing Advances.

     Section 1.20 Protection of Accounts.

     Amounts on deposit in the Collection Account may at the option of the
Collateral Agent be invested in Eligible Investments; provided that in the event
that amounts on deposit in the Collection Account (which shall be properly
titled to insure the funds in such account on a loan-by-loan basis) exceed the
amount fully insured by the FDIC (the "Insured Amount") the Servicer shall be
obligated to invest the excess amount over the


                                       53
<PAGE>

Insured Amount in Eligible Investments on the next Business Day as such excess
amount becomes present in the Collection Account. Monies held in the Collection
Account shall be invested in Eligible Investments having maturities of no
greater than one day; provided, that if there is no Commercial Paper then
outstanding, monies held in the Collection Account shall be invested in Eligible
Investments having maturities of no greater than 30 days. So long as there are
Eligible Investments having maturities of greater than one day, the Purchaser
shall not issue Commercial Paper. All such Eligible Investments shall be made in
the name of, and shall be payable to, the Collateral Agent.

     Section 1.21 Maintenance of Hazard Insurance.

     The Servicer shall cause to be maintained for each Eligible Loan hazard
insurance such that all buildings upon the Mortgaged Property are insured by a
generally acceptable insurer rated A:VI or better in the current Best's Key
Rating Guide ("Best's") against loss by fire, hazards of extended coverage and
such other hazards as are customary in the area where the Mortgaged Property is
located, in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements securing such Eligible Loan and (ii) the
greater of (a) the outstanding principal balance of the Eligible Loan and (b) an
amount such that the proceeds thereof shall be sufficient to prevent the
Mortgagor or the loss payee from becoming a co-insurer.

     If upon origination or acquisition of the Eligible Loan, the related
Mortgaged Property was located in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) the Servicer shall cause to be in
effect a flood insurance policy meeting the requirements of the current
guidelines of the Flood Insurance Administration with a generally acceptable
insurance carrier rated [A:VI] or better in Best's in an amount representing
coverage equal to the lesser of (i) the minimum amount required, under the terms
of coverage, to compensate for any damage or loss on a replacement cost basis
(or the unpaid balance of the mortgage if replacement cost coverage is not
available for the type of building insured) and (ii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973, as
amended. If at any time during the term of the Eligible Loan, the Servicer
determines in accordance with applicable law and pursuant to the Guidelines that
a Mortgaged Property is located in a special flood hazard area and is not
covered by flood insurance or is covered in an amount less than the amount
required by the Flood Disaster Protection Act of 1973, as amended, the Servicer
shall notify the related Mortgagor that the Mortgagor must obtain such flood
insurance coverage, and if said Mortgagor fails to obtain the required flood
insurance coverage within forty-five (45) days



                                       54
<PAGE>

after such notification, the Servicer shall immediately force place the required
flood insurance on the Mortgagor's behalf.

     The Servicer shall cause to be maintained on each Mortgaged Property
earthquake or such other or additional insurance as may be required pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance, or pursuant to the requirements of any
private mortgage guaranty insurer, or as may be required to conform with
Accepted Servicing Practices.

     In the event that the Purchaser or the Servicer shall determine that the
Mortgaged Property should be insured against loss or damage by hazards and risks
not covered by the insurance required to be maintained by the Mortgagor pursuant
to the terms of the Mortgage, the Servicer shall communicate and consult with
the Mortgagor with respect to the need for such insurance and bring to the
Mortgagor's attention the desirability of protection of the Mortgaged Property.

     The Servicer shall not interfere with the Mortgagor's freedom of choice in
selecting either his insurance carrier or agent; provided, however, that the
Servicer shall not accept any such insurance policies from insurance companies
unless such companies are rated A:VI or better in Best's and are licensed to do
business in the jurisdiction in which the Mortgaged Property is located. The
Servicer shall determine that such policies provide sufficient risk coverage and
amounts, that they insure the property owner, and that they properly describe
the property address. The Servicer shall furnish to the Mortgagor a formal
notice of expiration of any such insurance in sufficient time for the Mortgagor
to arrange for renewal coverage by the expiration date.

     Pursuant to Section 4.5 hereof, any amounts collected by the Servicer under
any such policies (other than amounts to be deposited in any Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Eligible Loan, or to be released to the
Mortgagor, in accordance with Accepted Servicing Practices as specified in
Section 4.15 hereof) shall be deposited in the Collection Account subject to
withdrawal pursuant to Section 4.6 hereof.

     Section 1.22 Maintenance of Mortgage Impairment Insurance.

     If the Servicer shall obtain and maintain a blanket policy insuring against
losses arising from fire and hazards covered under extended coverage on all of
the Eligible Loans, then, to the extent such policy provides coverage in an
amount equal to the amount required pursuant to Section 4.11 hereof and
otherwise complies with all other requirements


                                       55
<PAGE>

of Section 4.11, it shall conclusively be deemed to have satisfied its
obligations as set forth in such Section 4.11. Any amounts collected by the
Servicer under any such policy relating to an Eligible Loan shall be deposited
in the Collection Account subject to withdrawal pursuant to Section 4.6 hereof.
Such policy may contain a deductible clause, in which case, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with Section 4.11 hereof, and there shall have been a loss which would
have been covered by such policy, the Servicer shall deposit in the Collection
Account at the time of such loss the amount not otherwise payable under the
blanket policy because of such deductible clause, such amount to be deposited
from the Servicer's funds, without reimbursement therefor. Upon request of the
Purchaser, the Servicer shall cause to be delivered to the Purchaser a certified
true copy of such policy.

     Section 1.23 Maintenance of Fidelity Bond and Errors and Omissions
Insurance.

     The Servicer shall maintain with responsible companies, at its own expense,
a blanket Fidelity Bond and an Errors and Omissions Insurance Policy, with broad
coverage on all officers, employees or other persons acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the Eligible Loans ("Company Employees"). Any such Fidelity Bond and Errors and
Omissions Insurance Policy shall be in the form of the Mortgage Banker's Blanket
Bond and shall protect and insure the Servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such Company Employees. Such Fidelity Bond and Errors and Omissions Insurance
Policy also shall protect and insure the Servicer against losses in connection
with the release or satisfaction of an Eligible Loan without having obtained
payment in full of the indebtedness secured thereby. No provision of this
Section 4.13 requiring such Fidelity Bond and Errors and Omissions Insurance
Policy shall diminish or relieve the Servicer from its duties and obligations as
set forth in this Agreement. The minimum coverage under any such bond and
insurance policy shall be at least equal to the corresponding amounts required
by the Guidelines. Upon the request of the Purchaser, the Servicer shall cause
to be delivered to the Purchaser a certified true copy of such fidelity bond and
insurance policy.

