<PAGE>


                                                                  EXECUTION COPY

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





                            AAMES CAPITAL CORPORATION
                                   as Seller,



                          COUNTRYWIDE HOME LOANS, INC.
                                   as Servicer



                                       and



                    BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
                                   as Trustee



                         POOLING AND SERVICING AGREEMENT

                            Dated as of March 1, 2001

                           Aames Mortgage Trust 2001-1

                       Mortgage Pass-Through Certificates,
                                  Series 2001-1




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

<PAGE>

                                                TABLE OF CONTENTS

                                              ARTICLE I DEFINITIONS

<TABLE>
<CAPTION>
<S>              <C>                                                                                        <C>
Section 1.01.    Definitions...................................................................................1
Section 1.02     Interest Calculations........................................................................32

                       ARTICLE II CONVEYANCE OF THE TRUST ORIGINAL ISSUANCE OF CERTIFICATES

Section 2.01     Conveyance of the Trust......................................................................32
Section 2.02     Conveyance of the Subsequent Mortgage Loans; Fixed Price Contract............................34
Section 2.03     Acceptance by the Trustee; Repurchase or Substitution of Mortgage Loans......................38
Section 2.04     Representations and Warranties Regarding the Servicer and the Seller.........................40
Section 2.05     Representations and Warranties of the Seller Regarding the Mortgage Loans....................43
Section 2.06     Execution and Authentication of Certificates.................................................54
Section 2.07     Reserved.....................................................................................54
Section 2.08     Indemnification of the Trust.................................................................54

                  ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS; CERTIFICATE ACCOUNT

Section 3.01     The Servicer and the Sub-Servicers...........................................................54
Section 3.02     Collection of Certain Mortgage Loan Payments; Collection Account and Certificate Account.....56
Section 3.03     Additional Servicing Responsibilities for the Adjustable Rate Mortgage Loans.................59
Section 3.04     Hazard Insurance Policies....................................................................59
Section 3.05     Enforcement of Due-on-Sale Clauses; Assumption and Modification Agreements...................60
Section 3.06     Realization upon Liquidated Mortgage Loans...................................................60
Section 3.07     Trustee to Cooperate; Release of Mortgage Files..............................................62
Section 3.08     Servicing Compensation; Payment of Certain Expenses by the Servicer..........................63
Section 3.09     Annual Statement as to Compliance............................................................63
Section 3.10     Annual Independent Public Accountants' Servicing Report......................................63
Section 3.11     Access to Certain Documentation and Information Regarding the Mortgage Loans.................64
Section 3.12     Maintenance of Fidelity Bond and Errors and Omissions Policy.................................64
Section 3.13     Notices to the Rating Agencies and the Trustee...............................................64
Section 3.14     Reports of Foreclosures and Abandonment of Mortgaged Properties..............................65
Section 3.15     Sub-Servicers and Sub-Servicing Agreements...................................................66
Section 3.16     Prefunding Account...........................................................................66
Section 3.17     Capitalized Interest Account.................................................................67


                                                       -i-

<PAGE>

Section 3.18     [Reserved]...................................................................................67
Section 3.19     [Reserved]...................................................................................67
Section 3.20     [Reserved]...................................................................................67
Section 3.20     Net Rate Cap Fund............................................................................68
Section 3.22     Covenants and Representations of the Servicer Regarding Prepayment Charges...................68
Section 3.23.    Claims Upon the PMI Policy...................................................................69

                                           ARTICLE IV REMITTANCE REPORT

Section 4.01     Servicer Remittance Report...................................................................69
Section 4.02     Trustee Distribution Date Statement..........................................................69

                             ARTICLE V PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS

Section 5.01     Distributions................................................................................71
Section 5.02     Monthly Advances; Servicing Advances.........................................................75
Section 5.03     Statements to Certificateholders.............................................................76
Section 5.04.    Allocation of Losses.........................................................................79

                                           ARTICLE VI THE CERTIFICATES

Section 6.01     The Certificates.............................................................................79
Section 6.02     Registration of Transfer and Exchange of Certificates........................................79
Section 6.03     Mutilated, Destroyed, Lost or Stolen Certificates............................................84
Section 6.04     Persons Deemed Owners........................................................................84
Section 6.05     Actions of Certificateholders................................................................85

                                     ARTICLE VII THE SERVICER AND THE SELLER

Section 7.01     Liability of the Seller and the Servicer.....................................................85
Section 7.02     Merger or Consolidation of, or Assumption of the Obligations of, the Servicer................85
Section 7.03     Limitation on Liability of the Servicer and Others...........................................85
Section 7.04     Servicer Not to Resign.......................................................................86
Section 7.05     Merger or Consolidation of the Seller........................................................87

                                               ARTICLE VIII DEFAULT

Section 8.01     Events of Default............................................................................87
Section 8.02.    Trustee to Act; Appointment of Successor.....................................................89
Section 8.03     Notifications to Certificateholders..........................................................90
Section 8.04     Assumption or Termination of Sub-Servicing Agreements by the Trustee or any
                 Successor Servicer...........................................................................90

                                              ARTICLE IX THE TRUSTEE

                                                      -ii-
<PAGE>

Section 9.01     Duties of the Trustee........................................................................90
Section 9.02     Certain Matters Affecting the Trustee........................................................92
Section 9.03     Trustee Not Liable for Certificates or Mortgage Loans........................................93
Section 9.04     Trustee May Own Certificates.................................................................93
Section 9.05     Payment of the Trustee's Fees and Expenses...................................................93
Section 9.06     Eligibility Requirements for the Trustee.....................................................94
Section 9.07     Resignation or Removal of the Trustee........................................................94
Section 9.08     Successor Trustee............................................................................95
Section 9.09     Merger or Consolidation of the Trustee.......................................................95
Section 9.10     Appointment of Co-Trustee or Separate Trustee................................................96
Section 9.11     Compliance with REMIC Provisions.............................................................97
Section 9.12     Trustee May Enforce Claims Without Possession of Certificates................................98
Section 9.13     Exercise of Trustee Powers by Certificateholders.............................................98
Section 9.14     Tax Returns..................................................................................98
Section 9.15     Taxpayer Identification Number...............................................................98
Section 9.16     Miscellaneous REMIC Matters..................................................................99

                                              ARTICLE X TERMINATION

Section 10.01    Termination Upon Purchase or Liquidation of All Mortgage Loans..............................103
Section 10.02    Additional Termination Requirements.........................................................105

                                       ARTICLE XI MISCELLANEOUS PROVISIONS

Section 11.01    Amendment...................................................................................106
Section 11.02    Recordation of Agreement....................................................................107
Section 11.03    Limitation on Rights of Certificateholders..................................................107
Section 11.04    Governing Law...............................................................................108
Section 11.05    Notices.....................................................................................108
Section 11.06    Severability of Provisions..................................................................109
Section 11.07    Assignment..................................................................................109
Section 11.08    Certificates Nonassessable and Fully Paid...................................................109
</TABLE>



                                                      -iii-

<PAGE>

                             SCHEDULES AND EXHIBITS
                             ----------------------


Schedule I               List of Sub-Servicers
Schedule II              Schedule of Restricted Mortgage Loans
Exhibit A-1              Form of Class A Certificate
Exhibit A-2              Form of Class M Certificate
Exhibit A-3              Form of Class B Certificate
Exhibit A-4              Form of Class A-IO Certificate
Exhibit B-1              Form of Class C Certificate
Exhibit B-2              Form of Class R Certificate
Exhibit B-3              Form of Class P Certificate
Exhibit C                [Reserved]
Exhibit D                [Reserved]
Exhibit E                Mortgage Loan Schedule
Exhibit F                Form of Annual Statement as to Compliance
Exhibit G                Form of Transfer Affidavit
Exhibit H                Form of Payoff Notice
Exhibit I                Form of Liquidation Report
Exhibit J                Form of Officer's Certificate as to Charge-offs
Exhibit K                Form of Transferor Affidavit
Exhibit L                [Reserved]
Exhibit M                Form of Transferor Letter
Exhibit N-1              Form of Investment Letter [Non-Rule 144A]
Exhibit N-2              Form of Rule 144A Letter
Exhibit O                Mortgage Guaranty Insurance Corporation PMI Policy
Exhibit P                List of PMI Mortgage Loans
Exhibit Q                [Reserved]
Exhibit R                Prepayment Charge Schedule




                                      -iv-

<PAGE>


     THIS POOLING AND SERVICING AGREEMENT (this "Agreement"), dated as of March
1, 2001, by and among Aames Capital Corporation, as seller (in such capacity,
the "Seller") Countrywide Home Loans, Inc., as servicer (the "Servicer") and
Bankers Trust Company of California, N.A., as trustee (the "Trustee").

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


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

                                    ARTICLE I

                                   DEFINITIONS

     Section 1.01 Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.

     Addition Notice: With respect to the transfer of Subsequent Mortgage Loans
to the Trust pursuant to Section 2.02 of this Agreement, notice of the Seller's
designation of Subsequent Mortgage Loans to be sold to the Trust separated by
Mortgage Loan Group and the aggregate Subsequent Cut-off Date Principal Balance
of such Subsequent Mortgage Loans in each Mortgage Loan Group, which notice
shall be given to the Trustee not later than one Business Day prior to the
related Subsequent Transfer Date.

     Adjustable Rate Mortgage Loan: Any Hybrid Loan which, upon the expiration
of its initial term bearing a fixed rate of interest, has a Mortgage Loan Rate
that is adjustable at regular periodic intervals, based on the Index plus the
related Gross Margin subject to any Minimum Rate, Maximum Rate and any periodic
limitations on adjustment from time to time, all as set forth in the Mortgage
Loan Schedule.

     Adjustment Date: With respect to any Adjustable Rate Mortgage Loan, the
date on which a change to the Mortgage Loan Rate on a Mortgage Loan becomes
effective.

     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, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings corresponding to the foregoing.

     Aggregate Principal Amount: As to any Distribution Date, the sum of the
Basic Principal Amount for each Mortgage Loan Group.

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


<PAGE>

     Annual Statement of Compliance: The annual statement to be prepared and
delivered by the Servicer in accordance with Section 3.09.

     Applied Realized Loss Amounts: As to any Distribution Date, an amount equal
to the excess, if any, of (i) the aggregate of the Certificate Principal
Balances of the Offered Certificates, after giving effect to all distributions
on such Distribution Date over (ii) the Pool Balance as of the last day of the
related Collection period.

     Appraised Value: The appraised value of any Mortgaged Property based upon
the appraisal made at the time of origination of the related Mortgage Loan or,
in the case of a Mortgage Loan that is a purchase money mortgage loan, the sales
price of the related Mortgaged Property if such sales price is less than such
appraised value.

     Available Funds: With respect to any Mortgage Loan Group and any
Distribution Date, the sum, without duplication of the following amounts with
respect to the Mortgage Loans in such Mortgage Loan Group and the immediately
preceding Collection Period:

         (i) scheduled and unscheduled payments of principal and interest on the
     Mortgage Loans received by the Servicer, including amounts deposited in
     respect of the Closing Date Deposit (net of amounts representing the
     Monthly Servicing Fee with respect to each Mortgage Loan to the extent
     previously paid to the Servicer and reimbursement for Monthly Advances and
     Servicing Advances);

         (ii) Net Liquidation Proceeds and Trust Insurance Proceeds with respect
     to the Mortgage Loans (net of amounts applied to the restoration or repair
     of a Mortgaged Property);

         (iii) amounts payable in connection with each such Mortgage Loan that
     was repurchased from the Trust, and all amounts payable in respect of any
     Mortgage Loan in the related Mortgage Loan Group in connection with a
     substitution of a Qualified Replacement Mortgage Loan therefor;

         (iv) payments from the Servicer in connection with (a) Monthly Advances
     and (b) Compensating Interest, and payments in connection with the
     termination of the Trust with respect to the Mortgage Loans as provided in
     this Agreement;

         (v) on the Distribution Dates during and immediately following the
     Funding Period, amounts from the Capitalized Interest Account for the
     payment of interest on the Certificates of the related Mortgage Loan Group;
     and

         (vi) on the Distribution Date at or immediately following the end of
     the Funding Period, amounts remaining on deposit in the Prefunding Account
     with respect to the related Mortgage Loan Group.


                                      -2-
<PAGE>

     Available Funds Cap: A per annum rate equal to (i) the weighted average Net
Loan Rate of the Mortgage Loans minus (ii) the product of (x) the Pass-Through
Rate on the Class A-IO Certificates and (y) a fraction, the numerator of which
is the Notional Amount of such Class A-IO Certificates immediately prior to such
Distribution Date, and the denominator of which is the Pool Balance as of the
end of the second preceding Collection Period.

     Basic Principal Amount: With respect to any Mortgage Loan Group and any
Distribution Date, an amount equal to the sum of the following amounts (without
duplication) with respect to the Mortgage Loans in such Mortgage Loan Group and
the immediately preceding Collection Period:

         (i) each payment of principal on a Mortgage Loan received by the
     Servicer during such Collection Period, including all full and partial
     principal prepayments (net of reimbursements to the Servicer for Servicing
     Advances);

         (ii) the Net Liquidation Proceeds and Trust Insurance Proceeds
     allocable to principal received by the Servicer with respect to any
     Mortgage Loan during such Collection Period (net of amounts applied to the
     restoration or repair of a Mortgaged Property);

         (iii) all amounts allocable to principal payable in connection with
     each such Mortgage Loan that was repurchased from the Trust during such
     Collection Period, and all amounts allocable to principal payable in
     respect any Mortgage Loan in the related Mortgage Loan Group in connection
     with a substitution of a Qualified Replacement Mortgage Loan therefor; and

         (iv) any related amounts remaining in the Prefunding Account with
     respect to the related Mortgage Loan Group after the Funding Period.

     Basic Principal Distribution Amount: As to any Distribution Date, is an
amount equal to the Aggregate Principal Amount minus the Excess
Overcollateralization Amount.

     Bloomberg: The on-line computer based information network maintained by
Bloomberg L.P., or any successor thereto.

     Book-Entry Certificate: Any Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository). As of the Closing Date, only the Offered Certificates
constitute Book-Entry Certificates.

     Book-Entry Nominee: As defined in Section 6.02(b).


                                      -3-
<PAGE>

     Business Day: Any day other than (a) a Saturday or a Sunday or (b) a day on
which banking institutions in the State of California or the State of New York
are required or authorized by law, executive order or governmental decree to be
closed.

     Capitalized Interest Account: Not applicable.

     Capitalized Interest Account Deposit: $0.

     Capitalized Interest Requirement: Not applicable.

     Certificate: Any Class A-1, Class A-2, Class A-IO, Class M-1, Class M-2,
Class B, Class C, Class P or Class R Certificate issued pursuant to this
Agreement.

     Certificate Account: The segregated account, which shall be an Eligible
Account, established and maintained pursuant to Section 3.02(e) and entitled
"Bankers Trust Company of California, N.A., as Trustee for Aames Mortgage Trust
2001-1 Mortgage Pass-Through Certificates, Series 2001-1, Certificate Account".

     Certificateholder: The Person in whose name a Certificate is registered in
the Certificate Register, except that, solely for the purpose of taking any
action under Article Eight or giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Seller or the Servicer or any Person
actually known to a Responsible Officer of the Trustee to be an Affiliate of the
Seller or the Servicer shall be deemed not to be outstanding and the Percentage
Interest evidenced thereby shall not be taken into account in determining
whether Holders of the requisite Percentage Interests necessary to take any such
action or effect any such consent have acted or consented unless the Seller, the
Servicer or any such Person is an owner of record of all of the Certificates.

     Certificate Owner: With respect to any Book-Entry Certificate, the Person
who is the beneficial owner thereof.

     Certificate Principal Balance: With respect to the Class A-1 Certificates,
the Class A-1 Certificate Principal Balance; with respect to the Class A-2
Certificates, the Class A-2 Certificate Principal Balance; with respect to the
Class M-1 Certificates, the Class M-1 Certificate Principal Balance; with
respect to the Class M-2 Certificates, the Class M-2 Certificate Principal
Balance; with respect to the B Certificates, the Class B Certificate Principal
Balance; with respect to the Class C Certificates, the Class C Certificate
Principal Balance; and with respect to the Class P Certificates, the Class P
Certificate Principal Balance. The Class A-IO Certificates do not have a
Certificate Principal Balance.

     Certificate Register: The register maintained pursuant to Section 6.02.

     Class: Any class of the Offered Certificates, the Class C Certificate, the
Class P Certificate, the Class R-I Certificate, the Class R-II Certificate or
the Class R-III Certificate, as the case may be, taken as a whole.

                                      -4-
<PAGE>

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

     Class A Principal Allocation Percentage: For any Distribution Date, the
percentage equivalent of a fraction, determined as follows: (i) in the case of
the Class A-1 Certificates, the numerator of which is (x) the portion of the
Aggregate Principal Amount for such distribution date that is attributable to
principal received on the Group I Mortgage Loans, and the denominator of which
is (y) the Aggregate Principal Amount for such Distribution Date, and (ii) in
the case of the Class A-2 Certificates, the numerator of which is (x) the
portion of the Aggregate Principal Amount for such Distribution Date that is
attributable to principal received on the Group II Mortgage Loans, and the
denominator of which is (y) the Aggregate Principal Amount for such Distribution
Date.

     Class A-1 Certificate: Any one of the Certificates executed by the Trustee
on behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-1 hereto.

     Class A-1 Certificate Principal Balance: As to any Distribution Date, the
Original Class A-1 Certificate Principal Balance less the Class A-1 Principal
Distribution Amounts actually distributed to the holders of the Class A-1
Certificates on previous Distribution Dates.

     Class A-1 Pass-Through Rate: The lesser of (x) with respect to each
Interest Period ending on or prior to the Clean-Up Call Date, 6.379%, and for
each Interest Period thereafter, 6.879% and (y) the Available Funds Cap.

     Class A-2 Certificate: Any one of the Certificates executed by the Trustee
on behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-1 hereto.

     Class A-2 Certificate Principal Balance: As to any Distribution Date, the
Original Class A-2 Certificate Principal Balance less the Class A-2 Principal
Distribution Amounts actually distributed to the holders of the Class A-2
Certificates on previous Distribution Dates.

     Class A-2 Pass-Through Rate: The lesser of (x) with respect to each
Interest Period ending on or prior to the Clean-Up Call Date, 6.388%, and for
each Interest Period thereafter, 6.888% and (y) the Available Funds Cap.

     Class A-IO Certificate: Any one of the Certificates executed by the Trustee
on behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-4 hereto.

     Class A-IO Pass-Through Rate: 6.000% per annum.

                                      -5-
<PAGE>

     Class B Certificate: Any one of the Certificates executed by the Trustee on
behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-4 hereto.

     Class B Certificate Principal Balance: As to any Distribution Date, the
Original Class B Certificate Principal Balance less the Class B Principal
Distribution Amounts actually distributed to the holders of the Class B
Certificates on previous Distribution Dates and reduced by any Applied Realized
Loss Amounts allocated to such Class on prior Distribution Dates.

     Class B Pass-Through Rate: The lesser of (x) with respect to each Interest
Period ending on or prior to the Clean-Up Call Date, 7.588%, and for each
Interest Period thereafter, 8.088% and (y) the Available Funds Cap.

     Class B Principal Distribution Amount: On any Distribution Date on and
after the Stepdown Date and so long as a Delinquency Event is not in effect, an
amount equal to the excess of (1) the sum of (A) the aggregate Certificate
Principal Balance of the Class A Certificates (after giving effect to the
distribution of the Senior Principal Distribution Amount on such Distribution
Date), (B) the Certificate Principal Balance of the Class M-1 Certificates
(after giving effect to the distribution of the Class M-1 Principal Distribution
Amount on such Distribution Date), (C) the Certificate Principal Balance of the
Class M-2 Certificates (after giving effect to the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date) and (D) the Certificate
Principal Balance of the Class B Certificates immediately prior to such
Distribution Date, over (2) the lesser of (A) 100% of the Pool Balance minus the
Subordination Required Overcollateralization Amount as of the last day of the
related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the OC Floor, provided, however, that after the
Certificate Principal Balances of the Class A, Class M-1 and Class M-2
Certificates are reduced to zero, the Class B Principal Distribution Amount for
such Distribution Date will equal 100% of the Principal Distribution Amount.

     Class C Certificate: Any one of the Certificates executed by the Trustee on
behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
B-1 hereto.

     Class C Carryforward Amount: With respect to any Distribution Date, the
amount by which the aggregate of the amount by which the Class C Distribution
Amount for each prior Distribution Date exceeded the amount actually distributed
in respect of the Class C Distribution Amount on each such date, reduced by the
aggregate of the amounts distributed in respect of the Class C Carryforward
Amount on each such prior Distribution Dates, and reduced by the aggregate of
the amounts of Applied Realized Loss Amounts that have resulted in the reduction
of the Overcollateralization Amount on each such prior Distribution Date.

     Class C Certificate Principal Balance: As to any Distribution Date, the
Initial Certificate Principal Balance of the Class C Certificates less any
amounts distributed to the holders of the Class C Certificates on previous
Distribution Dates with respect to principal on the Class C Certificates.

                                      -6-
<PAGE>

     Class C Distribution Amount: With respect to any Distribution Date, means
the interest allocated to the Class C Certificates as separate components in
accordance with note (5) of Section 9.16(c) with respect to such Distribution
Date and additionally, with respect to the first Distribution Date, an amount
equal to the Class C Certificate Principal Balance.

     Class Interest Carryover Shortfall: With respect to any Class of Offered
Certificates on any Distribution Date, means the amount, if any, by which (i)
the Class Monthly Interest Amount on such Class for the preceding Distribution
Date plus any outstanding Class Interest Carryover Shortfall with respect to
such Class from the preceding Distribution Date (together with interest on such
outstanding Class Interest Carryover Shortfall at the related Pass-Through Rate
for the related Interest Period to the extent lawful) exceeds (ii) the amount of
interest actually distributed to the holders of such Certificates on such
Distribution Date.

     Class Interest Distribution: As to any Class of Regular Certificates and
Distribution Date, an amount equal to the sum of (a) the related Class Monthly
Interest Amount and (b) any Class Interest Carryover Shortfall for such Class of
Certificates for such Distribution Date.

     Class M-1 Certificate: Any one of the Certificates executed by the Trustee
on behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-2 hereto.

     Class M-1 Certificate Principal Balance: As to any Distribution Date, the
Original Class M-1 Certificate Principal Balance less the Class M-1 Principal
Distribution Amounts actually distributed to the holders of the Class M-1
Certificates on previous Distribution Dates and reduced by any Applied Realized
Loss Amounts allocated to such Class on prior Distribution Dates.

     Class M-1 Pass-Through Rate: The lesser of (x) with respect to each
Interest Period ending on or prior to the Clean-Up Call Date, 7.193%, and for
each Interest Period thereafter, 7.693% and (y) the Available Funds Cap.

     Class M-1 Principal Distribution Amount: As to any Distribution Date on or
after the Stepdown Date, 100% of the Principal Distribution Amount if the
Certificate Principal Balance of each Class of Class A Certificates has been
reduced to zero and a Delinquency Event exists, or, if a Delinquency Event is
not in effect, the excess of (1) the sum of (A) the aggregate Certificate
Principal Balance of the Class A Certificates (after giving effect to
distributions of the Senior Principal Distribution Amount for such Distribution
Date) and (B) the Certificate Principal Balance of the Class M-1 Certificates
immediately prior to such Distribution Date over (2) the lesser of (A) 81% of
the Pool Balance minus the Subordination Required Overcollateralization Amount
as of the last day of the related Collection Period and (B) the Pool Balance as
of the last day of the related Collection Period minus the OC Floor.

                                      -7-
<PAGE>

     Class M-2 Certificate: Any one of the Certificates executed by the Trustee
on behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
A-3 hereto.

     Class M-2 Certificate Principal Balance: As to any Distribution Date, the
Original Class M-2 Certificate Principal Balance less the Class M-2 Principal
Distribution Amounts actually distributed to the holders of the Class M-2
Certificates on previous Distribution Dates and reduced by any Applied Realized
Loss Amounts allocated to such Class on prior Distribution Dates.

     Class M-2 Pass-Through Rate: The lesser of (x) with respect to each
Interest Period ending on or prior to the Clean-Up Call Date, 7.588%, and for
each Interest Period thereafter, 8.088% and (y) the Available Funds Cap.

     Class M-2 Principal Distribution Amount: As to any Distribution Date on or
after the Stepdown Date, 100% of the Principal Distribution Amount if the
aggregate Certificate Principal Balance of each of the Class A and Class M-1
Certificates has been reduced to zero and a Delinquency Event exists, or, if a
Delinquency Event is not in effect, the excess of (1) the sum of (A) the
aggregate Certificate Principal Balance of the Class A Certificates (after
giving effect to distributions of the Senior Principal Distribution Amount for
such Distribution Date), (B) the Certificate Principal Balance of the Class M-1
Certificates (after giving effect to distribution of the Class M-1 Principal
Distribution Amount for such Distribution Date) and (C) the Certificate
Principal Balance of the Class M-2 Certificates immediately prior to such
Distribution Date over (2) the lesser of (A) 92% of the Pool Balance minus the
Subordination Required Overcollateralization Amount as of the last day of the
related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the OC Floor.

     Class Monthly Interest Amount: With respect to any Class and Distribution
Date, means the amount of interest due for any Class of Certificates in respect
of any Interest Period at the applicable Pass-Through Rate on the related
Certificate Principal Balance or Notional Amount, less such Class' related share
of Interest Shortfalls. All calculations of interest will be made on the basis
of a 360-day year assumed to consist of twelve 30-day months.

     Class P Certificate: Any one of the Certificates executed by the Trustee on
behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
B-3 hereto.

     Class P Certificate Principal Balance: As to any Distribution Date, the
Initial Certificate Principal Balance of the Class P Certificates less any
amounts distributed to the holders of the Class P Certificates on previous
Distribution Dates with respect to principal on the Class P Certificates.

     Class P Deposit: $100.00, to be deposited into the Certificate Account.


                                      -8-
<PAGE>

     Class Principal Carryover Shortfall: As to any Class of Subordinate
Certificates and any Distribution Date, the excess, if any, of (i) the sum of
(x) the amount of the reduction in the Certificate Principal Balance of that
Class of Subordinate Certificates as a result of the application of Applied
Realized Loss Amounts and (y) the amount of such reductions on prior
Distribution Dates over (ii) the amount distributed in respect of the Class
Principal Carryover Shortfall to such Class of Subordinate Certificates on prior
Distribution Dates.

     Class R Certificate: Any one of the Certificates executed by the Trustee on
behalf of the Trust, not in its individual capacity, but solely as Trustee,
authenticated by the Trustee and in substantially the form set forth in Exhibit
B-2 hereto representing each of the Class R-I, Class R-II and Class R-III
Certificates.

     Class R-I Certificate: Any one of the Certificates described in Section
9.16 as representing the "residual interest" in REMIC I, as such term is defined
in Code Section 860G(a)(2). The Class R-I Certificate shall be certificated
together with the Class R-II and Class R-III Certificates, in the form of the
Class R Certificate.

     Class R-II Certificate: Any one of the Certificates described in Section
9.16 as representing the "residual interest" in REMIC II, as such term is
defined in Code Section 860G(a)(2). The Class R-II Certificate shall be
certificated together with the Class R-I and Class R-III Certificates, in the
form of the Class R Certificate.

     Class R-III Certificate: Any one of the Certificates described in Section
9.16 as representing the "residual interest" in REMIC III, as such term is
defined in Code Section 860G (a)(2). The Class R-III Certificate shall be
certificated together with the Class R-I and Class R-II Certificates, in the
form of the Class R Certificate.

     Clean-up Call Date: The first Distribution Date on which the Pool Balance
is less than 5% of the sum of the Original Pool Balance and the Prefunding
Account Deposit.

     Closing Date: March 29, 2001.

     Closing Date Deposit: $0.

     Code: The Internal Revenue Code of 1986, as amended.

     Collection Account: The segregated account, which shall at all times be an
Eligible Account, established and maintained pursuant to Section 3.02(a) and
entitled "Bankers Trust Company of California, N.A., in trust for the benefit of
Holders of Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Collection Account". References herein to the Collection Account
shall include any Sub-Servicing Account as the context requires.

     Collection Period: As to the first Distribution Date, the period beginning
on and including March 2, 2001 and ending on and including April 1, 2001 (except
that with respect to payments due and unpaid on or before March 1, 2001, only
collections of principal are included).

                                      -9-
<PAGE>

As to any Distribution Date thereafter for collections of both interest and
principal, the period beginning on and including the second day of the calendar
month immediately preceding the month in which such Distribution Date occurs and
ending on and including the first day of the calendar month of such Distribution
Date.

     Combined Loan-to-Value Ratio: With respect to a Mortgage Loan, the ratio
(expressed as a percentage) of (i) the sum of the Original Principal Amount of
such related Mortgage Loan plus the outstanding principal balance (at the time
of origination of such Mortgage Loan) of each mortgage loan secured by the
related Mortgaged Property that is senior to such Mortgage Loan to (ii) the
Appraised Value of the related Mortgaged Property determined by the Seller at
the time of origination of such Mortgage Loan.

     Company: Aames Capital Corporation, a California corporation.

     Compensating Interest: As to any Distribution Date and any Mortgage Loan
Group, an amount equal to the lesser of (a) the related Monthly Servicing Fee
for the related Collection Period and (b) the difference between (i) 30 days'
interest (at the related Mortgage Loan Rates, net of the Servicing Fee Rate) on
the Principal Balance of each Mortgage Loan in such Mortgage Loan Group as to
which a Principal Prepayment was received or that became a Liquidated Mortgage
Loan or that was otherwise charged-off (before giving effect to any related
reduction in the Principal Balance of such Mortgage Loan) by the Servicer during
the related Collection Period and (ii) the amount of interest actually collected
by the Servicer for such Mortgage Loans in such Mortgage Loan Group during such
Collection Period.

     Corporate Trust Office: The principal office of the Trustee at which at any
particular time its corporate trust business with respect to this Agreement
shall be principally administered, which office at the date of the execution of
this Agreement is located at 1761 East St. Andrew Place, Santa Ana, California
92705-4934, Attention: Aames Mortgage Loan Pass-Through Certificates, Series
2001-1.

     Cumulative Loss Event: For any Distribution Date in the applicable period
below, if Cumulative Net Losses shall be in excess of the applicable percentage
of the aggregate Initial Certificate Principal Balances of the Offered
Certificates:

       Number of
       Distribution Dates                       Percentages
       ------------------                       -----------

       37-48                                    3.50%
       49-60                                    4.00%
       61 and thereafter                        4.50%



                                      -10-
<PAGE>

     Cumulative Net Losses: As of any date of determination, the aggregate of
the Liquidation Loan Losses incurred from the Cut-Off Date through the end of
the calendar month preceding such date of determination.

     Cut-off Date: With respect to the Initial Mortgage Loans in each Mortgage
Loan Group, the close of business on March 1, 2001. With respect to the
Subsequent Mortgage Loans, the close of business on the Subsequent Cut-off Date.

     Cut-off Date Principal Balance: As to any Mortgage Loan, its Principal
Balance as of the related Cut-off Date.

     Defective Mortgage Loan: Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to Section 2.03 or 2.05.

     Definitive Certificates: As defined in Section 6.02(e).

     Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Qualified Replacement Mortgage Loan.

     Delinquency Amount: As to any Distribution Date, the aggregate Principal
Balance of the Mortgage Loans that are (a) 60 or more days delinquent, (b) 60 or
more days delinquent and in bankruptcy or (c) in foreclosure and are REO, in
each case, as of the last day of the immediately preceding calendar month.

     Delinquency Event: A Delinquency Event shall have occurred and be
continuing, if at any time the Three Month Delinquency Rate exceeds 50% of the
Senior Enhancement Percentage.

     Deposit Date: As to any Distribution Date, the third Business Day prior to
such Distribution Date.

     Depository: The initial depository shall be The Depository Trust Company,
the nominee of which is Cede & Co. The Depository shall at all times be a
"clearing corporation" as defined in Section 8102(3) of the Uniform Commercial
Code of the State of California, as amended, or any successor provisions
thereto.

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

     Determination Date: As to any Distribution Date, the last day of the
related Collection Period.

     Disqualified Organization: Any Person that is (i) the United States, any
state or any political subdivision thereof, any possession of the United States,
or any agency or instrumentality of any of the foregoing (other than an
instrumentality of a governmental unit that

                                      -11-
<PAGE>

is a corporation if all of its activities are subject to tax and, except in the
case of the Federal Home Loan Mortgage Corporation, a majority of its board of
directors is not selected by such governmental unit), (ii) a foreign government,
international organization or any agency or instrumentality of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives described
in Code Section 521) exempt from tax imposed by Chapter 1 of the Code (including
the tax imposed by Code Section 511 on unrelated business taxable income), (iv)
rural electric and telephone cooperatives described in Code Section
1381(a)(2)(C), and (v) any other Person so designated by the Trustee based upon
an Opinion of Counsel that the holding of an ownership interest in a Class R
Certificate by such Person may cause any REMIC Pool or any Person having an
ownership interest in any Class R Certificate, other than such Person, to incur
a liability for any tax imposed under the Code that would not otherwise be
imposed but for the transfer of an ownership interest in a Class R Certificate
to such Person. The terms "United States", "state" and "international
organization" shall have the meanings set forth in Code Section 7701 or
successor provisions.

     Distribution Date: The 25th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
April 25, 2001.

     Eligible Account: Either (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "AA" or better by
Standard & Poor's or "A2" or better by Moody's and in the highest short term
rating category by Standard & Poor's and Moody's and that is either (i) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws and (iv) a
principal subsidiary of a bank holding company or (B) a segregated trust account
maintained with the trust department of a federal or state chartered depository
institution or trust company, having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity, the unsecured and
uncollateralized debt obligations of which shall be rated "Baa3" or better by
Moody's. Any Eligible Accounts maintained with the Trustee shall conform to the
preceding clause (B).

     ERISA Plan: Any Person that is an employee benefit plan within the meaning
of Section 3(3) of ERISA or any Person that is an individual retirement account
or employee benefit plan, trust or account subject to Section 4975 of the Code.

     ERISA Prohibited Holder: As defined in Section 6.02(b).

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

     Event of Default: As defined in Section 8.01.

     Excess Interest: With respect to any Distribution Date, the sum of (a) any
Excess Overcollateralization Amount for such Distribution Date and (b) the
excess of (x) the Available

                                      -12-
<PAGE>

Funds for such Distribution Date (excluding any amounts payable therefrom for
the Trustee Fee, the Monthly Servicing Fee and the PMI Insurer Premium) over (y)
the sum for such Distribution Date of (A) the Class Monthly Interest Amounts for
the Offered Certificates, (B) any Class Interest Carryover Shortfall for the
Senior Certificates, and (C) the Aggregate Principal Amount.

     Excess Overcollateralization Amount: As to any Distribution Date, the
lesser of (i) the Aggregate Principal Amount for such Distribution Date and (ii)
the excess, if any, of (x) the Overcollateralization Amount (assuming 100% of
the Aggregate Principal Amount is distributed on the Offered Certificates) over
(y) the Required Overcollateralization Amount.

     Expense Fee Rate: The sum of (i) the Servicing Fee Rate, (ii) the per annum
rate for calculating the Trustee Fee (i.e., 0.015%) and (iii) the PMI Insurer
Premium expressed as a per annum rate equal to a fraction, expressed as a
percentage, the numerator of which is the PMI Insurer Premium and the
denominator of which is the Principal Balance of the Mortgage Loans as of the
applicable Determination Date.

     FDIC: The Federal Deposit Insurance Corporation and its successors in
interest.

     FEMA: The Federal Emergency Management Agency and its successors in
interest.

     FHLMC: The Federal Home Loan Mortgage Corporation and its successors in
interest.

     Final Scheduled Distribution Date: The Final Scheduled Distribution Date
for each of the Classes of Certificates are as set forth below:

                  Class                  Final Scheduled Distribution Date
                  -----                  ---------------------------------
                Class A-1                           June 2031
                Class A-2                           June 2031
                Class A-IO                          March 2004
                Class M-1                           June 2031
                Class M-2                           June 2031
                Class B                             June 2031
                Class C                             June 2031
                Class P                             June 2031
                Class R                             June 2031


     FNMA: The Federal National Mortgage Association and its successors in
interest.

     Foreign Person: A Person that is not (i) a citizen or resident of the
United States, (ii) a corporation or partnership (including an entity treated as
a corporation or partnership for U.S. federal income tax purposes) created in
the United States or organized under the laws of the United States or any state
thereof or the District of Columbia (except, in the case of a partnership, as
otherwise provided by Treasury regulations), (iii) an estate that is subject to
United States federal income tax regardless of the source of its income, or (iv)
a trust whose administration

                                      -13-
<PAGE>

may be subject to the primary supervision of a court within the United States
and for which one or more United States persons have the authority to control
all substantial decisions of the trust.

     Funding Period: Not applicable.

     Gross Margin: With respect to any Adjustable Rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note, which amount is added
to the Index in accordance with the terms of the related Mortgage Note to
determine the applicable Mortgage Loan Rate.

     Group Factor: As to any Distribution Date and any Mortgage Loan Group, the
percentage (carried to eight places, rounded down) obtained by dividing the
aggregate Principal Balances of the Mortgage Loans in the related Mortgage Loan
Group (after giving effect to any distribution of principal on the related
Certificates on such Distribution Date) by (i) in the case of Group I, the sum
of the Original Group I Balance and the related allocated Prefunding Account
Deposit or (ii) in the case of Group II, the sum of the Original Group II
Balance and the related allocated Prefunding Account Deposit, as applicable.

     Group I: The group of Initial Mortgage Loans comprised of fixed rate
mortgage loans and Hybrid Loans having agency-conforming balances and identified
in the Mortgage Loan Schedule as having been assigned to Group I and any
Subsequent Mortgage Loans identified in a Subsequent Transfer Agreement as
having been assigned to Group I, including any Qualified Replacement Mortgage
Loans delivered in replacement thereof.

     Group I Class A-IO Class Interest Distribution: As to any distribution
date, an amount equal to the Class Interest Distribution for the Class A-IO
Certificates for such Distribution Date multiplied by a fraction, the numerator
of which is (x) the Certificate Principal Balance of the Class A-1 Certificates
immediately prior to such Distribution Date and the denominator of which is (y)
the aggregate Certificate Principal Balance of the Class A Certificates
immediately prior to such Distribution Date.

     Group II: The group of Initial Mortgage Loans comprised of fixed rate
mortgage loans and Hybrid Loans, both having and not having agency conforming
balances and identified in the Mortgage Loan Schedule as having been assigned to
Group II and any Subsequent Mortgage Loans identified in a Subsequent Transfer
Agreement as having been assigned to Group II, including any Qualified
Replacement Mortgage Loans delivered in replacement thereof.

     Group II Class A-IO Class Interest Distribution: As to any Distribution
Date, an amount equal to the Class Interest Distribution for the Class A-IO
Certificates for such Distribution Date multiplied by a fraction, the numerator
of which is (x) the Certificate Principal Balance of the Class A-2 Certificates
immediately prior to such Distribution Date and the denominator of which is (y)
the aggregate Certificate Principal Balance of the Class A Certificates
immediately prior to such Distribution Date.

     Holder: A Certificateholder.


                                      -14-
<PAGE>

     Hybrid Loan: Any Mortgage Loan that bears interest at a fixed rate for its
initial three year period following origination, and at an adjustable rate for
the ensuring 27 years in which it remains outstanding.

     Index: With respect to any Adjustable Rate Mortgage Loan, the applicable
index for computing the Mortgage Loan Rate as specified in the Mortgage Note.

     Initial Certificate Principal Balance: As to the Class P Certificates,
$100. As to the Class C Certificates, $785.11, which is equal to the initial
Overcollateralization Amount as of the Closing Date. As to the Class R
Certificates, $0. As to any other Class of Offered Certificates, other than the
Class A-IO Certificates, the respective amount set forth below opposite such
Class:

                                              Initial Certificate
                 Class                         Principal Balance
                 -----                         -----------------
          Class A-1 Certificates                  $100,000,000
          Class A-2 Certificates                   $26,000,000
          Class M-1 Certificates                    $9,750,000
          Class M-2 Certificates                    $8,250,000
          Class B Certificates                      $6,000,000

     Initial Mortgage Loan: Any Mortgage Loan in any Mortgage Loan Group
included in the assets of the Trust as of the Closing Date that is indicated as
such on the Mortgage Loan Schedule.

     Insurance Proceeds: With respect to any Distribution Date, proceeds paid by
any insurer (other than the PMI Insurer) and received by the Servicer during the
related Collection Period pursuant to any insurance policy covering a Mortgage
Loan or the related Mortgaged Property, including any deductible payable by the
Servicer with respect to a blanket insurance policy pursuant to Section 3.04 and
the proceeds from any fidelity bond or errors and omission policy pursuant to
Section 3.12 (to the extent such payments compensate for losses that would
otherwise be payable to Certificateholders pursuant to this Agreement), net of
any component thereof covering any expenses incurred by or on behalf of the
Servicer and specifically reimbursable under this Agreement.

     Interest Period: The calendar month preceding the month in which such
Distribution Date occurs.

     Interest Remittance Amount: As to any Distribution Date, that portion of
the Available Funds for such Distribution Date attributable to interest received
or advanced on the Mortgage Loans.

     Interest Shortfall: As to any Distribution Date, the amount of any (i)
Prepayment Interest Shortfall and (ii) Relief Act Shortfall. On any Distribution
Date, the amount of any Interest Shortfalls will be applied to reduce the Class
Monthly Interest Amount of a Class in the following order: first, to the Class C
Certificates in reduction of the interest amounts payable to

                                      -15-
<PAGE>

such Class on the related Distribution Date and, to the extent the amount of
such Interest Shortfall exceeds the interest due and payable to the Class C
Certificates on such Distribution Date, thereafter to the Offered Certificates,
pro rata, based on the respective Class Monthly Interest Amount for each such
Class on such Distribution Date.

     Investment Company Act: The Investment Company Act of 1940, as amended.

     Junior Mortgage Loan: Any Mortgage Loan secured by a Mortgage with a lien
of other than first priority.

     Late Payment Rate: With respect to any date of determination, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York on its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%.

     Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan as
to which the Servicer has determined, in accordance with the servicing
procedures specified herein, during the related Collection Period that all
Liquidation Proceeds that it expects to recover from or on account of such
Mortgage Loan have been recovered.

     Liquidation Expenses: Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses shall include, without
limitation, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 3.06 with
respect to the related Mortgage Loan (including, without limitation, amounts
voluntarily advanced to correct defaults on each mortgage loan that is senior to
such Mortgage Loan), any other related and previously unreimbursed Servicing
Advances and any related and previously unreimbursed Property Protection
Expenses.

     Liquidation Loan Losses: For each Liquidated Mortgage Loan the amount, if
any, by which the Principal Balance thereof plus accrued and unpaid interest
thereon is in excess of the related Net Liquidation Proceeds with respect
thereto.

     Liquidation Proceeds: Cash (other than Insurance Proceeds) received in
connection with the liquidation of any Mortgaged Property, including payments
received under the PMI Policy, whether through trustee's sale, foreclosure sale,
condemnation, taking by eminent domain or otherwise received in respect of any
Mortgage Loan foreclosed upon as described in Section 3.06 (including, without
limitation, proceeds from the rental of the related Mortgaged Property).

     Liquidation Report: A liquidation report in the form of Exhibit I attached
hereto.

     Loan-to-Value Ratio: The Original Principal Amount of a Mortgage Loan as a
percentage of the Appraised Value of the related Mortgaged Property determined
by the Seller at the time of origination of such Mortgage Loan.

                                      -16-
<PAGE>

     Maximum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute maximum Mortgage Loan Rate set by provisions in the related Mortgage
Note.

     Minimum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute minimum Mortgage Loan Rate, set by provisions in the related Mortgage
Note, subject to the initial Mortgage Loan Rate first adjusting to a level in
excess of such minimum Mortgage Loan Rate in accordance with the terms of the
Mortgage Note.

     Monthly Advance: Defined in Section 5.02(a).

     Monthly Mortgage Payment: With respect to any Mortgage Note, the amount of
each monthly payment (other than any final balloon payment) payable under such
Mortgage Note in accordance with its terms by the Mortgagor, including one
month's accrued interest on the related Principal Balance at the then applicable
Mortgage Loan Rate, but net of any portion of such monthly payment that
represents late payment charges, prepayment or extension fees or collections
allocable to payments to be made by Mortgagors for payment of insurance premiums
or similar items.

     Monthly Servicing Fee: With respect to any Collection Period and each
Mortgage Loan Group, 1/12 of the product of the Servicing Fee Rate and the
aggregate Principal Balance of the Mortgage Loans in such Mortgage Loan Group as
of the beginning of the related Collection Period (or, in the case of the first
Collection Period, the aggregate Principal Balance of the related Mortgage Loans
as of the Cut-off Date). The Monthly Servicing Fee shall be payable on the
following Deposit Date to the Servicer as servicing compensation hereunder
pursuant to Section 3.08.

     Moody's: Moody's Investors Service, Inc. and its successors in interest.

     Mortgage: The mortgage, deed of trust or other instrument creating a first,
second or third lien on an estate in fee simple in real property securing a
Mortgage Loan.

     Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to
such Mortgage File pursuant to this Agreement.

     Mortgage Loan: Each of the Mortgage Loans transferred and assigned to the
Trustee pursuant to Section 2.01 or 2.02, that from time to time comprise part
of the Trust, the Mortgage Loans originally so held being identified in the
Mortgage Loan Schedule attached hereto as Exhibit E.

     Mortgage Loan Group: Group I or Group II. References herein to any Class or
Classes of Certificates being related to a Mortgage Loan Group, shall mean (A)
in the case of Group I, the Class A-1 Certificates, the Class A-IO Certificates,
the Class M-1 Certificates, the Class M-2 Certificates, the Class B
Certificates, the Class C Certificates, the Class P Certificates and the Class R
Certificates, and (B) in the case of Group II, the Class A-2 Certificates, the
Class A-IO

                                      -17-
<PAGE>

Certificates, the Class M-1 Certificates, the Class M-2 Certificates, the Class
B Certificates, the Class C Certificates, the Class P Certificates and the Class
R Certificates.

     Mortgage Loan Rate: With respect to any Adjustable Rate Mortgage Loan, the
per annum rate of interest computed in accordance with the provisions of the
related Mortgage Note as the sum of the Index and the Gross Margin, subject to
any Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such
rate applicable from time to time to the calculation of interest thereon. As to
any Fixed Rate Mortgage Loan, the fixed per annum rate of interest applicable to
the calculation of interest thereon specified in the related Mortgage Note.

     Mortgage Loan Schedule: As of any date, the schedule of Mortgage Loans as
amended by each subsequently delivered schedule of Subsequent Mortgage Loans
separated by Mortgage Loan Group. The initial schedule of Mortgage Loans as of
the related Cut-off Date is attached hereto as Exhibit E and sets forth as to
each such Mortgage Loan, among other things, (a) its identifying number and the
name of the related Mortgagor; (b) the street address of the related Mortgaged
Property including the state, county and zip code; (c) its date of origination;
(d) the original number of months to stated maturity; (e) its original stated
maturity; (f) its Original Principal Amount; (g) its Cut-off Date Principal
Balance; (h) the related Mortgage Loan Rate as of the related Cut-off Date and,
with respect to any Adjustable Rate Mortgage Loan, the related Index, Gross
Margin, Minimum Rate, Maximum Rate and any periodic limitations on adjustment;
(i) the scheduled Monthly Mortgage Payment as of the related Cut-off Date; (j)
the date in each month on which the related Monthly Mortgage Payments are due;
(k) its Combined Loan-to-Value Ratio or the ratio, expressed as a percentage, of
the Original Principal Amount of such Mortgage Loan to the Appraised Value of
the related Mortgaged Property, as applicable; (l) the lien status of the
related Mortgage and, with respect to any Junior Mortgage Loan, the principal
amount (as of the date of origination) of all related Senior Liens; (m) whether
the related Mortgaged Property is owner-occupied or non-owner-occupied; (n)
whether the related Mortgaged Property is a single-family residence, a two- to
four-family residence, a unit in a condominium or planned unit development, or
manufactured housing; (o) whether the Mortgage Loan has been originated by an
Affiliate of the Company; (p) the related Cut-off Date (unless specified in a
related Subsequent Transfer Agreement); and (q) a code indicating if the
Mortgage Loan is covered under the PMI Policy.

     Mortgage Note: The note or other instrument evidencing the indebtedness of
a Mortgagor under the related Mortgage Loan.

     Mortgaged Property: The underlying property securing a Mortgage Loan.

     Mortgagor: The obligor under a Mortgage Note.

     Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds net
of Liquidation Expenses. If Liquidation Expenses exceed Liquidation Proceeds as
to any Mortgage Loan, Net Liquidation Proceeds shall be zero. For all purposes
of this Agreement, Net Liquidation Proceeds shall be allocated first to accrued
and unpaid interest on the related Mortgage Loan and then to the Principal
Balance thereof.

                                      -18-
<PAGE>

     Net Loan Rate: With respect to any Mortgage Loan as to any day, the
Mortgage Loan Rate less the Expense Fee Rate.

     Net Rate Cap Carryover: As to any Distribution Date and the Offered
Certificates (other than the Class A-IO Certificates), the sum of (i) the
excess, if any, of the related Class Monthly Interest Amount, calculated at the
applicable Pass-Through Rate (without regard to the Available Funds Cap), over
the Class Monthly Interest Amount for such Distribution Date, (ii) any Net Rate
Cap Carryover remaining unpaid from the prior Distribution Date and (iii) 30
days' interest on the amount in clause (ii) calculated at the applicable
Pass-Through Rate (without regard to the Available Funds Cap).

     Net Rate Cap Fund: The Net Rate Cap Fund established and maintained as
described in Section 3.21 and entitled "Bankers Trust Company of California,
N.A., as Trustee for Aames Mortgage Trust 2001-1, Mortgage Pass-Through
Certificates, Series 2001-1, Net Rate Cap Fund."

     Non-permitted Foreign Holder: As defined in Section 6.02(c).

     Notional Amount: The Notional Amount of the Class A-IO Certificates for any
Distribution Date prior to the 37th Distribution Date will equal the lesser of
(i) the Pool Balance as of the end of the second preceding related Collection
Period and (ii) the applicable amount set forth below:

              Distribution Date           Notional Amount
              -----------------           ---------------

              1  through 3                   $17,466,667
              4  through 6                    16,920,833
              7  through 9                    16,375,000
              10 through 12                   15,829,167
              13 through 15                   15,283,333
              16 through 18                   14,191,667
              19 through 21                   13,100,000
              22 through 24                   12,008,333
              25 through 27                    9,825,000
              28 through 30                    8,733,333
              31 through 33                    7,641,667
              34 through 36                    7,095,833

     On and after the 37th Distribution Date, the Notional Amount of the
Notional Amount Certificates will be zero.

     OC Floor: An amount equal to 0.50% of the aggregate Certificate Principal
Balance of the Offered Certificates as of the Closing Date. (i.e., $750,000).

                                      -19-
<PAGE>

     Offered Certificateholder: A holder of an Offered Certificate.

     Offered Certificates: The Certificates other than the Retained
Certificates.

     Officer's Certificate: A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board, the President or a Vice President of the Seller
or the Servicer, as the case may be, and delivered to the Trustee or each Rating
Agency, as the case may be.

     Opinion of Counsel: A written opinion of counsel reasonably acceptable to
the Trustee, who may be in-house counsel for the Seller or the Servicer (except
with respect to any opinion with respect to or concerning the REMIC status of
any REMIC Pool). Any expense related to obtaining an Opinion of Counsel for an
action requested by a party shall be borne by the party required to obtain such
opinion or seeking to effect the action that requires the delivery of such
Opinion of Counsel.

     Original Group I Balance: Means the aggregate of the outstanding principal
amounts of each Initial Mortgage Loan that is a Group I Mortgage Loan as of its
related Cut-off Date, which amount is $118,767,803.01.

     Original Group II Balance: Means the aggregate of the outstanding principal
amounts of each Initial Mortgage Loan that a Group II Mortgage Loan as of its
related Cut-off Date, which amount is $31,232,982.10.

     Original Pool Balance: Means the aggregate outstanding principal amounts of
each Initial Mortgage Loan as of its related Cut-off Date, which amount is
$150,000,785.11.

     Original Principal Amount: With respect to any Mortgage Loan, the original
principal amount due under the related Mortgage Note as of its date of
origination.

     Overcollateralization Amount: As of any Distribution Date, the excess of
(x) the Pool Balance as of the last day of the related Collection Period (plus,
during the Funding Period, related allocated amounts on deposit in the
Prefunding Account on such date) over (y) the aggregate Certificate Principal
Balance of the Offered Certificates (after taking into account all distributions
in respect of principal collections on such Distribution Date).

     Pass-Through Rate: The Class A-1 Pass-Through Rate, the Class A-2
Pass-Through Rate, the Class A-IO Pass-Through Rate, the Class M-1 Pass-Through
Rate, the Class M-2 Pass Through Rate or the Class B Pass Through Rate, as
applicable.

     Payment Ahead: Any payment of one or more Monthly Mortgage Payments
remitted by a Mortgagor with respect to a Mortgage Note in excess of the Monthly
Mortgage Payment due during such Collection Period with respect to such Mortgage
Note, which sums the related Mortgagor has instructed the Servicer to apply to
Monthly Mortgage Payments due in one or more subsequent Collection Periods. A
Monthly Mortgage Payment that was a Payment Ahead shall, for purposes of
computing Available Funds, be deemed to have been received by the

                                      -20-
<PAGE>

Servicer on the date in the related Collection Period on which such Monthly
Mortgage Payment would have been due if such Monthly Mortgage Payment was not a
Payment Ahead.

     Payoff Notice: The certification delivered by the Servicer in connection
with any payment in full of the outstanding principal balance of a Mortgage Loan
pursuant to Section 3.07, to be substantially in the form of Exhibit H.

     Percentage Interest: With respect to any Certificate, the undivided
percentage interest (carried to eight places, rounded down) obtained by dividing
the original principal balance of such Certificate by the Initial Certificate
Principal Balance of the related Class, as applicable, and multiplying the
result by 100; provided that with respect to a Class C Certificate, a Class P
Certificate or a Class R Certificate, Percentage Interest means the undivided
percentage interest set forth on the face of such Certificate, which in the
aggregate shall not exceed 100%.

     Permitted Investments: One or more of the following obligations,
instruments and securities:

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

         (B) Federal Housing Administration debentures, FHLMC senior debt
     obligations and FNMA senior debt obligations, but excluding any of such
     securities whose terms do not provide for payment of a fixed dollar amount
     upon maturity or call for redemption or that are not rated in the highest
     rating category by each Rating Agency;

         (C) federal funds, certificates of deposit, time and demand deposits
     and banker's acceptances (in each case having original maturities of not
     more than 365 days) of any bank or trust company incorporated under the
     laws of the United States or any state thereof, provided that the
     short-term debt obligations of such bank or trust company at the date of
     acquisition thereof have been rated "A-1" or better by Standard & Poor's,
     "Prime-1" or better by Moody's;

         (D) deposits of any bank or savings and loan association that has
     combined capital, surplus and undivided profits of at least $100,000,000,
     which deposits are held up to the applicable limits insured by the Bank
     Insurance Fund or the Savings Association Insurance Fund of the FDIC;

         (E) commercial paper (having original maturities of not more than 180
     days) that has the highest short term rating of each of Standard & Poor's
     and Moody's;

         (F) investments in money market funds rated "AAAm" or "AAAm-G" by
     Standard & Poor's and "Aaa" by Moody's (any such money market funds that
     provide for

                                      -21-
<PAGE>

     demand withdrawals without penalty being conclusively deemed to satisfy any
     maturity requirement for Permitted Investments set forth herein); and

         (G) investments approved in writing by all Rating Agencies;

     provided that no investment described hereunder shall evidence either the
right to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity of the underlying obligations; and provided, further, that no
instrument described hereunder may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments, or in the case of Permitted Investments held in the Prefunding
Account, shall be available on the Business Day next succeeding the date the
Trustee receives the Addition Notice that such monies will be needed.
Notwithstanding the foregoing, with respect to investment of amounts in any
account, any of the foregoing obligations, instruments or securities will not be
Permitted Investments to the extent that an investment therein will cause the
then outstanding principal amount thereof in which such funds are then invested
to exceed $25,000,000 (such investments being valued at par).

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

     PMI Insurer: Mortgage Guaranty Insurance Corporation, a monoline private
insurance company organized and created under the laws of the State of
Wisconsin, or its successors in interest.

     PMI Insurer Premium: For any Distribution Date and any Mortgage Loan Group,
the aggregate of the premiums payable, if any, during the immediately preceding
Collection Period under each PMI Policy for any PMI Mortgage Loans in the
related Mortgage Loan Group, as set forth in an a statement delivered to the
Trustee by the PMI Insurer with respect to such Distribution Date.

     PMI Mortgage Loans: The list of Mortgage Loans insured by the PMI Insurer
attached hereto as Exhibit P as amended by each subsequently delivered schedule
of Subsequent Mortgage Loans insured by the PMI Insurer.

     PMI Policy: The related primary mortgage insurance policy
(Nos. 04-307-4-1323, 04-307-4-2290 and 04-355-4-1261) with respect to the PMI
Mortgage Loans and all endorsements thereto, issued by the PMI Insurer.

     Pool Balance: As to any Distribution Date, the sum of the aggregate of the
Principal Balances of the Mortgage Loans as of the end of the related Collection
Period plus, in the case of

                                      -22-
<PAGE>

any Distribution Date relating to a Collection Period that includes any part of
the Funding Period, any portion of the related allocated Prefunding Account
Deposit remaining on deposit in the Prefunding Account or Certificate Account as
of the last day of such Collection Period.

     Prefunding Account: Not applicable.

     Prefunding Account Deposit: Not applicable.

     Prefunding Distribution Date: Not applicable.

     Prepayment Assumption: Means the prepayment assumptions described in the
Prospectus Supplement as having been used to generate the prepayment scenarios
therein described.

     Prepayment Charge: As to a Mortgage Loan, any charge paid by a Mortgagor in
connection with certain partial prepayments and all prepayments in full made
within the related Prepayment Charge Period, the Prepayment Charges with respect
to each applicable Mortgage Loan so held by the Trust being identified in a
prepayment charge schedule (other than any Servicer Prepayment Charge Payment
Amount).

     Prepayment Charge Period: As to any Mortgage Loan, the period of time, if
any, during which a Prepayment Charge may be imposed.

     Prepayment Charge Schedule: As of any date, the list of Prepayment Charges
on the Mortgage Loans included in the Trust on such date, attached hereto as
Exhibit R (including the Prepayment Charge Summary attached thereto). The
Prepayment Charge Schedule shall set forth the following information with
respect to each Prepayment Charge:

     (i)       the Mortgage Loan identifying number;

     (ii)      a code indicating the term of the Prepayment Charge;

     (iii)     the state of origination of the related Mortgage Loan;

     (iv)      the date on which the first Monthly Mortgage Payment was due on
               the related Mortgage Loan;

     (v)       the term of the related Mortgage Loan;

     (vi)      the Principal Balance of the related Mortgage Loan as of the
               Cut-off Date;

     (vii)     a code indicating whether a Mortgage Loan has a prepayment
               penalty;

     (viii)    a code indicating the type of prepayment penalty;


                                      -23-
<PAGE>

     (ix)      a code indicating the amount, if any, of a prepayment by a
               Mortgagor that would not be subject to the prepayment penalty
               that would otherwise apply; and

     (x)       the period from the date of origination of the Mortgage Loan
               during which the prepayment penalty applies.

     Prepayment Interest Shortfall: As to any Distribution Date and any Mortgage
Loan Group, the amount, if any, by which the amount described in clause (b) of
the first sentence of the definition of Compensating Interest for such
Distribution Date exceeds the Monthly Servicing Fee (calculated with a Servicing
Fee Rate of 0.50% per annum) for such Mortgage Loan Group and the related
Collection Period.

     Principal Balance: As to any Mortgage Loan and any day, the actual
outstanding principal amount thereof as of the close of business on the last day
of the preceding calendar month (or, if prior to the last day of the calendar
month in which the Cut-off Date occurs, as of the related Cut-off Date, without
duplication), less the following amounts, if any, received through the last day
of the preceding calendar month (i) any Principal Payments received in respect
of such Mortgage Loan, (ii) Net Liquidation Proceeds and Trust Insurance
Proceeds allocable to principal recovered or collected in respect of such
Mortgage Loan, (iii) the portion of the Purchase Price allocable to principal to
be remitted by the Seller or the Servicer to the Trustee on the next succeeding
Deposit Date in connection with a purchase or repurchase of such Mortgage Loan
pursuant to Section 2.03, 2.05, 3.01, 3.06 or 10.01, to the extent such amount
is actually received by the Trustee on such Deposit Date and (iv) the amount to
be remitted by the Seller to the Trustee on the next succeeding Deposit Date in
connection with a substitution of a Qualified Replacement Mortgage Loan for such
Mortgage Loan pursuant to Section 2.03 or 2.05, to the extent such amount is
actually received by the Trustee on such Deposit Date.

     Principal Distribution Amount: As to any Distribution Date, the lesser of
(a) the aggregate Certificate Principal Balances immediately preceding such
Distribution Date and (b) the sum of (1) the Aggregate Principal Amount minus
the Excess Overcollateralization Amount and (2) the Subordination Increase
Amount.

     Principal Payment: As to any Mortgage Loan and Collection Period, all
amounts received or, in the case of the principal portion of any Payment Ahead,
deemed to have been received by the Servicer from or on behalf of the related
Mortgagor during such Collection Period (including Principal Prepayments) that,
at the time of receipt or, in the case of any Payment Ahead, at the time such
Payment Ahead is deemed to have been received, were applied or were required to
be applied by the Servicer in reduction of the Principal Balance of such
Mortgage Loan.

     Principal Prepayment: As to any Mortgage Loan and Collection Period, any
payment by a Mortgagor or other recovery in respect of principal on a Mortgage
Loan (including Net Liquidation Proceeds) that, in the case of a payment by a
Mortgagor, is received in advance of its scheduled due date and is not a Payment
Ahead.

                                      -24-
<PAGE>

     Property Protection Expenses: Expenses (exclusive of overhead expenses)
reasonably paid or incurred by or for the account of the Servicer in connection
with the preservation or protection of a Mortgaged Property or the security of a
Mortgaged Property, including (a) hazard insurance policy premiums, (b) real
estate taxes and property repair, replacement, protection and preservation
expenses, (c) amounts expended to cure or prevent any default with respect to
any mortgage loan senior to the related Mortgage Loan and (d) similar expenses
reasonably paid or incurred to preserve or protect the value of such Mortgaged
Property or security (including but not limited to reasonable legal fees and
expenses).

     Prospectus: That certain Prospectus dated as of March 13, 2001 relating to
the asset-backed bonds and certificates to be sold by the Company.

     Prospectus Supplement: That certain Prospectus Supplement dated as of March
13, 2001 relating to $150,000,000 principal amount of Mortgage Pass-Through
Certificates, Series 2001-1.

     Purchase Price: With respect to (a) any Defective Mortgage Loan or (b) any
Mortgage Loan to be purchased by the Servicer pursuant to Section 3.01 or
Section 3.06, an amount equal to (i) the sum of (A) the outstanding principal
balance of such Mortgage Loan or Defective Mortgage Loan, as the case may be, as
of the beginning of the Collection Period next preceding the Deposit Date on
which such repurchase or purchase is required to occur, (B) interest computed at
the applicable Mortgage Loan Rate on such outstanding principal balance from the
date to which interest was last paid by the Mortgagor to the last day of the
Collection Period immediately preceding the Deposit Date on which such
repurchase or purchase occurs and (C) any previously unreimbursed Servicing
Advances made on or in respect of such Defective Mortgage Loan or Mortgage Loan,
as the case may be, less (ii) any payments of principal and interest in respect
of such Defective Mortgage Loan or Mortgage Loan, as the case may be, made by or
on behalf of the related Mortgagor during such Collection Period; provided that
the Purchase Price with respect to any Restricted Mortgage Loan to be purchased
by the Servicer pursuant to Section 3.06 will be the fair market value of the
related Mortgaged Property as described in such Section 3.06.

     Qualified Replacement Mortgage Loan: A Mortgage Loan that is substituted
for a Deleted Mortgage Loan pursuant to Section 2.03 or Section 2.05 that must,
at the end of the Collection Period preceding the date of such substitution, (i)
have an outstanding principal balance (when taken together with any other
Qualified Replacement Mortgage Loan being substituted for such Deleted Mortgage
Loan), not in excess of and not substantially less than the unpaid principal
balance of the Deleted Mortgage Loan at the end of the Collection Period
preceding the date of substitution, (ii) if the Deleted Mortgage Loan is an
Adjustable Rate Mortgage Loan, have the Mortgage Loan Rate computed on the same
basis as the Mortgage Loan Rate on the related Mortgage Loan, utilizing the same
Index and having a Gross Margin or Minimum Rate not less than (and not more than
one percentage point in excess of) the Gross Margin and Minimum Rate applicable
to the Deleted Mortgage Loan and if the Deleted Mortgage Loan is a Fixed Rate
Mortgage Loan, have a Mortgage Loan Rate not less than (and not more than one
percentage point in excess of) the Mortgage Loan Rate of the Deleted Mortgage
Loan, (iii) have a remaining term to maturity not greater than (and not more
than one

                                      -25-
<PAGE>

year less than) that of the Deleted Mortgage Loan, (iv) have a Combined
Loan-to-Value Ratio equal to or lower than the Combined Loan-to-Value Ratio of
the Deleted Mortgage Loan, (v) satisfy the criteria set forth from time to time
in the definition "qualified replacement mortgage" at Section 860G(a)(4) of the
Code, (vi) have the same or a superior lien priority as the Deleted Mortgage
Loan, (vii) comply as of the date of substitution with each representation and
warranty set forth in Section 2.05, (viii) have the same or better property type
as the Deleted Mortgage Loan and (ix) have the same or better occupancy status.
In the event that one or more mortgage loans are proposed to be substituted for
one or more Deleted Mortgage Loans, the foregoing tests may be met on a weighted
average basis or other aggregate basis, except that the requirements of clauses
(iv) through (viii) hereof must be satisfied as to each Qualified Replacement
Mortgage Loan.

     Rating Agencies: Standard & Poor's and Moody's (each, a "Rating Agency").
If either such agency or a successor is no longer in existence, "Rating Agency"
shall be such nationally recognized statistical credit rating agency, or other
comparable Person, designated by the Servicer, notice of which designation shall
be given to the Trustee.

     Realized Loss: With respect to any Liquidated Mortgage Loan, the amount, if
any, by which the Principal Balance of such Mortgage Loan and accrued and unpaid
interest thereon (determined as of the Determination Date immediately prior to
such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such Mortgage Loan, which amount
shall in no event exceed the Principal Balance of such Mortgage Loan (determined
as of the Determination Date immediately prior to such Mortgage Loan becoming a
Liquidated Mortgage Loan), in each case as determined by the Servicer and set
forth on a Liquidation Report and accompanying Officer's Certificate
substantially in the form of Exhibits I and J hereto.

     Record Date: As to any Distribution Date, the close of business on the last
Business Day of the calendar month immediately preceding such Distribution Date.

     Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

     Relief Act Shortfall: As to any Distribution Date and any Mortgage Loan
Group, the amount of any reduction of interest collectible on any Mortgage Loan
in such Mortgage Loan Group for the related Collection Period due to the
application of the Relief Act.

     REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D, and in particular, any of REMIC I, REMIC II or REMIC III as
indicated by context.

     REMIC I Interests: As defined in Section 9.16(b) and described in Section
9.16.

     REMIC I Regular Interests: As defined in Section 9.16(b) and described in
Section 9.16.

     REMIC II Interests: As defined in Section 9.16(c) and described in Section
9.16.

                                      -26-
<PAGE>

     REMIC II Regular Interests: As defined in Section 9.16(c) and described in
Section 9.16.

     REMIC Pool: With respect to REMIC I, the assets of the Trust other than the
Prefunding Account, Capitalized Interest Account, Net Rate Cap Fund, the REMIC I
Regular Interests and the REMIC II Regular Interests; with respect to REMIC II,
the REMIC I Regular Interests, other than the Class P Certificates; and, with
respect to REMIC III, the REMIC II Regular Interests.

     REMIC Provisions: Provisions of the federal income tax law relating to
REMICs that appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury proposed, temporary or final regulations and rulings promulgated
thereunder, as the foregoing may be in effect from time to time.

     REO Property: As defined in Section 5.02(a).

     Representative: Greenwich Capital Markets, Inc.

     Required Overcollateralization Amount: As to any Distribution Date (a)
prior to the Stepdown Date, the product of (i) 3.00% and (ii) the Pool Balance
as of the Cut-off Date; and (b) on and after the Stepdown Date, the greater of
(i) the lesser of (x) the product of 3.00% of the Pool Balance as of the Cut-off
Date and (y) the product of 6.00% and the Pool Balance as of the end of the
related Collection Period and (ii) the OC Floor; provided, however, that on each
Distribution Date during the continuance of (a) a Delinquency Event or
Cumulative Loss Event, the Required Overcollateralization Amount will equal the
Required Overcollateralization Amount in effect as of the Distribution Date
immediately preceding the date on which such Delinquency Event or Cumulative
Loss Event first occurred.

     Responsible Officer: When used with respect to the Trustee, any Vice
President or Assistant Vice President, any Assistant Secretary, any Assistant
Treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and to whom,
with respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject. When used
with respect to the Seller or Servicer, the President or any Vice President,
Assistant Vice President or any Secretary or Assistant Secretary.

     Restricted Mortgage Loan: A Mortgage Loan that as of the Closing Date was
90 or more days contractually delinquent. As of the date hereof, there are no
Restricted Mortgage Loans in any Mortgage Loan Group.

     Restricted Mortgaged Property: With respect to any Restricted Mortgage
Loan, the Mortgaged Property securing such Restricted Mortgage Loan.

     Retained Certificates: The Class C Certificates, the Class P Certificates
and the Class R Certificates.

                                      -27-
<PAGE>

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

     Seller: The Company.

     Senior Certificates: The Class A-1, Class A-2 and Class A-IO Certificates.

     Senior Enhancement Percentage: As to any Distribution Date, the percentage
equivalent of a fraction, the numerator of which is the sum of (i) the aggregate
Certificate Principal Balances of the Subordinate Certificates and (ii) the
Overcollateralization Amount (in each case, prior to taking into account the
distribution of the Principal Distribution Amount on such Distribution Date) and
the denominator of which is the Pool Balance as of the last day of the related
Collection Period.

     Senior Lien: With respect to any Junior Mortgage Loan, any liens on the
related Mortgaged Property of higher priority.

     Senior Principal Distribution Amount: As to (a) any Distribution Date prior
to the Stepdown Date or during the continuance of a Delinquency Event, the
lesser of (i) 100% of the Principal Distribution Amount and (ii) the aggregate
Certificate Principal Balances of the Class A Certificates, and (b) any other
Distribution Date, an amount equal to the lesser of (x) the Principal
Distribution Amount and (y) the excess, if any, of (i) the aggregate Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date over (ii) the lesser of (x) the product of 68% and the Pool
Balance as of the last day of the related Collection Period less the
Subordination Required Overcollaterization Amount for that Distribution Date and
(y) the Pool Balance as of the last day of the related Collection Period minus
the OC Floor.

     Servicer: Countrywide Home Loans, Inc., a New York corporation, or any
successor servicer appointed as provided pursuant to this Agreement.

     Servicer Prepayment Charge Payment Amount: The amounts payable by the
Servicer in respect of any waived Prepayment Charges pursuant to Section 3.22.

     Servicer Remittance Report: The monthly report prepared by the Servicer and
delivered to the Trustee pursuant to Section 4.01.

     Servicing Advances: All reasonable and customary "out-of-pocket" costs and
expenses incurred in the performance by the Servicer of its servicing
obligation, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
(ii) any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property, (iv) compliance with the
obligations under Section 3.04 and (v) expenditures relating to the correction
of a default on any Senior Lien pursuant to Section 3.06 in connection with the
liquidation of a Mortgage Loan.

                                      -28-
<PAGE>

     Servicing Fee Rate: With respect to any Mortgage Loan Group and each
Collection Period, 0.50% per annum.

     Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Trustee by the Servicer, as such list may
from time to time be amended.

     Sixty Day Delinquency Rate: As to any Distribution Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate Principal
Balances of the Mortgage Loans that are (a) 60 or more days delinquent as of the
last day of the related Collection Period, (b) 60 or more days delinquent and in
bankruptcy as of the last day of the related Collection Period or (c) REO
Property and Mortgage Loans in foreclosure and the denominator of which is the
Pool Balance as of the last day of the immediately preceding calendar month.

     Standard & Poor's: Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., and its successors in interest.

     Startup Day: As defined in Section 9.16(e).

     Statement to Certificateholders: As defined in Section 5.03.

     Stepdown Date: The later to occur of (x) the earlier to occur of (i) the
Distribution Date in April 2004 and (ii) the Distribution Date on which the
aggregate Certificate Principal Balance of the Class A Certificates is reduced
to zero, and (y) the first Distribution Date on which the Senior Enhancement
Percentage (assuming 100% of the Principal Distribution Amount is distributed on
the Offered Certificates) is at least equal to 38%.

     Subordinate Certificates: The Class M-1, Class M-2 and Class B
Certificates.

     Subordination Deficiency: As to any Distribution Date, the excess, if any,
of (i) the Required Overcollateralization Amount for such Distribution Date over
(ii) the Overcollateralization Amount for such Distribution Date after giving
effect to the distribution of the Basic Principal Amount on such Distribution
Date.

     Subordination Increase Amount: As to any Distribution Date, the lesser of
(i) the Subordination Deficiency and (ii) the Excess Interest.

     Subordination Required Overcollateralization Amount: (A) as to any
Distribution Date on which a Delinquency Event or a Cumulative Loss Event has
not occurred and is not continuing, the Required Overcollateralization Amount
without giving effect to clause (y) (ii) of such definition and (B) as to any
Distribution Date on which a Delinquency Event or a Cumulative Loss Event has
occurred and is continuing, the Required Overcollateralization Amount.

                                      -29-
<PAGE>

     Subsequent Cut-off Date: None.

     Subsequent Cut-off Date Principal Balance: None.

     Subsequent Mortgage Loan Schedule: None.

     Subsequent Mortgage Loan: None.

     Subsequent Purchase Price: None.

     Subsequent Transfer Agreement: None.

     Subsequent Transfer Date: None.

     Sub-Servicer: Any Person, including an Affiliate of the Servicer, with whom
the Servicer has entered into a Sub-Servicing Agreement and who satisfies the
requirements set forth in Section 3.15 hereof in respect of the qualification of
a Sub-Servicer. The Sub-Servicers with respect to any of the Mortgage Loans as
of the related Cut-off Date are listed on Schedule I attached to this Agreement.

     Sub-Servicing Account: Any segregated account, which shall at all times be
an Eligible Account, established and maintained pursuant to Section 3.02(b) and
entitled "Bankers Trust Company of California, N.A., in trust for the benefit of
Holders of Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Collection Account". References herein to the Collection Account
shall include any Sub-Servicing Account as the context requires.

     Sub-Servicing Agreement: A written contract between the Servicer and any
Sub-Servicer relating to the servicing and/or administration of certain Mortgage
Loans.

     Three Month Delinquency Rate: As to any Distribution Date the arithmetic
average of the Sixty Day Delinquency Rates for the three Distribution Dates
preceding such Distribution Date.

     Transfer Affidavit: The affidavit to be delivered by any transferee of an
interest in a Class R Certificate pursuant to Section 6.02(b), to be
substantially in the form attached hereto as Exhibit G.

     Transferor Affidavit: The affidavit to be delivered by any transferor of an
interest in a Class R Certificate pursuant to Section 6.02(b), to be
substantially in the form attached hereto as Exhibit K.

     Transition Cost: Any documented expenses reasonably incurred by Trustee in
connection with a transfer of servicing from the Servicer to a successor
servicer as successor servicer pursuant to Section 8.02, but not to exceed
$5,000 with respect to any single succession.

                                      -30-
<PAGE>

     Trust: The trust created by this Agreement and the corpus thereof, which
consists of, to the extent described herein, the Mortgage Loans, such assets as
shall from time to time be identified or shall be required by this Agreement to
be deposited in the Collection Account, the Certificate Account, the Prefunding
Account or the Capitalized Interest Account or invested in Permitted Investments
in accordance with this Agreement, all rights under any insurance policy
covering a Mortgage Loan or the related Mortgaged Property, including the PMI
Policy, and property and any proceeds thereof that secured a Mortgage Loan and
that has been acquired by foreclosure, deed in lieu of foreclosure or by a
comparable conversion.

     Trust Insurance Proceeds: Insurance Proceeds that (a) are applied by the
Servicer to reduce the Principal Balance of the related Mortgage Loan or pay
interest due on the related Mortgage Loan and (b) not applied to the restoration
or repair of the related Mortgaged Property or released to the related Mortgagor
in accordance with the Servicer's normal servicing procedures or the terms of
the related Mortgage Loan.

     Trust Parties: As defined in Section 5.04.

     Trustee: Bankers Trust Company of California, N.A., a national banking
association, and its successors in interest or any successor trustee appointed
as provided pursuant to this Agreement.

     Trustee Fee: With respect to any Distribution Date and each Mortgage Loan
Group, 1/12 of the product of 0.015% and the aggregate Principal Balance of the
Mortgage Loans in such Mortgage Loan Group as of the beginning of the related
Collection Period (or, in the case of the first Distribution Date, the aggregate
Principal Balance of the related Mortgage Loans as of the Cut-off Date).

     Turbo Amount: As defined in Section 9.16(c).

     Vice President: Any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president".

     Voting Interest: The portion of the voting interests of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Interests shall be allocated to the Class
A-IO Certificates (such Voting Rights to be allocated among the Holders of
Certificates of such Class in accordance with their respective Percentage
Interests), (b) 1% of all Voting Interests shall be allocated to the Class C
Certificates (such Voting Rights to be allocated among the Holders of
Certificates of such Class in accordance with their respective Percentage
Interests), (b) 1% of all Voting Interests shall be allocated to the Class P
Certificates, (d) 1% of all Voting Interests shall be allocated to the Class R
Certificates in the aggregate, or if separate Class R-I and Class R-II and Class
R-III Certificates are issued, 1/3% to each such Class (such Voting Interests to
be allocated among the Holders of Certificates of each such Class in accordance
with their respective Percentage Interests), and (e) the remaining Voting
Interests shall be allocated among Holders of the Classes of Offered
Certificates in proportion to the

                                      -31-
<PAGE>

Certificate Principal Balances of their respective Offered Certificates on such
date. Each Certificateholder of a Class will have a Voting Interest equal to the
product of the Voting Interest to which such Class is collectively entitled and
the Percentage Interest in such Class represented by such Holder's Certificates.
With respect to any provision hereof providing for action, consent or approval
of each Class of Certificates or specified Classes of Certificates, each
Certificateholder of a Class will have a Voting Interest in such Class equal to
such Holder's Percentage Interest in such Class.

     Section 1.02 Interest Calculations. All calculations of interest at the
Mortgage Loan Rate that are made in respect of the Principal Balance of a
Mortgage Loan, shall be made on a daily basis using a 360-day year of twelve
30-day months.

     All calculations of interest on the Offered Certificates will be computed
on the basis of a 360-day year of twelve 30-day months.

                                   ARTICLE II
                             CONVEYANCE OF THE TRUST
                        ORIGINAL ISSUANCE OF CERTIFICATES

     Section 2.01 Conveyance of the Trust. The Seller, concurrently with the
execution and delivery of this Agreement, does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders, without recourse (except as otherwise
explicitly provided for herein), all of its right, title and interest in and to
the Trust, including specifically, without limitation, the Mortgage Loans, the
Mortgages, the Mortgage Files and the Mortgage Notes, including all interest and
principal (whether in the form of payments by Mortgagors or other proceeds)
received or deemed to be received by the Seller on or with respect to the
Mortgage Loans on or after the related Cut-off Date net of amounts in respect of
interest accrued on the Mortgage Loans in periods prior to the related Cut-off
Date, (whether in the nature of amounts held by the Seller for application on
behalf of the related Mortgagor as a Monthly Mortgage Payment that is due on any
date on or after the related Cut-off Date or otherwise), and the Class P Deposit
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
In addition, on or prior to the Closing Date the Seller shall (i) cause the the
PMI Policy to be delivered to the Trustee and (ii) deposit the Closing Date
Deposit in the Collection Account.

     In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Trust by the Seller to the Trustee, such
sale and assignment is deemed to constitute a pledge of security for a loan, it
is the intent of this Agreement that the Seller shall be deemed to have granted
to the Trustee for the benefit of the Certificateholders a first priority
perfected security interest in all of the Seller's right, title and interest in
and to the Mortgage Loans, the Mortgages, the Mortgage Files and the Mortgage
Notes, all payments of principal or interest on the Mortgage Loans received on
or after the related Cut-off Date net of amounts in respect of interest accrued
on the Mortgage Loans in periods prior to the related Cut-off Date, all other
payments (exclusive of assumption fees, late payment charges, charges for checks
returned for insufficient funds, if any, and extension and other administrative
charges other than

                                      -32-
<PAGE>

Prepayment Charges) made in respect of such Mortgage Loans on or after the
related Cut-off Date and all proceeds of any thereof, including all amounts on
deposit in the Certificate Account, the Collection Account, the Prefunding
Account and the Capitalized Interest Account and amounts invested in Permitted
Investments (but excluding all investment income with respect to the Prefunding
Account and Capitalized Interest Account), and that this Agreement shall
constitute a security agreement under applicable law. The Seller shall file
financing statements and continuation statements as necessary to maintain the
perfection of such security interest.