     Section 1.24 Inspections.

     The Servicer shall inspect the Mortgaged Property as often as deemed
necessary by the Servicer to assure itself that the value of the Mortgaged
Property is being preserved.

     Section 1.25 Restoration of Mortgaged Property.


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<PAGE>


     The Servicer need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be
applied to the restoration or repair of the Mortgaged Property if such release
is in accordance with Accepted Servicing Practices. At a minimum, the Servicer
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:

          (1) The Servicer shall receive satisfactory independent verification
     of completion of repairs and issuance of any required approvals with
     respect thereto;

          (2) The Servicer shall take all steps necessary to preserve the
     priority of the lien of the Mortgage, including, but not limited to,
     requiring waivers with respect to mechanics' and materialmen's liens;

          (3) The Servicer shall verify that the Eligible Loan is not in
     default; and

          (4) Pending repairs or restoration, the Servicer shall place the
     Insurance Proceeds or Condemnation Proceeds in any Escrow Account.

     Section 1.26 Maintenance of PMI Policy; Claims.

     With respect to each Eligible Loan with a LTV in excess of 80%, the
Servicer shall, without any cost to the Purchaser, maintain or cause the
Mortgagor to maintain in full force and effect a PMI Policy insuring that
portion of the Eligible Loan in excess of 80% of value, and shall pay or shall
cause the Mortgagor to pay the premium thereon on a timely basis, until the LTV
of such Eligible Loan is reduced to 80% or less. In the event that such PMI
Policy shall be terminated, the Servicer shall, prior to any such termination,
obtain from another Qualified Insurer a comparable replacement policy, with a
total coverage equal to the remaining coverage of such terminated PMI Policy. If
the insurer shall cease to be a Qualified Insurer, the Servicer shall determine
whether recoveries under the PMI Policy are jeopardized for reasons related to
the financial condition of such insurer, it being understood that the Servicer
shall in no event have any responsibility or liability for any failure to
recover under the PMI Policy for such reason. If the Servicer determines that
recoveries are so jeopardized, it shall notify the Purchaser and the Mortgagor,
if required, and obtain from another Qualified Insurer a replacement insurance
policy. The Servicer shall not take any action which would result in noncoverage
under any applicable PMI Policy of any loss which, but for the actions of the
Servicer, would have been covered thereunder. In



                                       57
<PAGE>

connection with any assumption or substitution agreement entered into or to be
entered into pursuant to Section 6.1 hereof, the Servicer shall promptly notify
the insurer under the related PMI Policy, if any, of such assumption or
substitution of liability in accordance with the terms of such PMI Policy and
shall take all actions which may be required by such insurer as a condition to
the continuation of coverage under such PMI Policy. If such PMI Policy is
terminated as a result of such assumption or substitution of liability, the
Servicer shall obtain a replacement PMI Policy as provided above.

     In connection with its activities as Servicer, the Servicer agrees to
prepare and present claims to the insurer under any PMI Policy in a timely
fashion in accordance with the terms of such PMI Policy and, in this regard, to
take such action as shall be necessary to permit recovery under any PMI Policy
respecting a Defaulted Loan. Pursuant to Section 4.5 hereof, any amounts
collected by the Servicer under any PMI Policy shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 4.6 hereof.

     Section 1.27 Title, Management and Disposition of REO Property.

     In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the Servicer as agent for the Secured Parties, or
in the event the Servicer is not authorized or permitted to hold title to real
property in the state where the REO Property is located, or would be adversely
affected under the "doing business" or tax laws of such state by so holding
title, the deed or certificate of sale shall be taken in the name of such Person
or Persons as shall be reasonably acceptable to the Purchaser. The Person or
Persons holding such title other than the Servicer shall acknowledge in writing
that such title is being held as nominee for the Servicer.

     The Servicer shall manage, conserve, protect and operate each REO Property
for the Purchaser 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 manner that it
manages, conserves, protects and operates other foreclosed property for its own
account, and in the manner that similar property in the locality as the REO
Property is managed. The Servicer shall attempt to sell the Eligible Loan on
such terms and conditions as the Servicer deems to be in the best interest of
the Purchaser. The Servicer shall dispose of the REO Property in accordance with
Accepted Servicing Practices as soon as possible.

     The Servicer shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum


                                       58
<PAGE>

insurable value of the improvements which are a part of such property, liability
insurance and, to the extent required and available under the Flood Disaster
Protection Act of 1973, as amended.

     The disposition of REO Property shall be carried out by the Servicer at
such price and, upon such terms and conditions, as the Servicer deems to be in
the best interest of the Purchaser. The proceeds of sale of the REO Property
shall be promptly deposited in any Collection Account.

     Section 1.28 Servicer Reports.

     The Servicer shall deliver a report to the Purchaser, the Collateral Agent,
the Custodian, the Indenture Trustee, the Agent, the CP Dealers and the
Remarketing Agent on each Payment Date (the "Monthly Report"), a form of which
is attached hereto as Exhibit C.

     Section 1.29 Real Estate Owned Reports.

     The Servicer shall furnish to the Purchaser on or before the Payment Date a
statement with respect to any REO Property covering the operation of such REO
Property and the Servicer's efforts in connection with the sale of such REO
Property and any rental of such REO Property incidental to the sale thereof.
That statement shall be accompanied by such other information as the Purchaser
shall reasonably request.

     Section 1.30 Liquidation Reports.

     Upon the foreclosure sale of any Mortgaged Property or the acquisition
thereof by the Purchaser pursuant to a deed in lieu of foreclosure, the Servicer
shall submit to the Purchaser a liquidation report with respect to such
Mortgaged Property.

     Section 1.31 Reports of Foreclosures and Abandonments of Mortgaged
Property.

     Following the foreclosure sale or abandonment of any Mortgaged Property,
the Servicer shall report such foreclosure or abandonment as required pursuant
to Section 6050J of the Code.

     Section 1.32 Servicer Advance Report.



                                       59
<PAGE>

     The Servicer shall deliver a report (a "Monthly Servicer Advance Report")
to the Collateral Agent from time to time pursuant to Section 4.6(d), a form of
which is attached hereto as Exhibit D.