     The Company confirms to the Trustee that it has caused its computer records
relating to the Initial Mortgage Loans to indicate by a code that the Initial
Mortgage Loans have been sold to the Trustee on behalf of the Trust and
constitute part of the Trust in accordance with the terms of this Agreement. The
Company further confirms to the Trustee that it will cause its computer records
relating to each Subsequent Mortgage Loan to indicate by a code that such
Subsequent Mortgage Loan has been sold to the Trustee on behalf of the Trust and
that it constitutes part of the Trust in accordance with the terms of this
Agreement. The Company confirms that it will treat the conveyance transactions
contemplated hereby and in each Subsequent Transfer Agreement as sales in
accordance with generally accepted accounting principles and will reflect such
transactions as sales on its primary accounting records.

     In connection with each such sale and assignment, the Company, in its
capacity as Seller hereunder, does hereby deliver to, and deposit with, the
Trustee the originals of the following documents or instruments with respect to
each Mortgage Loan so assigned:

         (a) The original Mortgage Note, with all intervening endorsements
     sufficient to show a complete chain of endorsement to the Seller, endorsed
     (which endorsement may be by manual or facsimile signature) by the Seller
     without recourse to the order of the Trustee in the following form: "Pay to
     the order of Bankers Trust Company of California, N.A., in trust for the
     benefit of holders of Aames Mortgage Trust 2001-1 Mortgage Pass-Through
     Certificates, Series 2001-1, without recourse";

         (b) The original Mortgage with evidence of recording indicated thereon;

         (c) The original assignment of the Mortgage executed by the Seller in
     recordable form;

         (d) Originals of all assumption, modification and substitution
     agreements in those instances where the terms or provisions of a Mortgage
     or Mortgage Note have been modified or such Mortgage or Mortgage Note has
     been assumed;

         (e) Originals of all intervening mortgage assignments with evidence of
     recording indicated thereon sufficient to show a complete chain of
     assignment from the originator of the Mortgage Loan to the Seller; and

         (f) Original lender's title insurance policy issued on the date of the
     origination of such Mortgage Loan or a true copy thereof or, if such
     original lender's title insurance

                                      -33-
<PAGE>

     policy has been lost, a copy thereof certified by the appropriate title
     insurer to be true and complete or, if such lender's title insurance policy
     has not been issued as of the Closing Date, a marked up commitment (binder)
     to issue such policy.

     As promptly as practicable subsequent to the Closing Date, and in any
event, within 30 days thereafter, the Company, in its capacity as initial
Sub-Servicer shall (i) affix the Trustee's name to each assignment of Mortgage,
as the assignee thereof in the following form: "Bankers Trust Company of
California, N.A., in trust for the benefit of holders of Aames Mortgage Trust
2001-1 Mortgage Pass-Through Certificates, Series 2001-1, without recourse",
(ii) cause such assignment to be in proper form for recording in the appropriate
public office for real property records, and (iii) cause to be delivered for
recording in the appropriate public office for real property records the
assignments of the Mortgages to the Trustee, except that, with respect to any
assignments of Mortgage as to which the Servicer has not received the
information required to prepare such assignment in recordable form, the Servicer
shall be obligated to prepare and to deliver such assignment for such recording
as soon as practicable after receipt of such information and in any event within
30 days after receipt thereof (and in no event more than one year after the
Closing Date) and that the Servicer need not cause to be recorded any assignment
that relates to a Mortgage Loan in any jurisdiction under the laws of which, as
evidenced by an Opinion of Counsel delivered to the Trustee at Seller's expense
to the effect that the recordation of such assignment is not necessary to
protect the Trustee's and the Certificateholders' interest in the related
Mortgage Loan.

     If the Company cannot deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Agreement solely because of a delay caused by the
public recording office where such original Mortgage or mortgage assignment has
been delivered for recordation, the Company shall deliver to the Trustee an
Officer's Certificate, with a photocopy of such Mortgage or mortgage assignment,
as the case may be, attached thereto, stating that such original Mortgage or
mortgage assignment has been delivered to the appropriate public recording
official for recordation. The Company shall promptly deliver to the Trustee such
original Mortgage or intervening mortgage assignment with evidence of recording
indicated thereon upon receipt thereof from the public recording official. If
the Company within six months from the Closing Date shall not have received such
original Mortgage or intervening mortgage assignment from the public recording
official, it shall obtain, and deliver to the Trustee within eight months from
the Closing Date, a copy of such original Mortgage or mortgage assignment
certified by such public recording official to be a true and complete copy of
such original Mortgage or mortgage assignment as recorded by such public
recording office.

     The costs relating to the delivery of the documents specified in this
Section shall be borne by the Seller.

     Section 2.02 Conveyance of the Subsequent Mortgage Loans; Fixed Price
Contract. Subject to the conditions set forth in the paragraphs below, in
consideration of the Trustee's delivery on the Closing Date or related
Subsequent Transfer Dates to or upon the order of the Seller of the Subsequent
Purchase Price of the related Subsequent Mortgage Loans from amounts

                                      -34-
<PAGE>

on deposit in the Prefunding Account (or other amounts payable to the Seller if
such purchases of all Subsequent Mortgage Loans occur on the Closing Date) with
respect to the related Mortgage Loan Group, the Seller shall, from time to time,
on the Closing Date or any Subsequent Transfer Date, sell, transfer, assign, set
over and otherwise convey without recourse, to the Trustee, all right, title and
interest of the Seller in and to each Subsequent Mortgage Loan identified on the
Subsequent Mortgage Loan Schedule attached to the related Subsequent Transfer
Agreement delivered by the Seller on the Closing Date or such Subsequent
Transfer Date, including all of its right, title and interest in and to
principal and interest (whether in the form of payments by Mortgagors or other
proceeds) received or deemed to be received by the Seller on each such
Subsequent Mortgage Loan on and after the related Subsequent Cut-off Date, net
of amounts in respect of interest accrued on such Subsequent Mortgage Loans in
periods prior to the related Subsequent Cut-off Date (whether in the nature of
amounts held by the Seller for application on behalf of the related Mortgagor as
a Monthly Mortgage Payment that is due on any date on or after the related
Subsequent Cut-off Date or otherwise) plus all items with respect to such
Subsequent Mortgage Loan to be delivered pursuant to Section 2.01 and other
items in the related Mortgage File; provided, however, that the Seller reserves
and retains all of its right, title and interest in and to principal (including
prepayments) and interest collected on each such Subsequent Mortgage Loan prior
to the related Subsequent Cut-off Date (except for amounts held by the Seller
for application on or after the related Subsequent Cut-off Date). The transfer
by the Seller of the Subsequent Mortgage Loans set forth on the Subsequent
Mortgage Loan Schedule to the Trustee shall be absolute and shall be intended by
the parties hereto to be treated as a sale by the Seller. On or before the last
day of the Funding Period, the Seller shall convey to the Trustee pursuant to
this Section 2.02 the lesser of: (i) all Mortgage Loans then in its possession
that satisfy the requirements of this Section 2.02 or (ii) the maximum principal
balance of Mortgage Loans as determined by Seller that satisfy the requirements
of this Section 2.02 whose aggregate Subsequent Purchase Price does not exceed
the Prefunding Account Deposit. Subsequent Mortgage Loans to be conveyed on a
given Subsequent Transfer Date must have an aggregate Subsequent Cut-off Date
Principal Balance of not less than $500,000; provided, however, that the
Subsequent Mortgage Loans to be conveyed on the final Subsequent Transfer Date
may have an aggregate Subsequent Cut-off Date Principal Balance of less than
$500,000.

     In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Subsequent Mortgage Loans on the related
Subsequent Transfer Date by the Seller to the Trustee, such sale and assignment
will be deemed to constitute a pledge of security for a loan, it is the intent
of this Agreement that the Seller shall be deemed to have granted to the Trustee
for the benefit of the Certificateholders a first priority perfected security
interest in all of the Seller's right, title and interest in and to the
Subsequent Mortgage Loans, the Mortgages, the Mortgage Files and the Mortgage
Notes, all payments of principal and interest on the Subsequent Mortgage Loans
received on or after their respective Subsequent Cut-off Dates, net of amounts
in respect of interest accrued on such Subsequent Mortgage Loans in periods
prior to the related Subsequent Cut-off Date, all other payments (provided that
the parties to this Agreement acknowledge that the Servicer is entitled to
receive all assumption fees, late payment charges, charges for checks returned
for insufficient funds, if any, and extension and other administrative charges
other than Prepayment Charges) made in respect of such Subsequent Mortgage Loans
on

                                      -35-
<PAGE>

or after the related Subsequent Cut-off Date, and that this Agreement and the
related Subsequent Transfer Agreement shall each constitute a security agreement
with respect to the related Subsequent Mortgage Loans under applicable law. The
Seller shall file financing statements and continuation statements as necessary
to maintain the perfection of such security interest.

     The amount released to the Seller from the Prefunding Account on any
Subsequent Transfer Date (or from other amounts payable to the Seller on the
Closing Date) in connection with any conveyance of Subsequent Mortgage Loans to
be included in the Fixed Rate Group, Adjustable Rate Group I or Adjustable Rate
Group II shall be equal to the aggregate of the related Subsequent Purchase
Prices for such related Subsequent Mortgage Loans to be included in such related
Mortgage Loan Group, which related amounts, in the aggregate, shall not exceed
the allocated Prefunding Account Deposit for such related Mortgage Loan Group.
The amount so released to the Seller in connection with any conveyance of
Subsequent Mortgage Loans shall, for federal income tax purposes, be considered
cash contributed to REMIC I by the Seller and used by the Trustee to acquire the
related Subsequent Mortgage Loans pursuant to a fixed price contract established
pursuant to this Section 2.02.

     On each related Subsequent Transfer Date, the Seller shall transfer to the
Trustee the Subsequent Mortgage Loans and the other property and rights related
thereto described in the first paragraph in this section only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:

         (a) the Seller shall provide the Trustee, the Servicer, the
     Representative and the Rating Agencies with an Addition Notice and shall
     provide any information reasonably requested by the Trustee, the Servicer,
     the Representative or the Rating Agencies with respect to the Subsequent
     Mortgage Loans;

         (b) the Seller shall deliver to the Trustee, the Servicer, the
     Representative and the Rating Agencies a duly executed Subsequent Transfer
     Agreement and any other related documentation in the forms of the exhibits
     listed thereon;

         (c) the Seller shall deposit in the Collection Account all collections
     in respect of the Subsequent Mortgage Loans received or deemed received by
     the Seller on or after the related Subsequent Cut-off Date (whether in the
     nature of amounts held by the Seller for later application on behalf of the
     related Mortgagor in respect of a Monthly Payment due on or after the
     related Subsequent Cut-off Date or otherwise) except for amounts in respect
     of interest accrued on such Subsequent Mortgage Loans prior to the related
     Cut-off Date;

         (d) the Seller shall certify that, as of the Subsequent Transfer Date,
     the Seller was not insolvent, was not made insolvent by such transfer and
     is not aware of any pending insolvency;

                                      -36-
<PAGE>

         (e) the Seller shall certify that such addition of Subsequent Mortgage
     Loans will not result in a material adverse tax consequence to the Trust or
     the Certificateholders; and

         (f) the Funding Period shall not have expired.

     In addition, the Seller will provide the Servicer, the Representative, the
Rating Agencies and the Trustee with data regarding all Subsequent Mortgage
Loans to be transferred to the Trust on any Subsequent Transfer Date prior to
the related Subsequent Transfer Date. On or prior to each Subsequent Transfer
Date, the following conditions shall have been satisfied with respect to all
Subsequent Mortgage Loans to be transferred to the Trust on any Subsequent
Transfer Date:

         (A) the Seller shall have confirmed to the Rating Agencies, the
     Representative and the Trustee, in the related Subsequent Transfer
     Agreement, the satisfaction of each condition precedent specified in this
     Section 2.02;

         (B) the Seller shall have delivered to the Rating Agencies, the
     Representative and the Trustee Opinions of Counsel with respect to the
     transfer of all of the Subsequent Mortgage Loans to the Trust on any
     Subsequent Transfer Date substantially in the form of the Opinions of
     Counsel delivered to the Trustee on the Closing Date regarding bankruptcy,
     corporate and tax matters;

         (C) the Trustee shall deliver to the Rating Agencies, the
     Representative and the Seller an Opinion of Counsel with respect to the
     enforceability of each of the Subsequent Transfer Agreements substantially
     in the form of the Opinion of Counsel delivered to the Seller on the
     Closing Date; and

         (D) the Servicer shall deliver to the Seller, the Trustee, the
     Representative and the Rating Agencies the Servicer's acknowledgment to
     service all Subsequent Mortgage Loans purchased by the Trust on any
     Subsequent Transfer Date.

     On or prior to each Subsequent Transfer Date, the Seller shall provide to
the Trustee, the Servicer and the Representative a schedule of mortgage loans
that are expected to be Subsequent Mortgage Loans, and Subsequent Mortgage Loans
transferred to the Trust shall be taken only from such schedule; provided,
however, if any such identified mortgage loans do not satisfy the requirements
of Subsequent Mortgage Loans as set forth in this Section 2.02 or if any such
mortgage loans are rejected as Subsequent Mortgage Loans by the Servicer,
mortgage loans acceptable to the Servicer may be substituted for such defective
or rejected mortgage loans. The Seller shall certify that the Subsequent
Mortgage Loans will be transferred to the Trust in accordance with the foregoing
and that such Subsequent Mortgage Loans satisfy the requirements of Subsequent
Mortgage Loans as set forth in this Section 2.02 as of the Closing Date.

     Subject to Section 3.16, if all of the Subsequent Mortgage Loans are
transferred to the Trust on the Closing Date, then the remaining portion of the
Prefunding Account Deposit will be deposited into the Certificate Account and
held there, without investment thereof, until the first

                                      -37-
<PAGE>

Distribution Date. On such first Distribution Date, such amounts will be deemed
to comprise a portion of the Principal Distribution Amount and will be
distributable to the Certificateholders.

     Section 2.03 Acceptance by the Trustee; Repurchase or Substitution of
Mortgage Loans. The Trustee acknowledges the sale and assignment to the Trust
and receipt by it of the original Mortgage Notes, Assignments and Mortgages
pursuant to this Agreement and the delivery to it of the PMI Policy, and subject
to (i) the provisions of the penultimate paragraph of Section 2.01, (ii) the
review provided for in this Section of the documents referred to in clauses (a)
through (f) of Section 2.01 and (iii) delivery of the Officer's Certificates
pursuant to Section 2.01, declares that it will hold the Trust in trust upon the
terms herein set forth for the use and benefit of all present and future
Certificateholders. The Trustee agrees, for the benefit of Certificateholders,
to review each Mortgage File within 45 days after the Closing Date (or, 45 days
after the Subsequent Transfer Date, with respect to the Subsequent Mortgage
Loans) to determine whether the documents described in Section 2.01(a)-(c), (e)
and (f) have been executed and received, and whether such documents relate to
the Mortgage Loans identified in the Mortgage Loan Schedule, or the Subsequent
Mortgage Loan Schedule, as applicable, and in so doing the Trustee may rely on
the purported due execution and genuineness of any such document and on the
purported genuineness of any signature thereon. If within such 45-day period the
Trustee finds any document constituting a part of a Mortgage File not to have
been executed or received or to be unrelated to the Mortgage Loans identified in
the Mortgage Loan Schedule or the Subsequent Mortgage Loan Schedule, as
applicable, the Trustee shall promptly, but in no event later than 30 days
following such finding, notify the Seller of such findings. The Seller shall
have a period of 60 days from the date of such notice to correct or cure any
such defect. Notwithstanding the second paragraph of Section 9.01, the Trustee
shall be under no duty or obligation to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face.

     If the Trustee has notified the Seller of a defect in a Mortgage File that
materially and adversely affects the value of the related Mortgage Loan or the
interests of the Certificateholders in the related Mortgage Loan, and such
defect remains uncured after such 60-day period following the Seller's
notification, the Seller shall, (i) in the case of a defect consisting solely of
the failure of the Company to deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon for reasons set forth in
Section 2.01, on the first Deposit Date occurring after the expiration of eight
months from the Closing Date, and (ii) in the case of all other defects, on the
Deposit Date occurring not later than 60 days after receipt of notice of such
defect from the Trustee either (I) repurchase the related Mortgage Loan
(including any property acquired in respect thereof and any insurance policy or
current or future insurance proceeds with respect thereto) from the Trust at a
price equal to the Purchase Price, which shall be accomplished by deposit of
monies by the Seller in the Certificate Account on such Deposit Date, or (II)
substitute one or more Qualified Replacement Mortgage Loans for the related
Mortgage Loan.

                                      -38-
<PAGE>

     Upon receipt by the Trustee of an Officer's Certificate of the Servicer to
the effect that the Purchase Price for a Defective Mortgage Loan (other than a
Defective Mortgage Loan that is a Deleted Mortgage Loan) has been deposited in
the Certificate Account, and upon confirmation by the Trustee that such Purchase
Price has been received by it, the Trustee shall execute and deliver such
instrument of transfer or assignment presented to it by the Seller, in each case
without recourse, as shall be necessary to vest in the Seller legal and
beneficial ownership of such repurchased Defective Mortgage Loan (including any
property acquired in respect thereof or insurance policy or current or future
insurance proceeds with respect thereto).

     Payments received with respect to Qualified Replacement Mortgage Loans in
the Collection Period prior to the Deposit Date on which such substitution
occurs will not be part of the Trust and will be retained by the Seller. For the
Distribution Date following the Deposit Date on which such substitution occurs,
distributions to Certificateholders will reflect the payments received on such
Deleted Mortgage Loan in the related Collection Period representing amounts due
or accrued thereon prior to such Deposit Date, and the Seller shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. In the case of a Qualified Replacement Mortgage Loan, the
Mortgage File relating thereto shall be delivered to the Trustee and the amount,
if any, by which the Principal Balance of the related Deleted Mortgage Loan as
of the related Deposit Date exceeds the Principal Balance of the Qualified
Replacement Mortgage Loan as of the first day of the related Collection Period
shall be remitted by the Seller to the Trustee for deposit in the Certificate
Account on the Deposit Date on which the substitution occurs. For purposes of
this Agreement, any such amount so deposited in the Certificate Account shall be
deemed a prepayment of the related Deleted Mortgage Loan received by the
Servicer as of the prior Determination Date. Upon receipt by the Trustee of an
Officer's Certificate of the Seller certifying that the Qualified Replacement
Mortgage Loan conforms to the requirements of this Agreement and (a) written
notification of such deposit signed by a Servicing Officer and (b) the new
Mortgage File (containing all of the documents referred to in clauses (a), (b),
(c), (d), (e) and (f) of Section 2.01), the Trustee shall release or cause to be
released to the Seller the Mortgage File related to the Deleted Mortgage Loan or
property and shall execute and deliver or cause to be executed and delivered
such instrument of transfer or assignment presented to it by the Seller, without
recourse, as shall be necessary to vest in the Seller all of the legal and
beneficial ownership of such Deleted Mortgage Loan or property and the Trustee
shall have no further responsibility with respect to said Mortgage File. In
addition, the Trustee shall assign to the Seller any of the Trustee's rights
under the PMI Policy in respect of any such Deleted Mortgage Loan released to
the Seller. It is understood and agreed that the obligation of the Seller to
substitute a Qualified Replacement Mortgage Loan for or repurchase any Defective
Mortgage Loan (or any property acquired in respect thereof or insurance policy
or current or future insurance proceeds with respect thereto) shall constitute
the sole remedy against it respecting such defect available to the
Certificateholders, the PMI Insurer or the Trustee, and such obligation on the
part of the Seller shall survive any resignation or termination of the Company
as Servicer under this Agreement. Notwithstanding the foregoing, a substitution
by the Seller for a defect in a constituent document will not be made unless the
Trustee receives an Officer's Certificate certifying that the Qualified
Replacement Mortgage Loan conforms to the requirements of this Agreement and an
Opinion of Counsel that such substitution will not be a "prohibited transaction"
as defined in Section 860F(a)(2) of the Code.

                                      -39-
<PAGE>

Any substitution must be effected not later than two years after the Closing
Date, or within such longer period of time as may be permitted under the REMIC
Provisions for substitution of mortgage loans.

     On or prior to the 90th day after the Closing Date (or the 90th day after
the applicable Subsequent Transfer Date with respect to the Subsequent Mortgage
Loans), the Trustee shall certify to the Seller and the Servicer that it has
received all of the documents referred to in clauses (a) (b), (c), (e) and (f)
of Section 2.01 and that all corrections or curative actions required to be
taken by the Seller within the 60-day period referred to in the first paragraph
of this Section have been completed or effected, or the related Mortgage Loans
have been repurchased or substituted, in accordance with the provisions of this
Section or, if any deficiencies in the Mortgage Files or other omissions of the
Seller with respect to the Mortgage Files are known to the Trustee at the time
of such certification, the Trustee shall make such certification only with
respect to those Mortgage Loans as to which no such defects or omissions are
known, and shall qualify such certification with respect to the remaining
Mortgage Loans, identifying the related defects or omissions. Thereafter, the
Trustee shall provide the Seller and the Servicer with monthly exception reports
indicating the status of any exceptions until all such exceptions have been
eliminated. Such monthly exception reports shall be distributed by the Trustee
on the related Distribution Date with the Statement to Certificateholders.

     Section 2.04 Representations and Warranties Regarding the Servicer and the
Seller. (a) The Company, as Seller, hereby represents and warrants to the
Trustee, the Servicer and the Certificateholders that, as of the Closing Date:

         (i) The Company is a corporation duly organized, validly existing and
     in good standing under the laws of the State of California. The Company has
     the power and authority to execute and deliver this Agreement and to
     perform its obligations in accordance herewith; the execution, delivery and
     performance of this Agreement (including all instruments of transfer to be
     delivered pursuant to this Agreement) by the Company and the consummation
     of the transactions contemplated hereby have been duly and validly
     authorized by all necessary corporate action; this Agreement evidences the
     valid and binding obligation of the Company enforceable against the Company
     in accordance with its terms, subject to the effect of bankruptcy,
     insolvency, reorganization, moratorium and other similar laws relating to
     or affecting creditors' rights generally or the application of equitable
     principles in any proceeding, whether at law or in equity; and the
     consummation of the transactions contemplated hereby will not result in the
     breach of any terms or provisions of the articles of incorporation or
     by-laws of the Company or result in the breach of any term or provision of,
     or conflict with or constitute a default under or result in the
     acceleration of any obligation under, any material agreement, indenture or
     loan or credit agreement or other material instrument to which the Company
     or its property is subject, or result in the violation of any law, rule,
     regulation, order, judgment or decree to which the Company or its property
     is subject.

         (ii) All actions, approvals, consents, waivers, exemptions, variances,
     franchises, orders, permits authorizations, rights and licenses required to
     be taken, given

                                      -40-
<PAGE>

     or obtained, as the case may be, by or from any federal, state or other
     governmental authority or agency, that are necessary in connection with the
     execution and delivery by the Company of this Agreement, have been duly
     taken, given or obtained, as the case may be, are in full force and effect,
     are not subject to any pending proceedings or appeals (administrative,
     judicial or otherwise) and either the time within which any appeal
     therefrom may be taken or review thereof may be obtained has expired or no
     review thereof may be obtained or appeal therefrom taken, and are adequate
     to authorize the consummation of the transactions contemplated by this
     Agreement on the part of the Company and the performance by the Company of
     its obligations under this Agreement;

         (iii) There is no action, suit, proceeding or investigation pending or,
     to the best of the Company's knowledge, threatened against the Company
     that, 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
     that would draw into question the validity of this Agreement or the
     Mortgage Loans or of any action taken or to be taken in connection with the
     obligations of the Company contemplated herein, or that would be likely to
     impair the ability of the Company to perform under the terms of this
     Agreement;

         (iv) The Company is not in default with respect to any order or decree
     of any court or any order, regulation or demand of any federal, state,
     municipal or governmental agency, which default might have consequences
     that would materially and adversely affect the condition (financial or
     other) or operations of the Company or its properties or might have
     consequences that would adversely affect its performance hereunder;

         (v) The transfer, assignment and conveyance of the Mortgage Loans by
     the Company, as Seller, pursuant to this Agreement are not subject to the
     bulk transfer laws or any similar statutory provisions in effect in any
     applicable jurisdiction and are not being transferred with the intent to
     hinder, delay or defraud any creditors; and

         (vi) The collection practices used by the Company are in all material
     respects legal, proper, prudent and customary in the home equity mortgage
     loan servicing business.

(b) The Servicer hereby represents and warrants to the Trustee, the Seller and
the Certificateholders that, as of the Closing Date:

         (i) The Servicer is a corporation licensed as a mortgage banker duly
     organized, validly existing and in good standing under the laws of the
     state of its incorporation and has, and had at all relevant times, full
     corporate power to service the Mortgage Loans, to own its property, to
     carry on its business as presently conducted and to enter into and perform
     its obligations under this Agreement. The Servicer has all necessary
     licenses and is qualified to transact business in and is in good standing
     under the laws of each state where a Mortgaged

                                      -41-
<PAGE>

     Property is located or is otherwise exempt under applicable law from such
     qualification or is otherwise not required under applicable law to effect
     such qualification and no demand for such qualification has been made upon
     the Servicer by any state having jurisdiction;

         (ii) The execution and delivery of this Agreement by the Servicer and
     the performance by it of and compliance with the terms of this Agreement
     will not violate the Servicer's articles of incorporation or by-laws or
     constitute a default (or an event which, with notice or lapse of time or
     both, would constitute a default) under, or result in the breach or
     acceleration of, any material contract, agreement or other instrument to
     which the Servicer is a party or which may be applicable to the Servicer or
     any of its assets;

         (iii) The Servicer has the full power and authority to enter into and
     consummate all transactions contemplated by this Agreement to be
     consummated by it, has duly authorized the execution, delivery and
     performance of this Agreement, and has duly executed and delivered this
     Agreement. This Agreement, assuming due authorization, execution and
     delivery by the other parties hereto, constitutes a valid, legal and
     binding obligation of the Servicer, enforceable against it in accordance
     with the terms hereof, except as such enforcement may be limited by
     bankruptcy, insolvency, reorganization, receivership, moratorium or other
     similar laws relating to or affecting the rights of creditors generally,
     and by general equity principles (regardless of whether such enforcement is
     considered in a proceeding in equity or at law);

         (iv) The Servicer is not in violation of, and the execution and
     delivery of this Agreement by the Servicer and the performance by it and
     compliance with the terms of this Agreement will not constitute a violation
     with respect to, any order or decree of any court or any order or
     regulation of any federal, state, municipal or governmental agency having
     jurisdiction, which violation would materially and adversely affect the
     condition (financial or otherwise) or operations of the Servicer or any of
     its properties or materially and adversely affect the performance of any of
     its duties hereunder;

         (v) There are no actions or proceedings against, or investigations of,
     the Servicer pending or, to the knowledge of the Servicer, threatened,
     before any court, administrative agency or other tribunal (A) that, if
     determined adversely, would prohibit its entering into this Agreement, (B)
     seeking to prevent the consummation of any of the transactions contemplated
     by this Agreement or (C) that, if determined adversely, would prohibit or
     materially and adversely affect the performance by the Servicer of any of
     its obligations under, or the validity or enforceability of, this
     Agreement;

         (vi) No consent, approval, authorization or order of any court or
     governmental agency or body is required for the execution, delivery and
     performance by the Servicer of, or compliance by the Servicer with, this
     Agreement, or for the consummation of the transactions contemplated by this
     Agreement, except for such consents, approvals, authorizations and orders,
     if any, that have been obtained prior to the Closing Date;

                                      -42-
<PAGE>

         (vii) No Officer's Certificate, statement, report or other document
     prepared by the Servicer and furnished or to be furnished by it pursuant to
     this Agreement or in connection with the transactions contemplated hereby
     contains any untrue statement of material fact;

         (viii) The Servicer believes that the Servicing Fee Rate provides a
     reasonable level of base compensation to the Servicer for servicing the
     Mortgage Loans on the terms set forth herein; and

         (ix) The transactions contemplated by this Agreement are in the
     ordinary course of business of the Servicer.

         (x) Each Sub-Servicer engaged by the Servicer has obtained all licenses
     and approvals required under state or federal law to service the Mortgage
     Loans specified in the Sub-Servicing Agreement to which the Sub-Servicer is
     a party.

     (c) The representations and warranties set forth in this Section shall
survive the sale and assignment of the Mortgage Loans to the Trust and the
issuance, sale and delivery of the Certificates. Upon discovery of a breach of
any of the foregoing representations and warranties that materially and
adversely affects the value of such Mortgage Loans or the interests of the
Certificateholders in such Mortgage Loans, the party discovering such breach
shall give prompt written notice to the other parties. Within 60 days of its
discovery or its receipt of notice of breach, the Company or the Servicer, as
the case may be, shall cure such breach in all material respects.

     Section 2.05 Representations and Warranties of the Seller Regarding the
Mortgage Loans. The Seller represents and warrants to the Trustee, the Servicer
and the Certificateholders as of the Closing Date and, with respect to any
Subsequent Mortgage Loan, as of the Subsequent Transfer Date (in either case
except as otherwise expressly stated) that, as to each Mortgage Loan conveyed to
the Trust by it:

         (i) The information with respect to each Mortgage Loan set forth in the
     Mortgage Loan Schedule or Subsequent Mortgage Loan Schedule is true and
     correct as of the related Cut-off Date or related Subsequent Transfer Date;

         (ii) All of the original or certified documentation set forth in
     Section 2.01 (including all material documents related thereto), with
     respect to each Mortgage Loan has been or will be delivered to the Trustee
     on the Closing Date or as otherwise provided in Section 2.01 or Section
     2.02, as applicable;

         (iii) Each related Mortgaged Property is improved by a one- to
     four-family residential dwelling owned by the related Mortgagor in fee
     simple that is permanently affixed to the land and constitutes real
     property under the laws of the state in which the Mortgaged Property is
     located but shall not include co-operatives or mobile homes;

                                      -43-
<PAGE>

         (iv) Each Mortgage Loan is a "qualified mortgage" as defined in Section
     860G(a)(3) of the Code and no such Mortgage Loan has a loan-to-value ratio
     (calculated in accordance with the REMIC Provisions) in excess of 125%;
     none of the Mortgage Loans are either "consumer credit contracts" or
     "purchase money loans" as such terms are defined in 16 C.F.R. ss. 433; with
     respect to each Mortgage Loan that is a "mortgage" as such term is defined
     in 15 U.S.C. 1602(aa), no obligor has or will have a claim or defense under
     such Mortgage Loan;

         (v) As of the Cut-off Date, no Initial Mortgage Loan included in Group
     I or Group II has a Loan-to-Value Ratio in excess of 97%; except that
     Mortgage Loans in Group I representing not more than 0.13% of the Original
     Rate Group I Balance have Combined Loan-to-Value Ratios between 95% and 97%
     and Mortgage Loans in Adjustable Rate Group II representing not more than
     3.32% of the Original Group II Balance have Combined Loan-to-Value Ratios
     between 90% and 95%;

         (vi) Each Mortgage Loan was originated by the Seller, an Affiliate of
     the Seller or by an originator not affiliated with the Seller authorized to
     originate such Mortgage Loan and is being serviced by the Seller;

         (vii) Each Initial Mortgage Loan included in Group I as of the Cut-off
     Date either bears a fixed rate of interest of at least 7.46% per annum or
     is a Hybrid Loan that has a Minimum Rate of not less than 9.50% per annum
     and a Mortgage Loan Rate as of the Cut-off Date of not less than 7.46% per
     annum and each Initial Mortgage Loan included in Group II as of the Cut-off
     Date either bears a fixed rate of interest of at least 7.99% per annum or
     is a Hybrid Loan that has a Minimum Rate of not less than 10.13% per annum
     and a Mortgage Loan Rate as of the Cut-off Date of not less than 7.99% per
     annum; the terms of each Hybrid Loan that becomes an Adjustable Rate
     Mortgage Loan require that adjustments in the related Mortgage Loan Rate be
     made employing the related Index measured as of a date not more than three
     months prior to the related adjustment date;

         (viii) Each Mortgage Note provides for a schedule of substantially
     level and equal Monthly Mortgage Payments (subject, in the case of an
     Adjustable Rate Mortgage Loan, to periodic adjustments relating to changes
     in the Mortgage Loan Rate) that are sufficient to amortize fully the
     principal balance of such Mortgage Note on or before its maturity date,
     except that, Mortgage Notes with respect to Initial Mortgage Loans
     representing not more than 1% of the initial Pool Balance, provide for
     level and equal Monthly Mortgage Payments that are sufficient to amortize
     fully the principal balances of such Notes over a period not exceeding 30
     years, with "balloon" payments at stated maturity that are substantially in
     excess of the Monthly Mortgage Payments;

         (ix) Each Mortgage is a valid and subsisting lien of record on the
     Mortgaged Property having the priority indicated on the Mortgage Loan
     Schedule, subject, in the case of any Junior Mortgage Loan, only to any
     Senior Lien or Senior Liens on such Mortgaged Property and subject in all
     cases to the exceptions to title set forth in the title

                                      -44-
<PAGE>

     insurance policy with respect to the related Mortgage Loan, which
     exceptions are generally acceptable to home equity mortgage lending
     institutions, and such other exceptions to which similar properties are
     commonly subject and that do not individually, or in the aggregate,
     materially and adversely affect the benefits of the security intended to be
     provided by such Mortgage;

         (x) Immediately prior to the sale, transfer and assignment herein
     contemplated, the Seller held good and indefeasible title to, and was the
     sole owner of, each Mortgage Loan conveyed by the Seller subject to no
     liens, charges, mortgages, encumbrances or rights of others, except with
     respect to liens that will be released simultaneously with such transfer
     and assignment; and immediately upon the transfer and assignment herein
     contemplated, the Trustee will hold good and indefeasible title to, and be
     the sole owner of, each Mortgage Loan subject to no liens, charges,
     mortgages, encumbrances or rights of others;

         (xi) The Mortgage Loan Rate for each Adjustable Rate Mortgage Loan will
     be adjustable on each related Adjustment Date and will equal the sum,
     rounded upward to the nearest three decimal places, of the Index plus the
     related Gross Margin, subject to any related Minimum Rates, Maximum Rates
     or any limitations or periodic adjustments, in each case as specified in
     the related Mortgage Loan Schedule. No Mortgage Loans in any Mortgage Loan
     Group are subject to negative amortization.

         (xii) With respect to any Adjustable Rate Mortgage Loan, no mortgage
     document in the Mortgage File contains any provision permitting or
     requiring conversion of the Mortgage Loan to a fixed interest rate nor is
     the Mortgage Loan Rate conditioned upon Mortgagor maintaining accounts with
     Seller;

         (xiii) As of the Closing Date or Subsequent Cut-off Date, as
     appropriate (a) no Mortgage Loan had two or more Monthly Mortgage Payments
     past due and (b) not more than 1.00% of the Initial Mortgage Loans (by
     Original Pool Balance) had one Monthly Mortgage Payments past due;

         (xiv) As of the related Cut-off Date or Subsequent Cut-off Date, as
     appropriate, there is no delinquent tax or assessment lien on any Mortgaged
     Property, and, to the best knowledge of the Seller, each Mortgaged Property
     is free of damage and is in good repair and is not affected by hazardous or
     toxic wastes or substances;

         (xv) There is no offset, right of rescission, counterclaim or defense,
     including the defense of usury, with respect to any Mortgage Note or
     Mortgage, 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 subject
     to any right to rescission, set-off, counterclaim or defense, including the
     defense of usury, and no such right of rescission, set-off, counterclaim or
     defense has been asserted with respect thereto;

                                      -45-
<PAGE>

         (xvi) As of the related Cut-off Date or Subsequent Cut-off Date, as
     appropriate, there is no mechanic's lien or claim for work, labor or
     material affecting any Mortgaged Property that is or may be a lien prior
     to, or equal to or on a parity with, the lien of the related Mortgage
     except those that are insured against by any title insurance policy
     referred to in paragraph (xvii) below;

         (xvii) To the best of the Seller's knowledge, each Mortgage Loan at the
     time it was made complied in all material respects with applicable local,
     state and federal laws and regulations, including, without limitation, the
     federal Truth-in-Lending Act and other consumer protection laws, real
     estate settlement procedure, usury, equal credit opportunity, disclosure
     and recording laws;

         (xviii) With respect to each Mortgage Loan, a lender's title insurance
     policy (issued in standard form by a title insurance company authorized to
     transact business in the state where the related Mortgaged Property is
     located), in an amount at least equal to the Original Principal Amount of
     such Mortgage Loan insuring the mortgagee's interest under the related
     Mortgage Loan as the holder of a valid lien of record on the real property
     described in the related Mortgage (subject only to exceptions of the
     character referred to in paragraph (viii) above), was effective on the date
     of the origination of such Mortgage Loan, and, as of the Closing Date, such
     policy is in full force and effect and thereafter such policy shall
     continue in full force and effect and shall inure to the benefit of the
     Certificateholders upon consummation of the transactions contemplated by
     this Agreement;

         (xix) As of the related Cut-off Date or Subsequent Cut-off Date, as
     appropriate, either (a) the improvements upon each Mortgaged Property are
     covered by a valid and existing hazard insurance policy (which may be a
     blanket policy) with a generally acceptable carrier that provides for fire
     and extended coverage representing coverage not less than the least of (a)
     the outstanding principal balance of the related Mortgage Loan (together,
     in the case of a Junior Mortgage Loan, with the outstanding principal
     balance of the Senior Lien), (b) the minimum amount required to compensate
     for damage or loss on a replacement cost basis or (c) the full insurable
     value of the Mortgaged Property or (b) in the case of a Junior Mortgage
     Loan, a policy has been issued by a generally acceptable carrier that will
     cover the full Principal Balance of such Junior Mortgage Loan in the event
     of a loss covered by a hazard typically insured against by the type of
     policy referred to in clause (xviii)(a);

         (xx) If any Mortgaged Property is in an area identified in the Federal
     Register by FEMA as having special flood hazards, a flood insurance policy
     in a form meeting the requirements of the current guidelines of the Federal
     Insurance Administration, if obtainable with respect to such Mortgaged
     Property, is in effect with respect to such Mortgaged Property with a
     generally acceptable carrier in an amount representing coverage not less
     than the least of (A) the outstanding principal balance of the related
     Mortgage Loan (together, in the case of a Junior Mortgage Loan, with the
     outstanding principal balance of the Senior Lien), (B) the minimum amount
     required to compensate

                                      -46-
<PAGE>

     for damage or loss on a replacement cost basis or (C) the maximum amount of
     insurance that is available under the Flood Disaster Protection Act of
     1973;

         (xxi) Each Mortgage and Mortgage Note is the legal, valid and binding
     obligation of the maker thereof and is enforceable in accordance with its
     terms, except only as such enforcement may be limited by bankruptcy,
     insolvency, reorganization, moratorium or other similar laws affecting the
     enforcement of creditors' rights generally and by general principles of
     equity (whether considered in a proceeding or action in equity or at law),
     and all parties to each Mortgage Loan had full legal capacity to execute
     all documents relating to such Mortgage Loan and convey the estate therein
     purported to be conveyed; with respect to each Mortgage Loan, only one
     original Mortgage Note exists;

         (xxii) The Seller has caused and will cause to be performed any and all
     acts required to be performed to preserve the rights and remedies of the
     Trustee in any insurance policies applicable to each Mortgage Loan,
     including any necessary notifications of insurers, assignments of policies
     or interests therein, and establishment of co-insured, joint loss payee and
     mortgagee rights in favor of the Trustee;

         (xxiii) As of the Cut-off Date, Initial Mortgage Loans representing no
     more than 1% of the Group I Balance and Initial Mortgage Loans representing
     no more than 1% of the Original Group II Balance, respectively, are secured
     by Mortgaged Properties located within any single zip code area;

         (xxiv) Each original Mortgage has been recorded or is in the process of
     being recorded, and all subsequent assignments of the original Mortgage
     (other than the assignment from the Seller to the Trustee and any
     assignment to the Seller or an affiliate thereof) have been recorded in the
     appropriate jurisdictions as to which no Opinion of Counsel was delivered
     pursuant to Section 2.01 or 2.02, as applicable, or such Mortgages and
     assignments are in the process of being recorded);

         (xxv) The terms of each Mortgage Note and each Mortgage have not been
     impaired, altered or modified in any respect, except by a written
     instrument that has been recorded, if necessary, to protect the interest of
     the Certificateholders and that has been delivered to the Trustee. The
     substance of any such alteration or modification is reflected on the
     Mortgage Loan Schedule and has been approved by the primary mortgage
     guaranty insurer, if any;

         (xxvi) The proceeds of each Mortgage Loan have been fully disbursed,
     and there is no obligation on the part of the mortgagee to make future
     advances thereunder. Any and all requirements as to completion of any
     on-site or off-site improvements and as to disbursements of any escrow
     funds therefor either have been complied with or are not yet required to be
     complied with but will be complied with as and when required. All costs,
     fees and expenses incurred in making or closing or recording such Mortgage
     Loans were paid;

                                      -47-
<PAGE>

         (xxvii) No Mortgage Note is or has been secured by any collateral,
     pledged account or other security other than the lien of the corresponding
     Mortgage;

         (xxviii) No Mortgage Loan was originated under a buydown plan;

         (xxix) No Mortgage Loan has a shared appreciation feature or other
     contingent interest feature;

         (xxx) Each Mortgaged Property consists of one or more contiguous
     parcels of real property with a residential dwelling erected thereon;

         (xxxi) Each Mortgage Loan contains a provision for the acceleration of
     the payment of the unpaid principal balance of such Mortgage Loan in the
     event the related Mortgaged Property is sold without the prior consent of
     the mortgagee thereunder;

         (xxxii) Any advances made to the Mortgagor after the date of
     origination of a Mortgage Loan but prior to the related Cut-off Date or
     Subsequent Cut-off Date, as appropriate, have been consolidated with the
     outstanding principal amount secured by the related Mortgage, and the
     secured principal amount, as consolidated, bears a single interest rate and
     single repayment term reflected on the Mortgage Loan Schedule. The
     consolidated principal amount as of the related Cut-off Date or Subsequent
     Cut-off Date, as appropriate, does not exceed the original principal amount
     of the related Mortgage Loan and is reflected as the current principal
     amount of such Mortgage Loan on the Mortgage Loan Schedule;

         (xxxiii) To the best knowledge of the Seller, there is no proceeding
     pending or threatened for the total or partial condemnation of any
     Mortgaged Property, nor is such a proceeding currently occurring;

         (xxxiv) To the best knowledge of the Seller, all of the improvements
     that were included for the purposes of determining the Appraised Value of
     any Mortgaged Property lie wholly within the boundaries and building
     restriction lines of such Mortgaged Property, and no improvements on
     adjoining properties encroach upon such Mortgaged Property except those
     that are identified in the related title insurance policy and affirmatively
     insured;

         (xxxv) To the best knowledge of the Seller, no improvement located on
     or being part of any Mortgaged Property is in violation of any applicable
     zoning law or regulation, all inspections, licenses and certificates
     required to be made or issued with respect to all occupied portions of each
     Mortgaged Property and, with respect to the use and occupancy of the same,
     including but not limited to certificates of occupancy and fire
     underwriting certificates, have been made or obtained from the appropriate
     authorities and such Mortgaged Property is lawfully occupied under
     applicable law;

                                      -48-
<PAGE>

         (xxxvi) With respect to each Mortgage that is 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 such Mortgage,
     and no fees or expenses are or will become payable by the
     Certificateholders or the Trust to any trustee under any deed of trust,
     except in connection with a trustee's sale after default by the related
     Mortgagor;

         (xxxvii) With respect to each Junior Mortgage Loan, either (A) no
     consent for such Mortgage Loan was required by the holder of the related
     Senior Lien prior to the making of such Mortgage Loan or (B) such consent
     has been obtained and is contained in the related Mortgage File;

         (xxxviii) Each Mortgage contains customary and enforceable provisions
     that render the rights and remedies of the holder thereof adequate for the
     realization against the related Mortgaged Property of the benefits of the
     security, including by trustee's sale and by judicial foreclosure and there
     is no homestead or other exemption available to the related Mortgagor that
     would materially interfere with the right to sell the related Mortgaged
     Property at a trustee's sale or the right to foreclose upon the related
     Mortgaged Property;

         (xxxix) There is no default, breach, violation or event of acceleration
     existing under any Mortgage or the related Note and no event that, 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 the Seller has not waived any default, breach violation
     or event of acceleration;

         (xl) No instrument of release or waiver has been executed in connection
     with any Mortgage Loan, and no Mortgagor has been released, in whole or in
     part, except in connection with an assumption agreement that has been
     approved by the primary mortgage guaranty insurer, if any, and that has
     been delivered to the Trustee;

         (xli) The maturity date of each Junior Mortgage Loan is at least 12
     months prior to the maturity date of the related Senior Lien if such Senior
     Lien provides for a balloon payment;

         (xlii) As of the Cut-off Date, at least 91.10% of the Initial Mortgage
     Loans in Group I (by Original Group I Balance) and at least 94.35% of the
     Initial Mortgage Loans in Group II (by Original Group II Balance) are
     secured by Mortgaged Properties that are maintained by the related
     Mortgagors as primary residences;

         (xliii) There are no defaults (other than delinquencies) in complying
     with the terms of the Mortgage, and all taxes, governmental assessments,
     insurance premiums, water, sewer and municipal charges, leasehold payments
     or ground rents that 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 that remains unpaid; the Seller has not advanced funds, or
     induced, solicited or knowingly received any advance of funds by a

                                      -49-
<PAGE>

     party other than the Mortgagor, directly or indirectly, for the payment of
     any amount required by the Mortgage, other than interest accruing from the
     date of the Mortgage Note or date of disbursement of the Mortgage proceeds,
     whichever is greater, to the date that precedes by one month the due date
     of the first installment of principal and interest;

         (xliv) To the best of the Seller's knowledge, all parties that have had
     any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee
     or otherwise during the period in which they held and disposed of such
     interest, were and either are now or, in the case of subclause (1) of this
     clause, will be within 30 days of the Closing Date or Subsequent Cut-off
     Date, as appropriate, (1) in compliance with any and all applicable
     licensing requirements of the laws of the state wherein the Mortgaged
     Property is located, and (2) (A) organized under the laws of such state, or
     (B) qualified to do business in such state, or (C) federal savings and loan
     associations or national banks having principal offices in such state, or
     (D) not doing business in such state so as to require qualification or
     licensing;

         (xlv) No Mortgage Loan was selected by the Seller for inclusion in the
     Trust on any basis intended to adversely affect the Trust;

         (xlvi) A full appraisal of each Mortgaged Property was performed in
     connection with the origination of the related Mortgage Loan, and such
     appraisal is the appraisal referred to in determining the Appraised Value
     of such Mortgaged Property;

         (xlvii) With respect to each Junior Mortgage Loan, the related Senior
     Lien requires equal monthly payments or, if such Senior Lien bears an
     adjustable interest rate, the monthly payments for such Senior Lien may be
     adjusted no more frequently than monthly;

         (xlviii) With respect to any Junior Mortgage Loan with a related Senior
     Lien that provides for negative amortization or an open-end feature that
     permits additional borrowings, the balance of such Senior Lien reflected on
     the Mortgage Loan Schedule and used to calculate the Combined Loan-to-Value
     Ratio for such Junior Mortgage Loan is based on the maximum amount of
     negative amortization, deferred interest or maximum amount of borrowings
     permitted under such Senior Lien;

         (xlix) The Company has not required the Mortgagor to sign a letter in
     connection with the origination of any Mortgage Loan in which such
     Mortgagor indicates its inability to repay such Mortgage Loan in accordance
     with the terms of the related Mortgage Note;

         (l) [Reserved];

         (li) As of the related Cut-off Date or Subsequent Cut-off Date, as
     appropriate, no Mortgage Loan in any Mortgage Loan Group was secured by
     more than one Mortgaged Property;

                                      -50-
<PAGE>

         (lii) With respect to each Hybrid Loan, all of the terms of the
     Mortgage pertaining to interest rate adjustments, payment adjustments and
     adjustments of the outstanding principal balance are enforceable; such
     adjustments will not affect the priority of the Mortgage lien and all of
     the adjustments have been properly calculated, recorded, reported and
     applied in accordance with the Mortgage and applicable law;

         (liii) All insurance policies, other than any primary mortgage
     insurance policies purchased by the Seller or Servicer or any of its
     affiliates, are the valid and binding obligation of the insurer and contain
     a standard mortgagee clause naming the originator, its successors and
     assigns, as mortgagee. Such insurance policies require prior notice to the
     insured of termination or cancellation and no such notice has been
     received, each Mortgage obligates the Mortgagor thereunder to maintain all
     such insurance at the Mortgagor's cost and expense, and upon the
     Mortgagor's failure to do so, authorizes the holder of the Mortgage to
     obtain and maintain such insurance at the Mortgagor's cost and expense and
     to seek reimbursement therefor from the Mortgagor;

         (liv) None of the Mortgage Loans is subject to a plan of bankruptcy and
     no Mortgagor has sought protection or relief under any state or federal
     bankruptcy or insolvency law during the term of the related Mortgage;

         (lv) At least 93.49% of the Initial Mortgage Loans in Group I (by
     Original Group I Balance) and at least 94.88% of the Initial Mortgage Loans
     in Group II (by Original Group II Balance) have Monthly Mortgage Payments
     due during the first Collection Period during which such Mortgage Loan is
     included in the Trust;

         (lvi) All Mortgage Loans were underwritten or re-underwritten in
     accordance with the underwriting guidelines of the Company;

         (lvii) To the knowledge of the Seller, no misrepresentation,
     negligence, fraud or similar occurrence with respect to a Mortgage Loan has
     taken place on the part of the Mortgagor, any appraiser, any builder or
     developer, or any other party having statutory or common law liabilities
     with respect to the origination of the Mortgage Loan or in any related
     application for insurance in relation to such Mortgage Loan;

         (lviii) To the knowledge of the Seller, certain Mortgage Loans are
     secured by Mortgaged Properties upon which are affixed manufactured housing
     or modular homes, provided that it is the intent and agreement of the
     parties hereto that this representation shall be deemed breached if any
     Mortgage Loan is determined to be secured by a Mortgaged Property upon
     which is affixed manufactured housing or a modular home and such Mortgage
     Loan is subject to a foreclosure which results in a Realized Loss;

         (lix) There was no fraud involved in the origination of any Mortgage
     Loans by the mortgagee or the Mortgagor, any appraiser or any other party
     involved in the origination of the Mortgage Loans;

                                      -51-
<PAGE>

         (lx) No Mortgage Loan is 60 days or more contractually delinquent as of
     the Cut-off Date and no Subsequent Mortgage Loan will be 60 days or more
     contractually delinquent as of its Subsequent Transfer Date (and
     accordingly there are no Restricted Mortgage Loans required to be listed in
     Schedule II);

         (lxi) All requirements for the valid transfer of each PMI Policy,
     including any assignments or notices required in each PMI Policy, have been
     satisfied;

         (lxii) As of the Closing Date with respect to each Mortgage Loan that
     is subject to a PMI Policy, the Seller has not taken any action, or omitted
     to take any action, and there are no circumstances that would cause the PMI
     Insurer to deny a claim with respect to such Mortgage;

         (lxiii) As of the Cut-off Date, not more than 61.31% of the Initial
     Mortgage Loans included in Group I are "cash-out refinance" Mortgage Loans
     (as such term is described under the Company's underwriting guidelines) and
     not more than 62.68% of the Initial Mortgage Loans included in Group II are
     "cash-out refinance" Mortgage Loans;

         (lxiv) The information set forth in the Prepayment Charge Schedule
     (including the Prepayment Charge Summary attached thereto) is complete,
     true and correct in all material respects on the date or dates when such
     information is furnished and each Prepayment Charge is permissible and
     enforceable in accordance with its terms (except to the extent that the
     enforceability thereof may be limited by bankruptcy, insolvency,
     moratorium, receivership and other similar laws relating to creditors'
     rights generally or the collectability thereof may be limited due to
     acceleration in connection with a foreclosure) under applicable state law;

         (lxv) The Servicer will not waive any Prepayment Charge unless it is
     waived in accordance with the standard set forth in Section 3.22; and

         (lxvi) On the Closing Date, as measured by the Cut-off Date aggregate
     Principal Balance, 6.81% of the Mortgage Loans having Loan-to-Value Ratios
     exceeding 80% are covered by the PMI Policy.

         (lxvii) As of the Cut-off Date, none of the Initial Mortgage Loans in
     Group I or in Group II were subject to the Home Ownership and Equity
     Protection Act of 1994 ("HOEPA") or any comparable state law.

         (lxviii) No proceeds from any Initial Mortgage Loan were used to
     finance single-premium credit, life and disability insurance policies.

         (lxix) No Initial Mortgage Loan imposes a prepayment charge for a term
     in excess of five years.

                                      -52-
<PAGE>

     It is understood and agreed that the representations and warranties set
forth in this Section shall survive the sale and assignment of the Mortgage
Loans to the Trust and the issuance, sale and delivery of the Certificates. Upon
discovery by the Seller, the Servicer or a Responsible Officer of the Trustee of
a breach of any of the foregoing representations and warranties, without regard
to any limitation set forth in such representation or warranty concerning the
knowledge of the Seller as to the facts stated therein, which breach materially
and adversely affects the value of the related Mortgage Loan or the interests of
the Certificateholders in the related Mortgage Loan, the party discovering such
breach shall give prompt written notice to the Trustee which shall inform the
other parties hereto, and each of the Rating Agencies and take such other action
as it deems appropriate pursuant to Section 9.01.

     Within 60 days of its discovery or its receipt of notice of such breach,
the Seller shall use all reasonable efforts to cure such breach in all material
respects. Unless, prior to the expiration of such 60-day period, such breach has
been cured in all material respects or otherwise does not exist or continue to
exist, the Seller shall, not later than the Deposit Date in the month following
the related Collection Period in which any such cure period expired, but in all
events within 90 days of the earlier of the discovery of the breach or the
Seller's receipt of notice of breach (or at the election of the Seller, an
earlier Collection Period), either (I) repurchase such Mortgage Loan (or, in the
case of any representation and warranty stated above in terms of minimum or
maximum aggregate percentage amounts, repurchase Mortgage Loans such that, after
giving effect to such repurchase, the related representation and warranty would
be complied with) (including any property acquired in respect thereof and any
insurance policy or insurance proceeds with respect thereto) from the Trust in
the same manner and subject to the same conditions as set forth in Section 2.03
or (II) remove such Mortgage Loan and substitute in its place a Qualified
Replacement Mortgage Loan (or, in the case of any representation and warranty
stated above in terms of minimum or maximum aggregate percentage amounts, remove
such Mortgage Loans and substitute in their place Qualified Replacement Mortgage
Loans such that, after giving effect to such substitution, the related
representation and warranty would be complied with) in the same manner and
subject to the same conditions as set forth in Section 2.03. Upon making any
such repurchase or substitution, the Seller shall be entitled to receive an
instrument of assignment or transfer from the Trustee, without recourse to the
Trustee, to the same extent as set forth in Section 2.03 with respect to the
repurchase of or substitution for Defective Mortgage Loans under that Section.
It is understood and agreed that the obligation of the Seller to repurchase or
substitute any such Defective Mortgage Loan (or property acquired in respect
thereof or insurance policy or current or future insurance proceeds with respect
thereto) shall constitute the sole remedy against it respecting such breach of
the foregoing representations or warranties available to the Certificateholders
or the Trustee, as the case may be, and such obligation shall survive any
resignation or termination of the Company as Servicer under this Agreement.

     Notwithstanding the foregoing, a substitution of a Mortgage Loan by the
Seller for a breach will not be made unless the Trustee receive an Officer's
Certificate of the Seller certifying that the Qualified Replacement Mortgage
Loan conforms to the requirements of this Agreement and an Opinion of Counsel
that such substitution will not be a "prohibited transaction" as defined in
Section 860F(a)(2) of the Code. Any substitution must be effected not later than
two years

                                      -53-
<PAGE>

after the Closing Date, or within such longer period of time as may be permitted
under the REMIC Provisions for substitution of mortgage loans.

     Section 2.06 Execution and Authentication of Certificates. The Trustee
shall on behalf of the Trust, not in its individual capacity but solely as
Trustee, cause to be executed, and delivered on the Closing Date to or upon the
order of the Seller, in exchange for the Mortgage Loans and the other assets
comprising the Trust, simultaneously with the sale, assignment and transfer to
the Trustee of the Mortgage Loans, each Class of Certificates duly executed by
the Trustee, and authenticated by the Trustee, pursuant to Section 6.01, in
authorized denominations, equaling, 100% of the Percentage Interests in each
Class, and collectively evidencing the entire ownership of the Trust.

     Section 2.07 Reserved.

     Section 2.08 Indemnification of the Trust. The Seller shall indemnify the
Trust for any liability incurred thereby as a result of a breach of the
representation and warranty set forth in clause (xvii) of Section 2.05 (without
regard to any limitation therein relating to the knowledge of the Seller). This
indemnity obligation shall be in addition to any other obligation the Seller may
have in connection with any such breach.

                                   ARTICLE III
                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS;
                               CERTIFICATE ACCOUNT

     Section 3.01 The Servicer and the Sub-Servicers. Acting directly or through
one or more Sub-Servicers as provided in Section 3.15, the Servicer, as
servicer, shall administer the Mortgage Loans with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable home equity mortgage loans that it services for itself or others. The
duties of the Servicer shall include collecting and posting of all payments,
responding to inquiries of Mortgagors or by federal, state or local government
authorities with respect to the Mortgage Loans, investigating delinquencies,
reporting tax information to Mortgagors in accordance with its customary
practices and accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions and making Monthly
Advances and Servicing Advances pursuant to Section 5.02. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer, to the extent not in conflict with the provisions of this
Agreement. Notwithstanding the appointment of any Sub-Servicer, the Servicer
shall remain liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary to perform its servicing obligations hereunder in
the jurisdictions in which it services Mortgage Loans. If the Servicer commences
directly to service a material number or principal amount of Mortgage Loans with
related Mortgaged Properties located in any other state, the Servicer will use
its reasonable efforts promptly to obtain, and thereafter to maintain, all
licenses and qualifications necessary to perform its servicing obligations
hereunder in each such state. Each Sub-Servicer shall maintain all licenses and
qualifications necessary to perform its servicing obligations in the states
where the Mortgaged Properties to which the

                                      -54-
<PAGE>

applicable Sub-Servicing Agreement relates are located. The Servicer shall
cooperate with the Trustee and furnish to the Trustee such information in its
possession as may be necessary or appropriate to enable the Trustee to perform
its tax reporting duties hereunder. The Trustee shall furnish the Servicer with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder.

     Without limiting the generality of the foregoing, the Servicer (i) shall
continue, and is hereby authorized and empowered by the Trustee, to execute and
deliver, on behalf of itself, the Certificateholders and the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or of partial or
full release or discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the related Mortgaged Properties (ii) may
consent to any modification of the terms of any Mortgage Note not expressly
prohibited hereby if the effect of any such modification will not be to
materially and adversely affect the security afforded by the related Mortgaged
Property or to decrease or slow (other than as permitted by Section 3.02(a)(ii))
the timing of receipt of any payments required thereunder and (iii) shall not
consent to the placing of a lien senior to or on parity with that of the
Mortgage on the related Mortgaged Property.

     The Servicer may but shall not be obligated to sue to enforce or collect on
any of the Mortgage Loans or any insurance policy covering a Mortgage Loan, in
its own name if possible, or on behalf of the Trust. If the Servicer commences a
legal proceeding to enforce a Mortgage Loan or any such insurance policy, the
Trustee shall thereupon be deemed to have automatically assigned the Mortgage
Loan or the rights under such insurance policy to the Servicer for purposes of
collection only. If, however, in any suit or legal proceeding for enforcement,
it is held that the Servicer may not enforce or collect on a Mortgage Loan or
any insurance policy covering a Mortgage Loan on the ground that it is not a
real party in interest or a holder entitled to enforce such Mortgage Loan or
such insurance policy, as the case may be, then the Trustee shall, upon the
written request of a Servicing Officer, furnish the Servicer with such powers of
attorney and other documents as are necessary or appropriate to enable the
Servicer to enforce such Mortgage Loan or insurance policy, as the case may be.
Amounts expended by the Servicer under this paragraph shall be considered
Servicing Advances.

     The relationship of the Servicer to the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.

     The parties intend that each REMIC Pool shall constitute a REMIC, and that
the affairs of each REMIC Pool shall be conducted so as to qualify it as a
REMIC. In furtherance of such intention, (i) the Servicer covenants and agrees
that it shall act as agent (and the Servicer is hereby appointed to act as
agent) on behalf of each REMIC Pool, and that in such capacity it shall: (a) use
its best efforts to conduct the affairs of such REMIC Pool at all times that any
Certificates are outstanding so as to maintain the status thereof as a REMIC
under the REMIC Provisions; (b) not knowingly or intentionally take any action
or omit to take any action that would cause the termination of the REMIC status
of any REMIC Pool or that would subject such REMIC Pool to tax, including the
modification of a qualified mortgage that would subject such REMIC Pool to tax;
and (c) exercise reasonable care not to allow such REMIC Pool to receive

                                      -55-
<PAGE>

income from the performance of services or from assets not permitted under the
REMIC Provisions to be held by a REMIC, and (ii) the Holder of the Class R
Certificates covenants and agrees that it shall (a) pay the amount of any
federal income tax, including, without limitation, prohibited transaction taxes,
taxes on net income from foreclosure property, and taxes on certain
contributions to a REMIC after the Startup Day, imposed on any REMIC Pool when
and as the same shall be due and payable (but such obligation shall not prevent
the Holder of the Class R Certificates or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Holder of the Class R Certificates from withholding or depositing payment of
such tax, if permitted by law, pending the outcome of such proceedings); and (b)
pay the amount of any and all taxes imposed on any REMIC Pool pursuant to
Sections 24870, 24874 and 23153 of the California Revenue and Taxation Code. The
Holder of the Class R Certificates shall not be entitled to reimbursement for
any taxes paid pursuant to this Section.

     Section 3.02 Collection of Certain Mortgage Loan Payments; Collection
Account and Certificate Account.

     (a) The Servicer shall, to the extent such procedures shall be consistent
with this Agreement, follow such collection procedures as it follows from time
to time with respect to home equity mortgage loans in its servicing portfolio
that are comparable to the Mortgage Loans; provided that the Servicer shall
always at least follow collection procedures that are consistent with standard
industry practices. Consistent with the foregoing, and subject to the
limitations in Section 3.05, the Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, if any, excluding Prepayment Charges, or other fees that may
be collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan, or (iii) modify payments
of monthly principal and interest on any Mortgage Loan becoming subject to the
terms of the Relief Act in accordance with the Servicer's general policies for
comparable home equity mortgage loans subject to such Act.

     (b) The Servicer shall establish and maintain, or cause to be established
and maintained, one or more Eligible Accounts that in the aggregate are the
Collection Account. All amounts held in the Collection Account shall be invested
by the depository institution or trust company then maintaining the account at
the written direction of the Servicer in Permitted Investments that mature not
later than the Deposit Date next succeeding the date of investment. No Permitted
Investment shall be sold or disposed of at a gain prior to maturity unless the
Servicer has obtained an Opinion of Counsel that such sale or disposition will
not cause any REMIC Pool to be subject to the tax on income from prohibited
transactions imposed by Code Section 860F(a)(1), or otherwise subject any REMIC
Pool to tax or cause any REMIC Pool to fail to qualify as a REMIC and delivered
copies thereof to the Trustee. The Servicer shall not retain any cash or
investment in the Collection Account for a period in excess of 12 months and
cash therein shall be considered transferred to Certificate Account on a
first-in, first-out basis. All net income and gain realized from any such
investment shall be for the benefit of the Servicer as additional servicing
compensation and shall be subject to its withdrawal or order from time to time.
Any losses realized in connection with any such investment shall be for the
account of the

                                      -56-
<PAGE>

Servicer and the Servicer shall deposit or cause to be deposited the amount of
such loss (to the extent not offset by income from other investments) in the
Collection Account immediately upon the realization of such loss.

     (c) Subject to Section 3.02(d), the Servicer shall deposit in the
Collection Account each of the following payments on and collections in respect
of the Mortgage Loans as soon as practicable, but in no event later than the
close of business on the second Business Day after its receipt thereof:

         (i) all payments in respect of or allocable to interest on the Mortgage
     Loans (including any net income from REO Properties);

         (ii) all Principal Payments;

         (iii) all Payments Ahead;

         (iv) all Net Liquidation Proceeds;

         (v) all Trust Insurance Proceeds (including, for this purpose, any
     amounts required to be credited by the Servicer pursuant to the last
     sentence of Section 3.04); and

         (vi) all Prepayment Charges.

     The Servicer shall replace such amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 5.02(a) or towards the payment of a Servicing
Advance pursuant to Section 5.02(b) by depositing into the Collection Account on
or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts applied to the payment of a Servicing
Advance and those amounts applied to the payment of a Monthly Advance required
to be deposited pursuant to Section 5.01(b).

     The foregoing requirements respecting deposits to the Collection Account
are exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing fees, late payment charges, charges for checks returned for
insufficient funds, if any, or extension or other administrative charges
(excluding Prepayment Charges) paid by Mortgagors or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items. The amounts deposited
in the Collection Account are subject to withdrawal, from time to time, to make
deposits into the Certificate Account pursuant to Section 3.02(e), to pay itself
the Monthly Servicing Fee pursuant to Section 3.08 and to make Servicing
Advances or to reimburse itself for Servicing Advances, as applicable, in either
case in accordance with Section 5.02(b), to make Monthly Advances or to
reimburse itself for payments of Monthly Advances, as applicable, in either case
in accordance with Section 5.02(a). In addition, if the Servicer deposits in the
Collection Account any amount not required to be so deposited or any amount in
respect of payments by Mortgagors made by checks subsequently

                                      -57-
<PAGE>

returned for insufficient funds or other reason for non-payment, it may at any
time withdraw such amount from the Collection Account, any provision herein to
the contrary notwithstanding.

     (d) Upon such terms as the Rating Agencies may approve, the Servicer may
make the deposits to the Collection Account referred to in Section 3.02(c) on a
later day than the second Business Day after receipt of the amounts required to
be so deposited, which terms and later day shall be specified by the Rating
Agencies and confirmed to the Trustee and the Servicer in writing.

     (e) The Trustee shall establish and maintain the Certificate Account. The
Certificate Account shall be an Eligible Account segregated on the books of the
Trustee and held by the Trustee in trust, and the Certificate Account and the
amounts deposited therein shall not be subject to any claim, liens or
encumbrances of any creditors or depositors of the Trustee or the Company
(whether made directly or indirectly through a liquidator, receiver or trustee
in bankruptcy of the Trustee or the Company). At or before 2:00 p.m. Los Angeles
time on each Deposit Date, the Servicer shall withdraw from the Collection
Account all amounts on deposit therein that constitute any portion of Available
Funds for a Mortgage Loan Group and the related Distribution Date (including any
amounts therein that are being held for distribution on a subsequent
Distribution Date which are being applied toward the Monthly Advance for the
related Distribution Date pursuant to Section 5.02(a)) and all Prepayment
Charges collected during the related Collection Period and remit such amounts to
the Trustee for deposit in the Certificate Account. In addition, any
Compensating Interest and Monthly Advances required to be made by the Servicer
for the related Mortgage Loan Group in respect of the related Distribution Date
and any amounts required to be deposited into the Certificate Account in
connection with a purchase or repurchase of any Mortgage Loans in such Mortgage
Loan Group or any shortage on such Mortgage Loans by the Seller or the Servicer
pursuant to Section 2.03, 2.05, 3.01, 3.06 or 10.01 or a substitution of a
Qualified Replacement Mortgage Loan pursuant to Section 2.03 or 2.05, or in
connection with a purchase of Mortgage Loans by the Servicer pursuant to Section
10.01 or in connection with the Servicer's failure to adjust the Mortgage Loan
Rate on an Adjustable Rate Mortgage Loan, shall be remitted to the Trustee for
deposit in the Certificate Account on the applicable Deposit Date. On the
Closing Date, the Class P Deposit shall be deposited in to the Certificate
Account. Any amounts held in the Certificate Account (other than the Class P
Deposit) may be invested at the written direction of the Servicer in Permitted
Investments upon the same terms and conditions as those specified in clause (b)
above with respect to the Collection Account except that such investments shall
mature not later than the Business Day preceding the Distribution Date next
succeeding the date of investment, and in the absence of such direction the
Trustee shall invest in Permitted Investments described in clause (e) of the
definition of Permitted Investments. All net income and gain realized from any
such investment shall be for the benefit of the Servicer as additional servicing
fee; except that the net income and gain realized from such investments in
respect of the Business Day immediately preceding any Distribution Date shall be
for the benefit of the Trustee as additional trustee fee, and shall be subject
to its withdrawal or order from time to time. Any losses realized in connection
with any such investment shall be for the account of the Servicer and the
Servicer shall deposit or cause to be deposited the amount of such loss (to the
extent not offset by income from other investments) in the Certificate Account
immediately upon the realization of such loss.

                                      -58-
<PAGE>

     Section 3.03 Additional Servicing Responsibilities for the Adjustable Rate
Mortgage Loans. The Servicer shall enforce each Adjustable Rate Mortgage Loan
and shall timely calculate, record, report and apply all Mortgage Loan Rate
adjustments in accordance with the related Mortgage Note. The Servicer's records
shall, at all times, reflect then-current Mortgage Loan Rate and Monthly
Mortgage Payment and the Servicer shall timely notify the Mortgagor of any
changes to the Mortgage Loan Rate and the Monthly Mortgage Payment. If the
Servicer fails to adjust the Mortgage Loan Rate or the Monthly Mortgage Payment
in accordance with the terms of the Mortgage Note for the related Adjustable
Rate Mortgage Loan, or if the Servicer fails to notify the related Mortgagor of
any such adjustment as required under the terms of such Mortgage Note, or if any
liability, claim or defense arises with respect to any Adjustable Rate Mortgage
Loan solely as a result of any such failure, the Servicer shall pay, from its
own funds and without right of reimbursement therefor, any shortage in amounts
collected or collectible on the related Adjustable Rate Mortgage Loan that
results. The Servicer shall deposit any amounts in respect of such shortage in
the Certificate Account on the Deposit Date with respect to the related
Collection Period.

     Section 3.04 Hazard Insurance Policies. The Servicer shall cause to be
maintained for each Mortgage Loan (including Mortgage Loans as to which the
related Mortgaged Property has been acquired by the Trust upon foreclosure, by
deed in lieu of foreclosure or comparable conversion), hazard insurance
(including flood insurance coverage, if obtainable, to the extent such property
is located in a federally designated flood area in such amount as is required
under applicable FEMA guidelines) with extended coverage in an amount that is
not less than the least of (i) the maximum insurable value from time to time of
the improvements that are a part of such property, or (ii) the combined
principal balance of such Mortgage Loan and the principal balance of each
mortgage loan senior to such Mortgage Loan at the time of such foreclosure plus
accrued interest and the good-faith estimate of the Servicer of related
Liquidation Expenses to be incurred in connection therewith; provided, further
that such hazard insurance shall be in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. Each such hazard insurance policy shall contain
a standard mortgagee clause naming the originator, its successors and assigns,
as mortgagee and shall require prior notice to the insured of termination or
cancellation. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake or other additional insurance and shall be under
no obligation itself to maintain any such additional insurance on property
acquired in respect of a Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. Amounts collected by the Servicer under any such policies
shall be deposited in the Collection Account or Certificate Account, as the case
may be, in accordance with Section 3.02 to the extent that they constitute Net
Liquidation Proceeds or Trust Insurance Proceeds. If the Servicer shall obtain
and maintain a blanket policy, issued by an insurer acceptable to each Rating
Agency, insuring against such hazard losses, it shall conclusively be deemed to
have satisfied its obligations as set forth in the first sentence of this
Section, it being understood and agreed that such policy may contain a
deductible clause that is in form and substance consistent with standard
industry practice, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of

                                      -59-
<PAGE>

this Section, and there shall have been a loss that would have been covered by
such policy, deposit in the Collection Account in accordance with Section 3.02
the amount not otherwise payable under the blanket policy because of such
deductible clause.

     Section 3.05 Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements. In any case in which property subject to a Mortgage is
voluntarily conveyed by the Mortgagor, the Servicer shall enforce any
due-on-sale clause contained in the related Mortgage Note or Mortgage, to the
extent permitted by such Mortgage Note or Mortgage, applicable law and
governmental regulations, but only to the extent that such enforcement will not
adversely affect or jeopardize coverage under any related insurance policy or
result in legal action by the Mortgagor. Subject to the foregoing, the Servicer
may take or enter into an assumption and modification agreement from or with the
Person to whom such Mortgaged Property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the related Mortgage Note and
the Mortgagor remains liable thereon or, if the Person to whom such Mortgaged
Property has been or is about to be conveyed satisfies the Servicer's
then-current underwriting standards for home equity mortgage loans similar to
the Mortgage Loans, and the Servicer in its reasonable judgment finds it
appropriate, is released from liability thereon. If the Trustee is holding the
Mortgage Files, the Servicer shall notify the Trustee that any assumption and
modification agreement has been completed by delivering to the Trustee an
Officer's Certificate certifying that such agreement is in compliance with this
Section and the Servicer shall forward to the Trustee the original of such
assumption and modification agreement. Such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the Mortgage Loan Rate
shall not be reduced (but may be increased), the Principal Balance of such
Mortgage Loan shall not be changed and the term of such Mortgage Loan will not
be extended beyond the existing term of such Mortgage Loan. Any fee collected by
the Servicer for entering into any such agreement shall be retained by the
Servicer as additional servicing compensation.

     Notwithstanding the foregoing paragraph of this Section 3.05 or any other
provision of this Agreement, the Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reasons of any
assumption of a Mortgage Loan, or transfer of any Mortgaged Property without the
assumption thereof, by operation of law or any assumption or transfer that the
Servicer reasonably believes it may be restricted by law from preventing, for
any reason whatsoever.

     Section 3.06 Realization upon Liquidated Mortgage Loans. Subject to the
limitations set forth in this Section 3.06 with respect to Restricted Mortgage
Loans, the Servicer, on behalf of the Trust, shall foreclose upon or otherwise
comparably convert to ownership Mortgaged Properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.02(a); provided that if the Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances, then the Servicer shall not cause the Trust to
acquire title to such Mortgaged Property in a foreclosure or similar proceeding.
In connection with such foreclosure or other conversion, the Servicer shall
follow

                                      -60-
<PAGE>

such practices (including, in the case of any default on a related Senior Lien,
the advancing of funds to correct such default) and procedures as it shall deem
necessary or advisable and as shall be normal and usual in its general first,
second and third lien one- to four-family mortgage loan servicing activities
(including the procurement of a drive-by appraisal of the related Mortgaged
Property prior to foreclosure or other conversion). The foregoing is subject to
the proviso that neither the Servicer nor the Trustee shall be required to
expend its own funds in connection with any foreclosure or towards the
correction of any default on a related Senior Lien or restoration of any
Mortgaged Property unless, in the reasonable judgment of the Servicer, such
foreclosure, correction or restoration will increase Net Liquidation Proceeds
(taking into account any unreimbursed Monthly Advances made or expected to be
made with respect to such Mortgage Loan). Amounts expended by the Servicer under
this paragraph shall be considered Servicing Advances.

     To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the unpaid Principal Balance of the related
Mortgage Loan and accrued interest thereon at the applicable Mortgage Loan Rate
to the related due date during the Collection Period in which such foreclosure
or conversion occurs (net of any related Monthly Advances or Servicing Advances
that were unreimbursed prior to the receipt of such Net Liquidation Proceeds),
such excess shall be paid to the Holder of the Class R-I Certificate.

     Neither the Trust nor the Trustee on behalf of the Trust shall complete
foreclosure proceedings with respect to any Restricted Mortgage Loan. In lieu of
foreclosure, any Restricted Mortgage Loan shall be repurchased or substituted in
accordance with and subject to the limitations contained in Section 2.05.

     Notwithstanding the foregoing, the Servicer, at its sole option, may
purchase from the Trust on any Deposit Date any Mortgage Loan as to which the
related Mortgagor has failed to make full Monthly Mortgage Payments as required
under the related Mortgage Note for three consecutive months at any time
following the Cut-off Date and prior to such Deposit Date at a price equal to
the Purchase Price by depositing such amount in the Certificate Account on such
Deposit Date pursuant to Section 3.02; provided, however, that the aggregate
Principal Balances of the Mortgage Loans purchased by the Servicer pursuant to
the exercise of the option granted in this sentence shall not exceed 3% of the
sum of the Original Pool Balance plus the amount of the Prefunding Account
Deposit and such Mortgage Loans may be purchased only in the order of the most
delinquent to the least delinquent.

     In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee, on behalf of the
Certificateholders, and the Servicer shall manage, conserve, protect and operate
each such Mortgaged Property for the Certificateholders solely for the purpose
of its prompt disposition and sale. The Servicer shall use its best efforts to
dispose of each such Mortgaged Property as expeditiously as possible consistent
with the goal of maximizing Net Liquidation Proceeds (taking into account any
unreimbursed Monthly Advances made or expected to be made with respect to such
Mortgage Loan). Neither the Trustee nor the Servicer, acting on behalf of

                                      -61-
<PAGE>

the Trust, shall provide financing from the Trust to any purchaser of any such
Mortgaged Property.

     In the event that the Trust acquires any Mortgaged Property as aforesaid or
otherwise in connection with a default or imminent default on a Mortgage Loan,
such Mortgaged Property shall be disposed of by the Servicer on behalf of the
Trust before the last day of the third calendar year following the year in which
the foreclosure occurred (the "grace period") unless (i) the Servicer on behalf
of the REMIC Pools has applied for and received an extension of such grace
period pursuant to Code Sections 856(e)(3) and 860G(a)(8)(A), in which case the
Servicer shall sell such Mortgaged Property within the applicable extension
period or (ii) the Trustee shall have received an Opinion of Counsel to the
effect that the holding by the Trust of such Mortgaged Property subsequent to
the expiration of the grace period will not result in a tax on prohibited
transactions imposed by Code Section 860F(a)(1), or otherwise subject any REMIC
Pool to tax or cause any REMIC Pool to fail to qualify as a REMIC at any time
that any Certificates are outstanding. The Servicer shall further ensure that
the Mortgaged Property is administered so that it constitutes "foreclosure
property" within the meaning of Code Section 860G(a)(8) at all times, that the
sale of such property does not result in the receipt by any REMIC Pool of any
income from non-permitted assets as described in Code Section 860F(a)(2)(B), and
that no REMIC Pool derives any "net income from foreclosure property" within the
meaning of Code Section 860G(c)(2) with respect to such property.

     Section 3.07 Trustee to Cooperate; Release of Mortgage Files. Upon the
payment in full of the principal balance of any Mortgage Loan, if the Trustee is
holding the Mortgage Files, the Servicer shall notify the Trustee by a
certification in the form of Exhibit H hereto (which certification shall include
a statement to the effect that all amounts received in connection with such
payment which are required to be deposited to the Collection Account pursuant to
Section 3.02 have been so deposited) of a Servicing Officer. Such notification
shall be made each month at the time that the Servicer delivers its Servicer
Remittance Report to the Trustee pursuant to Section 4.01. Upon any such payment
in full, the Servicer is authorized to procure from such trustee under the
Mortgage that secured the related Mortgage Note a deed of full reconveyance
covering the related Mortgaged Property encumbered by such Mortgage, which deed,
except as otherwise provided in Section 2941(c) of the California Civil Code or
other applicable law, shall be recorded by such trustee in the office of the
County Recorder in which the Mortgage is recorded, or, as the case may be, to
procure from such trustee an instrument of satisfaction or, if the related
Mortgagor so requests, an assignment without recourse, in each case prepared by
the Servicer at its expense and executed by the Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection or Certificate Account. From time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Trustee
shall, upon written request of the Servicer and delivery to the Trustee of a
trust receipt signed by a Servicing Officer, release the related Mortgage File
to the Servicer and shall execute such documents prepared by the Servicer as
shall be necessary to the prosecution of any such proceedings. Such trust
receipt shall state that the Servicer is holding the Mortgage File in trust for
the Trustee and shall obligate the

                                      -62-
<PAGE>

Servicer to return the Mortgage File to the Trustee when the need therefor by
the Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to that
herein above specified, the trust receipt shall be released by the Trustee to
the Servicer.

     Section 3.08 Servicing Compensation; Payment of Certain Expenses by the
Servicer. On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans for the related Collection Period, as servicing
compensation for such Collection Period, the Monthly Servicing Fee. Additional
servicing compensation shall be assumption fees, late payment charges, charges
for checks returned for insufficient funds, or extension and other
administrative charges received by the Servicer (excluding Prepayment Charges)
and any earnings on investments by the Servicer of amounts held in escrow
accounts established thereby on behalf of Mortgagors (any such investments to be
made in compliance with applicable law). The Servicer is obligated to pay
Compensating Interest out of the related Monthly Servicing Fee on each Deposit
Date, to the extent of the amount of the Monthly Servicing Fee, and shall not be
entitled to reimbursement therefor. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder (including
payment of the fees and expenses relating to the Annual Independent Public
Accountant's Servicing Report described in Section 3.10, and all other fees and
expenses not otherwise expressly stated hereunder for the account of the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein.

     Section 3.09 Annual Statement as to Compliance.