     Section 1.33 Year 2000. The Trust has initiated a commercially reasonable
review of its operations with a view to assessing whether its business or
operations will, in the receipt, transmission, processing, manipulation,
storage, retrieval, retransmission or other utilization of data, be vulnerable
to any significant risk that computer hardware or software used in its business
or operations will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000. Based on such ongoing review,
the Trust has no reason to believe that a Material Adverse Effect will occur
with respect to such business or operations resulting form any such risk.

     Section 1.34 Secondary Market Trading Report. The Servicer shall on each
Payment Date deliver to the Owner Trustee, the Indenture Trustee and to the
Collateral Agent a report (the "Monthly Secondary Market Trading Report")
setting forth the information described below with respect to sales and
Securitizations of Eligible Loans made by the Purchaser in the preceding month.
The Indenture Trustee shall have no duty to examine any such report.

     The information included in the Secondary Market Trading Report will
include (i) a photocopy of each confirmation or trading ticket with respect to
Eligible Loans sold or Securitization Securities sold in such month, (ii) a
schedule indicating the other bids considered by the Servicer on behalf of the
Trust with respect to the Eligible Loans sold or Securitization Securities sold
in such month or, if no other bids were considered by the Servicer, comparison
materials indicating substantially contemporaneous pricing of similar
Securitization Securities or Eligible Loans to those sold by the Trust.

     Each of the Owner Trustee, the Indenture Trustee (acting at the written
direction of the Required Noteholders) and the Collateral Agent shall have the
right to request that the Servicer provide additional comparative pricing
information to establish that the Eligible Loans sold or securitized by the
Servicer on behalf of the Purchaser were sold at the market value thereof at the
time of sale or Securitization.




                                       60
<PAGE>

                                    ARTICLE V

                                SERVICER ADVANCES

     Section 1.35 Servicer Monthly Advances.

     On each Determination Date, the Servicer shall deposit into the Collection
Account from its own funds an amount equal to all Monthly Payments which were
due on the Eligible Loans with respect to the applicable Due Period and which
remain unpaid at the close of business on such Determination Date or which were
deferred pursuant to Section 4.1 hereof. The Servicer's obligation to make such
Servicer Monthly Advances as to any Eligible Loan will continue through the last
Monthly Payment due prior to the payment in full of the Eligible Loan or through
the Payment Date for the distribution of all Liquidation Proceeds and other
payments or recoveries (including Insurance Proceeds and Condemnation Proceeds)
with respect to the Eligible Loan unless the Servicer provides an Officer's
Certificate stating that such Servicer Monthly Advance would not be recoverable;
provided, however, that the Servicer's obligation to make such Servicer Monthly
Advances shall not continue if the Eligible Loan has become a Defaulted Loan.


                                   ARTICLE VI

                          GENERAL SERVICING PROCEDURES

     Section 1.36 Transfers of Mortgaged Property.

     The Servicer shall enforce any "due-on-sale" provision in accordance with
Accepted Servicing Practices and applicable law contained in any Mortgage or
Mortgage Note and to deny assumption by the Person to whom the Mortgaged
Property has been or is about to be sold whether by absolute conveyance or by
contract of sale, and whether or not the Mortgagor remains liable on the
Mortgage and the Mortgage Note. When the Mortgaged Property has been conveyed by
the Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance, exercise its rights to accelerate the maturity of such Eligible Loan
under the "due-on-sale" clause applicable thereto; provided, however, that the
Servicer shall not exercise such rights if prohibited by law from doing so or if
the exercise of such rights would impair or threaten to impair any recovery
under the related PMI Policy, if any.

     If the Servicer reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, the Servicer shall enter into (i) an
assumption and modification agreement with the person to whom such property has
been conveyed, pursuant to which such person becomes liable under the Mortgage
Note and the original Mortgagor remains liable thereon or (ii) in the event that
the Servicer is unable under applicable law to require




                                       61
<PAGE>

that the original Mortgagor remain liable under the Mortgage Note and the
Servicer has the prior consent of the primary mortgage guaranty insurer, a
substitution of liability agreement with the purchaser of the Mortgaged Property
pursuant to which the original Mortgagor is released from liability and the
purchaser of the Mortgaged Property is substituted as Mortgagor and becomes
liable under the Mortgage Note.

     Section 1.37 Satisfaction of Mortgages and Release of Mortgage Loan Files.

     Upon the payment in full of any Eligible Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer shall notify the Purchaser and the
Collateral Agent.

     If the Servicer satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Servicer otherwise prejudice any rights the Purchaser may have under the
mortgage instruments, upon written demand of the Purchaser, the Servicer shall
repurchase the related Eligible Loan at the Repurchase Price by deposit thereof
in the Collateral Account within two Business Days of receipt of such demand by
the Purchaser. The Servicer shall maintain the Fidelity Bond and Errors and
Omissions Insurance Policy as provided for in Section 4.13 hereof insuring the
Servicer against any loss it may sustain with respect to any Eligible Loan not
satisfied in accordance with the procedures set forth herein.

     Section 1.38 Servicing Compensation.

     As compensation for its services hereunder, Servicer shall be entitled to
the Servicing Fee.

     Section 1.39 Annual Statement as to Compliance.

     The Servicer shall deliver to the Purchaser, the Indenture Trustee, the
Owner Trustee, the Liquidity Banks, the Remarketing Agent, the CP Dealers and
the Swap Counterparties, on or before April 5 each year beginning 1999, an
Officer's Certificate, stating that (i) a review of the activities of the
Servicer during the preceding fiscal year ended December 31 and of performance
under this Agreement has been made under such officer's supervision, (ii) the
Servicer has complied with the provisions of Article II and Article IV hereof,
and (iii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled its obligations in all material respects under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each


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<PAGE>

such default known to such officer and the nature and status thereof and the
action being taken by the Servicer to cure such default.

     Section 1.40 Annual Independent Public Accountants' Servicing Report.