     (a) The Servicer will deliver to the Trustee, the Seller and each Rating
Agency, on or before September 30 of each year, beginning with September 30,
2002, an Officer's Certificate of the Servicer substantially in the form set
forth in Exhibit F hereto stating that (a) a review of the activities of the
Servicer during the preceding calendar year (or since the Closing Date in the
case of the first such statement) and of its performance under this Agreement
has been made under such officer's supervision and (b) to the best of such
officer's knowledge, based on such review, the Servicer has fulfilled all its
material obligations under this Agreement throughout such year (or since the
Closing Date in the case of the first such statement), or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof.

     (b) The Servicer shall deliver to the Trustee, the Seller, and each Rating
Agency, promptly after having obtained knowledge thereof, but in no event later
than five Business Days thereafter, written notice by means of an Officer's
Certificate of any event that with the giving of notice or the lapse of time, or
both, would become an Event of Default.

     Section 3.10 Annual Independent Public Accountants' Servicing Report. On or
before May 31 of each year, beginning with May 31, 2002, the Servicer at its
expense shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish a
report to the Trustee, the Seller and each Rating Agency to the effect that such
firm has examined certain documents and records (including the Servicer
Remittance

                                      -63-
<PAGE>

Reports delivered by the Servicer during the period covered by such reports)
relating to the servicing activities of the Servicer (which would include
servicing of Mortgage Loans under this Agreement) for the period covered by such
report, and that such examination (which will have been conducted substantially
in compliance with the Uniform Single Attestation Program for Mortgage Bankers
to the extent that the procedures in such audit guide are applicable to the
servicing obligations set forth in this Agreement), has disclosed no exceptions
or errors in records relating to the servicing activities of the Servicer,
including servicing of Mortgage Loans subject to this Agreement, that, in the
opinion of such firm, are material, except for such exceptions as shall be set
forth in such report.

     Section 3.11 Access to Certain Documentation and Information Regarding the
Mortgage Loans.

     (a) The Servicer shall provide to Certificateholders that are federally
insured savings associations and the FDIC and its supervisory agents and
examiners access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Office of Thrift Supervision, and to the Trustee
all documentation relating to the Mortgage Loans that is in the possession of
the Servicer, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. The
Servicer shall accurately and fully provide information regarding payment
performance of the Mortgagors to the nationally recognized credit repositories,
to the extent such reporting remains customary and prudent in the servicing of
mortgage loans similar to the Mortgage Loans. Nothing in this Section shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.

     (b) The Servicer shall supply information to the Trustee in such form as
the Trustee shall reasonably request, by the start of the third Business Day
preceding each Distribution Date, as is required in the Trustee's reasonable
judgment to enable the Trustee to make required distributions and to furnish the
certificates, statements and reports to Certificateholders required pursuant to
this Agreement.

     Section 3.12 Maintenance of Fidelity Bond and Errors and Omissions Policy.
The Servicer shall during the term of its service as Servicer maintain in force
a (a) policy or policies of insurance covering errors and omissions in the
performance of its obligations as Servicer hereunder and (b) fidelity bond in
respect of its officers, employees and agents, in each case having coverage
amounts that satisfy FNMA or FHLMC requirements for mortgage loan originators
and servicers.

     Section 3.13 Notices to the Rating Agencies and the Trustee . In addition
to the other notices required to be given to the Rating Agencies and the Trustee
by the provisions of this Agreement, the Servicer shall give notice to each
Rating Agency, the Trustee and the Seller of (a) any amendment to this
Agreement, (b) the final distribution on the Offered Certificates, (c) the
occurrence of an Event of Default and (d) the repurchase, purchase or
substitution, as applicable,

                                      -64-
<PAGE>

of any Mortgage Loan pursuant to Section 2.03, 2.05, 3.01 or 3.06 by the Seller
or Servicer, as the case may be.

     Section 3.14 Reports of Foreclosures and Abandonment of Mortgaged
Properties. Each calendar year beginning in 2002 the Servicer shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Code Section 6050J. In order to facilitate this reporting process, the Servicer,
on or before February 28th of each year, shall provide to the Internal Revenue
Service and the Trustee reports relating to each instance occurring during the
previous calendar year in which the Servicer (i) on behalf of the Trustee
acquired an interest in a Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that a Mortgaged Property has been abandoned.
The reports from the Servicer shall be in form and substance sufficient to meet
the reporting requirements imposed by such Section 6050J.

     Section 3.15 Sub-Servicers and Sub-Servicing Agreements.

     (a) The Servicer may enter into Sub-Servicing Agreements for any servicing
and administration of Mortgage Loans with any institution that is in compliance
with the laws of each state necessary to enable it to perform its obligations
under such Sub-Servicing Agreement. The Servicer shall give notice to, the
Seller, the Trustee, the Rating Agencies and the PMI Insurer of the appointment
of any Sub-Servicer. The Servicer shall not enter into any Sub-Servicing
Agreement that does not provide for the servicing of the Mortgage Loans
specified therein on a basis consistent with the terms of this Agreement or that
otherwise violates the provisions of this Agreement. The Servicer may enter
into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.

     (b) For purposes of this Agreement the Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 3.01 to make
deposits in the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.

     (c) Any Sub-Servicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Trustee shall not be
deemed a party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer, except that the Trustee shall have
such claims or rights that arise as a result of any funds held by a Sub-Servicer
in trust for or on behalf of the Trust. Notwithstanding the execution of any
Sub-Servicing Agreement, the Servicer shall not be relieved of any liability
hereunder and shall remain obligated and liable for the servicing and
administration of the Mortgage Loans.

     (d) The Servicer shall be entitled to terminate any Sub-Servicing Agreement
and the rights and obligations of any Sub-Servicer pursuant to any Sub-Servicing
Agreement in

                                      -65-
<PAGE>

accordance with the terms and conditions of such Sub-Servicing Agreement. In the
event of termination of any Sub-Servicer, all servicing obligations of such
Sub-Servicer shall be assumed simultaneously by the Servicer without any act or
deed on the part of such Sub-Servicer or the Servicer, and the Servicer either
shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer. The Sub-Servicer shall
give written notice to the Trustee and the Seller of the termination of any
Sub-Servicer.

     (e) Any Sub-Servicing Agreement shall (i) include the provision that such
agreement may be immediately terminated by the Trustee in accordance with the
terms of this Agreement, in the event that the Servicer shall, for any reason,
no longer be the Servicer (including termination due to an Event of Default) and
(ii) clearly and unambiguously state that either (x) such termination is
effective without a fee or (y) any termination fee is the sole responsibility of
the Servicer and none of the Trust, the Trustee, the Seller or the
Certificateholders has any liability therefor, regardless of the circumstances
surrounding such termination.

     Section 3.16 Prefunding Account.

     (a) If a Prefunding Account is specified in Article I, the Trustee will
establish and maintain the Prefunding Account. No later than the Closing Date,
the Trustee will deposit in the Prefunding Account the Prefunding Account
Deposit from the proceeds of the sale of the Offered Certificates. Subject to
this Section, upon the conveyance of Subsequent Mortgage Loans to the Trust on
any Subsequent Transfer Date, the Seller shall instruct the Trustee to withdraw
from the Prefunding Account (i) an amount equal to the Subsequent Purchase Price
for the Subsequent Mortgage Loans to be included in each Mortgage Loan Group and
make a corresponding reduction in the amount on deposit in the Prefunding
Account allocated to such Mortgage Loan Group, and to pay such amount to or upon
the order of the Seller upon satisfaction of the conditions set forth in Section
2.02 of this Agreement with respect to such transfer.

     (b) The Prefunding Account will be part of the Trust but not part of any
REMIC Pool. Amounts held in the Prefunding Account shall be invested in
Permitted Investments of the type specified in clause (f) of the definition of
Permitted Investments. The Trustee shall not be liable for any losses on amounts
invested in accordance with the provisions hereof. Any losses realized in
connection with any such investment shall be for the account of the Seller and
the Seller shall deposit the amount of such loss (to the extent not offset by
income from other investments) in the Prefunding Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in the Prefunding Account shall be taxed to the Seller and for
federal and state income tax purposes the Seller shall be deemed to be the owner
of the Prefunding Account. All interest and any other investment earnings on
amounts held in the Prefunding Account shall be paid by the Trustee to the
Seller on the Distribution Date next following the end of the Funding Period.

     (c) On the Distribution Date next following the end of the Funding Period,
any amounts remaining in the Prefunding Account (net of reinvestment earnings
payable to the Seller) shall be deposited at such time into the Certificate
Account for distribution in the related

                                      -66-
<PAGE>

allocated amounts as part of the Principal Distribution Amount for the related
Mortgage Loan Group on such Distribution Date.

     Section 3.17 Capitalized Interest Account.

     (a) Unless all Subsequent Mortgage Loans are purchased by the Trust on the
Closing Date, or unless a Capitalized Interest Account is not specified in
Article I, the Trustee shall establish and maintain the Capitalized Interest
Account. On the Closing Date, the Trustee will deposit the Capitalized Interest
Account Deposit in the Capitalized Interest Account or, if all Subsequent
Mortgage Loans are purchased on the Closing Date, in the Certificate Account.
The Trustee shall hold the Capitalized Interest Account Deposit for the benefit
of the Offered Certificateholders.

     (b) The Capitalized Interest Account will be part of the Trust but not part
of any REMIC Pool. Amounts held in the Capitalized Interest Account prior to the
first Deposit Date shall be invested in Permitted Investments of the type
specified in clause (f) of the definition of Permitted Investments, which
Permitted Investments shall mature no later than the Deposit Date immediately
following the end of the Funding Period. The Trustee shall not be liable for any
losses on amounts invested in accordance with the provisions hereof. All
interest and other investment earnings on amounts held in the Capitalized
Interest Account (and any other amounts remaining on deposit therein in excess
of the amounts to be so withdrawn and deposited into the Certificate Account)
shall be paid or released by the Trustee to the Seller on the Distribution Date
immediately following the end of the Funding Period and taxed to the Seller. For
federal and state income tax purposes the Seller shall be deemed to be the owner
of the Capitalized Interest Account. Any losses realized in connection with any
such investment shall be for the account of the Seller and the Seller shall
deposit the amount of such loss (to the extent not offset by income from other
investments) in the Capitalized Interest Account immediately upon the
realization of such loss. All amounts earned on deposit in the Capitalized
Interest Account shall be taxed to the Seller.

     (c) On each Prefunding Distribution Date, the Trustee shall transfer from
the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Distribution Date; provided, however,
that on the final Subsequent Transfer Date the Trustee shall (i) transfer the
Capitalized Interest Requirement, if any, for the following Distribution Date
from the Capitalized Interest Account to the Certificate Account, (ii) remit the
balance of the funds on deposit in the Capitalized Interest Account to the
Seller and (iii) close the Capitalized Interest Account.

     Section 3.18 [Reserved]

     Section 3.19 [Reserved]

     Section 3.20 [Reserved]


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<PAGE>


     Section 3.21 Net Rate Cap Fund. The Trustee will establish the Net Rate Cap
Fund on the Closing Date. On the Closing Date, the Class C Certificateholders
will deposit, or cause to be deposited, into the Net Rate Cap Fund $10,000. On
each Distribution Date as to which there is a Net Rate Cap Carryover, the
Trustee has been directed by the Class C Certificateholders to, and therefor
will, deposit into the Net Rate Cap Fund the amounts described in Section
5.01(e)(5), rather than distributing such amounts to the Class C
Certificateholders. On each such Distribution Date, the Trustee shall hold all
such amounts for the benefit of the Offered Certificateholders, other than the
Class A-IO Certificateholders, and will distribute such amounts to the
applicable Certificateholders pursuant to Section 5.01(e)(5). If no Net Rate Cap
Carryover is payable on a Distribution Date, the Trustee shall deposit into the
Net Rate Cap Fund on behalf of the Class C Certificateholders an amount such
that when added to other amounts already on deposit in the fund, the aggregate
amount on deposit therein is equal to $10,000. For federal and state income tax
purposes, the Class C Certificateholders will be deemed to be the owners of the
Net Rate Cap Fund and all amounts deposited into the Net Rate Cap Fund (other
than the initial $10,000 deposit) shall be treated as amounts distributed by
REMIC III with respect to the Class C Distribution Amount and Class C
Carryforward Amount. Related amounts held in the Net Rate Cap Fund and not
distributable to any Offered Certificateholders on any Distribution Date will be
invested by the Trustee in investments designated in writing by the Class C
Certificateholders having maturities on or prior to the next succeeding
Distribution Date on which such related amounts will be distributable to the
applicable Class of Certificateholders; provided, that, if no such designation
is made by the Class C Certificateholders, all such amounts shall remain
uninvested. Upon the termination of the Trust, or the payment in full of the
Offered Certificateholders, other than the Class A-IO Certicateholders, all
amounts remaining on deposit in the Net Rate Cap Fund will be released from the
lien of the Trust and distributed to the Class C Certificateholders or their
designees. The Net Rate Cap Fund will be part of the Trust but not part of any
REMIC Pool and any payments to Offered Certificateholders of related Net Rate
Cap Carryover will not be payments with respect to a "regular interest" in a
REMIC within the meaning of Code Section 860G(a)(1).

     Section 3.22 Covenants and Representations Regarding Prepayment Charges.
(a) The Servicer will not waive any Prepayment Charge or part of a Prepayment
Charge unless in connection with a Mortgage Loan that is in default or for which
a default is reasonably foreseeable.

     (b) The information set forth in the Prepayment Charge Schedule (including
the prepayment charge summary attached thereto) is complete, true and correct in
all material respects at the date or dates respecting which such information is
furnished and each Prepayment Charge is permissible and enforceable in
accordance with its terms (except to the extent that the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally) under applicable state
law.

     (c) Upon discovery by the Seller, the Servicer or a Responsible Officer of
the Trustee of a breach of the foregoing, which materially and adversely affects
the right of the Holders of the Class P Certificates to any Prepayment Charge,
the party discovering such breach shall give prompt written notice to the other
parties. Within 60 days of the earlier of discovery by the Servicer or the
Seller, as the case may be, or receipt of notice by the Servicer or the Seller,
as the case may be, of a

                                      -68-
<PAGE>

breach of clause (a) or (b) above, then in the case of clause (a) above the
Servicer shall cure such breach in all material respects and in the case of
clause (b) above the Seller shall cure such breach in all material respects. If
the covenant in clause (a) above is breached, the Servicer must pay into the
Collection Account the amount of the waived Prepayment Charge. If the
representation in clause (b) above is breached, in addition to any rights the
Trustee may have hereunder, the Seller must pay into the Collection Account the
amount of the scheduled Prepayment Charge, less any amount previously collected
and paid by the Servicer into the Collection Account.

     Section 3.23. Claims Upon the PMI Policy. The Servicer shall, on behalf of
the Trust, prepare and file in a timely basis with the PMI Insurer, with a copy
to the Trustee, all claims that may be made under any PMI Policy with respect to
PMI Mortgage Loans. Consistent with its rights and obligations hereunder, the
Servicer shall take all actions required under each PMI Policy as a condition to
the payment of any such claim. Any amount received from the PMI Insurer with
respect to any PMI Mortgage Loan shall be deposited by the Servicer, not later
than the Business Day following receipt thereof, into the Certificate Account
for distribution on the related Distribution Date as part of Liquidation
Proceeds for the related Mortgage Loan Group.

                                   ARTICLE IV
                                REMITTANCE REPORT

     Section 4.01 Servicer Remittance Report. With respect to each Distribution
Date, not later than the fifth Business Day prior to the related Deposit Date
the Servicer shall deliver to the Trustee and the Seller a computer-readable
magnetic tape or disk containing the Servicer Remittance Report detailing the
payments and collections received in respect of the Mortgage Loans in each
Mortgage Loan Group during the immediately preceding Collection Period. The
computer-readable magnetic tape or disk shall include loan-by-loan information
that specifies account number, borrower name, outstanding principal balance and
activity since the last Distribution Date. Such tape shall be in the form and
have the specifications as may be agreed to among the Servicer, the Trustee and
the Seller from time to time and shall include information concerning original
loan-to-value ratios, the lien positions of and number of days contractually
delinquent of the Mortgage Loans and information necessary to calculate
Delinquency Rate Events, Cumulative Loss Rate Events, Rolling Loss Rate Events
and Targeted Overcollateralization Amounts.

     In addition to the foregoing, the Servicer shall provide the Trustee and
the Seller at the time the tape is delivered to the Trustee a Liquidation Report
and accompanying Officer's Certificate with respect to each Mortgage Loan that
became a Liquidated Mortgage Loan during the related Collection Period
substantially in the form of Exhibits I and J hereto.

     Section 4.02 Trustee Distribution Date Statement. The Trustee shall, not
later than the Business Day prior to each Deposit Date, furnish by telecopy to
the Servicer and the Seller a statement derived from information on the Servicer
Remittance Report that sets forth the following information for the Offered
Certificates relating to the next succeeding Distribution Date:

                                      -69-
<PAGE>

         (a) the total amount of payments in respect of or allocable to interest
     on the Mortgage Loans received or deemed to have been received from the
     related Mortgagors by the Servicer during such Collection Period (including
     any net income from REO Properties received during the related Collection
     Period);

         (b) the aggregate amount of all Principal Prepayments received from the
     related Mortgagors by the Servicer during such Collection Period;

         (c) the aggregate amount of all Principal Payments received or deemed
     to have been received from the related Mortgagors by the Servicer during
     such Collection Period;

         (d) the total amount of Payments Ahead received during the related
     Collection Period;

         (e) the aggregate of any Trust Insurance Proceeds received by the
     Servicer during such Collection Period;

         (f) the aggregate of any Net Liquidation Proceeds received by the
     Servicer during such Collection Period;

         (g) the total amount of Compensating Interest payments to be paid by
     the Servicer pursuant to Section 3.08;

         (h) the aggregate Purchase Prices for (i) any Defective Mortgage Loans
     that the Seller is required to repurchase on the related Deposit Date
     pursuant to Section 2.03 or 2.05 and (ii) any Mortgage Loan that the
     Servicer is required to purchase on the related Deposit Date pursuant to
     Section 3.01 or 3.06;

         (i) any amounts required to be deposited by the Seller on the related
     Deposit Date in connection with the substitution of a Qualified Replacement
     Mortgage Loan pursuant to Section 2.03 or 2.05;

         (j) the amount of Monthly Advances to be made by the Servicer pursuant
     to Section 5.02(a);

         (k) the related Monthly Servicing Fee attributable to the Mortgage
     Loans in the related Mortgage Loan Group;

         (l) the amount of Monthly Advances reimbursable to the Servicer in such
     Collection Period pursuant to Section 5.02(a) and not previously
     reimbursed;

         (m) the amount of any Servicing Advance made by the Servicer pursuant
     to Section 5.02(b) and not previously reimbursed;


                                      -70-
<PAGE>

         (n) the amount of any Interest Shortfall for the related Distribution
     Date;

         (o) the number and Principal Balance of Mortgage Loans in each Mortgage
     Loan Group that, as of the end of the preceding calendar month were (i) 30
     or more days contractually delinquent, (ii) 60 or more days contractually
     delinquent, (iii) 90 or more days contractually delinquent, (iv) in
     foreclosure, (v) as to which the Mortgagor is in bankruptcy to the
     knowledge of the Servicer, or (vi) as to which the related Mortgaged
     Property was an REO Property;

         (p) the dollar amount of (i) claims paid by the PMI Insurer under the
     PMI Policy as of the related Distribution Date as reported by the Servicer
     and (ii) the claims denied by the PMI Insurer under the PMI Policy as of
     the related Distribution Date as reported by the Servicer;

         (q) Prepayment Charges collected for the related Distribution Date; and

         (r) the Pass-Through Rates for each Class of Offered Certificates.

                                    ARTICLE V
                  PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS

     Section 5.01 Distributions. (a) On each Distribution Date, the Trustee
shall distribute to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution to
Certificateholders if the termination of the Trust is in connection with a
purchase of the assets of the Trust by the Servicer pursuant to Section 10.01)
by check or money order mailed to such Certificateholder at the address
appearing in the Certificate Register, or upon written request by a Holder of a
Certificate, by wire transfer (in the event such Certificateholder owns of
record one or more Certificates that have principal or notional denominations
aggregating at least $5,000,000 and has given the Trustee, at least five
Business Days prior to the related Record Date, written instruction for making
such wire transfer to a bank account maintained in the United States), or by
such other means of payment as such Certificateholder and the Trustee shall
agree, such Certificateholder's Percentage Interest of the amounts (to the
extent applicable to the Class of such Holder's Certificate) and in the
following orders of priority with respect to each Mortgage Loan Group.
Notwithstanding such priorities, the aggregate of amounts distributed on all
Distribution Dates in reduction of the Certificate Principal Balance of any
Class shall not exceed the Certificate Principal Balance of such Class as of the
Closing Date.

     (b) On each Distribution Date, the Trustee shall withdraw the portion of
Available Funds for each Mortgage Loan Group from the Certificate Account in
such amount so as to pay concurrently, to the Trustee, the Trustee Fee; to the
Servicer, the Monthly Servicing Fee and the applicable PMI Insurer Premium (in
such amount, as shall have been calculated by the Servicer and notified in
writing to the Trustee), if any, paid by the Servicer (in each case to the
extent not otherwise reimbursed from the Collection Account); and to the PMI
Insurer, the PMI Insurer

                                      -71-
<PAGE>

Premium, if any (to the extent not paid by the Servicer), in each case for such
Mortgage Loan Group and Distribution Date.

     (c) On each Distribution Date, after subtracting amounts payable toward the
Trustee Fee, the Monthly Servicing Fee and the Primary Mortgage Insurance
Premium, if any, the Trustee shall withdraw from the Certificate Account that
portion of Available Funds for such Distribution Date consisting of the Interest
Remittance Amount for such Distribution Date, and make the following
disbursements and transfers in the order of priority described below, in each
case to the extent of the Interest Remittance Amount remaining for such
Distribution Date:

         1. To each class of Senior Certificates, the related Class Interest
     Distribution for the applicable Distribution Date, allocated as follows:

            A. The portion of the related Class Interest Distribution
         attributable to the Group I Mortgage Loans will be distributed:

               first, concurrently, to the Class A-IO Certificates, the Group I
               Class A-IO Class Interest Distribution and to the Class A-1
               Certificates, the Class Interest Distribution for the Class A-1
               Certificates, allocated pro rata based on entitlement pursuant to
               this clause first; and

               second, concurrently, to the Class A-IO Certificates, the Group
               II Class A-IO Class Interest Distribution and to the Class A-2
               Certificates, the Class Interest Distribution for the Class A-2
               Certificates, in each case to the extent not paid pursuant to
               clause B. below, allocated pro rata based on entitlement pursuant
               to this clause second;

            B. The portion of the related Class Interest Distribution
         attributable to the Group II Mortgage Loans will be distributed:

               first, concurrently, to the Class A-IO Certificates, the Group II
               Class A-IO Class Interest Distribution and to the Class A-2
               Certificates, the Class Interest Distribution for the Class A-2
               Certificates, allocated pro rata based on entitlement pursuant to
               this clause first; and

               second, concurrently, to the Class A-IO Certificates, the Group I
               Class A-IO Class Interest Distribution and to the Class A-1
               Certificates, the Class Interest Distribution for the Class A-1
               Certificates, in each case to the extent not paid pursuant to
               clause A. above, allocated pro rata based on entitlement pursuant
               to this clause second;


                                      -72-
<PAGE>

         2. Sequentially, to the Class M-1, Class M-2 and Class B Certificates,
     in that order, the related Class Monthly Interest Amount for the applicable
     Distribution Date.

     (d) On each Distribution Date, the Trustee shall withdraw from the
Certificate Account that portion of Available Funds for such Distribution Date
consisting of amounts in respect of principal received, and distribute to the
Holders of the Offered Certificates, other than the Class A-IO Certificates,
such amount, to the extent of the Principal Distribution Amount, in the
following amounts and order of priority:

         1. To the Class A Certificates, the Senior Principal Distribution
     Amount for the applicable Distribution Date, excluding any Subordination
     Increase Amount included in that amount, distributed as follows:

         A. To the Class A-1 Certificates, payable solely from the Basic
            Principal Amount from the Group I Mortgage Loans, an amount equal to
            the product of (a) the Senior Principal Distribution Amount,
            excluding any Subordination Increase Amount included in that amount,
            and (b) the Class A Principal Allocation Percentage applicable to
            the Class A-1 Certificates, until the Certificate Principal Balance
            thereof is reduced to zero;

         B. To the Class A-2 Certificates, payable solely from the Basic
            Principal Amount from the Group II Mortgage Loans, an amount equal
            to the product of (a) the Senior Principal Distribution Amount,
            excluding any Subordination Increase Amount included in that amount,
            and (b) the Class A Principal Allocation Percentage applicable to
            the Class A-2 Certificates, until the Certificate Principal Balance
            thereof is reduced to zero;

         2. To the Class M-1 Certificates, the Class M-1 Principal Distribution
     Amount for the applicable Distribution Date, excluding any Subordination
     Increase Amount included in that amount, until its Certificate Principal
     Balance is reduced to zero.

         3. To the Class M-2 Certificates, the Class M-2 Principal Distribution
     Amount for the applicable Distribution Date, excluding any Subordination
     Increase Amount included in that amount, until its Certificate Principal
     Balance is reduced to zero.

         4. To the Class B Certificates, the Class B Principal Distribution
     Amount for the applicable Distribution Date, excluding any Subordination
     Increase Amount included in that amount, until its Certificate Principal
     Balance is reduced to zero.

     If the Certificate Principal Balance of either Class of Class A
Certificates is reduced to zero, then the remaining amount of principal
distributions distributable to the Holders of the Class A Certificates on such
Distribution Date, and the amount of principal distributions distributable to
the Holders of the Class A Certificates on all subsequent Distribution Dates,
will be distributed to the Holders of the Class of Class A Certificates
remaining outstanding, until the

                                      -73-
<PAGE>

Certificate Principal Balance of such Class of Class A Certificates remaining
outstanding has been reduced to zero.

     (e) On each Distribution Date, the Trustee shall withdraw from the
Certificate Account that portion of Available Funds consisting of any Excess
Interest and shall pay such amount in the following order of priority, in each
case to the extent of the Excess Interest remaining undistributed:

         1. To the Offered Certificates other than the Class A-IO Certificates,
     the Subordination Increase Amount for the applicable Distribution Date,
     allocated in the order set forth in Section 5.01(d) above.

         2. To the Class M-1 Certificates, any related (a) Class Interest
     Carryover Shortfall and then (b) Class Principal Carryover Shortfall.

         3. To the Class M-2 Certificates, any related (a) Class Interest
     Carryover Shortfall and then (b) Class Principal Carryover Shortfall.

         4. To the Class B Certificates, any related (a) Class Interest
     Carryover Shortfall and then (b) Class Principal Carryover Shortfall.

         5. To fund a distribution to Class C Certificateholders of the Class C
     Distribution Amount plus any Class C Carryforward Amount; provided that,
     pursuant to Section 3.21 hereof, on any Distribution Date as to which there
     is any unpaid Net Rate Cap Carryover, the Trustee will deposit from amounts
     that would otherwise be distributable to the Class C Certificateholders
     funds into the Net Rate Cap Fund for immediate application pursuant to this
     clause of the distribution of the related Net Rate Cap Carryover to the
     applicable Class of Offered Certificates, other than the Class A-IO
     Certificates, in proportion to their respective Net Rate Cap Carryover, and
     such deposit will constitute payment in full of and satisfaction of all
     obligations hereunder to distribute amounts equal to the related Net Rate
     Cap Carryover to the Class C Certificateholders, including for purposes of
     Section 9.16, and the Trustee, the Servicer and the Class C
     Certificateholders agree hereby appropriately to report any deposit of Net
     Rate Cap Carryover as if corresponding distributions had been made to the
     Class C Certificateholders for federal income tax and accounting purposes
     with respect to the Class C Distribution Amount and Class C Carryforward
     Amount. (All distributions or deemed distributions with respect to the
     Class C Distribution Amount and Class C Carryforward Amount shall be
     applied first to the interest components of such amounts and second to
     reduce the Class C Certificate Principal Balance).

         6. To the Class R Certificates, the remainder.

     (f) By accepting a Class C Certificate, each Class C Certificateholder
hereby agrees to direct the Trustee, and the Trustee hereby is directed, to
deposit into the Net Rate Cap Fund the amounts described in Section 3.21 on each
Distribution Date as to which there is any Net

                                      -74-
<PAGE>

Rate Cap Carryover rather than distributing such amounts to the Class C
Certificateholders. By accepting a Class C Certificate, each Class C
Certificateholder further agrees that such direction is given for good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
such acceptance.

     (g) On each Distribution Date, the Trustee shall make distributions to the
Holders of the Class P Certificates of all Prepayment Charges on deposit in the
Certificate Account with respect to the Mortgage Loans in each Mortgage Loan
Group during the related Collection Period. Such Prepayment Charges will not be
available for distributions to the Holders of the other Classes of Certificates
and shall not reduce the Class P Certificate Principal Balance. If at any time
the Pool Balance is $15,000 or less, the Trustee shall withdraw a portion of the
Class P Deposit from the Certificate Account and apply such amount to the Class
P Certificate Principal Balance such that the remaining Class P Deposit is
always less than 0.66% of the sum of the Pool Balance and the remaining Class P
Deposit. After all of the Certificates (other than the Class P Certificates)
have been paid in full, the Trustee shall withdraw the remaining Class P Deposit
from the Certificate Account and apply such amount to reduce the Class P
Certificate Principal Balance to zero.

     Notwithstanding any of the foregoing, the aggregate of amounts distributed
on all Distribution Dates in reduction of the Certificate Principal Balance of
any Class of Certificates shall not exceed the Certificate Principal Balance of
such Class as of the Closing Date.

     Section 5.02 Monthly Advances; Servicing Advances.

     (a) On or before each Deposit Date, the Servicer will deposit in the
Certificate Account in respect of each Mortgage Loan Group, in same day funds,
an amount, if any (a "Monthly Advance"), equal to the sum of (i) with respect to
all Mortgage Loans that are delinquent as of the close of business on the
related Determination Date, the aggregate of the interest portions of each
Monthly Mortgage Payment in respect of the related Mortgage Loan Group due
during the related Collection Period (net of the aggregate of the Monthly
Servicing Fees for each Mortgage Loan Group attributable to such Mortgage
Loans), inclusive of those amounts representing the interest portions of Monthly
Mortgage Payments due during the first Collection Period, plus (ii) with respect
to each Mortgaged Property that was acquired in foreclosure or similar action
(each, an "REO Property") during or prior to the related Collection Period and
as to which a final sale did not occur during the related Collection Period, an
amount equal to the excess, if any, of interest on the Principal Balance of such
REO Property at the related Mortgage Loan Rate (net of the Monthly Servicing Fee
attributable to such REO Property) over the net income from such REO Property
transferred to the Collection Account or the Certificate Account, as the case
may be, for such Distribution Date; provided, however, that in no case will the
Servicer be required to make advances with respect to any period or portion of
any Collection Period following (i) the final due date with respect to any
Mortgage Loan and (ii) to the extent that the Servicer reasonably believes that
the amount of such advance will not be recoverable from subsequent collections
on the related Mortgage Loan or from Liquidation Proceeds from the related
Mortgage Loan in the event such Mortgage Loan is liquidated.

                                      -75-
<PAGE>

     The Servicer shall be permitted to fund all or a portion of any Monthly
Advance required to be made on a Deposit Date on any Business Day and to
reimburse itself for any Monthly Advance paid from the Servicer's own funds out
of amounts on deposit in the Collection Account in respect of collections on any
Mortgage Loan in the related Mortgage Loan Group that are not required to be
deposited on such Deposit Date in the Certificate Account as any portion of
Available Funds for such Mortgage Loan Group and the related Distribution Date;
provided, however, that the Servicer shall be required to replace any such
amounts by deposit to the Collection Account on or before the next Deposit Date
and the amount of such deposit shall thereafter be considered a Monthly Advance
for purposes of reimbursement under this Agreement. The Servicer may recover
Monthly Advances made from its own funds (i) from the Mortgagor on whose behalf
such Monthly Advance was made and from collections on the related Mortgage Loan,
including Liquidation Proceeds, Insurance Proceeds and such other amounts as may
be collected by the Servicer from the Mortgagor or otherwise relating to the
Mortgage Loan and (ii) in the case of a Monthly Advance that the Servicer
reasonably believes will not be recoverable from the related Mortgage Loan, from
collections or recoveries on any Mortgage Loan in the related Mortgage Loan
Group, in each case prior to the payment of such amounts to the Collection
Account or to any other party to this Agreement.

     (b) The Servicer shall from time to time during the term of this Agreement
make such Servicing Advances as the Servicer shall deem appropriate or advisable
under the circumstances and are required pursuant to the terms of this
Agreement; provided, however, that in no case will the Servicer be required to
make Servicing Advances with respect to any Mortgage Loan to the extent that the
Servicer reasonably believes that the amount of such advance will not be
recoverable from subsequent collections on the related Mortgage Loan or from
Liquidation Proceeds from the related Mortgage Loan in the event such Mortgage
Loan is liquidated. Servicing Advances may be paid by the Servicer out of
amounts on deposit in the Collection Account in respect of the related Mortgage
Loan Group from time to time; provided, however, that the Servicer shall be
required to replace any such amounts by deposit to the Collection Account in
respect of the related Mortgage Loan Group on or before the first Deposit Date
occurring after the payment of a Servicing Advance with such amounts, and the
amount of such deposit shall thereafter be considered a Servicing Advance for
purposes of reimbursement under this Agreement. The Servicer may recover
Servicing Advances made from its own funds (i) from the Mortgagor on whose
behalf such Servicing Advance was made and from collections on the related
Mortgage Loan, including Liquidation Proceeds, Insurance Proceeds and such other
amounts as may be collected by the Servicer from the Mortgagor or otherwise
relating to the Mortgage Loan and (ii) in the case of a Servicing Advance that
subsequent to the date the advance was made the Servicer reasonably believes
that such advance will not be recoverable from the related Mortgage Loan, from
collections or recoveries on any Mortgage Loan in the related Mortgage Loan
Group, in each case prior to the payment of such amounts to the Collection
Account or to any other party to this Agreement.

     Section 5.03 Statements to Certificateholders. Concurrently with each
distribution charged to the Certificate Account on a Distribution Date the
Trustee shall make available on its web site, located at
http://www-apps.gis.deutsche-bank.com/invr, a written statement (a

                                      -76-
<PAGE>

"Statement to Certificateholders") setting forth the following information with
respect to the Offered Certificates:

         (a) the amount of the distribution with respect to each Class of
     Certificates (based on a Certificate in the original principal amount of
     $1,000);

         (b) the amount of such distribution allocable to principal on the
     related Mortgage Loans in each Mortgage Loan Group, separately identifying
     the aggregate amount of any Prepayments or other recoveries of principal
     included therein;

         (c) the amount of such distribution allocable to interest on the
     related Mortgage Loans in each Mortgage Loan Group separately identifying
     the aggregate amount of any prepayment or other recoveries of principal
     included therein;

         (d) the Class Monthly Interest Amount and Class Interest Carryover
     Shortfall for each Class of Certificates;

         (e) the outstanding Certificate Principal Balance of each Class of
     Offered Certificates (based on a Certificate in the original principal
     amount of $1,000) that will be outstanding after giving effect to any
     payment of principal on such Distribution Date;

         (f) the aggregate of the Principal Balances of all Mortgage Loans after
     giving effect to any payments of principal on such Distribution Date by
     Mortgage Loan Group and for the entire Trust, and each Group Factor;

         (g) based upon information furnished by the Servicer, such information
     as may be required by Section 6049(d)(7)(C) of the Code and the regulations
     promulgated thereunder to assist the Certificateholders in computing their
     market discount;

         (h) the total of all amounts paid by the Seller and the Servicer during
     the related Collection Period in connection with purchases or repurchases
     from the Trust of Mortgage Loans and substitutions for Mortgage Loans of
     Qualified Replacement Mortgage Loans with respect to each Mortgage Loan
     Group and by reason for such purchase;

         (i) the weighted average Mortgage Loan Rate of the Mortgage Loans in
     each Mortgage Loan Group;

         (j) whether a Delinquency Event or a Cumulative Loss Event has occurred
     and, if so, what event;

         (k) the amount of any Excess Interest included in such distribution;

                                      -77-
<PAGE>


         (l) the Overcollateralization Amount, Required Overcollateralization
     Amount and Applied Realized Loss Amount, both in the aggregate and with
     respect to each applicable Class, for such Distribution Date;

         (m) the Basic Principal Amount with respect to each Mortgage Loan
     Group;

         (n) the amount of any Net Rate Cap Carryover paid and remaining unpaid
     as of such Distribution Date;

         (o) the Capitalized Interest Requirement and amounts remaining in the
     Prefunding Account each as of such Distribution Date;

         (p) the amount of any draw to be made on any PMI Policy on the related
     Distribution Date, and the amounts to be paid to the PMI Insurer, if any,
     as of such Distribution Date in respect of the PMI Insurer Premiums with
     respect to each PMI Mortgage Loan in the related Mortgage Loan Group;

         (q) with respect to each Mortgage Loan Group, the number of Mortgage
     Loans in each Mortgage Loan Group and the aggregate of their Principal
     Balances as a percentage of the Group I Balance or Group II Balance, as
     appropriate, that as of the end of the immediately preceding calendar month
     are (i) 30 to 59 days delinquent, (ii) 60 to 89 days delinquent, (iii) 90
     or more days delinquent, (iv) the subject of bankruptcy proceedings (to the
     actual knowledge of the Servicer), (v) in foreclosure and (vi) as to which
     the related Mortgaged Property is REO Property; and

         (r) the Certificate Principal Balance of each Class of Certificates
     then outstanding after giving effect to all payments or principal on such
     Distribution Date.

     In the case of information furnished pursuant to subclauses (a), (b), (c)
and (d) above, the amounts shall be expressed as a dollar amount per Certificate
with a $1,000 principal denomination.

     Within 90 days after the end of each calendar year, the Trustee shall mail
such report to Greenwich Capital Markets, Inc., 600 Steamboat Road, Greenwich,
Connecticut 06830, Attention: Mortgage Finance (which report shall include, in
addition to the information contained in reports to others hereunder, the total
amount of interest on the Mortgage Loans for the period covered by such report),
and to each Person who at any time during the calendar year was an Offered
Certificateholder, a statement for each Certificateholder containing the
information set forth in subclauses (a) through (c) above, aggregated for such
calendar year or, in the case of each Person who was an Offered
Certificateholder for a portion of such calendar year, setting forth such
information for each month thereof for the portion of the year during which such
Person was a Certificateholder. The Servicer shall provide any other information
necessary in order to report income in respect of the Certificateholders for
federal income tax purposes.

                                      -78-
<PAGE>

     Section 5.04. Allocation of Losses. On each Distribution Date, the Trustee
shall determine the total of the Applied Realized Loss Amounts for such
Distribution Date. The Applied Realized Loss Amount for any Distribution Date
shall be applied by reducing the Certificate Principal Balance of each Class of
Subordinate Certificates beginning with the Class of Subordinate Certificates
then outstanding with the lowest relative payment priority, in each case until
the respective Certificate Principal Balance thereof is reduced to zero. Any
Applied Realized Loss Amount allocated to a Class of Subordinate Certificates
shall be allocated among the Subordinate Certificates of such Class in
proportion to their respective Percentage Interests.

                                   ARTICLE VI
                                THE CERTIFICATES

     Section 6.01 The Certificates.

     (a) The Certificates shall be substantially in the forms set forth in
Exhibits A-1, A-2, A-3, A-4, B-1, B-2 and B-3 hereto, and shall, on original
issue, be executed and delivered by the Trustee on behalf of the Trust, not
individually but solely as Trustee to or upon the order of the Seller
concurrently with the sale and assignment to the Trustee of the Trust.

     (b) The Book-Entry Certificates will be evidenced by one or more
certificates, beneficial ownership of which will be held in minimum dollar
denominations of $25,000 and integral multiples of $1,000 in excess thereof. The
Class P Certificates, the Class R-I Certificate, the Class R-II Certificate and
the Class R-III Certificate shall be issuable solely as single certificates
evidencing the entire Percentage Interests of the Class P Certificates, the
Class R-I Certificates, the Class R-II Certificates and the Class R-III
Certificates, respectively, and the Class C Certificates shall be initially
issued as a single certificate evidencing the entire Percentage Interest
thereof.

     (c) The Certificates shall be executed by manual or facsimile signature by
the Trustee on behalf of the Trust (not in its individual capacity but solely as
Trustee) by an authorized officer of the Trustee. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersigning and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such signature upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.

     Section 6.02 Registration of Transfer and Exchange of Certificates.

     (a) The Trustee shall cause to be kept at the Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall

                                      -79-
<PAGE>

provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided.