     On or before April 5 of each year beginning 1999, the Servicer, at its
expense, shall cause a firm of independent public accountants which is a member
of the American Institute of Certified Public Accountants to furnish a statement
to the Purchaser, the Indenture Trustee, the Liquidity Banks, the CP Dealers,
the Remarketing Agent and the Swap Counterparties to the effect that such firm
has examined certain documents and records relating to the servicing of the
Eligible Loans and this Agreement and that such firm is of the opinion that the
provisions of Article II and Article IV hereof have been complied with, and
that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers, nothing has
come to their attention which would indicate that such servicing has not been
conducted in compliance therewith, except for (i) such exceptions as such firm
shall believe to be immaterial, and (ii) such other exceptions as shall be set
forth in such statement. The Indenture Trustee shall have no duty to examine
such statement.

     Section 1.41 Right to Examine Servicer Records.

     The Purchaser, the Indenture Trustee (acting at the written direction of
the Required Noteholders), the Owner Trustee, the Agent and the Collateral Agent
shall each have the right to reasonable access to the books, records, or other
information of the Servicer, whether held by the Servicer or by another on its
behalf, with respect to or concerning this Agreement or the Eligible Loans,
during regular business hours or at such other times as may be reasonable under
applicable circumstances, upon reasonable advance notice.


                                   ARTICLE VII

                              REPURCHASE OBLIGATION

     Section 1.42 Servicer's Repurchase Obligations.

     Upon receipt by the Servicer of notice from the Purchaser of a breach of
any representation or warranty of it contained in Section 3.1 of this Agreement
or any action resulting in prejudice to the Purchaser in accordance with Section
6.2 hereof, the Servicer shall promptly notify the Purchaser, the Agent, the
Indenture Trustee, the Collateral Agent


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and the Swap Counterparties and shall, at the direction of the Purchaser use its
best efforts to cure and correct any such breach, and, in the event such breach
is not cured and corrected within the applicable 60 day time period, the
Servicer shall repurchase the Eligible Loans at the Repurchase Price pursuant to
Section 3.3 hereof.

     Upon deposit by the Servicer of the Repurchase Price in the Collateral
Account, the Custodian and the Servicer shall arrange for the reassignment of
Eligible Loans adversely affected by such breach to the Servicer according to
the Servicer's instructions, and the delivery to the Custodian of any documents
held by the Purchaser. In the event of a repurchase, the Servicer shall,
simultaneously with such reassignment, give written notice to the Seller, the
Agent, the Collateral Agent, the Indenture Trustee and the Swap Counterparties
that such repurchase has taken place. Upon receipt of the Repurchase Price by
the Collateral Agent, the Purchaser and the Servicer shall arrange for the
reassignment of the Eligible Loans to the Servicer and the Delivery to the
Servicer of any documents held by the Custodian relating to the reassigned
Eligible Loans.


                                  ARTICLE VIII

                              SERVICER TO COOPERATE

     Section 1.43 Provision of Information.

     During the term of this Agreement, the Servicer shall furnish to the
Purchaser, the holders of all Series of Certificates, the holders of all Series
of Notes and the Liquidity Banks such periodic, special, or other reports or
information, including the Servicer Report required to be delivered to the
Purchaser, the Collateral Agent, the Indenture Trustee, the Owner Trustee, the
Custodian, the CP Dealers, the Remarketing Agent and the Liquidity Banks on each
Payment Date, and copies or originals of any documents contained in the Mortgage
Loan File for each Eligible Loan, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Purchaser. All such
reports, documents or information shall be provided by and in accordance with
all reasonable instructions and directions which the Purchaser may give.

     The Servicer shall execute and deliver all such instruments and take all
such action as the Purchaser, the Collateral Agent, the Indenture Trustee
(acting at the written direction of the Required Noteholders), the Owner
Trustee, the Custodian, the Certificateholders and the Liquidity Banks may
reasonably request from time to time, in order to effectuate the purposes and to
carry out the terms of this Agreement.



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<PAGE>


                                   ARTICLE IX

                                  THE SERVICER

     Section 1.44 Indemnification of Third Party Claims.

     The Servicer agrees to indemnify and hold harmless the Purchaser, the
Collateral Agent, the Indenture Trustee, the Owner Trustee, the Remarketing
Agent, the CP Dealers and the Liquidity Banks against any and all claims,
losses, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any other costs, fees and expenses that the Purchaser may sustain
in any way related to the failure of the Servicer to perform its duties and
service the mortgage loans in strict compliance with the terms of this
Agreement. The Servicer shall immediately notify the Purchaser, the Collateral
Agent, the Remarketing Agent, the Indenture Trustee, the Owner Trustee, the CP
Dealers and the Liquidity Banks if a claim is made by a third party with respect
to this Agreement or the mortgage loans and the Servicer shall assume the
defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against the Servicer or the Purchaser in respect of
such claim. The Servicer's indemnification obligation pursuant to this Section
9.1 shall survive the termination of this Agreement.

     Section 1.45 Corporate Existence of the Servicer.

     The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and shall 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 Eligible Loans and to perform its duties under this Agreement.

     Section 1.46 Limitation on Liability of Servicer and Others.

     Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall be under any liability to the Purchaser 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 Servicer or any such person against any
breach of warranties or representations made herein, or failure to perform its
obligations in compliance with any standard of care set forth in this Agreement,
or any liability which would otherwise be imposed by reason of any breach of the
terms and


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<PAGE>

conditions of this Agreement. The Servicer and any director, officer, employee
or agent of the Servicer may rely in good faith on any document which it in good
faith reasonably believes to be genuine and have been adopted or signed by the
proper authorities 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 Eligible Loans in
accordance with this Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Servicer may, with the consent
of the Purchaser undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto. In such event, the Servicer shall be entitled to reimbursement
from the Purchaser of the reasonable legal expenses and costs of such action.

     Section 1.47 Limitation on Resignation and Assignment by the Servicer.

     The Purchaser has entered into this Agreement with the Servicer in reliance
upon the representations as to the adequacy of its servicing facilities, plant,
personnel, records and procedures, its integrity, reputation and financial
standing, and the continuance thereof. The Servicer shall not resign from the
obligations and duties hereby imposed on it as to any Eligible Loan except by
consent of the Required Banks and the Required Noteholders, the Swap
Counterparties, the Collateral Agent and the holders of a majority in principal
amount of all Series of Certificates or upon the determination that its duties
hereunder are no longer permissible under applicable law and such incapacity
cannot reasonably be cured by the Servicer. Notice of any such determination
permitting the resignation of the Servicer shall be delivered to each Rating
Agency and any such determination shall evidenced by an Opinion of Counsel to
such effect delivered to the Purchaser which Opinion of Counsel shall be in form
and substance acceptable to the Purchaser. No such resignation shall become
effective until a successor shall have assumed the Servicer's responsibilities
and obligations hereunder in the manner provided in Section 12.1 hereof, subject
to Rating Agency Confirmation.