     Upon surrender for registration or transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose (as designated by
the Trustee from time to time) and upon satisfaction of the conditions set forth
in Section 6.02(b) and (c), the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates of the same Class and of a like aggregate Percentage Interest. As
of the Closing Date, the Trustee designates its office located on 123 Washington
Street, New York, New York 10006 for such purpose.

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

     Every Certificate presented or surrendered for transfer or exchange shall
(if so required by the Company or the Trustee) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder thereof or his attorney duly authorized in
writing.

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

     All Certificates surrendered for transfer or exchange shall be canceled by
the Trustee in accordance with its standard procedures.

     (b) No transfer of a Class R Certificate shall be made unless, as evidenced
by an Opinion of Counsel and Transfer Affidavit delivered to the Trustee, each
in form and substance satisfactory to the Trustee, such transfer is not subject
to registration under the Securities Act or any applicable state securities
laws. Any such Opinion of Counsel and Transfer Affidavit shall not be obtained
at the expense of the Trustee, the Trust, the Seller or the Servicer. The Holder
of a Class R Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Seller and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with the Securities Act and such state laws. Neither the Seller, the
Servicer nor the Trustee or the Trust is under an obligation to register the
Class R Certificates under the Securities Act or any state securities law.

     The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of such Class R Certificate to reflect
any change in applicable law or regulation (or the

                                      -80-
<PAGE>

interpretation thereof) or practices relating to the resale or transfers of
restricted securities generally.

     No legal or beneficial interest in all or any of the Class R Certificates
may be transferred directly or indirectly to: (i) a Disqualified Organization or
an agent of a Disqualified Organization (including a broker, nominee or
middleman), (ii) an entity that holds REMIC residual securities as nominee to
facilitate the clearance and settlement of such securities through electronic
book-entry changes in accounts of participating organizations (a "Book-Entry
Nominee"), (iii) an individual, corporation, partnership or other Person unless
such transferee (A) is not a Foreign Person or (B) is a Foreign Person that will
hold such Class R Certificate in connection with the conduct of a trade or
business within the United States and has furnished the transferor and the
Trustee with, and agrees to periodically furnish in accordance with Treasury
regulations, an effective Internal Revenue Service Form W-8ECI (or any
applicable successor form) or (C) is a Foreign Person that has delivered (at the
expense of the transferee) to both the transferor and the Trustee an opinion of
a nationally recognized tax counsel to the effect that the transfer of the Class
R Certificate to it is in accordance with the requirements of the Code and the
regulations promulgated thereunder and that such transfer of the Class R
Certificate will not be disregarded for federal income tax purposes (any such
Person who is not covered by clause (A), (B) or (C) above being referred to
herein as a "Non-permitted Foreign Holder") or (iv) to an ERISA Plan or an
entity, including an insurance company separate account or general account,
whose underlying assets include ERISA Plan assets by reason of an ERISA Plan's
investment in the entity or a Person investing the assets of an ERISA Plan or
such an entity, whether as nominee, trustee, agent or otherwise (such plan,
entity or Person, an "ERISA Prohibited Holder"), and any such purported transfer
shall be void and have no effect.

     The Trustee shall not execute, and shall not authenticate and deliver, a
new Class R Certificate and shall not accept a surrender for the registration of
transfer or register the transfer of, any Class R Certificate, unless the
transferor thereof shall have provided to the Trustee a Transfer Affidavit
substantially in the form attached as Exhibit G hereto, signed by the
transferee, to the effect that the transferee is not a Disqualified Organization
and is not a nominee for a beneficial owner of the Class R Certificate from
which the transferee has not received a substantially similar affidavit, a
Book-Entry Nominee, a Non-permitted Foreign Holder or an ERISA Prohibited
Holder. Such Transfer Affidavit shall contain (i) the consent of the transferee
to any such amendments of this Agreement as may be required to further
effectuate the foregoing restrictions on transfer of the Class R Certificates to
Disqualified Organizations, Book-Entry Nominees, Non-permitted Foreign Holders
or ERISA Prohibited Holders and (ii) a representation from the transferee that
such transferee does not have the intent or purpose to impede the assessment or
collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificates. Such Transfer Affidavit, if not
executed in connection with the initial issuance of the Class R Certificates,
also shall be accompanied by a Transferor Affidavit, substantially in the form
attached hereto as Exhibit K, signed by the transferor to the effect that as of
the time of the transfer, the transferor has no actual knowledge that such
affidavit is false and that the transferor does not have the intent or purpose
to impede the assessment or collection of any federal, state or local income
taxes legally required to be paid with respect to the Class R Certificate.

                                      -81-
<PAGE>

     Each Class R Certificate shall bear a legend referring to the foregoing
restrictions. Any Person acquiring the Class R Certificate, or beneficial
ownership thereof, agrees to give the Servicer written notice that it is a
"pass-through interest holder" within the meaning of Treasury Regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring the Class R Certificate, or
beneficial ownership thereof, if it is, or is acquiring the Class R Certificate
on behalf of, a "pass-through interest holder."

     Upon notice to the Servicer that any legal or beneficial interest in any
Class R Certificate has been transferred, directly or indirectly, to a
Disqualified Organization in contravention of the foregoing restrictions or to a
pass-through entity as defined in the REMIC Provisions an interest of which is
held by a Disqualified Organization, the Servicer agrees to furnish to the
Internal Revenue Service and to any transferor of the Class R Certificate or
such agent or such pass-through entity such information as may be required to be
delivered thereto by the Code as necessary to the application of Code Section
860E(e) and described in Treasury regulations ss.1.860D-1(b)(5)(ii), or any
successor provision, including, but not limited to, the present value of the
total anticipated excess inclusions with respect to the Class R Certificate (or
portion thereof) for periods after such transfer. Such information shall be
provided in the manner described in Treasury regulations ss.1.860E-2(a)(5), or
any successor provision. At the election of the Servicer, the cost to the
Servicer of computing and furnishing such information may be charged to the
transferor or such agent referred to above; provided, however, that the Servicer
shall in no event be excused from furnishing such information.

     The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of the Class R Certificates to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfer of restricted securities generally.

     (c) No transfer of a Class C Certificate, Class P Certificate or beneficial
interest therein shall be made unless the Trustee shall have received (i) a
letter from the transferor, substantially in the form attached hereto as Exhibit
M, and (ii) a representation letter from the transferee, substantially in the
form attached hereto as either Exhibit N-1 or Exhibit N-2, as applicable:

     Notwithstanding anything else to the contrary herein, any purported
transfer of a Class C Certificate, or a Class P Certificate or a beneficial
interest therein to or on behalf of an employee benefit plan subject to ERISA or
to the Code or a person acting on behalf of an ERISA Plan or using the assets of
an ERISA Plan to effect such transfer shall be void and of no effect.

     To the extent permitted under applicable law (including, but not limited
to, ERISA), the Trustee shall be under no liability to any Person for any
registration of transfer of any Class C Certificate or any Class P Certificate
that is in fact not permitted by Section 6.02(c) or for making any payments due
on such Certificate to the holder thereof or taking any other action with
respect

                                      -82-
<PAGE>

to such Holder under the provisions of this Agreement so long as the transfer
was registered by the Trustee in accordance with the foregoing requirements.

     The Class C Certificates, the Class P Certificates, this Agreement and
related documents may be amended or supplemented from time to time to modify
restrictions on and procedures for resale and other transfer of such Class C
Certificates or a Class P Certificate to reflect any change in applicable law or
regulation (or the interpretation thereof) or practices relating to the resale
or transfers of restricted securities generally.

     (d) The Book-Entry Certificates shall, subject to Section 6.02(e), at all
times remain registered in the name of the Depository or its nominee and at all
times: (i) registration thereof may not be transferred by the Trustee except to
another Depository; (ii) the Depository shall maintain book-entry records with
respect to the Certificate Owners and with respect to ownership and transfers of
such Certificates; (iii) ownership and transfers of registration of the
Certificates issued in book-entry form on the books of the Depository shall be
governed by applicable rules established by the Depository and the rights of
Certificate Owners with respect to Book-Entry Certificates shall be governed by
applicable law and agreements between such Certificate Owners and the
Depository, Depository Participants, and indirect participating firms; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository as
the authorized representative of the Certificate Owners of the Book-Entry
Certificates for all purposes including the making of payments due on the
Book-Entry Certificates and exercising the rights of Holders of Book-Entry
Certificates under this Agreement; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository; (vii)
Certificate Owners shall not be entitled to certificates for the Book-Entry
Certificates and (viii) the Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by holders of
Book-Entry Certificates and give notice to the Depository of such record date.

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

     (e) If (x)(i) the Company or the Depository advises the Trustee in writing
that the Depository is no longer willing, qualified or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Company is unable to locate a qualified successor, (y) the Company at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository or (z) after the occurrence of an Event of Default,
Certificate Owners representing not less than 51% of the aggregate Certificate
Principal Balance of the Book-Entry Certificates together advise the Trustee and
the Depository in writing that the continuation of a book-entry system through
the Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of definitive, fully
registered Certificates ("Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the

                                      -83-
<PAGE>

Trustee of such Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall issue the
Definitive Certificates and the expense of any such issuance shall be reimbursed
by the Trust pursuant to Section 9.05. Neither the Company nor the Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed applicable with
respect to such Definitive Certificates and the Certificates as
Certificateholders hereunder.

     (f) On or prior to the Closing Date, there shall be delivered to the
Trustee (as agent for the Depository) one certificate for each Class of
Book-Entry Certificates registered in the name of the Depository's nominee, Cede
& Co. The face amount of each such Certificate shall be equal to the Principal
Balance thereof. Each Certificate issued in book-entry form shall bear the
following legend:

     "Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."

     Section 6.03 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee, the Servicer and the
Seller such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class and Percentage Interest. Upon the issuance of any new Certificate under
this Section, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership of the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.

     Section 6.04 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Servicer, the Seller, the Trustee
and any of their respective agents may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.01 and for all other purposes
whatsoever, and neither the Servicer, the Seller, the Trustee nor any of their
respective agents shall be affected by notice to the contrary.

                                      -84-
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     Section 6.05 Actions of Certificateholders.

     (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, when required, to the Seller or the Servicer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee, the Seller and the Servicer if made in the manner provided
in this Section.

     (b) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner that the Trustee
deems sufficient.

     (c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Trustee, the Seller or the Servicer in reliance thereon, whether or not notation
of such action is made upon such Certificate.

                                   ARTICLE VII
                           THE SERVICER AND THE SELLER

     Section 7.01 Liability of the Seller and the Servicer. The Seller and the
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Seller and the
Servicer herein.

     Section 7.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer. Any corporation or other entity (i) into which the Seller or
the Servicer may be merged or consolidated, (ii) that may result from any
merger, conversion or consolidation to which the Seller or the Servicer shall be
a party, or (iii) that may succeed to all or substantially all of the business
of the Seller or the Servicer, which corporation or other entity shall, in any
case where an assumption shall not be effected by operation of law, execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement, shall be the successor to the Seller or the Servicer, as the case may
be, under this Agreement without the execution or filing of any document or any
further act by any of the parties to this Agreement; except that if the Servicer
is not the surviving entity, then the surviving entity shall execute and deliver
to the Trustee an agreement of assumption to perform every obligation of the
Servicer hereunder.

     Section 7.03 Limitation on Liability of the Servicer and Others. Neither
the Servicer nor any of its directors, officers, employees or agents shall be
under any liability to the Trustee, the Trust or the Certificateholders for any
action taken or for refraining from the taking of any action by the Servicer
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
liability that

                                      -85-
<PAGE>

would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the duties of the Servicer or by reason of
reckless disregard of the obligations and duties of the Servicer hereunder. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.

     Section 7.04 Servicer Not to Resign. Subject to the provisions of Section
7.02 regarding the merger or consolidation of the Servicer into or with another
entity, the Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties or
obligations hereunder is no longer permissible under applicable law or
regulation or are in material conflict by reason of applicable law or regulation
with any other activities carried on by it at the date of this Agreement. Any
such determination permitting the resignation of the Servicer pursuant to this
Section shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No resignation pursuant to this Section 7.04 (a) shall become
effective until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.

     If, at the time the Servicer is removed or resigned and the Trustee does
not appoint a different successor servicer, then the Trustee shall become the
successor servicer.

     Upon the termination or resignation of the Servicer, the Servicer also
shall promptly (and in any event no later than 10 Business Days subsequent to
such termination or resignation) deliver or cause to be delivered to the Trustee
or successor servicer all the books and records (including, without limitation,
records kept in electronic form) that the Servicer has maintained for the
Mortgage Loans, including all tax bills, assessment notices, insurance premium
notices and all other documents as well as all original documents then in the
Servicer's possession. The Servicer may retain copies of any such books and
records.

     Any collections received by the Servicer after termination or resignation
shall be endorsed by it and remitted directly and immediately to the Trustee or
the successor servicer. The Servicer shall be entitled to receive the Monthly
Servicing Fee through the day on which it is terminated as Servicer (which may
be pro rated for a partial month).

     To the extent that the Servicer, at the time of its termination or
resignation, has therefore expended any amounts as Monthly Advances or Servicing
Advances with respect to any Mortgage Loan, which Monthly Advances or Servicing
Advances remain unreimbursed as of such date ("Unrecovered Advances") the
Servicer shall thereafter be entitled to receive from the successor servicer,
monthly, such information as may be generated by the successor servicer as may
be reasonably necessary to enable the Servicer to monitor the recovery of, and
collection

                                      -86-
<PAGE>

efforts undertaken with respect to, the Unrecovered Advances, which information
will include details of collection activities, payment records and trial
balances. To the extent that the successor servicer receives any amounts that
relate to reimbursement for Unrecovered Advances made by the prior Servicer,
such amounts shall be remitted to the prior Servicer on the related Distribution
Date. To the extent that the Servicer, based upon the information supplied by
the successor servicer, believes that any discrepancies exist between actual
Unrecovered Advances received by the successor servicer and the amounts
forwarded to the Servicer as recovered Unrecovered Advances, the Servicer and
the successor servicer shall attempt in good faith to reconcile such
discrepancies.

     The Servicer agrees to cooperate reasonably with the successor servicer in
effecting the termination of the Servicer's servicing responsibilities and
rights hereunder and shall promptly provide to the successor servicer all
documents and records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to the successor
servicer all amounts that then have been or should have been deposited in the
Collection Account, or that are thereafter received with respect to the Mortgage
Loans. The successor servicer shall not be held liable by reason of any failure
to make, or any delay in making, any distribution hereunder or any portion
thereof caused by (i) the failure of the Servicer to deliver, or any delay in
delivering, cash, documents or records to it, or (ii) restrictions imposed by
any regulatory authority having jurisdiction over the Servicer.

     The Servicer which is being terminated or is resigning shall give notice to
the Mortgagors of the transfer of the servicing to the successor servicer. Said
notice shall be a joint notice of servicing transfer in the form required by
applicable law.

     Section 7.05 Merger or Consolidation of the Seller. Any corporation or
other entity (i) into which the Seller may be merged or consolidated, (ii) that
may result from any merger, conversion or consolidation to which the Seller
shall be a party, or (iii) that may succeed to all or substantially all of the
business of the Seller, which corporation or other entity shall, in any case
where an assumption shall not be effected by operation of law, execute an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement, except that if the Seller in any of the foregoing cases is not the
surviving entity, then the surviving entity shall execute and deliver to the
Trustee an agreement of assumption to perform every obligation of the Seller
hereunder.

                                  ARTICLE VIII
                                     DEFAULT

     Section 8.01 Events of Default. If any one of the following events (each an
"Event of Default") shall occur and be continuing:

         (a) Any failure by the Servicer to (i) make a required Monthly Advance
     on any Deposit Date or (ii) deposit in the Collection Account or the
     Certificate Account any other amount required to be deposited therein under
     this Agreement or failure to pay the

                                      -87-
<PAGE>

     Trustee Fee, which, in the case of a failure to make a required deposit to
     the Collection Account, continues unremedied for a period of five Business
     Days after the date upon which written notice of such failure shall have
     been given to the Servicer by the Trustee or to the Servicer and the
     Trustee by Holders of Certificates evidencing Voting Interests represented
     by all Certificates aggregating not less than 51%;

         (b) Failure on the part of the Servicer duly to observe or perform in
     any material respect any other covenants or agreements of the Servicer set
     forth in the Certificates or in this Agreement, which failure (i)
     materially and adversely affects the Certificateholders and (ii) continues
     unremedied for a period of 30 days after the date on which written notice
     of such failure (which notice shall refer specifically to this Section),
     requiring the same to be remedied, shall have been given to the Servicer by
     the Trustee or to the Servicer and the Trustee by the Holders of
     Certificates evidencing Voting Interests represented by all Certificates
     aggregating not less than 51%;

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

         (d) The consent by the Servicer to the appointment of a trustee,
     conservator or receiver or liquidator in any bankruptcy, insolvency,
     readjustment of debt, marshalling of assets and liabilities or similar
     proceedings of or relating to the Servicer or of or relating to
     substantially all of its property; or 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 bankruptcy, insolvency or
     reorganization statute, make an assignment for the benefit of its
     creditors, or voluntarily suspend payment of its obligations; and

         (e) The occurrence of any merger or consolidation of the Servicer
     described in Section 7.02 following which the Servicer does not have a net
     worth of at least $10,000,000 determined in accordance with generally
     accepted accounting principles.

then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either the Trustee or the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%, by notice then given in writing to the Servicer
the Seller and to the Trustee, may terminate all of the rights, responsibilities
and obligations of the Servicer as Servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Certificates or
the Mortgage Loans or otherwise, shall pass to and be vested in the successor
servicer pursuant to and under this Section and Sections 7.04 and 8.02 and,
without limitation, the successor servicer is hereby authorized and empowered to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or

                                      -88-
<PAGE>

appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Mortgage Loans and related
documents, or otherwise. The Servicer agrees to cooperate with the successor
servicer in effecting the termination of its responsibilities and rights as
Servicer hereunder, including, without limitation, the transfer to the successor
servicer for the administration by it of all cash amounts that shall at the time
be held by the Servicer that have been deposited by the Servicer in the
Collection Account or the Certificate Account or thereafter received by the
Servicer with respect to the Mortgage Loans.

     All reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Mortgage Files to the successor servicer,
amending this Agreement to reflect the appointment of a successor as Servicer
pursuant to this Section 8.01 and Sections 7.04 and 8.02 or otherwise in
connection with the assumption by the successor servicer of the duties of the
predecessor servicer hereunder shall be paid by the predecessor servicer upon
presentation of reasonable documentation of such costs and expenses.

     Section 8.02. Trustee to Act; Appointment of Successor. (a) On and after
the time the Servicer receives a notice of termination pursuant to Section 8.01,
the Trustee shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall succeed to all the rights, powers and privileges
of the Servicer hereunder and be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, including without limitation, the obligation to make Monthly Advances
and to pay Compensating Interest. As compensation therefor, the Trustee shall be
entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given. Notwithstanding the
foregoing, if the Trustee shall be unwilling so to act, or the Trustee is
legally unable so to act, the Trustee with the consent of the Rating Agencies
may promptly appoint, or petition a court of competent jurisdiction to appoint
any established housing and home finance institution or any institution that
regularly services home equity loans that is then servicing a home equity loan
portfolio and having all licenses, permits and approvals required by applicable
law, and having a net worth of not less than $10,000,000 as the successor to the
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder; provided that any such
successor servicer shall be acceptable to the Rating Agencies, which acceptance
shall not be unreasonably withheld and, if such successor servicer shall not
have been appointed by the Trustee, the Trustee shall be provided 5 Business
Days' prior notice of any such appointment; and provided further that the
appointment of any such successor servicer will not result in the qualification,
reduction or withdrawal of the rating assigned to any subclass of Offered
Certificates by any Rating Agency. Pending appointment of a successor to the
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer hereunder; and provided further that, if
due to market conditions, the parties thereto shall agree to compensation in
excess of that permitted the Servicer hereunder, the Trustee shall not be
responsible for any such amounts in excess thereof. Trustee and such successor
shall take such

                                      -89-
<PAGE>

action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The appointment of a successor servicer shall not affect any
liability of the predecessor Servicer that may have arisen under this Agreement
prior to its termination as Servicer (including without limitation, any
liability for a deductible amount pursuant to the last sentence of Section
3.04), nor shall any successor servicer be liable for any acts or omissions of
the predecessor Servicer or for any breach by such Servicer or the Seller of any
of its representations or warranties contained herein or in any related document
or agreement. Each of the Rating Agencies shall be given written notice of the
appointment of a successor servicer pursuant to this Section.

     (b) The Trustee, shall be reimbursed for Transition Costs, if any, incurred
in connection with the assumption of responsibilities of the successor servicer,
upon its delivering to the Seller documentation of such costs and expenses. The
Trustee shall have no claim against the Servicer, any Certificateholder, the
Trust or any other party to this Agreement for any costs and expenses incurred
in effecting such succession in excess of the amount specified in the definition
of "Transition Costs."

     Section 8.03 Notifications to Certificateholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article Eight, the
Trustee shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register, the PMI Insurer and
to each Rating Agency.

     Within 60 days of obtaining actual knowledge of the occurrence of any Event
of Default that remains uncured, the Trustee shall transmit by mail to all
Certificateholders notice of such Event of Default.

     Section 8.04 Assumption or Termination of Sub-Servicing Agreements by the
Trustee or any Successor Servicer. Upon the termination of the Servicer as
servicer under this Agreement, the Trustee as successor to the Servicer
hereunder or any other successor to the Servicer hereunder may, subject to the
terms of any Sub-Servicing Agreement, in its sole and absolute discretion elect
to assume or terminate any Sub-Servicing Agreement then in force and effect
between the Servicer and the Sub-Servicer. Notwithstanding the foregoing, any
termination fee due to a Sub-Servicer because of its termination by the Trustee
hereunder shall be the responsibility of the terminated Servicer and not the
Trustee. Upon the assumption of any Sub-Servicing Agreement, the Servicer agrees
to deliver to the assuming party any and all documents and records relating to
the applicable Sub-Servicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effectuate the
orderly transfer of the Sub-Servicing Agreement.

                                   ARTICLE IX
                                   THE TRUSTEE

     Section 9.01 Duties of the Trustee. The Trustee, prior to the occurrence of
an Event of Default and after the curing of all Events of Default that may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge shall

                                      -90-
<PAGE>

have occurred (which has not been cured) and subject to the provisions of
Section 9.13, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.

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

         (a) prior to the occurrence of an Event of Default, and after the
     curing of all such Events of Default that may have occurred, the duties and
     obligations of the Trustee shall be determined solely by the express
     provisions of this Agreement, the Trustee shall not be liable except for
     the performance of such duties and obligations as are specifically set
     forth in this Agreement, no implied covenants or obligations shall be read
     into this Agreement against the Trustee and, in the absence of bad faith on
     the part of the Trustee, the Trustee may conclusively rely, as to the truth
     of the statements and the correctness of the opinions expressed therein,
     upon any certificates, filings or opinions furnished to the Trustee and
     conforming to the requirements of this Agreement;

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

         (c) the Trustee shall not be personally liable with respect to any
     action taken, suffered or omitted to be taken by it in good faith in
     accordance with the direction of the Holders of Certificates evidencing
     Voting Interests represented by all Certificates (or all affected
     Certificates, as appropriate) aggregating not less than 51% relating to the
     time, method and place of conducting any proceeding for any remedy
     available to the Trustee, or exercising any trust or power conferred upon
     the Trustee, under this Agreement; and

         (d) the Trustee shall not be charged with knowledge of any failure by
     the Servicer to comply with the obligations of the Servicer referred to in
     clauses (a) and (b) of Section 8.01 unless a Responsible Officer obtains
     actual knowledge of such failure or the Trustee receives written notice of
     such failure from the Servicer or the Holders of Certificates evidencing
     Voting Interests represented by all Certificates aggregating not less than
     51%, as the case may be; and

         (e) the Trustee shall not be required to expend or risk its own funds
     or otherwise incur financial liability in the performance of any of its
     duties hereunder, or in the exercise of any of its rights or powers, if
     there is reasonable ground for believing that the repayment of such funds
     or adequate indemnity against such risk or liability is not reasonably
     assured to it, and none of the provisions contained in this Agreement shall
     in any event require the Trustee to perform, or be responsible for the
     manner of performance of, any of the obligations of the Servicer under this
     Agreement, except during such time, if any, as the Trustee shall be the
     successor to, and be vested with the rights, duties, powers and privileges
     of, the Servicer in accordance with the terms of this Agreement.

                                      -91-
<PAGE>

     Section 9.02 Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 9.01:

         (a) The Trustee may rely and shall be protected in acting or refraining
     from acting upon any resolution, Officer's Certificate, certificate of
     auditors or any other certificate, statement, instrument, opinion, report,
     notice, request, consent, order, appraisal, bond or other paper or document
     reasonably believed by it to be genuine and to have been signed or
     presented by the proper party or parties;

         (b) The Trustee may consult with counsel selected by it with due care
     and any advice obtained from such counsel or Opinion of Counsel shall be
     full and complete authorization and protection in respect of any action
     taken or suffered or omitted by it hereunder in good faith and in
     accordance with such advice or Opinion of Counsel;

         (c) The Trustee shall be under no obligation to exercise any of the
     rights or powers vested in it by this Agreement, or to institute, conduct
     or defend any litigation hereunder or in relation hereto, at the request,
     order or direction of any of the Certificateholders, pursuant to the
     provisions of this Agreement, unless the Person so requesting, ordering or
     directing same shall have offered to the Trustee reasonable security or
     indemnity against the costs, expenses and liabilities that may be incurred
     therein or thereby; the right of the Trustee to perform any discretionary
     act enumerated in this Agreement shall not be construed as a duty, and the
     Trustee shall not be answerable for other than its negligence or willful
     misconduct in the performance of any such act; nothing contained herein
     shall, however, relieve the Trustee of the obligations, upon the occurrence
     of an Event of Default known to a Responsible Officer of the Trustee (which
     has not been cured), to exercise such of the rights and powers vested in it
     by this Agreement, subject to the provisions of Section 9.13, and to use
     the same degree of care and skill in their exercise as a prudent man would
     exercise or use under the circumstances in the conduct of his own affairs;

         (d) The Trustee shall not be personally liable for any action taken,
     suffered or omitted by it in good faith in accordance with the direction of
     the Holders of Certificates evidencing Voting Interests representing all
     Certificates (or all affected Certificates, as appropriate) aggregating not
     less than 51%;

         (e) Prior to the occurrence of an Event of Default and after the curing
     of all Events of Default that may have occurred, the Trustee shall not be
     bound to make any investigation into the facts or matters stated in any
     resolution, certificate, statement, instrument, opinion, report, notice,
     request, consent, order, approval, bond or other paper or documents, unless
     requested in writing to do so by the Holders of Certificates evidencing
     Voting Interests represented by all Certificates (or all affected
     Certificates, as appropriate) aggregating not less than 51%; provided,
     however, that if the payment within a reasonable time to the Trustee of the
     costs, expenses or liabilities likely to be incurred by it in the making of
     such investigation is, in the opinion of the Trustee, not reasonably


                                      -92-
<PAGE>

     assured to the Trustee by the security afforded to it by the terms of this
     Agreement, the Trustee may require reasonable indemnity against such cost,
     expense or liability as a condition to such proceeding; the reasonable
     expense of every such examination shall be paid by the Servicer or, if paid
     by the Trustee, shall be reimbursed by the Servicer upon demand; and
     nothing in this clause (e) shall derogate from the obligation of the
     Servicer to observe any applicable law prohibiting disclosure of
     information regarding the Mortgagors; and

         (f) The Trustee may execute any of the trusts or powers hereunder or
     perform any duties hereunder either directly or by or through agents or
     attorneys or a custodian. The Trustee shall not be liable or responsible
     for the misconduct of any agent, attorney or custodian appointed with due
     care by the Trustee hereunder.

     Section 9.03 Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the signature and
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Servicer, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates and the
signature of the Trustee on this Agreement) or of any Mortgage, Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the
Collection Account by the Servicer.

     Section 9.04 Trustee May Own Certificates. The Trustee in its individual or
any other capacity may become the owner or pledgee of Certificates with the same
rights as it would have if it were not Trustee.

     Section 9.05 Payment of the Trustee's Fees and Expenses.

     (a) On each Distribution Date, the Trust shall pay to the Trustee an amount
equal to the Trustee Fee described in the definition thereof (including any fees
and expenses of a co-trustee or separate trustee appointed under Section 9.10)
as compensation for all services rendered by the Trustee (and any such
co-trustee or separate trustee) in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder of
the Trustee (and any such co-trustee or separate trustee).

     (b) The Trust shall pay or reimburse the Trustee the Trustee Fee pursuant
to Section 5.01 and such other reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or that is otherwise reimbursable to the Trustee by the
Servicer pursuant to Section 9.05(a) above; provided, however, that the Trustee
shall not refuse to perform any of

                                      -93-
<PAGE>

its duties hereunder solely as a result of the failure of the Trust to pay or
reimburse such expenses, disbursements or advances.

     (c) The Servicer agrees to indemnify the Trustee from, and hold it harmless
against, any and all losses and liabilities, damages, claims or expenses
(including reasonable attorneys' fees) arising in respect of its acts or
omissions in connection with this Agreement or the Certificates except to the
extent the negligence, bad faith or intentional misconduct of the Trustee
contributes to the loss, liability, damage, claim or expense.

     (d) This Section 9.05 shall survive the termination of this Agreement or
the resignation or removal of the Trustee as regards rights accrued prior to
such resignation or removal.

     Section 9.06 Eligibility Requirements for the Trustee. The Trustee
hereunder shall at all times be a bank or other depository institution doing
business under the laws of the United States or any state thereof, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $100,000,000 and subject to supervision or examination
by federal or state authority and rated at least BBB by Standard & Poor's and
Baa2 by Moody's. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 9.07.

     Section 9.07 Resignation or Removal of the Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Servicer and each Rating Agency. Upon receiving such
notice of resignation, the Servicer shall promptly appoint a successor trustee
satisfying the criteria set forth in Section 9.06 by written instrument, copies
of which shall be delivered to the resigning Trustee, the successor trustee and
the Servicer. If no successor trustee shall have been so appointed and having
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

     If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Servicer, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, or the Trustee shall fail to
perform its obligations under this Agreement, then the Servicer or the Seller
shall remove the Trustee and appoint a successor trustee satisfying the criteria
set forth in Section 9.06 by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.

                                      -94-
<PAGE>

     If at any time the Trustee shall fail to duly observe or perform in any
material respect any covenants or agreements of the Trustee set forth in Section
9.01 of this Agreement, which failure (i) materially and adversely affects the
Certificateholders and (ii) continues unremedied for a period of 10 days after
the date on which written notice of such failure (which notice shall refer
specifically to this Section), requiring the same to be remedied, shall have
been given to the Trustee, the Seller and the Servicer by the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%, then the Servicer or the Seller may remove the
Trustee and appoint a successor trustee satisfying the criteria set forth in
Section 9.06 by written instrument, in duplicate, one copy of which instrument
shall be delivered to Trustee so removed and one copy to the successor trustee.

     Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor trustee as provided
in Section 9.08. The provisions of Section 9.05 shall survive any such
resignation or removal.

     Section 9.08 Successor Trustee. Any successor trustee appointed as provided
in Section 9.07 shall execute, acknowledge and deliver to the Servicer and to
its predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Seller, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties and obligations.

     No successor Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance it shall be eligible under the provisions
of Section 9.06.

     Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to each Rating Agency. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.

     Section 9.09 Merger or Consolidation of the Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee or substantially all of the Trustee's
trust business, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 9.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.

                                      -95-
<PAGE>

     Section 9.10 Appointment of Co-Trustee or Separate Trustee. Notwithstanding
any other provisions of this Agreement, at any time, for the purpose of meeting
any legal requirements of any jurisdiction in which any part of the Trust or any
Mortgaged Property may at the time be located, the Servicer and the Trustee,
acting jointly, shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights, indemnities and trusts
as the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 9.06 and
no notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 9.08. Each of the Rating Agencies shall
be given written notice of the appointment of a co-trustee or a separate trustee
pursuant to this Section.

     Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

         (a) All rights, powers, duties and obligations conferred or imposed
     upon the Trustee shall be conferred or imposed upon and exercised or
     performed by the Trustee and such separate trustee or co-trustee jointly
     (it being understood that such separate trustee or co-trustee is not
     authorized to act separately without the Trustee joining in such act),
     except to the extent that under any law of any jurisdiction in which any
     particular act or acts are to be performed (whether as Trustee hereunder or
     as successor to the Servicer hereunder), the Trustee shall be incompetent
     or unqualified to perform such act or acts, in which event such rights,
     powers, duties and obligations (including the holding of title to the Trust
     or any portion thereof in any such jurisdiction) shall be exercised and
     performed singly by such separate trustee or co-trustee, but solely at the
     direction of the Trustee;

         (b) No trustee hereunder shall be held personally liable by reason of
     any act or omission of any other trustee hereunder; and

         (c) The Servicer and the Trustee acting jointly may at any time accept
     the resignation of or remove any separate trustee or co-trustee, except
     that following the occurrence of an Event of Default that has not been
     cured, the Trustee, acting alone may accept the resignation of or remove
     any separate or co-trustor.

     Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its

                                      -96-
<PAGE>

acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and copies
thereof given to each of the Seller and the Servicer.

     Any separate trustee or co-trustee may, at any time, constitute the Trustee
its agent or attorney-in-fact, with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

     No appointment of any separate trustee or co-trustee shall absolve the
Trustee of its duties and obligations under this Agreement.

     Section 9.11 Compliance with REMIC Provisions. The Trustee shall neither
knowingly nor intentionally take any action or omit to take any action in the
performance of its duties hereunder that would cause any REMIC Pool to fail to
qualify as a REMIC or that would cause the imposition of a tax on any REMIC
Pool. The Trustee shall: (a) prepare and file, or cause to be prepared and
filed, such federal, state and local income tax and information returns or
reports using the calendar year as the taxable year for each REMIC Pool when and
as required by the REMIC Provisions and other applicable federal, state and
local income tax laws, which returns or reports shall be signed by the Trustee
or such other person as may be required thereby; (b) make an election, on behalf
of each REMIC Pool, to be treated as a REMIC and make the appropriate
designations, if applicable, in accordance with Section 9.16 on the federal
income tax return of the REMIC Pool for its first taxable year, in accordance
with the REMIC Provisions; (c) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders all information reports, or furnish or
cause to be furnished by telephone, mail, publication or other appropriate
method such information, as and when required to be provided to them in
accordance with the Code; (d) exercise reasonable care not to allow the creation
of any "interests" in any REMIC Pool within the meaning of Code Section
860D(a)(2) other than the interests represented by the Certificates (other than
the Class R-I, Class R-II and Class P Certificates) in the case of REMIC III,
the REMIC II Interests in the case of REMIC II, and the REMIC I Interests in the
case of REMIC I; and (e) within 30 days of the Startup Day, furnish or cause to
be furnished to the Internal Revenue Service, on Form 8811 or as may otherwise
be required by the Code, the name, title, address, and telephone number of the
person that Certificateholders may contact for tax information relating to their
Certificates (and the Trustee shall act as the representative of each REMIC Pool
for this purpose), together with such additional information as may be required
by such Form, and shall update such information at the time and in the manner
required by the Code. Each Class R Certificateholder shall designate the
Servicer, if permitted by the Code and applicable law, to act as "tax matters
person" for the related REMIC Pool within the meaning of Treasury regulations
Section 1.860F-4(d), and the Servicer is hereby designated as agent of each
Class R Certificateholder for such purpose (or if the Servicer is not so
permitted, the Holder of

                                      -97-
<PAGE>

the related Class R Certificate shall be the tax matters person in accordance
with the REMIC Provisions).

     Section 9.12 Trustee May Enforce Claims Without Possession of Certificates.
All rights of action and claims under this Agreement or the Certificates may be
prosecuted and enforced by the Trustee without the possession of any of the
Certificates or the production thereof in any proceedings relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
or in its capacity as Trustee. Any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Certificateholders in respect of which such judgment has been recovered in
accordance with the terms of this Agreement.

     Section 9.13 Exercise of Trustee Powers by Certificateholders. The Holders
of Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%, may direct the time, method and place of
conducting any proceeding relating to the Trust or the Certificates or for any
remedy available to the Trustee with respect to the Certificates or exercising
any trust or power conferred on the Trustee with respect to the Certificates of
the Trust provided that:

         (i) such direction shall not be in conflict with any rule of law or
     with this Agreement;

         (ii) the Trustee shall have been provided with indemnity satisfactory
     to it; and

         (iii) the Trustee may take any other action deemed proper by the
     Trustee that is not inconsistent with such direction; provided, however,
     that the Trustee need not take any action that it reasonably determines
     might involve it in liability unless it has been satisfactorily indemnified
     and, with respect to actions directed by Certificateholders, may be
     unjustly prejudicial to the Holders not so directing.

     Section 9.14 Tax Returns. The Trustee shall maintain all information in its
possession as may be required in connection with the preparation of all federal
and, if applicable, state and local income tax and information returns of each
REMIC Pool (including, but not limited to, tax reporting under the REMIC
Provisions for each REMIC Pool) and shall prepare, execute and file as required
all such returns. The Trustee shall include in the first federal income tax
return the information required to be included therein under the REMIC
Provisions, including, but not limited to, Treasury regulation ss.1.860D-1(d)(2)
and Treasury regulation ss.1.860F-4(b)(2), or any successor provisions . The
Servicer shall report all required tax information to Mortgagors in accordance
with applicable law. To the extent directly applicable, the Prepayment
Assumption used in pricing the Offered Certificates will be used in preparing
any reports concerning or touching on interest payments made or original issue
discount with respect to the Certificates.

     Section 9.15 Taxpayer Identification Number. The Trustee shall prepare and
file with the Internal Revenue Service, on behalf of each REMIC Pool within the
time period prescribed

                                      -98-
<PAGE>

therefor, an application on IRS Form SS-4 for such REMIC Pool. The Trustee, upon
receipt from the Internal Revenue Service of the Notice of Taxpayer
Identification Number assigned to each REMIC Pool, shall promptly forward a copy
of such notice to the Servicer.

     Section 9.16 Miscellaneous REMIC Matters.

     (a) The Trustee shall elect that REMIC I, REMIC II and REMIC III shall be
treated as REMICs under Section 860D of the Code, as described in Section 9.11.
The REMIC I REMIC Pool, REMIC II REMIC Pool and REMIC III REMIC Pool shall
constitute the assets of REMIC I, REMIC II and REMIC III respectively. Any
inconsistencies or ambiguities in this Agreement or in the administration of the
Trust shall be resolved in a manner that preserves the validity of such REMIC
elections.

     (b) REMIC I will be evidenced by the Class IA, Class IB, Class IC, Class
ID, Class IE, Class IF, Class IG, Class IH, Class II, Class IJ, Class IK, Class
IL and Class IM Interests and the Class P Certificates (together, the "REMIC I
Regular Interests"), which (i) (except in the case of the Class P Certificates)
will be uncertificated and non-transferable and (ii) are hereby designated as
the "regular interests" in REMIC I and (y) the Class R-I Certificate, which is
hereby designated as the single "residual interest" in REMIC I (the REMIC I
Regular Interests, together with the Class R-I Certificate, the "REMIC I
Interests"). The REMIC I Regular Interests (other than the Class P Certificates)
shall be recorded on the records of the REMIC I as being issued to and held by
the Trustee on behalf of REMIC II.

     The REMIC I Interests will have the following designations, initial
principal balances and pass-through rates:

                                                               Pass-
                REMIC I                   Initial             Through
               Interests                  Balance               Rate
               ---------                  -------               ----

                   P                  $            100        0% (2)
                   IA                 $      7,095,833         (1)
                   IB                 $        545,834         (1)
                   IC                 $      1,091,666         (1)
                   ID                 $      1,091,667         (1)
                   IE                 $      2,183,333         (1)
                   IF                 $      1,091,667         (1)
                   IG                 $      1,091,667         (1)
                   IH                 $      1,091,666         (1)
                   II                 $        545,834         (1)
                   IJ                 $        545,833         (1)
                   IK                 $        545,833         (1)
                   IL                 $       545,834          (1)
                   IM                 $132,534,118.11          (1)
                   R-I                $             0         0%


                                      -99-
<PAGE>


(1)  The per annum Pass-Through Rate on these REMIC I Regular Interests shall at
     any time of determination equal the weighted average of the Net Loan Rates
     of the Mortgage Loans.

(2)  The Class P Certificates shall be entitled to receive all Prepayment
     Charges collected with respect to the Mortgage Loans. Such Prepayment
     Charges shall not be available for distribution with respect to any other
     Class of REMIC I Interests. The Prepayment Charges received by the Class P
     Certificates shall not be applied to the principal balance of those
     Certificates.