     Section 1.48 Limitation on Assignment of Right. Except pursuant to a
resignation approved pursuant to Section 9.4 hereof, the Servicer shall not
assign, sell or otherwise transfer its right to receive any payments (including
the Servicing Fee) hereunder.


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<PAGE>

                                    ARTICLE X

                                     DEFAULT

     Section 1.49 Servicer Events of Default.

     Each of the following shall constitute a "Servicer Event of Default" on the
part of the Servicer:

     (1) any failure by the Servicer to observe or perform in any material
respect any of the terms, covenants or agreements on the part of the Servicer
set forth in this Agreement, any Transfer Supplement or in the Custodial
Agreement (other than those set forth in clauses (h), (i) and (m) below) which
continues unremedied for a period of 45 days after the date on which the
Purchaser, the Custodian or the Agent has actual knowledge of such failure or
written notice of such failure, requiring the failure to be remedied, shall have
been given to the Servicer, the Agent, the Collateral Agent, the Indenture
Trustee, the Owner Trustee and the Swap Counterparties by the Purchaser or by
the Custodian or the Agent; or

     (2) any representation, warranty, statement or certificate made by the
Servicer shall prove to have been incorrect in any material respect at the time
when made, and which continues to be incorrect in any material respect for 45
days after actual knowledge or written notice; or

     (3) any failure by the Servicer to maintain any required licenses to do
business in any jurisdiction where the Mortgaged Property is located; or

     (4) jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, including bankruptcy,
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 a decree or order shall have remained in force undischarged or
unstayed for a period of 45 days; or

     (5) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, 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

     (6) 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, bankruptcy or reorganization statute, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its obligations
or cease its normal business operations for six Business Days; or



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<PAGE>

     (7) the Servicer or PHH Corporation enters into a consent agreement or
otherwise agrees in writing with any federal or state regulatory agency or
authority to restrict its activities, if the default of such agreement by the
Servicer or PHH Corporation entitles such applicable federal or state agency to
place the Servicer in receivership or conservatorship; or

     (8) failure of the Servicer to cause to be delivered to the Collateral
Agent on the date of sale or Securitization of an Eligible Loan the proceeds of
any such sale or Securitization; or

     (9) failure of the Servicer to cause to be delivered to the Collateral
Agent for deposit into the Collection Account not later than two Business Days
after receipt by the Servicer of any amounts required by Section 4.5 hereof to
be deposited by the Servicer in the Collection Account; or

     (10) the Seller, Servicer or PHH Corporation shall default on any of its
debt obligations in excess of $50,000,000 in the aggregate; or

     (11) failure of the Servicer to be an Approved Seller/Servicer by at least
two of GNMA, FNMA and FHLMC; or

     (12) the ratings of PHH Corporation or its successors and assigns are
withdrawn or are downgraded below BB+/Ba1 by the Rating Agencies; or

     (13) the failure on the part of the Servicer to make any payment or deposit
(not described in clause (h) or (i) above) required under this Agreement on or
before five Business Days after the date such payment or deposit is required to
be made.

     In each and every such case, so long as a Servicer Event of Default shall
not have been remedied, in addition to whatsoever rights the Purchaser may have
at law or in equity to damages, including injunctive relief and specific
performance, the Purchaser, by notice in writing to the Servicer, the Agent, the
Collateral Agent, the Indenture Trustee, the Owner Trustee, the Swap
Counterparties and the Rating Agencies may terminate all of the rights and
obligations of the Servicer under this Agreement and in and to the Eligible
Loans and the proceeds thereof other than unpaid Servicing Fees. The Purchaser
will only remove the Servicer as described above upon the affirmative vote of
the holders of a majority in principal amount of all Series of Certificates, and
the consent of the Swap Counterparties, the Collateral Agent and the Required
Banks and Required Noteholders.



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<PAGE>

     Upon receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Eligible
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 12.1 hereof. Upon written request from the Purchaser, the
Servicer shall prepare, execute and deliver to the successor entity designated
by the Purchaser any and all documents and other instruments, place in such
successor's possession all Mortgage Loan Files, and do or cause to be done all
other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including but not limited to the transfer and endorsement
or assignment of the Eligible Loans and related documents, at the Servicer's
sole expense. The Servicer shall cooperate with such successor in effecting the
termination of the Servicer's responsibilities and rights hereunder, including
without limitation, the transfer to such successor for administration by it of
all cash amounts which shall at the time be credited by the Servicer to any
Collection Account or Escrow Account or thereafter received with respect to the
Eligible Loans.

     Section 1.50 Waiver of Defaults.

     With the consent of Required Banks and Required Noteholders and the Swap
Counterparties, the Purchaser and the holders of a majority in principal amount
of all Series of Certificates, by written notice to the Collateral Agent, may
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any waiver of a past default, such default
shall cease to exist, and any event of default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived. Notice of any such waiver shall be
given to each Rating Agency.

                                   ARTICLE XI

                                   TERMINATION

     Section 1.51 Termination of Agreement.

     This Agreement shall terminate upon the final payment or other liquidation
(or any advance with respect thereto) of the last Eligible Loan sold hereunder.

     Section 1.52 Termination of Purchase Obligations.

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<PAGE>

     Upon the occurrence and continuance of any of the following conditions, the
Purchaser shall have the right subject to the consent of the holders of a
majority in principal amount of the Certificates and the Required Banks or
Required Noteholders to notify the Seller that the commitment of the Purchaser
to purchase Eligible Loans from the Seller shall terminate (each, a "Termination
Event"):

     (1) any representation, warranty, statement, or certification made by PHH
Corporation in its capacity as Guarantor of the Servicer shall prove to have
been false or misleading in any material respect as of the time when made, and
which continues to be incorrect in any material respect for a period of
forty-five (45) days after written notice, or

     (2) the failure on the part of the Seller to observe or perform in any
material respect any of the terms, covenants or agreements of the Seller
contained in the Program Documents which failure continues unremedied for a
period of forty-five (45) days after written notice, or

     (3) the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, including bankruptcy, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Seller or PHH Corporation and
such decree or order shall have remained in force undischarged or unstayed for a
period of forty-five (45) days, or

     (4) the Seller or PHH Corporation shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Seller or PHH Corporation or of or relating to all or substantially all of
its property, or

     (5) the Seller or PHH Corporation 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, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment of its
obligations or cease its normal business operations for six (6) Business Days,
or

     (6) noncompliance with the Portfolio Aging Limitations, or

     (7) the occurrence of an Interest Rate Swap Termination Event under the
Interest Rate Swaps has occurred or is continuing after giving effect to any
applicable grace period, or



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<PAGE>

     (8) a Liquidity Agreement Event of Default has occurred and is continuing
after giving effect to any applicable grace period, or

     (9) an Indenture Event of Default has occurred and is continuing after
giving effect to any applicable grace period, or

     (10) the Servicer or PHH Corporation enters into a consent agreement or
otherwise agrees in writing with any Federal or state regulatory agency or
authority to restrict its activities, if a default under such agreement by the
Servicer or PHH Corporation entitles such applicable Federal or state agency to
place the Servicer in receivership or conservatorship, or

     (11) failure of the Servicer to cause to be delivered to the Collateral
Agent for deposit into the Collateral Account on the date of sale or
Securitization of any Mortgage Loans the proceeds of any such sale or
Securitization, or

     (12) failure of the Servicer to cause to be delivered to the Collateral
Agent for deposit into the Collection Account not later than two (2) Business
Days after receipt by the Servicer of any amounts required to be deposited by
the Servicer in the Collection Account, or

     (13) any Servicer Event of Default has occurred and is continuing after
giving effect to any applicable grace period, or

     (14) funds on deposit in the Reserve Fund shall be less than 0.60% of the
Program Size for 120 days or more, or

     (15) at any time either (i) the rolling three month average of the
Outstanding Purchase Price of all Delinquent Loans shall equal more than five
percent (5%) of the rolling three month average of the Outstanding Purchase
Price of all Mortgage Loans owned by the Trust at such time or (ii) the
Outstanding Purchase Price of all Delinquent Loans shall equal more than seven
percent (7%) of the Outstanding Purchase Price of all Mortgage Loans owned by
the Trust at such time, or

     (16) the failure of the Trust to maintain an agreement (in substantially
the form of Exhibit __) with a Rated Bidder to the effect that such Rated Bidder
agrees to submit a binding bid for all non-Delinquent and non-Defaulted Eligible
Loans in a Termination Event Auction which failure continues for a period of
thirty (30) or more days, or

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<PAGE>

     (17) the Remarketing Agent has failed to remarket any Series of
Certificates for a period of five successive years, or

     (18) one or more Swap Counterparties fail to agree to any annual extension
of any Interest Rate Swap, resulting in the expiration of one or more Interest
Rate Swaps prior to the maturity of all the Trust's outstanding obligations, and
a replacement Swap Counterparty or Swap Counterparties shall not have been
obtained in a notional amount at least equal to the lesser of (x) the notional
amount of the Interest Rate Swap or Interest Rate Swaps represented by the
non-extending Swap Counterparty or Swap Counterparties, or (y) if the Program
Size has been reduced, an amount equal to (i) the then-current Program Size,
less (ii) the notional amount of all effective (as of such scheduled termination
date) Interest Rate Swaps, at least one year prior to the scheduled termination
date.

     In the event a Termination Event occurs and is continuing, the Purchaser
will no longer be permitted to purchase additional Eligible Loans and principal
payments on Eligible Loans, principal proceeds of sales and Securitizations of
Eligible Loans and amounts received by the Swap Counterparties will be used to
pay the Obligations of the Purchaser, subject to the priorities set forth in
Section 2.01 of the Security Agreement.

     Notwithstanding anything in this Agreement to the contrary, in the event a
Termination Event described in paragraph (n), (o) or (p) occurs and is
continuing, the Collateral Agent shall use its best efforts to sell or
Securitize all non-Delinquent and non-Defaulted Eligible Loans within sixty (60)
days of the date on which the Termination Event occurs. In the event that all
non-Delinquent and non-Defaulted Eligible Loans have not been so sold or
Securitized, on such sixtieth day the Collateral Agent shall hold an auction (a
"Termination Event Auction") of the remaining non-Delinquent and non-Defaulted
Eligible Loans Eligible Loans for settlement not later than the eighty-fifth day
following the date on which such Termination Event occurred. At least one of the
bidders in such auction shall have a rating of P-1 from Moody's (a "Rated
Bidder").

     Section 1.53 Termination of Servicing With Respect to Any Eligible Loan

     This Agreement shall terminate with respect to any Eligible Loan upon the
occurrence of the following: (i) the receipt into the Collateral Account of the
proceeds of any sale or Securitization of such Eligible Loan or the Repurchase
Price or Principal Prepayment in full of such Eligible Loan; or (ii) the
effectiveness of the termination of the Company pursuant to Section 12.1 No
termination shall become effective until a successor shall have


                                       72
<PAGE>

assumed the Servicer's responsibilities and obligations hereunder in the manner
provided in Section 12.1.

     Upon written request from the Purchaser, the Servicer shall prepare,
execute and deliver to the successor entity designated by the Purchaser any and
all documents and other instruments, place in such successor's possession all
Mortgage Loan Files, and do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
including but not limited to the transfer and endorsement or assignment of the
Eligible Loans and related documents, at the Servicer's sole expense. The
Servicer shall cooperate with such successor in effecting the termination of the
Servicer's responsibilities and rights hereunder, including without limitation,
the transfer to such successor for administration by it of all cash amounts
which shall at the time be credited by the Servicer to any Collection Account or
Escrow Account or thereafter received with respect to the Eligible Loans.


                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

     Section 1.54 Successor to Servicer.