     On each Distribution Date, principal collections and realized losses on the
Mortgage Loans shall be allocated first, to the Class IM Interests, and then, to
the REMIC I Regular Interests (other than the Class IM Interests and Class P
Certificates), sequentially, in reverse order to which they are listed above,
until the principal balance of each such class is reduced to zero. The Class R-I
Certificates shall have no principal balance and no pass-through rate and shall
be entitled to only those distributable assets (exclusive of the Class P
Deposit), if any, remaining in REMIC I on each Distribution Date after all
amounts required to be distributed to the REMIC I Regular Interests (other than
the Class P Certificates) and applicable Trust expenses have been paid. If, at
any time, the Pool Balance is $15,000 or less, a portion of the Class P Deposit
shall be paid as principal with respect to the Class P Certificates such that
the remaining Class P Deposit is always less than 0.66% of the sum of the Pool
Balance and the remaining Class P Deposit. After all of the REMIC I Regular
Interests (other than the Class P Certificates) have been paid in full, the
remaining available funds in REMIC I shall first be applied to reduce the
principal balance of the Class P Certificates to zero, and then shall be payable
with respect to the Class R-I Certificates. It is expected that there will not
be any distributions on the Class R-I Certificate.

     (c) REMIC II will be evidenced by (x) the Class II-A-1, Class II-A-2, Class
II-M-1, Class II-M-2, Class II-B, the 12 components of Class II-A-IO described
in note (2) below, and Class II-Q Interests (the "REMIC II Regular Interests"),
which will be uncertificated and non-transferable and are hereby designated as
the "regular interests" in REMIC II and (y) the Class R-II Certificates, which
are hereby designated as the single "residual interest" in REMIC II (the REMIC
II Regular Interests, together with the Class R-II Certificates, the "REMIC II
Interests"). The REMIC II Regular Interests shall be recorded on the records of
REMIC II as being issued to and held by the Trustee on behalf of REMIC III.

     The Basic Principal Distribution Amount shall be allocated 99% to the Class
II-Q Certificate and 1% to the Class II-A-1, Class II-A-2, Class II-M-1, Class
II-M-2 and Class II-B Interests until paid in full. The aggregate amount of the
Basic Principal Distribution Amount allocated to the Class II-A-1, Class II-A-2,
Class II-M-1, Class II-M-2 and Class II-B Interests shall be apportioned among
such classes in the same manner as such amount is payable with respect to the
Class A-1, Class A-2, Class M-1, Class M-2 and Class B Certificates,
respectively.

                                     -100-
<PAGE>

The Excess Overcollateralization Amount shall be allocated entirely to the Class
II-Q Certificates until paid in full.

     On any Distribution Date, any interest paid with respect to the Mortgage
Loans that is allocable to payments of principal on the Certificates pursuant to
Section 5.01(e) (the "Turbo Amount") will not be payable to the REMIC II Regular
Interests. Instead, a portion of the interest payable with respect to the Class
II-Q Interest which equals 1% of the Turbo Amount will be payable as a reduction
of the principal balances of the Class II-A-1, Class II-A-2, Class II-M-1, Class
II-M-2 and Class II-B Interests in the same manner as the Turbo Amount is
allocated among the Class A-1, Class A-2, Class M-1, Class M-2 and Class B
Certificates, respectively (and will be accrued and added to principal on the
Class II-Q Interest).

     Losses on the Mortgage Loans shall be applied such that after all
distributions have been made on such Distribution Date, the principal balances
of the Class II-A-1, Class II-A-2, Class II-M-1, Class II-M-2 and Class II-B
Interests equal 1% of the principal balances of the Class A-1, Class A-2, Class
M-1, Class M-2 and Class B Certificates, respectively, and the principal balance
of the Class II-Q Interest equals the Pool Balance less an amount equal to the
aggregate principal balances of the Class II-A-1, Class II-A-2, Class II-M-1,
Class II-M-2 and Class II-B Interests.

     The REMIC II Interests will have the following designations and
pass-through rates, and distributions of principal and interest thereon shall be
allocated to the Certificates in the following manner:

<TABLE>
<CAPTION>
                                               Pass-        Allocation         Allocation
       REMIC II               Initial         Through          of                 of
       Interests              Balance          Rate         Principal           Interest
       ---------              -------          ----         ---------           --------
<S>                       <C>                 <C>            <C>               <C>
       II-A-1                   1,000,000       (1)            (3)               (4),(5)
       II-A-2                     260,000       (1)            (3)               (4),(5)
       II-M-1                      97,500       (1)            (3)               (4),(5)
       II-M-2                      82,500       (1)            (3)               (4),(5)
       II-B                        60,000       (1)            (3)               (4),(5)
       II-Q               $148,500,785.11       (1)            (3)               (4),(5)
       II-A-IO            $             0       (2)            N/A             Class A-IO
       R-II               $             0        0%            N/A               N/A(6)

</TABLE>

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

(1)  The per annum Pass-Through Rate on these REMIC II Regular Interests shall
     at any time of determination equal the weighted average of the Pass-Through
     Rates of the REMIC I Regular Interests (other than the Class P
     Certificates), after first subtracting 6.0% from the Pass-Through Rates of
     each of such regular interests (other than the Class IM Interests) for the
     Distribution Dates indicated below for each of such regular interests.


                                     -101-
<PAGE>

<TABLE>
<CAPTION>
                                          6.0% Subtraction                                    6.0% Subtraction
                  REMIC I                   Distribution                REMIC I                 Distribution
                  Interest                     Dates                  Certificates                 Dates
                ------------            --------------------        -----------------       ---------------------
               <S>                      <C>                           <C>                      <C>

                     IA                        1 - 36                      IG                      1 - 18
                     IB                        1 - 33                      IH                      1 - 15
                     IC                        1 - 30                      II                      1 - 12
                     ID                        1 - 27                      IJ                      1 - 9
                     IE                        1 - 24                      IK                      1 - 6
                     IF                        1 - 21                      IL                      1 - 3
</TABLE>

(2)  Interest on the Class II-A-IO will equal the sum of 12 strips of interest,
     with each strip being a strip off the principal balance of a REMIC I
     Regular Interest (other than the Class IM Interests and the Class P
     Certificates) at 6.0% per annum for the Distribution Dates indicated in the
     table in note (1) for such regular interest, and 0.0% thereafter. Each of
     the 12 interest strips comprising the interest on the Class II-A-IO shall
     constitute 12 separate components of the Class II-A-IO, each of which shall
     be designated as a separate REMIC II Regular Interest.

(3)  Principal will be allocated to and apportioned among the Class A-1, Class
     A-2, Class M-1, Class M-2 and Class B Certificates, in the same proportion
     as principal is payable with respect to such Certificates, except that a
     portion of such principal in an amount up to the Excess
     Overcollateralization Amount shall first be allocated as a payment of
     interest to the Class C Certificates, and all principal will be allocated
     to the Class C Certificates after the principal balances of the Class A-1,
     Class A-2, Class M-1, Class M-2 and Class B Certificates have been reduced
     to zero.

(4)  Except as provided in note (5), interest with respect to this REMIC II
     Regular Interest will be allocated among the Class A-1, Class A-2, Class
     M-1, Class M-2 and Class B Certificates in the same proportion as interest
     is payable on such Certificates.

(5)  Any interest with respect to this REMIC II Regular Interest in excess of
     the product of (i) 100 times the weighted average coupon of the Class
     II-A-1, Class II-A-2, Class II-M-1, Class II-M-2, Class II-B and Class II-Q
     Interests, where each of such REMIC II Regular Interests, other than the
     Class II-Q Interest, is first subject to a cap and floor equal to the Class
     A-1, Class A-2, Class M-1, Class M-2 and Class B Pass-Through Rates,
     respectively, and the Class II-Q Interest is subject to a cap equal to 0%,
     and (ii) the principal balance of this REMIC II Regular Interest, shall not
     be allocated to the Class A-1, Class A-2, Class M-1, Class M-2 or Class B
     Certificates, but will be allocated to the Class C Certificates. However,
     the Class C Certificates shall be subordinated to the extent provided in
     Section 5.01.

                                     -102-
<PAGE>

(6)  On each Distribution Date, available funds, if any, remaining in REMIC II
     after payments of interest and principal, as designated above, will be
     distributed to the Class R-II Certificate. It is expected that there will
     not be any distributions on the Class R-II Certificates.

     (d) The Offered Certificates and Class C Certificates, but exclusive, in
each case, of any rights to receive any Net Rate Cap Carryover, are hereby
designated as "regular interests" with respect to REMIC III and the Class R-III
Certificate is hereby designated as the single "residual interest" with respect
to REMIC III. The Class R-III Certificate shall have no pass-through rate and
shall have no principal balance. On each Distribution Date, available funds, if
any, remaining in REMIC III after payments of interest and principal on the
regular interests in REMIC III will be distributed to the Class R-III
Certificates.

     (e) The Closing Date is hereby designated as the "Startup Day" of each of
REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of the
Code. The "latest possible maturity date", solely for purposes of Treasury
regulation ss.1.860G-1(a)(4)(iii), of each of the REMIC I and REMIC II Regular
Interests and each of the "regular interests" with respect to REMIC III is June
25, 2031.

                                    ARTICLE X
                                   TERMINATION

     Section 10.01 Termination Upon Purchase or Liquidation of All Mortgage
Loans. Subject to Section 10.02, the respective obligations and responsibilities
hereunder of the Servicer, the Seller and the Trustee (other than the obligation
of the Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Seller to send certain notices as
hereinafter set forth) and the Trust created hereby shall terminate with respect
to all Certificates upon the last action required to be taken by the Trustee on
the final Distribution Date pursuant to this Article following the earlier of
(a) the purchase by the Servicer of all Mortgage Loans then remaining in the
Trust and all property acquired by the Trust in respect of any such Mortgage
Loan at a price equal to the sum of (x) 100% of the Principal Balance of each
such Mortgage Loan (other than any Mortgage Loan as to which title to the
underlying Mortgaged Property has been acquired by the Trust and whose fair
market value is included pursuant to clause (y) below) as of the final
Distribution Date and (y) the fair market value of such acquired Mortgaged
Property (determined as described below), plus accrued and unpaid interest at
the applicable Mortgage Loan Rate on the Principal Balance of each such Mortgage
Loan (including any Mortgage Loan as to which title to the underlying Mortgaged
Property has been acquired by the Trust) through the end of the Collection
Period preceding the date of repurchase and the aggregate amount of unreimbursed
Servicing Advances made in respect of any such Mortgage Loan, less any payments
of principal and interest received by the Trust during such Collection Period in
respect of each such Mortgage Loan (the "Termination Price") or (b) the final
payment or other liquidation of the Principal Balance of the last Mortgage Loan
remaining in the Trust or the disposition of all property remaining in the Trust
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan;
provided, however, that in no event shall the trust created hereby continue
beyond the expiration of 21 years from the death

                                     -103-
<PAGE>

of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, who are living on the
Closing Date. The fair market value of Mortgaged Properties pursuant to the
foregoing clause (y) shall be determined by the Servicer as of the close of
business on the third Business Day next preceding the date upon which notice of
any such termination is furnished to Certificateholders pursuant to the third
paragraph of this Section 10.01.

     The right of the Servicer to purchase all outstanding Mortgage Loans
pursuant to clause (a) above is exercisable only on or after the related
Clean-up Call Date. If such right is exercised, (i) the Servicer shall remit the
Termination Price specified in this Section to the Trustee for deposit in the
Certificate Account pursuant to Section 3.02 (e) on or before the related
Deposit Date and (ii) the Trustee, if it has received the Mortgage Files
pursuant to Section 2.01, shall, promptly following remittance of such
Termination Price, release to the Servicer the Mortgage Files pertaining to the
Mortgage Loans being purchased and all other documents furnished by the Servicer
as are necessary to transfer the Trustee's interest in the Mortgage Loans to the
Servicer.

     Notice of any termination, specifying the Distribution Date (which shall be
a date that would otherwise be a Distribution Date) upon which the related
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation shall be given promptly by the
Trustee (upon receipt of written directions from the Servicer, which directions
shall be received by the Trustee not later than the 15th day of the month
preceding the month of such final distribution) by letter to Certificateholders
mailed not earlier than the first day and not later than the 10th day of the
month of such final distribution specifying (a) the Distribution Date upon which
final distribution of the related Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the Trustee therein
designated, (b) the amount of any such final distribution and (c) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of such
Certificates at the office or agency of the Trustee therein specified.

     If the termination of the Trust is in connection with a purchase of the
assets of the Trust by the Servicer pursuant to clause (a) of the first
paragraph in this Section, the Trustee shall cause to be distributed to
Certificateholders on the final Distribution Date, an amount equal to (i) as to
the Offered Certificates, and upon presentation and surrender thereof, to the
Holders thereof in proportion to their respective Percentage Interests the
Certificate Principal Balance, and the Class Interest Distribution applicable to
such Offered Certificate and (ii) as to the Servicer, any unpaid servicing
compensation with respect to such Distribution Date (other than amounts retained
to meet claims) after application pursuant to clause (i) above and payment to
the Servicer of any amounts to which it is entitled as reimbursement hereunder
and (iii) as to the Class C Certificateholders and upon presentation and
surrender of the Class C Certificates, in proportion to their Percentage
Interests, any amounts remaining after application pursuant to clauses (i) and
(ii), up to an amount equal to the Class C Distribution Amount and any Class C
Carryforward Amount; provided, however, that if the fair market value of any
acquired property referred to in, or covered by, clause (a)(y) of the first
paragraph of this Section is less than the Principal Balance of the related
Mortgage Loan, then the excess of such Principal Balance over such fair market


                                     -104-
<PAGE>

value shall be allocated in reduction of the amounts otherwise distributable on
the final Distribution Date in the following order of priority: first, to the
Holders of the applicable Class R Certificates, second to the Holders of the
Class C Certificate and third to the Holders of the Offered Certificates,
sequentially, in reverse order of priority, beginning with the Class of Offered
Certificates then outstanding with the lowest relative payment priority, in each
case until the respective Certificate Principal Balance thereof is reduced to
zero. The distribution on the final Distribution Date in connection with the
purchase by the Servicer of the assets in the Trust shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class of Certificates. The Servicer shall provide in writing to the
Trustee the information with respect to the amounts so to be paid.

     In the event that all of the relevant Certificateholders shall not
surrender their Certificates for final payment and cancellation on or before the
fifth day following such final Distribution Date, the Trustee shall on such date
cause all funds in the Certificate Account not distributed in the final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining Certificateholders by holding such funds uninvested in a separate
escrow account for the benefit of such Certificateholders, and the Servicer (if
the Servicer exercised its right to purchase the assets of the Trust as provided
above) or the Trustee (in any other case) shall give a second written notice to
the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, any funds deposited in such escrow account and
remaining unclaimed shall be paid by the Trustee to the Servicer and thereafter
Certificateholders shall look only to the Servicer with respect to any claims in
respect of such funds.

     Section 10.02 Additional Termination Requirements. In the event the
Servicer exercises its purchase option as provided in Section 10.01(a), each
REMIC Pool shall be terminated in accordance with the following additional
requirements, and the Trustee shall receive an Opinion of Counsel to the effect
that the termination of such REMIC Pool (i) will constitute a "qualified
liquidation" of each REMIC Pool within the meaning of Code Section
860F(a)(4)(A), and (ii) will not subject such REMIC Pool to tax or cause such
REMIC Pool to fail to qualify as a REMIC at any time that any Certificates are
outstanding.

         (i) Within 90 days prior to the final Distribution Date set forth in
     the notice of intention to purchase the Mortgage Loans given by the
     Servicer under Section 10.01, the Trustee, at the direction of the
     Servicer, shall adopt a plan of complete liquidation of each REMIC Pool on
     behalf of the REMIC within the meaning of Code Section 860F(a)(4)(A)(8),
     which shall be evidenced by such notice; and

         (ii) At or after the time of adoption of such a plan of complete
     liquidation and at or prior to the final Distribution Date, the Trustee
     shall sell all of the assets of each REMIC Pool to the Servicer, as the
     case may be, for cash at the purchase price specified in Section 10.01 and
     shall distribute such cash in the manner specified in Section 10.01.


                                     -105-
<PAGE>

         (iii) The Holder of the Class R Certificates will be deemed to have
     adopted a plan of liquidation on the date that the Trustee, at the
     direction of the Servicer, has adopted such plan. The Trustee shall attach
     a statement to the final return of each REMIC Pool for which a plan of
     liquidation is adopted by the Trustee, at the direction of the Servicer,
     setting forth the date of adoption of the plan of liquidation.

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

     Section 11.01 Amendment. This Agreement may be amended from time to time by
the Servicer, the Seller and the Trustee, without the consent of any of the
Certificateholders, (a) to cure any error or any ambiguity or to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein; (b) to add to the duties or obligations of the Servicer
hereunder; (c) to maintain or improve any rating then assigned by any Rating
Agency to any subclass of the Offered Certificates; (d) to add any other
provisions with respect to matters or questions arising under this Agreement, as
the case may be (including specifically amendments or supplements pursuant to
the second paragraph of Section 6.02(b)); (e) to modify, eliminate or add to any
of its provisions to such extent as shall be necessary to maintain the
qualification of each REMIC Pool as a REMIC at all times that any Certificates
are outstanding or to avoid or minimize the risk of the imposition of any tax on
any REMIC Pool pursuant to the Code that would be a claim against any REMIC
Pool, provided that in the case of this clause (e) the Trustee has received an
Opinion of Counsel addressed to the Trustee to the effect that such action is
necessary or desirable to maintain such qualification or to avoid or minimize
the risk of the imposition of any such tax; (f) to modify, eliminate or add to
the provisions of Section 6.02(c) or any other provisions hereof restricting
transfer of the Class R Certificates or (g) to modify, eliminate or add to the
provisions hereunder in order to provide for one or more third parties to effect
all or a portion of the Monthly Advances or Servicing Advances and to provide
for the reimbursement from the Trust Fund of such third party for such Monthly
Advances or Servicing Advances (i) from amounts payable to the Servicer, (ii)
from collections which the Servicer would have been permitted to otherwise
retain and (iii) from any other amounts that would otherwise be payable to the
Servicer if the Servicer had made such Monthly Advances or Servicing Advances or
from such other funds owed to the Servicer, in each case as the Servicer shall
agree; provided that in all such cases the Trustee has obtained written
confirmation from each Rating Agency that any such modifications to this
Agreement will not result in a qualification, reduction or withdrawal of the
rating assigned to any Class of Offered Certificates by such Rating Agency and
has received an Opinion of Counsel to the effect that any such modifications to
this Agreement do not give rise to a risk that any REMIC Pool or any of the
Certificateholders will be subject to a tax caused by a transfer to a
Disqualified Organization; provided, further, that in all such cases such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.

     This Agreement may also be amended from time to time by the Servicer, the
Seller and the Trustee and the Holders of Certificates evidencing Voting
Interests of each Class affected thereby aggregating not less than 51%, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any

                                     -106-
<PAGE>

manner the rights of the Holders of Certificates of such Class; provided,
however, that no such amendment shall (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or distributions
which are required to be made on any Certificate without the consent of the
Holder of such Certificate or (b) reduce the aforesaid percentage of each Class
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.

     Promptly after the execution of any such amendment or consent pursuant to
the next preceding paragraph, the Trustee shall furnish written notification of
the substance of such amendment to each affected Certificateholder and each
Rating Agency.

     It shall not be necessary for the consent of Certificateholders under this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.

     Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
that affects the Trustee's own rights, duties or immunities under this
Agreement.

         Section 11.02 Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer, at its
expense but only upon, determination of the Servicer accompanied by an Opinion
of Counsel to the effect that such recordation is legally required to protect
the Trustee's interest in the Mortgage Loans.

     For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.

     Section 11.03 Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement, the Trust or any REMIC established pursuant to Section 3.01, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust or any REMIC established pursuant to this
Agreement, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.

     Except as otherwise expressly provided herein, no Certificateholder, solely
by virtue of its status as a Certificateholder, shall have any right to vote or
in any manner otherwise control the

                                     -107-
<PAGE>

operation and management of the Trust or any REMIC established pursuant to this
Agreement, or the obligations of the parties hereto, nor shall anything herein
set forth, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.

     No Certificateholder, solely by virtue of its status as a
Certificateholder, shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates evidencing Voting Interests represented by all
Certificates (or all affected Certificates, as appropriate) aggregating not less
than 51% shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provision of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

     Section 11.04 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York (without regard to conflict of
laws principles and the application of the laws of any other jurisdiction), and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.

     Section 11.05 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
to (a) in the case of the Seller, at 350 South Grand Avenue, Los Angeles,
California 90070, Attn: Chief Financial Officer, with a copy to General Counsel;
(b) in the case of the Trustee, at the Corporate Trust Office at 1761 East St.
Andrew Place, Santa Ana, California 92705-4934, Attn: Aames Capital Corporation,
Series 2001-1; (c) in the case of the Servicer, Countrywide Home Loans, Inc.,
4500 Park Granada, Calabasas California 91302 Attn: Dave Sambol, with a copy to
Countrywide Home Loans, Inc. 400 Countrywide Way, Simi Valley, California 93065,
Attn: Lupe Montero, Vice President; (d) in the case of S&P, to Standard &
Poor's, 55 Water Street, 41st Floor, New York, New York 10041, Attn: Mortgage
Surveillance Group; (e) in the case of Moody's, to Moody's Investors Service
Inc., 99 Church Street, New York, New York 10007, Attn: Residential Mortgage
Pass-Through Monitoring; (f) in the case of the PMI Insurer, Mortgage

                                     -108-
<PAGE>

Guaranty Insurance Corporation, MGIC Plaza, P.O. Box 488, Milwaukee, Wisconsin
53201, Attention: Tim Edwards or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party. Any
notice required or permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at its address shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice. Any notice or other document required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to deliver such notice or document
to any such Rating Agency.

     Section 11.06 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.

     Section 11.07 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in this Section and Sections 7.02, 7.04 and
7.05, this Agreement may not be assigned by the Seller or the Servicer without
the prior written consent of the Holders of Certificates evidencing not less
than 66% of the Voting Interests of all Certificates.

     Section 11.08 Certificates Nonassessable and Fully Paid. The parties agree
that the Certificateholders shall not be personally liable for obligations of
the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that Certificates upon execution, authentication
and delivery thereof by the Trustee pursuant to Section 2.06 are and shall be
deemed fully paid.



                               [Signatures follow]




                                     -109-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.

                                           AAMES CAPITAL CORPORATION,
                                             as Seller

                                           By: /s/ Jon Van Deuren
                                              -----------------------------
                                              Name:  Jon Van Deuren
                                              Title: Senior Vice President



                                           BANKERS TRUST COMPANY
                                           OF CALIFORNIA, N.A.,
                                             as Trustee and not in its
                                             individual capacity

                                           By: /s/ Barbara Campbell
                                              -----------------------------
                                              Name:  Barbara Campbell
                                              Title: Assistant Secretary



                                           COUNTRYWIDE HOME LOANS, INC.
                                             as Servicer

                                           By: /s/ Michael Schloessmann
                                              -----------------------------
                                              Name:  Michael Schloessmann
                                              Title: Vice President



                                     -110-
<PAGE>

State of New York      )
                       )       ss.:
County of New York     )


     On the 29th day of March in the year 2001, before me, the undersigned,
personally appeared __________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.




                                                ------------------------------
                                                Notary Public

[Notary Seal]



                                     -111-
<PAGE>

State of California        )
                           )        ss.:
County of Los Angeles      )


     On the 29th day of March in the year 2001, before me, the undersigned,
personally appeared ______________________, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the
individual, or the person upon behalf of which the individual acted, executed
the instrument.



                                                ------------------------------
                                                Notary Public

[Notary Seal]








                                     -112-
<PAGE>

State of _________    )
                      )   ss.:
County of ________    )


     On the 29th day of March in the year 2001, before me, the undersigned,
personally appeared ______________, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her capacity, and that by his/her signature on the instrument, the
individual, or the person upon behalf of which the individual acted, executed
the instrument.



                                                ------------------------------
                                                Notary Public


[Notary Seal]









                                     -113-
<PAGE>

                                   Schedule I
                                   ----------

                              List of Sub-Servicers

None.









                                     A-1-1

<PAGE>

                                   Schedule II
                                   -----------

                      Schedule of Restricted Mortgage Loans



None.










                                     A-1-2

<PAGE>

                                                                     EXHIBIT A-1

                           FORM OF CLASS A CERTIFICATE


Date of Pooling and Servicing                   Original Class A-__Certificate
Agreement and Cut-off Date:                     Balance:  $
March  1, 2001

First Distribution Date:                        CUSIP No. :
April 25, 2001

Denomination:  $                                Certificate No.:  A-__


                         Class A-__Pass-Through Rate: __%
                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                             SERIES 2001-1, CLASS A-__

     evidencing a percentage interest in the distributions allocable to the
     Class A-__ Certificates with respect to a Trust consisting primarily of a
     pool of conventional, closed-end, fixed and adjustable rate residential
     mortgage loans, sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York Corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the requested owner hereof, Cede & Co. has an interest
herein.

     This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination of
this Certificate shown


                                     A-1-3
<PAGE>

above by the Original Class A-_ Certificate Principal Balance) in a trust, the
assets of which consist primarily of a pool of conventional, closed-end, fixed
and adjustable rate residential mortgage loans (the "Mortgage Loans"), sold by
Aames Capital Corporation (the "Seller") and serviced by Countrywide Home Loans,
Inc. (the "Servicer," which term includes any successor Servicer under the
Agreement referred to below). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement") among the Seller,
the Servicer and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month (or if any such day is not a Business Day, on the
Business Day immediately following such 25th day) (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person in
whose name this Certificate is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Certificate and (b) the sum of the applicable
interest and principal distributable thereon, as more specifically set forth in
the Agreement.

     Except as otherwise provided in the Agreement, distributions on this
Certificate will be made by the Trustee by check or money order mailed to the
Person entitled thereto at the address appearing in the Certificate Register, or
upon written request by the Certificateholder, by wire transfer to a bank
account maintained in the United States (in the case of any Holder of
Certificates entitled to such form of payment as provided in the Agreement) or
by such other means of payment as such Person and the Trustee shall agree.
Except as otherwise provided in the Agreement, the final distribution on this
Certificate will be made in the applicable manner described above, after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose and as specified in such notice.

     This Certificate is one of a duly authorized issue of Certificates
designated as "Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Class A-_" (herein called the "Class A-_ Certificates") and
representing a beneficial ownership interest, in each case subject to the
limitations set forth in the Agreement in, among other things, the Mortgage
Loans, such assets as shall from time to time be identified or shall be required
by the Agreement to be identified as deposited in the Collection and/or
Certificate Account or invested in Permitted Investments in accordance with the
Agreement, all rights under any insurance policy covering a Mortgage Loan or the
related Mortgaged Property and property and any proceeds thereof which secured a
Mortgage Loan and which has been acquired by foreclosure, deed in lieu of
foreclosure or by a comparable conversion.

     The Class A-_ Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans, as more
specifically set forth in the Agreement.

                                     A-1-4
<PAGE>

The Holder of this Certificate, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Certificate Account and
that the Trustee in its individual capacity is not personally liable to the
Certificateholders for any amount payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Servicer and the Trustee and the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class of authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class of authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.


                                     A-1-5
<PAGE>


     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price determined as provided in the
Agreement, or (b) the later of the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or the disposition of all property
acquired upon foreclosure or by deed in lieu of foreclosure of any Mortgage
Loan. The exercise of the right of the Servicer to purchase all the Mortgage
Loans and property in respect of Mortgage Loans will result in early retirement
of the Certificates, the right of the Servicer to purchase being subject to the
Pool Balance at the time of purchase being less than 5% of the sum of the
Original Pool Balance and the Prefunding Account Deposit.

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.














                                     A-1-6
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.


Dated:  March  ___, 2001

                                            BANKERS TRUST COMPANY
                                              OF CALIFORNIA, N.A., as Trustee


                                            By:
                                               ---------------------------------
                                                      Authorized Officer


CERTIFICATE OF AUTHENTICATION:

This is one of the Class A-_
Certificates referred to in
the within named Agreement


By:
   ---------------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee



                                     A-1-7
<PAGE>
                                                                     EXHIBIT A-2


                           FORM OF CLASS M CERTIFICATE

Date of Pooling and Servicing                  Original Class M-_ Certificate
Agreement and Cut-off Date:                    Balance:  $
March  1, 2001

First Distribution Date:                       CUSIP No.
April 25, 2001

Denomination:  $                               Certificate No.:  M-_


                        Class M-_ Pass-Through Rate: __%
                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                            SERIES 2001-1, CLASS M-_

     evidencing a percentage interest in the distributions allocable to the
     Class M-_ Certificates with respect to a Trust consisting primarily of a
     pool of conventional, closed-end, fixed and adjustable rate residential
     mortgage loans, sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO THE EXTENT SET FORTH
IN THE AGREEMENT REFERRED TO HEREIN.

     Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York Corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the requested owner hereof, Cede & Co. has an interest
herein.

                                     A-2-1
<PAGE>

     This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination of
this Certificate shown above by the Original Class M-_ Certificate Principal
Balance) in a trust, the assets of which consist primarily of a pool of
conventional, closed-end, fixed and adjustable rate residential mortgage loans
(the "Mortgage Loans"), sold by Aames Capital Corporation (the "Seller") and
serviced by Countrywide Home Loans, Inc. (the "Servicer," which term includes
any successor Servicer under the Agreement referred to below). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as specified above
(the "Agreement") among the Seller, the Servicer and Bankers Trust Company of
California, N.A., as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month (or if any such day is not a Business Day, on the
Business Day immediately following such 25th day) (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person in
whose name this Certificate is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Certificate and (b) the sum of the applicable
interest and principal distributable thereon, as more specifically set forth in
the Agreement.

     Except as otherwise provided in the Agreement, distributions on this
Certificate will be made by the Trustee by check or money order mailed to the
Person entitled thereto at the address appearing in the Certificate Register, or
upon written request by the Certificateholder, by wire transfer to a bank
account maintained in the United States (in the case of any Holder of
Certificates entitled to such form of payment as provided in the Agreement) or
by such other means of payment as such Person and the Trustee shall agree.
Except as otherwise provided in the Agreement, the final distribution on this
Certificate will be made in the applicable manner described above, after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose and as specified in such notice.

     This Certificate is one of a duly authorized issue of Certificates
designated as "Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Class M-_" (herein called the "Class M-_ Certificates") and
representing a beneficial ownership interest, in each case subject to the
limitations set forth in the Agreement in, among other things, the Mortgage
Loans, such assets as shall from time to time be identified or shall be required
by the Agreement to be identified as deposited in the Collection and/or
Certificate Account or invested in Permitted Investments in accordance with the
Agreement, all rights under any insurance policy covering a Mortgage Loan or the
related Mortgaged Property and property and any proceeds thereof which secured a
Mortgage Loan and which has been acquired by foreclosure, deed in lieu of
foreclosure or by a comparable conversion.

                                     A-2-2
<PAGE>

     The Class M-_ Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans in the Fixed Rate
Group, as more specifically set forth in the Agreement. The Holder of this
Certificate, by its acceptance of this Certificate, agrees that it will look
solely to the funds on deposit in the Certificate Account and that the Trustee
in its individual capacity is not personally liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Servicer and the Trustee and the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class of authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class of authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

                                     A-2-3
<PAGE>

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price determined as provided in the
Agreement, or (b) the later of the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or the disposition of all property
acquired upon foreclosure or by deed in lieu of foreclosure of any Mortgage
Loan. The exercise of the right of the Servicer to purchase all the Mortgage
Loans and property in respect of Mortgage Loans will result in early retirement
of the Certificates, the right of the Servicer to purchase being subject to the
Pool Balance at the time of purchase being less than 5% of the sum of the
Original Pool Balance and the Prefunding Account Deposit.

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.


                                     A-2-4
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.


Dated:  March  ___, 2001

                                            BANKERS TRUST COMPANY
                                              OF CALIFORNIA, N.A., as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Officer

CERTIFICATE OF AUTHENTICATION:

This is one of the Class M-_
Certificates referred to in
the within named Agreement

By:
   ---------------------------------------
   Authorized Officer of Bankers Trust Company
       of California, N.A., as Trustee





                                     A-2-5
<PAGE>

                                                                     EXHIBIT A-3

Date of Pooling and Servicing                Original Class B Certificate
Agreement and Cut-off Date:                  Balance:  $
March  1, 2001

First Distribution Date:                     CUSIP No.
April 25, 2001

Denomination:  $                             Certificate No.: B-_


                         Class B Pass-Through Rate: __%
                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                             SERIES 2001-1, CLASS B

     evidencing a percentage interest in the distributions allocable to the
     Class B Certificates with respect to a Trust consisting primarily of a pool
     of conventional, closed-end, fixed and adjustable rate residential mortgage
     loans, sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO THE EXTENT SET FORTH
IN THE AGREEMENT REFERRED TO HEREIN.

     Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York Corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the requested owner hereof, Cede & Co. has an interest
herein.

     This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination of
this Certificate shown above by the Original Class B Certificate Principal
Balance) in a trust, the assets of which consist

                                     A-3-1
<PAGE>

primarily of a pool of conventional, closed-end, fixed and adjustable rate
residential mortgage loans (the "Mortgage Loans"), sold by Aames Capital
Corporation (the "Seller") and serviced by Countrywide Home Loans, Inc. (the
"Servicer," which term includes any successor Servicer under the Agreement
referred to below). The Trust was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement") among the Seller, the
Servicer and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month (or if any such day is not a Business Day, on the
Business Day immediately following such 25th day) (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person in
whose name this Certificate is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Certificate and (b) the sum of the applicable
interest and principal distributable thereon, as more specifically set forth in
the Agreement.

     Except as otherwise provided in the Agreement, distributions on this
Certificate will be made by the Trustee by check or money order mailed to the
Person entitled thereto at the address appearing in the Certificate Register, or
upon written request by the Certificateholder, by wire transfer to a bank
account maintained in the United States (in the case of any Holder of
Certificates entitled to such form of payment as provided in the Agreement) or
by such other means of payment as such Person and the Trustee shall agree.
Except as otherwise provided in the Agreement, the final distribution on this
Certificate will be made in the applicable manner described above, after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose and as specified in such notice.

     This Certificate is one of a duly authorized issue of Certificates
designated as "Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Class B" (herein called the "Class B Certificates") and
representing a beneficial ownership interest, in each case subject to the
limitations set forth in the Agreement in, among other things, the Mortgage
Loans, such assets as shall from time to time be identified or shall be required
by the Agreement to be identified as deposited in the Collection and/or
Certificate Account or invested in Permitted Investments in accordance with the
Agreement, all rights under any insurance policy covering a Mortgage Loan or the
related Mortgaged Property and property and any proceeds thereof which secured a
Mortgage Loan and which has been acquired by foreclosure, deed in lieu of
foreclosure or by a comparable conversion.

     The Class B Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans, as more
specifically set forth in the Agreement. The Holder of this Certificate, by its
acceptance of this Certificate, agrees that it will look solely

                                     A-3-2
<PAGE>

to the funds on deposit in the Certificate Account and that the Trustee in its
individual capacity is not personally liable to the Certificateholders for any
amount payable under this Certificate or the Agreement or, except as expressly
provided in the Agreement, subject to any liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Servicer and the Trustee and the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class of authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class of authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in

                                     A-3-3
<PAGE>

accordance with the Agreement upon (a) the purchase by the Servicer of all
Mortgage Loans and all property acquired in respect of any Mortgage Loan
remaining in the Trust at a price determined as provided in the Agreement, or
(b) the later of the final payment or other liquidation of the last Mortgage
Loan remaining in the Trust or the disposition of all property acquired upon
foreclosure or by deed in lieu of foreclosure of any Mortgage Loan. The exercise
of the right of the Servicer to purchase all the Mortgage Loans and property in
respect of Mortgage Loans will result in early retirement of the Certificates,
the right of the Servicer to purchase being subject to the Pool Balance at the
time of purchase being less than 5% of the sum of the Original Pool Balance and
the Prefunding Account Deposit.

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.













                                     A-3-4
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.


Dated:  March  ___, 2001

                                            BANKERS TRUST COMPANY
                                              OF CALIFORNIA, N.A., as Trustee

                                            By:
                                               --------------------------------
                                                     Authorized Officer

CERTIFICATE OF AUTHENTICATION:

This is one of the Class B
Certificates referred to in
the within named Agreement

By:
   ------------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee











                                     A-3-5
<PAGE>

                                                                     EXHIBIT A-4

                         FORM OF CLASS A-IO CERTIFICATE


Date of Pooling and Servicing                   Percentage Interest: 100%
Agreement and Cut-off Date:
March  1, 2001                                  CUSIP No.

First Distribution Date:                        Certificate No.:  A-IO-_
April 25, 2001

                        Class A-IO Pass-Through Rate: __%
                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                            SERIES 2001-1, CLASS A-IO

     evidencing a percentage interest in the distributions allocable to the
     Class A-IO Certificates with respect to a Trust consisting primarily of a
     pool of conventional, closed-end, fixed and adjustable rate residential
     mortgage loans, sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     THIS CLASS A-IO CERTIFICATE HAS NO PRINCIPAL BALANCE.

     Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York Corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the requested owner hereof, Cede & Co. has an interest
herein.

     This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Certificate in a trust, the assets of which consist
primarily of a pool of conventional, closed-end, fixed and adjustable rate
residential mortgage loans (the "Mortgage

                                     A-4-1
<PAGE>

Loans"), sold by Aames Capital Corporation (the "Seller") and serviced by
Countrywide Home Loans, Inc. (the "Servicer," which term includes any successor
Servicer under the Agreement referred to below). The Trust was created pursuant
to a Pooling and Servicing Agreement dated as specified above (the "Agreement")
among the Seller, the Servicer and Bankers Trust Company of California, N.A., as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month (or if any such day is not a Business Day, on the
Business Day immediately following such 25th day) (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person in
whose name this Certificate is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Certificate and (b) the applicable interest
distributable thereon, as more specifically set forth in the Agreement.

     Except as otherwise provided in the Agreement, distributions on this
Certificate will be made by the Trustee by check or money order mailed to the
Person entitled thereto at the address appearing in the Certificate Register, or
upon written request by the Certificateholder, by wire transfer to a bank
account maintained in the United States (in the case of any Holder of
Certificates entitled to such form of payment as provided in the Agreement) or
by such other means of payment as such Person and the Trustee shall agree.
Except as otherwise provided in the Agreement, the final distribution on this
Certificate will be made in the applicable manner described above, after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose and as specified in such notice.

     This Certificate is one of a duly authorized issue of Certificates
designated as "Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates,
Series 2001-1, Class A-IO " (herein called the "Class A-IO Certificates") and
representing a beneficial ownership interest, in each case subject to the
limitations set forth in the Agreement in, among other things, the Mortgage
Loans, such assets as shall from time to time be identified or shall be required
by the Agreement to be identified as deposited in the Collection and/or
Certificate Account or invested in Permitted Investments in accordance with the
Agreement, all rights under any insurance policy covering a Mortgage Loan or the
related Mortgaged Property and property and any proceeds thereof which secured a
Mortgage Loan and which has been acquired by foreclosure, deed in lieu of
foreclosure or by a comparable conversion.

     The Class A-IO Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans, as more
specifically set forth in the Agreement. The Holder of this Certificate, by its
acceptance of this Certificate, agrees that it will look solely to the funds on
deposit in the Certificate Account and that the Trustee in its individual
capacity is not personally liable to the Certificateholders for any amount
payable under this Certificate or the

                                     A-4-2
<PAGE>

Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Servicer and the Trustee and the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class of authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class of authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price

                                     A-4-3
<PAGE>

determined as provided in the Agreement, or (b) the later of the final payment
or other liquidation of the last Mortgage Loan remaining in the Trust or the
disposition of all property acquired upon foreclosure or by deed in lieu of
foreclosure of any Mortgage Loan. The exercise of the right of the Servicer to
purchase all the Mortgage Loans and property in respect of Mortgage Loans will
result in early retirement of the Certificates, the right of the Servicer to
purchase being subject to the Pool Balance at the time of purchase being less
than 5% of the sum of the Original Pool Balance and the Prefunding Account
Deposit.

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.








                                     A-4-4
<PAGE>


     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March  ___, 2001

                                           BANKERS TRUST COMPANY
                                             OF CALIFORNIA, N.A., as Trustee

                                           By:
                                              --------------------------------
                                                      Authorized Officer


CERTIFICATE OF AUTHENTICATION:

This is one of the Class A-IO
Certificates referred to in
the within named Agreement

By:
   -----------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee



                                     A-4-5
<PAGE>

                                                                     EXHIBIT B-1

                           FORM OF CLASS C CERTIFICATE

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE EXTENT SET FORTH IN
THE AGREEMENT REFERRED TO HEREIN.