     Prior to termination of the Servicer's responsibilities and duties under
this Agreement pursuant to Sections 9.4 or 10.1 hereof, the Purchaser shall
appoint a successor which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this Agreement
prior to the termination of the Servicer's responsibilities, duties and
liabilities under this Agreement. In connection with such appointment and
assumption, the Purchaser may make such arrangements for the compensation of
such successor out of payments on Eligible Loans as it and such successor shall
agree. In the event that the Servicer's duties, responsibilities and liabilities
under this Agreement should be terminated pursuant to the aforementioned
sections, the Servicer shall discharge such duties, responsibilities and
liabilities during the period from the date it acquires knowledge of such
termination until the effective date thereof with the degree of diligence and
prudence which it is obligated to exercise under this Agreement and shall take
no action whatsoever that might impair or prejudice the rights or financial
condition of its successor. The resignation or removal of the Servicer pursuant
to the aforementioned Sections shall not become effective until (i) a successor
shall be appointed pursuant to this Section 12.1 and (ii) notice thereof shall
have been given to the Rating Agencies and the Purchaser shall have received
Rating Agency Confirmation, and such resignation or removal shall in no event
relieve the Servicer



                                       73
<PAGE>

of the representations and warranties made pursuant to Sections 3.1 and 3.2
hereof and the remedies available to the Purchaser under Section 3.3 hereof, it
being understood and agreed that the provisions of such Sections 3.1, 3.2 and
3.3 shall be applicable to the Servicer notwithstanding any such sale,
assignment, resignation or termination of the Servicer, or the termination of
this Agreement.

     Any successor appointed as provided herein shall execute, acknowledge and
deliver to the Servicer and the Purchaser an instrument accepting such
appointment, wherein the successor shall make the representations and warranties
set forth in Section 3.1 hereof, whereupon such successor shall become fully
vested with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer, with like effect as if originally named as a party
to this Agreement. Any termination or resignation of the Servicer or termination
of this Agreement pursuant to Sections 9.4, or 10.1 hereof shall not affect any
claims that the Purchaser may have against the Servicer arising out of the
Servicer's actions or failure to act prior to any such termination or
resignation.

     The Servicer shall deliver promptly to the successor Servicer the funds in
any Collection Account and Escrow Account and all Mortgage Loan Files and
related documents and statements held by it hereunder and the Servicer shall
account for all funds and shall execute and deliver such instruments and do such
other things as may reasonably be required to more fully and definitively vest
in the successor all such rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer.

     Section 1.55 Amendment.

     This Agreement may only be amended with the written consent of the
Purchaser, the Seller, the Controlling Majority with the consent of the Required
Banks, the Swap Counterparties, the holders of a majority in principal amount of
all Series of Certificates and the Servicer, and written notice of such
amendment to each Rating Agency. Any material amendment shall be subject to
Rating Agency Confirmation. The costs and expenses associated with any such
amendment shall be borne by the party requesting the amendment.

     Section 1.56 Governing Law.

     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.



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<PAGE>

     Section 1.57 Duration of Agreement.

     This Agreement shall continue in existence and effect until terminated as
herein provided.

     Section 1.58 Notices.

     All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, addressed as follows:

     (1) if to Cendant Mortgage Corporation:

         Cendant Mortgage Services
         6000 Atrium Way
         Mt. Laurel, NJ  08054
         Attn: Joseph E. Suter
         Telephone:  (609) 414-4170
         Telecopy:  (609) 414-4540

or such other address as may hereafter be furnished to the Purchaser in writing;

     (2) if to the Purchaser:

         Bishop's Gate Residential Mortgage Trust
         c/o First Union Trust Company, National Association
         Corporate Trust/Administration
         1 Rodney Square
         920 King Street
         Wilmington, DE  19801
         Attn: Edward L. Truitt, Jr.
         Telephone:  (302) 888-7539
         Telecopy:  (302) 888-7544

     Section 1.59 Severability of Provisions.

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


                                       75
<PAGE>

provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

     Section 1.60 Relationship of Parties.

     Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor and not as agent for the
Purchaser.

     Section 1.61 Execution; Successors and Assigns.

     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 agreement. This Agreement shall inure to the benefit of and be
binding upon the Servicer and the Purchaser and their respective successors and
assigns; provided, however, that the rights of the Purchaser to an indemnity
from the Servicer pursuant to Section 3.3 hereof are not assignable and shall
inure only to the benefit of the Purchaser and to no other Person.

     Section 1.62 Recordation of Assignments of Mortgage.

     To the extent permitted by applicable law, each of the Assignments of
Mortgage 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 Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected at the Purchaser's expense in the event recordation is either necessary
under applicable law or requested by the Purchaser at its sole option.

     Section 1.63 Assignment by Purchaser.

     The Purchaser shall have the right, to assign its interest under this
Agreement to the Collateral Agent for the benefit of the Secured Parties.

     Section 1.64 Non-Petition Agreement.

     The Company agrees not to cause the filing of a petition in bankruptcy
against the Purchaser for failure to pay amounts due under this Purchase
Agreement until the payment in full of the Obligations and not before one year
and one day (or if longer, the applicable preference period then in effect) have
elapsed since such payment.

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     Section 1.65 Waiver of Offset.

     The Servicer agrees to deliver to the Purchaser all amounts required by
this Agreement to be delivered by the Servicer to the Purchaser free and clear
of any offset, counterclaim or other deduction on account of, or in respect of,
any Purchaser to the Servicer hereunder.

     Section 1.66 Limited Recourse.

     The Servicer agrees that the obligations of the Purchaser to the Servicer
under this Agreement are limited recourse obligations of the Purchaser payable
solely from the assets of the Purchaser available for such purposes under the
Security Agreement and that, upon application of all assets of the Purchaser
available under the Security Agreement for, such purposes, the Servicer shall
have no recourse to the Purchaser for any obligations of the Purchaser to the
Servicer to the extent such application does not provide for full satisfaction
and payment of such obligation.

     Section 1.67 Limitation of Liability.

     This document or instrument has been executed on behalf of a Delaware
business trust by First Union Trust Company, National Association solely in its
capacity as trustee of such trust, and not in its individual capacity. In no
case shall First Union Trust Company, National Association (or any entity acting
as successor or additional trustee) be personally liable for or on account of
any of the statements, representations, warranties, covenants or obligations of
such trust hereunder, any right to assert any such liabilities against First
Union Trust Company, National Association (or any entity acting as successor or
additional trustee) being hereby waived by the other parties hereto; provided,
however, that such waiver shall not affect the liability of First Union Trust
Company, National Association (or any entity acting as successor or additional
trustee) to any Person under any other agreement to which it is a party and to
the extent expressly agreed to in its individual capacity thereunder.

     Section 1.68 Binding Effect on Voting Group.

     If any provision hereof provides that either the Required Banks or the
Required Noteholders (in each case, a "Voting Group"), but not both, may
consent, vote, direct or take other action, the first of either Voting Group to
so consent, vote, direct or take action shall bind the other Voting Group with
respect thereto.