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.02(c) OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS TO THE TRANSFEROR AND THE TRUSTEE THAT (1) SUCH TRANSFEREE
IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), OR A PERSON ACTING ON BEHALF OF A PLAN OR
USING THE ASSETS OF A PLAN TO EFFECT SUCH PURCHASE AND IS NOT AN INSURANCE
COMPANY PURCHASING SUCH CERTIFICATE OR INTEREST FROM FUNDS IN A GENERAL ACCOUNT
OR SEPARATE ACCOUNT (WITH CERTAIN LIMITATIONS) OR (2) SUCH TRANSFEREE IS AN
INSURANCE COMPANY PURCHASING A CLASS C CERTIFICATE WITH FUNDS CONTAINED IN AN
"INSURANCE COMPANY GENERAL ACCOUNT" (AS DEFINED IN SECTION V(E) OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) SATISFYING SECTION III OF PTCE
95-60.







                                     B-1-1
<PAGE>

Date of Pooling and Servicing                      Percentage Interest:  __%
Agreement and Cut-off Date:
March 1, 2001                                      Certificate No.:

First Distribution Date:
April 25, 2001

                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                             SERIES 2001-1, CLASS C

     evidencing a percentage interest in the distributions allocable to the
     Class C Certificate with respect to a Trust consisting primarily of a pool
     of conventional, closed-end, fixed and adjustable rate residential mortgage
     loans sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     This certifies that Capital Z Investments, L.P. is the registered owner of
the Percentage Interest specified on the face of this Class C Certificate. This
Class C Certificate is one series of Certificates issued by a trust, the assets
of which consist primarily of a pool of conventional, closed-end, fixed rate and
adjustable rate residential mortgage loans (the "Mortgage Loans"), sold by Aames
Capital Corporation (the "Seller") and, serviced by Countrywide Home Loans, Inc.
(the "Servicer," which term includes any successor Servicer under the Agreement
referred to below). The Trust was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement") between the Seller, the
Servicer and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     No transfer of a Class C Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act"), and any applicable state securities laws or is made in
accordance with such Act and laws. In the event that such a transfer is desired
to be made by the holder hereof, (i) the transferee will be required to execute
an investment letter in the form described by the Agreement and (ii) if such
transfer is to be made, the Trustee shall require the Holder to deliver an
Opinion of Counsel acceptable to

                                     B-1-2
<PAGE>

and in form and substance satisfactory to the Trustee and the Seller that such
transfer is exempt (describing the applicable exemption and the basis therefor)
from or is being made pursuant to the registration requirements of the Act and
of any applicable state securities laws. The Holder hereof desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee, the Seller
and the Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. In
connection with any such transfer, the Trustee will also require an affidavit,
in the form as described in the Agreement, stating the matters set forth on the
legend of this Class C Certificate.

     The Class C Certificates are entitled to the Class C Distribution Amount on
each Distribution Date. The Class C Certificates are not entitled to any
payments on and collections in respect of the Mortgage Loans on any Distribution
Date until all other distributions on the Offered Certificates for such
Distribution Date and reimbursements of certain advances have been made in
accordance with the Agreement. The Holder of this Certificate, by its acceptance
of this Certificate, agrees that the Trustee in its individual capacity is not
personally liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Seller, the Servicer and the Trustee and the
Holders of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

     The Certificates are issuable only as registered Certificates without
coupons in the Percentage Interest specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for a new Certificate evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Servicer, the Trustee, and the Certificate Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing together with
an affidavit in the form as described in the Agreement, and thereupon a new
Certificate evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.

                                     B-1-3
<PAGE>

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price determined as provided in the
Agreement, or (b) the later of the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or the disposition of all property
acquired upon foreclosure or by deed in lieu of foreclosure of any Mortgage
Loan. The exercise of the right of the Servicer to purchase all the Mortgage
Loans and property in respect of all Mortgage Loans in the Trust will result in
early retirement of the Certificates, the right of the Servicer to purchase
being subject to the Pool Balance at the time of purchase being less than 5% of
the sum of the Original Pool Balance and the Prefunding Account Deposit..

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.









                                     B-1-4
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March __, 2001

                                            BANKERS TRUST COMPANY
                                              OF CALIFORNIA, N.A., as Trustee


                                            By:
                                               ---------------------------------
                                                     Authorized Officer

CERTIFICATE OF AUTHENTICATION:

This is the Class C Certificate
referred to in the within named
Agreement


By:
   ---------------------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee










                                     B-1-5
<PAGE>
                                                                     EXHIBIT B-2

                           FORM OF CLASS R CERTIFICATE

     THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE EXTENT SET
FORTH IN THE AGREEMENT REFERRED TO HEREIN.

     THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 6.02(b) OF THE AGREEMENT REFERRED TO
HEREIN.

     FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
"RESIDUAL INTEREST" IN EACH OF TWO "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G(A)(2) AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). A TRANSFEREE OF THIS
CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CERTIFICATE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN SECTION
6.02(b) OF THE POOLING AND SERVICING AGREEMENT, AND SHALL BE REQUIRED TO FURNISH
AN AFFIDAVIT TO THE TRANSFEROR AND THE TRUSTEE TO THE EFFECT THAT (I) IT IS NOT
(i) A DISQUALIFIED ORGANIZATION, AS SUCH TERM IS DEFINED IN CODE SECTION
860E(e)(5), OR AN AGENT (INCLUDING A BROKER, NOMINEE OR OTHER MIDDLEMAN) FOR
SUCH DISQUALIFIED ORGANIZATION, (ii) AN ENTITY THAT HOLDS REMIC RESIDUAL
SECURITIES AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH
SECURITIES THROUGH BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS
(A "BOOK-ENTRY NOMINEE"), (iii) AN INDIVIDUAL, CORPORATION, PARTNERSHIP OR OTHER
PERSON UNLESS SUCH TRANSFEREE (A) IS NOT A FOREIGN PERSON OR (B) IS A FOREIGN
PERSON THAT WILL HOLD SUCH CLASS R CERTIFICATE IN CONNECTION WITH THE CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES AND HAS FURNISHED THE TRANSFEROR
AND THE TRUSTEE WITH AN EFFECTIVE INTERNAL REVENUE SERVICE FORM 4224 OR (C) IS A
FOREIGN PERSON THAT HAS DELIVERED TO BOTH THE TRANSFEROR AND THE TRUSTEE AN
OPINION OF A NATIONALLY RECOGNIZED TAX COUNSEL TO THE EFFECT THAT THE TRANSFER
OF THE CLASS R CERTIFICATE TO IT IS IN ACCORDANCE WITH THE REQUIREMENTS OF THE
CODE AND THE REGULATIONS PROMULGATED THEREUNDER AND THAT SUCH TRANSFER OF THE
CLASS R CERTIFICATE WILL NOT BE DISREGARDED FOR FEDERAL INCOME TAX PURPOSES (ANY
SUCH PERSON WHO IS NOT COVERED BY

                                     B-2-1
<PAGE>

CLAUSE (A), (B) OR (C) ABOVE BEING REFERRED TO HEREIN AS A "NON-PERMITTED
FOREIGN HOLDER") OR (iv) ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN WITHIN THE
MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED, OR ANY PERSON WHICH IS AN INDIVIDUAL RETIREMENT ACCOUNT OR EMPLOYEE
BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO SECTION 4975 OF THE CODE (AN "ERISA
PLAN") OR AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR GENERAL
ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE ERISA PLAN ASSETS BY REASON OF AN ERISA
PLAN'S INVESTMENT IN THE ENTITY, OR ANY PERSON INVESTING THE ASSETS OF AN ERISA
PLAN OR SUCH AN ENTITY, WHETHER AS NOMINEE, TRUSTEE, AGENT OR OTHERWISE, (II) IT
HAS NO INTENT OR PURPOSE TO IMPEDE THE ASSESSMENT OR COLLECTION OF ANY FEDERAL,
STATE OR LOCAL INCOME TAXES LEGALLY REQUIRED TO BE PAID WITH RESPECT TO THE
CLASS R CERTIFICATE, AND (III) IT HAS AGREED TO SUCH AMENDMENTS TO FURTHER
EFFECTUATE THE RESTRICTIONS ON TRANSFERS TO DISQUALIFIED ORGANIZATIONS, AGENTS
THEREOF, BOOK-ENTRY NOMINEES, NON-PERMITTED FOREIGN HOLDERS OR ERISA PLANS. THE
TERM "FOREIGN PERSON" MEANS A PERSON WHO IS NOT ONE OF THE FOLLOWING: A CITIZEN
OR RESIDENT OF THE UNITED STATES, A CORPORATION OR PARTNERSHIP (OR OTHER ENTITY
CLASSIFIED AS A CORPORATION OR PARTNERSHIP FOR U.S. FEDERAL INCOME TAX PURPOSES)
CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES OR ANY POLITICAL
SUBDIVISION THEREOF, AN ESTATE THAT IS SUBJECT TO U.S. FEDERAL INCOME TAX
REGARDLESS OF THE SOURCE OF ITS INCOME, OR TRUST IF (i) A COURT WITHIN THE
UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION OVER THE ADMINISTRATION OF
THE TRUST, AND (ii) ONE OR MORE UNITED STATES PERSONS HAVE THE AUTHORITY TO
CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.

     THE HOLDER OF THIS CLASS R CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO
HAVE AGREED TO THE DESIGNATION OF THE SERVICER AS ITS AGENT TO ACT AS "TAX
MATTERS PERSON" TO PERFORM THE FUNCTIONS OF A "TAX MATTERS PARTNER" FOR PURPOSES
OF SUBCHAPTER C OF CHAPTER 63 OF SUBTITLE F OF THE CODE, OR, IF SO REQUESTED BY
THE SERVICER, TO ACT AS TAX MATTERS PERSON.



                                     B-2-2
<PAGE>


Date of Pooling and Servicing                       Percentage Interest:  ___%
Agreement and Cut-off Date:
March 1, 2001                                       Certificate No.:  ___

First Distribution Date:
April 25, 2001


                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                             SERIES 2001-1, CLASS R

     evidencing a percentage interest in the distributions allocable to the
     Class R Certificate with respect to a Trust consisting primarily of a pool
     of conventional, closed-end, fixed rate and adjustable rate residential
     mortgage loans sold by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     This certifies that Aames Capital Corporation is the registered owner of
the Percentage Interest specified on the face of this Class R Certificate. This
Class R Certificate is one series of Certificates issued by a trust, the assets
of which consist primarily of a pool of conventional, closed-end, fixed rate and
adjustable rate residential mortgage loans (the "Mortgage Loans"), sold by Aames
Capital Corporation (the "Seller") and serviced by Countrywide Home Loans, Inc.
(the "Servicer," which term includes any successor Servicer under the Agreement
referred to below). The Trust was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement") among the Seller, the
Servicer and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     No transfer of a Class R Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act"), and any applicable state securities laws or is made in
accordance with such Act and laws. In the event that such a transfer is desired
to be made by the holder hereof, (i) the transferee will be required to execute
an investment letter in the form described by the Agreement and (ii) if such
transfer is to be made, the Trustee shall require the Holder to deliver an
Opinion of Counsel acceptable to and in form and substance satisfactory to the
Trustee and the Seller that such transfer is exempt

                                     B-2-3
<PAGE>

(describing the applicable exemption and the basis therefor) from or is being
made pursuant to the registration requirements of the Act and of any applicable
state securities laws. The Holder hereof desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee, the Seller and the Servicer
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws. In connection with any such
transfer, the Trustee will also require an affidavit, in the form as described
in the Agreement, stating the matters set forth on the legend of this Class R
Certificate.

     The Holder of the Class R Certificate, by acceptance hereof, is deemed to
have designated the Servicer, if permitted by the Code and applicable law, to
act as the "tax matters person", to perform the functions of a "tax matters
partner" for purposes of Subchapter C of Chapter 63 of Subtitle F of the Code
and if not so permitted, the Holder of the Class R Certificate, is deemed to
have agreed to act as such "tax matters person".

     The Class R Certificate is not entitled to any payments on and collections
in respect of the Mortgage Loans on any Distribution Date until all other
distributions for such Distribution Date have been made in accordance with the
Agreement. The Holder of this Certificate, by its acceptance of this
Certificate, agrees that the Trustee in its individual capacity is not
personally liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Seller, the Servicer, and the Trustee and the
Holders of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of the Certificates.

     This Certificate is issuable only as a registered Certificate without
coupons in the Percentage Interest specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, the
Certificate is exchangeable for a new Certificate evidencing the same aggregate
Percentage Interest, as requested by the Holder surrendering the same.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Servicer, the Trustee, and the Certificate Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing together with
an affidavit in the form as described in

                                     B-2-4
<PAGE>

the Agreement, and thereupon a new Certificate evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price determined as provided in the
Agreement, or (b) the later of the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or the disposition of all property
acquired upon foreclosure or by deed in lieu of foreclosure of any Mortgage
Loan. The exercise of the right of the Servicer to purchase all the Mortgage
Loans and property in respect of Mortgage Loans will result in early retirement
of the Certificates, the right of the Servicer to purchase being subject to the
Pool Balance at the time of purchase being less than 5% of the sum of the
Original Pool Balance and the Prefunding Account Deposit.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.









                                     B-2-5
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March __,2001


                                        BANKERS TRUST COMPANY
                                          OF CALIFORNIA, N.A., as Trustee


                                        By:
                                           -----------------------------------
                                                Authorized Officer


CERTIFICATE OF AUTHENTICATION:

This is the Class R Certificate
referred to in the within named
Agreement


By:
   -----------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee








                                     B-2-6
<PAGE>

                                                                     EXHIBIT B-3

                           FORM OF CLASS P CERTIFICATE

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE EXTENT SET FORTH IN
THE AGREEMENT REFERRED TO HEREIN.

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.02(c) OF THE AGREEMENT REFERRED TO HEREIN.

THIS CERTIFICATE DOES NOT BEAR INTEREST AND WILL NOT RECEIVE ANY DISTRIBUTIONS
EXCEPT AS PROVIDED HEREIN.









                                      B-3-1
<PAGE>


Date of Pooling and Servicing                    Percentage Interest:  100%
Agreement and Cut-off Date:
March 1, 2001                                    Certificate No.:

First Distribution Date:
April 25, 2001


                           AAMES MORTGAGE TRUST 2001-1
                       MORTGAGE PASS-THROUGH CERTIFICATE,
                             SERIES 2001-1, CLASS P

     evidencing a percentage interest in the distributions allocable to the
     Class P Certificate with respect to a Trust consisting primarily of a pool
     of conventional, closed-end, fixed and adjustable rate residential mortgage
     loans sold and serviced by Aames Capital Corporation.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN AAMES
CAPITAL CORPORATION OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

     This certifies that Countrywide Home Loans, Inc. is the registered owner of
the Percentage Interest specified on the face of this Class P Certificate. This
Class P Certificate is one series of Certificates issued by a trust, the assets
of which consist primarily of a pool of conventional, closed-end, fixed rate and
adjustable rate residential mortgage loans (the "Mortgage Loans"), sold by Aames
Capital Corporation (the "Seller") and, serviced by Countrywide Home Loans, Inc.
(the "Servicer," which term includes any successor Servicer under the Agreement
referred to below). The Trust was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement") between the Seller, the
Servicer and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     No transfer of a Class P Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act"), and any applicable state securities laws or is made in
accordance with such Act and laws. In the event that such a transfer is desired
to be made by the holder hereof, (i) the transferee will be required to execute
an investment letter in the form described by the Agreement and (ii) if such
transfer is

                                      B-3-2
<PAGE>

to be made, the Trustee shall require the Holder to deliver an Opinion of
Counsel acceptable to and in form and substance satisfactory to the Trustee and
the Seller that such transfer is exempt (describing the applicable exemption and
the basis therefor) from or is being made pursuant to the registration
requirements of the Act and of any applicable state securities laws. The Holder
hereof desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Seller and the Servicer against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws. In connection with any such transfer, the Trustee
will also require an affidavit, in the form as described in the Agreement,
stating the matters set forth on the legend of this Class P Certificate.

     The Class P Certificates do not have a pass-through rate and will be
entitled to distributions only to the extent set forth in the Agreement. The
Holder of this Certificate, by its acceptance of this Certificate, agrees that
the Trustee in its individual capacity is not personally liable to the
Certificateholders for any amount payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller, the Servicer, and the rights of the Certificateholders under the
Agreement at any time by the Seller, the Servicer and the Trustee and the
Holders of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

     The Certificates are issuable only as registered Certificates without
coupons in the Percentage Interest specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, each
Certificate is exchangeable for a new Certificate evidencing the same aggregate
Percentage Interest, as requested by the Holder surrendering the same.

     As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registerable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New
York, accompanied by a written instrument of transfer in form satisfactory to
the Servicer, the Trustee, and the Certificate Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing together with
an affidavit in the form as described in the Agreement, and thereupon a new
Certificate evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.

     No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

                                      B-3-3
<PAGE>

     The Seller and the Trustee and any of their respective agents may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Seller, the Trustee nor any of their respective agents
shall be affected by any notice to the contrary.

     The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon payment to the Certificateholders, or
provision therefor, in accordance with the Agreement upon (a) the purchase by
the Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust at a price determined as provided in the
Agreement, or (b) the later of the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or the disposition of all property
acquired upon foreclosure or by deed in lieu of foreclosure of any Mortgage
Loan. The exercise of the right of the Servicer to purchase all the Mortgage
Loans and property in respect of all Mortgage Loans in the Trust will result in
early retirement of the Certificates, the right of the Servicer to purchase
being subject to the Pool Balance at the time of purchase being less than 5% of
the sum of the Original Pool Balance and the Prefunding Account Deposit.

     This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.

     This Certificate will not be entitled to any benefit under the Agreement or
be valid for any purpose unless manually countersigned for authenticating
purposes only by any authorized officer of the Trustee.



                                     B-3-4

<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March __,2001

                                            BANKERS TRUST COMPANY
                                              OF CALIFORNIA, N.A., as Trustee


                                            By:
                                               ---------------------------------
                                                       Authorized Officer

CERTIFICATE OF AUTHENTICATION:

This is the Class P Certificate
referred to in the within named
Agreement


By:
   ---------------------------------
   Authorized Officer of Bankers Trust Company
         of California, N.A., as Trustee







                                     B-3-5
<PAGE>

                                                                       EXHIBIT C




                                   [RESERVED]















                                      C-1
<PAGE>

                                                                       EXHIBIT D



                                   [RESERVED]


















                                      D-1

<PAGE>


                                                                       EXHIBIT E



                             MORTGAGE LOAN SCHEDULE

                       [On file with Sponsor and Trustee]















                                      E-1

<PAGE>

                                                                       EXHIBIT F

                    FORM OF ANNUAL STATEMENT AS TO COMPLIANCE

     The undersigned,        ,           of Countrywide Home Loans, Inc. (the
"Servicer"), in its capacity as Servicer under that certain Pooling and
Servicing Agreement dated as of March 1, 2001 (the "Pooling and Servicing
Agreement") among Aames Capital Corporation, as seller, Countrywide Home Loans,
Inc., as servicer and Bankers Trust Company of California, N.A., as trustee,
does hereby certify pursuant to Section 3.09 of the Pooling and Servicing
Agreement that as of the ___ day of ____________, ____:

         (a)   a review of the activities of the Servicer for the year ended
               December 31, ____ and of its performance under the Pooling and
               Servicing Agreement has been made under my supervision, and

         (b)   to the best of my knowledge, based on such review, the Servicer
               has fulfilled all of its material obligations under the Pooling
               and Servicing Agreement throughout such year.

     IN WITNESS WHEREOF, I have hereunto signed my name as of this ____day of
___________, ____.





                                           -------------------------------------
                                           Name:
                                           Title:





                                      F-1
<PAGE>


                                                                       EXHIBIT G

                FORM OF AFFIDAVIT PURSUANT TO SECTION 860E(e)(4)
                OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED


STATE OF ___________  )
                      ) ss.:
COUNTY OF __________  )


     [NAME OF OFFICER], being first duly sworn, deposes and says:

     1. That he is [Title of Officer] of [Name of Investor] (the "Investor"), a
[savings institution] [corporation] duly organized and existing under the laws
of [the State of        ] [the United States], on behalf of which he makes this
affidavit. Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Agreement as defined in the Class R Certificate.

     2. That the Investor's Taxpayer Identification Number is [         ].

     3. That the Investor is not a "Disqualified Organization" within the
meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), or an agent of a Disqualified Organization (including a broker,
nominee or middleman) and will not be a "Disqualified Organization" as of [date
of transfer], and that the Investor is not acquiring a Class R Certificate of
the Aames Mortgage Trust 2001-1 Mortgage Pass-Through Certificates, Series
2001-1 (the "Class R Certificate") for the account of, or as an agent (including
a broker, nominee or middleman) of any entity as to which the Investor has not
received an affidavit substantially in the form of this affidavit. For these
purposes, a "Disqualified Organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
an instrumentality if all of its activities are subject to tax and a majority of
its board of directors is not selected by such governmental entity), any
cooperative organization furnishing electrical energy or providing telephone
service to persons in rural areas as described in Code Section 1381(a)(2)(c), or
any organization (other than a farmers' cooperative described in Code Section
521) that is exempt from federal income tax unless such organization is subject
to the tax on unrelated business income imposed by Code Section 511.

     4. That the Investor is not (i) an entity that holds Class R Certificates
as nominee to facilitate the clearance and settlement of such Class R
Certificates through electronic book-entry changes in accounts of participating
organizations (a "Book-Entry Nominee"), (ii) an individual, corporation,
partnership or other person unless such transferee (A) is not a Foreign Person
or (B) is a Foreign Person that will hold such Class R Certificate in connection
with the conduct of a trade or business within the United States and has
furnished the transferor and the Trustee with an effective Internal Revenue
Service Form 4224 or (C) is a Foreign Person that has delivered to

                                       G-1
<PAGE>

both the transferor and the Trustee an opinion of a nationally recognized tax
counsel to the effect that the transfer of a Class R Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of a Class R Certificate will not be
disregarded for federal income tax purposes (any such person who is not covered
by clause (A), (B) or (C) above being referred to herein as a "Non-permitted
Foreign Holder") or (iii) a Person that is an employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, or any Person that is an individual retirement account or employee
benefit plan, trust or account subject to Section 4975 of the Code (an "ERISA
Plan") or an entity, including an insurance company separate account or general
account, whose underlying assets include ERISA Plan assets by reason of an ERISA
Plan's investment in the entity or a Person investing the assets of an ERISA
Plan or such an entity, whether as nominee, trustee, agent or otherwise (an
"ERISA Prohibited Holder").

     5. That the Investor agrees to any such amendments of the Pooling and
Servicing Agreement as may be required to further effectuate the restrictions on
transfer of the Class R Certificate to such a Disqualified Organization or a
Book-Entry Nominee or a Non-permitted Foreign Holder or an ERISA Prohibited
Holder.

     6. That the Investor has no intent or purpose to impede the assessment or
collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificate and will not transfer the Class R
Certificate to any Person that it has reason to believe has the intention to
impede the assessment or collection of such taxes and that the Investor
understands that, as the holder of the Class R Certificate, it may incur tax
liabilities in excess of any cash flows generated by the Class R Certificates.

     7. The Investor has been advised of, understands and acknowledges that
under the Code, a substantial tax would be imposed on a "pass-through entity"
holding a Class R Certificate if at any time during the taxable year of the
pass-through entity a Person that is a Disqualified Organization is the record
holder of an interest in such entity. (For this purpose, a "pass-through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain cooperatives and,
except as may be provided in Treasury Regulations, persons holding interests in
pass through entities as a nominee for another Person). A pass-through entity
shall be relieved of liability for the tax if it had received from such Person
an affidavit (in substantially the same form as this affidavit) that such Person
is not a Disqualified Organization and the entity had no actual knowledge that
the affidavit was false. The Investor will advise the Trustee and the Servicer
if it becomes a pass-through entity or if it is a pass-through entity, if any of
the interest holders are or become Disqualified Persons.

     8. The Investor has reviewed the provisions of Section 6.02 of the
Agreement and understands the legal consequences of the acquisition of a Class R
Certificate including, without limitation, the restrictions on subsequent
transfers. The Investor expressly agrees to be bound by and to abide by the
provisions of Section 6.02 of the Agreement, as such Section may be amended from
time to time.



                                      G-2
<PAGE>


     9. The Investor agrees to require an affidavit substantially similar to
this affidavit from any Person to whom the Investor attempts to transfer its
Class R Certificate including any Person with respect to which the Investor is
then acting as nominee, trustee or agent, and in connection with any transfer by
a Person for whom the Investor is acting as nominee, trustee or agent, and the
Investor will not transfer its Class R Certificate to be transferred to any
Person that the Investor knows is a Disqualified Organization.

     10. The Investor is acquiring the Class R Certificate either (i) for its
own account or (ii) as nominee, trustee or agent for another Person and has
attached hereto an affidavit from such Person in substantially the same form as
this affidavit. If clause (ii) of the preceding sentence is applicable, such
Person is not a Disqualified Organization and the Investor has no knowledge that
any such affidavit from such Person is false.










                                      G-3
<PAGE>

     IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to authority of its Board of Directors, by its [Title of
Officer] and its corporate seal to be hereunto attached, attested by its
[Assistant] Secretary, this ____ day of _________, ____.



                                             [NAME OF INVESTOR]


                                             By:
                                                -------------------------------
                                                Name:
                                                Title:

     Personally appeared before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.

     Subscribed and sworn before me this _____day of ___________, ____.



NOTARY PUBLIC

COUNTY OF _______________

STATE OF ________________

My Commission expires the ____ day of ________, ____.










                                      G-4
<PAGE>


                                                                       EXHIBIT H

                    FORM OF NOTICE REGARDING PAYMENT IN FULL
                      OF PRINCIPAL BALANCE OF MORTGAGE LOAN


Bankers Trust Company of California, N.A.,
  as Trustee
1761 East St. Andrews Place
Santa Ana, California  92705

    Re:   Aames Mortgage Trust 2001-1
          Mortgage Pass-Through Certificates, Series 2001-1
          -------------------------------------------------

Ladies and Gentlemen:

     Reference is made to Section 3.07 of the Pooling and Servicing Agreement
dated as of March 1, 2001 (the "Pooling and Servicing Agreement") among Aames
Capital Corporation, as Seller, Countrywide Home Loans, Inc., as Servicer and
Bankers Trust Company of California, N.A., as Trustee. All capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Pooling and Servicing Agreement.

     The undersigned hereby certifies that the Principal Balance of the Mortgage
Loan(s) listed on Schedule A annexed hereto has been paid in full and that all
amounts received in connection with the payment of such Mortgage Loan(s) that
were required to be deposited or credited in the Certificate Account pursuant to
Section 3.02 of the Pooling and Servicing Agreement have been so deposited or
credited.

     The undersigned further certifies that he is a Servicing Officer of the
Servicer holding the office set forth beneath his signature and that he is duly
authorized to execute this certificate on behalf of the Servicer.


                                          COUNTRYWIDE HOME LOANS, INC.


Date:                                     By:
     ------------------------                ---------------------------------
                                             Name:
                                             Title:




                                      H-1
<PAGE>
                                                                       EXHIBIT I


                           FORM OF LIQUIDATION REPORT

1.   Type of Liquidation (REO disposition/charge-off/short pay-off)

         o   Date Last Paid
         o   Date of Foreclosure
         o   Date of REO
         o   Date of REO Disposition
         o   Property Sale Price; Estimated Market Value at Disposition

2.   Liquidation Proceeds

         o   Principal Prepayment                          $
                                                            ----------------
         o   Property Sale Proceeds
                                                            ----------------
         o   Insurance Proceeds
                                                            ----------------
         o   Other (itemize)
                                                            ----------------
         o   TOTAL                                         $
                                                            ================

     Liquidation Expenses

         o   Servicing Advances                            $
                                                            -----------------
         o   Monthly Advances
                                                            -----------------
         o   Contingency Fees
                                                            -----------------
         o   Servicing Fees
                                                            -----------------
         o   Annual Expense Escrow Amount
                                                            -----------------
         o   Supplemental Fee (if any)
                                                            -----------------
         o   Additional Interest (if any)
                                                            -----------------
         o   Monthly Sponsor Fee (if any)
                                                            -----------------
         o   TOTAL                                         $
                                                           =================

3.   Net Liquidation Proceeds*                             $
     (Total of Item 2 minus total of Item 3)                -----------------

4.   Accrued and Unpaid Interest on Mortgage Loan          $
                                                            -----------------

5.   Principal Balance of Mortgage Loan                    $
                                                            -----------------



                                      I-1
<PAGE>

6.   Realized Loss on Mortgage Loan                        $
     (Item 4 plus Item 5 minus Item 3, with                 ------------------
     a Realized Loss resulting only if the total
     of this calculation is a positive number)

*Applied first to Item 4 and then to Item 5.




















                                      I-2
<PAGE>

                                                                       EXHIBIT J

                              OFFICER'S CERTIFICATE

     I, _____________________, hereby certify that I am the duly elected
_____________________ of Countrywide Home Loans, Inc. acting as servicer
pursuant to a Pooling and Servicing Agreement dated as of March 1, 2001 by and
among the Aames Capital Corporation, as Seller, Countrywide Home Loans, Inc. and
Bankers Trust Company of California, N.A., as Trustee, and further certify, to
the best of my knowledge and after due inquiry that the following, including the
attached Liquidation Report, is a summary of the facts and circumstances
surrounding the "charge-off" of any Mortgage Loans during the Collection Period
from _____ 1 through _____ 30/31, ____;

[Insert the following information for each "charged-off" Mortgage Loan]

     Loan #
     Borrower Name
     Property Address
     Date of "charge-off"
     Original Principal Balance
     Outstanding Principal Balance
     Mortgage Loan Rate
     Accrued Interest at time of "charge off"
     Unreimbursed Servicing Advances at time of "charge off"
     Unreimbursed Delinquency Advances at time of "charge off"
     # of days in default at time of "charge off"
     Original Appraised Value
     Current appraised value based upon "drive by"
     Amount of outstanding first lien
     Estimate of Foreclosure Costs
          Broker Fees
          Legal Fees
          Repair and Miscellaneous Expenses
     Projected Marketing Period
     Estimate of Loss on Foreclosure and Liquidation

Capitalized terms not otherwise defined herein have the meanings set forth in
the Pooling and Servicing Agreement.



                                      J-1
<PAGE>

     IN WITNESS WHEREOF, I have hereunto signed by name and affixed the seal of
the Servicer.


Dated:
      --------------------                   --------------------------------
                                             Name:
                                             Title:

















                                      J-2
<PAGE>

                                                                       EXHIBIT K

                          FORM OF TRANSFEROR AFFIDAVIT
                           [LETTERHEAD OF TRANSFEROR]


                                                              ,
                                              ----------------  ----


Bankers Trust Company of California, N.A.,
  as Trustee
1761 East St. Andrews Place
Santa Ana, California  92705

     Re:  Aames Mortgage Trust 2001-1
          Mortgage Pass-Through Certificates, Series 2001-1
          -------------------------------------------------

Ladies and Gentlemen:

     We have reviewed the attached affidavit of [NAME OF TRANSFEREE] and have no
actual knowledge that such affidavit is not true and has no reason to believe
that the requirements set forth in paragraph 3, paragraph 4(i) or paragraph
4(ii) are not satisfied and have no reason to believe that the transferee has
the intention to impede the assessment or collection of any federal, state or
local taxes legally required to be paid with respect to a Class R Certificate.
In addition, we have conducted a reasonable investigation at the time of the
transfer and found that the transferee had historically paid its debts as they
came due and found no significant evidence to indicate that the transferee will
not continue to pay its debts as they become due.



                                             Very truly yours,


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


                                             By:
                                                -----------------------------
                                                Name:
                                                Title:





                                      K-1

<PAGE>

                                                                       EXHIBIT L




                                   [RESERVED]



















                                      L-1

<PAGE>

                                                                       EXHIBIT M

Bankers Trust Company of California, N.A.,
  as Trustee
1761 East St. Andrews Place
Santa Ana, California  92705

     Re:  Aames Mortgage Trust 2001-1,
          Mortgage Pass-Through Certificates,
          Series, 2001-1, Class [  ] (the "Certificates")
          -----------------------------------------------


Ladies and Gentlemen:

     In connection with our disposition of the above Certificates we certify
that (a) we understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being disposed by us in
a transaction that is exempt from the registration requirements of the Act, (b)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act and (c)
with respect to our disposition of the Certificates, we have no knowledge that
the transferee is not a permitted transferee.


                                             Very truly yours,


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


                                             By:
                                                -----------------------------
                                                      Authorized Officer








                                      M-1
<PAGE>

                                                                     EXHIBIT N-1

                    FORM OF INVESTMENT LETTER [NON-RULE 144A]

                                     [DATE]

[Seller]
[Seller Address]


Bankers Trust Company of California, N.A.,
  as Trustee
1761 East St. Andrews Place
Santa Ana, California  92705


     Re:  Aames Mortgage Trust 2001-1,
          Mortgage Pass-Through Certificates,
          Series, 2001-1, Class [  ] (the "Certificates")
          -----------------------------------------------


Ladies and Gentlemen:

     In connection with our acquisition of the above-captioned Certificates, we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the Seller
concerning the purchase of the Certificates and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Certificates, (d) either (i) we are not an employee benefit plan that is subject
to the Employee Retirement Income Security Act of 1974, as amended, or a plan
that is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such plan or (ii) the purchaser is
an insurance company which is purchasing such certificates with funds contained
in an "insurance company general account" (as such term is defined in Section
V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that
the purchase and holding of such Certificates are covered under PTCE 95-60, (e)
we are acquiring the Certificates for investment for our own account and not
with a view to any distribution of such Certificates (but without prejudice to
our right at all times to sell or otherwise dispose of the Certificates in
accordance with clause (g) below), (f) we have not offered or sold any
Certificates to, or solicited offers to buy any Certificates

                                     N-1-1
<PAGE>

from, any person, or otherwise approached or negotiated with any person with
respect thereto, or taken any other action which would result in a violation of
Section 5 of the Act, and (g) we will not sell, transfer or otherwise dispose of
any Certificates unless (1) such sale, transfer or other disposition is made
pursuant to an effective registration statement under the Act or is exempt from
such registration requirements, and if requested, we will at our expense provide
an opinion of counsel satisfactory to the addressees of this Certificate that
such sale, transfer or other disposition may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of such Certificate has executed
and delivered to you a certificate to substantially the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement.



                                               Very truly yours,


                                               [NAME OF TRANSFEREE]


                                               By:
                                                  ----------------------------
                                                       Authorized Officer




                                     N-1-2

<PAGE>

                                                                     EXHIBIT N-2

                            FORM OF RULE 144A LETTER

                                     [DATE]

[Seller]
[Seller Address]


Bankers Trust Company of California, N.A.,
  as Trustee
1761 East St. Andrews Place
Santa Ana, California  92705


     Re:  Aames Mortgage Trust 2001-1,
          Mortgage Pass-Through Certificates,
          Series, 2001-1, Class [  ] (the "Certificates")
          -----------------------------------------------

Ladies and Gentlemen:

     In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we have had the
opportunity to ask questions of and receive answers from the Seller concerning
the purchase of the Certificates and all matters relating thereto or any
additional information deemed necessary to our decision to purchase the
Certificates, (c) we are not an employee benefit plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended, or a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended, nor
are we acting on behalf of any such plan, (d) we have not, nor has anyone acting
on our behalf offered, transferred, pledged, sold or otherwise disposed of the
Certificates, any interest in the Certificates or any other similar security to,
or solicited any offer to buy or accept a transfer, pledge or other disposition
of the Certificates, any interest in the Certificates or any other similar
security from, or otherwise approached or negotiated with respect to the
Certificates, any interest in the Certificates or any other similar security
with, any person in any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any other action, that
would constitute a distribution of the Certificates under the Act or that would
render the disposition of the Certificates a violation of Section 5 of the Act
or require registration pursuant thereto, nor will act, nor has authorized or
will authorize any person to act, in such manner with respect to the
Certificates, (e) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Act and have completed either of

                                     N-2-1
<PAGE>

the forms of certification to that effect attached hereto as Annex 1 or Annex 2.
We are aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Act.



                                               Very truly yours,


                                               [NAME OF TRANSFEREE]

                                               By:
                                                  -----------------------------
                                                  Authorized Officer









                                     N-2-2
<PAGE>

                                                          ANNEX 1 TO EXHIBIT N-2
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

     [For Transferees Other Than Registered Investment Companies]

     The undersigned (the "Buyer") hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:

     (a) As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.

     (b) In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis $ 1 in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year (such amount being calculated in accordance with Rule 144A and (ii) the
Buyer satisfies the criteria in the category marked below.

      ___      Corporation, etc. The Buyer is a corporation (other than a bank,
               savings and loan association or similar institution),
               Massachusetts or similar business trust, partnership, or
               charitable organization described in Section 501(c)(3) of the
               Internal Revenue Code of 1986, as amended.

      ___      Bank. The Buyer (a) is a national bank or banking institution
               organized under the laws of any State, territory or the District
               of Columbia, the business of which is substantially confined to
               banking and is supervised by the State or territorial banking
               commission or similar official or is a foreign bank or equivalent
               institution, and (b) has an audited net worth of at least
               $25,000,000 as demonstrated in its latest annual financial
               statements, a copy of which is attached hereto.

      ___      Savings and Loan. The Buyer (a) is a savings and loan
               association, building and loan association, cooperative bank,
               homestead association or similar institution, which is supervised
               and examined by a State or Federal authority having supervision
               over any such institutions or is a foreign savings and loan
               association or equivalent institution and (b) has an audited net
               worth of at

-------------------
1    Buyer must own and/or invest on a discretionary basis at least $100,000,000
     in securities unless Buyer is a dealer, and, in that case, Buyer must own
     and/or invest on a discretionary basis at least $10,000,000 in securities.


                                     N-2-3
<PAGE>

               least $25,000,000 as demonstrated in its latest annual financial
               statements, a copy of which is attached hereto.

      ___      Broker-dealer. The Buyer is a dealer registered pursuant to
               Section 15 of the Securities Exchange Act of 1934.

      ___      Insurance Company. The Buyer is an insurance company whose
               primary and predominant business activity is the writing of
               insurance or the reinsuring of risks underwritten by insurance
               companies and which is subject to supervision by the insurance
               commissioner or a similar official or agency of a State,
               territory or the District of Columbia.

      ___      State or Local Plan. The Buyer is a plan established and
               maintained by a State, its political subdivisions, or any agency
               or instrumentality of the State or its political subdivisions,
               for the benefit of its employees.

      ___      ERISA Plan. The Buyer is an employee benefit plan within the
               meaning of Title I of the Employee Retirement Income Security Act
               of 1974.

      ___      Investment Advisor. The Buyer is an investment advisor registered
               under the Investment Advisors Act of 1940.

      ___      Small Business Investment Company. Buyer is a small business
               investment company licensed by the U.S. Small Business
               Administration under Section 301(c) or (d) of the Small Business
               Investment Act of 1958.

      ___      Business Development Company. Buyer is a business development
               company as defined in Section 202(a)(22) of the Investment
               Advisors Act of 1940.

     (c) The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.

     (d) For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its


                                     N-2-4
<PAGE>

financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.

     (e) The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

     (f) Until the date of purchase of the Rule 144A Securities, the Buyer will
notify each of the parties to which this certification is made of any changes in
the information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.


                                            -------------------------------
                                            Print Name of Buyer

                                            By:
                                               -------------------------------
                                               Name:
                                               Title:

                                               Date:
                                                    -------------




                                     N-2-5
<PAGE>


                                                          ANNEX 2 TO EXHIBIT N-2
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That are Registered Investment Companies]

     The undersigned (the "Buyer") hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:

     (a) As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.

     (b) In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.



                                     N-2-6
<PAGE>


     ___       The Buyer owned $         in securities (other than the excluded
               securities referred to below) as of the end of the Buyer's most
               recent fiscal year (such amount being calculated in accordance
               with Rule 144A).

     ___       The Buyer is part of a Family of Investment Companies which owned
               in the aggregate $____________ in securities (other than the
               excluded securities referred to below) as of the end of the
               Buyer's most recent fiscal year (such amount being calculated in
               accordance with Rule 144A).

     (c) The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

     (d) The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.

     (e) The Buyer is familiar with Rule 144A and under-stands that the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer will be in reliance on Rule 144A. In
addition, the Buyer will only purchase for the Buyer's own account.



                                      N-2-7
<PAGE>

     (f) Until the date of purchase of the Certificates, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.


                                            ----------------------------------
                                            Print Name of Buyer or Adviser

                                            By:
                                               -------------------------------
                                               Name:
                                               Title:

                                            IF AN ADVISER:


                                            ----------------------------------
                                                  Print Name of Buyer

                                            Date:
                                                 ------------------


                                     N-2-8
<PAGE>

                                                                       EXHIBIT O



                     Mortgage Guaranty Insurance Corporation
                                   PMI Policy




















                                       O-1
<PAGE>

                                                                       EXHIBIT P

                           List of PMI Mortgage Loans

                             [Available from Aames]

















                                      P-1
<PAGE>

                                                                       EXHIBIT Q

                                   [RESERVED]
























                                      Q-1
<PAGE>

                                                                       EXHIBIT R

                           Prepayment Charge Schedule

                             [Available from Aames]

















                                      R-1