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                                  ARTICLE XIII

                            PHH CORPORATION GUARANTEE

     Section 1.69 Guarantee of Servicer's Performance and Payment Obligations.
For value received, and in consideration of the financial accommodation accorded
to the Company by the Purchaser under this Purchase Agreement, PHH Corporation
(the "Guarantor") hereby fully, unconditionally, and irrevocably guarantees to
the Purchaser, the holders of all Series of Certificates, the holders of all
Series of Notes, the holders of the Commercial Paper, the Indenture Trustee and
the Liquidity Banks the due performance of, and punctual payment of all amounts
payable by, the Company, in its capacity as Servicer under this Agreement when
and as such obligations hereunder shall become due and, in the case of any
payments, payable. The Guarantor will ensure the performance and payment of
every act, duty, obligation, agreement and responsibility of the Servicer set
forth herein.

     In case of the inability of the Servicer to punctually perform any such
act, duty, obligation, responsibility or agreement or to pay punctually any such
amounts, the Guarantor hereby agrees, upon written demand by the Purchaser, to,
as applicable, (i) perform any such act, duty, obligation, responsibility or
agreement and (ii) pay or cause to be paid any such amount, punctually when and
as the same shall become due and, in the case of any payment, payable (exclusive
of any grace period).

          i. Guarantor hereby agrees that its obligations under this Section
     13.1 constitute a guarantee of performance and payment when due and not of
     collection.

          ii. Guarantor hereby agrees that its obligations under this Section
     13.1 shall be unconditional, irrespective of the validity, regularity or
     enforceability of this Purchase Agreement against the Servicer, the absence
     of any action to enforce the Servicer's obligations under this Purchase
     Agreement, any waiver or consent by the Purchaser, the holders of all
     Series of Certificates, the holders of all Series of Notes, the Indenture
     Trustee or the Liquidity Banks with respect to any provisions thereof, the
     entry by the Servicer and the Purchaser into additional transactions under
     this Purchase Agreement or any other circumstance which might otherwise
     constitute a legal or equitable discharge or defense of a guarantor (other
     than the defenses of statute of limitations or payment, which are not
     waived); provided, however,



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     that Guarantor shall be entitled to exercise any right that the Servicer
     could have exercised under this Purchase Agreement to cure any default in
     respect of its obligations under this Purchase Agreement or to set-off,
     counterclaim or withhold payment in respect of any event of default or
     potential event of default in respect of the Purchaser or any Affiliate,
     but only to the extent such right is provided to the Servicer under this
     Purchase Agreement. The Guarantor acknowledges that the Servicer and the
     Purchaser may from time to time enter into one or more transactions
     pursuant to this Purchase Agreement and agrees that the obligations of the
     Guarantor under this Section 13.1 will upon the execution of any such
     transaction by the Servicer and the Purchaser extend to all such
     transactions without the taking of further action by the Guarantor.

          iii. The Guarantor hereby waives (i) promptness, diligence,
     presentment, demand of payment, protest, order and, except as set forth in
     paragraph (a) hereof, notice of any kind in connection with this Purchase
     Agreement and this Section 13.1, or (ii) any requirement that the
     Purchaser, the holders of all Series of Certificates, the holders of all
     Series of Notes, the Indenture Trustee or the Liquidity Banks exhaust any
     right to take any action against the Servicer or any other person prior to
     or contemporaneously with proceeding to exercise any right against the
     Guarantor under this Section 13.1.

                                   ARTICLE XIV

                                   ASSIGNMENT

     Section 1.70 Assignment. Notwithstanding anything to the contrary contained
in this Purchase Agreement, the Purchaser hereby assigns, conveys, transfers,
delivers and sets over unto the Collateral Agent for the benefit of the Secured
Parties, all of its right, title and interest in, to and under, whether now
owned or existing, or hereafter acquired, this Purchase Agreement. The Purchaser
acknowledges the security interest in the Eligible Loans of the Collateral Agent
as representative secured party for the Purchaser and the Persons or entities to
whom Purchaser owes the obligations secured by such Eligible Loans.

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     The Purchaser and the Seller shall each treat the Collateral Agent as the
Purchaser under this Purchase Agreement and each consent to such assignment and
acknowledge that the Collateral Agent shall enjoy the Purchaser's rights under
this Agreement in accordance with the provisions of this Section. Without
limiting the generality of the foregoing, the Purchaser and the Seller shall
each report to and correspond and communicate with the Collateral Agent and in
all other regards treat the Collateral Agent as the Purchaser hereunder with
respect to the Eligible Loans. The Collateral Agent shall have all rights of the
Purchaser to enforce the covenants and conditions set forth in this Purchase
Agreement with respect to the Eligible Loans, and the Purchaser and the Seller,
respectively, shall each follow the instructions of the Collateral Agent under
this Purchase Agreement. The Collateral Agent shall have the right to give any
waivers or consents required or allowed under this Purchase Agreement, and such
waivers and consents shall be binding upon the Purchaser and any party for whom
the Collateral Agent acts as representative secured party as if the Purchaser or
such party had given the same. All amounts due the Purchaser under this Purchase
Agreement shall be remitted to the Collateral Agent in accordance with the
Collateral Agent's instructions and in accordance with this Purchase Agreement.


                                   ARTICLE XV

                                 COMMITMENT FEE

     Section 1.71 Commitment Fee. In consideration of the agreement of the
Purchaser to purchase Eligible Loans from the Seller from time to time, the
Seller has paid to the Purchaser a fee (the "Commitment Fee") of $3,801,500.



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     IN WITNESS WHEREOF, the Company and the Purchaser have caused their names
to be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.


                               CENDANT MORTGAGE CORPORATION,
                                as Seller and Servicer


                               By:
                                   ---------------------------------------
                                   Name:  Joe Suter
                                   Title: Senior Vice President



                               BISHOP'S GATE RESIDENTIAL MORTGAGE TRUST,
                               as Purchaser

                               By: FIRST UNION TRUST COMPANY,
                                   not in its individual capacity but
                                   solely as Owner Trustee under the Trust
                                   Agreement


                                   By:
                                       -----------------------------------
                                       Name:   Doris J. Krick
                                       Title:  Vice President



                               PHH CORPORATION,
                               solely in its capacity of Guarantor of
                               the Servicer's obligations pursuant to
                               Article XIII of this Agreement.


                               By:
                                   ---------------------------------------
                                   Name:   Terry Kridler
                                   Title:  Senior Vice President and Treasurer